Walmart CEO Doug McMillon joins Yahoo Finance’s All Markets Summit to discuss his outlook for retail in 2020 and beyond.
Video Transcript
BRIAN SOZZI: Welcome back to “The Yahoo Finance All Markets Summit.” I’m Brian Sozzi, joined, of course, by Walmart CEO Doug McMillon. Doug, real quick, though, I see the markets under pressure here. The Dow is down about 730 points. The S&P 500 and NASDAQ under a lot of pressure this morning on coronavirus fears. Doug, always good to speak with you here.
Listen, I’ve been going to your stores consistently throughout the pandemic, like a lot of other people across this country. What are some of the biggest changes you have implemented to this stores since March?
DOUG MCMILLON: Hey, Brian, nice to be with you. There’s been a lot of change as we’ve gone through this year. As you know, our first priority is to keep our associates safe. Our second priority is to keep the supply chain moving and drive in-stock. As you know, we’ve been challenged in a number of categories. And that continues to be the case in some instances.
Our third objective has been to try and help others with our stores being open and the company having cash flow. We’ve made decisions to support people that lease space in our stores, to hire more people, things like that. Fourth, make sure we manage this business well through the crisis. And then fifth, with the bandwidth it’s available after that, make progress on our strategy and move forward with what our goals were when we started the year.
BRIAN SOZZI: Talk to us on managing the business. How do you turn a company Walmart’s size on a dime inside an environment a retailer has never seen before?
DOUG MCMILLON: It’s been impressive. I have really appreciated how all of our associates have responded, our leadership team included. They made decisions so quickly and continue to when new information is made available, things to make it safer to shop in our stores, things to improve the safety of our e-commerce fulfillment centers. Just time after time, cycle times have really picked up. What might have taken us weeks and months to do before, we’re doing and hours and days. And it’s been amazing to see.
BRIAN SOZZI: Are the product out of stocks, are they over? It’s not just cleaning materials, it’s food. I’m in a stores. And it’s not just Walmart. It’s grocery stores. The demand has been so strong. What is driving that? And when does it stop?
DOUG MCMILLON: Things are getting better. But we still have a ways to go to recover. And I think it’s going to be a bit choppy for months to come as we all deal with the volatility and as things change. And as you know, there are virus counts changing locally that cause different behavior locally. So what you see is unique to the location that you’re in.
But our team’s really focused on in-stock. The number of receipts that we have versus that that we’ve sold in the last few weeks and months has been greater. So we’re seeing in-stock levels improve. But as we went through the year, you could see people kind of moving together. Families were at home more. They were watching the news. They were making choices about where they needed to solve for.
So we saw that initial stock-up phase that was paper goods, and dry grocery, and things to keep you safe and keep you fed. That moved to, educate my children, help me entertain the family while we’re at home. Then we saw, as the spring and summer went through, bicycles, things related the outdoors, like your backyard, and the lawn. All those things happened.
And today, what we’re seeing is, there’s been some leveling out. But with the case count coming back up, there are some areas where we’re starting to see stock-up behavior again locally.
BRIAN SOZZI: Talk to us about that a little more, Doug. Do you think there will be– a lot of these products will come back in stock for the holiday season? How will those supply-chain pressures impact the holidays?
DOUG MCMILLON: Well, our team’s had some time to react now. And our suppliers have too. So, you know, if you go back to what we were seeing in May, for example, we started to think about what holiday was going to look like and what we needed to adjust for holiday way back then. So we’ve made a number of changes. One of the kind of big set of changes is related to how we’re going to handle the sales around Thanksgiving, Black Friday and that event.
You know, we’re basically, at Walmart, trying to spread out those sales over more time, and to drive them more to e-commerce, and to conduct those sales in a way that’s safer for everybody. So spread out the store volume, try to reduce the pressure that we feel in terms of crowds in stores, and take more care of them through e-commerce and spreading out the volume in stores.
