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Wal-Mart Sets Sales Goal of $500B

Mike Duke, the company’s president and ceo, revealed the target at the retailer's annual meeting for the investment community on Tuesday.

Half a trillion dollars.

This story first appeared in the October 16, 2013 issue of WWD.  Subscribe Today.

That’s the goal for Wal-Mart Stores Inc. as the world’s largest retailer aims for sales of $500 billion by 2016 — without acquisitions.

Mike Duke, the company’s president and chief executive officer, revealed the target at Wal-Mart’s annual meeting for the investment community on Tuesday.

A significant part of that growth is expected to come from the retailer’s e-commerce activities, which were expected to generate revenues of $9 billion in the current fiscal year, but in May that was raised to $10 billion. Walmart.com is seen having sales of $13 billion in 2014, “which makes us the fastest-growing site,” said Neil Ashe, president and ceo of global e-commerce.

Digital dominated a large part of the presentation as Wal-Mart aims to gain traction against its much larger online rival Amazon.com, which it has historically lagged.

“Neil and e-commerce shows how integrated this overlap of physical and digital is; it came to play in all the presentations,” said Duke.

Ashe shed light on Wal-Mart’s global technology platform Pangaea, which has helped e-commerce advance quickly at home and abroad. “We know who every person in the world is and we know every product in the world, and we’ll connect them,” Ashe said. “It’s built on a service-oriented platform. We’ve improved search; conversion is 20 percent-plus higher. We’re rolling Pangaea out to samsclub.com.”

Walmart.com in the U.S. has grown its assortment to 5 million stockkeeping units, compared with 150,000 sku’s in SuperCenters. “We’re pushing the boundaries on new vendors at walmart.com,” Ashe said, adding, “We’ve developed merchant tools. Pangaea can predict demand and deploy merchandise.”

Next-generation fulfilment networks are also enabling global e-commerce’s march. “We’re building technology assets and e-commerce-specific fulfilment aspects that combine with the existing assets of the world’s largest retailer, for example, truck fleets and a network of stores around the country. We use algorithms” to decide from where to ship an item. “Only we can pull all these things together. We have online-only fulfilment centers, DCs [distribution centers] and 4,100 stores that position Wal-Mart closer to our customers.” Ashe said walmart.com has sped up delivery times by 15 percent, while lowering costs by 10 percent.

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Walmart.com now can monitor the competitive landscape, drilling down to the smallest Neighborhood Market or one of Asda’s biggest competitors in the U.K., Tesco. “We’re competitive in price online in the U.S.,” Ashe said. “We built incredibly sophisticated merchant tools. Seventy-five percent of the time, we’ll have the lowest price online.”

Rosalind Brewer, president and ceo of Sam’s Club, and Doug McMillon, president and ceo of Wal-Mart International, also touted technology. “The majority of members come to the clubs with smartphones,” Brewer said. “At the end of the second quarter, our redesigned mobile app helped improve overall shopping by 25 percent.”

Sam’s Club is building a member engagement platform that will bow next year, first through direct mail and then online. It includes a mobile app that sends consumers updates on products aligned with their needs and offers rewards at checkout. “It will revolutionize the way we do business,” Brewer said.

“We’ve had great gains across the business,” she added. “The first is apparel. We are more robust in our branded offerings. Apparel has seen a midsingle-digit comp increase.”

Charles Redfield, chief merchant at Sam’s, said three times as many new items were added to home and apparel versus a year ago. “We’re a house of brands,” he said. “We have the same brands as the big department stores in New York and Boston, with up to 60 percent [off]. We’re changing the merchandise. With new and different merchandise, I’m confident we’ll have a great holiday.”

“We’re seeing a shift from Boomers to Millennial,” Brewer said, noting that small businesses, Sam’s traditional base, are struggling.

Wal-Mart International also struggled, delivering softer sales — $135 billion — than expected. Country results were a mixed bag, with Brazil up 13.8 percent in market share and Japan down 8 percent. McMillon said new rules issued by the Indian government led Wal-Mart to change its agreement with Barti, which will take control of the retail stores while Wal-Mart will retain the Cash and Carries.

In Mexico, Wal-Mart sold its restaurant business, and in Brazil and China closed underperforming stores. The actions, together with India, will be dilutive to earnings by 5 cents to 7 cents, mostly in the fourth quarter.

Meanwhile, International has added capabilities in e-commerce and mobile and made investments in apparel and other areas. Walmart.com recently bowed in Canada. The retailer said it stepped up its game in the face of competition from Target Corp. “We spent a lot of time looking at our apparel and home ranges due to [Target] and we’re very pleased with them,” McMillon said. “Market share has remained very consistent.” McMillon said George at Asda in the U.K. will launch in Chile, Japan and South Africa, “so there’s real progress there.”

Wal-Mart U.S. accelerated its small-format openings and e-commerce fulfillment centers, increasing 2014 projected capital expenditures by $500 million to $6 billion to $6.5 billion. Wal-Mart Stores’ capex is expected to be $11.8 billion to $12.8 billion for 2015. The company maintains its 2014 capital forecast of $12 billion to $13 billion. Wal-Mart International will reduce its capex by $500 million due to fewer new store openings. The company will add 33 million to 37 million net retail square feet worldwide next year, with more than half of the increase driven by Wal-Mart U.S., including accelerated small-format openings.