'The Insider': Live-Blogging Walmart Stores' 17th Annual Meeting For the Investment Community

'The Insider' - Heard on the Street

Walmart Stores, Inc. kicked off its 17th Annual Meeting for the Investment Community this evening at 7:15 p.m., with opening remarks by Tom Schoewe, the global retailer's chief financial officer.

As I write the column, Leslie Dach, Walmart's executive vice president, corporate affairs and government relations, is giving the keynote dinner presentation. He's set to conclude at 8 p.m.

Tonight is a warm-up for tomorrow, when Walmart executives, led by CEO Mike Duke, will make presentations from 8 am-3.35 pm . Duke will kick off the day with opening remarks at 8 a.m. and then bat clean up , closing the conference in the late afternoon.

Much of the focus of Dach's talk right now is on Walmart's sustainability, education and charitable giving practices, including Walmart USA's record-breaking donation to U.S. food banks this year.

Dach has finished his talk and is preparing to answer audience questions. But first a little entertainment. And it's entertainment with a message.

A group of Walmart associates, dressed in trademark blue shirts, has taken the stage and are singing: "New York, New York," as a slide show of various Big Apple sites, like Wall street, is shown on a big screen. New Jersey-born Frank Sinatra, often referred to as "The Chairman of the Board," made the song and New York City synonomous.

The message is this: Tomorrow morning Walmart USA CEO Bill Simon plans to outline the retailer's new urban-focused smaller-store strategy. One of the cities he's expected to discuss is...New York City, where Walmart has zero retail presence but wants to "Be A Part Of...Good Old New York, New York." [Read the story - October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?]

After the song Dach said: "Any relationship between our choice of songs and any actual political strategy is purely fictional," a clear indication, using a little humor, Walmart wants to ink a similar deal with Mayor Bloomberg and legislators for stores in New York City like it did with Mayor Daley and legislators recently in Chicago. (See the linked story above for details.)

Further symbolism: The same "Walmart Choir" sang Dach on to the stage earlier tonight, singing another song - "My Kind of Town," (Chicago is) - made famous by Frank Sinatra. Walmart already has at least three-four stores, of various formats and sizes, approved in Chicago.

I expect Simon to mention three medium and smaller store formats tomorrow - a medium format store, a version of the about 20,000 square-foot 'Neighborhood Market by Walmart' prototype, and a small-format grocery store, which we've been calling an "American Bodega, along with discussing smaller supercenters (which already exists in various versions). There could be some surprises as well.

[Read the story - October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?]

The Walmart associates' choir just finished singing the iconic song, "New York, New York." They did a good job, by the way. I see a singing future for the group. Pay attention Mike Duke. They would be great roving ambassodors for the chain.

Dach is back on stage to answer audience questions.

In response to a question from an audience member, Dach says Card Check (the Employee Free Choice Act), the legislation that would eliminate the secret ballot in union elections at companies, is essentially dead, according to his analysis. Walmart has few worries about the legislation at this point in time, he says.

He's not alone in that analysis. Even if the House of Representatives were to take up Card Check before the November election, which they won't, there aren't enough votes in the Senate to pass it. And with nearly every political analyst predicting the Democrats will lose some Senate seats in the November election, along with numerous U.S. House seats, the organized labor-backed legislation seems dead in its tracks.

You can believe Walmart CEO Duke and team are very happy Card Check won't happen in the near future.

Just two audience questions for Dach. He got off easy. The one above was the most significant from a Walmart political-economic perspective.

You can watch a webcast of this evenings activities here.

