Need more evidence that digital and supply chain prowess, as well as customer-centric business strategy, pays huge dividends? Just look to the strong financial results and outlook disclosed this week by Walmart and Cisco. These two stand out because there’s not a huge number of companies — from tech or other industries — delivering in that fashion amid current economic pressures.
Insights delivered during the earnings calls of both companies provide a blueprint for how to navigate current economic factors and deliver customer-centric innovations.
“When times are good, we have room to grow. When things are more difficult, we sell things people want and need at a value and in ways they want to shop,” Walmart CEO Doug McMillon said. Increasingly, customers want to shop online or start their journey on the web, Walmart’s results indicate.
Explaining his company’s strong performance and outlook, Cisco CEO Chuck Robbins said: “While we are proactively managing through an evolving and complex market environment, we remain intensely focused on executing on our strategy, including our transition to more software and subscription-based recurring revenue.” He credited excellent execution and actions taken to remediate supply challenges for delivering the largest quarterly revenue in the company’s history.
Walmart: Strong and Getting Stronger
Acceleration Economy continues to track Walmart’s financial results because its digital innovations demonstrate how companies can use tech to create great customer experiences and drive outstanding business performance. Its supply chain management insights, moreover, could help other companies navigate the turbulence of the day.
With that context, here’s a look at the results from this retail and technology titan:
For its third fiscal quarter of 2023, Walmart reported total net sales of $152.8 billion, an 8.7% increase vs. one year earlier. E-commerce revenue growth was 16% and the company said that, so far this year, 13% of total sales start in a digital fashion. On a constant currency basis, e-commerce sales were up 46%. The company’s digital advertising business grew over 30%.
Operating income was $2.7 billion with adjusted earnings per share of $1.50 and was reduced by legal charges and other factors. Reflecting its third-quarter performance, the company raised its full-year outlook to consolidated net sales growth of 5.5%.
Walmart’s results soundly beat expectations.
Here are select Walmart executive comments on several of the critical contributors to its performance:
On one of its latest technology investments, the purchase of Alert Innovation, CFO John David Rainey said: “Last week, we acquired Alert Innovation as we expand our market fulfillment center build-out. MFCs [micro-fulfillment centers] are positioned inside or attached to Walmart Supercenters and use robotics and AI [artificial intelligence] to fill online orders more quickly.”
McMillon on digital customer engagement: “As our app becomes more a part of daily life for our customers and members, they find that they can do so much with it, like easily build a shopping cart, schedule a time to pick up an order, or have it delivered when it’s convenient for them.”
McMillon on costs and inventory: “We can keep costs in line and continue to invest in our people and technology, including supply chain automation, and continue to deliver value for customers, members, and shareholders. We’ve made good progress to improve our inventory position.”
Contrast Walmart’s results with those of rival Target, which reported comparable sales growth of 2.7% and lowered its outlook for the critical holiday quarter; the company said it plans to slash up to $3 billion in costs. Analysts cited Walmart’s strength in groceries (56% of revenue vs. Target’s 20%) as one important factor in its enduring performance.
Cisco: Managing Through Supply Constraints
Networking and security bellwether Cisco, regarded as one of the world’s premier supply chain operators, reported $13.6 billion in revenue, up 6% year over year for its first fiscal quarter of 2023. Non-GAAP EPS was 86 cents, up 5% year over year. Both of these key results exceeded analysts’ expectations.
The company also increased its full-year guidance, based in part on an easing supply situation.
Robbins on managing through supply constraints: “We are encouraged by what we are seeing with modest improvement in certain component availability as shortages continue to ease from last quarter. The redesign of many of our products has also helped bring supply stability and more resiliency.”
Robbins on the performance of the company’s “webscale” business: “Demand remains solid, driven by [customers] growing investments with Cisco to build out AI fabric and massively scalable cloud networks.”
Robbins on the company’s unique position: Cisco is “helping customers become more agile and resilient as they continue to navigate a complex set of challenges.”
On the downside, Cisco also said it’s restructuring (“right-sizing certain businesses”) and expects to lay off about 5% of its workforce which exceeds 80,000. That would mean roughly 4,000 job cuts. Officials said the restructuring will allow it to invest more aggressively in security and cloud products.
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