In a new interview with Yahoo Finance anchor Alexis Christoforous, Sam’s Club CEO Kathryn McLay discuss preparing for the holiday season, consumer trends in stores, retaining employees, and seeing organic growth in membership.

Video Transcript

ALEXIS CHRISTOFOROUS: Kathryn McLay is the CEO of Sam's Club. She runs the members only warehouse which is part of Walmart. Sam's Club had revenues of $64 billion last year, employing 100,000 associates, in almost 600 clubs. McLay held a number of leadership roles at Walmart before becoming Sam's Club CEO in 2019.

Kath, it's great to have you on the show again. Great to see you. Thanks for being with us and making some time during this very busy time for you.

KATHRYN MCLAY: Oh I'm happy to be here, Alexis. Thank you very much.

ALEXIS CHRISTOFOROUS: So you are in your bread and butter time of the year, Kath. The holiday shopping season. Tell us about how your members are shopping. And did they start their shopping any earlier than years past?

KATHRYN MCLAY: Yeah. This is the fun time, I think in retail. The lead up from now right through Thanksgiving into Christmas, I really feel like our clubs really sparkle at this period of time. And, yeah, you're right. We have been surveying our members. And they told us recently that 20% of them have already started filling their shopping lists.

So members are getting out there early, they're buying up for Christmas. And we had planned that people, like last year, might buy early. So we got Halloween in early. And now we've got all of our, what we call Red and Green, all of our Christmas event product in early as well too. Our members are enjoying it. And truly have already started shopping quite aggressively.

ALEXIS CHRISTOFOROUS: So it's not even Halloween but you're just decked out for Christmas at this point at your stores?

KATHRYN MCLAY: Yeah. I think our model is one where we want to get it in early and sell through. And so a lot of our Halloween product has sold through. And we've transitioned to Christmas.

ALEXIS CHRISTOFOROUS: So what are your expectations for holiday sales this year? And are you doing anything differently as you prepare for that holiday rush?

KATHRYN MCLAY: We are. So we want to be there for our members if they want to get together and gather in groups if that is OK for us as a society to be able to do. So we're seeing at the moment that our members are both still participating and buying COVID related items, like masks and tests, etc. And the same time, they're also buying those celebratory, kind of more gathering type products. Like party trays and cookie trays, etc.

So we're seeing that as an early indicator that people, this year, are really going to want to gather around the Thanksgiving table or the Christmas table with family and friends. And so we're really leaning in big. We have more events as we lead into Christmas this year than we've had in any year prior. And we've also got some really big things around introducing New Director Home Wine as well as looking at some special events as well for our members.

ALEXIS CHRISTOFOROUS: Are you seeing any trends in terms of what people are gravitating towards in terms of gifts or even food items?

KATHRYN MCLAY: Well, I think indulgence is still important right now in people's lives. So you know we're seeing that we're doing really well in fresh freezer and in our perishable space.

We're anticipating that turkey sales are going to be strong this year. And we're also making sure, last year as we went through these periods we also had some really good sales in lamb and beef and seafood. So to be honest, Alexis, however people want a party, however people want to celebrate, and be festive, we want to be there for them.

ALEXIS CHRISTOFOROUS: OK. Which leads me to my next question. And that is inventory. Are you confident you have the inventory to meet what's expected to be a strong demand, especially with all of the supply chain disruptions? Have you had to buy differently because of it?

KATHRYN MCLAY: Yeah, I mean this is a hot topic for every retailer I think right now. So as I said before, all of our Halloween has hit and has already sold strong. And our Christmas product has all been shipped. And it's either here or on its way and imminent. And so, we're feeling really confident about our lead into Christmas. I think we have the privilege in Sam's Club for leveraging Walmart supply chain as well. And I think they've spoken quite publicly about how they've gone out and chartered some ships and vessels to ensure that they could get surety of supply. And so we get to partner in that which is really a great benefit for our Sam's Club members. And I think

ALEXIS CHRISTOFOROUS: You're referencing that Walmart has now brought on its own ships to try to get supply to the stores. And I'd imagine as the parent company, Walmart being Sam's Club's parent company, you're able to participate in that.

KATHRYN MCLAY: That's exactly right. Yeah. So, we partner with them around a lot of our supply chain initiatives. And there's been a lot of work put in place to make sure that we're pulling forward orders and we're making sure that we're getting that inventory into the club so that we can serve members how they want to shop.

ALEXIS CHRISTOFOROUS: Now in terms of pricing, you talked about having some leverage because the stores are so big. Both yourself and Walmart. But we are seeing inflation creep up in every corner of our economy. Folks are paying more for everyday household items, food items. What are you seeing in your stores right now in terms of passing those higher costs along to consumers?

KATHRYN MCLAY: Yeah. This is such an important topic, Alexis, right now. We have been working actively with our supply community over the last, it feels like it's been about six months now, in really looking at how do we handle inflation. So because members pay to shop with us, we don't want to be a pass through.

We want to work with our suppliers to see how we can mitigate it and how we can absorb it. And then at the last instance what do we need to pass through into price? So we know that members come to us because they expect disruptive prices. So we have worked really hard with our supply community to do as much absorbing and mitigating as we possibly can.

ALEXIS CHRISTOFOROUS: I think a lot of people are wondering how strong the holiday sales are going to be. What are the promotions and discounts going to be like with this backdrop of higher inflation, higher prices? What are you planning for Sam's Club?

