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A big change at Wal-Mart?
A little-noticed management shift at the country's biggest retailer could have major implications.
December 19, 2003: 4:48 PM EST
By Justin Lahart, CNN/Money Senior Writer

NEW YORK (CNN/Money) - A little-noticed shift in the management ranks at Wal-Mart could have far-reaching consequences.

Two weeks ago, the country's biggest retailer said that executive vice president for general merchandise Don Harris, a 23-year veteran of the company, was retiring at 46. His duties are now split between Claire Watts, who was promoted to executive vice president for merchandising, and Doug Degn, executive vice president for food merchandising.

Although the news got virtually no play in the market, which at this time of year is focused on the tenor of holiday sales to the exclusion of everything else, it did raise the eyebrows of a couple of analysts, who believe it may represent a shift in Wal-Mart's (WMT: Research, Estimates) strategy of aggressively keeping prices low.

With Christmas just around the corner, the management shift came at an odd time, wrote Banc of America Securities analyst Aram Rubinson in a research note. He also pointed out that lower prices at Wal-Mart do not appear to be bringing in increased volume as in the past.

UBS Investment Research analyst Gary Balter also thinks that Harris' exit may signal a change in pricing strategy. Disappointing sales over Thanksgiving drove home the need to freeze profits on a per-item basis, he wrote in a note published Thursday, and Watts and Degn are not traditionally price-oriented players like Harris was.

Balter thinks the change in strategy will lead to higher profit margins at Wal-Mart, and as a result raised his rating on the company to buy from neutral.

There are other reasons Wal-Mart might want to get less aggressive on pricing. It's a big importer -- one tenth of direct U.S. imports from China go to Wal-Mart -- and import prices have for the first time in years begun to edge higher. It is also becoming the subject of gnawing political criticism over the "Walmartization" of the U.S. economy, where highly skilled manufacturing jobs get shipped overseas, and U.S. workers are forced into low-paid jobs as retail clerks hawking foreign-made wares.

To counter the critics, Wal-Mart could purchase more U.S.-made goods, or increase benefits and salaries. To make up for those rising costs, it might have to raise prices.

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Written by: Justin Lahart

If there really is a strategic change on pricing taking place at Wal-Mart (which didn't return calls in time for publication of this column), it would have big implications. Wal-Mart's annual domestic sales of $200 billion represent more than 8 percent of U.S. non-auto retail sales. If it eases up on the drive to cut prices, retailers all over the country, which have been squeezed hard by competition from Wal-Mart, are going to breathe easier.

Heck, some of them might even try raising their prices. Then inflation wouldn't look quite as muted as it does now.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.