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.
Yet the big picture is that Wal-Mart U.S. remains a work in progress.
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
Bentonville and into each regional market.
"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.