Below is tomorrow's agenda from Bentonville:

>8:00 a.m. -8:20 a.m.
Company Strategy and Priorities - Mike Duke, president and CEO

>8:20 a.m. -9:15 a.m.
Sam's Club, Brian Cornell, CEO, and team

>9:15 a.m. -10:35 a.m.
Walmart International, Doug McMillon, CEO, and team

>10:50 a.m. -12:05 p.m.
Walmart U.S., Bill Simon, CEO, and team

>1:05 p.m. -2:20 p.m.
Global Sourcing and Global eCommerce, Eduardo Castro-Wright, vice chairman, and teams

>2:20 p.m. -2:55 p.m.
Consolidated Financial Update - Charles Holley, executive vice president finance and treasurer

>2:55 p.m. -3:35 p.m.
Closing Remarks - Mike Duke, president and CEO

Walmart Stores, Inc. executives collectively have much to talk about tomorrow - ranging on the international front from the company's September 27 announcement that it intends to acquire South Africa-based food and general merchandise chain 'Massmart' for 4.1 billion, and the September 24 conditional approval of its $1.2 billion acquisition of about 190 Netto stores in the United Kingdom, which after selling 47 units it plans to fold into its UK Asda chain, to its initiatives, operations and future plans in China, India, Mexico, Canada and elsewhere.

At home in America, in addition to outlining its small store plans, I think Walmart could either announce or offer some additional information about its eventual plans to offer a full selection of packaged food and grocery products on its Walmart.com site, to include home delivery via postal carriers (as it does now with packaged non-food items), along with an expansion of its site-to-store pick up program.

Also look for a discussion from Walmart USA CEO Bill Simon about new merchandising initiatives, including the new key role U.S. food and grocery retailing veteran Duncan McNaughton is assuming in Walmart's U.S. food and grocery operations.

McNaughton, who joined Walmart Canada after leaving Supervalu, Inc. in 2009, where he was corporate executive vice president of merchandising and marketing, started at Walmart HQ in Bentonville a little over a week ago, where he joins Jack Sinclair in heading up Walmart's U.S. food, grocery and packaged goods merchandising and marketing functions and initiatives.

These are just a few highlights of what's to come tomorrow. Stay tuned.

Walmart Stores, Inc. by the numbers: Walmart currently has over 8,600 retail stores operating under 59 different banners in 15 countries. The company had fiscal year 2010 sales of $405 billion. Walmart currently employs more than two million associates worldwide.

Recent columns by 'The Insider':

~October 8, 2010: Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

~September 13, 2010: Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

~September 3, 2010: How the California Grocers Association and its Members Can Snatch Victory From the Jaws of the Defeat of California's Plastic Bag Ban

~August 22, 2010: Challenges & Opportunities: Tesco's Fresh & Easy Neighborhood Market Will Supply its Northern CA Stores From its Riverside County DC in Southern CA

~July 18, 2010: When it Comes to Northern California - its Competitors are Rome Burning and Tesco's Fresh & Easy Neighborhood Market is Nero Playing the Fiddle

~July 13, 2010: A Few Words on The Life and Death of Veteran Southern California Grocer Roger K. Hughes

~June 27, 2010: The Insider: Will Tesco Acquire Supervalu, Inc. and Change its 'Fresh & Easy' Game in America?

~June 12, 2010: Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

~May 20, 2010: Welcome to Discountopia USA

~April 29, 2010: Heard on the Street: There's Something About Albertsons ... In Southern California

Competitor News: Retiring Wal-Mart CEO Lee Scott's $640 Million Christmas Present to Incoming CEO Mike Duke - 63 Labor-Related Lawsuits Are Resolved

Wal-Mart Stores, Inc. today agreed to pay up to $640 million to settle 63 separate federal and state class action lawsuits in which Wal-Mart store employees argued they were cheated out of pay by the mega-retailer and forced to work at times through regular lunch hour and other breaks.

Read the coverage at the links below:

New York Times: Wal-Mart Settles 63 Lawsuits Over Wages... CNN/Money: Wal-Mart to settle wage suits...Bloomberg: Wal-Mart Will Pay Up to $640 Million in Settlement.

Others: Reuters - The Associated Press - BBC News - MarketWatch.

As Fresh & Easy Buzz reported on November 21, 2008 [Breaking News: Wal-Mart Stores, Inc. Names New CEO to Replace Lee Scott; USA Chief Castro-Wright Elevated to Vice Chairman Effective Immediatly] current Wal-Mart CEO Lee Scott will step-down as CEO at the end of January, 2009, and turn over the mantle of Sam Walton to current Wal-Mart head of global operations Mike Duke.

