In focus: supply chain profit potential
Retailers and CPG companies faced with the twin pressures of low inflation and a lack of volume growth are discovering new methods of driving profit improvement from some surprising sources within their supply chains.
The supply chain has long been relied on as the great enabler of retailer and CPG company strategies, but in recent years as anemic consumer demand made profit growth harder to achieve scrutiny of the supply chain intensified. That scrutiny has paid dividends as service providers have been able to identify deficient processes, recommend corrective actions and produce quantifiable gains in efficiency.
To illustrate what this looks like, industry leader GENCO documented a real world experience with a major supplier who achieved tremendous gains. The process and payback GENCO achieved for the supplier can be viewed in greater detail by clicking here.
Genesco invests in omnichannel capabilities following Q4 results
Genesco chairman, president and CEO Robert J. Dennis said that the company’s overall fourth-quarter results were lower than expected, thanks to inconsistent sales patterns and severe winter storms that affected its key markets.
All is not grim, however, as the company is making investments to bolster its omnichannel capabilities, which Dennis expects will protect near-term profitability and allow the company to expand its retail footprint.
Net sales for the 13-week fourth quarter decreased 0.5% to $793 million from $797 million in the 14-week fourth quarter of fiscal 2013. Comparable sales in the quarter increased 1%, with a 4% increase in the Lids Sports Group, a flat comp in the Journeys Group, a 7% decrease in the Schuh Group and an 11% increase in the Johnston & Murphy Group.
For the full year, the company reported net sales of $2.62 billion, an increase of 0.8% from net sales of $2.60 billion in the 53-week period ended Feb. 2, 2013.
"Our fiscal 2014 performance reflects a challenging selling environment throughout the year, including the fourth quarter,” said Dennis. "The inconsistent sales patterns that characterized last year carried over into the start of fiscal 2015 with comparable sales down 2% through Saturday, March 8, 2014. Following a difficult first week that was marked by severe winter storms in several of our key markets, comparable sales turned positive and margins have held up. However, we remain cautious in our outlook for the first half of the fiscal year given the lack of a strong new fashion driver in the teen footwear space and continued uncertainty around customer traffic.”
Based on current sales trends, the company expects adjusted fiscal 2015 diluted earnings per share to be in the range of $5.40 to $5.55, which represents a 6% to 9% increase over fiscal 2014’s adjusted earnings per share of $5.09. The company also anticipates comparable-store sales increases in the low single digit range for the full fiscal year.
The Nashville-based specialty retailer sells footwear, headwear, sports apparel and accessories in more than 2,550 retail stores and leased departments throughout the U.S., Canada, the United Kingdom and the Republic of Ireland, principally under the names Journeys, Journeys Kidz, Shi by Journeys, Underground by Journeys, Schuh, Lids, Locker Room by Lids, Lids Clubhouse, Johnston & Murphy, as well as corresponding e-commerce sites.
Early influences shaped merchant mindset
In 1984, at the impressionable age of 17, Doug McMillon’s journey with Walmart began in a way that hardly foretold he would one day become CEO. On the way to a Walmart warehouse for his first day of unloading trucks, McMillon rear-ended his supervisor’s car with his father’s Honda Civic, he recalled in the February issue of Walmart World.
Although McMillon’s early exposure to Walmart came inside a sweltering distribution center, he said the camaraderie, enthusiasm and passion he witnessed let him know something special was going on.
“I was surprised when I started working in those trailers in the summertime,” McMillon said in Walmart World. “I was working with people who were highly engaged. People were doing hard work in the heat of the summer, but enjoying it and talking about the company in a positive way and with a genuine affection for Walmart.”
The enthusiasm McMillon witnessed among his co-workers was in abundant supply in 1984. Walmart founder Sam Walton was still running the company and was so highly revered in Northwest Arkansas that the Highway 71 bypass had been renamed Walton Boulevard the previous year. The company was enjoying meteoric growth and double-digit, same-store sales increases were the norm. The company had opened 65 new stores in 1983, to end with 642 stores, and also had introduced a new concept called Sam’s Club, to end the year with sales of $4.7 billion. Those figures were still well shy of market leader Kmart’s 2,160 stores and sales of $18.6 billion, but the trajectory was clear. Those factors combined with a steadily appreciating share price and Walton’s inspirational leadership style, made for an intoxicating motivational cocktail.
While McMillon was toiling in a distribution center, Walmart was going through some succession drama of its own. The big retail industry news in the summer of 1984 was Walton’s decision to have David Glass and Jack Shewmaker switch jobs. Glass, Walmart’s former president and CEO, was CFO and then became president and COO, while Shewmaker assumed Glass’ responsibilities as CFO and became vice chairman.
McMillon worked several more summers in the warehouse and also worked at the Bank of Bentonville, now known as Arvest, while continuing to earn a degree in business administration at the University of Arkansas. Upon graduation, he continued his studies at the University of Tulsa and also worked as an assistant manager at a Walmart store. After earning an MBA in finance, McMillon got his foot in the door at Walmart by taking a job as an assistant buyer.
His first day at the retailer’s home office came in 1991, an experience recounted during a 2011 speech at the Brookings Institute. McMillon described how during a five-minute orientation with former Walmart merchant Ray Hobbs he was offered two bits of advice. The first was to use paper cups for the scalding coffee and the second was that, “you are responsible for everything, no matter what.”
Another highlight of his first day as an assistant buyer in the fishing category was a note Walton left on his desk wanting to know why a competitor had a lower price on fishing line, McMillon recalled in Walmart World. Walton was still active at the company in 1991, despite having been diagnosed the prior year with a form of bone cancer called multiple myeloma, but the merchandising department in those days was overseen by former Walmart president Bill Fields. Walton passed away in early April 1992.
McMillon would go on to buy various merchandise categories, including food and candy, women’s apparel and crafts. He was later promoted to the role of VP/DMM for home furnishings and infants and toddlers. Fields left the company in 1995, and McMillon found himself working in an organization led by Lee Scott. Scott had been tapped to serve as EVP of merchandising after a career in logistics and would go on to succeed David Glass as CEO.
McMillon’s next progression came when he was named VP/GMM for Sam’s Club International. Lee Scott departed the merchandising organization to become president of the Walmart stores division in 1998, and the following year McMillon rejoined the Walmart merchandising group, then led by EVP of merchandising Bob Connolly, as an SVP/GMM overseeing toys, electronics, video games, sporting goods, stationery and office supplies.
After spending most of his first 11 years in merchandising, McMillon’s career began a steep upward progression in 2002 when he was named EVP of merchandising at Sam’s Club. McMillon was part of a package deal that also included former Walmart chief information officer Kevin Turner who was named CEO. When Turner jumped shipped for Microsoft three years later, McMillon was the obvious choice to replace him, and it quickly became apparent that further promotions were in his future.
That proved to be the case in February 2009 when Lee Scott retired as president and CEO and then Walmart International president and CEO Mike Duke filled his shoes. McMillon assumed Duke’s responsibilities and spent four years crisscrossing the global as a tireless advocate for operational efficiency and EDLP. Last fall, to the surprise of no one, McMillon was named to succeed Mike Duke.