Doug McMillon, president and CEO of Walmart Inc. Corporation, participates in a panel discussion on the “Future of Work in an Era of Automation and Artificial Intelligence,” during a CEO Innovation Summit, December 6, 2018 in Washington, D.C. , DC.
Mark Wilson | Getty Images
FAYETTEVILLE, Ark. — Thousands of Walmart employees gathered in a huge arena on Friday, dancing as the Jonas Brothers headlined the return of the annual event which acts as a pep rally for the company. Yet despite the festive backdrop, CEO Doug McMillon acknowledged the new challenge facing the company: inflation.
Between loud cheers and celebrity acts, McMillon praised how employees around the world have persisted during the pandemic while dealing with reduced workforces due to Covid. He noted that sales have increased even as stores struggle to keep shelves stocked. And he vowed the company would avoid repeating disappointing first quarter results, when inflation ate away at profits.
“We’re working to fix this and improve our performance as the year progresses,” he said, adding that Walmart’s workforce is “resilient and we like the challenge of retail.”
Later in the day, McMillon also told analysts the company was reviewing its spending and pushing vendors to cut and absorb some costs. And he noted that Walmart taps into the expertise of its executives who operate in Brazil and other countries with a history of high inflation.
“We have been working very hard on costs from top to bottom, taking steps to reduce our costs so that the second quarter is better than the last quarter, and we are on the right track,” he said during the interview. an investor event near the company’s headquarters. headquarters in Bentonville, Arkansas.
His comments came just weeks after Walmart’s stock had its worst day in 35 years. In mid-May, the company reported quarterly earnings below Wall Street expectations as rising fuel and freight costs hurt profits. CFO Brett Biggs also noted at the time that skyrocketing inflation was weighing on customers, with some buying half-gallons of store-brand milk and deli meats to save on grocery bills.
Walmart’s quarterly performance – and similar results by Target – helped drag down corporate stocks and broader markets, with Walmart closing 11.4% on the day it reported earnings. Shares of the company have fallen about 13% so far this year, roughly matching the S&P 500 index.
Walmart’s annual gathering is known for its party atmosphere and traditionally coincides with its shareholders’ meeting. Employees from around the world descend on Walmart’s birthplace for the event, donning company apparel and waving flags of their home countries, at the Bud Walton Arena on the University of ‘Arkansas. Friday marked the return of the event since the pandemic.
In a Q&A with analysts, McMillon said Walmart’s team has responded “in a very detailed and aggressive manner” in recent weeks as it strives to become even more profitable.
“Some people in the business kind of called it ‘old school Walmart,'” he said, referring to the company’s nearly 60-year history of obsessing over details to keep prices down. down.
McMillon also noted that the company is closely monitoring the spending habits of its most value-conscious customers and making sure the prices of the staples that feed their families stay close at hand. And since middle- and upper-income customers are also looking to stretch their budget, he said Walmart will try to lure them in with clothes and other items they might not have bought from Walmart before.
He said it could ultimately help the company gain market share and increase profits.
“If the world is under more pressure and people are generally more aware of values, we’re the place to go,” he said.