Walmart Stores (US)

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In the retail universe, there are retailers and then there is Walmart. Normal rules do not apply to this US colossus, whose annual revenues of over $485bn are roughly equal to those of the next four global retail groups combined. With Walmart, all the numbers are big. The company is the world's largest non-governmental employer, with around 2.3m associates. Approximately 260m people visit Walmart's stores every week, and 78% of American households shop there at least once a year. But America is by no means the only market to experience the Walmart effect. The group is also a force in the international arena with operations in 27 other countries in Latin America, Europe and Asia. Yet the business is only a little over 50 years old, and virtually all its extraordinary growth in the US since the first Walmart store opened in 1962 has been generated organically, rather than as a result of acquisition.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 23rd Feb 2017: Investors were encouraged by a rebound in revenues at Walmart after last year's decline, but currencies and higher prices remain a challenge. Total revenues edged up just under 1% to a new record of $485.87bn, as a near-6% decline in international was offset by 3% growth in the US, where sales for the main Walmart Stores business topped $300bn for the first time. At constant currency rates, combined topline revenues would have been just under $497bn. However higher costs resulted in a 7% decline in net income to $13.64bn, the lowest level since ye 2009.

Adbrands Weekly Update 24th Aug 2016: Walmart's UK subsidiary Asda suffered the sharpest quarterly sales decline in its history, with like-for-like sales to June falling 7.5%, a slump described by Retail Remedy analyst Paul Thomas as "apocalyptic... it could be no worse". Asda's sales have declined for eight consecutive months. The company blamed "fierce competition and food deflation". The supermarket chain lost its long-held #2 market position to Sainsbury towards the end of last year, and shows little sign of reclaiming it any time soon. Walmart's Chinese subsidiary also fared poorly, though the recent partnership with etailer JD.com is seen as a potential fix for those troubles. The UK and China performance cast a cloud over an otherwise solid performance by Walmart.

Adbrands Weekly Update 11th Aug 2016: Walmart is to acquire two-year-old online retailer Jet.com for $3.3bn in cash and stock, the highest price paid to-date for any ecommerce business. A key attraction of Jet.com to Walmart is its "smart items" technology, which offers on-the-fly savings to shoppers on certain items if they are bought and shipped together. Sales are about $1bn this year, though Jet.com has yet to make a profit. Jet.com's founder Marc Lore will take charge of a merged Jet.com/Walmart.com online store, replacing Walmart's current ecommerce chief Neil Ashe. Lore launched Jet.com two years ago after selling his previous start-up Diapers.com to Amazon in 2011 for $550m. He's said to be in line for a payout of as much as $750m from this latest deal. The deal positions Walmart as the clear #2 in global ecommerce behind Amazon.

Adbrands Weekly Update 14th Jul 2016: Walmart announced a wide-ranging strategic alliance with Publicis Groupe's Publicis Communications division, aligning creative, digital and shopper marketing with the French-owned business. The brief also includes "resources outside of marketing, including capabilities to support corporate reputation and technology that builds relationships with customers." That's presumably a consultancy angle to be managed via Publicis.Sapient. Though the deal is described as non-exclusive, it will lead to the termination of the retailer's nine-year creative relationship with IPG's Martin Agency, in favour of a new dedicated entity drawing resources from various different agencies under the Publicis umbrella. The core contributor will be Saatchi & Saatchi, which already produces advertising for Walmart in the US, and captured advertising for the retailer's UK subsidiary Asda earlier in the year. Publicis CEO Maurice Levy said the Groupe's new "silo-busting" structure was the main driver for the deal. "This relationship is the direct result of Publicis' new approach, 'the Power of One', which is designed to deliver end-to-end solutions for our clients. Our goal is to leverage all of Publicis' assets - not just the resources of one agency - to help them in these efforts." However the new deal doesn't include media. Walmart already announced a transfer of this business out of Publicis-owned MediaVest in February, though a new agency has yet to be appointed. IPG's Golin will continue as Walmart's lead PR agency.

Adbrands Weekly Update 23rd Jun 2016: Walmart transfered ownership of its Chinese ecommerce business Yihaodian to e-tail giant JD.com, the local #2 behind Alibaba with around 30% of the Chinese ecommerce sector. In return the US group will receive a 5% equity position in JD.com, and will have access to that site's 100m registered customers.


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Background

Free for all users | see full profile for current activities: Despite its vast size, Walmart is a comparative spring chicken compared to many other US retail groups. The first Wal-Mart Discount City store opened in Rogers, Arkansas in 1962, but founder Sam Walton was no novice when it came to retailing. He had trained at JCPenney before taking over the lease in 1945 on a local dime store, part of the Ben Franklin chain. As the original store prospered, Walton added several other Ben Franklin franchises until he was operating around 15 stores under the Walton Five & Dime name by the start of the 1960s.

In 1962, aged 44, he struck out on his own, founding his first Wal-Mart discount store as a partnership with brother James (known as "Bud"). Seeking out areas where other chains had yet to establish themselves, Sam and Bud opened a string of 18 stores over the next eight years. The company's philosophy was simple, summed up as "Every Day Low Prices". Sam Walton believed in making a better lifestyle available to everyone by selling good quality merchandise at low prices. He regarded his staff as part of one big family, insisting on calling them associates, not employees. Customers were part of that family too. This belief was enshrined in the company methodology in various working rules. The Wal-Mart "10 Foot Rule", for example, was inspired by the promise Sam Walton always demanded from his associates: "That whenever you come within 10 feet of a customer, you will look him in the eye, greet him and ask if you can help him." Another company bye-law is the Sundown Rule, under which the stores strive to deal with all customer requests or enquiries by sundown on the day they receive them.

