President and CEO of Walmart US John Furner, in a conversation with National Retail Federation (NRF) CEO Matthew Shay, asserted the supply chain is “much more stable than it has been for several years”, in response to a question on challenges that are “out of our control” such as the ongoing Red Sea disruption.
Furner said what has been key to Walmart’s success is supply chain diversification with a focus on getting goods to consumers more quickly.
“In the last couple of years, I’ve been to places inside the US where we are manufacturing bicycles or doing innovative things to bring more of the supply chain closer to the customer which is great for lead times. We see there is demand for something and we can react," Furner explained.
Furner added that there has always been supply chain disruption and there will continue to be.
“Of course, 2020-23 was a bit more of an acute circumstance that was more extreme than we were used to. But flexibility is a really important part of what we are thinking about going forward,” Furner said, adding Walmart has benefitted from data and technology which “helps us sort out the way our supply chains act dynamically and allow us to serve our customers more flexibly.
“Our customers expect to be served more convenient options and we must remain flexible, serving them when they want to be served with the products they want and how they want to be served. That flexibility helps the entire company and even the industry to be able to weather the unexpected events that will happen.”
Furner further explained Walmart has increased its focus on nearshoring, sourcing and manufacturing in the US wherever possible. He noted that many parts of the economy are globally and domestically interconnected.
“That’s great. But there are also parts of the world that can do things that others cannot. And that will continue for as long as we are in this industry and the rest of our careers. “
For Walmart Inc, about two-thirds of the products it sources are either made, grown or assembled in the US.
In March 2023, Walmart teamed up with technology company Unspun to manufacture workwear chinos using their 3D weaving machines to shift textile production back to the US and simultaneously tackle the issue of waste in the apparel industry.
“We are in the middle of another $350bn commitment to increase what is sourced in the US. Ultimately this is helpful for the customer too. It's about having the right item at the right quality and being able to react, respond, and replenish more quickly and I’d say shorter lead times are always going to be better than longer lead times," Furner said.
NRF expects US retail sales to reach $5.23-5.28trn in 2024
The conversation was held as part of the NRF’s State of the Retail & Consumer 2024 report in which the NRF revealed it expects US retail sales to increase in 2024 between 2.5% and 3.5% to between $5.23 trillion and $5.28trn.
“The resiliency of consumers continues to power the American economy, and we are confident there will be moderate but steady growth through the end of the year,” NRF's Shay said. “Successful retailers offer consumers products and services when, where and how they want to shop with prices they want to pay.”
The 2024 sales forecast compares with 3.6% annual sales growth of $5.1trn in 2023. The 2024 forecast is in line with the 10-year pre-pandemic average annual sales growth of 3.6%.
Non-store and online sales, which are included in the total figure, are expected to grow between 7% and 9% year over year to a range of $1.47trn to $1.50trn. That compares with non-store and online sales of $1.38trn in 2023.
NRF projects full-year GDP growth of around 2.3%, a slower speed than the 2.5% in 2023 but strong enough to sustain job growth. Inflation prices are also expected to moderate to 2.2% on a year-over-year basis.
“The economy is primarily supported by consumers who have shown much greater resilience than expected, and it’s hard to be bearish on the consumer,” NRF chief economist Jack Kleinhenz added. “The question for 2024 ultimately is, will consumer spending maintain its resilience?”
NRF's Shay previously highlighted that the 2023 US retail holiday season reflected a more sustainable rate of growth than seen during the pandemic years.
