Wal-Mart Stores, Inc. (NYSE:WMT) 2013 International Meeting for the Investment Community
June 25, 2013 Tokyo, Japan
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•Walmart Japan overview
•Japan retail overview
•Business objectives
Customer
Associate
Community
Shareholder
Contents
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Walmart Japan overview
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Walmart acquired a majority stake (53%) in Seiyu’s
outstanding shares
In June 2008, Seiyu became a wholly-owned subsidiary
of Walmart
Walmart Japan Holdings was established
2002 2005 2008 2009 2012
Seiyu.com opening
Walmart made an initial investment in Seiyu
2013
Walmart and Seiyu for the last 10 Years
10th anniversary of Walmart’s entry
into Japan
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As of June 4, 2013;. Numbers do not include Wakana roadside deli stores.
Seiyu today
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Format Store banner No. of stores
Super- markets
257
Hyper- markets
115
Overviews
• Full assortment of foods and consumables with some general merchandise.
• Average store 25,000 sq ft
• Full range of products: food, consumables, general merchandise, apparel
• One-stop shopping experience
• Average store size 155,000 sq ft
Wakana 65
• Roadside deli with take away meal solutions
• Wakana products also offered in most supermarkets and hypermarkets
• Average store 740 sq ft
Photo
Photo
Photo
As of June 4, 2013
Store formats
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New store openings
In 2013, the opening of 5 new supermarkets (including 2 relocation/reopening) has already been scheduled
Tsukuba Takezono (Tsukuba City, Ibaraki)
Shin-Yuri Green Town (Kawasaki City, Kanagawa)
Gyoda Sama (Gyoda City, Saitama)
Fuchu Yotsuya (Fuchu City, Tokyo)
Kagohara (Kumagaya City, Saitama)
Nozomino (Izumi City, Osaka)
Toride Ekimae (Toride City, Ibaraki)
Seiyu opened 7 new supermarkets in 2012
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A three-part business
Food General merchandise* Apparel
79% 14% 7%
* Includes consumables (e.g. paper, pet foods, household chemicals, HBA , pharmacy and drug)
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Limited financials
2012 Summary
Net sales growth +0.7%
Comp sales growth +0.5%
Expense leverage
Operating income
growing faster than sales
Note: Growth rates are on a constant currency basis
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Japan retail overview
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What is on the horizon?
Bright spots
• “Abenomics” driving macro forecasts higher
• Trans Pacific Partnership
• 5.0% eCommerce growth (4 year CAGR)
Headwinds
•Consumption tax doubles over next 2 years:
Apr. 2014: 5% → 8%
Oct. 2015: 8% → 10%
•Consumer spending not increasing despite
gains in stock market / other indicators
•Growing 65+ age group; workforce
decreasing
•Real disposable income is not projected to
accelerate
•Rising debt as % of GDP
Economic forecasts: 2012 → 2016 (4-year CAGR)
Real GDP growth
0.1% → 1.6%
Inflation
-0.6% → 1.2%
Real disposable income
1.3% → 1.2%
% Age >65
24% → 28%
Source: Economist Intelligence Unit; June 2013
Japanese economic challenges continue…
Source: McKinsey
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Population growth by region
Population will be concentrated around big cities and rural areas will suffer from population decrease by more than 10% by 2030
Source: National Institute of Populations and Social Security Research
Population growth by prefecture (2010-2030)
Total growth: -8.7%
> 0%
> -5%
> -10%
> -15%
< -15%
Tokyo
Osaka Nagoya
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14%
6%
7%
5%
5%
4%3%
56%
…the retail market is extremely fragmented…
Retail sales by country USD billion (2012)
Sources: Based on various sales announcements (for settlement of accounts) (JPY:96.470) Retail sales by country – Planet Retail, June 2013
Japan retail market share by channel
Japan SM & GMS market share
2012 WMJ mkt share: 2.7% 2012 SM and GMS sales
in retail mkt : 20%
3,468
2,299
1,714
860
761
US
China
Japan
India
Brazil
Super
Market
GMS
DIY
CVS
Others
Dep.
