Duke then turned to a company-wide goal he set at the annual investors' meeting two years ago: reducing operating expenses as a percentage of sales by at least 100 basis points over five years. "We made progress on that goal last year, and our goal is to deliver leverage again for this fiscal year," said Duke.
Substantial Progress in Key Long-Term Areas
Highlighting the long-term areas where the company is making progress, Duke started by saying that investments in leverage initiatives are paying off around the world. For example, the U.S. logistics team is reducing shipping costs and increasing transportation efficiency, a single process initiative is generating significant savings in labor productivity in China, and the company has migrated all but one market in Latin America to its Costa Rican Shared Services Center. Duke added, "We're driving costs out of our system so we can invest those savings into lower prices for Walmart customers."
Duke said the company is "much more streamlined in how we make real estate decisions and invest capital." He highlighted the stronger performance of new stores and progress in bringing down the cost to build, expand and remodel stores.Duke said he "loved the progress that the company has made in e-commerce over the past year. The biggest opportunity we have is winning the intersection between physical and digital retail around the world. We've never been more connected across the company on e-commerce, and our results demonstrate this." In the first half of the year, Walmart's e-commerce sales grew 30 percent globally, including a strong performance at Yihaodian in China. As the company has discussed previously, Walmart has made major investments in compliance over the past year. Its focus has been on better processes and procedures, increased training for associates and strengthening organizational leadership. "This is the right thing to do," Duke said. "And let me be clear that our progress with compliance makes us a stronger business for the long-term. Compliance is an essential part of our growth strategy."
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