Posted on: Monday, June 11, 2001
Wal-Mart copes with growing pains
Associated Press
BENTONVILLE, Ark. — The Saturday morning gathering looks like a pep rally before a big football game. It starts and ends with a noisy cheer, and in between are moments of rowdy applause as the coach challenges his team to beat its rivals.
This is Wal-Mart Store Inc.'s weekly sales meeting, where some 600 executives and associates hear about the previous week's results, compare notes on what they're seeing in the aisles and learn how they can improve their numbers.
In response to a jittery economy, the world's largest retailer is relying more heavily on the Saturday sessions, along with other tactics and traditions put into place by late founder Sam Walton, to keep growing.
Wal-Mart, which has seen slower sales in the past year, reported a 4 percent increase in profits for the first quarter ended April 30. It warned that double-digit earnings growth won't return until at least the second half of the year.
"We have no control of the economy," said Lee Scott, president and chief executive, in an interview after a Saturday session. "But we have more confidence that we have control of our destiny."
The chain's growth plan has several facets: squeezing more sales out of its 4,000-plus stores worldwide; fixing and developing its international business; and expanding its "super center" format, which combines general merchandise with a supermarket. The company now operates 952 supercenters and wants to add 150 to 175 per year.
Wal-Mart operates five stores in Hawai'i, three on O'ahu (a Sam's Club in Pearl City and two Wal-Mart stores in Mililani and Kunia.) The company's sixth, a Wal-Mart on Maui, is under construction and scheduled to open around October.
But some questions remain: Can rapidly expanding Wal-Mart, now with annual sales of $191.3 billion, convey a sense of urgency to its 1.2 million employees worldwide? And will it be able to sell all of those workers on Wal-Mart's culture of frugality, integrity and service?
The retailer is known for building loyalty by treating employees like partners in the business, a trait that some describe as cult-like. It's also ruthless when it comes to controlling expenses and avidly emphasizes pleasing the customer.
"Can you take this 'good ol' boy' culture that's ingrained and bring it to all four corners of the U.S.? It's a tough thing to do," said Rob Voss, a 20-year Wal-Mart veteran, who left his merchandising executive post two years ago.
At least one analyst — Bob Buchanan of A.G. Edwards — said he is noticing poor customer service, long lines at the aisles and sloppy merchandise at a number of stores across the country.
"Wal-Mart is experiencing some growth pains," Buchanan said. "It's two generations removed from its evangelical leader. Their game has slipped."
But Jeff Feiner, managing director of Lehman Brothers, believes that Wal-Mart is one retailer that will be able to gain market share as spending slows down because of its low prices and lean cost structure.
Scott, a 22-year veteran who rose through the ranks to become CEO in January 2000, is intent on maintaining Wal-Mart's success by improving customer service and keeping the right merchandise in stock.
Wal-Mart, whose trademark policy is "everyday low prices," is also pricing its merchandise more aggressively in response to heavier discounting from Kmart Corp., Target Corp. and other competitors. It's also looking to further pare expenses, speed up deliveries and strengthen its clothing lines.
Perhaps Wal-Mart's biggest weapon in a soft economy is its ability to control costs better than its competitors. This frugality has been a core value since the company was founded in 1962 by the folksy Walton.
Wal-Mart also doesn't buy too much into its success.
"No matter how good Wal-Mart is doing, they believe they can always get better," said Bob Duncan, a professor at Northwestern University's Kellogg Graduate School of Management, a specialist in corporate culture.
