No Need to Shop Around

Wal-Mart Tells Shareholders It Is Primed to Buck the Recession

FAYETTEVILLE, Ark., June 5 -- Wal-Mart's new chief executive Mike Duke made his debut at the company's boisterous, star-studded annual shareholders meeting Friday, promising to take his cues from legendary founder Sam Walton as the retailer weathers the global recession.

"Never has there been a time when the strengths of our company were more aligned with what the world needs than right now," Duke said.

Wal-Mart has posted a solid financial performance in the country's deepest recession in generations. While other retailers have suffered plummeting sales, the downturn has proved a boon for Wal-Mart as cost-conscious shoppers trade down and hunt for value. Sales at U.S. stores rose 3.8 percent during the most recent quarter. Wal-Mart vice chairman Eduardo Castro-Wright said 17 percent of February's growth in traffic came from new customers.

In Fayetteville, roughly 16,000 Wal-Mart employees from around the world joined stockholders and investment analysts for the event at the Bud Walton arena, about 30 miles from the company's headquarters in Northwest Arkansas. In addition to the official business of voting on company and shareholder proposals, Wal-Mart's unorthodox annual meeting typically includes musical performances by popular artists -- who have albums for sale on the giant retailer's shelves -- and other celebrity appearances, giving it the feel of a pep rally rather than a business seminar.

In fact, Friday's meeting began with a rousing cheerleading squad, marching band and a step team. Comedian Ben Stiller hosted the event, which included performances by Miley Cyrus and Smokey Robinson. Perhaps the brightest star was basketball great Michael Jordan, who was greeted on stage by raucous cheers from the crowd and a standing ovation. He spoke about his drive to win and remain a team player but was occasionally interrupted by shouts of "I wanna be like Mike!"

Employees shook pompoms and fluttered flags, danced in their seats and did the wave. Wal-Mart chief financial officer Tom Schoewe pretended to be a contestant on American Idol -- after the actual reality show winner Kris Allen, who is from Arkansas, sang.

"Every one of us is a steward of this culture and the Wal-Mart mission," Duke said.

Duke is only the fifth chief executive of the company in nearly 50 years. In 2005, he stepped up as head of Wal-Mart's international division and took over in February from H. Lee Scott Jr., who hired him. Scott remains chairman of Wal-Mart's board of directors with an office two doors from Duke. Duke repeatedly invoked Walton and his legacy in his first public address as chief executive.

"I'm absolutely convinced that these are the times that Sam Walton built this company for," he said.

In May, however, the company said it would stop reporting monthly sales, making sales part of the quarterly earnings report instead. Wal-Mart said it wanted to encourage investors to focus on the long-term rather than monthly fluctuations.

The company plans to remodel about 600 stores this fiscal year under a program known as Project Impact, widening aisles and improving signage and displays. The renovations also eliminate the famous pallets of merchandise stacked in the aisles, which the company called action alley. Executives said they hope that such improvements will help them retain new shoppers.

"Our customers will stay with us when this economy turns around and they have more discretionary spending," Duke said. "They will stay with Wal-Mart, I promise you that."

But the company's global business has not weathered the storm as well. Sales in its international division dropped 11 percent in the last quarter, in part because of falling exchange rates, after driving the company's growth for the past several years. Still, executives say their results internationally outpace their markets, and the company continues to seek to expand in emerging and underserved countries, such as Russia.

In official business Friday, Wal-Mart presented a $15 billion stock repurchase plan, following a similar announcement two years ago. Shareholders also reelected its board of directors and approved Ernst and Young as the company's independent accountants. Six shareholder proposals on issues such as the recognition of gender identity and political contributions were voted down.

But such matters were practically incidental. The elaborate annual meeting has become a tradition at Wal-Mart, stemming from early days when Walton tried to lure analysts to the meeting by taking them camping. It has since evolved into a celebrity spectacle and employee pep rally. Yesterday, thousands of workers cheered and danced in the arena long before the meeting began at 7 a.m.

"Man, you guys like to get up early," Ben Stiller told the crowd. "I hear they're still sleeping at Target."