Wal-Mart's McMillon: Investments in stores, tech will help us win

WMT CEO: Keeping on our toes and making changes
WMT CEO: Keeping on our toes and making changes
WMT CEO:  Managing push and pull retail
WMT CEO: Managing push and pull retail
WMT CEO: Expanding local store pickup services
WMT CEO: Expanding local store pickup services

Wal-Mart's investments in its employees, stores and e-commerce capabilities are working, CEO Doug McMillon told CNBC on Wednesday.

"We're making progress and our associates are buying in," he said in a "Squawk Box" interview ahead of the company's meeting with analysts in New York City. "We've got a stores business that needs investment, and the investments that we've made in people and training and in-stock and faster checkout are starting to pay off."

As it invests in its physical locations, he added, Wal-Mart must build a technology company to address consumers' shift to e-commerce.

"Ultimately the way we are going to win, which is what we'll talk about with analysts today, is the strategy of bringing them together."

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Wal-Mart has seen profits slip as it invests in major initiatives, including wage increases for a half-million employees. However, those initiatives have helped reverse seven straight quarterly declines in same-store sales.

In the last financial quarter, Wal-Mart's profit came in below expectations and down from the previous year, but U.S. revenue rose 4.8 percent in the second quarter to $74 billion, with sales at stores open more than a year increasing 1.5 percent.

McMillon said approval ratings among customers have risen from about 16 percent prior to the initiatives to about 67 percent today.

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He said Wal-Mart had been too focused on productivity and expense leverage, but the world has changed.

The company raised hourly wages to at least $1.75 above the current federal minimum wage, or $9 per hour, in April. By next February, it will rise wages to at least $10 per hour.

That investment would cost about $1.2 billion this year, he said. Meanwhile, Wal-Mart's average starting wage rates are increasing, it added about 8,000 department managers in June, and it will hire another 3,000 managers to coordinate pick-up service, he added.

Wal-Mart has lately focused on leveraging its network of retail locations and distribution centers to take advantage of the continuing shift to online and mobile buying. It has built new fulfillment centers, and now has 30 facilities that process orders from its website, which features more than 7 million items.

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It is also expanding a program that allows customers to order products on mobile devices and pick up the purchase in stores the same day or the following day.

McMillon called the opportunity to leverage stores as distribution centers for online orders "huge," thanks to Wal-Mart's existing infrastructure and relationship with suppliers.

"As retail moves from being what has been a push system — we push inventory into stores and ask you to come get it — to a pull system, where on a mobile app you're telling us ahead of time what you want online, our accuracy and being able to manage inventory and place inventory goes up, which helps us take costs out."

That will reduce Wal-Mart's need to offer price mark downs, offsetting the cost of transportation and shipping, he added.

McMillon acknowledged that not everyone is buying into Wal-Mart's long-term investment story. He said the company would address concerns by providing revenue and earnings guidance, as well as a forecast for capital needs, for the next three years at its analyst meeting.

Wal-Mart is the second worst performing stock in the Dow Jones industrial average. The stock is down about 22 percent this year, compared with the Dow's minus 4 percent.