Walmart bets big on automation and supply chain capabilities: ‘Our automation plan is now ready to scale’

19-Feb-2021 - Last updated on 19-Feb-2021 at 16:34 GMT

Photo Credit: Walmart

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Walmart generated a record $152.1bn in sales, an increase of $10.4bn or +7.3%, in Q4 (13 weeks ended Jan. 29, 2021). Looking towards FY22, the retailer said it will be investing heavily in its “next generation business model” to fuel further growth.

“Now certainly we had tailwinds during the year, but we're performing extraordinarily well. This strong performance has allowed us to invest in the future of the business,” said Walmart president and CEO Doug McMillon on the company's Q4 FY21 earnings call.

“This is a time to be even more aggressive because of the opportunity we see in front of us. The strategy, team and capabilities are in place. We have momentum with customers, and our financial position is strong.”

Walmart said it will continue to invest in automation of its business in FY22 -- to the tune of $14bn in planned capital investments -- to build its supply chain capacity and automation to stay ahead of demand, improve its customer experience, and increase productivity.

“Our automation plan is now ready to scale. We'll be investing in our distribution centers, our e-commerce fulfillment centers and in market fulfillment centers, which will, in many cases, be inside of or built beside our stores,” McMillon noted.

Food as part of the healthcare omnichannel experience

With its scale and logistical muscle, Walmart has the opportunity to become a health solution destination for customers who are prioritizing their wellbeing more than ever, said McMillon.

“As you evaluate our opportunity in healthcare, consider not only our pharmacy, optical, hearing and OTC businesses, but also consider our position as the country's largest seller of food and how that relates to health,” said McMillon.

Earning e-commerce consumer loyalty

Walmart US e-commerce sales increased 79% in Q4 FY21 compared to Q4 FY20. McMillon noted how the company is still expanding its footprint and brand recognition in the online channel.

“[In the early stages] We weren't the first place you go when it's time to buy products online. We're trying to change that, obviously,” said McMillon.

“You've got to earn that. You've got to have the assortment. You got to have the price. You got to provide service. You got to deliver when you're supposed to deliver. All of those things have to be done, and it takes some time to build those kinds of capabilities. But as we're building that, the opportunity that we have is in the way that we put them together.”

Part of its strategy of becoming the go-to online retailer and drive consumer loyalty was to launch Walmart+, the company’s e-commerce membership program.

The company is confident Walmart+ will drive new and repeat business and become a part of consumers’ regular shopping routine, said McMillon.

“Over time, more and more of our customers will want Walmart+ because it makes life better. That relationship will drive repeat business and provide data that enables us to serve them even better and be more personalized. It's an important piece of our strategy. For now, we're focused on continuing a high quality experience for Walmart+ members as we add capacity. Over time, we'll add more benefits to the membership to broaden its appeal,” McMillon noted.

The year ahead

Walmart anticipates additional tailwinds and headwinds in FY22 and is continuing to seek clarity on the impact the availability of the COVID-19 vaccine and the evolving economic climate will have on its business.

However, said Walmart EVP and chief financial officer Brett Biggs, “Even if conditions stay generally similar to now, for any length of time this year and with limited additional stimulus, we would expect continued solid underlying performance from Walmart U.S. with low-single-digit comps and continued solid e-commerce sales growth.”