Walmart Stores to invest $1 billion in employees

BENTONVILLE, Ark. — Walmart Stores pledges to double down on improving customer service and employee compensation after posting its year-end results.  

 

Walmart Stores on Thursday reported consolidated net sales of $482.2 billion for the fiscal year ended Jan. 31, 2015, representing a 1.9% increase. Comparable sales without fuel for the full year across both Walmart U.S. and Sam's Club totaled 0.5% for the year and 1.6% for the quarter. 

 

"We had a good fourth quarter to close out our fiscal year, with underlying EPS of $1.61. Walmart U.S. delivered better than expected comp sales. Sam's Club had its best performance of the year, and Walmart International had solid sales and profitability," stated Doug McMillon, Wal-Mart Stores president and CEO. "Like many other global companies, we faced significant headwinds from currency exchange rate fluctuations, so I'm pleased that we delivered fiscal year revenue of $486 billion. But, we're not satisfied."

 

Walmart Stores shares were down more than $2 per share to less than $84 in early morning trading. 

 

In an effort to improve both results and the customer experience going forward, Wal-Mart Stores plans to invest more than $1 billion in its employee base. "Sam Walton knew that an inspired, dedicated team of associates was the way to exceed our customers' expectations," said McMillon. "He often said 'Our people make the difference.' I feel a big responsibility to carry on what that phrase represents: the care and commitment that Sam had for Walmart associates."

 

To that end McMillon announced a bold new initiative on pay and training for U.S. associates. Approximately 500,000 full-time and part-time associates at Walmart U.S. stores and Sam's Clubs will receive pay raises in the first half of the current fiscal year. Current and future associates will benefit from this initiative, which ensures that Walmart hourly associates earn at least $1.75 above today's federal minimum wage, or $9.00 per hour, in April. The following year, by Feb. 1, 2016, current associates will earn at least $10.00 per hour.

 

But the investment will come at a cost in the form of pressure on the company's operating income in fiscal 2016. "We will invest approximately $0.02 per share in the first quarter and approximately $0.20 per share for the full year in the new wage structure, comprehensive associate training and educational programs," noted Charles Holley, Wal-Mart Stores CFO. "Along with these significant investments, we expect ongoing headwinds from currency exchange rates during the year. We also consider economic conditions in our various markets and our estimated tax rate in establishing our guidance ranges for the year," added Holley. "After evaluating these factors, we are forecasting earnings per share for the full year of fiscal 2016 to range between $4.70 and $5.05. For the first quarter, EPS will range from $0.95 to $1.10."

 

This guidance compares to $1.10 per share Walmart reported for the first quarter of fiscal 2015 and $4.99 per share for the full year. In addition, Holley said that if currency exchange rates remain where they are today, this would cause a negative impact to fiscal year 2016 net sales of approximately $10 billion, as well as a negative impact on operating income of around $0.10 per share.

 

"Given the potential impact of currency headwinds, we expect that our fiscal year 2016 sales growth will be between 1% and 2%, versus the 2% to 4% we provided at our October investor conference," said Holley. "Our capital expenditure guidance of $11.6 billion to $12.9 billion, which includes investments for stores and e-commerce, remains unchanged. Our net square footage store growth target, excluding future acquisitions, remains unchanged at 26 to 30 million square feet for this year."

 

"Today, we announced comprehensive changes to our hiring, training, compensation and scheduling programs, as well as to our store management structure. These changes will give our U.S. associates the opportunity to earn higher pay and advance in their careers. We're pursuing a comprehensive approach that is sustainable over the long term," explained McMillon. "By realigning our store operational structure, associates can enjoy a closer relationship with their supervisors. In addition, associates will have more control over their schedules."

 

As part of today's announcement, Walmart and the Walmart Foundation also committed $100 million over five years to help increase the economic mobility for entry level workers by advancing their careers. This initiative will benefit the retail and service industries. The Walmart Foundation will work with other foundations, employers, community colleges and non-profit organizations to address a fundamental challenge in America - how to better train and advance workers in the retail and adjacent sectors. Today, more than 15 million people, including 7 million women, work in retail.

 

"Beyond this commitment, Walmart is also piloting a new, comprehensive on-boarding and training program to create clear career pathways for associates, so they can earn more and seek promotions," McMillon explained. "We're encouraging our associates to continue their education by providing no-cost access for them to complete their high school diploma or GED, as well as free and low-cost college credit to reduce the time and cost of earning a college degree. The skills and training that an associate receives through this program will be transferable outside of Walmart."

 

For the year, Walmart U.S. generated $288 billion in net sales, up 3.1%, while Sam's Club pulled in $58 billion, up 1.5%.

 

A strong holiday season helped boost sales. "Our fourth quarter was the first positive traffic comp we've had since the third quarter of fiscal year 2013," said Greg Foran, Walmart U.S. president and CEO. "Walmart U.S. had increased traffic during the six-week holiday season, with strong sales in seasonal, toys, home and apparel. We completed almost 1 billion total transactions during the holiday season, including our largest online day ever on Cyber Monday. We are also pleased to deliver positive comp sales for the full year."

 

Foran also noted the strong comp sales of Neighborhood Market stores.

 

"Neighborhood Markets delivered approximately a 7.7% comp during the quarter," he said. "We opened 233 Neighborhood Markets during the year, and customers like their easy and convenient access to fresh foods, pharmacy and services."

 

For the 13-week period ending May 1, 2015, Walmart U.S. expects comp store sales to increase between 1% and 2%. Last year, Walmart's comp sales were relatively flat for the 13-week period ended May 2, 2014. Sam's Club expects comp sales, excluding fuel, for the 13-week period ending May 1, 2015 to rise between 1% and 2%. Last year, comp sales, excluding fuel, decreased 0.5% for the 13-week period ended May 2, 2014.

 

Walmart U.S. and Sam's Club will report comparable sales for the 13-week period ending May 1, 2015 on May 19, when the company reports first quarter results.