The new East and the old West
Walmart’s past and future collided this week in a stark juxtaposition of events. While the company’s lawyers were engaged in oral arguments before the U.S. Supreme Court stemming from events in the past, senior executive of the international division were gathered with financial analysts in a hotel ballroom in Shenzhen, China to discuss the future.
The issue before the Supreme Court relates to a bygone era when Walmart’s approach to its U.S. business was dramatically different than it is today and women were paid less and received fewer promotions. The result was allegations of sex discrimination on the part of a handful of female workers, which were vigorously disputed by Walmart. As plaintiffs’ lawyers sought class action status Walmart continued its vigorous defense, and now 10 years later Supreme Court is being asked to determine whether current and former female employees can be certified as a class.
Walmart’s approach to matters of personnel and promotions has come a long way during the past decade, but litigation by its nature is backward-looking, as the parties attempt to resolve differences related to historical events. Conversely, it was all about the future at the analysts’ meeting in Shenzhen where senior executive of the international division, including president and CEO Doug McMillon, detailed growth strategies for an international division that is poised to one day surpass the U.S. division’s sales and profits.
It’s got a ways to go since Walmart U.S. had sales of $260 billion, but international is growing more rapidly and opportunity is more abundant. Walmart International ended the most recent fiscal year with 4,573 units in 15 countries that generated sales of $109 billion and an operating profit of $5.6 billion. According to McMillon, that makes Walmart International a good business, but he wants to make it great.
“What we’ve got to do is continue to drive some growth in really profitable markets like Mexico and Canada where we have terrific returns and continue to drive growth in a country like the U.K. that is our largest revenue country and then simultaneously lift other international markets like Brazil and China to a higher level of profitability without slowing down the growth so the portfolio has a better return,” McMillon said during the meeting. “That is what we are focused on doing.”
The formula for global growth hinges on four components. Growing same store sales at existing store while continuing to open new stores will be key growth drivers as will a heightened emphasis on e-commerce and multichannel capabilities. Then there is the issue of acquisitions in new and existing markets and the ongoing emphasis on what Walmart refers to as majoring in the majors.
“If you want to know where we are interested in going to next as it relates to new markets just do the math on big markets with high growth rates,” McMillon said. “It’s that simple. What we are looking for is the size of the opportunity, the growth rate of the opportunity and our ability to gain share.”