WAL-MART MAPS PLANS FOR HOLDERS
Byline: Jennifer Owens
FAYETTEVILLE, Ark. — The 18,000 shareholders at Wal-Mart Stores’ annual meeting at the University of Arkansas’s Bud Walton Arena here Friday had plenty to cheer about — from the giant’s confident mood about expansion overseas to its aggressive outlook on domestic growth through supercenters and the sales surge in its Sam’s Club division.
Reviewing the firm’s recently released first-quarter results with its 27 percent gain in net earnings on a 17 percent sales hike, David Glass, chairman and chief executive officer, said he’s more excited now about the company’s future prospects than at any other time with the company.
“We’ve just had the best first quarter we’ve ever had,” he said. “There’s no reason, with the momentum that we have, that we can’t continue to improve on that performance.”
Much of that improvement is expected to come from Wal-Mart’s international division, which, in the most recent quarter, saw sales double to $2.6 billion from $1.3 billion last year.
“We get asked all the time, ‘Can you export the Wal-Mart culture?”‘ Glass said. The answer, he said, is yes: “International is the fastest growing part of our company.”
On the international front, the firm announced it plans to open six more stores in China by the end of 1999, adding to the three already there — two supercenters and one Sam’s Club, all in Shenzhen province. Including the China expansion, which is twice as many units as analysts had expected, the firm plans to add 50 to 60 units overseas this year.
Domestic expansion will include 50 new Wal-Mart stores; at least 120 to 125 supercenters (up from last year’s 100), including about 90 relocations or expansions of established Wal-Mart stores, and 10 new Sam’s Clubs.
The expansion, domestic and international, will add approximately 8 percent to the firm’s retail space. Wal-Mart ended last year with 1,921 domestic Wal-Mart stores, 441 domestic supercenters, 443 domestic Sam’s Clubs, and 601 international units.
As reported, Glass has said that supercenters will be Wal-Mart’s vehicle for domestic growth, with about 100 coming primarily from remodelings planned for each year from 1999 on.
Glass noted on Friday, however, the intense interest generated by Wal-Mart’s plan to go small, with three experimental stores based on a 40,000 square foot format as compared with the retailer’s usual store size of 90,000 square feet.
“Mostly they are laboratories for us, and they will all be built in Arkansas,” he said of the stores designed for smaller markets. “But it’s really no different than any other experiment Wal-Mart has tried.”
That includes on-line retailing, which Wal-Mart entered last year and with which it plans to stick this year despite sluggish growth, “Although it hasn’t achieved a size that is significant to the company, it continues to grow,” Glass said, adding that the company expects on-line shopping to be a major sales force in the future.
For the present, Glass expressed more enthusiasm for the Sam’s Clubs: “Sam’s is growing, and we’re expanding this business. They’ve rejuvenated that business.” Sam’s Club sales in May jumped 10.9 percent to $1.7 billion from $1.55 billion. For the first quarter, Sam’s Club saw sales rise 9 percent to $5 billion from $4.6 billion.
According to Mark Hansen, president of the Sam’s Club division, the membership retailer now serves 30 million people representing 23 percent of all U.S. households. In response, Hansen said, his division has been focusing on membership development, noting that Sam’s Clubs is posting a 4.4 percent improvement in membership renewal over a year ago.
Hansen said Sam’s Club plans to remodel 70 units and add 120 fresh food departments. The focus at Sam’s Clubs this year, he said, will be on ancillary businesses, such as introducing pharmacies and copy centers, increasing the number of one-hour photo processing plants and optical departments, and studying the possibility of adding more gasoline stations.
There was also good news about apparel, as Lee Scott, president of Wal-Mart’s Stores division, reported same-store sales in the category this year were running 20 percent higher than a year ago. Tom Coughlin, executive vice president of operations, said much of that improvement has been due to better buying, clearer signs and a floor redesign that has expanded aisles past their traditional 36-inch width.
Previously, said Coughlin, “Customers didn’t want to go in there with their carts and their children.”
Bob Martin, president and ceo of Wal-Mart’s international division, ticked off his division’s highlights of the last year, including a doubling of profits among Puerto Rico’s units, which now generate the division’s highest sales volume.
In addition to its three units in China, Wal-Mart operates 12 units in Argentina, nine in Brazil, 145 in Canada, 21 in Germany, 404 in Mexico and 14 in Puerto Rico.
Martin said the six new Chinese units should open in 12 to 18 months. “We watch that part of the world cautiously,” he said. “But well-timed opportunities exist.” Martin said another 12 units are slated for Argentina and Brazil.
Reiterating Glass’s optimism about international expansion, Martin said, “Can we still be Wal-Mart and still be successful outside the United States? …It’s no doubt about the answer.”
The meeting maintained a celebratory tone throughout as Wal-Mart officials touted last year’s net sales gain of 12.5 percent to $118 billion and a rise in net income of 15.4 percent to $3.1 billion. The company was also proud of its push to shrink inventories by 4 percent, which saved $1.4 billion last year.
Rob Walton, chairman, hailed 1997 as “our best year ever,” as the numbers were displayed on the huge TV screens around the arena.
There was even cheering as Glass told the throng that it has no plans to split its stock, but they also heard during the meeting that the stock price had hit $58, topping its 52-week high of 57 7/16. The stock closed the day at 57 13/16.
Glass said the decision not to split doesn’t mean that Wal-Mart stock prices won’t continue to grow. But, he said, responding to rumors rampant in Fayetteville on Friday, “It’s not appropriate at this time… Rather than leave it hanging, we thought we’d address that here.”
Company officials say Wal-Mart has not established a target split price yet.
The gathering was, as usual, long as well as merry. At 7:30 a.m., Richard Simmons woke up early arrivals by leading calisthenics, while a short performance by country music star Faith Hill wound things up around 1 p.m.
(For more on Wal-Mart, see page 11.)