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A winning position

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BENTONVILLE, Ark. — Wal­mart’s deep and diverse leadership team is moving to transform the company into a swift-moving innovator with a unique collection of assets that place it in position to win in the future while also delivering good financial results in the short term, president and chief executive officer Doug McMillon told Wall Street analysts during the company’s annual investors day ­conference.

“These are exciting times that are full of opportunity,” McMillon said. “To seize the moment, we’re changing. We’re adapting. We continue to transform the company, how we think and how we work, with one goal — and that is earn the business of our existing customers, as well as new customers, today and tomorrow.”

Walmart’s combination of physical and digital assets positions it to prevail in an omnichannel retail environment, he said. “And we believe that is the winning model.”

Furthermore, Walmart is investing “thoughtfully” to plant the seeds for the future. “We are building our ecosystem where we see lots of opportunities,” he said.

The company is learning from mistakes as it amasses new assets that can better leverage its strengths and relationships for future growth, McMillon said. Walmart in recent months has shuffled its international portfolio, taking a 77% stake in India e-commerce company Flipkart while divesting its struggling Brazilian business and agreeing to sell a majority stake in its British grocer Asda to rival J ­Sainsbury PLC.

The partnership with Flipkart is one of several Walmart has formed to bolster its logistics capabilities. Others include tie-ups with third-party delivery services such as Doordash, Postmates and Rakuten in Japan that can help Walmart with costs associated with the “last mile” — moving merchandise from distribution warehouses to the people who bought it.

The company also continues to invest in technology innovators through Store No. 8, its incubation arm, said Marc Lore, CEO of Walmart U.S. eCommerce. Same-day delivery is integral to the company’s online strategy, Lore said, and 40% of Americans will have access to same-day delivery from Walmart in the coming year. JetBlack, Walmart’s concierge-style shopping service that offers text recommendations, ordering and same-day delivery to customers in Manhattan, is providing the company with great insights in this area, Lore said.

Janey Whiteside, Walmart’s chief customer officer, summarized the company’s efforts to court higher-end consumers by offering brands that are new to Walmart, such as plus-size clothing brand Eloquii, men’s wear line Bonobos and online indie clothing retailer ModCloth. “Our customer set is widening,” she said. “As we build omnichannel convenience and add new brands and services, we will continue to lean into that.”

The $16 billion deal for a controlling stake in Flipkart is the biggest in Walmart’s history. McMillon said he’s not sure when the Flipkart deal, or the rest of the e-commerce division, will become profitable.

The Flipkart price tag was the biggest factor in a lowered earnings projection for fiscal 2019 that Walmart unveiled ahead of the October 16 conference with investors. Walmart now expects per-share earnings for the fiscal year ending in January of between $2.65 and $2.80, down from the earlier forecast of $2.90 to $3.05. Adjusted EPS is now pegged at $4.65 to $4.80 compared to the earlier $4.90 to $5.05.

But prospects for fiscal 2020 look promising, Walmart said. The company predicts U.S. sales growth will rise 3% or more and U.S. same-store sales growth will increase between 2.5% and 3% next year. Walmart estimates its net international sales growth will be around 5%, including the positive effect of Flipkart and the damage from the divestiture of Walmart Brazil. The company expects to open about 300 stores internationally next year, with expansion focused on China and Mexico.

“Sometimes we plant seeds and they grow quickly. Sometimes they take a while. Sometimes we start something, a 1.0 version, that doesn’t work, but by version 3.0 or 4.0, it does,” McMillon said. “Expect us to test a lot and fail sometimes. But along that journey, you should expect some successes and occasionally some big wins.”


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