Walmart's (WMT) CEO Greg Foran Presents at Bank of America Merrill Lynch 2018 Consumer & Retail Technology Conference (Transcript)

Walmart Stores, Inc. (NYSE:WMT) Bank of America Merrill Lynch 2017 Consumer & Retail Technology Conference March 14, 2018 10:30 AM ET

Executives

Greg Foran - CEO

Analysts

Robert Ohmes - Bank of America Merrill Lynch

Robert Ohmes

I'm the Food and Discount Store analyst of Merrill Lynch. We are very pleased to have Greg Foran, President and CEO of Walmart U.S. with us here today. Greg has been with Walmart since 2011 working in many different roles in Walmart International including President and CEO of Walmart International. Prior to Walmart, Greg held a number of positions at Woolworths, the largest retailer in Australia and New Zealand.

He's been extremely busy, as some of you probably know with strategy and performance at Walmart U.S. over the last few years. So this is a real, real treat that he is -- he made time to be here for us, so we really appreciate it. I also want to thank Michael Dastugue who's here with us as well. He is Walmart U.S. CFO. And Carrie Brunner is right there and he made the trip also. So again, really pleased that these guys are here.

I'm going to turn it over to Greg for some comments before we do Q&A.

Greg Foran

Good morning and thank you Robbie for the introduction. Any excuse to get out of the filing shelves. I am Greg Foran look after the Walmart U.S. Stores Business and before I get into Q&A, I’ll just take a few minutes and just giving you an update on how things are going with the business. But first, we better share you the legal disclaimer.

So as a reminder, we may make forward looking statements during the presentation this morning, so please review our entire safe harbor statement on our website. So to the business, strong management stores in FY ’18 as you can see from the headline and look I’m pleased with the how business in the stores has been going. We have got a strong -- reasonably strong year with comp sales and the good thing about this is that it's healthy. That was led by really good traffic increases. And in fact in Q4, our two year comp stack was 4.4 and Michael, I think that’s best it's been about eight years. So, we are feeling pretty good about some of the momentum that we are seeing there.

I’m really pleased with as I said the health of that, in particular inventory is being a bit of highlight and a focus for us in the U.S. stores business. We continue to bring the comp store inventory down and we have done that for 11 consecutive quarters. There is still room there for us to do more. And the importance of that is that a brief life end of the store. If any of you that worked in shops and it is really tough turning up to work knowing that your background is completely filled and maybe this 30 or 40 shipping containers out the back full of merchandise.

I can now obtain the stores and finalize, I can see no shipping containers at the back of stores apart from when we're running right away. And in most stores, the backrooms now have empty steel. And at the same time that we are bringing the inventory down, actually the on-shelf customer availability now in-stock for customers is actually improving and that’s not surprising. I have seen that play out in other businesses and it's because effectively it's just a healthier way to run your business.

Technology is helping us get there and a lot of investments from Mark and his team around developing the right technology and then we layer in the academy training so that our associates actually are able to perform their task easier. This is about 14 to 15x they have on TC70s or like some of this we have these downloaded on our phones. I can check in stock, I can check availability, I can check things like what associate turnover is on Cat2 teams, I can check customer service goals, clean fast friendly.

I see customer recommendations or complaints. All of that is available digitally to all associates in our stores, so good year, good progress, and momentum and good momentum coming into this year. Our plan to win our strategy hasn’t changed and but I'll just give you a bit of an update on a few things. We have been executing against this consistently now over the last three years, and customers are responding to it. And as you can say running growth stores, providing convenience thing great merchants delivering value.

What is changing is that we are changing our mindset around this. For the last three years, we have been focused on fixing. And I think that’s been appropriate, fixing things like in the stock, fixing the quality on leafy greens, fixing the associate experience. Now we are moving to a mindset of leading. And let me touch on how we are doing that across each objective. So firstly running great stores and lots of progress we have made and you have heard me already mentioned things like clean fast friendly, we've seen improvements in that, week on week, months on months.

We continue to be focused around driving our grocery business that is core to our strategy and included in that fresh foods. And we are seeing the customers responding to what we are doing there, so whether it's developing a much better cross on which is just setting our shells now or whether it's improving the quality of our frozen foods, we are seeing customers responding to that. But we also see significant opportunity in omni-channel. And our view is that customers should be able to shop when they want, where they want, and how they want.

