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The Honolulu Advertiser
Posted on: Saturday, June 5, 2010

Wal-Mart aiming to improve weak business

Associated Press

FAYETTEVILLE, Ark. Wal-Mart Stores Inc.'s CEO told shareholders yesterday that the company is positioning itself for 20 years of worldwide growth and that it plans to hire a half-million employees over the next five years.

The company also unveiled a new $15 billion stock buyback. But it was short on specifics on how it will turn around weak business at its U.S. Walmart stores as the rest of the retail industry, including its key competitor Target Corp., has started to heat up.

But the recession is continuing to vex the world's largest retailer as consumers keep a tight grip on their money.

"There is business opportunity in the world, but the world is changing fast in big, disruptive, complex ways," CEO Mike Duke told shareholders packed into a University of Arkansas arena in Fayetteville, about 30 miles from its Bentonville headquarters.

A year ago Wal-Mart was in the sweet spot of the Great Recession. As shoppers traded down to cheaper stores, Wal-Mart gained market share and saw big sales gains. But now Wal-Mart is struggling to hold on to customers. Its cash-strapped shoppers are looking elsewhere such as dollar stores and local grocery chains for even better deals than Wal-Mart offers. And some better-off customers are heading back to the mall or Target.

Duke also said the company must further tighten its expenses to keep its hallmark low prices lower than the competition.

"Wal-Mart must widen the gap here. We will win on price leadership, and we will win big," he said.

Duke also noted that as retailing enters a "new era of price transparency" where shoppers can get deals anywhere and at anytime, it will push its low-price message more aggressively online and vowed it will focus more on mobile technology.

"Some of our competitors are ahead of us here. ... Building the best website will be just as important as getting our store formats right," Duke said.

After the formal presentations, Vice Chairman Eduardo Castro-Wright told reporters that stores in areas with high unemployment have the worst numbers while stores in low unemployment areas are thriving.

Last fall, when gasoline prices spiked in October and November, Castro-Wright said customer visits dropped.

Duke said Wal-Mart's global performance shows that there has been a worldwide recession for the past 18 months. He stopped short of saying conditions would get worse but didn't predict improvement.

Adding to the drop was an increase in how much customers spend. Shoppers still went to Walmart to stock up, but midweek "fill-in" trips fell off, he said.

Amid a celebrity-laden extravaganza featuring Mariah Carey and Jamie Foxx, executives said the company needs to solve problems with its merchandise mix and reverse a decline in customer traffic.

But the company put a lot more emphasis on its bottom line and how it's been able to increase expenses slower than revenue for two straight quarters. It also will push to think globally. Its international business now accounts for 25 percent of its business and is its fastest-growing segment.