Walmart - John Molson MBA International Case …€¦ · 16. Implementation: Macy’s Acquisition....
Transcript of Walmart - John Molson MBA International Case …€¦ · 16. Implementation: Macy’s Acquisition....
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WalmartThe future of shopping
SMURFIT CONSULTING PRESENTING TO DOUG MCMILLON & MARC LOREGEAROID O BRIAIN – MARIA BARRY – RUTH LALOR – ANDREW GEBELIN
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The Challenge2
How do you protect your market share while transforming yourselves for the
future of shopping?
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Recommendations
One last acquisition, consolidate and build for the future
FutureCo
Walmart
Bricks & Mortar
Walmart.com
Macys
Macys.com
Experience stores
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Agenda
AnalysisMaria Barry
RecommendationsRuth Lalor
ImplementationAndrew Gebelin
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AnalysisMaria Barry
AnalysisMaria Barry
RecommendationsRuth Lalor
ImplementationAndrew Gebelin
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EXTERNAL ANALYSIS – KEY TRENDS
Challenge to balance external factors in the future
•On-line retail growth•E-commerce sales•Empty main streets
Economical
•Convenience•Busy customers•Urbanization
Social
•Employment laws•Gender pay disputesLegal
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EXTERNAL ANALYSIS – MAIN COMPETITOR
Strong physical presence – main differentiator
Amazon Traditional Walmart stores
Products Full range Low cost and QualityE-commerce Strong
(74.1% total sales)Low- expanding(2.8% total sales)
Supply chain expertise Strong StrongTechnology Strong Developing
Physical presence Low - expanding HighPricing Use of algorithms EDLP
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INTERNAL ANALYSIS-COMPETENCIES
Location plus supply chain
Physical stores – extensive physical distribution
Supply chain expertise
Strong retail networks
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INTERNAL ANALYSIS - FINANCIALSLargest company be revenue ( $485.9 billion 2017) – ahead of Amazon in overall revenues
Online sales growth rose 63% in Q1 2017 vs 23% in Q4 2016
No R&D expenditure
Stagnant operating profit from 2014 to 2017
Large fixed asset base ($ 114 billion)
Profits are stable and strong fixed asset base
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INTERNAL ANALYSIS - FOCUS
Two competing visions
Traditional Walmart Stores
• Low price/quality• General
population (low/middle income)
• Rural and suburban customers
New Acquisitions
• Mid to premium brands
• Millenial customer base
• Urban customers
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Recommendations & AlternativesRuth Lalor
AnalysisMaria Barry
RecommendationsRuth Lalor
ImplementationAndrew Gebelin
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The Challenge12
How can we grow scale in our online business & expand our target market?
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NON-VIABLE Options
These are NOT good options
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Pros Cons
Organic Growth
Pros Cons
Separate brands
Pros Cons
Buy Amazon
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Heat-map of options
Growth by single acquisition
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Organic growth
Continue small
acquisitions
Buy amazon
Buy other large
retailerGrowth
CostFeasible
Risk
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What does the future look like?
Restructure, consolidate and deliver the future of shopping
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One big acquisition: Buy Macy’s for $68BN.
Aggregate non Walmart online stores onto a common marketplace called Macy’s, using Jet.com technology
Use Jet.com technology on Walmart.com, no rebranding. Retain bricks and mortar Walmart
Bonobos style stores for macys.com
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ImplementationAndrew Gebelin
AnalysisMaria Barry
RecommendationsRuth Lalor
ImplementationAndrew Gebelin
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Implementation: Macy’s Acquisition
Rapid scale, two brands and target markets
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2018$68BN
acquisition
All share offer increases equity to $372BN
FutureCo
Walmart
Bricks & Mortar
Walmart.com
Macys
Macys.com
Experience stores
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2019
• One-time restructuring ($100M)• 2 operating subsidiaries under
FutureCo• Walmart headed up by new
CEO appointed from within• Macy’s headed up by Lore as
CEO and Andy Dunn as COO • Rebrand with marketing
campaign• Social media• Multi-brand portfolio at Macys• Consolidation of all physical
stores (non-Walmart)• Implement Jet.com tech on
Walmart.com
Restructure & Rebrand
Solve the image problem and innovate the future of retail
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2020
• Use analytics of Jet.com to determine store locations for Macy’s
• Review Macys traditional stores, rationalise
• Develop technology to disrupt shopping
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Implementation: Internal Focus19
2019• Annual capital investment of $1BN for new ‘Guideshop’• Convert planned Macy’s store closures/ downsizes to
Guideshops• Build store concept into Macys.com
2020
• Invest in R&D ($30M)• Shopping avatar• Online CS• Omnichannel presence
• Scale knowledge to build internally
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FINANCIAL IMPLICATIONS
Acquisition is financially viable with 5 year payback period
Year Item $ % increase in profits2018 Acquisition cost (68 billion)2019 Profits 29.7 billion +10% 2020 Profits 35.5 billion +20%2021 Profits 46.15 billion +30%2020 Profits 64.61 billion +40%2022 Profits 96 billion +50%
Acquisition of Macys
Assumptions:• Acquisition cost: 2.5 times Macy’s revenues• Macys E-Commerce sales: $4.8 billion (17.5% of total sales) Projected total Macy’s sales: $27 billion• Projected growth in Macy’s sales year on year
• 5 year payback period• Average yearly ROI: 60% per year• NPV positive - $142.5BN (2019-2022)
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FINANCIAL IMPLICATIONSIn US$ 000s 2018 2019 2020Total revenues 534,460,000 641,352,000 833,757,000Cost of revenues 397,381,000 476,000,000 618,000,000Gross profits 137,000,000 165,000,000 215,000,000Operating expensesR&D 0 30,000,000 30,000,000SGA 102,853,000 97,141,000 93,518,000Operating income
35,000,000 38,000,000 92,000,000
Assumptions:• Overall Revenue growth: 2018 (10%), 2019 (20%), 2020 (30%)• Increase in cost of revenues: 2018 (10%), 2019 (20%), 2020 (30%)• SGA to increase with increase in marketing costs ($350 million over three years)
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Risks
Impact
Probability
Acquisition failure
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Slow growth
Bricks & mortar fail
Low customer retention
Cannibalize Walmart business
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Mitigants
Impact
Probability
Acquisition failureSell
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Low customer retention
Slow growth
Bricks & mortar fail
Scale back
Rationalise
Move onlineCannibalize Walmart business
Reorient
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The future – Any questions?
One last acquisition, consolidate and build for the future
FutureCo
Walmart
Bricks & Mortar
Walmart.com
Macys
Macys.com
Experience stores
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