Five moves Walmart is making to overhaul its business for the future

New York (CNN) — Walmart, the global mega-retailer that began in Arkansas in 1962, is making huge moves in 2024. It’s making investments in technology and inventory that move it into new businesses and which will alter the Walmart experience of many customers.

The company will release its fourth quarter earnings before the market opens Tuesday. They will provide the first clue to how and whether this is all going to work out. Walmart CEO Doug McMillon is expected to further outline the company’s new strategies and initiatives.

Walmart, addressing criticism it has faced in the past over worker compensation, it is also ratcheting up pay for at least a slice of its work force.

Walmart’s biggest risk is the increased investments it is making, according to a recent note from Jeffries analysts, which added that “was one of the most discussed topics in our conversations with investors.”

It’s partway through a billion-dollar store makeover program, Walmart said in October, designed to keep customers engaged and shopping. Among the most discernable changes, pharmacies have been moved toward the front of the store and feature new private screening rooms. Home goods are showcased and some aisles are wider.

Walmart did not respond to a request for comment.

Stock split

The mega-retailer announced a 3-for-1 stock split that takes effect this week. A stock split means a single share gets split into multiple shares. Under the plan Walmart announced, people who own shares by close of business on February 22 will get two additional new shares of Walmart for every share they own.

When markets open on February 26, investors will hold the same value of stock – they’ll just have three times the number of shares they previously held, each worth a third of the price.

Stock splits can put a company’s stock within the reach of smaller, individual investors. It helps companies gain liquidity, and splits can create more demand for a company’s stock. But lower prices can also attract day traders and increase volatility.

In a statement, Walmart said the decision to do a 3-for-1 split was in part so that employees “feel that purchasing shares is easily within reach.”

Store manager salaries

Walmart is boosting the average pay of its store managers to $128,000 from $117,000. The boost of 9%, the first increase in a decade, went into effect on February 1.

The company said in a news release that it is also changing the managers’ bonus program to emphasize store profits, which will play a bigger role in calculating their bonuses, in addition to sales. Managers who hit all their targets can get bonuses of up to 200% of base pay, the retailer said.

The move comes as big box retailers strive to attract and retain more workers, curb turnover rates and confront a growing wave of labor organizing efforts. Labor groups have been critical of Walmart over worker salaries, shift hours and benefits.

All about tech

Walmart announced new technology initiatives with great fanfare last month at the Consumer Electronics Show in Las Vegas. McMillon delivered the keynote address for the event. He indicated a Jetsons-like experience, with speedy drone delivery and AI that predicts your online order, is on the horizon – but that will be tricky to pull off.

It’s important to note that many of its announced projects are currently only in select markets, though the company said it plans to roll them out this year. And the impacts of these select markets may not hit on its balance sheet for some time.

The company said it’s implementing artificial intelligence in everything from its supply chain to its existing app and inHome service. Walmart said it is revamping its generative AI usage in a partnership with Microsoft.

Quieter stores, at least temporarily

Walmart has made several changes to its in-store shopping experience.

In November, Walmart began setting in-store televisions to a static image, turning off the sound system, and lowering the lights for a few hours every day.

Walmart said it learned during a pilot test for the back-to-school shopping period that these efforts are especially beneficial to neurodiverse individuals — both customers and employees — with sensory disabilities. It previously held special morning shopping hours for older, vulnerable consumers during the pandemic.

It was a smart business strategy to cater toward the needs of some customers, said Burt Flickinger, retail expert and managing director of retail consultancy Strategic Resource Group.

“At a time when discounters are competing more aggressively with each other for consumers’ dollars, Walmart is not only building some goodwill with its shoppers but these changes could also bring more shoppers into its stores and keep them shopping there longer,” said Flickinger.

How will customers react?

Wanting to move past pandemic lockdown-era shopping habits, Walmart is pulling a Costco and introducing in-store samples in an attempt to lure back customers to stores. Walmart launched the demo in 125 locations each weekend last June and said it wanted to expand to 1,000 locations by the end of the year. CNN has reached out to Walmart on how many stores currently offer free samples.

Americans have been suffering through some of the steepest price hikes in decades, and though inflation has begun to cool off, Telsey Group analysts believe “consumers are likely to remain resilient and selective on how they spend” as they begin to move toward more discretionary purchases.

Walmart tends to thrive during times of economic stress – inflation-weary customers flocked to Walmart last year. It side-stepped problems that hurt its top competitor, Target. Its stock (WMT) — hovering around $170 per share — is trading at an all-time high.

Walmart could have to grapple with shifting consumer habits, but its e-commerce and advertising business will continue to grow in 2024, Insider Intelligence analyst Blake Droesch said.

Analysts surveyed by FactSet expect Walmart on Tuesday to report an increase in earnings per share, revenue and profits from the prior quarter.

CNN’s Parija Kavilanz, Nathaniel Meyersohn, Elisabeth Buchwald and Alicia Wallace contributed to this report.

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