A USA based multinational retailer, Wal-Mart Stores Inc. operates as a global chain of discount department stores and a chain of warehouses. Wal-Mart has more than 11 000 stores in 28 countries, is the world’s largest company by revenue, employs over 2.2 million employees and has approximately 262 million active customers per week. Locally, Wal-Mart owns Mass-Mart, which make up stores that are part of our everyday lives in South Africa like Makro, Game and Builder’s Warehouse.
As a brand Wal-Mart has a strong global reputation and is one of the most stable brands in the world. Wal-Mart has increased its revenue, profits and earnings per share for the past 20 years and has posted an earnings growth of nearly 10% over the last seven years. Ranked at number 26 in the world by the Brandz 100 report, the company’s foundation is the promise of “everyday low prices”.
The Wal-Mart share price is down over 16% in the last 12 months.
Source: Google Finance
What happened?
In short, Wal-Mart has failed to deliver on an inspiring employee and customer experience. They are also being outdone online by gigantic ecommerce companies like Amazon and Alibaba, which are now the world’s top 2 most valuable retail brands according to the Brandz report in 2015.
| # | Top 5 Retail Brands | Brand Value 2015 $M | Brand Contribution | Brand Value % Change 2015 v 2014 |
|---|---|---|---|---|
| 1 | Alibaba | 66,375 | 2 | N/A |
| 2 | Amazon | 62,292 | 4 | -3% |
| 3 | Walmart | 35,245 | 2 | 0% |
| 4 | The Home Depot | 27,705 | 2 | 25% |
| 5 | Ikea | 17,025 | 3 | -12% |
| Source: BrandZ Report 2015 | ||||
During its latest annual shareholder’s webcast, Wal-Mart have detailed their plans for the future and how they intend to continue growing over the next three years and beyond. The new CEO, Doug McMillan has clearly outlined the growth strategy and the drive towards seamless sustainability. They have put in place a decisive strategy that aims to change and grow their current business.
In their latest webcast, McMillan admitted that one of the main reasons for the drop in revenue in 2015 is directly related to the fact that in 2014 they still hadn’t fully understood the need to evolve fast enough as a business. Their focus is to invest in people and technology, thereby empowering their employees and improving the customer experience. Wal-Mart has been working on building their e-Commerce business, refreshing the customer experience and aims to be a true internet technology company in the next three years and their shopping app has become one of the top three apps in retail.
Digital innovation is core to any business of the future and Wal-Mart have placed this at the core of their strategy. Their plan has three integral components:
- Win with stores, by giving customers a true shopping experience. Wal-Mart are empowering their employees to take more responsibility in the customer shopping experience.
- Enhance the supply chain capabilities by connecting warehouses and improving efficiency and accuracy, thus creating a dynamic, connected and sustainable supply chain.
- Build deeper digital relationships with their customers in an attempt to “be the first to deliver a seamless shopping experience at scale”. Wal-Mart believe that providing a seamless experience across e-commerce and physical stores is their key advantage.
When it comes to its shareholders, Wal-Mart has three priorities; growth as an organisation, dividend payments and share repurchases. Wal-Mart has increased its dividend payments every year for 42 years.
With their new strategy firmly in implementation stage, it is clear that purchasing Wal-Mart shares at its current price may provide a great buying opportunity if Wal-Mart can execute. Buying shares in Wal-Mart is an example of the “buy low” philosophy of successful investing. Should you be looking to invest in a global brand such as Wal-Mart contact AXIAM.