Wal-Mart - the ever expanding empire

WILL THE real Wal-Mart please stand up? Is the parent of Asda and the world's largest company, with more than $256bn (£141bn) in revenues, a gentle giant with its folksy Everyday Low Prices slogan and its employees shaking their behinds as they do the Wal-Mart cheer? Or is it an evil empire, out to become the world's only retailer on the back of sweatshop-made products, minimum-wage workers and monster stores that blight neighbourhoods?

The answer depends on who you ask but the one truth is that Wal-Mart, and Asda for that matter, are only going to become bigger and bigger. Wal-Mart chief executive Lee Scott will speak at the annual shareholders' meeting in a few days' time, and there's no doubt the gist of his message will morph the real estate cliche into 'growth, growth, growth'.

The get-together will not be typical of an annual meeting. It will be a high-energy, raucous affair and Scott will have an audience of more than 18,000 packed into a basketball stadium at the University of Arkansas in Fayetteville on 4 June.

The university is not far from where the Walton brothers, Sam and Bud, began to grow their business from a single store into a multinational behemoth.

Business talk at the annual event is usually kept to a minimum but the audience may hear that, despite the threat of soaring oil prices cutting into sales, the company is still on track to open one massive supercentre in the US every 36 hours during 2004. That will enable it to add $33bn to its sales this year.

For many who are at the meeting, however, Scott will not be the centre of attention. The chief executive, who has one of the lowest profiles among high-flying US chief executives, will no doubt be upstaged by a celebrity or two.

Singer Amy Grant crooned there last year; American football quarterbacks strutted their stuff the year before, as did supermodel Cindy Crawford. This year's entertainment agenda is still a secret to all but a few, but it is doubtful the people will go home disappointed.

Protest groups

MOST of those who are there will be Wal-Mart employees representing the company's 5,000-plus outlets in nine countries, including Asda in the UK. The 'associates' and 'colleagues', as US and British Wal-Mart employees are respectively called, are also likely to be introduced to an array of new products that the king of retailers has in mind to attract the 100m customers said to enter its premises each week.

There will be a smidgen of regular AGM-type business as well, with new share-ownership plans for Asda employees likely to be approved.

As is the case in much of corporate America, emboldened shareholders want a bigger say. However, proposals such as calling for an independent chairman and seeking shareholder approval of a deferred pay scheme for executives are expected to be roundly defeated.

Such deliberations are not thought likely to affect the high spirits at the meeting. A planned protest by a coalition of organisations that opposes Wal-Mart will not affect the celebrations as it is being held the day after.

The protest groups reckon they will get a lot more people there on a Saturday than they would the previous day. They anticipate 1,000 people turning out.

One protesting group, the Progressive Student Association at the University of Arkansas, has a list of complaints against Wal-Mart, including its anti-union stance, alleged use of manufacturing sweatshops, perceived unfair treatment of employees, supposedly unfair buying practices and the fact that it sells 'unethical' products such as ammunition and diet pills.

In days of yore, Wal-Mart would have, at best, ignored the protests, and perhaps might even have tried to get the creatively named 'conscientious consumers' convention' banned. Not under the regime of Lee Scott. Since he took over as chief executive just over four years ago, he has changed the company's approach to dealing with critics by confronting criticism rather than ignoring it.

'He was the one who undertook a reputation programme,' says Robert Slater, whose book The Wal-Mart Triumph will be published soon.

Slater says Scott beefed up the media department and community relations activities and even brought in new lawyers, because the courts hated dealing with the company.

'Wal-Mart still has problems with communications and its reputation but I think they are moving in the right direction now,' he says. That direction includes supplying tents, portable toilets and water to the University of Arkansas for the protesters' use.

Lawsuits by the thousand

SCOTT is doing his bit to spread the word that Wal-Mart is not an evil empire. But instead of appearing on a high-profile talk show, he accepted an invitation to be interviewed by an African American, Tavis Smiley, that is shown on the unassuming Public Broadcasting Service, a largely viewer-funded network of non-commercial stations.

