Wal-Mart Stores, Inc. (WMT) is bringing back store greeters to help improve service and combat theft, and while that alone isn’t immediately material to WMT stock, the retailer’s broader strategy of investing in labor and the customer experience is a wise one.
After all, much of what ails WMT is out of its control. With sprawling international operations, the world’s largest retailer is at the mercy of a strong dollar as much as any U.S. multinational.
At the same time, many of the gains stemming from seven years of economic expansion have bypassed Walmart’s core customers.
And then there’s the case that all big-box retailers aren’t in fashion quite like they once were, while online shopping continues to surge. By necessity, WMT needs to keep building out its e-commerce business, but it will probably never mount much more than a fighting retreat against the Amazon.com, Inc.‘s (AMZN) of the world.
That’s why it has become imperative to make Walmart stores cleaner, better organized and more welcoming. The return of Walmart greeters — as well as morale- and consumption-boosting wage increases — is an investment in such goals.
In addition to making WMT a more appealing place to shop, the Walmart greeters serve another important function. They help deter shoplifting, which along with other forms of so-called shrinkage, costs the company something around $300 million a year.
WMT will roll out the program in a number of forms. About two-thirds of Walmart’s U.S. locations will get a standard greeter at the entrance. Elsewhere, employees known as “customer hosts” will have additional training in order to deter theft as well as help shoppers lift heavy objects or process express returns. WMT will also assign employees to oversee self-checkout areas, which can be prone to shoplifting.
The Market Is Buying Into WMT’s Turnaround
Best of all — at least from an investor’s point of view — these new staffing assignments will be made mostly from the company’s existing labor force. The hit to total labor costs should be minimal to immaterial.
Ultimately, the return of the Walmart greeter makes for a nice addition to a turnaround program that has the market’s thumbs up, at least so far. WMT stock is up more than 8% year to date, easily beating the broader market’s essentially flat performance.
After a woeful 2015 — and two years of sideways trading before that — it’s fair to say that sentiment is starting to change on Walmart stock. You can see this in WMT’s trailing price-to-earnings multiple, which hit a low of about 12 near the end of 2015. Today, WMT goes for more than 15 times forward earnings.
Walmart isn’t expected to enjoy both full-year revenue and earnings per share growth until next year. Maybe the new greeter program can help it get there sooner.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
