Wal-Mart

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Wal-Mart Stores, Inc.

Type	Public
Founded	Rogers, Arkansas, 1962
Location	Bentonville, Arkansas, USA
Key people	Sam Walton 1918-1992, Founder H. Lee Scott, CEO S. Robson Walton, Chairman
Industry	Retail (Department & Discount)
Products	Wal-Mart Discount Stores Wal-Mart Supercenter Sam's Club Neighborhood Markets
Revenue	$288 billion USD ($29B FY 2005)
Website	www.walmartstores.com

Wal-Mart Stores, Inc. (NYSE: WMT), founded by Sam Walton in 1962, is the largest retailer and largest company in the world based on revenue. In the fiscal year ending January 31, 2005, Wal-Mart reported net income of US$10.3 billion on US$285.2 billion of sales revenue (3.6% profit margin). If Wal-Mart were its own economy, it would rank 33rd in the world, with a GDP between Ukraine and Colombia. It is the largest private employer in the United States, Mexico and Canada. It holds an 8.9 percent retail store market share—$8.90 out of every $100 spent in U.S. retail stores is spent at Wal-Mart.

History

A Wal-Mart advertisement, showing a Wal-Mart greeter.

• 1962 First Wal-Mart store opens in Rogers, Arkansas
• 1969 The company incorporates as Wal-Mart Stores, Inc. on October 31, 1969.
• 1972 Wal-Mart listed on the New York Stock Exchange.
• 1983 First Sam's Club opens in Midwest City, Oklahoma.
• 1987 Wal-Mart completes largest private satellite communication system in the U.S.
• 1988 First Supercenter opens in Washington, Missouri.
• 1990 Wal-Mart becomes nation's largest retailer.
• 1991 The first store outside of the U.S. opens, in Mexico City.
• 1994 Wal-Mart acquires 122 Woolco stores in Canada.
• 1996 Wal-Mart enters China through a joint-venture agreement.
• 1997 Wal-Mart replaces Woolworth on the Dow Jones Industrial Average.
• 1997 Wal-Mart becomes largest private employer in the United States, with 680,000 employees worldwide.
• 1997 Wal-Mart has its first $100 billion sales year.

Another Wal-Mart advertisement

• 1999 Wal-Mart has 1,140,000 employees, making it the largest private employer in the world. It acquires the ASDA Group with 229 stores in the United Kingdom.
• 2003 Wal-Mart sets a single-day sales record of $1.52 billion on Black Friday.
• 2004 Wal-Mart buys the Amigo supermarket chain in Puerto Rico for $17 million.
• 2004 Wal-Mart employees in Jonquière, Quebec, Canada vote in favor of becoming the first unionized Wal-Mart in North America. Five months later, Wal-Mart announces that it would close the store.
• 2005 Wal-Mart launches http://www.walmartfacts.com in a public relations effort to counter critics.

Criticism

Bumper sticker from Wal-Mart critic ReclaimDemocracy.org

Main article: Criticism of Wal-Mart

Critics argue that a portion of Wal-Mart's financial success is due to business practices harmful to employees, the community, the economy or the environment. Specific areas of controversy include the company's product selection; treatment of suppliers, competitors and employees; impact on local communities; and effects on world trade and globalization.

In 2005, Wal-Mart officials made public statements and embarked on a campaign to counter some of the criticism through a web site, walmartfacts.com.

• Opposition to unions

The target of persistent unionizing efforts, Wal-Mart aggressively resists union attempts. On several occasions, the company has been found to have acted illegally to prevent unionization. Wal-Mart is alleged to have fired workers sympathetic to unionization and has closed stores and departments after workers have voted to unionize. The company shows anti-union videos in an effort to discourage unionization. So far, only a few North American stores have successfully voted to unionize. Of these, at least one (Jonquière in the province of Québec) was closed within one year of the successful vote to unionize. Wal-Mart denies that the vote in favor of unionization was the motive for their actions.

• Treatment of employees

As with many US retailers, Wal-Mart experiences a high rate of employee turnover (approximately 50% of employees leave every year, according to the company). Although they average nearly double the federal minimum wage, wages at Wal-Mart are about 20% less than at other retail stores. Founder Sam Walton once argued that his company should be exempt from the minimum wage. (Palast, 121).

