Wal-Mart sets $15 billion buyback
FAYETTEVILLE, Arkansas (Reuters) - Wal-Mart Stores Inc plans to buy back $15 billion more of its shares and expects to add over 500,000 employees in the next five years as it increases its global presence.
At the same time, the discounter is working to turn around sales in its U.S. Walmart business, which have fallen at existing stores for the past four quarters, Chief Executive Mike Duke said at the company's annual shareholder meeting.
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 told 16,000 cheering employees and shareholders assembled at the University of Arkansas' basketball arena for the annual 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 question whether it can retain shoppers won in the recession.
Wal-Mart shares fell 2.5 percent to close at $50.40 on the New York Stock Exchange, but performed better than the Standard & Poor's 500 Index, which dropped 3.4 percent due to weaker-than-expected payroll data and fresh concerns over Europe's debt troubles.
"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, Wal-Mart will add 500,000 jobs to a base of 2.2 million. Wal-Mart's international business is growing at a much faster clip than in the United States. The company already has 4,110 stores in 14 countries besides 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.
As to the future of the U.S. economy, Duke said the job market was still a concern for its customers.
"I would not say that I could predict that there will be any decline," Duke said of the economy. "But I still sense a great deal of pressure on the customer base."
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. Wal-Mart said it had received 13 million job applications at its U.S. stores in the past two years.
RAY CHARLES? SORT OF
Meeting host Foxx started with a song celebrating 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 company is also focusing on basic items like socks, underwear and jeans to help its flagging apparel business.
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 to attract customers.