And I am completely ambivalent as to whether they want to drive to our supercenter or neighborhood market, partly carrying, going and do the shopping themselves or whether from the convenience of their home or maybe they're at work call up their mobile device or to what they want online and then come and pick it up, or as you've heard us say today at their convenience order online, and we’ll deliver it to them.

I am in Dublin just too how they want to do that, and I am excited about the opportunity that they present. I'll talk some more about that in a minute, but we're also in the game of taking friction out wherever we can and the way I think about that is I look at customers experiences, customer journeys in our store and whether they're coming into retain a product that they bought, get a refund, whether they're trying to order a birthday cake, whether they're trying to get their car checked in to get their oil change, whether they're trying to get a script refilled, whether that's checking out and using scan and go.

I think there's an enormous opportunity for us to double down on this area and take friction out for the customer. So that's a key part of the omni-channel experience as well. In terms of our grocery pickup, another key part of it we've shared with you the fact that we've rolled out basically 1,100 locations over the last 18 months. And we've gained momentum through here. We’ll do another 1,000 this year, actually just over a 1,000, and that's a pretty record ties and I am really pleased with the way that the team are doing there.

We're doing it once we're doing it right, the customers like it. Our NPS scores for what we're doing with Online Grocery is incredibly high, at the same time, these pickup tails and some of you will seeing these getting rolled out and increasing right. I think we're up to circle around about 118 and I am pleased at the moment. And you’re going to see several 100 of these bit our key stores. The right time for getting a parcel out at one of those towers is about 15 seconds, so you can imagine the customer experience is pretty good.

And then of course today, we've said we need to get into the business of delivering products if customers want them to their homes. That hasn't been something that has just cropped up on our screen. We've been quite deliberate about how we've approached this. First and foremost, you have to fix the basics in the store. Secondly, develop the skills to be able to pick items from the store and make them available for pickup. Third thing, as you develop that muscle, work out how we can deliver those to customers.

And I think it plays well in to this concept that here were are a business spread pretty much across all of America, majority of our stores within 15 miles where most people live and within those stores a 100,000 of the best-selling SKUs. So, theoretically, if we've done our job properly, we got them into the store at ideally the most effective cost than anyone in America. Now if you want to come go shopping, you can do that; if you want to pick them up, you can do it; and if you want to deliver we’ll provide that as well.

And next part of our strategy, great merchants, isn't this is a key part of being a retailer, and you often hear people talk about assortments, but actually I get much more excited talking about items and I do that because customers buy items. And with them something recently which is just been incredible, we've taken our VPI, volume producing items, and some of you who know the story of Walmart will know the story of the Moon Pie, and we have invigorated this. We now have a VPI act for our associates are going to stores now and associates are pulling out their devices, their phones or the TC synergies and showing the ranking on where they are on the item that they picked, how much margin they are making, how much they’re selling.

But as well as that, Steve and the team have been leaning into both national brands and private brands. And the great thing about Walmart is you know we can do both because we’ve got big boxes, and we can do a great selection of national brands and we have been working hard to get some new ones added into the stable, and you can see them down there whether expose or quiz up. And then of course the opportunity to do great job with private brands but not just in food.

We’ve leaned into that over the last three years, but now as we move from fix into leading let's get really good at general merchandize. And I can tell you that apparel, when Walmart does that well is powerful. You can go in our stores and you can buy women’s cami, comes in eight colors for $1.68. And we make pretty good margin on that item. Why? Because we actually buy about 60 million units, so there is competitive advantage in general merchandize just as there is in food when we execute it well.

Finally, delivering value, our mission hasn’t changed and nor should it. Save people money, so they can live better. Now I can tell you is I get around country and I learn more and more about the U.S. what a fantastic mission for Walmart to have. There is a lot of people out there where we operate stores that rely on us to do this every single day so they can live well. And I’m proud of the fact that what we continue to do is to provide better value. At the same time we lift quality and we drop our prices.

