Wal-Mart’s Scott Cites Challenges

Sep 09, 2004

By George Anderson

Wal-Mart’s chief executive, Lee Scott, said the company is facing a challenging business environment as rising fuel costs and politics are weighing heavily on the minds and pocketbooks
of the retailer’s core customer group.

The company reported uncharacteristically flat sales for its discount store division in August and is looking for its third quarter performance to come in at the lower end of
its estimate for the period.

Speaking to analysts at the annual Global Retailing Conference sponsored by Goldman Sachs, Mr. Scott said approximately 20 percent of Wal-Mart’s customer base is made up of people
living paycheck to paycheck. Rises in gasoline prices, for example, can represent a major expenditure for people who do not have a checking account.

The world’s largest retailer is still expecting a strong fourth quarter, despite the current uncertainties and he told analysts not to “get too depressed” over August’s results
or the downward revision of the company’s third quarter numbers.

Wal-Mart intends to continue its focus on driving costs out of the system, said Mr. Scott. One area of focus will be in inventory management. By reducing inventory, he said,
Wal-Mart can save on inventory warehousing and labor costs.

The company’s goal, he said, was to cut the growth of its inventory to half of its sales rate.

Moderator’s Comment: Do you agree with Lee Scott that rising fuel costs and the political environment in the U.S. are impacting how Wal-Mart’s customers
shop? What do you think are the biggest challenges facing Wal-Mart as it attempts to continue growing as it has in the past?

George Anderson – Moderator

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