BRIAN SOZZI: Wells Fargo out with an interesting forecast for the holidays this morning, Doug. 9% projection sales increase, they came out with. But we have no stimulus. How is the lack of stimulus putting estimates like that at risk because of the lower incomes you guys focus on?
DOUG MCMILLON: Well, behavior patterns have changed. And people aren’t spending money as much to travel, and take vacations, and do some of the other things that they would have been doing. So some of that is impacting retail in the categories that we sell. I think the lack of stimulus is showing up more so with those that have been unemployed, small businesses, people that really need help.
I think it’s important that we all understand, in some ways, we’re having a shared experience because we’re all in a pandemic together. But in other ways, we’re having a very different experience. If you have been let go and you haven’t had income, you really do need some help. And so what we’ve been saying, both through the voice we have at Walmart and that of Business Roundtable, is to say to Congress and the administration, we need you to help those people that need help.
There are some industries, the airline industry, for example, lodging, that need targeted, specific assistance. And it’s important that that happen. But this country is so driven by small business that small business in particular and families that are disadvantaged need help in a way that some of the rest of us don’t. And we’d like to see that happen as soon as possible.
BRIAN SOZZI: I’m glad you mentioned the Business Roundtable, Doug. You chair the Business Roundtable. And I’m hearing from a lot of CEOs. There has been a pause in business over the past month. And they’re pinning the blame on the lack of stimulus. Have you seen a pause in business?
DOUG MCMILLON: Well, as I mentioned before, not everyone’s having the same experience. So don’t think of customers as being in one group. Generally speaking, a lot of the trends that we had seen when we released our last-quarter quarterly results are continuing. But the way that some families are feeling this is in a different category.
BRIAN SOZZI: What about– you know, I follow you on Instagram. I have for some time. What are you telling employees? You have– just following your account, you’ve been going to the stores, talking with employees. What have you told them about their interactions with consumers? I can imagine they’ve been scared to get up, and close, and personal with consumers.
DOUG MCMILLON: I think the steps that they are taking and that we’ve taken as a company have helped, social distancing, wearing facial coverings, using plexiglass, washing hands, all those things. It’s a combination of things that have to be done to keep people safe. And our associates have done a great job in that respect. And when I’m visiting stores, and clubs, and distribution centers during this period of time, I’m basically doing maybe just two things. One is, thank you.
They’re being so courageous, so dedicated, really do have a heart to serve other people. Those that needed to take leave because they may have a preexisting condition or need to take care of their family, the company has leave policies that enable people to do that. So quite a few of our folks have gone out on leave. But the vast majority of them are coming to work and making it happen.
We’ve also hired quite a few people during the course of the year, globally. The last number we shared publicly is that we’ve hired over half a million people, vast majority of those being in the United States, to help offset the demand pressure that we’re feeling and take the place of those Walmart associates that have gone out on leave. So the first thing I’m doing is saying thank you. And then the second thing is asking, what do you need?
What more can we do to help keep you safe, help keep customers safe, and serve them effectively? And the number-one answer I’m getting back right now is help us with in-stock. We need more inventory– back to your original question. But as it relates to safety, people feel like we’ve done everything we can think of to do at this moment. Now, we’ll keep learning. And if there’s something more we can do to help keep people safe, we’ll do it.
BRIAN SOZZI: Since day one that you took over– almost seven years, though. I can’t believe time has flown– Doug, you’ve been a champion of the workers. You have moved aggressively to raise wages. And that most recent wage increase, I believe, kicked in to $15 an hour in October. Are you looking at any other bonuses for workers this holiday season? Just, they are doing more work. And I’m sure they are worried about their safety.
DOUG MCMILLON: Yeah, it’s important that our associates are rewarded for the hard work that they do. And basically, Brian, I think you and I may have talked about this before. We’re trying to create a ladder of opportunity. And that starting-wage rate is just one component of an overall system. We want people to be rewarded as they move up in responsibility level. 2/3 of our management associates come from our hourly ranks.
