Walmart is shifting its focus toward e-commerce and less, smaller stores in an effort to better target today’s time-crunched consumer and to be more “thoughtful” about growth.
At its annual investment meeting Wednesday, Walmart also lowered its annual sales growth forecast as a result of a tougher than anticipated sales environment. The company said it now expects net sales to grow 2 to 3 percent, down from the 3 to 5 percent guidance it provided last October.
Charles Holley, Walmart’s executive vice president and chief financial officer, said, “Our business and customers continue to evolve and so will the way we deploy capital. We will invest more heavily in e-commerce initiatives, while temporarily moderating our global physical growth, particularly larger stores.” He added, “We are focused on creating an endless aisle and appealing to our customers’ changing needs.”
The company said it would increase its investment in mobile commerce and digital initiatives, which is expected to range between $1.2 and $1.5 billion in fiscal 2016, up from roughly $1 billion estimated for this year.
Walmart global e-commerce president and CEO Neil Ashe, said, “We are delivering best in class e-commerce capabilities that we are combining with the assets of the world’s largest retailer to engage with customers in new ways. We have delivered the core components of our new global technology platform. We are expanding our next generation fulfillment network to reach our customers fast and efficiently, and we’re building new data capabilities to enhance our customer experience.”
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Global e-commerce sales are expected to reach $12.5 billion by the end of this year, and increase by around 25 percent in fiscal 2016. Walmart said growth over the three-year period from fiscal 2016 to 2018 is expected to average 30 to 40 percent.
Ashe said Walmart will build new online fulfillment centers in Georgia and Pennsylvania in 2015—both over 1 million square feet—which will be part of its next generation fulfillment network comprised of online fulfillment centers, shared distribution centers and ship-from-store locations. Brazil and China will also get new fulfillment centers.
Retail square footage growth, however, will slow. Walmart will add between 26 and 30 million net retail square feet, down from the originally anticipated 32 to 34 million square feet. Walmart will only add 60-70 new Supercenters in fiscal 2016, compared to the 120 projected in fiscal 2015.
“We know that our supercenters are an important format for the stock-up trip, but we want to be thoughtful about our investment, ensuring that we align the space to evolving customer needs,” Walmart U.S. president and CEO Greg Foran said. “To do this, we will moderate supercenter growth in fiscal 2016. Our investment in Neighborhood Markets will go forward because they continue to show strong results across the box and they provide our customers with convenient access to grocery, pharmacy services, and other quick-trip needs.”