Wal-Mart said sales will be “relatively flat” in the current year

Wal-Mart said sales will be “relatively flat” in the current year

Wal-Mart has said it will add capabilities to its supply chain in a bid to be more efficient as the US retail giant cut its profit forecast for the next fiscal year.

Speaking at the group's investor day yesterday (15 October), CFO Charles Holley said he expects earnings to fall 6% to 12% in the year ending January 2017, as a result of investments in low prices and rising worker wages.

In August, Wal-Mart had lowered its EPS forecast for fiscal 2016, saying it expects earnings of between $4.40 and $4.70 per share, down from a previous forecast of $4.70 to $5.05 per share.

The company said it expects net sales to grow 3% to 4% annually over the next three years, but added that they will be “relatively flat” in the current year as a result of currency exchange.

“We have experienced increasing sales momentum in our Wal-Mart US business and we continue to see improvement in our customer traffic,” Holley told investors. “However, the impact of currency on our total global growth has been much stronger than we anticipated a year ago.”

Addressing the firm's strategy for growth, CEO Doug McMillon said Wal-Mart will look at adding capabilities to its supply chain.

“It has been one of our most important strengths and we are working to morph our supply chain of today to enable us to win in the future. Today most of our distribution centres were obviously built for the purpose of serving stores. We are changing that to have a stronger [each] capability for moving individual items.”

McMillon said Wal-Mart will connect its various types of distribution centres and improve its inventory accuracy and efficiency.

“Optimising the inventory in our system is a huge lever to serve customers better and to take a lot of cost out, not only through transportation and handling but also through markdown elimination,” he explained.

“A dynamic connected supply-chain with improved forecasting leveraging predictive analytics can serve customers and reduce cost by merging truckload, pallet, case and each movement. Accurate inventory placement is a really good way to make money. Moving forward our supply chain will be an even more effective asset, if it is resilient and more sustainable.

“We are actively engaged in reshaping the systems in which we work. We cannot only strengthen our business but use our scale and our capabilities to make a real difference in the world.”