Store Drug
Store
Others 62%
Cons Ele
Others 62%
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Changes in total sales and no. of stores
...and retailers are rapidly expanding their footprint
despite little overall sales growth
100 100 99 100 103
100
111
118
130
144
2000 2003 2006 2009 2012
Total sales (rebased 2000=100)
No. of stores (rebased 2000=100)
Source: METI surveys ("Supermarkets" only - stores > 1500sqm, excludes department stores)
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Business objectives
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Our beliefs and purpose
By listening to our customers and achieving a price, assortment and
shopping experience that exceeds their expectations,
we will become a necessity for society and our customers in their daily lives and
thereby help people to
Save Money so they can Live Better.
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Shareholder Growth, Leverage, Returns
Associate No.1 place to work and grow for
our associates
Community No.1 business that contributes to
the local communities
Customer No.1 “store in my neighborhood”
EDLP promise Value for money
Business objectives
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Shareholder Growth, Leverage, Returns
Community No.1 business that contributes to
the local communities
Customer No.1 “store in my neighborhood”
EDLP promise Value for money
Business objectives
Associate No.1 place to work and grow for
our Associates
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Source: Japan Economy Midterm Outlook by MUFJ Research & Consulting (Jan. 2013)
Index: year 2010 = 100
100
105
106
100 Disposable income
CPI
CPI (excl. perishables)
Consumption tax increases and rising utilities are weighing on the household Among consumer spending, the share of “consumer goods” decreased
Growing need and opportunity to save customers money
Japanese households are under pressure…
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0%
20%
40%
60%
80%
100%
Shar
e o
f to
tal b
ee
r m
arke
t “True” beer ¥178
Happoshu ¥121
“Third beer” ¥101
… and the need for quality products is growing
The beer market is a good example where consumers are trading down quality for price New beer and Happoshu are lower quality products, and 43% less expensive Today they have taken over 50% of the beer market
Sources: Kirin Brewery Company; Prices are at Seiyu retail
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They shop at Seiyu
because... Have low prices always
Offer the lowest prices on the products I usually buy
Have long store hours
Provide a wide selection of products
I can get what I need at this store alone
Our customers are… About half are “2 persons or less” households
About 30% are households with annual income of “less than 3 million yen”
About 30% “visit our store 2-3 times/week or more”
About half come to our store “on foot/by bicycle”
Walmart satisfies our customers’ needs…
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Introduced EDLP to baby category
Transitioned food/apparel/GM to EDLP
Cut prices of major 1,300 items (Average 9% price reduction)
Cut prices on 2,300 items
… by building Every Day Low Price strategy
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And communicated with innovative marketing
KY
2012 2008 2011 2013
Focus on categories
Baspura SAGERIKU Nesage
Communicate EDLP (Company oriented)
Communicate customer’s benefit (Customer oriented)
Increase price perception
Accumulate facts
Basket price at SEIYU is low
Request in tweet, discount in store.
Cut prices of 2300 items a year
Price-cut on signature categories.
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Marketing example: beef campaign
Meat department in the store Store front KY Times(flyer) TV commercial WEB
Low prices on beef and other
food products, too. So low prices on a basket full of
products, too
Japanese Black: \297
Low prices on Japanese Black
Low prices on all beef items Baspra Low prices on all beef items
Japanese Black \297 US beef steak \197
US short rib \97 Enhance price
What!Japanese Black at such a low price?
Such a low price on Japanese Black! Other beef items are cheap, too. I’ve got to go to SEIYU!
We’ll have Sukiyaki tonight as the beef is so cheap! I think I’ll buy other ingredients for the dish like vegetables.
Japanese Black is cheap and other beef, too. (Wonder if other meats are low prices, too. Let’s check it out!)
