Walmart Inc. Presents at Barclays Global Consumer Staples Virtual Conference, Sep-08-2020 12:40 PM - NYSE:WMT

NYSE:WMT

** Key Points from M. Brett Biggs:**

1. Consumer Dynamics and Market Share:

   • The consumer landscape has changed significantly due to the pandemic, with stimulus checks influencing spending patterns.
   • Walmart has gained market share in general merchandise, but grocery and consumer market share are harder to assess due to operational changes and external factors.
   • Reduced operating hours impacted sales, especially during the second quarter.

2. Inventory Management:

   • Inventory challenges were faced, particularly in the second quarter, but improvements are ongoing.
   • Store managers have some flexibility to override inventory algorithms, especially for short-lead-time items like food and consumables.
   • Longer-lead-time items (e.g., holiday goods) are more challenging to adjust.

3. Walmart+ Membership Program:

   • Launched to offer enhanced benefits and convenience, appealing to a broad demographic.
   • The $35 minimum order threshold helps differentiate Walmart’s fulfillment model.
   • Aims to increase basket size and customer loyalty, particularly in grocery and general merchandise.

4. Price Gap and Consumer Behavior:

   • Price gap with competitors has widened, but price sensitivity may increase if no further stimulus is provided.
   • Convenience has become more important and is likely to remain a key factor.
   • Structural improvements in e-commerce profitability are being made, driven by sales growth, fixed cost leverage, and higher-margin categories.

5. Holiday Season Outlook:

   • Merchants are preparing for a different holiday season, with a focus on making it special despite economic uncertainties.
   • Expectations for increased spending on home decor and other festive items, similar to trends observed during economic downturns.

6. E-commerce Profitability:

   • Positive trends in e-commerce profitability, driven by sales growth, improved contribution margins, and fixed cost leverage.
   • Capital investment for e-commerce is expected to remain in the $10 billion to $12 billion range, with potential increases if growth accelerates.

7. Margin Structure and Expenses:

   • Gross margins may fluctuate, but the focus is on maintaining or improving operating profit margins through expense management.
   • COVID-related expenses are expected to continue, but at a reduced level compared to Q1 and Q2.
   • Wage pressures are monitored geographically, with a focus on retaining and attracting talent in competitive markets.

8. Capital Allocation:

   • No specific plans for share buybacks, but the company remains flexible and committed to capital investments.
   • A share repurchase grid is in place, based on stock price levels.

9. Strategic Acquisitions and Divestitures:

   • Open to enabling-type acquisitions that bring value in terms of brands, technology, or talent.

   • Divested certain e-commerce assets to focus on core areas, with a continued emphasis on critical categories like footwear and intimates.