The Supply Chain Matters blog continues to highlight for readers the ongoing implications of the COVID-19 pandemic, particularly the explosion in online buying among global consumers. Large numbers of populations being locked down in personal residences and ongoing fears for not venturing into public venues such as brick and mortar stores continue to provide the perfect storm of expanding online retail demand.

In this commentary we once again highlight reported financial and operational performance for global retailer Walmart in the latest reported quarter, and how the global retailer is redoubling investments in online fulfillment capabilities.

Walmart perfmance- Supply Chain Matters

Walmart’s Performance

This week the broad-based discount general merchandise and grocery retailer announced record Q4 and fiscal year 2021 financial results, but Wall Street seemed to have concerns related to future growth and operating income.

Highlights of financial performance included:

  • For the fiscal Q4 quarter that ended January 31, total revenues rising 7.3 percent to $152.1 billion, exceeding Wall Street estimates of slightly over $148 billion. Operating income was $5.5 billion, an increase of 3.4 percent, but consolidated net income resulted in a loss of $2.09 billion. The latter was attributed to a loss in operations held for sale in the United Kingdom and Japan, as well as a charge related to executive compensation. Walmart International sales in the quarter were reported as $34.9 billion, an increase of 5.5 percent.


  • U.S. based same store sales growing 8.6 percent in the most recent quarter, higher than expected by analysts. Ecommerce sales in the quarter increased 69 percent with strong results noted across all channels.



  • For the fiscal 2021 that ended January 31, total revenue rising 6.7 percent to $559.2 billion. Full year operating income increased 10.6 percent to $22.8 billion. The retailer noted that $36.1 billion was generated in operating cash flow and $8.7 billion was returned to shareholders through dividends and share repurchases. Net of capital expenditures, free cash flow was $25.8 billion.



In conjunction with reporting financial performance, the retailer announced that it will boost average wages for U.S. hourly workers to above $15 per hour. The $15 number happens to be the minimum wage online retailers Amazon and Target pay its hourly workers. According to reporting from The Wall Street Journal, the retailer will be keeping its starting wage at $11 per hour, and the planned wage increase is aimed for workers in store focused digital online order fulfillment and merchandise stocking roles. Workers who receive these raises will reportedly no longer be eligible to receive quarterly bonuses.



There is no question that Walmart has benefitted from the shifts in consumer buying needs and habits brought on by the ongoing coronavirus pandemic. Direct government stimulus to consumers has been credited with boosting sales volumes. By the same token, the pandemic has presented a reported $1.1 billion in added expenses directly related to COVID-19 measures. We suspect that added transportation costs were another factor.

At a virtual investor conference, CEO Doug McMillan indicated that the retailer is continuing to retool its businesses to better serve customers, tap added revenue streams and promote new services. He described the announced Walmart+ membership buying service as an important part of the overall strategy.

McMillan indicated in his remarks that it is time to be even more aggressive given the opportunity that management observes for the next generation of retail. That includes making advantage of ongoing momentum and the strong financial position of this retailer.

Moving forward, the strategy calls for added investment in automation to speed-up online order fulfillment and store curbside pickup capabilities. Recall that Walmart’s learnings from observing online trends over the past 3-4 years is to position physical stores as the focal point for fulfillment, foot traffic and add-on services.

In the current year, the retailer plans to increase capital expenditures from $10 billion to $14 billion, reportedly investing in supply chain, added automation of customer fulfillment and distribution centers, and enhanced digital experience capabilities.

McMillan has stressed that prior investments have positioned the retailer to where it aims to be and that these new investments will move overall efforts earlier than originally planned. Such a theme continues to resonate among many online retail players. Seize the opportunity.

Reportedly what caused investors a concern was management’s guidance outlook which called for U.S. sales growth in the low single digits for the coming fiscal year as well as a slight decline in operating income.


Additional Supply Chain Matters Perspectives

As we continue to share our individual predictions for industry and global supply chains, our purposeful theme has been characterizing 2021 as a year of renewal for various industry supply chain management teams in specific areas. Renewal includes new thinking, new definition and new directions in planning, fulfillment, and decision-making capabilities. That certainly includes online B2C online retail and B2B online commerce for retail and wholesale segments.

As we continue to highlight financial performance of specific industry players, we are troubled by the reactions and continued short-term timing perspectives of certain of their investors. Perhaps in hindsight, we should have extended the theme of new thinking to include the equity analyst and investment community, both private and public.

We have shared how specific manufacturers, retailers and other firms were able to pivot product demand and supply network capabilities more successfully and to sense and respond to new or added pandemic focused product and fulfillment channel demands more quickly. These companies did so because of the foundational investments made in areas of supply chain digital transformation, agility, and resilience.

There were other companies that were burdened by prior years of cost cutting or a shorter-term perspective on investment needs. This was particularly the case in retail and consumer product goods market segments. The latter became enamored with zero-based budgeting practices. Teams had to mostly scramble and innovate on the fly to be able to respond to market changes. That is the lesson on focusing solely on a metric of reduced cost and profitability.

A retailer as large as Walmart was woken up by industry disruptor Amazon. The latter’s corporate culture was to aggressively invest in needed capabilities and always keep a long-term strategic focus. If that meant to the ire of Wall Street and individual investors, the reward would come later.

Walmart now senses market momentum as well as opportunity, and management is instilling as best it can a start-up mentality. There is now recognition that technology can be a business enabler when coupled with business strategy vs, just a mandate. It may not be as cool or as flashy, but size and physical store footprint is an advantage.

Investors need to be thinking in a similar context. The world of retail has indeed been disrupted.


Bob Ferrari

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