Wal-Mart Stores Inc. is out to invest in its people — and e-commerce.
This story first appeared in the June 9, 2014 issue of WWD. Subscribe Today.
At the retailer’s annual general meeting Friday at the Bud Walton Arena in Fayetteville, Ark., the dual themes of technology and associates were invoked as speaker after speaker called both the future of the company.
“It will be our associates who make the difference,” said Doug McMillon, president and chief executive officer of Wal-Mart Stores Inc., presiding over his first annual meeting
Not all Wal-Mart associates are content, however. As many as 20 protests by workers, including mothers seeking higher pay and better work schedules, were held around the country last week. Workers say Wal-Mart is not paying them enough to rise out of poverty and they’re demanding a base salary of $25,000 a year.
In addition, a hearing began last week in the federal government’s trial against Wal-Mart for breaking federal labor law — the National Labor Relations Act — by violating workers’ rights. The National Labor Relations Board is prosecuting the company for firing and disciplining nearly 70 workers for protesting and striking.
A Wal-Mart spokesman called the strikers “paid protesters not associated with Wal-Mart shipped in to simply disrupt.” A spokeswoman for the activist group Our Wal-Mart said, “Of course the striking moms work for Wal-Mart.” The organization claims Wal-Mart loses up to $3 billion a year because of stocking problems that would be alleviated with more full-time workers.
One area where the company is hiring is in global e-commerce. In the last year, 1,000 technologists joined the division, which has filed more than 300 patents in the last two years.
“We’ll be at the forefront of innovation and technology,” McMillon said, adding that Wal-Mart is testing tube stations in London as product pickup points; merchandise is distributed from a truck. “To do all this, we need to move fast,” he said. “That’s why we’re piloting so many things around the world. We acquired 14 companies in the last three years.”
Global e-commerce, Wal-Mart’s fastest-growing segment, last year rose 30 percent and accounted for one-third of the company’s total sales growth. Neil Ashe, president and ceo of global e-commerce, forecast $13 billion in sales this year. “Our customer is changing,” Ashe said. “About 65 percent of our U.S. shoppers have smartphones and 80 percent of those under 35 have” the devices. Customers who shop on different platforms spend twice as much money as in Wal-Mart stores, he said.
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The company is bullish on its smaller-format Wal-Mart Express stores and Neighborhood Markets. The latter delivered a 5 percent same-store sales increase since last quarter and logged 46 consecutive quarters of comp growth, said Bill Simon, president and ceo of Wal-Mart U.S. The company will build 200 Neighborhood Markets this year and add 80 to 100 Express units. “They’ll all be digitally connected to walmart.com’s seven million product assortment,” he said.
As always, the meeting was a blend of business and entertainment. Host Harry Connick Jr. joked about the early hour — 7 a.m. local time. “The only people up right now are in China or are Justin Bieber’s lawyers,” he said to tepid applause. Robin Thicke and Sarah McLachlan each performed two songs and Brian Kelley and Tyler Hubbard of Florida Georgia Line let loose with their country pop sound. About 14,000 associates screamed and cheered, giving the event the feel of a giant pep rally.
The first number, “Happy,” was sung by associates from around the world. Then, Pharrell Williams bounded out to sing his hit and shouted, “Put your hands together for Wal-Mart, guys, they’re making the world a happier place.”
“We’re investing in new formats, products and technologies,” said Simon. “We’re also investing in our people. We need to make sure you have the opportunity to grow. We’re making more flexible schedules. And we want to be clearer on what it takes to advance here.”
S. Robson Walton, chairman of the board, had succession on his mind. He announced that the company named Greg Penner as vice chairman. Penner, who is Walton’s son-in-law, has served on the board since 2008, and has deep experience in technology and e-commerce, Robson said.
Wal-Mart is under scrutiny from the financial community. Sales have declined for the past five quarters and comp-store sales have fallen for six quarters in a row. Wal-Mart is catering to working-class customers who are not yet enjoying the economic recovery that’s benefited wealthier shoppers. “Last year was not a typical Wal-Mart year and we all felt it,” said Charles Holley, cfo. “In spite of a difficult year, you’re working for a very strong company.”
Simon said the company is “continuing to look for ways to grow same-store sales.”
Holley touted Wal-Mart’s financial achievements, such as reaching $473 billion in sales. Profits at Wal-Mart this year reached $28 billion and the company has generated earnings per share of $5.11 over the last five years. Wal-Mart U.S. is a $279 billion business, while international did $137 billion in sales last year and Sam’s Club had sales of $57 billion.
But that hasn’t been enough to satisfy Wal-Mart’s critics. Institutional Shareholder Services, advisers to institutional investors, said last week that it opposes Wal-Mart chairman S. Robson Walton and former ceo Mike Duke’s reelection to the board and criticized the board for doing little to rectify possible violations of probes in Mexico and other countries. Wal-Mart is being investigated by the Securities and Exchange Commission and the U.S. Department of Justice regarding the Foreign Corrupt Practices Act, while the company itself is looking into its operations in Brazil, India, China and Mexico. Wal-Mart said it’s spent $439 million in cooperating with the government and upgrading its compliance program.
Charmaine Givens-Thomas, a Wal-Mart employee, introduced a shareholder proposal calling for an independent chairman. “Something is wrong when the richest family in America pays hundreds of thousands of workers so little that they cannot survive without public assistance,” she said.
UAW Retiree Medical Benefits Trust and the Illinois State Board of Investment, leading a global investor coalition, proposed that Wal-Mart’s board disclose annually whether or not the company clawed back or recouped incentive compensation from any senior executive for misconduct that exposes the company to serious financial, legal and reputational risks.
The shareholder proposals failed.
Meanwhile, actor Tracy Morgan on Sunday remained hospitalized after a Wal-Mart tractor trailer slammed into a limo bus he was riding in, killing another passenger. The accident on the New Jersey Turnpike left at least three others seriously injured. Simon said in a statement: “We can’t change what happened, but we will do what’s right for the family of the victim and the survivors in the days and weeks ahead.”
On Sunday, a shooting that started in a Las Vegas restaurant ended at a nearby Wal-Mart. The shooters, a man and woman, critically injured two police officers in the restaurant, then fled to Wal-Mart, where they shot a customer. They reportedly killed themselves inside the store. The store remained closed after the shootings.