Wal-Mart recently agreed to a $11 million civil settlement of a government lawsuit alledging that it had knowingly hired illegal workers and underpaid them. Wal-Mart continues to deny wrong-doing

Wal-Mart is currently facing an $11 billion sex discrimination lawsuit that has been granted class action status by the district court hearing the case.

• Legal Disputes

Wal-Mart is accused of allowing right wing, conservative or religious viewpoints to influence its product selection. Critics claim this effectively forces the company's moral opinions on customers and suppliers. Wal-Mart points out that these products are readily available from other suppliers.

• Supplier relations and Predatory pricing

As the single largest customer to most of its suppliers, Wal-Mart openly uses its bargaining power to negotiate lower prices from suppliers.

Wal-Mart has been prosecuted for predatory pricing behavior, temporarily lowering prices in order to drive competitors out of business and develop local monopolies. The chain has been found guilty of predatory pricing in lower courts, but those convictions have been overturned on appeal. There are also several ongoing cases alleging predatory pricing. There have been no successful federal or state actions to sanction Wal-Mart for practicing predatory pricing.

• Local community impacts

Community activists often organize campaigns against proposed new store locations. Critics and academic studies note that Wal-Mart displaces locally owned stores and results in the reduction of locally-owned corporate assets and real estate.

Business

Wal-Mart operates discount retail department stores selling a broad range of products. It typically stocks basic, rather than premium products. Wal-Mart also operates "Supercenters" which include a full line of grocery items. Wal-Mart also operates Sam's Club; these are "warehouse clubs" which, like Costco, require membership dues and sell merchandise in large and inexpensive sizes and quantities.

As of January 2005 Wal-Mart employed 1.3 million people in the United States. Wal-Mart's Home Office is located in Bentonville, Arkansas. Apart from stores and clubs, it also operated 99 Distribution Centers/Transportation Offices in the United States. Internationally Wal-Mart employs over 410,000 people (excluding Japan) for a company-wide total of 1.7 million employees. Wal-Mart is also the largest real estate company in the United States, with an entire division devoted entirely to building new stores, selling old stores, and developing shopping centers around its new and existing stores. In addition to its wholly owned international operations, Wal-Mart owns a 37.8% stake in The Seiyu Co., Ltd. in Japan, with an option to purchase a majority stake in the future.

In the past Wal-Mart has operated dot Discount Drugs, Bud's Discount City, Hypermart*USA, OneSource Nutrition Centers, and Save-Co Home Improvement stores. In 1990 Wal-Mart acquired The McLane Company, a foodservice distributor. In 2003 McLane Company was sold to Berkshire Hathaway.

Wal-Mart stock is publicly traded at the New York Stock Exchange under the symbol WMT. As of March 31, 2004, there were 333,604 shareholders of Wal-Mart's common stock.

Retail operations

Main article: List of assets owned by Wal-Mart Stores, Inc.

Wal-Mart operates 5 major retail formats under 3 retail divisions:

• Wal-Mart Stores USA
  • Wal-Mart Discount Stores — Average 100,000 square feet (9,290 m²) and include a selection of general merchandise, including apparel, electronics, health and beauty aids, toys, sporting goods, and household products.
  • Wal-Mart Supercenter — Average 187,000 square feet (17,400 m²) and combine a standard Wal-Mart Discount Store with a full-line supermarket. (commonly known as big box stores)
  • Wal-Mart Neighborhood Market — Average 43,000 square feet (4,000 m²) and include grocery, pharmacy, and limited general merchandise products.
  • Walmart.com — Online shopping site that offers merchandise different from that in stores. The walmart.com site also offers digital music downloads and online photo processing.
• SAM'S CLUB — a membership-only wholesale warehouse club focused mainly on serving small business owners. Clubs average 128,000 square feet (11,891 m²).
• Wal-Mart International — operates various formats internationally, including (but not limited to) SAM'S CLUB, Discount Stores, Supercenters, Supermarkets, and restaurants.

Exterior of a typical Wal-Mart store.