Scott hit out at critics who say Wal-Mart is able to keep its prices low because it pays subsistence level wages and doesn't offer health benefits to its employees. He said that at a recent store opening Wal-Mart had 5,000 applications for 500 jobs, and added that the company's total health benefits bill is $2bn a year.

'We have to pay competitive wages or we wouldn't be able to get associates to work in those stores,' he said.

Wal-Mart's critics remain vociferous, however, especially when they are trying to keep the chain out of their neighbourhood. They are also litigious - the company is named in literally thousands of lawsuits.

Newer and bigger stores are the fuel for the company's extraordinary growth. Revenues have grown from $43.8bn in 1992, when co-founder Sam Walton died, to $256.3bn in its latest year, ending 31 January. The bigger the store, the bigger the profit Wal-Mart can glean per square foot. That is why the company's supercentre concept is its expansion method of choice.

The US has 1,500 Wal-Mart supercentres with a further 230 planned for this year. Britain is to get its first purpose-built supercentre in Huyton, Merseyside, this year. It is part of a £400m expansion by Asda that will also see the company adding a mezzanine floor to some stores - a move than avoids planning restrictions.

US supercentres are about the size of three soccer pitches, and opponents complain about the way they affect existing businesses, traffic and other aspects of the environment.

Al Norman, the founder of Sprawl-Busters, travels the US advising communities on how to keep the company at bay. 'Anti-Wal-Mart sentiment has reached fever pitch in this country,' he says. 'Americans across the country are angry at how they have been treated by this company.'

'Market greed'

NORMAN gives the example of Sandy, Utah, which has five supercentres in a 22-mile radius, with the company seeking permission for a sixth. 'This is not about market need. It is about market greed,' he says.

The Sprawl-Busters website has a list of more than 220 communities that have turned down the chance to have huge stores built near them. But financial analysts who follow Wal-Mart are in the main betting that its growth will continue. Thomson/FirstCall says nine out of 30 analysts have put a strong buy rating on Wal-Mart, 11 a buy and 10 a hold.

Shareholders, whose investment in the company flourished for 20 years, have had little to cheer about - other than regular increases in dividend payouts - since the turn of the millennium as the price has teetered around $50.

Charles Cerankowsky at KeyBanc Capital Markets, which has a buy rating, says he has no problems with Wal-Mart's strategy and that shareholders need not worry. 'The company continues to grow earnings and take market share,' he says. 'It is throwing off cash like crazy, paying down debt and buying back stock.'

He doesn't believe that attempts to stop supercentres being built will affect performance. 'Those are vastly overblown by the media,' he says. 'Any chain that has any kind of large opening programme finds local residents, often influenced by the chain's competitors, that don't want the store to open.'

Chief executive Scott has seen his company become the biggest in the world and twice win the title of World's Most Admired Company, awarded in a poll carried out by Fortune magazine. But, he says, the focus is still on the customer: 'I've yet to meet a customer who came to a store because we're number one. If they come, it's because of the value we give them.'

Continental quest on agenda

NEWS that Wal-Mart's formidable chief executive, Lee Scott, was meeting European Union officials in Brussels earlier this week sent a wave of speculation through the European retail sector, writes Fiona Walsh.

Scott was making his first visit to the Belgian capital to speak at an industry conference, but at the same time had discussions with Mario Monti, the powerful European Competition Commissioner, and with EU consumer protection minister David Byrne.

Wal-Mart's last attempt at expansion in Europe - the £3bn takeover of Safeway - was firmly ruled out by Britain's competition authorities but the US group remains keen to increase its foothold in continental Europe. And it will need the commissioners' backing if any acquisition move is to stand a chance.

Having already made a less-than-successful move into Germany, France is now seen as Wal-Mart's most likely hunting ground and shares in Carrefour and Casino both rose sharply. The Dutch Ahold group was also tipped as a potential target.

In an interview with the Financial Times, Scott made it clear Wal-Mart's European ambitions are undimmed by its lack of success in Germany, and the group is considering opening its own outlets, possibly under the Asda name, as well as making large retail acquisitions.

Although he refused to be drawn on specific plans, Scott said he could not think 'of any country in Europe that we wouldn't want to be in over the long course of time'.