← Bloomberg Talks
Loading summary
Transcript64 lines
- [00:00]
A
Indiana University is shaping the future of healthcare. Advancing discoveries that become treatments for Alzheimer's, obesity, cancer and rare diseases. And training the providers trusted to deliver them. From the lab to the clinic. IU powers medical breakthroughs and the talent behind them. See how IU solves what's next iu. Edu Impact Bloomberg Audio Studios Podcasts Radio News Carol Massar, Tim Stanwick live here at the Bloomberg Global Business Forum at the Plaza in New York City. Well, if you want to know what global consumers are up to or what massive global companies are really thinking about when it comes to the macro environment, what are their priorities, then keeping an eye on Walmart is definitely a must do. It is the world's largest retailer. It was among the retailers that recently raised their forecast. That happened over the summer. And a member of the company C Suite is joining us. Tim, right here at the forum.
- [00:56]
B
Yeah, here at the Bloomberg Global Business Forum. Pleased to have Chris Nicholas with us. President and CEO of Sam's Club. It is Walmart's membership only retail warehouse club, mostly with clubs here in the US but also overseas clubs in Mexico, China and Brazil. Former CEO of Walmart U.S. previously CFO across Walmart U.S. and Walmart International.
- [01:16]
A
Which means you've seen everything I've tried.
- [01:19]
B
How are you?
- [01:20]
C
I'm doing great. Really excited to be here.
- [01:22]
B
How are we doing? And by we I mean the American consumer. You've got such a great view you on what happens across the country. How are we doing?
- [01:29]
C
Yeah, I mean we. What we're seeing at Sam's Club is consumers that are consistent and rational. You know, I've been in retail for more than 30 years now and I've never known a time when people don't love great items at great prices. And as long as you're giving people that, we're finding consumers really, you know, rational and consistent.
- [01:51]
B
What is their behavior though right now? Because that's something Carol and I were talking a lot about today and you know, the whole idea of are they buying what they typically buy? Are they buying what they buy at a certain point in economic cycle? Are they trading up? Are they trading down? What are they doing in your stores?
- [02:05]
C
Yeah, it's interesting. I mean consistent would be the word I'd use. People are still buying general merchandise from us. I mean we talked in our last quarter the results about general merchandise sales having another quarter of positive comp. But what's really interesting within that is that the units are moving faster than the items, which means that, you know, we're still giving them great value. And I think people are really moving to appreciate when they're getting good value. You know, the club warehouse model is, is made for times like these. I would say it's a good time to be in the club model. We've got in our clubs, we've only got 4,000 items. And the way that the club model works just to level set us is our job is to make almost nothing on what we sell. We just about break even and we make all our money from membership. So the lower you can operate in terms of costs, the lower you can keep prices. And when that happens, people are more loyal, they renew more often, and you get more members. So we're in this, like, really special moment right now where people love the great value that we've got and they love the great items that we've got too.
- [03:08]
A
You know, I want to cross that with what we just heard from Fed Chairman Jay Powell, Chris, last week in terms of the decision and kind of basically saying the Fed's not in a great place. Like, either way, there's some risks to the employment picture. They're concerned still about inflation. So this is. There's kind of risks to both sides of the equation and concerned about monetary policy that it's hard to do right now in this environment. So that to me sounds uncertain, unsure, but it doesn't sound like you're saying any of that.
- [03:36]
C
Look, the club. Here's the thing. We have this, this position where there's only, I mean, between us and our main competitors in the club model in particular, right. We're only like six and a half percent of the, of the, of the, the total retail market. And we would definitely, from a club point of view, our consumers definitely skew sort of more wealthy, you know, bigger basket sizes. But we do serve everybody. And we don't see a great delta because between different income cohorts, you don't know.
- [04:11]
A
All right, that's.
- [04:12]
C
Nor generations.
- [04:13]
A
Well, what about, I mean, are you, when you think about kind of the environment, especially when it comes into tariffs in terms of pricing, how do you kind of figure out where you can maybe raise prices where you can.
- [04:24]
C
It's such a great, it's such a great question. We. And again, not to sort of pivot, but one of the powers of the club model is because you've only got 4,000 items in the club, those items are curated and our merchants, they are true professionals. Many of them have been in their jobs decades and they understand the value chain from end to end better than anybody. And so they get the ability to choose what's in the club. But they also get the ability to work through where the inefficiencies are in the supply chain. They've got deep relationships to suppliers. So you work through where the opportunities are between the suppliers too. So I'll give you an example. Our roses that we buy from Ecuador, the costs went up because the tariff environment changed. And so our merchants worked through with the supplier, like what could we do? So we move them in different ways so we have less packaging. We wrap them in the US now instead of where we used to wrap them. And so you do things like that that help you to manage the input costs. That means you don't have to pass it on to the consumer. And our job is to work through how little you pass through and you work through how late you do it. So we'd always like to be last, last up. But we, we have the ultimate opportunity in the club channel and that is that we have choice because we don't have to sell everything. So we. The curation actually is a superpower for us.