Store counts & revenue

Current store counts and revenue for Fiscal Year Ending January 31, 2005 (revenue amounts in U.S. Dollars):

• Company Total: 5,246 stores (excludes Seiyu operations) (US$285.2 billion)
  • Wal-Mart Stores USA (3,337 stores, excluding Puerto Rico) (US$201.4 billion)
    • Discount Stores: 1,353
    • Supercenters: 1,713
    • Neighborhood Markets: 85
  • SAM'S CLUB (United States): 551 Clubs (US$37.1 billion total)
  • International: 1,587 (US$56.3 billion total)
    • Argentina: 11
    • Brazil: 149
    • Canada: 262
    • China: 43
    • Germany: 91
    • South Korea: 16
    • Mexico: 679
    • Puerto Rico (United States insular area): 54
    • United Kingdom (ASDA): 282

ASDA in the United Kingdom is the largest of the international businesses by sales.

Competition

Wal-Mart's chief competitors in the discount retail space nationally include the Sears Holdings Corporation and the Target Corporation, along with many smaller regional chains such as Meijer in the midwest. Wal-Mart's move into grocery has also positioned it against major grocery chains such as Kroger, Publix, and local grocery chains. In the Sam's Club warehouse business, Wal-Mart's chief competitor is Costco, which is slightly larger than Sam's in terms of sales, as well as the smaller BJ's Wholesale Club chain operating mainly on the East Coast.

Wal-Mart TV Network

The Wal-Mart TV Network is an in-store network showing commercials for products sold in the stores, concert clips and music videos for recording artists products sold in the stores, trailers for upcoming movie releases, and news. According to a New York Times story, it is seen by 130 million people a month, making it the fifth largest network in America, behind NBC, CBS, ABC and Fox.

Contributions

In 2004, cash donations to non-profit organizations by Wal-Mart, its employees, and its customers made through Wal-Mart, the Wal-Mart Foundation and the Sam's Club Foundation totaled more than $170 million (less than 0.06% of Wal-Mart's gross revenue, less than 1.7% of profit).

The typical Supercenter channels gives $30,000 to $50,000 a year to local charitable needs ranging from youth programs to literacy councils. More than 90 percent of cash donations from Wal-Mart Stores and the Wal-Mart & SAM'S CLUB Foundation target local communities.

Renewable energy experiments

Among more than 3,300 U.S. stores, the corporation has designed one, scheduled to open in 2005 in McKinney, Texas, featuring a wind turbine, photovoltaic solar panels, and a biofuel-capable boiler. The building includes many other enrgy and cost-saving technologies.

The Institute for Local Self-Reliance, while acknowledging that [1] "the features incorporated into Wal-Mart's new "green" store ... create very modest improvements in energy consumption and stormwater runoff," says that it does not change "Wal-Mart's basic business model, which is extremely polluting." The ILSR contends that Wal-Mart's practices increase driving, and that it has a poor record of locating stores on environmentally sensitive sites, especially wetlands.

Employees

Wal-Mart refers to its employees as "associates," and encourages managers to think of themselves as "servant leaders." Each shift at every store, club, and distribution center (theoretically) starts with a store-wide meeting where managers discuss with hourly associates daily sales figures, company news, and goals for the day.

All Wal-Mart stores have employees referred to as "People Greeters." They welcome people to the store and help prevent shoplifting. At Sam's Club these employees inspect the contents of the shopping carts of every exiting customer and check them off item by item against the printed receipt; however, nonmember U.S. customers may legally refuse to reveal the contents of their purchase.

U.S. Senator Hillary Clinton (Democrat, New York) formerly worked as a lawyer for Wal-Mart and also served on its Board of Directors.

Key employees

Wal-Mart benefits

Wal-Mart offers the following benefits to its employees:

• Health (80/20 co-pay cost varies by plan and health; Wal-Mart pays average of two-thirds of insurance cost.⁶)
• Dental (80/20 co-pay)
• Stock Options (1.5% return default)
• 401k (50% match, up to 4% of employees' pay)
• Life Insurance (up to 200,000)
• Company Paid Life Insurance (up to 50,000)
• Accidental Death and Dismemberment (100% company paid)
• Short Term Disability (100% company paid)
• Long Term Disability
• Prescription Drug Benefit
• 10% Discount
• Stake Holders Bonus (varies per store based on sale threshold)
• Sick Pay
• Vacation pay
• Personal time pay
• Bereavement Pay (immediate family members)

Employees are eligible for full benefits after six months of full-time employment, two years of peak-time (part-time or seasonal) employment, or 1000 hours worked. Most benefits, including limited health insurance, start at the first day of employment.

