US retail colossus Walmart supersized its AI ambitions as it disclosed its crucial fourth quarter results this week.
C Douglas McMillon, president and CEO, said it had “finished the year with another quarter of strong results”.
The big box giant's revenues for the three months to January 31 came in at $180.6bn, up 4.1% on the year. Net income before taxes was $7bn, down 7.4% on the year. Full year revenues were $680bn, up 17.5%, with pretax net income of $26.3bn, up 20.4% year on year.
McMillon paid tribute to “our associates…doing a great job.” But he also disclosed that the company was stepping up its use of AI. Last November, it disclosed it was putting its "valuable" datasets "to work" to improve customer experience and help its staff perform their daily work.
This week he shared more examples, disclosing a new AI agent for it merchants dubbed Wally. [For the benefit of British readers, the retailer is sometimes dubbed Wally World]
“Wally is learning to help us get to the root cause of issues related to things like out of stocks or overstocks with more accuracy and speed,” according to McMillon.
More broadly, he said, the company’s developers had access to “coding assistance and completion tools that are helping streamline deployments and deliver code faster with fewer bugs”.
The company had saved about 4 million developer hours last year thanks to these, McMillon said. “This year, we plan to make these tools available to all developers in North America and India.”
Walmart has long been a digital pioneer. CRO John David Rainey said that, “Global e-commerce penetration is now 18% of sales, about 1,100 basis points higher than it was in FY 2020.”
In the US he continued, “We've built marketplace capabilities to broaden our assortment while also growing the average number of e-commerce orders fulfilled from stores by over 500 million orders, without new store growth during that time period.”
At the same time, he said, it was looking to digital solutions “to differentiate ourselves in the warehouse club channel.
Overall, Rainey said, “We expect CapEx to range between 3% and 3.5% of sales, as we invest in technology to optimize our supply chain, remodel stores and open new stores and clubs in both the US and certain international markets.”
But digital investments can cut both ways. Rainey said, in response to an analyst question on SG&A costs, “The SG&A related to a digital transaction, an e-commerce transaction is higher than it is for brick-and-mortar.
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“So historically, we thought of our business when it was more brick-and mortar as 20% or maybe slightly below that was a good way to think about the cost profile of that business. As our business moves more digital, it's going to create pressure there. It's just a channel mix equation.”
That said, he continued, “as you think about our cost structure going forward, one of the big drivers is going to be the improvements that we see in supply chain automation. We're already seeing that. We're encouraged by some of the early productivity metrics.”
With less than half of its US stores are served fully by automation, he said, “There's a lot of benefit still to come here as we automate our supply chain.”