● ● ● ● ●
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Oct 2008 Oct 2012
52%
86%
Growing % of our customers appreciate “value for money” we offer
EDLP is resounding with our customers…
Source: Monthly “Store Trak” Surveys by Seiyu
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2009 2010 2011 2012
METI
Average comp
spread of +330 bps
4th year in a row of positive comps sales Growing operating margin
…and Seiyu stores have outperformed the market
Source: Japan Ministry of Economy, Trade, and Industry; Seiyu financials
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Enhance private brand and direct import offerings
Continue to build on EDLC/EDLP
Excitement
Convenience
Differentiation
Accelerate eCommerce
Differentiate with Wakana
Unique Seiyu offerings drive excitement and value
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¥298 ¥69
¥ 49
Wakana provides high quality, low cost meal solutions
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Wakana has fully integrated capabilities of developing,
manufacturing and selling deli products
Production
Development Sales
Production • 9 central kitchens • In-store kitchens • Collaboration with direct import team • By managing from product
development to sales vertically, Wakana can provide a high benefit, contributing to WMJ profitability
Sales • Wakana contributes to Seiyu business
as an important traffic driver • Wakana deli products are 4th most
important traffic driver after vegetables, meat and milk
Development • Own development capabilities • Assign central and area buyers to
meet the local need and preference • New items are released on a
4-week cycle
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2006 2007 2008 2009 2010 2011
More women pursuing careers
Increasing number of single households
Aging population & declining birth rate
*Total sales of prepared meals in Japan
Source: Japan Souzai Association
consistently driving and outperforming the growth of Seiyu
Growing demand for quality & value in prepared meals
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Seiyu launched Net Super (home grocery delivery) in 2000, ahead of other retailers
Net Super currently operates at 109 stores
Existing Net Super business is a store-pick model
Net Super (meal prep)
Store-pick & delivery
Back-end Front-end
Customer ordering
Customer receiving
Same day to 1 day
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Seamless and user friendly front-end Unique two-way delivery scheme Adding fulfillment centers allows country-wide delivery
Seiyu.com site expands offering and delivery coverage
Net Super (meal prep)
eCommerce (replenishment) + fun family shopping
Store-pick & delivery
Back-end Seamless front-end
Fulfillment Center pick & delivery
Customer ordering
1-3 days
Customer receiving
Same day to 1 day
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Chosen by you (Minasama-no Osumitsuki)
Basic of Basic (Kihon-no Ki)
Concept: Simple & Basic, so low price.
New PB ① Same quality as national brands with lower price
New PB ② Opening price point
Concept: All the items are tested and approved by consumer
Re-launched private brands
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Extensive consumer testing before launches
Fail
Product development
More than 70% of
the panel satisfied in the sampling
Products to be sample-tested every 1.5-2 year for update
Commercialization Pass
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Leveraging ASDA’s wholly owned procurement
company
Sourcing of products from Asia for direct
import to Japan
Walmart
Global
Sourcing
Direct import of products through tag on of
purchases or DC pull from US and Canada
Leveraging Walmart network for direct imports
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Japan direct imports: “Leverage” opportunities
Price advantage • GV potato chips: 178 yen • GV pure olive oil: 298 yen • Fleece jackets: 990 yen
Key supplier leverage
Eliminating the middleman
• US beef • Wakana potatoes
Unique assortment
Treasure hunt / excitement
• European beers • Pouch wine
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2012
5 Years
Perishables
Groceries
Apparel / General merchandise
Online 3x
Direct import goal of TRIPLING volume in 5 years
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Shareholder Growth, Leverage, Returns
Community No.1 business that contributes to
the local communities
Customer No.1 “store in my neighborhood”
EDLP Promise Value for money
Business objectives
Associate No.1 place to work and grow for
our associates
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2012 external field benchmark Avg.=30
Walmart Japan Associate Engagement Score
Associates are more engaged in our business
Source: Annual Grassroots Surveys by Walmart Japan
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2008 2015 % of female store managers
1%
6%
10%
2013
Careers for women: Approximately 70 percent of Walmart Japan associates are female, which is in line with our female customer base. With that in mind, we launched our Female Leadership Program to encourage our female associates to pursue career development opportunities in the company. Since 2010, 242 associates have participated in the Female Leadership Program, and a number of participants have gone on to take leadership roles.
“Top 100 Companies for Women to Work” Ranking
25th Overall:
"Female Appointment for Managerial Positions“ score: 9th
We will create a culture of diversity…
Source: Nikkei Women magazine (May 2013)
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Part-time to management
Source: Walmart Japan Associate Newsletter (Dec 2012)
Across Japan, it’s generally difficult for part-time workers to grow their professional careers. Walmart Japan, however, offers unique opportunities of career development for all associates who are innovative, enthusiastic and committed to better serving our customers. In fact, since 2006, 249 male and female associates who began part-time have been promoted into management positions. In 2012, 66 associates, 38 of them women, were promoted to assistant manager.
…and help our associates reach their potential
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Shareholder Growth, Leverage, Returns
Customer No.1 “store in my neighborhood”
Community No.1 business that contributes to
the local communities
EDLP Promise Value for money
Business objectives
Associate No.1 place to work and grow for
our Associates
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Sustainability objectives align with global goals
• Reduced GHG emissions of our stores and DCs that existed in 2005 by more than 20% as of 2012 by increasing energy efficiency across the business.