We put in place academies to help people with education. We’ve put a dollar a day college program in to help people get college hours if they want to advance their degrees. And our compensation rate starts around the country at $11 at the lowest rate in some parts of the country. The other parts that started $15. But our strategy is not to spend all of our money think of only the starting wage rate. Our strategy is to build a system where people can come through it all the way up to my job.
BRIAN SOZZI: Switching gears here. And in the midst of pandemic, as if it wasn’t hard enough to manage through that, you also have made a play for TikTok, along with Oracle. What’s the latest on that?
DOUG MCMILLON: Yeah, we’ve had an ongoing conversation with ByteDance for a while now. And basically, what we would love to do is to play a role in the e-commerce, fulfillment, payment, and, to some degree, advertising aspects of that relationship. So the National security concerns in the US and in China, those will be resolved by government officials and Oracle, not Walmart.
We’re focused on the front end and how users might be able to interact with TikTok. And when they see something they want to buy, do it in a simple, fun, seamless way, and have a good-back end experience because of our fulfillment capabilities. So that’s an interesting relationship that could end up impacting more than just the United States.
BRIAN SOZZI: No, it’s pretty cool. When would that new form of marketplace– when would that go live? Is that within the year? Can you build it that quickly?
DOUG MCMILLON: Well, there are forms of social commerce that are happening already around the world. You can see that maybe most prominently in China. But whether it’s TikTok, or Facebook, Instagram, in some ways, Google, the digital front ends that exist– in our case, we have one with our app, in addition to the ways that we interact through others– will become kind of seamless for people as they want to buy merchandise and have that experience. So I think you can start to see some of the signs of that today with marketplaces that are being built and with what we’re building.
But I think it’ll progress. It’ll become more pronounced across various channels and become more pronounced geographically as it grows.
BRIAN SOZZI: So has it been worth it to go through all this? It seems, though, that Walmart’s been in the headlines. It’s been drug through the mud a little bit with regard to TikTok. But just listening to you, it sounds like that is OK because the longer-run opportunity is still pretty big?
DOUG MCMILLON: Yeah, I think there’s been criticism of the deal. And it’s been, you know, complicated in some ways because the governments are involved. But I don’t have any concern about the way that we’ve been treated. Our focus here, as I described earlier, is really simple. We want to play e-commerce role and help users. And hopefully, something can be worked out.
BRIAN SOZZI: Let’s switch gears here again, some social issues. What has been Walmart’s role throughout the social unrest we’ve seen in recent months.
DOUG MCMILLON: Well, as a company, as you probably know from following us so closely, we’ve been working on diversity, equity inclusion forever. And when George Floyd was murdered. It served as a moment for everybody, I think. And inside the company, the conversations that we’re having escalated. And we started trying to figure out, OK, what more can we do?
Clearly, there are inequities here. And too many of our systems are generating those inequities. The numbers speak for themselves. If Black and African-Americans could participate in our economy at the same level that others do, it’d be a boost to GDP growth. You know, what has to happen underneath all of this, not just policing reform and things related to criminal justice, but the financial system, the education system, health care? What has to change in those complex systems? And what are the underlying roots that we can get at that will create more equity on the other side?
And at Walmart, what we’ve done is create four different teams that are led by African-American officers focused on those systems that I just mentioned. And in parallel, Business Roundtable, the CEOs decided to do the same thing. So we had a group of CEOs, Mary Barra, Craig Arnold, Jamie Dimon, and many others, that got involved in understanding what these systems look like, learning from experts, and coming back with changes that we can make inside of our companies, or policies that we can recommend to government that would create more equity on the other side.
In addition to that, Walmart did set up a $100 million Center for Racial Equity that will help support some of this change. But the core systems work reminds us of the environmental sustainability work that we’ve done. If you can find ways with our purchase orders– think about sourcing from diverse suppliers– or where we put our cash at night so that Black-owned banks can loan money more so than they could before, just different policy choices like that that, when you add them all up, the systems result in more equity and more opportunity for everybody. That’s, ultimately, what we’re trying to create.
BRIAN SOZZI: I’m sure you’re watching the election. It’s coming up hot and heavy very quickly here. How would a change in the White House impact Walmart’s bottom line over the next four years?
