Wal-Mart Cites Challenges at Meeting

Wal-Mart's customarily festive annual shareholders' meeting was tempered by struggles with the company's reputation, sales and stock price.

FAYETTEVILLE, Ark. — Wal-Mart’s struggles with its reputation, sluggish sales and stagnant stock price tempered the customarily festive annual shareholders’ meeting, which was replete with the national anthem sung by Jessica Simpson, performances by Jon Bon Jovi and Garth Brooks and raucous cheers.

“We’d better be ready to be better,” said president and chief executive officer Lee Scott, addressing 20,000 shareholders, analysts, suppliers and Wal-Mart associates at the five-hour session in Bud Walton Arena at the University of Arkansas. “Because today we’re the focus of one of the most sophisticated, most expensive corporate campaigns ever launched against a single company…. A coalition of labor unions and others are spending over $25 million to damage this company. That’s a lot of money and a lot of firepower scattered across the U.S.”

Scott added, “We are going to stay the course, and this company is going to continue to grow.”

Chairman Rob Walton said the board of directors and the Walton family were “frustrated” by the stock price, which has been flat for the past five years. He defended Scott’s performance. And he acknowledged mistakes.

“I know you’ve gotten a little bit more of a job than you anticipated five years ago,” Walton said. “But we’ve appreciated the way you’ve approached the job, the integrity and standards you’ve brought to it.”

Wal-Mart stock closed at $47.35 per share Friday in New York Stock Exchange trading, close to its 52-week low of $46.20. The company on Thursday reported its same-store sales increased 2.5 percent in May, at the low end of its forecast of a 2 to 4 percent boost. Chief rival Target, in contrast, said sales went up 5.1 percent, ahead of the 3 to 5 percent estimate.

Still, the $285 billion company has the opportunity to add 4,000 more Supercenters in the U.S. to its current total of more than 1,800, and already has 900 approved building projects in the pipeline, Scott and chief financial officer Tom Schoewe said.

Wal-Mart has come under attack on issues ranging from employee wages and benefits to store expansion and development. The company has countered with an advertising campaign and by being more proactive in getting out its message, including providing more access to the media.

This story first appeared in the June 6, 2005 issue of WWD.  Subscribe Today.

In a question-and-answer session, shareholders voiced concerns about the impact of the stock price, which is tied to employee profit sharing, on company morale.

“If this stuff keeps on, and the morale of Wal-Mart employees keeps losing, you’re going to see the unions come snapping like alligators at our backsides,” said a speaker who identified himself as the husband of a Wal-Mart associate and a 29-year shareholder.

“Sam [founder Sam Walton] would never have put stonewalling the outside world above growing the company,” said a representative of Northstar Asset Management, lobbying for Wal-Mart to disclose stock awards and bonuses for women and minorities.

Martha Burk, chairwoman of the National Council of Women’s Organizations, criticized Wal-Mart for having only two women on its 14-member board.

Last week, a group of prominent shareholders that controls more than $545 million in stock, led by New York City Comptroller William Thompson, urged the company to set up an independent board of directors to review corporate compliance issues.

All 11 shareholder proposals, such as disclosing stock awards and bonuses to women and minorities, were defeated.

On Thursday, about 50 members of the Kansas City, Mo., chapter of Reclaim Democracy, a workers’ advocacy group, paraded past the Walton Arts Center in Fayetteville with signs reading “Low Wages, Low Morale.” And Wal-Mart Watch, an anti-Wal-Mart coalition running ads attacking the retailer’s wages and benefits, released its annual report on Wal-Mart entitled “Low Prices at What Cost?”

Although executives defended Wal-Mart’s corporate integrity, they admitted to subpar performance from the U.S. Wal-Mart Stores division, which missed its first-quarter earnings.

“We’re not where we need to be today, especially in Wal-Mart Stores U.S.,” Scott said. The company is working to clean up its stores and to upgrade its merchandise to better serve a more affluent, female shopper.

“We don’t think we’re doing a very good job on ‘high-end’ apparel, or home fashion, or electronics or other items,” he said. “They may bypass some of these departments completely on the assumption that our competitors are doing a better job.”

To service that affluent customer in apparel, Wal-Mart has opened a New York-based trend office, is sourcing better-quality fabrics and is putting more design muscle behind its George label, with the help of its U.K.-based George Global product development office. Jewelry and shoes, run by separate teams, have been centralized with apparel. Other initiatives to serve a more affluent customer include a broader array of home decor, including 400-thread-count sheets, and organic foods.

In stores, Wal-Mart has improved its apparel presentation through a grid of fixtures and a more distinct brand matrix, said Claire Watts, executive vice president of product development, apparel and home merchandise.

The company did not refer directly to the financial scandal swirling around former vice chairman Thomas Coughlin, who resigned from the board after allegations of misusing company funds.

However, Scott referred to “embarrassing and difficult” departures, while Walton told shareholders the board will “hold your company accountable for the business results and for operating the business consistent with the Wal-Mart culture holding true to our founding principles.”

The meeting had moments of levity. Simpson, who plans to introduce her “Dessert’’ fragrance at Wal-Mart in the fall, sounded a bit hoarse when she sang the national anthem at 8:30 a.m., after which the entertainer remarked she had “never sung this early in the morning.” The crowd politely applauded Bon Jovi, but roared and sang along with Brooks, who at one point put on a Wal-Mart vest.

It was all part of a week of meetings and entertainment for about 5,000 associates from across the company who attended. At the meeting, they presented flags and dressed in color-coordinated shirts. Jimmy Buffet and Will Smith performed earlier in the week at private events for associates.