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Oct. 22, 2018, 1:32 p.m. EDT

Walmart will save $20 million annually on floor wax

The retail giant once again raises the possibility of higher prices due to tariffs

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By Tonya Garcia, MarketWatch


Bloomberg
Walmart discussed its approach to spending, which includes items and services for business operations

Walmart Inc. has found a new way to save millions of dollars: Switch the floor wax it uses in its stores.

According to the retail giant’s Chief Financial Officer Brett Biggs, Walmart /zigman2/quotes/207374728/composite WMT +0.30%   switched to a new floor wax that’s both cheaper and more effective, reducing the number of times the floors have to be buffed.

“That one change in floor wax will save us over $20 million a year,” he said, according to a FactSet transcript of the company’s Tuesday investment community meeting. “So these small differences can make a big difference to Walmart.”

That is just one example of the ways the company is approaching how it spends, and finding ways to modernize its operations.

Read: Christmas sweaters will be in style this holiday season

“The allocation of capital is quite different from before and aligned with how we’ll serve customers in the future,” Biggs said. “We’ve shifted spending away from new stores and clubs in the U.S… and have allocated more capital to e-commerce, store remodels, supply chain and technology. And this is roughly the type of allocation I think you can expect over the next couple of years.”

In his remarks, Chief Executive Doug McMillon emphasized the “cultural change” that’s happening at Walmart, emphasizing things like the use of blockchain for food safety and the removal of emissions from its supply chain. He also talked about the trial-and-error that it takes for some of the changes to be successful.

“Of course some of the things we’ve tried didn’t work or haven’t worked yet,” he said. “We tried grocery delivery with Uber and Lyft, but switched to others as we all learned it’s different to move a grocery basket than it is to move people or a restaurant order.

“We don’t have the right model to scale associate delivery yet, but it makes sense, so we’re working on the next iteration,” McMillon said.

Analysts left the meeting upbeat about the path Walmart is on.

See: A Sears liquidation could create some winners and over 100,000 losers

“Walmart is seizing the moment to transform through innovation and utilization of unique store, grocery and people assets,” wrote Cowen analysts led by Oliver Chen, in a note.

The retailer’s most “important weapons” include its use of 4,761 U.S. locations to execute delivery service (there are also 597 Sam’s Club locations, according to the company website), its academies that will train 500,000 associates in 2018 and its pharmacy relationships. These are also traits that make the company “un-Amazon-able,” the analysts said.

Cowen rates Walmart shares outperform with a $115 price target.

Walmart cut its profit outlook for the year, and Cowen concedes the medium-term pressures that could drive gross margin headwinds and earnings pressure. But analysts think the guidance is “achievable and beatable.”

/zigman2/quotes/207374728/composite
US : U.S.: NYSE
$ 124.06
+0.37 +0.30%
Volume: 9.77M
May 29, 2020 4:00p
P/E Ratio
23.59
Dividend Yield
1.74%
Market Cap
$350.50 billion
Rev. per Employee
$223,654
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