FAYETTEVILLE, Ark. -- In between recapping the previous year's performance, Wal-Mart Stores' top executives danced with a giant goldfish cracker, swigged Red Bull energy drink, and estimated how many boxes of Act II microwave popcorn would fill the Bud Walton Arena here, where this year's annual shareholders meeting took place.
It was all part of promoting VPIs (volume-producing items), a jokey internal marketing contest that produces serious results on the sales floor of the Bentonville, Ark.-based discounter. Each executive picks an item and spends the year finagling ways to sell more of it than his peers. Special K cereal, chosen by John Menzer, Wal-Mart international president and chief executive officer, is up 46% in sales this year. At Sam's Club, Red Bull -- a new item and Sam's Club President and CEO Kevin Turner's VPI pick -- is pulling in $1,000 per week per club.
Beyond VPIs, food remained an oft-referenced topic at the shareholders meeting on June 6, which packed about 4,000 associates and 14,000 others into the arena on the University of Arkansas campus.
The company is bolstering its food operations internationally, adding food-distribution centers in Germany and Argentina this year. The company is also exporting some of the practices in those countries, with plans to roll out Germany's bakery and Argentina's wine department to other countries.
Domestically, it's expanding private-label candy, particularly sugar-free varieties, and is researching gluten-free items like those already successful at ASDA in the United Kingdom.
Radio Grill, the company-operated diners at the store's front end, will be phased out in favor of McDonald's outlets, a snack bar or a combo soda fountain/candy shop, depending on the community.
The company also reaffirmed its commitment to low prices, like 88-cent toothpaste and other necessities.
"So many of our customers live month to month, paycheck to paycheck," said Don Harris, executive vice president and general merchandise manager.
In the question-and-answer session after the meeting, one shareholder asked why the company sold food distributor McLane Co. to Berkshire Hathaway.
"Being owned by us was impeding their progress," Chief Financial Officer Tom Schoewe responded. "Now they can go to Dollar General or to Target and flourish. We're a retailer. We're going to stick to our knitting."
Overall, the company focused on corporate loyalty, as executives emphasized messages of employee ownership, career opportunity, and advancement for women and minorities during the five-hour meeting.
"That is the challenge, developing and retaining good people," said Rob Walton, chairman of the board.
Susan Chambers, senior vice president of benefits, told associates to expect more stories about their achievements in community media.
"We're not only celebrating the individual," she said. "We're helping our customers and communities understand how great the jobs we have are."
Afterward, the question burning in Chicago-based William Blair & Co. analyst Mark Miller's mind was, "How long can they go without some component of the company becoming unionized?" That, he added, "is the biggest risk here."
In some ways, executives spent the entire meeting trying to answer that question. Indeed, the famous Wal-Mart cheer has been amended to include the line "Whose Wal-Mart is it?" -- as if to equate ownership with loyalty. Answering that question, the roughly 4,000 associates roared back, "It's my Wal-Mart!"
Thus far, Wal-Mart has fended off organizing pressure, generated particularly from the United Food and Commercial Workers Union, Washington. It has not been able to duck several high-profile lawsuits, including one potential class-action suit alleging systematic discrimination against women.
Perennially tinkering, the company is testing a green-and-taupe Wal-Mart exterior instead of blue. The new facades would coordinate with the Neighborhood Markets, notably more modern and upscale in appearance than supercenters. It's also testing drive-through pharmacies and expects to roll out new store signage, starting in the food area, to make the store easier to navigate.
Tom Schoewe, executive vice president and chief financial officer, tallied fiscal 2003 with an enviable set of numbers: revenues at $245 billion, up 12% year over year. Net income hit $8 billion, with 21% earnings per share growth. Inventory improved to 7.6% and shrinkage fell to 3.35%. The company stemmed its three-year return-on-asset decline, posting a 9.2% increase.
Its expansion plans remain the most aggressive in retail. Some $11 billion will create 48 million new square feet spread over 350 stores. Supercenters remain the driving format, with 200 to 210 planned to open in fiscal 2004. Neighborhood Markets will grow by 20 to 25 units.
Around the serious stuff, the world's biggest retailer piped in fun and fluff, with talent ranging from bagpipe-playing brothers who stomped and sweated all over the stage to gospel singer Amy Grant to two store associate crooners who'd won Wal-Mart's version of "American Idol."