About 30% of its 1.6 million employees have some coverage under the insurance plan.⁶

Financial Results

Wal-Mart is now the top grocery chain in the United States, with 14 percent of all grocery sales in the country, with nearly twice the sales of Kroger ($95 billion vs. $51 billion). Wal-Mart also does 20 percent of the retail toy business. Sam Walton's family's holdings in Wal-Mart if combined would comprise the nation's largest fortune; at $100 billion combined they are significantly ahead of Bill Gates.

Wal-Mart went public in 1975. Since then its stock has climbed from 5 cents (split adjusted) to a high of $63 in March 2002. Since then however the stock has performed less well closing under $50 in August 2005.

Different explanations have been offered for this success:

• The company has always paid a great deal of attention to site selection; in the company's early years, Sam Walton would fly over small towns in a private plane to identify prospective locations. The company claims it analyzes potential locations to find those that would support "one and a half" stores.
• Wal-Mart benefits from economies of scale in manufacturing and logistics; the purchase of massive quantities of items from its suppliers combined with a very efficient stock control system help make Wal-Mart's operating costs lower than those of its competitors. They are leaders in the field of vendor managed inventory—asking large suppliers to oversee stock control for a category and make recommendations to Wal-Mart buyers. This reduces the overhead of having a large inventory control and buying department. Wal-Mart's vast purchasing power also gives it the leverage to force manufacturers to change their production (usually by creating cheaper products) to suit its wishes: a single Wal-Mart order can easily comprise a double-digit percentage of a supplier's annual output.
• One particular aspect of the economy of scale is the aggregation effect, used in other business such as The Home Depot and Wells Fargo, whereby Wal-Mart sells as many different items as possible. This allows the company to grow revenue over its fixed cost base (more sales out of the same store). This is why Wal-Mart began to sell low margin groceries.
• Information Systems: Wal-Mart helped push the retail industry to adopt UPC codes and bar-code scanning equipment. Also, Wal-Mart's focus on cost reduction has led to its involvement in a standards effort [2] to use RFID-based Electronic Product Codes to lower the costs of supply chain management. As of June 2004, it has announced plans [3] to require the use of the technology among its top 300 suppliers by January 2006.
• Suppliers: A spokesperson for the company told the Wall Street Journal on Nov. 18, 2004 that it imported $15 billion worth of goods from China in the year that ended Jan. 31, 2004. About $7.5 billion were directly imported by Wal-Mart; the other $7.5 came indirectly through suppliers. In the same period net sales reached $256 billion, with $209 billion coming from U.S. operations. U.S. current account imports from China was reported as $152.4 billion during 2003 ([4]). Mainland Chinese media place Wal-Mart as their 8th largest trading partner in front of Russia and the UK on the top-10 list.
• Cost Control: Wal-Mart watches very closely controllable expenses. Hourly associates are asked to keep overtime to a minimum. Wal-Mart also squeezes out any inefficiencies in the business such as reducing paper used through computerization. Wal-Mart has closed stores in what critics claim were efforts to avoid the expense of hiring union workers.

See also

Wal-Mart

• Code Adam, the Wal-Mart child-safety program
• List of assets owned by Wal-Mart Stores, Inc.
• List of Wal-Mart brands
• Sam's Club
• Wal-Mart Neighborhood Market

Other

• ASDA
• Retailer
• Supermarket
• Superstore
• Whirl-Mart

References and external links

Wal-Mart corporate web sites

• Note 1: Wal-Mart Stores, Inc. Corporate Site
• Note 2: Wal-Mart Foundation
• Note 3: Wal-Mart Corporate Communications site
• Note 6: Wal-Mart Facts web page, section regarding Benefits (retreived May 25, 2005)