- [05:46]
A
Does that mean you haven't raised prices on anything?
- [05:48]
C
No, no, we see. I mean, look, here's the thing. There is. There are certain things that. Where prices move all of the time anyway. So produce would be a good example of that.
- [05:57]
A
But.
- [05:58]
C
And there are some strictly tariff related. Yeah. What I would say to. If I think about general merchandise would be the. Which is like all of the electronics and apparel and all of those things.
- [06:08]
A
The stuff that I have way too much in my home.
- [06:11]
C
There's never enough.
- [06:12]
A
Yes, there is.
- [06:13]
B
You're talking to guys who sell stuff, Carol.
- [06:15]
A
I know, I know. But anyway. But in terms of tariffs, particularly putting pressure on pricing.
- [06:20]
C
Yeah. So what we see is in terms of what people are buying. I think I mentioned this, but the, the growth in the units that we've had is outpacing our comps in general merchandise. So if you think about like the last few years, you had like packaged goods through Covid became more expensive and they never really came down. Whereas general merchandise, we had the supply chain disruption, you remember that? And the general merchandise inflated and then it deflated rapidly as it was after all of the supply chain disruptions disappeared. And at the end of last quarter we were still in a period of slight deflation in general merchandise. So prices move all of the time. Our job and our merchants job is to make sure that we give people access to the price points they want and the value that they want. Maybe it's worth mentioning, but in Sam's club, like we're 25% cheaper than retail in general. So as we resist putting prices up because that's in our DNA, we're always going to be more price competitive than everybody else.
- [07:25]
A
So then you haven't raised any prices related to tariffs.
- [07:28]
C
We will, we will be the last people to put prices up. And some prices have gone up, but in the mix, I'm telling you so for sure, I mean, we have input price changes in some items and some's come through already and some are still to come through. But I would tell you that, like our job is not to lead with putting prices up. And all of our sales growth in Sam's Club is through unit growth, not inflation. Cool.
- [07:56]
B
I'm wondering what you're hearing from your team who's out there talking to the producers, the American producers of things we grow produce. Beef as well. We had a Bloomberg News story last week about farmers and the toll that the Trump administration policies are taking on farmers right now. And immigration, just one of them. Tariffs on soybeans are another one as a result of fewer, less interest from China and Chinese buyers. What are you hearing though, on the immigration front? Because in some cases 40% of migrant workers are from outside. 40% of farm workers rather are migrant workers. So they're coming from outside the US and that's a challenge for farmers to actually find those employees right now. What are you hearing from them?
- [08:37]
C
Yeah, I'm not hearing. I don't have anything to add or to offer on that topic. I would tell you that we have brilliant farmer partners. We understand the value change really well and we have no in stock issues or cost price issues.
- [08:51]
B
So have they raised prices at all on American produce?
- [08:54]
C
I. You'd have to ask somebody else about the through line on like employment and price increases. I think you probably speak to lots of people that are better informed.
- [09:02]
B
What about from produce that comes outside of the United States? I mean, we can't do everything here. We can't grow bananas. We can't grow avocados.
- [09:08]
C
Avocados? Yeah.
- [09:09]
B
Tomatoes when they're out of season, come from outside of the U.S. what does that look like?
- [09:14]
C
Yeah, I mean, what is like the.
- [09:17]
B
Increase in costs associated with tariffs? Because those will be, or those are tariffs already. I mean, beef that comes from Brazil, 40% tariffs, for example.
- [09:24]
C
Yeah, I mean we, we are, we definitely over index on US Beef. The vast majority of what we buy is us the vast majority. And, and so, you know, but we have choices about where we buy from. This is the benefit of being this Curated limited assortment retailer is that we get the choices to buy from the places that where give the consumers great value and, and great quality which we're never going to relent on. But you know. Yeah, we buy items, you know, we buy avocados, as you said, from abroad and many other items. Tomatoes when it's out of season and, and you know, the quality and the value will never relent on the quality. But if the input costs increase and the inputs costs will increase. But there's, there's in produce, there are so many variables. Produce and beef, I mean that there are so many variables that pushes the costs down as well as up. So I think it's a super complex situation and I, and I think that our farmers are some of the best in the world and I think that our merchants know how to work with the farmers. The thing, the best thing you can do for those farmers is to give them great forecasts, allow them to grow to those forecasts and give them good prices that allow them to run sustainable business models. And we do a really good job of that.
- [10:41]
A
Chris, you guys in retail, I'm sure we're, you know, even late to talk about the holiday season and the upcoming holiday season. When you think about assortment.
- [10:49]
C
Yeah.
