Wal-Mart meeting docket most meaningful in a decade
BENTONVILLE, ARK. —There should be plenty of drama early next month in Northwest Arkansas as Wal-Mart convenes its annual meeting of shareholders in the familiar environs of Fayetteville’s Bud Walton Arena on the campus of the University of Arkansas.
The event, which draws more than 15,000 people, is held the first Friday of June and typically little new in the way of meaningful business details are shared. That is likely to be the case again this year, though the event could also be somewhat of a teary affair, as Helen Walton, the wife of Wal-Mart founder Sam Walton and a revered icon among longtime Wal-Mart employees, passed away in April. In addition to a tribute to Mrs. Walton, executives are expected to address topics such as sustainability, health care and the range of return on investment and customer relevancy issues related to Wal-Mart’s strategy of saving people money so they can live better.
While those topics are central to the company’s theme of “building a better Wal-Mart,” shareholders have other concerns on their mind. They have seen the company’s stock do nothing for the past six years and recent results give little cause for optimism. Then there is the $29 million pay package received by president and ceo Lee Scott, a portion of which was based on the company surpassing a curiously low threshold of 3.9% growth in pre-tax profits.
Beyond quibbling about executive compensation and sales performance, there are other potentially more intriguing developments in store at this year’s meeting. The first is the appointment of Allen Questrom to the Wal-Mart board. Questrom is credited with putting JCPenney on its current path of success and the thinking is the former ceo of Barney’s, Neiman Marcus and Federated Department Stores can bring some merchandising magic to the apparel and home departments that have proved to be a drain on company results in recent years. While his insights can’t hurt, shareholders thinking his addition to the board could lead to a JCPenney-style turnaround should remember that he was not the only architect of Penney’s success. Ironically, it was former Wal-Mart merchant Vanessa Castagna who joined JCPenney in 1999, a year before Questrom, who laid much of the groundwork .
However, Questrom’s insight could prove valuable in another area that may not even be mentioned at the meeting. Wal-Mart’s $41.6 billion Sam’s Club division has been the subject of considerable speculation in recent months concerning a possible sale or spinoff. Wal-Mart chairman Rob Walton could put the issue to rest by affirming the company’s commitment to growing the warehouse club division or choose to say nothing.
Either way, Questrom has direct experience in making difficult decisions to spin off a major business. He determined the sale of JCPenney’s Eckerd drug store division was in the best interest of shareholders and the troubled unit was split in two and sold in April 2004 to CVS and The Jean Coutu Group. The deal netted JCPenney $3.5 billion in cash that laid a foundation the company is now experiencing.
It is also worth noting that Questrom is the second retail veteran in as many years to join the Wal-Mart board. Last year, Roger Corbett, the former ceo of Australia’s Woolworth’s chain, joined the board. Woolworth’s is Australia’s largest retailer.
Beyond the basic business overview offered at the meeting, the appointment of Questrom and a vote of confidence for Sam’s Club that will be conspicuously absent if not offered, Wal-Mart faces the usual litany of shareholder proposals. This year, a familiar group of topics are again on the agenda as activist groups seek shareholder approval requiring the company to generate numerous reports related to political contributions, charitable giving, women and minority compensation, health care costs and social responsibility.