Wal-Mart reaches top of the tree

WITH the car industry stalled, technology caught in a recession time warp and oil prices bouncing around like barrels in a storm-tossed sea, the largest revenue-generating company in America is, for the first time, a lowly discount retailer.

News that Wal-Mart's annual sales reached $217.8 billion (£152 billion) last year, $5 billion more than the figure reported by former revenue king Exxon, makes it a sure bet to top the annual Fortune 500 list of the largest US corporations in the spring.

The meteoric rise of Wal-Mart, under president and chief executive Lee Scott, is all the more astonishing because it runs counter to the experience of its major rivals.

Kmart, in the top 20 just six years ago, is in bankruptcy. Sears, number nine in 1994, plunged to 29 in last year's survey. Fortune magazine is in the process of tallying up its new list based on 2001 corporate reports. Analysts expect a big shake-up in the rankings, especially in the top 20.

While Wal-Mart becomes the first retailer to ascend to the highest throne, carmakers are hurting and failed energy firm Enron, ranked seven last time, has departed the corporate court following allegations of treachery and deceit.

Citigroup, 17th by sales in 1994, was sixth by 2000 and is expected to continue to climb up the ladder as its strategy of growth by acquisition pays off. In recent years, it has paid top dollar from insurance, consumer banking and foreign partners.

By contrast, Wal-Mart's expansion has been home-grown, pushing its particular brand of discount marketing into new countries and new products, including groceries and prescription drugs at its superstores and discount shopping at Sam's Club.

Through a recession that has wreaked havoc on many corporate bottom lines, Wal-Mart has strengthened its hold on US consumption-increasing revenue at a double-digit clip by catering to consumers looking for bargains on everything from CD players to socks.

Analysts say the speed of its ascent, fuelled largely by internal growth, has been aided by the flame-out of some of its nearest competitors.

'What is most amazing about Wal-Mart is that it has come from a small base in a relatively short period of time while a lot of others that were bigger for far longer have fallen by the wayside,' says economist David Wyss of credit rating agency Standard & Poor's.

'Wal-Mart has picked up a biggerand bigger share of the market-which, let's face it, accounts for two-thirds of the US economy.'

Others dependent on the same two-thirds are finding it much tougher with the US in recession and no help from Europe, also in a slowdown.

In better days, all three of the major US car manufacturers were in the top 10 by sales. In 1994, General Motors and Ford were the top two. Ford was also top-ranked by profits, recording more in earnings - $5.3 billion - than any other company in America. Last year, Ford lost money and began shutting factories, firing workers and restructuring operations.

Wal-Mart, meanwhile, rolled out a $7 billion expansion plan to add more shelf space to existing megastores and build new superstores, akin to shopping malls within four walls.

'Just wait until the day Wal-Mart starts selling cars,' laughed one Wall Street analyst.