In 1970, Wal-Mart Stores went public, and the company expanded rapidly over the following decade. On a trip to Korea in 1975 to source low-cost merchandise, Sam Walton was impressed by a tennis ball factory where the workers performed callisthenics and a company cheer together every morning. On his return he instigated what is now the famous Wal-Mart cheer, spelling out the company name, and ending "Who's number one? The Customer! Always!". It is still shouted by staff every morning in every Wal-Mart outlet. In 1977 the group made its first acquisition, 16 Mohr-Value stores in Michigan and Illinois. A year later Wal-Mart acquired the Hutcheson Shoe Company, and introduced pharmacy, auto service and jewellery divisions. By 1979, the business had sales of over $1.2bn.

In 1983 Wal-Mart launched a separate chain of members-only warehouse outlets, selling bulk goods at low cost, under the Sam's Club brand. The same year, the group absorbed the Woolco chain in the US, and introduced greeters at all stores to welcome shoppers. In 1985, the group acquired Grand Central Stores, followed by the Supersaver chain in 1988. That year Sam Walton, now 70, stepped down as CEO, appointing David Glass as his successor.

In 1990, with the acquisition of Western Merchandisers of Texas and distribution company McLane, Wal-Mart became the US's biggest retailer. A year later, the group took its first step into the international market, opening a Sam's Club outlet in Mexico as a joint venture with local retailer Cifra. Sam Walton died the following year, before he was able to see just how big his business would become. With son Robson now named chairman, Wal-Mart embarked on mammoth international expansion over the next few years. The group acquired Woolco's 122 Canadian outlets in 1994, and established operations in Argentina and Brazil a year later. In 1996 the group established a joint venture in China, and invaded Germany in 1997, acquiring 21 Wertkauf stores. The group's presence in Germany was strengthened a year later with the purchase of 74 Interspar hypermarkets. That same year, the group made its debut in the UK, snatching fast-growing supermarket group Asda away from an agreed merger with British group Kingfisher. In 2003, the company said it would consider bidding for Safeway, a rival UK supermarket to Asda. However any such deal was quickly ruled out by local regulators.

In recent years, as is perhaps inevitable for a company of its size, Walmart has found itself embroiled in a series of legal disputes and PR crises. The following year, around 1.6m former Wal-Mart employees brought a class-action lawsuit against the group, claiming that it customarily denied female employees equal pay and promotion. That case is continuing to drag its way through the US justice system. The Supreme Court eventually dismissed the original lawsuit in 2011, ruling that it could not be prosecuted on a national basis. As a result, the female employees group began filing new suits on a state-by-state basis.

In 2005, in a separate case, group vice chairman Thomas Coughlin was dismissed, and the company subsequently launched a fraud lawsuit against him, alleging misappropriation of corporate assets worth around $500,000 over a period of 10 years to pay for personal expenditure. Later, he also pleaded guilty to federal charges of tax-evasion and wire fraud, and was eventually sentenced to 27 months' home confinement.

At the end of 2006, Wal-Mart provided the marketing industry with one of the biggest stories of recent years. Earlier the same year, the group had appointed Julie Roehm, formerly the outspoken marketing communications chief at Chrysler, as SVP global marketing communications. Roehm kicked off a full review of the company's creative and media accounts, and eventually awarded the business to Carat and the newly merged DraftFCB in October. Less than three months later, Roehm and an assistant from her department were abruptly dismissed; days later, DraftFCB and Carat were also sacked, and the accounts put back into review. Wal-Mart revealed that its decision was prompted by what it said were flagrant breaches of Wal-Mart's strict code of employee conduct by Roehm and her deputy. Not only were Roehm and her deputy - both already married to different partners - apparently conducting an affair against company rules, but they were perceived to have shown favouritism towards DraftFCB during the course of the agency review process, and were also accused of negotiating to join that company after it was appointed as Wal-Mart's agency. A bitter legal battle ensued when Roehm sued Wal-Mart for breach of contract. The two sides issued lengthy submissions detailing their respective cases, but Roehm's case, filed in her home state of Michigan, took a serious blow in August 2007 after a judge dismissed it, ruling that it should be heard instead in Wal-Mart's home state of Arkansas. Roehm was told to refile if she wished to pursue her battle. In the end, however, she decided instead to abandon her fight and withdraw her case. Wal-Mart in return suspended its own case.

The latest hot potato is the New York Times' allegations that the group conducted a widespread campaign of bribery to underpin the expansion of its Mexican operations. That case has potentially serious ramifications for the business, especially since current group CEO Mike Duke was previously vice chairman and president & CEO of Walmart International Division. Eduardo Castro-Wright, vice chairman with responsibility for global sourcing, and the former head of Walmart de Mexico, announced his retirement in 2011, shortly before publication of the NY Times' allegations of corruption at that division. See full profile for current activities


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