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Walmart Reports Record Profits, IT Transformation

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(RISNEWS, FEBRUARY 24, 2010) The retailing industry’s largest retailer reported a string of recent victories and new IT initiatives aimed at driving growth at a blistering pace in 2010. Hitting on all cylinders, the giant from Bentonville flexes its muscles by creating global.com, restructuring Walmart.com, racking up big gains through Project Impact, and starting a new round of IT investments in areas it calls “transformation projects.” Find out where Walmart is heading in 2010 and what it means for the rest of the retailing industry.

Walmart’s U.S. division delivered its highest profit ever, according to Eduardo Castro-Wright, vice chairman for Walmart during a recent earnings call with financial analysts and large investors. The retailer’s gross margin was up 53 basis points over last year’s fourth quarter and up 73 basis points for the full year. “We’re seeing benefits from investments we’ve made in systems for merchandising planning, price optimization, markdown planning, and labor productivity,” says Eduardo Castro-Wright, Vice Chairman, Walmart. “Because of our better sell-through, mark downs are down 6.3% from last year’s fourth quarter. Favorable inventory shrink results and lower transportation costs also favorably impacted fourth quarter gross profit. We are touching inventory fewer times and turning inventory much faster.”

Beyond gaining significant value from previous IT investments Walmart also announced several major new initiatives, including one called global.com. Few details are known right now about this large project, but it is intended to become a global e-commerce unit where e-commerce sites worldwide are unified in a way that makes them easily adapted to international markets. To give this new unit clear responsibility for the future of Walmart’s e-commerce ambitions, several top management executives at walmart.com have been reshuffled.

“There’s great potential for Walmart in e-commerce,” says Mike Duke, President and CEO of Walmart. “Some of these changes will yield immediate results and others, like repositioning our global sourcing and global e-commerce strategy, are more long-term focused. Walmart.com delivered sales growth over 30% in its fourth quarter compared to last year. Site traffic and order growth both exceeded the market. Additionally, fiscal 2010 traffic to the site exceeded one billion visits. Without a doubt, these results reflect the strength of the Walmart brand across multiple channels.”

After reaping the benefits of previous IT investments Walmart reports it will continue to move forward with what it calls “transformation projects.” According to Charles Holley, EVP of Finance and Treasurer, “A good example of how these transformation investments are paying off is the progress made in merchandise systems that have helped us better manage markdowns and improve space optimization, labor scheduling, and other processes.” He went on to say Walmart plans to continue the rollout of SAP throughout the organization. He cited a recent SAP implementation at ASDA in the United Kingdom, which according to Holley, “went exceptionally well.” Holley says Walmart is preparing for further “go lives” in North America in the first half of fiscal 2011.

Another major ongoing program for Walmat is Project Impact, which has delivered improved planning, reduced inventory, higher customer satisfaction scores and better merchandise sell-through, according to Castro-Wright. Walmart expects to have more than 50 percent of its store base remodeled by the end of the third quarter, reflecting the new look and feel laid out in Project Impact. “We are escalating the next phase of Project Impact to leverage our size and scale to drive greater efficiencies and lower the cost of goods to help accelerate growth,” says Castro-Wright

The PLM Customer Survey from WhichPLM: Your Solution, Your Views, Your Survey. Register your interest today!Walmart announced today it purchased Vudu, a Santa Clara, CA-based start-up company. The three-year-old online movie service is built into televisions and Blu-ray players and could help the big box retailer sell a variety of other merchandise through people’s televisions via the service. Terms of the acquisition have not been disclosed at this time.

Finally, Walmart reports that efficient inventory management continues to be a big part of its current success story and a big contributor to its free cash-flow performance, according to Castro-Wright. “We reduced total inventory by $1.8 billion in our stores and distribution centers over the last 12 months. Wal-Mart U.S. reduced total inventory by 7.6% on a full year sales increase of 1.1%.”

Source: RISNEWS

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Ben Hanson Ben Hanson is one of WhichPLM’s top contributors. Ben has worked for magazines, newspapers, local government agencies, multi-million pound conservation projects, museums and creative publications before his eventual migration to the Retail, Footwear and Apparel industry.Having previously served as WhichPLM’s Editor, Ben knows the WhichPLM style, and has been responsible for many of our on-the-ground reports and interviews over the last few years. With a background in literature, marketing and communications, Ben has more than a decade’s worth of experience, and is now viewed as one of the industry’s best-known writers.