Academy sustain a key part of our strategy and you can see a picture there and you can collect, you can find that at any stage in Google, if you like Walmart academies and you can see pictures of the associates who have graduated from Academies. What are academies? We’ve rolled out 200 in the last year. They located strategically so any associate in our stores can get to them within a couple of hours of where their store is. And there we provide proper training in how to use all the technology that we’re creating in the business, whether you’re doing fiction work and you’re changing on hands, whether you’re placing manual orders because you want to drive your VPI.

People are being trained new skills, so it could be you’ve moved from being at a partner manager to now being a personal shopper in Online Grocery. You’ve got to train your associate, so this year we will put through a 140,000 associates on top of the 250,000 we did last year. This is a meaningful difference to our business. We continue to think about what else we can do, we had an opportunity at the end of last year with the changes, tax rates to think about how we might accelerate some things. I can share with you that there are three things that we are very thoughtful about doing.

One of them not surprisingly was to say, why we don’t put a little bit more into our associates. What we’re seeing is as we invest in our associates we get a return on that. We get better productivity. It helps us leverage in fact Michael we basically leverage all four quarters last year in the store. So despite the fact we are investing, as we improve productivity, we have reduced turnover. We have improved fill rate, pick rates. We actually have the leverage in this business and at the same time drop prices. So we invested more in our associates. We took some action on start rates, but I think even more importantly, and I hear this from our associate we did a great job with benefits.

Second area, we are encouraged by what we are learning as we continue to offer even better value to our customers by dropping prices. So we have invested a bit more Michael in the pricing, very thoughtful, very strategic about how we do that. And then the third area which I'm really excited about is that we bought forward some more investments in IT, because we know this is a critical enabler at us driving even better productivity in our stores. So excited about what we are seeing here as we continue to work to drive the productivity load.

So, quickly in closing, I’ll close where I began. Store business is strong and we have got pretty good momentum. Our strategy remains the same and we execute against that very focused and very diligently. The change is that we are now moving from a fixing mindset to a leading mindset. Let’s not play defense, let’s get out there and play offense. We are going to continue to push down the journey of driving even greater value to our customers and we are excited about the year ahead good momentum. Robbie, back to you, happy to take your questions.

Question-and-Answer Session

Q - Robert Ohmes

I think the first question that I think everybody always wants to know from Walmart. So you mentioned the acceleration in your momentum and obviously all these things you are doing or working, but is there an aspect that's also your core customer feeling better. And can you tell us if you're feeling any change or seeing any change in spending habits that implies any momentum related to rising wages or a better economy or better confidence, et cetera?

Greg Foran

We felt the customer was in pretty good shape last year and we felt that certainly played out Q3 Q4. And we are not thinking any changes at the moment Michael. And when we look at a broad indicators whether its employment or whether its price of we think that’s all pretty good. I can tell you as I get around the stores and as we pay out my share payment to customers which to associates which we have just done this week, my sense is that everyone is feeling much they did last year and for our customer in reasonable shape. Anything you want to add?

Michael Dastugue

Yes, I think with the employment with all the extra money from the tax checks, I think we are reasonably upbeat about FY '19.

Robert Ohmes

There hasn't been a whole lot of inflation in your same-store sales for the last couple years. How should we think about puts and takes for seeing or not seeing some inflation come back in the year for comps.

Greg Foran

I’m actually really, really proud of the fact that we don’t have any inflation. To be honest with you I think it plays well through the story that we are seeing with comp sales and I like what I'm seeing in terms of units in the business, and most importantly it plays to saving people money so they can live better. So last year we arrived pretty much no inflation, I’m not going to forecast what I think is going to be, because I don’t really know, I hear chatter around the corridors from the merchants that they're saying they can feel it coming. And I can tell you that our attitude is we're going to continue to invest in price hopefully as we have been doing, that's sort of where it sits.

Robert Ohmes

Can you speak about the role that the stores are playing in the omni-channel strategy? What is your big focus at the store level that supports the walmart.com business? And what are the most important initiatives this year?

