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Wal-Mart: It's all about image now
CEO Lee Scott says retailer is working harder than ever to win over 'people who don't care for us.'
October 5, 2004: 5:17 PM EDT
By Parija Bhatnagar, CNN/Money staff writer

NEW YORK (CNN/Money) - It may be the world's largest retailer, but Wal-Mart's tarnished image as an "unfair" employer is a heavy burden to bear and an unwelcome distraction, CEO Lee Scott told analysts Tuesday.

In an unusual move, Scott, speaking at Wal-Mart's 11th annual analyst meeting in Bentonville, Ark., spent a considerable amount of his opening address discussing the company's legal woes rather than the state of its business.

"I know that it's unusual to come to a retail conference and talk about legal issues. But nine-tenths of the questions addressed to me are about legal matters," Scott said. "With over 100 million customers a week, we will be faced with a number of issues. But we're working hard to eliminate all these issues."

The meeting was monitored in New York City via a Web cast originating in Bentonville.

Wal-Mart, which employs 1.3 million workers and is the nation's largest private-sector, nonunion employer, has been a lightening rod for dozens of lawsuits charging it with wage-and-hour violations and gender discrimination. Last year, Wal-Mart was accused of allegedly hiring illegal immigrants through a contractor and underpaying those employees

Responding to growing criticism over its employment practices, Wal-Mart (WMT: Research, Estimates) in June announced a major overhaul of its policies on pay, promotions, diversity and how cashiers are notified of their breaks.

"What am I doing? I'm walking through stores every week, understanding what's happening at the customer level," said Scott. "In addition, I don't meet with fans. I have meetings with people who don't particularly care for us to understand why. We're going to run great retail stores, but we also have to address the social issues."

Other senior Wal-Mart executives echoed Scott's message.

"Last year, over 9,000 [Wal-Mart] hourly associates were promoted to managers. Supporting the growth of our people is very important to us, and that's the real opportunity for us," said Michael Duke, president and CEO of Wal-Mart Stores USA.

Can the giant get even bigger?

Earlier Tuesday, Wal-Mart unveiled expansion plans for its next fiscal year, saying that it aims to add 240 to 250 more of its largest stores in the United States and 130 to 140 new Wal-Mart stores in other countries.

"Wal-Mart has only 3 percent of global market share. So there's still tremendous opportunity for expansion," CFO Tom Schoewe told analysts Tuesday.

"We have just under 1,000 projects in the pipeline for the U.S. alone, or three years worth of future growth planned. We'll do it through new stores, through acquisitions and by growing sales in our existing stores."

But the world's largest retailer has struggled with sluggish sales growth in recent months. Last month, sales at Wal-Mart stores open at least a year grew 2.3 percent versus 5.6 percent a year earlier.

Going forward, officials cautioned that the lingering effects of higher energy and health-care costs, and sluggish job growth, will remain a challenge.

The company also reiterated its earlier guidance for the third quarter, saying it expects profits to come in at the low end of its 52 to 54 cents a share range. For the full year, Wal-Mart forecasts profits of $2.36 to $2.40 a share.

Wall Street expects a profit of 53 cents a share for the quarter and $2.39 a share for the full year, according to earnings tracker Thomson First Call.  Top of page




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