Walmart 1999 Annual Report Download - page 5

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the regional chains, then the national
discount chains, and now some of our
best competition comes from other
retail sectors and for that matter other
continents. The most exciting part is
that if we learn from competing with the
best in each of these categories, in each
and every market, we have the opportu-
nity to continue to build a world class
organization.
SAM’S experienced some challenges
two or three years ago. What changed
in that business that caused such an
outstanding performance in the last
two years and particularly the most
recent year?
SODERQUIST: SAM’S Club is a concept
that was started back in 1983. We
entered the club business because it
was the retail concept with the lowest-
cost method of distributing merchan-
dise. Unfortunately, I believe that over
the years the industry and SAM’S as
well, has lost some of its merchandise
focus. The SAM’S team used the last two
years or so to reinvigorate the clubs and
put some fun back into the operations,
and with their new president, Tom
Grimm, continue to improve the mer-
chandise offering. I believe this is obvi-
ous by the acceleration in the sales
increases as well as the number of new
members and the renewal rates of exist-
ing members.
GLASS: The clubs did an excellent job
this year of showing value to the mem-
bers. Throughout the year they took the
savings in their expenses and gave them
back to the members in the form of
lower prices. These efforts also acceler-
ated the sales growth and, consequently,
the earnings growth for the division.
SAM’S should be able to continue deliv-
ering sales growth as well as opening
10 to 15 new clubs this year.
You have just completed your second
acquisition in Germany. What are your
plans for future international growth?
WALTON: International has become a
significant piece of the Wal-Mart busi-
ness. This year alone the division in its
fifth year of operations generated $12.2
billion in revenue and $551 million in
operating profit. In addition to the 74
units in Germany we also acquired four
units in Korea and added another 36
units to the countries where we had
existing operations. We still have
tremendous room for growth domesti-
cally but also want to offer the Wal-Mart
shopping experience to customers
around the world. Over the next five
years the international division should
represent up to one-third of total sales
and earnings growth of the company. In
addition to being the largest retailer in
Canada and Mexico, we now have stores
in Asia, Europe and South America and
will continue to grow those markets as
well as look for other areas where we
can build on the Wal-Mart name.
How is Wal-Mart dealing with the
financial turmoil in markets like
Brazil or Asia?
WALTON: Fortunately, global companies
have the opportunity to make positives
out of negatives. In our “portfolio” of
countries, the difficulties you mention
are balanced by the extremely strong
performance of other operations –
Canada, Mexico and Puerto Rico, for
example. Slowdowns in these econ-
omies offer real estate and acquisition
opportunities. We take a longterm view,
and recognize these economies will
strengthen again and we look to position
ourselves for the future.
Wal-Mart has always had a unique cor-
porate culture – a culture that many
said could not transcend geographic
boundaries. How have you managed to
translate that culture and make it
speak to the amazingly diverse popu-
lation you’re now serving?
SODERQUIST: Over the years many said
that we would not be able to serve cus-
tomers west of the Mississippi, outside
of the South, in metropolitan areas or
outside of the United States. Frankly, we
find that customers want the same
things. Regardless of where we are, cus-
tomers want to be treated well, want to
have a good assortment of products to
choose from and they want that mer-
chandise at a great price. The most
amazing fact is that our associates
around the world embrace and protect
this culture that they have built over the
last 35 years.
In January you announced several
changes in your management team. I
believe Lee Scott is now the COO and
Tom Coughlin is the President of the
Wal-Mart stores division. Why would
you make those changes after such a
good year?
GLASS: Change is inevitable, and one of
the things that we must do as an organi-
zation is to prepare the company for the