Wal-Mart's CEO urges employees to reimagine the company's future

FAYETTEVILLE, Ark. -- Wal-Mart's CEO urged employees on Friday to reimagine its future in a fast-shifting retail landscape.

The company is at a crossroads, as its long-held dominance in pricing and convenience has been chipped away at by Amazon and dollar stores. But it's fighting back on multiple fronts, growing more aggressive with prices and going after Amazon, both online and on the doorstep, by expanding delivery services to cater to shoppers who want to buy anywhere, anytime.

"We want to make every day easier for busy families. We're connecting all the parts of Wal-Mart into one seamless shopping experience with great stores, easy pickup, fast delivery and apps and websites that are simple to use," chief executive Doug McMillon said at the annual shareholders' meeting.

The event was packed with 14,000 people including nearly 6,000 Wal-Mart workers as well as shareholders, analysts and several Walton family members. The legacy of the company's late founder Sam Walton still resonates, with executives paying homage to his philosophy of low prices and customer service. Part business meeting, part pep rally, the meeting was hosted by comedian James Corden and featured musicians Katy Perry, Nick Jonas, Maxwell and Andy Grammer.

Entertainment aside, Wal-Mart emphasized ways in which it's working to be more nimble.

The company is spending money on its stores and its staff. It's in the second year of a $2.7 billion investment in training and higher wages, with the goal of making Wal-Mart a place people want to be.

Changes have been painful at times. The company announced this year it would shutter 269 stores worldwide, about half of them in the U.S. That's a tiny fraction of its locations worldwide, but was a rare pruning for Wal-Mart, particularly on its home turf.

Yet those maneuvers to spruce up stores and increase wages appear to be paying off.

The company posted its seventh consecutive quarter of rising comparable-store sales at U.S. Wal-Mart locations, which account for 62 percent of annual revenue. It expects sales to grow again this quarter. Traffic counts are up for the sixth straight quarter.

Amid a disastrous quarter for many retailers as a whole, Wal-Mart excelled.

But red flags have appeared as Wal-Mart digs in to fend off Amazon.com. Overall revenue in the fiscal year ended in January declined slightly to $478.6 billion, excluding revenue from membership fees and other income. That's the first annual drop since the company went public 45 years ago.

Wal-Mart's e-commerce growth has slowed dramatically even as it escalates investment there. Global e-commerce sales growth slowed to 7 percent during the first quarter, a notable downturn from nearly 30 percent two years ago.

"Domestically, Wal-Mart's challenge remains unchanged as it attempts to adapt to a changing retail environment in which stores are only 'part' of the environment and not 'only' the environment," wrote Credit Suisse analyst Michael Exstein.

Still, Wall Street appears optimistic. Wal-Mart shares are up 16 percent this year, while the Standard & Poor's index for multiline retail is up only 2.5 percent.

McMillon said afterward that Wal-Mart has past practice on its side. "We've got the history of studying competition," he said. "We can see what's happening with customers." He added that Wal-Mart is picking up the pace of change and doing plenty of experimentation.

Some details on steps Wal-Mart is taking:

• Reprioritizing prices: Wal-Mart is cutting prices on an array of products over the next few years, though it's not releasing specifics. Executives said that in the past few years, it hadn't been as aggressive on prices as it should have been. The company is also bringing back the smiley face in stores and TV ads after a decade, saying nearly 70 percent of customers still equate the image with savings.
• Expanding online: Wal-Mart is increasing its online options, including groceries. It's rapidly expanding into new markets for its online grocery pickup; it will be in over 200 stores in about 55 markets by the end of the month. It also plans to test grocery deliveries in Denver and Phoenix using ride-hailing companies Uber and Lyft. That joins a pilot program making the online delivery service Deliv available to Sam's Club customers in Miami.

Wal-Mart trimmed the delivery time for its free-shipping pilot program to two days from three, and it's cutting a dollar off the membership price to $49 a year. Amazon membership costs $99, but it comes with many other perks. Wal-Mart also is rolling out its own mobile payment system at every store nationwide by the end of this month.

• Sprucing up stores: Wal-Mart is focusing on improving the fresh produce offerings at its U.S. namesake stores, which drives frequent traffic. It's also refining its baked goods area and lowering store sight lines to help shoppers navigate. Wal-Mart has said customer scores on satisfaction have improved.
• Improving distribution: Wal-Mart ships goods directly to customers from 80 stores and uses 4,500 stores as pickup points. But it's also trying to fulfill orders more quickly at distribution centers. It offered a peek at a drone it's testing that skitters around, taking 30 pictures per second and flagging misplaced items. Wal-Mart says drones let it confirm inventory in about a day or less, rather than taking a month. The technology could be rolled out in the next six to nine months.

At the meeting, shareholders approved a makeover of the board and rejected three shareholder proposals. Walton family descendants hold about 50 percent of shares. The number of board members shrunk from 15 to 12, but still has three Walton family members as directors. That includes its chairman, Greg Penner, the son-in-law of Robson Walton, son of the late founder.