SCOTT: FUEL PRICES CONCERN WAL-MART

JON SPRINGER

NEW YORK -- Rising fuel and energy prices have created a "challenging" environment for Wal-Mart Stores, Lee Scott, chief executive officer of the Bentonville, Ark.-based chain, said in a presentation here last week.

Scott added he feels the economy is recovering, but he worries that Wal-Mart shoppers aren't getting that message from the media.

"If you look at television, where most people get their news, you'd believe that the economy is not in good shape," Scott said at the Goldman Sachs Annual Global Retailing Conference. "There does not seem to be much of an ability by the media to communicate the positive side of what's going on in the economy, and therefore we see people very worried."

Rising fuel prices affect Wal-Mart especially since so many of its shoppers live paycheck to paycheck, Scott said, adding that he estimates 20% of Wal-Mart shoppers have no checking account. "When you take disposable income out of their pockets and give it to the oil companies, that's money they do not have to spend," Scott said. Fuel costs, he added, have surpassed terrorism fears and the Iraq war as the top issue concerning its customers today.

Scott said Wal-Mart needs to do a better job of "being relevant in price and merchandise" for its economically challenged shoppers, particularly at its general merchandise stores. "I feel OK about Wal-Mart stores. I just feel they have to get better faster."

Many of Scott's comments concerned his efforts to change how Wal-Mart looks after its own image. According to Scott, Wal-Mart is at fault for allowing the company's image to be tainted by the media and the company's critics. The effort to improve its image involves the company communicating for the first time with "the person who is not familiar with Wal-Mart and what it stands for," and keeping a closer eye on the actions and procedures in everyday company business.

"Our message has not gotten out, and I think that's management's failure," he said. "We thought we could sit in Bentonville, take care of our business, and the world would leave us alone. It doesn't work that way anymore."

Among the challenges Wal-Mart has faced this year are a class-action lawsuit charging gender bias and difficult development battles in California, Chicago and other areas.

Company leaders have to become "more sophisticated" than they used to be, he said, and employees have to be held to a higher standard. "I have got to eliminate this constant barrage of negatives if Wal-Mart is going to be allowed to grow," he said.