2015 was a terrible year for Wal-Mart Stores Inc (WMT). The stock, which started the year at $85 fell 30% to $61. Halfway through the year, the retailer’s previously up-and-coming rival Amazon made enormous gains in the stock market and overtook Walmart as the most valuable retail company in the United States.
In 2015 Walmart announced expansions into China, a move that would have seen the retailer reap the benefits of a newly wealthy middle class. Unfortunately, China had problems of its own this year which led to a collapse of their stock markets and a decrease in consumer spending.
Back in the U.S., Walmart spent millions to improve its e-commerce strategy and plans to spend upwards of a billion dollars within the coming years. This investment was spent perfecting the website and offering new services to integrate customers with its website and mobile app. A free shipping pass was introduced in May at half the cost of Amazon Prime (Amazon.com Inc: AMZN) and was later followed by online grocery ordering and curbside pick-up tests in a dozen locations throughout the country. (For related reading, see: Should You Buy Groceries Online?)
Mobile using shoppers can now scan their receipts using the Walmart app to capture any price difference savings from other stores. The Walmart app also now lets customers pay via mobile with Walmart Pay, Walmart’s answer to the increasing demand that the retailer accept third-party mobile payment services.
Presidents and CEOs
Walmart’s charismatic President and CEO Doug McMillon was chastised by stockholders this year over his huge and costly reforms.
In what was possibly the most expensive move made by Walmart all year, McMillon announced in February that the retailer would institute a minimum wage of $9 an hour for all its employees. This minimum wage is to increase to $10 in 2016 and is independent of a later minimum wage increase that McMillon promised to managers ($10.90 – $13 per hour, depending on the department).
Greg Foran, Walmart U.S.’s President and CEO instituted a comprehensive plan-of-attack in April, stemming from hundreds of personal interviews and undercover visits to Walmart stores. His plan includes more productive and skilled employees, winning back shoppers and reducing inefficiencies in the supply chain. Walmart’s increased minimum wage is a key component of the new plan. Customers ought to expect a clean, fast, friendly place to shop, and keeping employees happy and motivated is the first step. (For more, see: Three Perks Businesses Should Give Their Employees.)
To pay for this increase, in September Walmart was accused of cutting employee hours and benefits and of reducing the number of staff in-store. In October, McMillon laid off 450 corporate employees and was forced to defend his actions to shareholders.
Walmart's Share Price
Walmart’s stock was selling for $85.90 at the beginning of the year and had a yield of a bit over 2%. Today the stock is a little over $61 and has a yield of 3.20%. In May, quarterly results were lower than had been expected despite an increase in same-store sales. Lower profit was attributed to the strong U.S. dollar and to internal investments within the company (its e-commerce plan and wage increases).
August saw another fall as the quarterly results mirrored May’s. Another large fall came in October when Walmart lost $20 billion in market cap upon news that it expected sales to only grow moderately and that, with the strong U.S. dollar, profits would be down considerably in 2016.
Perhaps shockingly, earnings released in November were better than had been predicted and saw the stock price increase a tiny bit as traffic and same-store sales increased by 1% and earnings beat analysts’ predictions.
The Bottom Line
Walmart spent the year in an unfortunate position. A stronger dollar decreased profits from abroad and competition from online competitors saw consumers flock to more convenient options. Walmart also began implementing expensive programs and expansions which seriously harmed the company’s bottom line. New technology and a plan to increase its number of customers saw Walmart’s traffic improve yet nothing the retailer does seemed to help its share price this year.