Walmart breaks down how the coronavirus has hit its $10 billion business in China
- Walmart's leadership weighed in on coronavirus concerns during the retail giant's investment community event on Tuesday.
- CFO Brett Biggs said that "sales have been okay" in China, although Walmart has faced issues with its product mix as consumers scramble to buy up essentials.
- Right now, Biggs said he is anticipating the outbreak to have "negative impact" to the tune of just a few cents for Walmart in the first quarter.
- CEO Doug McMillon said that its stores have largely remained open, although many are operating under reduced hours.
- "We like to keep stores open," McMillon said. "Customers need us."
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Walmart executives broke down the retail giant's response to the coronavirus outbreak in China during the company's investment community event on Tuesday. It's cutting store hours at locations in China and doubling down on a partnership with Chinese delivery and logistics firm Dada-JD Daojia. It's also anticipating a negative hit to its first-quarter numbers.
The virus has broken out at a time that's seen the retailer reach new heights in China. Walmart International CEO Judith McKenna said that the company runs a $10 billion business in the country, boasting 412 stores, 26 Sam's Clubs, and ongoing plans to open five more members-only clubs every year going forward. McKenna added that the Sam's Club in Shenzhen has the highest sales of any club or store "anywhere in the Walmart world."
But while Walmart's leadership said the coronavirus would likely have a small negative impact on its first quarter, it's too early to know the outbreak's impact beyond that.
"We're managing the issues related to the coronavirus daily," CEO Doug McMillon said early on in the presentation "Our primary focus is of course on our associates and our customers."
Later, in response to a question from Gordon Haskett analyst Chuck Grom, the CEO said that most Walmart stores and Sam's Clubs in China are operating on reduced hours.
"We like to keep stores open," McMillon said. "Customers need us. We do it with hurricanes in the US. We're doing it with this situation in China."
He added that the company is working in collaboration with Chinese government officials to ensure a safe environment.
McMillon said that McKenna and her team are particularly focused on the following questions: "What's happening with our associates, what do they need? Are the stores being run well? Are we taking care of customers to the extent that we can?"
According to McMillon, Walmart's partnership with Dada-JD Daojia has proved crucial as Chinese customers rely on delivery to get by during the outbreak.
"Delivery's gone up even higher, as you would guess," McMillon said.
During her portion of the presentation, McKenna said that Dada-JD Daojia provides Walmart Hypermarket, Walmart Supermarket, and Sam's Club customers with a one-hour delivery service.
All in all, Biggs said, "sales have been okay" for Walmart China throughout the crisis. The company has taken more of a hit in terms of its product mix in stores, as shoppers eschew items like apparel and toys in favor of essentials like food and household staples. He said that Walmart expected that it might see "a couple of cents negative impact" in the first quarter.
Biggs said that the company opted to withhold the potential impact of the outbreak from its current financial guidance, as the situation around the virus is "still so fluid." But so far, the disease hasn't tied up Walmart's international logistical or sourcing operations.
"We also continue to monitor how this might impact our sourcing operations," Biggs said. "As of now, we aren't seeing major impacts."
McMillon said that Walmart is still determining how the coronavirus could tangle up sourcing shipped from China to the United States, as well as from other markets. So far, he said, it's "real difficult to call how it's going to play out in the quarter."
"We're not even through the first month yet," McMillon said.