It was a fix-it year for Wal-Mart, which tried new tactics to cope with mounting external and internal problems.
In 2005, the $285 billion retailer fought back against increasingly well-organized critics with a massive public relations effort. Chief executive H. Lee Scott embarked on a nationwide speaking tour, while the company plowed millions into television and print ads defending its wages, benefits and track record as a corporate citizen.
As part of “telling our story better,” according to Scott, the Bentonville, Ark., giant held an unprecedented media conference in April, an acknowledgement the retailer had begun to consider how negative press impacts its bottom line.
The problems weren’t merely external. Wal-Mart’s $191 billion domestic store division, 67 percent of its revenues, missed its earnings for the second time in corporate history in the first quarter. Year-to-date, Wal-Mart has failed to increase operating profits faster than sales, a barometer the company uses to measure the efficiency of its performance. Holiday might be the first hint of a turnaround. November comp-store sales rose 3.8 percent, topping rival Target’s for the first time in 20 months. Scott has been publicly bullish on the company’s holiday prospects.
Yet the big picture is that Wal-Mart U.S. remains a work in progress.
In October, Scott swapped the roles of two top lieutenants, tapping Wal-Mart International ceo John Menzer to head the domestic store division and sending Michael Duke to the fast-growing global operation. Wal-Mart has also decentralized its U.S. middle management. Following the model Menzer used internationally, the retailer is moving cross-functional teams out of Bentonville and into each regional market.
“We are nimble and we will be different — very different — from the Wal-Mart you know,” promised Menzer at the company’s October analyst meeting.
He hopes to turn around the domestic stores by offering a cleaner and better-organized shopping experience, shorter checkout lines and more contemporary, upscale merchandise. The retailer said it has focused too much on serving traditional customers with opening-price merchandise, and needs to reach its more affluent grocery shoppers with more stylish apparel, electronics and home decor.
For apparel, it launched Metro 7, a trendy contemporary line that will be pitched by former Miss Universe Dayanara Torres. It has redeployed district managers as fashion merchandisers who make sure clothing is neatly and correctly displayed.
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“We realized it doesn’t do any good to have the right fashion, but have it look sloppy or have it falling on the floor,” said treasurer Jay Fitzsimmons at a Goldman Sachs conference in late November.
The company has also suffered embarrassments this year, such as a leaked health care policy memo that advised discouraging “unhealthy” workers from applying. Wal-Mart’s former vice chairman Thomas Coughlin is being investigated by an Arkansas grand jury on charges he allegedly stole as much as $500,000 through gift cards and phony expense reports.
A rocky year, yes, but not without bright spots.
The retailer’s California supercenters, despite bitter resistance from unions and some communities, have all surpassed sales expectations, executives have said. Wal-Mart International, led by outstanding performance at Wal-Mart de Mexico, that nation’s largest retailer, has seen rapid growth. The company acquired a one-third stake in Central America’s largest retailer, Central American Retail Holding Co., and took controlling interest of Japanese retailer Seiyu.
Wal-Mart has also been lauded for an increasingly proactive environmental stance, including a $35 million, 10-year “Acres for America” land conservation program. Wal-Mart opened new eco- and energy-efficient prototype supercenters, in McKinney, Tex., and Aurora, Colo., this year as part of a plan to reduce waste by 25 percent in the next three years. The firm also pledged to invest $500 million annually on ways to reduce greenhouse gas emissions.