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Scott Focuses on Wal-Mart’s Growth, Operations

NEW YORK — Wal-Mart’s president and chief executive officer Lee Scott has an agenda for Wal-Mart’s growth, one that puts part of his own bonus at stake.<BR><BR>On Tuesday, the ceo, along with members of his management team, gave a...

NEW YORK — Wal-Mart’s president and chief executive officer Lee Scott has an agenda for Wal-Mart’s growth, one that puts part of his own bonus at stake.

On Tuesday, the ceo, along with members of his management team, gave a presentation to Wall Street analysts at a two-day meeting in Bentonville, Ark. The discussion, according to a transcript of the event, centered on what the company is doing to maintain strong operations. Presentations included one on the retailer’s international segment, during which Wal-Mart confirmed it was looking to enter Russia. Management also offered a discourse on how Sam’s Club is a turnaround story even though it no longer accepts Visa or MasterCard and has discontinued delivery, membership discounts and acceptance of coupons.

For Scott, however, one sobering note over the past year has been the realization that the world is scrutinizing Wal-Mart on every front. He acknowledged the company faces certain challenges as it expands because of its size, but said he didn’t know whether it was rooted in societal changes or changes in expectations as Wal-Mart has become the “largest revenue company in the world.” What seems to be most pressing to Scott is that the company was “not prepared” for the amount of scrutiny it has received during these changes.

“Nine times out of 10, the questions that I get don’t deal with retail,” Scott told the analysts. Instead, they’re about legal matters and other nonretail issues.

Wal-Mart, to be sure, has made headlines in print and broadcast media on several legal fronts, many dealing with employment matters. The company, Scott disclosed, has beefed up its in-house legal team to include experienced trial attorneys. Wal-Mart this year also expanded its compliance department with new staff.

The discounter is heavily investing in the concept of diversity. Wal-Mart earlier this year hired Charlyn Jarrells Porter as senior vice president and chief diversity officer, in addition to other hires whose focus is on diversity within Wal-Mart.

To emphasize the retailer’s commitment to diversity, Scott noted that, in the fiscal year ending in January, 7.5 percent of his bonus will depend on Wal-Mart achieving certain diversity goals. Next year, 15 percent of his bonus will depend on achieving established diversity goals.

This story first appeared in the October 7, 2004 issue of WWD.  Subscribe Today.

“Personally, I have $600,000 at risk on that one issue alone. We are committed to making sure this company meets its obligation” on the diversity front to its customers and associates, he told analysts.

Scott and his team, he added, also keep busy every week observing what is going on at the store level, whether here or overseas.

“We are a retail company and I walk the stores every week,” the ceo said.

For now, Wal-Mart remains optimistic about a strong finish for the year, even though sales slowed at the start of the third quarter.

“When we put new items out there to stimulate customers [there is a] willingness to spend. We will finish this year with strong results. When you look at it, the economy is improving. The industry has lower inventory levels [and it] should lead to rational pricing,” the ceo noted.

One concern remains the cost of energy for the Wal-Mart customer and the upcoming election. Negative election campaigning doesn’t give consumers a license to go out and feel good, Scott said. Despite that, the ceo emphasized that Wal-Mart is on track to grow, with improvement in its Sam’s Club operation and “plenty of opportunities on a worldwide basis.”