Walmart reported 69% online sales growth and an 8.6% same-store sales bump in the U.S. during Q4 2021, which ended Jan 31, 2021. Total revenue for the full fiscal 2021 was $559.2 billion, up 6.7% from fiscal 2020. The retailer will build on this momentum by accelerating investments in services across the company and increasing wages for 425,000 frontline workers.
Walmart is retooling its business to better serve its shoppers, tap new revenue streams and create a diverse ecosystem of services said CEO Doug McMillon at a virtual investor conference, according to CNBC. Recent innovations on this front have included expanding its advertising business with an emphasis on in-store omnichannel experiences and adding new kinds of financial services. McMillon described the businesses as supporting each other like “a flywheel that’s spinning, powered by a mutually reinforcing set of assets.”
Creating and expanding these businesses will require major investments during the coming fiscal year. Walmart is planning to make $14 billion in capital expenditures, up from its recent rate of $10 billion to $11 billion annually. This capital will be invested in supply chain, automation and improvements to the customer experience, according to CFO Brett Biggs.
The new investments are building on the strategy Walmart launched more than five years ago, which has included spending billions on higher wages to improve customer service and enhancing the supply chain to reduce prices, helping the retailer reach its current peak. Charlie O’Shea, VP at Moody’s, believes the new expenditures will let the massive retailer solidify these gains.
“Walmart’s accelerating CapEx spend will crank up the competitive pressure, particularly in the U.S., with the 40% increase in spend for 2021 being deployed offensively, building on the momentum it has been generating over the past several years,” said O’Shea in commentary provided to Retail TouchPoints. “Looking back on the blockbuster 2015 announcement, which articulated the strategy that has resulted in the company’s current formidable position, this round of investment is different as it is much more offensive in scope, and is intended to leverage Walmart’s numerous strengths, including its exploding online capability that leans heavily on its stores.”
Walmart isn’t just investing in infrastructure. In addition to giving 425,000 store associates a raise, the company will increase starting rates to $13 to $19 per hour, based on the store’s location and market. The change will help the retail giant compete with Target’s and Amazon’s $15 minimum wages, improving Walmart’s ability to recruit and maintain high-quality employees in customer-facing positions and grow them into bigger roles.
“Whatever your role, know that we’ll continue to support and invest in you,” said John Furner, President and CEO, Walmart U.S. in a message to Walmart associates. “This is especially true for our hourly associates: 75% of our Walmart management team began as hourly associates, and we’re committed to offering strong wages, valuable benefits and training and development opportunities that allow someone to grow a career with us.”
Walmart doesn’t expect these investments to pay off immediately. The company warned that sales will level off over the course of fiscal 2022 due to the impact of unnamed “anticipated divestitures,” with net sales expected to grow in the low single-digits and operating income to range from flat to up slightly. However, the efforts should position the retailer for continued growth in the post-COVID environment.