DOUG MCMILLON: You know, we’ve been through a lot of these. Walmart’s been around since 1962. We’ve worked with all the administrations. And that’s what we would continue to do. We want to serve the country. We want to help the country get stronger. So whatever we’re asked to do, that’s what we’ll do. We hope to contribute to bringing the country together as it relates to things like inclusion. But we hope to help solve the other problems, too, if we’re asked. So that’s our attitude. How can we serve the country?
BRIAN SOZZI: Do you think the country needs a reset?
DOUG MCMILLON: I think the country needs to come together and solve problems. Regardless of the administration or who’s in Congress, when you look at the outcomes of what’s been happening, there are opportunities for us to invest in infrastructure, to create more equity, to invest in new technologies, to create jobs focused on the future, not industries from the past. That transition to a digital age, to a forward-looking country, needs to happen.
So what we want to see is people work together to create opportunity for people. Americans need jobs. They want to know that their children are going to a better future than the life they’ve had. And we should work together to make that happen.
BRIAN SOZZI: But do higher corporate taxes, would that change how you invest in your business?
DOUG MCMILLON: We’ve had different tax rates. I think the first thing that goes through my mind when I think about corporate tax is that we need to think about where we set the rate on a global basis and make sure that the US is competitive. Given all the debt that we’ve taken on with the pandemic, we do need to develop a plan to address debt levels. And so I think we need to work together with whoever’s in the White House and in Congress to figure out what combination of things need to change, taxes being one of them, that would result in a better overall outcome and a longer-term approach and view.
BRIAN SOZZI: Fair enough. And Doug, you know, we’ve talked many times in the past. Like I just mentioned, can’t believe you’re coming up on your seven-year anniversary of being the CEO of Walmart. It feels like yesterday. How has the pandemic changed you as a leader?
DOUG MCMILLON: I bet it’s changed just about everybody in some way. And when I think about what I’ve learned, you know, the two words that come to the top of the list for me are courage and speed. And what I’ve seen from our associates and our leadership team related to those two things has been super impressive. And so I think I’ve learned even more to let people move quickly, think big, and not let bureaucracy slow us down. And don’t sweat some of the small stuff. Just get on with the things that are most important. And I think we’ve moved faster as an organization as a result. And that’s changed me as a leader.
BRIAN SOZZI: Well, let’s zoom out. Just from your perch atop the Business Roundtable, how do you think a pandemic will change American business?
DOUG MCMILLON: Well, American business was already focused on multi-stakeholder capitalism. And I think the pandemic has only reinforced how we all feel about that. This argument over, what’s the role of a company? Is it to just make profit? Or is it to serve not only financial shareholders, but also serve communities, take steps to protect the planet, make sure that your associates are well compensated and taken care of in other ways, serve the customer more effectively? We feel that the multi-stakeholder approach is the smart way to approach business, and clearly, when you look at it through the long term rather than the short term.
So I think with the pandemic has done is reinforced– if you take BRT, for example, the statement that we made on corporate purpose last year reinforced our commitment to that, our belief in that. And hopefully, through the pandemic, what Americans are seeing is that companies are actually walking that talk. You know, we are doing things that help all of the stakeholders in this equation. We’re being systemic thinkers, not just focused on one set of stakeholders.
BRIAN SOZZI: And Doug, real quickly before I let you go, I just want to go back the holidays. Will this be a good holiday season?
DOUG MCMILLON: I think it will. I think people want to celebrate the holiday. And I think, hopefully, families will take steps to do that in a safe manner. But we all need some love and joy. And this time of year brings those things to, you know, being top of mind. And I think we’ll find a way to celebrate it. And I think it will end up being a good year. It’ll be unique. But I think it’ll be a good year.
BRIAN SOZZI: Unique, indeed. Walmart CEO Doug McMillon, always good to speak with you. Stay safe. And really appreciate what you’re doing out there.
DOUG MCMILLON: Thanks, Brian. Be well.
