Wal-Mart touts distribution centers and store updates as a growth strategy
January 17, 2017 03:16 PM
(Bloomberg)—Wal-Mart Stores Inc.’s slowdown in opening new stores—part of a push to increase e-commerce investment and cope with sluggish brick-and-mortar sales—is now being touted as a growth plan.
On Tuesday, the company announced its intention to open, expand or relocate 59 Wal-Mart and Sam’s Club locations this year. While that adds 10,000 retail jobs, the expansion is far smaller than in many previous years and would increase its headcount by less than 1% in the U.S.
Wal-Mart, No. 4 in the Internet Retailer 2016 Top 500 Guide, faces more pressure to show that it’s creating U.S. jobs ahead of Friday’s inauguration of President-elect Donald Trump, who has made the issue a signature of his campaign. In a statement Tuesday, Wal-Mart pointed to a plan for $6.8 billion in U.S. capital spending, including the construction of stores and distribution centers, though it previously announced that number last year.
“Trump is not afraid to get out in the press and tweet,” said Brian Yarbrough, an analyst at Edward Jones. “This is another sign of them trying to get out in front of things.”
Investors applauded the approach, sending Wal-Mart’s shares up as much as 3.2% to $69.29. The gain was the biggest intraday increase since May and moved the stock into positive territory for the year.
Wal-Mart is the largest private employer in the U.S., casting a big spotlight on the company as Trump heads for the White House. It has almost 1.5 million workers in the U.S., out of 2.3 million total. In addition to the 10,000 retail positions, the new and expanded stores will bring an estimated 24,000 construction jobs this year, the company said.
“We’re going to be selective in what we’re opening,” a spokesman for the Bentonville, Ark.-based company said. “We know we’re driving our U.S. growth.”
The company joins many of the largest U.S. businesses in boasting about job creation. General Motors Co. announced a $1 billion investment plan on Tuesday, though the money mostly came from models and plants that have been long in the works. The nation’s top automaker said it will add or retain about 7,000 salaried and hourly workers, including almost 2,000 in domestic factories. Last week, Amazon.com Inc. (No. 1 in the Top 500) vowed to hire more than 100,000 people in the U.S. in the next 18 months.
Trump saluted GM and Wal-Mart in a tweet on Tuesday, thanking them for “starting the big jobs push back into the U.S.!”
But when Wal-Mart originally announced its capital-spending plan in October, it was characterized as a slowdown of new store openings. The company told investors it would count more on e-commerce and existing stores.
Wal-Mart “plans to slow new-store openings, while increasing investments in e-commerce, technology, store remodels and other customer initiatives,” the company said at the time.
The customer initiatives include Wal-Mart’s pledge to invest $250 billion in products that support the creation of American jobs by 2023—a commitment that remains on track, said Dan Bartlett, executive vice president of corporate affairs.
“We’re aggressively pursuing to remove barriers to make manufacturing in the United States as strong as possible,” Bartlett said Tuesday at the U.S. Conference of Mayors in Washington.
The traditionally bricks-and-mortar retailer also has made a big e-commerce push, including last year’s $3.3 billion acquisition of Jet.com. While the acquisition seems to have helped boost online sales growth, CEO Doug McMillon said on Tuesday that there’s still a long way to go.
“We gave some others a head start—we’re trying to catch up,” McMillon said at the annual World Economic Forum in Davos, Switzerland. “We have to build technology into the company more than ever before and become more of a digital enterprise. That requires different ways of working.”
Publicity aside, Wal-Mart doesn’t really need to add a bunch of new stores, Yarbrough said.
“Opening more supercenters to me is probably the wrong avenue,” he said. “If e-commerce becomes as big as everyone thinks it’s going to be, you’re not going to need 3,800 retail and discount stores across the U.S. When you have that many, do you really need to open more?”