Greg Foran

As I shared in the presentation, I think it's really starting to leverage some of the assets that we've got. So just to replay quickly what I said, 4,700 stores and roughly 4,000 of those are supercenters, supercenter has circa 100,000 SKUs at a point in time, over the period of the year. They've about 270,000 SKUs. What's the difference? You put Christmas in, you take it out. You put Easter in, you got deletions, new lines. But fundamentally here you’re on the corner of central and the main, and most parts of the rural America, and you got a good box that we're remodeling, we've done 500 good remodels a year. And you got the best 100,000 SKUs you want online, 10 miles from where you look.

I bought them in a truckload, moved them in a truckload, and got them on the shelf in a case. The economics for that have got to be good. So, why don’t, we now as we've improved the running of the store, and the in stocks improved and I can have better confidence on the accuracy of the PI. Let's enable the customer to get access to those from the home. And as I said, a lot of people are still going to drive to the store and do the shopping, but I guess increasingly what you’re going to see is some people are going to see, let's order it, and have it available for pickup, and you know we can get really good at this pickup.

So it's quick, and by quick I mean we see you coming along the road and we do this now by the way about 85% of our customers use Online Grocery use the checking out. So we see you coming along the road, we stage the order, you pull them to the store. We burst out through the doors, you pop your trunk. We put the groceries in your car, high-five particularly for a man with busy children, and off they go. And of course today we've said let's get to 800 odd stores this year with delivery.

Now our view on delivery, that last mile cost you, if I get off on a free deliver for that last mile and you don’t have to be -- you can work out, I've got a pipe for that somewhere, so that's why we're going to charge $9.95. We're going to give you Walmart everyday low prices; and if you want it delivered limit, there’ll be a fee associated with it. I guess as we get more efficient of that we can probably bring that fee down, but I am excited about the fact that we've got the state of assets that we've got to a point now where we can really leverage them.

Robert Ohmes

Can you give us -- can you actually give us the more metrics on grocery pickup in terms of I think you said you’re doing a 1,000 more this year, any idea what happens to it? Can you give us some idea like when you add one of these, what kind of lift does it do overall to the stores? How important is it as a contributor to the overall walmart.com business?

Michael Dastugue

Let me start and Greg jump in. I think what we clearly see is that when we add this to our store, both the customers that use Online Grocery and there is customers that don’t, both benefit from the stores because frankly the store has to up its game and has to be better in start. The net promoter score are terrific. It's some of our best in the company. We don’t get into the granularity of what we’re talking about lift, but it says some meaningful part of our overall e-commerce business and we’re excited. And I think that you’re going to continue to see us investing in a big way over the next several years.

Robert Ohmes

And maybe a follow up on that, Greg, can you talk about how the vendors have been responding to the omni-channel strategy versus the field way of doing business? And how supportive are they in what Walmart is doing?

Greg Foran

Look we made some pretty significant changes, didn’t we about 3.5 years ago as we pulled together what we called our legacy plan for the business, and we committed ourselves for everyday low price. We’ve reduced the amount of tabs that we were running. We became disciplined around how we build modulars. We have it down a part of – trays and we’ve been quite thoughtful about the role of private label national brand with pull down inventory and to be completely transparent I think a lot of people probably see it not too sure how this is going to play out particularly initially if my order volume comes under pressure.

Actually how its playing out at the moment is pretty good because sales are up and units are up and we’re easy had to deal with, we’re more efficient to deal with. I look for a balance in anything that we do with our suppliers. I think suppliers are key stakeholders in our business just as you're, just as customers are, associates are and the community is. So getting that balance of the relationship was right, too easy, you leave money on the table, too hard it comes back and gets you. So Michael, Steve Bratspies and myself spent a lot of time actually going, if we got this balance about right are we being transparent, are we being clear on what we’re doing. We’re delivering on what we see we were doing.

I think we are riding this one pretty well at the moment and I’ve spend a lot of time with suppliers of with at the house we are showing in Chicago last Saturday and Sunday needing lots of suppliers. My sense is we’re about where we need to be and we’ve got to keep it going.

Michael Dastugue

The only thing I would add is in addition to Steve Bratspies, who leads merchandize effort. And Greg, also Greg Smith, who leads our supply chain team, he came in a little over a year ago and is doing a terrific job. He actually has experiences previously with some of our vendors. And supply chain we got to remember is an important part of that cost structure, and some of it is just inefficiency, right. And it's just better communication between Walmart and the vendor community. So, we think there is some real opportunities to continue to help us invest in price there.