- [10:49]
A
And what you want to have in inventory for consumers, how's it looking for this year? Is it going to be a lot different from last year? Are the supply chains all there to get what you need and what you want for your consumers?
- [10:58]
C
Yeah, that's not an issue. We don't see any issues with, with supply chain management in that way. We, a Sam's Club in particular, we get really early. So you go to a Sam's Club now, which hopefully, you know, please do, you'll see it's full of Christmas.
- [11:13]
A
I know, it drives me a little crazy.
- [11:15]
C
Yeah. I mean, if I understand why is it so early?
- [11:17]
A
I mean Halloween hasn't even happened.
- [11:19]
C
Yeah, well, in, in the club channel, people like to be prepared.
- [11:22]
A
I know.
- [11:23]
C
So we get in to a season early and then we exit early and, and that's kind of scarcity is part of the value that we, that we create. And so we, so we're not worried about it from a Sam's Club point of view. But the thing I would say is that like people just love to celebrate, they love to buy, they love the seasons. And so I think you'll find that certainly at Sam's Club people, whether it's the general merchandise they buy pre Thanksgiving and Christmas or the food that they buy for the season as Long as you're giving them great value, they're going to come to you and people will find a way to celebrate.
- [11:59]
A
One of the things we love about the Global Business Forum is we tackle everything. Climate change, you know, workforce, employment, economics, politics. As a leader who's been at a company for a long time and I'm sure looking at everything that's going on, what's top of mind for you and an environment where there's pushback against certain initiatives, there's a lot of political things going on, geopolitics. I'm just curious, you know, in running what you guys do and I know you're kind of a well oiled machine in many ways, but I'm just curious.
- [12:29]
C
Yeah, I think, you know, in an environment of change and by the way, I like change is a constant and you've got to love it then I've always found that the best thing to do is to focus on what you can control. And what you can control is the culture you create as a business, how you work with and treat your customers and your members, the experiences that you create. You know, a great example is the E commerce business. We've just launched express delivery from our clubs and people love it and they're opting in.
- [13:05]
B
Does the price change with delivery?
- [13:07]
C
No, we have price parity. We have price so others don't. We do so we have price parity between clubs and online with that's really important from a trust point of view and people are thanking us for it. Our delivery from club food and non food is growing at triple digits right now. So I think like focus on what you can control. Start with being great people. Start with being a great business. Look after your associates so they can look after our members and then you know that generally will lead to the right outcomes.
- [13:38]
B
So on that we'll hear from one of your big competitors tomorrow. Costco reports earnings tomorrow. How do you make sure that people join Sam's Club and not Costco?
- [13:48]
C
Yeah, look, Costco is a great competitor. We think that we're great too and we're doing a lot of good things. What I would tell you is this.
- [13:57]
A
Because you have an aggressive plan in terms of expansion. Yeah, I know.
- [14:01]
C
Yeah, we're really excited about that plan actually. The Club Channel in general is a relatively small channel. There's a huge, there's huge upside for the whole of the Club Channel. And I would tell you this, good competition makes you better. And, and I've never been afraid of, of good competition.
- [14:16]
A
What about AI and how you guys are working.
- [14:19]
B
Are you afraid of AI?
- [14:23]
A
We're trying to.
- [14:24]
C
AI is a big topic everywhere now, isn't it? We, you know, here's the thing. We are, we're excited about AI as a company and I am personally too. I think this idea of are you.
- [14:35]
A
Guys using it a lot?
- [14:36]
C
A lot. We've been using it for a long time, honestly. But the generative AI and then the agentic AI, that's coming through too. Yeah. Is, is really exciting. It's exciting for our members and for our associates. What we do, we pivot to growth. Does this help us move faster, do more for our associates and our members? How do we find different routes to market? So that's exciting. Of course we also look at like how do you find opportunities to take time out of product launches and all of those kind of things so that you're a better business. The one thing that you may have seen is we also believe that the opportunity to give people, to empower people with the use of AI, but with an enterprise, but with enterprise data is really exciting. So whether it's in the office or recently we made an announcement a couple of weeks ago, our holiday meeting where we gave our frontline management access to OpenAI to ChatGPT and which they can use to just go faster and do more. And that's really exciting.
- [15:33]
A
Yeah, it's kind of amazing. We're all kind of finding our way through it. Chris, thank you so much.
- [15:37]
C
Thank you for having me. I appreciate it. And yeah, good luck.
- [15:40]
A
Good luck. Thank you as well. Chris Nicholas. He's the president and CEO of Sam's Club. On September 25, Bloomberg Green returns to New York to bring together leaders from business, finance and government during Climate Week nyc. Join us for a half day of timely insights and high impact networking backed by Bloomberg's global journalism and data expertise. Together we'll explore strategies for future proofing business and communities from the planet's most pressing climate challenges. Supporting sponsor Susano learn more@BloombergLive.com greenny.