Samuel Moore Walton was born March 29, 1918 in Kingfisher, Oklahoma and died April 5, 1992 in Little Rock, Arkansas. From humble beginnings, he became a retail titan as the founder of Wal-Mart Stores, Inc. He graduated from the University of Missouri and entered the J.C. Penney training program before serving in the Army during World War II. He started a chain of five-and-dime variety stores in Arkansas right after returning from the Army, and opened his first Wal-Mart store in 1962. He pioneered many customer service functions that today are considered standard practice. Walton eschewed the typical discount-store chain practice of locating stores in or near large cities, preferring small towns where the competition was nonexistent. He had opened 1,000 stores by 1988 when he resigned as chief executive officer, (he retained the chairman title as long as he lived.) At the time of his death, Wal-Mart had over 1,700 stores and the Walton family was the wealthiest in the U.S. By the end of the 20th century, Wal-Mart had become the largest retailer in the world and retains that privilege today. The Walton family still owns a dominating percentage of the Wal-Mart common stock, and one of the major uncertainties facing the family and the company is the direction to be set by the new generation of managers. (Biography, 2011)
Wal-Mart Stores, Inc.
Built on the back of a small chain of variety stores, Sam Walton opened the first Wal-Mart store in 1962 in Rogers, Arkansas. Over the past five decades, Wal-Mart has grown to be the largest retail company in the world with stores across America, Mexico, Canada, Argentina, Brazil, Japan, South Korea, China, Germany, Puerto Rico and the UK. In the fiscal year ended January 31, 2011 Wal-Mart recorded total revenues of $419 billion. Of that total, 62.1 per cent was derived from Wal-Mart stores in the United States, 26.1 per cent from Wal-Mart International, and the remaining 11.8 per cent from Sam's Club stores in the United States. Samuel Robson (Rob) Walton was named chairman of the board of directors of Wal-Mart on April 7, 1992, two days after his father's death, and still maintains that title. Currently, Michael T. Duke is the President and CEO of Wal-Mart and has served in that position since February 1, 2009. Prior to this appointment, Duke held other positions with Wal-Mart since joining the company in July 1995, including Vice Chairman with responsibility for Wal-Mart International beginning in September 2005, and Executive Vice President and CEO of Wal-Mart U.S. beginning in April 2003. (Wal-Mart, 2011)
Wal-Mart Stores, Inc.
Fiscal Year-end January 31 ($billions except per share data)
Wal-Mart United States
William Simon was named President and CEO of Wal-Mart U.S. On June 29, 2010 and retains that title today. Argus analysts have reported and commented on the current outlook for Wal-Mart as revealed by management at a recent company-sponsored investor conference. Looking at the company's main business, Wal-Mart U.S. appears to be returning to its roots in Everyday Low Prices, often abbreviated as EDLP. The mantra is constantly to remind customers that at Wal-Mart they always get the lowest price on a basket of products and they can avoid the hassle of shopping around for temporary bargains. The execution of EDLP requires the precedent corollary Everyday Low Cost, or EDLC. This technique predates, and is the early model for, the Just-in-time Inventory practiced by large-scale manufacturing concerns. What this means is that the company needs to generate a steady flow of merchandise, avoiding the typical inventory peaks that occur when bringing in heavy quantities of merchandise for short-term promotions. EDLP also eliminates the disappointment of additional markdowns if the company orders too much merchandise. SG&A expenses tend to be favorably impacted because EDLP reduces the need for surges in staffing typically required to accommodate the tsunamis of sale merchandise. Wal-Mart U.S. also recently introduced a marketing promise to match competitors' prices continually to demonstrate compelling value for customers. (Argus, 2011)
The near-term management emphasis will focus on getting comparable sales up by adding back SKUs and emphasizing assortment and EDLP. Surveys showed that shoppers generally approved of the aesthetic improvements when Wal-Mart took merchandise out of the stores, but it did not encourage them to buy more. Shoppers expressed disappointment that they could not find all the items on their shopping list or that Wal-Mart no longer carried their favorite merchandise. Phase I of the "add back" program will be in the area of snacks, beverages, and dry groceries sourced from national suppliers. Phase II will include fresh foods, consumables, and health and wellness items. Phase III will concentrate on general merchandise. Management indicated that big-ticket items with long lead times such as entertainment, home accessories and clothing may not be in the stores until the second half of the year. Management has also recalculated its distribution system to be more responsive to the merchandise turnover ratios. The result is that the company expects to see improvements on its in-store stock positions, while reducing the number of distribution centers to a minimum and optimizing the number of trucks serving each store. (Argus, 2011)
Wal-Mart Stores Inc.'s flagship domestic chain of big box superstores has been challenged to find a workable sales strategy over the past year. Meanwhile, its Sam's Club membership-warehouse stores have increased sales every quarter, serving up a much needed silver lining for the giant retailer. It wasn't long ago that Sam's Club was the laggard of the Wal-Mart business empire, but now it is leading the way. Two years ago Brian Cornell, a former Safeway marketing executive, was recruited to lead Sam's Club. Since then, he has moved the chain to an upmarket strategy. He remodeled many of Sam's stores, began to offer much more fresh food, bit the bullet on several under-performing stores, and upgraded the quality of its merchandise. Until recently, customers had reported on surveys that they observed a quality gap between Sam's and its single biggest competitor, Costco Wholesale Corp. (Zimmerman, 2011)
Those customer surveys have persuaded Sam's to package its products in compact sizes more convenient for smaller households and to add more premium membership perks. Members who pay $100 - more than twice the average fee -- can enjoy specially tailored discount programs and receive free delivery. Sam's Club is also working to improve the shopping experience by speeding up checkout lines, moving attractive categories to the front of the store, and installing skylights to allow more natural lighting in stores. (Zimmerman, 2011)
Notwithstanding Sam's improving sales record, retail experts say that Costco, which has more members per club and higher spending per member, leads the parade in the membership-club business. Costco runs ahead of Sam's on almost every financial metric, including sales. Last year, Sam's $50 billion in sales was eclipsed by Costco's sales of $56 billion. Costco won again on the favorite retail management measurement, generating sales of $990 per square foot of store space versus $618 at Sam's. (Zimmerman, 2011)
Based on management comments, Argus analysts think that the Wal-Mart International segment presents the most likely opportunity to ratchet up the growth in sales and operating margin. China, India, South America and sub-Saharan Africa are all areas presenting a favorable combination of rapid growth in population, mounting per-capita income, and opportunities for improvements in retailing efficiency and market consolidation (read acquisition candidates.) For example, executives at the recent investor conference said that nearly 30 per cent of the fresh produce it buys in India is not fit to sell after it moves through the inefficient supply chain. The company sees this as an opportunity to utilize its logistics skills for its benefit and better to serve the public. (Argus, 2011)
The company expects that in 15 years China will have nearly a billion people in 300 million middle-class households. That would be a dramatic increase from the 42 million middle-class households in 1995. While not embracing the entire Chinese population, the middle-class statistic essentially represents Wal-Mart's potential customer base. Management forecasts show China having at least 200 cities of one million-plus people by 2025. The company spokesmen said at the conference that there was a good chance that China could experience 10 per cent, or more, growth in retail sales for the next three decades. The primary factors influencing customers' attitudes in China are trust, offering a smart shopping experience, relevant products, and good prices. Wal-Mart executives feel good about their performance so far, particularly in customer trust, being the smart shopping choice, and offering a good assortment of popular…