Wal-Mart Stores Inc will add more than 500,000 employees in the next five years as it increases its global presence, even as it works to improve sluggish U.S. sales, CEO Mike Duke said on Friday.
In setting out his vision for the next several years at the world's largest retailer, Duke, who is in his second year at the helm, said the company needs to widen its price gap with competitors as the Internet helps consumers find bargains.
We will win on price leadership and we will win big, Duke said to 16,000 cheering employees and shareholders assembled at the University of Arkansas' basketball arena for the company's annual shareholder meeting, which doubles as a star-studded pep rally.
While employees were entertained by Oscar-winning actor Jamie Foxx and musicians such as Mariah Carey and Mary J Blige, shareholders were given a new $15 billion share repurchase plan that comes on top of $10 billion in shares the company bought back in the past year.
But that might not be enough for shareholders who have seen Wal-Mart's stock stagnate and sales at U.S. discount stores open at least a year fall for the past four quarters. The company's shares were down 1.6 percent on Friday afternoon.
I don't think the $15 billion is enough at the moment, said Brian Sozzi, an analyst at Wall Street Strategies. The company simply needs to display to its shareholder base that it can execute on its sustainability message, in the attempt to drive down costs and regain lost traffic, either through lower prices or improved merchandising in higher margin departments.
Duke conceded the company, with $405 billion in annual sales, has work to do, both in improving sales at its U.S. discount stores and in increasing memberships and products at its Sam's Club warehouse clubs.
Internationally, where business units account for about one-quarter of total sales, we need to continue to set an impressive pace of growth and have a constant emphasis on returns, Duke said.
As part of that growth, Walmart will add 500,000 jobs to a base of 2.2 million. Walmart already has 4,110 stores in 14 countries outside the United States and is eyeing an entry into Russia.
The expansion story remains critical to the company due to the persistent lower economic problem in the United States, said Richard Hastings, consumer strategist at Global Hunter Securities.
RAY CHARLES? SORT OF
Meeting host Foxx started with a song that celebrated Walmart's price rollbacks and then went into an impersonation of American music legend Ray Charles, whom Foxx portrayed in a biopic.
In a video that introduced Foxx, he looked for his movies in a Walmart video section, while in the cosmetics department, he pointed to makeup ads that featured female co-stars he has kissed on the screen.
Sometimes I just come to Walmart in the makeup section to hang out with my girlfriends, he said.
The high-profile patronage, however, has not helped Wal-Mart's overall U.S. performance, as sales have been pressured by high unemployment and rising gasoline prices.
We get up every single day and look at the newspaper and what do we see, one set of bad news after another, said Chief Financial Officer Tom Schoewe.
The latest snapshot of the U.S. jobs market was disappointing, with the government saying on Friday that the private sector hired fewer people than expected in May.
Walmart has announced thousands of price rollbacks to attract customers who remain on very tight budgets. It has aggressively cut costs to help fund the rollbacks and increase earnings. Overseas sales have also helped lift results.
While low prices resonate with some customers, those who feel more secure in their jobs have started to shift to rival Target Corp and some department stores to buy more discretionary items such as clothing and home furnishings.
At the other end of the spectrum, Walmart faces increasing pressure from dollar stores, which have added food offerings in order to attract customers.
(Reporting by Brad Dorfman; editing by Lisa Von Ahn, Gerald E. McCormick and Andre Grenon)