Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
US consumers heading out on Black Friday shopping trips to Walmart may not realise they are visiting a branch of the latest hot tech stock. But after half a century on the New York Stock Exchange, the discount retail giant is about to relist on the Nasdaq, an index more often associated with fast-growing start-ups or tech titans such as Nvidia or Google. That what is still the world’s largest company by sales can rebrand itself, at least by association, as a growth stock is striking. It says much about its transformation under CEO Doug McMillon, who is stepping down after 12 years.
Walmart is the latest in a stream of companies to shift to Nasdaq, and far from the first in consumer goods or retail. But with a market capitalisation of $870bn, it is by far the most valuable to do so. It is also not long since it appeared to be running out of growth.
McMillon took the reins when Walmart was struggling to expand into ecommerce and in danger of being left in the dust by Amazon — which in 2015 steamed past it in market value. It was seen as a ruthless, price-focused operator, killing off Main Street stores while paying its workers some of the lowest rates in US retail. Same-store sales had been stagnant for several quarters. McMillon’s successful makeover of Walmart has two broad lessons.
One is the value of treating employees better. McMillon in 2015 launched a $2.7bn plan to raise salaries, greeted initially by a sharp stock sell-off. But improving starting wages, expanding parental leave and helping employees earn degrees and qualifications softened the retailer’s image. Most importantly, it raised morale, reduced staff turnover and improved the customer experience. Such initiatives have undoubtedly played their part in the quadrupling of Walmart’s stock price under McMillon.
The other lesson is the power of investing in technology — done right. McMillon has doubled capital spending to more than $20bn a year, powering a pivot from a bricks-and-mortar behemoth into an “omnichannel” retailer.
Operations are being automated and regional distribution centres equipped with robots to assemble pallets. The key strategic decision, though, has been to build Walmart’s US ecommerce operation around using its 4,600 American stores as fulfilment centres for in-store pick-up and home deliveries. Contrast that with Kroger, the biggest US grocer, which chose to build vast, expensive distribution centres in a partnership with Britain’s Ocado, an online grocery pioneer. Kroger said last week it was closing three of the eight automated warehouses already built.
While Walmart has embraced AI in the supply chain, store operations and online sales (including partnering with OpenAI to sell via ChatGPT), it has sought to carry staff with it. McMillon has asserted that “AI is going to change literally every job” — and eliminate many — but insisted the retailer’s goal is “to create the opportunity for everybody to make it to the other side”.
Companies scurrying to acquire the patina of tech-driven businesses has echoes of the dotcom boom. Some will fear it is a similar top-of-the-market signal. But Walmart’s reinvention has avoided it becoming an also-ran and kept it in the game; Forrester, a research group, estimated last year that Amazon and Walmart would together control two-thirds of a projected $1.8tn in US online sales by 2029.
Walmart’s example also suggests the line separating “tech stocks” from more traditional companies is increasingly blurred. Amid concerns that AI’s potential is being overhyped, investors are demanding proof that tech investment dollars are being well spent. But while they may not all rush to follow Walmart on to the Nasdaq, other industrial, financial and consumer stalwarts will be under pressure to demonstrate that they have credible digital transformation plans, too.