Wal-Mart Wants To Tell Its Story
CEO Says World's Largest Retailer Is Under Assault
MarketWatch - April 5, 2005
By Jennifer Waters

BENTONVILLE, Ark. -- Wal-Mart Stores Inc. Chief Executive Lee Scott said Tuesday that the nation's unions have declared war on the world's largest retailer.

"[They] have declared war on Wal-Mart (WMT: news, chart, profile) in hopes of unionizing this company or making us go away," Scott told scores of journalists at the company's first meeting with the media in its 42-year history.

A number of groups, including the nation's largest labor union, the AFL-CIO, and community activists Coalition for a Better Inglewood, are using the media gathering as a backdrop for launching anti-Wal-Mart campaigns across the country.

The United Food and Commercial Workers Union also said Tuesday that it launched a new grassroots campaign to protest what it views as destructive Wal-Mart policies.

"For too long, Wal-Mart's business practice has been to lower our wages, pressure suppliers to ship our jobs overseas, shift their health care costs onto American taxpayers and ask communities to give over $1 billion in subsidies for their expansion," said Paul Blank, the UFCW's "Wake-Up Wal-Mart" campaign director, in a statement.

"I don't know where this 'living wage' stuff came from," Scott told reporters on Tuesday.

The chief executive said people were operating under the misconception that Wal-Mart's No. 1 retail position meant it could pay the biggest wages. But the company's commitment to "everyday low prices" precludes that, as any loss of efficiencies could eventually hurt consumers in the form of higher prices, Scott added.

Earlier in the afternoon, Wal-Mart's top brass shrugged off questions ranging from its sagging stock price to decelerating same-store sales growth at the meeting held here in its hometown of Bentonville, Ark.

Although management admitted to being somewhat on the defensive in the face of those facts and amid reams of bad publicity, Wal-Mart insisted the story of its strong fundamentals and balance sheet was being overshadowed.

As for the company's stock, which is trading near two-year lows and has lost about 15 percent in the past 12 months, Chief Financial Officer Thomas Schoewe said investors were focusing on "headline risk" or bad publicity, while ignoring the fundamentals.

"Headline risk is just one of the many factors affecting the stock price," Schoewe added. "There are a lot of complex dynamics that go beyond our share price. You're seeing us be a lot more proactive so you can see the facts as they are."

Addressing the retailer's slowing growth rate of same-store sales -- sales generated in stores open at least a year, a key industry benchmark -- the finance chief said it was almost a nonevent compared with Wal-Mart's double-digit percentage increases in sales and earnings per share.

Schoewe said higher gas prices had the greatest impact on same-store sales, and also dismissed criticism that the company is cannibalizing older stores sales by opening new ones in the same market.

"We call it market development; you call it cannibalization," he told reporters. "We decided internally the term 'cannibalization' is kind of negative. We're trying to wipe that term out. We call it 'internally impacting ourselves' or 'market development.'"

Although management declined to discuss the ouster less than two weeks ago of Vice Chairman Thomas Coughlin, the chief executive of the Wal-Mart Stores division, Mike Duke, said it underscored the company's integrity and ethics.

Scott did say that Coughlin's forced resignation was an "extraordinary" issue because of the director's status and history with the company.

"But what I've seen more than anything else is sadness. There's just a lot of sadness," the chief executive added.

Coughlin was asked to resign from the board of directors over ethics issues related to questionable corporate expenses during his 26-year tenure.

For a company that has long held its cards close to the vest -- following in founder Sam Walton's deep dislike of reporters-- this can be viewed as an unusually open affair.

Consider that Wal-Mart doesn't even host analyst conference calls during earnings season, preferring instead to record a chat among senior executives that's available through a hard-to-find phone number.

Following a number of well-choreographed public relations events, Tuesday's meeting appeared to be another stab at gussying up the company's tarnished image.

Scott has seemingly come out of the shadows in the last few months. In recent appearances, he has steadfastly defended Wal-Mart's hiring practices, the treatment of its employees and its role in supporting local communities.

The parent of the namesake discount stores and Sam's Club outlets has been under unprecedented scrutiny in the last two years. Still reeling from the biggest civil class-action sex discrimination suit ever filed, Wal-Mart has tangled with lawyers and litigants in courthouses all over the country.

Other issues for Wal-Mart are a mixed bag, ranging from last month's $11 million settlement with the federal government over hiring undocumented workers and health care coverage to local zoning laws.

Jennifer Waters is the Chicago bureau chief for MarketWatch.