Wal-Mart clings to its culture in tough times
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BENTONVILLE, Ark. — The Saturday morning gathering looks like a pep rally before a big football game. It starts and ends with a noisy cheer, and in between are moments of rowdy applause as the coach challenges his team to beat its rivals.
This is Wal-Mart Stores' weekly sales meeting, where 600 executives and associates hear about the previous week's results, compare notes on what they're seeing in the aisles and learn how they can improve their numbers.
In response to a jittery economy, the world's largest retailer is relying more heavily on the Saturday sessions, along with other tactics put into place by late founder Sam Walton, to keep growing.
Wal-Mart, which has seen slower sales in the past year, reported a 4 percent increase in profit for the first quarter ended April 30. It warned that double-digit earnings growth won't return until at least the second half of the year.
"We have no control of the economy," said Lee Scott, president and chief executive. "But we have more confidence that we have control of our destiny."
The chain's growth plan has several facets: squeezing more sales out of its 4,000-plus stores worldwide; fixing and developing its international business; and expanding its "super center" format, which combines general merchandise with a supermarket. The company now operates 952 super centers and wants to add 150 to 175 per year.
But questions remain. Can rapidly expanding Wal-Mart, now with annual sales of $191.3 billion, convey a sense of urgency to its 1.2 million employees worldwide? And will it be able to sell all of those workers on Wal-Mart's culture of frugality, integrity and service?
The retailer is known for building loyalty by treating employees like partners in the business, a trait that some describe as cult-like. It's also ruthless when it comes to controlling expenses and avidly emphasizes pleasing the customer.
"Can you take this `good-ole-boy' culture that's ingrained and bring it to all four corners of the U.S.? It's a tough thing to do," said Rob Voss, a 20-year Wal-Mart veteran, who left his merchandising executive post two years ago.
At least one analyst - Bob Buchanan of A.G. Edwards - said he is noticing poor customer service, long lines at the aisles and sloppy merchandise at a number of stores across the country.
"Wal-Mart is experiencing some growth pains," Buchanan said. "It's two generations removed from its evangelical leader. Their game has slipped."
But Jeff Feiner, managing director of Lehman Brothers, believes Wal-Mart's low prices and lean cost structure will allow it to gain market share as spending slows.
Scott, a 22-year veteran who rose through the ranks to become CEO in January 2000, is intent on maintaining Wal-Mart's success by improving customer service and keeping the right merchandise in stock.
Wal-Mart, whose trademark policy is "everyday low prices," is also pricing its merchandise more aggressively in response to heavier discounting by Kmart, Target and other competitors. It's also looking to further pare expenses, speed up deliveries and strengthen its clothing lines.
"We are paranoid," said Scott, who, along with other executives, shops at competitors' stores once a week. "Everyone is getting better."
Perhaps Wal-Mart's biggest weapon in a soft economy is its ability to control costs better than its competitors can. This frugality has been a core value since the company was founded in 1962 by the folksy Walton, who used to drive to work in a pickup.
Wal-Mart's 660,000-square-foot main headquarters, with its drab gray interiors and frayed carpets, looks more like a public school than the home of one of the world's largest corporations. Business is often done in the no-frills cafeteria, and suppliers meet with managers in stark, cramped rooms. Employees have to throw out their own garbage at the end of the day and double up in hotel rooms on business trips.
Wal-Mart, which hasn't had any home-office layoffs since 1995, is also keeping a closer eye on jobs. Any hiring to fill openings has to be justified, company officials said.
A jump in utility costs also has forced more cost-consciousness. The retailer has a monitoring system at its home office to control temperature and lighting at faraway stores, and now it is more carefully examining where those controls have been overridden.
Wal-Mart also makes a point of not buying too much into its own success.
Not becoming complacent was a key rule passed down by Walton, who made sure executives' egos were kept in check.
"Even if the week was great, we would come out of the Saturday meeting feeling like the chain was going bankrupt," recalled Voss, who was at Wal-Mart from 1975 to 1990 and again for four years beginning in 1995, three years after Walton died. Voss is now a retail consultant based in Weston, Conn.
Walton's successors - first David Glass and now Scott - are less domineering, but the competitive attitude is very much there. Even while listening to reports of strong sales at a recent Saturday session, management focused on how to compete better with drugstore chains CVS and Walgreens in customer service.
Not everyone thrives in Wal-Mart's demanding environment, but plenty of employees are easy converts. Among the latter is George Tracy, a 43-year-old personnel coordinator at one of the company's distribution centers in Bentonville.
"Wal-Mart practices what it preaches," said Tracy, who started working for the chain three years ago after 20 years in the Air Force. "Respect for the individual, striving for excellence, and exceeding customers' expectations. If you just live with those three principles, you can succeed in anything."