CNBC: “To get to everyday low prices, you have to have everyday low costs.
Wal-Mart touched on that point Tuesday as it met with the financial community in its hometown of Bentonville, Arkansas.
In the midst of reviewing its forecasts and strategic plans for the next couple years, the world’s largest retailer noted how it has spent billions cleaning up and improving its store experience, lowering prices, paying employees more, and improving its e-commerce capability and efficiency.
“A simple change to our plastic bags at Walmart U.S. resulted in an annualized savings of approximately $20 million,” explained Brett Biggs, its chief financial officer. “A decision to shorten the length of the receipts, saved over $7 million.”
The retailer has been disciplined with expenses, but Biggs warns the hurricanes and some back-end technology spending could cause total expenses to be slightly higher than originally planned.
But after several years of heavy spending to improve e-commerce, those related expenses are expected to begin to come down.
“When you are building out an online business, you are building a second business,” Moody’s analyst Charlie O’Shea explained in an interview with CNBC. “You are going to start to see those two businesses converge and I think you will be able to shake expenses out of the system and I think Wal-Mart is in the early stages of that.”
Wal-Mart renegotiated terms with many suppliers to lower the costs of the goods in order to pass those savings onto shoppers. During the presentations Tuesday, several executives suggested there is still more that could be done there, and Wal-Mart continues to work on it.
Wal-Mart investors appeared to like what they heard, with the shares ending the day up 4.5 percent.”