Robert Ohmes

Another thing I want to ask you about was ship from store. One of your competitors is very big in shipment store and that’s not a big aspect right now of what you guys are doing. Can you walk us through the pluses and minuses they ship from stores from the Walmart point of view?

Greg Foran

Gee, hasn’t the world changed? Online Grocery, you could argue with is now going to be shipped from store, and of course we do pickup in every in general merchandise but Online Grocery pickup in 2,000 stores by the end of the year. So the complexity is goalless flight so far. And we then have another 80 odd stores that we actually used deliberately to ship from store to customers to help offset what we are doing now, if see. I think what we are seeing Michael and if Mac was Lori was sitting here -- he would jump into this conversation as well what we are seeing is not every item is the same.

And if I had to sum it, it would be generally lower average unit retail, lower GP items, it's quite efficient to actually handle those from the store because you've bought in the truck load you move them in a truckload, you move them in a case. It's quite hard to do that is that of a fulfillment center when they're low AUR low GP. Higher, AUR, higher GP items of course buying differently. So if you are buying a set of crystal wine glasses and they come in a box of eight and its $80 and you have made 40 points margin on them. That’s a different economic and probably it got issues about holding inventory across 4700 stores on that scale, in terms of registrar.

So what I’m saying play off here the pins on what you see. So I think ship from stores has a real role in our business and we are going to use that in the same way I think fulfillment theme as Michael we have a real role in that business we are going to use that. And that should be the beauty of Walmart experience.

Robert Ohmes

Can you talk about some of the things you have done at the stores to convert them to Walmart online shoppers and is there new initiatives in 2018 you can share with us?

Greg Foran

Such an important thing for us to do I think we shared with everyone here before that those customers, the shops store-store and online spent about double. And we see that as being a real sweet spot at our business. So getting people to engage with us by physically and digitally getting that app downloaded, we are looking at all kinds of things and stores at the moment we have got about 92 stores at the moment where you can use your phone to go around and do your shopping, or we will give you a device if you don’t want to use your phone.

Go through scale the items get them in the bag get up you go through slightly different point of sale terminal at the front end, bang, transaction is concluded. You don’t have go through a check out or way than a self checkout. Apps around hey you refill your script, hey you skipped the queue and financial services. We are continuing to delve and move as quickly as we can and all of these segments so that the whole friction of the experience go to life of the customer.

Robert Ohmes

I just want to pause for a second to just see if there were any questions in the audience. And while we are moving over to here, can you -- Greg, can you mention to us anything in terms of relative category momentum? Are there any categories I think you the mentioned the parallel on your overall remarks, any insight you can give us on what categories could be up ticking right now.

Greg Foran

Well, I’m pleased that what we are doing in apparel, and we have just bought four brands out there. Wonder Nation, Time and Tru, George, and Terra & Sky. That's been about getting the quality up, and improving the price ladders. What do I mean by that? You can go into our stores and you can buy a t-shirt, might be the cami at $1.68. We might say that's how good or better might be 228 and our best might be 274 and we've been working with the merchants and saying common lets improve that ladder.

And when you’re talking about good, better, best, let's make the best 280 gram, let's put in the side wings, let's do triple stitching, let's do some embellishment on the product and maybe we can sell it for $5.38, so that whole concept of improving the assortment, the items for the customers, is playing out in apparel. One of the reasons I like apparel is you stay in our stores and you just have a look at our apparel and you just got wow, then you look that, just incredible, and it's instant gratification for a customer.

So if we can ensure that we are really disciplined around being in stock by size, by color and it's the right item. What happens when we turn that on for an item that could be shipped to a customer signed from the store? We think, that's a real opportunity for us. So, I like apparel, we still have so much to do in fresh foods. And I got into our stores have improved, the in stock position has improved, Leafy greens have brands have improved, quality of bakery is improving, but we're not winning in today, we've got about 250 stores out there now where we are doing fresh convenience meals.

