Walmart CEO: Government should provide additional stimulus

Walmart CEO: Government should provide additional stimulus

CNBC’s “Squawk Alley” team is joined by Walmart president and CEO Doug McMillon to discuss the company’s quarterly results, outlook, raising the minimum wage and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

Walmart on Thursday reported fourth-quarter earnings that fell short of Wall Street’s expectations as the retailer aims to turn the strength of its e-commerce business during the pandemic into lasting momentum and higher profits by boosting investment.

Shares were down nearly 6% Thursday morning, as investors reacted to the retailer’s warning that it expects sales to moderate this year. It said earnings per share will decline, but will range flat to slightly higher after excluding divestitures.

The big-box retailer has benefited from pandemic trends, as Americans buy more groceries, cleaning products and other essentials. It also got a boost in the fiscal fourth quarter as many customers spent their stimulus checks. But the pandemic has also increased its costs — in the fourth quarter alone Covid-related expenses tallied $1.1 billion.

Part of Walmart’s recent strength has come from investments it made long before the health crisis to boost its online business so it could provide services like curbside pickup and speedy delivery.

Walmart CEO Doug McMillon said at a virtual investor conference Thursday that it is retooling its business to better serve customers, tap new revenue streams and create a diverse ecosystem of services, from delivering groceries to people’s fridges to offering annual health checkups and new kinds of financial services. It’s also bulking up its advertising business.

“Think of it as a flywheel that’s spinning, powered by a mutually reinforcing set of assets,” he said, in explaining how each of the businesses will support each other.

He said it will step up investments to adjust to the significant ways the pandemic has transformed the retail business. For example, he said Walmart will spend on automation to speed up the number of curbside pickup orders it can fill.

All told, Walmart is targeting about $14 billion in capital expenditures this fiscal year, up from a rate of $10 billion to $11 billion, as it invests in supply chain, automation and improvements to the customer experience, the company’s CFO Brett Biggs said.

McMillon described Walmart+, its subscription service, as “an important piece of our strategy.” He said the membership program, which launched in the fall, will drive repeat purchases by customers and give the company valuable data it could use to tailor their experience and grow its ads business. The service costs $98 a year or $12.95 a month.

He said it will also boost the wages of U.S. workers, raising the average for hourly employees to above $15 per hour.

“This is a time to be even more aggressive because of the opportunity we see in front of us,” he said in a news release. “The strategy, team and capabilities are in place. We have momentum with customers, and our financial position is strong.”

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