• Reduced the amount of fuel required to carry one ton of goods one kilometer by 34% from 2006 baseline by 2011.
Be supplied 100% by
renewable energy
• Our direct-sourced produce accounts for about 35% of total produce sales at Seiyu with 13,690 local farmers participating in our direct farm program.
• By expanding “non-tray” products in meat, etc, we have reduced total food tray usage weight by more than 26% from 2007.
Sell products that sustain
people and the environment
• Recycled more than 91% of wastes from our stores with more than 100 stores achieving “zero wastes” (100% waste recycling) in 2012
• Turned more than 70% of our customers to “my bag users” and reduced plastic bag usage weight by 40% from 2007 baseline in 2012.
Create zero waste
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Strengthening communities across Japan Partner
organizations
Hunger relief
We have worked with Second Harvest Japan to donate food from our stores to welfare facilities. In 2012, by utilizing backhaul, we expanded the activities to 38 of our stores in Kanto region, with a plan to expand participation to 150 stores across the region by 2016.
Second Harvest Japan
Women’s empower-
ment
Our grant to Florence, an NGO that supports parents who pursue career while raising children, has contributed to a program to provide low-income single parent households with childcare services when their children become ill.
Florence
“Tohoku Kosodate Project” – Our grants are used to support postpartum mothers and babies in the coastal areas of Tohoku, the disaster-stricken region. Nearly 5,000 mothers have participated in free consultative sessions by professional midwives.
J’espère
Recon- struction
Seiyu has helped OISCA through a grant to launch a project to restore seashore forest completely damaged by the 3.11 disaster. As a first-phase of the project, virus-resistant black pines have been seeded and grown in a seedling field in Miyagi prefecture.
OISCA
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Associates contribute to communities
• 4,456 associates raised a total of about US$24,700 during ‘Charity Bazaar Together’ campaign to support associates affected by the earthquake
• In Japan 11,000 associates joined MSP ‘s “Walking Together” campaign, logging 637 million steps, an amount equivalent to circling the earth 10 times
My Sustainability Plan
Associates participated in a soup kitchen event in Tokyo (Nov 2012) Associates cleaned up Arakawa River banks (May 2013)
Associates in Sendai took part in a seeding event organized by OISCA in its seedling field in a suburb of Sendai (April 2013)
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We offer our customers opportunities to donate to the organizations we work with when they check out, through a bar code-based store fundraising (“Bokin”) program at our checkout counters.
Encouraging customers to help with
community efforts
Seashore Forest Restoration Bokin
(for OISCA)
Tohoku “Kosodate” Bokin
(for J’espèr )
Sick Child Care Bokin
(for Florence)
Food Bank Bokin
(for Second Harvest )
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Shareholder Growth, Leverage, Returns
Community No.1 business that contributes to
the local communities
Customer No.1 “store in my neighborhood”
EDLP Promise Value for money
Business objectives
Associate No.1 place to work and grow for
our Associates
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Our productivity loop
Saving people money so they can live better
Grow sales
Sell for less
Buy for less
Operate for less
Continuous improvement core of business model
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Store labor cost
Logistics expense
HO expense SG&A
5-year productivity gains (2007-2012) (bps of SG&A % of sales)
-51 -67
-218
-619
Productivity loop fuels productivity gains…
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WJ reduced the energy consumption by 28%, compared to 2008 At the same time, the unit cost of electricity increased 14% From 2008 to 2012, WJ saved around $52.7 mln on electricity
72
100
114
2008 2009 2010 2011 2012
Total Electricity Usage Unit Cost of Electricity
… and utility cost reductions help to achieve EDLC
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Replicates successful program in UK and also being launched in Japan, Canada and China Involves global leverage resources and incorporates global best practice sharing Program objectives:
Clear accountability for results
Continuous pipeline of initiatives
Clear and consistent measurement of results
“Seisansei Kojo” – WO4L in Japanese
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Saving people money
so they can live better.TM
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Resources
• http://www.seiyu.co.jp
• http://www.walmart.com/
• http://stock.walmart.com/
You can download the Walmart Investor Relations App at
the following link or by scanning the QR Code.
http://stock.walmart.com/stock-information/walmart-
investor-relations-app