I've heard that they're trying to hit an SG&A number of 16% over the next four years or so. If this is true, they'll have to keep cutting headcount.
Can anyone confirm/deny this rumor? Is it even possible for Walmart's SG&A to get that low?
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I agree that we are still bleeding. I don't know if it is possible to get the SG&A as low as they want it though. They're busy cutting the company to the bone.
Walmart has dug itself into a hole by giving ML free rein to burn good cash on overpriced, go nowhere ecommerce acquisitions. Bentonville will continue to bleed from these California blunders
Selling, general, and administrative is what it means. It's your cost to do business. When we talk about SG&A rate, it's SG&A dollars divided by revenue.
I agree that they can't get there on payroll alone. But that's where technology comes in. I think they will have to rationalize under performing stores, too. The thing is, as they've invested in prices, that puts pressure on the rate. And as grocery grows they've got further pressure on the rate.
They need GM and apparel to accelerate the growth rate to offset the issue. Sort of hard to do though when that portion of the store is known for bad quality. Also no good brands want to sell them. Customers just don't want to be seen wearing Walmart clothes, yet we persist in sticking our brand logos on the outside of them. It defies logic.
Anyhow SG&A had been growing. But I think the rate looks worse than it would otherwise due to unfavorable mix between the two halves of the store and the growth of dotcom, not to mention the investments in price and store labor.
The question is with all of those unfavorable elements happening at the same time, how much lower can the SG&A rate get? The company will continue to cut headcount to the bone and get rid of most of the expensive labor I think. But at the end of it all, it seems like they're going to have to rely on good old fashioned merchandising to margin mix and sell their way out of the problem.
Too bad we don't web services to sell or investors that don't care if we make money.
16% SG&A is pretty aggressive. Approximately $25B of cost leverage. Will be hard if not impossible to get there on payroll alone. Need some sales lift as well, and Ecommerce has lower margins vs. B&M.