BENTONVILLE, Ark. - It was a fix-it year for Wal-Mart Stores here, which tried new tactics to cope with mounting external and internal problems.
In 2005, the $285 billion retailer fought back against increasingly well-organized critics with a massive public relations effort. H. Lee Scott, Wal-Mart's chief executive officer, embarked on a nationwide speaking tour, while the company plowed millions into television and print ads defending its wages, benefits and track record as a corporate citizen.
As part of "telling our story better," according to Scott, the retailing giant held an unprecedented media conference in April, an acknowledgement Wal-Mart had begun to consider how negative press impacts its bottom line.
The problems weren't merely external. Wal-Mart's $191 billion domestic store division, 67% of its revenues, missed its earnings for the second time in corporate history in the first quarter. Year-to-date, Wal-Mart has failed to increase operating profits faster than sales, a barometer the company uses to measure the efficiency of its performance. This holiday season might be the first hint of a turnaround. November comp-store sales rose 3.8%, topping rival Target's for the first time in 20 months. Scott has been publicly bullish on the company's holiday prospects.
In October, Scott swapped the roles of two top lieutenants, tapping John Menzer, CEO of Wal-Mart International, to head the domestic store division and sending Michael Duke to the fast-growing global operation. Wal-Mart has also decentralized its U.S. middle management. Following the model Menzer used internationally, the retailer is moving cross-functional teams out of
"We are nimble and we will be different - very different - from the Wal-Mart you know," promised Menzer at the company's October analyst meeting.
He hopes to turn around the domestic stores by offering a cleaner and better-organized shopping experience, shorter checkout lines and more contemporary, upscale merchandise. The retailer said it has focused too much on serving traditional customers with opening-price merchandise, and needs to reach its more affluent grocery shoppers with more stylish apparel, electronics and home decor.
The company has also suffered embarrassments this year, such as a leaked health care policy memo that advised discouraging "unhealthy" workers from applying. Thomas Coughlin, Wal-Mart's former vice chairman, is being investigated by an Arkansas grand jury on charges he allegedly stole as much as $500,000 through gift cards and phony expense reports.
A rocky year, yes, but not without bright spots. The retailer's California supercenters, despite bitter resistance from unions and some communities, have all surpassed sales expectations, executives have said. Wal-Mart International, led by outstanding performance at Wal-Mart de Mexico, that nation's largest retailer, has seen rapid growth.
Wal-Mart has also been lauded for an increasingly proactive environmental stance, including a $35 million, 10-year "Acres for America" land conservation program. Wal-Mart opened new eco- and energy-efficient prototype supercenters in McKinney, Texas, and Aurora, Colo., this year as part of a plan to reduce waste by 25% in the next three years. The firm also pledged to invest $500 million annually on ways to reduce greenhouse gas emissions.