Now I want that in pretty much every store, over the next couple of years, but that's a hard category to get into and initially the markdowns are going to be tough but should Walmart sell great quality, great value fresh convenient meals? Of course they should, and so much opportunity still in fresh, so much opportunity in apparel and I can go through, entertainment, should we be much better at selling mobile phones? You bet. So, we've got work underway in that category at the moment, so lots happening.

Robert Ohmes

I think you've started to address this when you talked about the mobile checkout. I think so, I wanted to delve little bit more into that because that's the worst -- everything you've done is great, but still when you go to checkout, there's nobody there to check you out and half the little stuff or things don’t work, that's always the worst part of the Walmart experience in my mind, so I was going to ask when you’re going to get the mobile checkout or what else are you doing to improve that part of the experience?

Greg Foran

Yes, so look I am ashamed at least, we got to change our front end. That's what we call out front end, so we have leaned heavily into what we call frontend transformation in our business we have a project on it, we're on the frontend transformation story. We've doubled the usage of self checkout in our stores and by the way that bifurcate customers. There're some customers who will tell me that absolutely less self checkout, there's others who object to it. So this is a journey. But you can sort of see where this is going to play out, and where it's going to play out is where you’re not going to have checkouts, and I don’t think anyone's really solve this yet.

I am sure lot of you've read of what competitors have done in terms of scales on shelf and various cameras, that's fine but it's got to be scalable and it's probably not in its current form. We’re working on that, but where you’re going to get to I think probably in about five years is a situation where we have taken as much friction out of this thing as we can and we’ve got about 90 odd stores at the moment as I mentioned where you can use the phone or use the device that we give you to check out. I think we’ll get that working quite well over the next few months and you’ll see us well roll out even into more stores. I think there will be a solution beyond that and we’re looking at that stage and have got trials underway with that. It will be journey.

Robert Ohmes

With regards to grocery pick up at this store, I had two questions. One is you indicated the basket is much bigger but I’m interested in what happens to that impulse item when the customer is not going into the stores? And so how do you deal with that issue and then you indicated your indifferent between where a customer shops, but in a pick-up you do have extra labor in picking the items and so I’m curious how you think about that in the sort of the economic volume?

Greg Foran

May I’ll deal with the impulse and you deal with economics. The impulse, there is no doubt that an impulse is there for a reason when you go through a kick out and for any of us who’ve had young children, we know the delights of that and it serves it purpose well and when you’re in the business of going sales per square foot, I like the impulse fast. How do you deal with that online? I’ll tell you how we’re dealing with it, if you go on to our orange Online Grocery approximately, you will see that as we get into events whether its Valentine's Day, whether its Mothers Day, whether its Easter which is what’s happening at the moment, we are expanding the assortments that’s available to the customer and its working for us.

I wouldn’t go as far as saying that it solves the entire problem but the good thing is that it solves a part of it and we are learning and we’re continuing to see what we can do. But there is no the doubt in my mind that part of the beauty of the store is that you buy things that you weren’t necessarily thinking about buying. And that’s one of the things I love about pick up, is that not every customer who does a pick up order simply comes in and picks up. Some do, a reasonable amount of them actually go and park their car, go into the store, get a few items, go out, use the pickup chick app and drive around in the pickup lane and pick the other things out. So we’re part in way to answering it, we’re not all the way there.

Michael Dastugue

I think from an economics perspective, I can understand your perspective and as kind of a finance geek, yes, if I can have the customer do all the work that’s great but I think let’s be honest we’re in a world where the customer today wants a better, faster, cheaper and easier and I think that what we’re seeing is when we can get a customer to try Online Grocery and have a great experience, we’re getting more share wallet, we’re seeing an improvement in this store performance but there is some additional cost to it and we have to figure that out but we’re optimistic that as this is the highest NPS that we have within our box and there is something there that we’ve got to figure out how we’re going to leverage it.

Robert Ohmes

Great, Greg could you talk to us about the e-commerce businessfor a few minutes, maybe talk about why you believe the business slowed sequentially from Q3 to Q4 last year and why you believe it will reaccelerate back to the 40% growth rate that you were seeing. And also if you can maybe just touch on while on the call I think Doug mentioned that Q1 you may not hit that level. So why will it get better as the year goes on?