Articles & reports

• Reclaim Democracy huge collection of articles, studies and websites on Wal-Mart. The articles largely are critical of Wal-Mart, but Wal-Mart supporters also are represented and the stories cover much of the best reporting and studies from multiple perspectives.
• UC Berkeley report on the community impact of Wal-Mart's lower wages(pdf)
• Wal-Mart's China inventory to hit US$18b this year China Daily, November 29, 2004.
• BBC Three, Outrageous Fortunes, aired on 26 April 2004, about the workings of Wal-Mart.
• "Inside the Leviathan" by Simon Head for The New York Review of Books, December 16, 2004
• Attacking Wal-Mart's Supply Chain
• "The Wal-Mart You Don't Know", Fast Company, Issue 77, December 2003, Page 68
• "A distorted lens on Wal-Mart", Bruce Bartlett, Washington Times, November 22, 2004
• "Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion", Emek Basker, Dept. of Economics, University of Missouri, 2002.
• Study of Peachcare
• Democratic Staff of the House Committee on Education and the Workforce, "Wal-Mart: High Prices for American Workers" (PDF file, February 16, 2004)

Documentaries

• Store Wars is a PBS special taking a close look at one community's battle over Wal-Mart.
• Frontline: Is Walmart Good for America? (PBS Frontline documentary on the impact of Walmart in the U.S. and China)
• Wal-Mart: The High Cost of Low Price is a documentary to be released in November 2005 by Robert_Greenwald, the creator of Outfoxed.

Books about Wal-Mart

• The Bully of Bentonville: How the High Cost of Wal-Mart's Everyday Low Prices Is Hurting America, by Anthony Bianco (2006)-ISBN 0385513569
• Data Warehousing: Using the Wal-Mart Model, by Paul Westerman (2000)-ISBN 155860684X
• How Wal-Mart Is Destroying America and the World: And What You Can Do about It (3rd edition), by Bill Quinn (2005)-ISBN 1580086683
• In Sam We Trust: The Untold Story of Sam Walton and Wal-Mart, the World's Most Powerful Retailer, by Bob Ortega (1998)-ISBN 0812963776
• Selling Women Short: The Landmark Battle for Workers' Rights at Wal-Mart, by Liza Featherstone (2004)-ISBN 0465023169
• Wal-Mart: A Field Guide to America's Largest Company and the World's Largest Employer, by Nelson Lichtenstein (2006)-ISBN 1595580212
• Wal-Mart: The High Cost of Low Price, by Disinformation Company (2005)-ISBN 1932857249
• The Wal-Mart Decade: How a New Generation of Leaders Turned Sam Walton's Legacy into the World's #1 Company, by Robert Slater (2003)-ISBN 1591840066
• The Wal-Mart Triumph: Inside the World's #1 Company, by Robert Slater (2004)-ISBN 1591840430
• The Wal-Mart Way: The Inside Story of the Success of the World's Largest Company, by Don Soderquist (2005)-ISBN 0785261192
• What I Learned from Sam Walton: How to Compete and Thrive in a Wal-Mart World, by Michael Bergdahl (2004)-ISBN 0471679984

Other Books and References

• Barbara Ehrenreich, Nickel and Dimed: On (Not) Getting By in America (2001, ISBN 0805063889)
• Greg Palast, The Best Democracy Money Can Buy (2002 ISBN 0745318460)

Critics

• Sprawl Busters, site Al Norman, an activist who helps local "site fights" against big box stores
• Index of numerous studies on Wal-Mart's economic and social impacts from The American Independent Business Alliance.
• Wake-Up Wal-Mart website by the United Food and Commercial Workers
• Wal-Mart Watchlabor union-funded website
• Wal-Mart Wiki Though not strictly critical, this wiki is definitely weighted against Wal-Mart in its current state.
• Wal-Mart Free NYC A group fighting to keep New York City Wal-Mart free.
• The New Rules Project(critiques big box development, not limited to Wal-Mart)

Data

• Yahoo! - Wal-Mart Stores, Inc. Company Profile
• WMT: Profile for WAL-MART STORES - Yahoo! Finance
• 2004-04-09 10-K