Wal-Mart Says 'Go Slow'

If Ryan Seacrest asked each year's American Idol winner the first thing they would do after winning the contest, the answer would be "I'm going to Bentonville, Ark., to sing at Wal-Mart's annual shareholder meeting!"

Following in the steps of previous winners, recently crowned Idol Jordin Sparks (who said she shops at Wal-Mart) gave her first performance since winning before a cheering crowd of thousands of Wal-Mart employees and shareholders gathered at the Bud Walton arena at the University of Arkansas in Fayetteville.

Based in the northwest corner of the state, the Wal-Mart annual shareholder meeting mixed corporate presentations with pep rally enthusiasm and pop star entertainment. Jennifer Lopez sang. Stars from "High School Musical" danced. Acrobats twirled, bounced and flipped in circles above the arena.

The comedian Sinbad, serving as emcee, often skewered his hosts, joking that he was fired 35 seconds after getting hired as a trainee because he took a break. The comment came a day after Wal-Mart employees filed a class-action against Wal-Mart Stores Inc., alleging the retailer deprived them of rest and meal breaks while forcing them to work "off the clock."

Sinbad also complained about Wal-Mart shoppers asking incessant questions such as how long one-hour photo development would take.

"You should have to pass a test to come in [to a Wal-Mart store]," he told thousands of Wal-Mart employees who laughed and applauded loudly. "You can't read, you can't come in."

Fewer Stores

Joking and singing aside, the company used the meeting to announce a significant change to the number of SuperCenters it plans to open this year and in the future.

The company said it would now open 190 to 200 Wal-Mart SuperCenters in 2007, down from the originally planned number of 265 to 270 stores.

The nation's largest retailer had been on track to grow around 8 percent this year. This reduction in stores will slow growth to around 4 percent for the year, according to one analyst.

In the subsequent years, Wal-Mart plans to open 170 SuperCenters annually. Tom Schoewe, Wal-Mart's chief financial officer, stressed that was still be a significant number, equaling an additional 20 million square feet a year.

The company's aggressive expansion has been a partial factor in the drop in sales at stores opened for more than a year -- comp store sales -- as shoppers have turned away from older stores to shop at newer ones. This "cannibalization," as it is called, has hurt the retailer.

In April, Wal-Mart comp store sales decline by 3.5 percent, its worst showing since the company started publishing the figures 27 years ago. For the first quarter, however, the company reported it earned $2.83 billion, an increase of 8 percent compared to the previous year.

While the nation's largest retailer has pursued an aggressive expansion strategy over the past several years, Schoewe said the announced slowdown was "an evolution in the company's strategy."

Wal-Mart will now focus on increasing sales at existing stores and increase its stock repurchase program from $10 billion to $15 billion, news that shareholders will be pleased to hear.

Fewer Stores, but Higher Stock Price?

Wall Street liked what it heard. The company's stock shot up 4 percent immediately after the announcement, leading Goldman Sachs retail analyst Adrianne Shapira to exclaim "Finally."

Many financial analysts were pleased with the news, as they had been calling on the company to reduce its "capital expenditures" or spending on major projects such as opening new stores. Retailer watchers have wanted the company to focus on those areas where the company has struggled, in particular apparel.

Citigroup's Deborah Weinswig described the announcement as "shocking" and later wrote in a note to investment clients: "The announcement came earlier and the magnitude was greater than expected. Management will now be more focused on existing stores, reflecting a clearer strategy toward improving retail operations."

Wal-Mart to Shoppers: Live Better

Throughout the meeting, Wal-Mart emphasized the new message it wants to convey to its employees, its shareholders and in particular, its customers: "Saving people money so they can live better."

Developed internally within the past few months, the slogan featured prominently on the new multicolored, pixilated pattern background the company has started to use. That layout was developed with Wal-Mart's new advertising agency, the Martin Group.

The message could be seen on banners hanging near the meeting, on T-shirts, on the giant television screens in the arena and was used throughout the presentations by executives at Wal-Mart.

Rob Walton, chairman of the board and son of Wal-Mart founder Sam Walton, used the phrase throughout his presentation: "We're working harder so people can lead better lives."

The message dovetails with the retailer's renewed emphasis on "every day low pricing" after the company stumbled last fall in its attempt to attract a more affluent shopper.

And it worked. Low prices drove customers to the stores during the holidays, and the world's largest retailer ended the year with revenue increasing to $345 billion with profits totaling $12.18 billion.

That was enough for Wal-Mart to reclaim the No. 1 spot on the Fortune 500 from ExxonMobil for the year.

Walton also used the shareholder meeting to broadcast a message to CEO Lee Scott that the board appreciated his hard work, perhaps trying to stop speculation about Scott's position.

"The board and the Walton family have absolute confidence in your leadership," he said.

Also addressed during the more than four-hour meeting was the election of the board of directors and the rejection of 11 shareholder proposals that ranged from requiring a report on how rising health care costs would affect the company to documenting pay by race and gender, and disclosing donations to charitable groups.