Greg Foran

So a couple of things and obviously, if Mac was here, we'll answer the question that is not so, he's is going to direct my area. Number one, we made a deliberate decision not to go quiet as heavily into that period as what we could have. So you think about Black Friday and you think about that later in the Christmas, we could have put that to the floor, we made a thoughtful decision not push as hard in that period. We are working through building the muscle and it's one of the reasons that we pull back.

So getting items merit, getting associates trying to pick faster, getting deliveries, part of the high and modern store operating more effectively we need to continue to build and work on that muscle, and we use that period deliberately to do that. And the third piece of it that it is of course we're overlapping some acquisitions that we did last year. So we weren't all that surprised by the number that was a deliberate decision by us. We sat down and we said hi let's number one, not blow our brains out too hard during that promotional period, number two, build the muscle, number three, we have got some acquisitions.

Having gone through that period we are now looking to increase the momentum again and that’s exactly what we are doing. Now to turn these things on and off overnight you don’t, you build into it, and that’s why Doug or Brett would have made the comment. We know we are with guidance you too for the year that’s what we are going for all things aren’t going to play out equally on each quarter and it will be what it will be for that first quarter. Anything you want to add.

Michael Dastugue

The confidence is still high heading.

Robert Ohmes

Greg, you've inventory in your presentation and I think one of the things that we heard across the especially consumer packaged goods vendors is surprised at the inventory reductions towards the end of the year. So just two questions, one is there more -- is there room actually take inventory down more. And the second is, we observed a lot of companies as they may not have the capabilities to run your inventories that lean, so I think if you could just address that one?

Greg Foran

First part of the question, yes there is more. What are we trying to achieve here? Fundamentally one touch, I need the product to arrive, at our distribution center and the income of distribution to the send it to the store. And that need to be handling I can’t more than once. We have all done the studies of what it cost every time I pick up a cart and its tied and I’m moving from here put down the cap and then spick it out the back and move from the back and put it on the side stack and from side stack it finally ends up on the shop. I don’t handle labors for that. I don’t have the energy. I don’t have the associates and engagement who want to do that task.

I need that truck to arrive the DC, I mean that product to flow through that D.C., I mean to arrive at the back door of the store, just in time and not out of stock. I've fulfilled all of my Online Grocery orders, I've dealt with ship from store, and in stock for the customer and then put it on the shelf. There is more to do. How do I know that, because when I walk into a stock, I still see either too much product at the back or I see too much product sitting on the top stock, and I am going to walk to DC, we've made improvements here but I still see too much there, that's why things like on time and full is important to us.

Getting it early is actually just as bad as getting it late. Now, this is a muscle that everyone has to build into, I can tell you when I first spoke to the team in the U.S. and I see we're going to take several billion out of our inventory, they looked at us Michael and they said no way this is not happening, you've not idea what it's going to do to the business. Actually what happened is the in stock rate went up, accidents have gone down. Cash flows made up all those things, so you got to build the muscle and you got to believe in this.

And the same way that we've had to teach our associates that whether you’re in the store or whether you’re in replenishment. I think we've got to do, the case was -- that case was some of our suppliers, most suppliers I talked to are actually enthusiastic about the direction we're going. Starting to be more concise about what the items are that we're doing, being more deliberate about the assortment, honing in on when we orders been placed, when we want them delivered. The good ones are heat of the wave, some of them are surfing at and some of them missed it. We just got to keep at it. It is critical that we get this right. So, really-really passionate about that.

What was the second part of your question, sorry?

Unidentified Analyst

[Indiscernible]

Greg Foran

We got to help and technology can help us in some of these areas. And I am just thrilled with some of the work that I am seeing getting done in our team. So GRS is now being rolled out, we've changed the replenishment function of under Scott Pleiman. And we've got a significant project now working with flow, because imports are going to be really important to us because they're part of -- important part of the management mix to be honest with you, so we got to wake up how we are going to flow this product and if we're buying it from Vietnam or Thailand or China, all of that's going to come together.

Robert Ohmes

And unfortunately we're over time. We'd probably sit here all day. Greg and Michael thank you so much for being here today, we really appreciate. Thank you.