KATHRYN MCLAY: I think we want to do a mix of making sure that we've got great items and having some exciting prices. But you know I'm not anticipating a highly promotional period as we lead into kind of Christmas. I think what we're all really interested in making sure that people can get great deals. And that they get great items. So that's kind of how we're anticipating the season is going to play out.

ALEXIS CHRISTOFOROUS: Have you seen any signs of panic buying because of the supply chain issues? Sort of hearkens back to the peak of the pandemic when people were running out to get paper goods and couldn't find them. Because more and more, lots of stores, regular grocery stores, their shelves are going bare because they just can't get their hands on some of the essentials.

KATHRYN MCLAY: Yeah I mean, we did see another peak in kind of toilet paper and paper goods supplies. Our sales were really strong throughout the last few months in those areas. Kind of akin to what we saw at the start of the pandemic. And so we've been working actively with a number of our suppliers on how do we make sure that we continue to get that flow of product through. They're probably the areas where we're seeing a lot of pressure, particularly in those paper goods spaces. But you know there's also still pressure on the fresh food supply chains. And a lot of planning and a lot of working hard you know and cooperatively to make sure that we still remain in stock.

ALEXIS CHRISTOFOROUS: And certainly having the supply is part of the formula. But you also need to have the staff to execute. And we keep hearing about the great resignation. And people are just leaving their jobs in droves. I'm wondering what you are seeing at Sam's Club in terms of your employees. What's your retention rate like? And are you having some challenging times hiring for the holidays?

KATHRYN MCLAY: Yeah it's probably the statistic that I am most proud of, Alexis. Our clubs have been at full staffing for probably now over three months. And so there's a lot of things that went into that. A little while ago, we announced that we're at $15 as a minimum wage. But our average wage is actually around $17.30. And so that has been a multi-year program to kind of build up our wage rate to make sure that we have what we call destination jobs and career ladders.

And so you know, there's a different kind of methodology for how we reward each role. But some of those destination roles, we're looking at like cake decorators, and meat cutters, and forklift drivers, we want them to be remunerated sorry in a way that is really attractive. And people can say that as a destination job.

And then we also have these roles that are more career ladders, that will start the bottom of the rung and work their way up. Because we really see retail as that kind of transition pipeline for leadership. So over 70% of our leaders have come from the front line.

And so what we've been working really hard on making sure that we have great jobs and great careers. And that we invest into people's development as well too. And all of that is coming to bear, in putting us in a position where we're at full employment in the field. And so we have a lot of confidence about a holiday plan. Because we've been able to be at full complement.

ALEXIS CHRISTOFOROUS: That's great news for you guys. What about how many people you expect to hire for the holidays? They're sort of those temporary workers who could possibly turn out to be long term workers. But do you have a number?

KATHRYN MCLAY: We don't have a target number. What we're constantly doing is just making sure we're growing in the fields that we need to. But we've also been able to use technology to help us grow without having to hire extra people as well too. So you know as we built out fulfillment teams across our entire network, we were able to build that out by transitioning people that we used to have working on the front end that were freed up because we use scan and go, into those fulfillment teams.

So there's a really nice balance of being able to keep our cost structure low. And to make sure that we're still giving great quality service in our clubs.

ALEXIS CHRISTOFOROUS: You know, we were talking about inflation a moment ago. And one area we're all seeing it is at the gas pump. And I know that Sam's Club, a lot of your members get their gas from your clubs. I don't know how many people actually realize that. How much leverage do you have when it comes to pricing at the pump, as it relates to Sam's Club?

KATHRYN MCLAY: Yeah our focus is to be highly competitive around gas pricing. We see it as a true member benefit to be able to get access to the cheapest fuel prices in the community within which we are serving. And so that actually is a really good drawcard for people to bring them to Sam's Club. To fill up your car and then also go and get your week's groceries, and treasure hunt items, and look for the perfect gift as well.

ALEXIS CHRISTOFOROUS: Now, I know you have put up some really strong revenue numbers this year during the pandemic. But also your membership numbers are off the charts. I believe they're still at a record high. Why do you think that is? And I guess perhaps the more important question is, what's your retention rate like?

KATHRYN MCLAY: So we saw last year, a real boost in our member growth. And we were quietly confident because we saw that the way those members participated with us was like a really sticky loyal member. And so what we've seen this year is that membership growth has continued to remain. And that we're getting a lot of walk in kind of members and organic growth in our membership. So that gives us a lot of confidence about the future, Alexis. That's a really good leading indicator to future sales.

We look at a number of things with our members. We know if our member uses scan and go, they're more likely to renew with us. We know if they get a Sam's Club credit card they're more likely to renew. So we've got all of these kind of indicators that show us whether a member is actually engaging with Sam's Club in a way that means that we're likely to retain them. And all of those indicators have been really positive last year for that first year group. And then we saw them renew in a healthy way. And we're seeing that again this year.

So there's quite an art and a science to membership in looking at how you encourage people to get into a more stickier relationship with you. And we're seeing that those kind of indicators are really positive.

ALEXIS CHRISTOFOROUS: Kath McClay, CEO of Sam's Club. Always a pleasure. And all the best to you and your family for the holidays.

KATHRYN MCLAY: And to you, Alexis.