The class action lawsuit situation has been hanging over CEO Lee Scott's and Wal-Mart's heads for a number of years now -- millions in lawyer's fees and much bad publicity. Therefore it appears Lee Scott has decided to give incoming CEO Mike Duke a nice Christmas present just two days before Christmas Day -- the resolution to the 63 class action lawsuits.

Talk about (almost) "The Night Before Christmas" goodies for Mr. Duke. Having these legal cases off of his plate as incoming CEO will be a big relief, as it's something no incoming CEO wants to deal with. And it's likely CEO Scott wanted to leave with his (legal) plate clean, as well. No CEO wants to leave 63 labor relations-based class action lawsuits filed during his tenure against the company he or she leads on the table after he leaves, after all. They're not the type of "second helping" new, incoming CEO's are hungry to gobble down. Nor are they a desired legacy for an outgoing CEO like Scott to leave the company. So he didn't.

When you think about it, a little over half a billion dollars is a good deal for Duke -- and for Wal-Mart. After all, the costs of inheriting the legal mess and dealing with it would be far higher than that in total. For Mike Duke, one could even say the timing of the resolution is, like the MasterCard credit card commercial says -- Priceless.

Breaking News: Wal-Mart Stores, Inc. Names New CEO to Replace Lee Scott; USA Chief Castro-Wright Elevated to Vice Chairman Effective Immediatly

In a move today that took nearly everybody by surprise, Wal-Mart Stores, Inc. replaced CEO Lee Scott with Mike Duke (pictured at left), the head of the mega-retailer's international operations. Duke will take over as CEO of Wal-Mart in February, 2009. Wal-Mart's investors responded to Duke's appointment by sending the stock up $2.26, or 4.5%, to $52.92 on Friday. The consensus among analysts is that Duke is a good retailer and deserved the CEO's job.

Duke, a former department store executive, only joined Wal-Mart in 1995. he was named to head the company's international division in 2005, making his three year rise from that key position to CEO a meteoric one. Prior to joining Wal-Mart, Duke's 23-year retail career included work for Federated Department Stores and May Department Stores.

When he joined Wal-Mart in 1995 Duke first led the company's logistics divisions and U.S. Wal-Mart stores before being named international chief in 2005.

Wal-Mart also today promoted the CEO of its Wal-Mart USA operations, 53-year-old Eduardo Castro-Wright, to vice chairman of the corporation, effective immediately. He's slated to take on additional responsibility in global procurement.

The announcement paved the way for what some say is his eventual ascension to the top job at Wal-Mart Stores, Inc. Many believe Castro-Wright, who is considered an extremely excellent retailer, is ready now to be CEO. However, his promotion is a pretty clear sign he's next in line for the position if he wants it whenever Mike Duke leaves. Duke held the same vice chairman position Castro-Wright was just promoted to, as did Lee Scott, before being named CEO. Duke and Scott were responsible for different aspects of Wal-Mart's business though as vice chairman

Current CEO Lee Scott, who has worked at Wal-Mart for three decades and served as CEO for the last nine years, isn't going away anytime soon though. He will continue as chairman of the executive committee of the board and as an adviser to Mike Duke through January 2011, Wal-Mart spokesman David Tovar said today.

The timing of the announcement caught most people in the retail industry and on Wall Street by surprise. Changes at the top for huge corporations like Wal-Mart generally don't come towards the end of the year or before the holiday season. Additionally, such changes are usually made at the beginning of a major corporation's fiscal year, which isn't the current case at Wal-Mart.

"Lee (CEO Scott) decided the time was right for him to retire and approached the board about doing so," Tovar said. "The board has an ongoing and rigorous succession plan process. We think the right time is now. It's a time of strength for us."

Wal-Mart didn't name a successor to Mike Duke today as part of the changes at the top for the world's largest corporation and retailer. Duke is Wal-Mart's most senior international executive, which is a key post. Some are suggesting the fact a replacement wasn't named today for Duke could mean Wal-Mart might make an outside hire to replace Duke for its most senior global executive position.

Lee Scott's nine years as the head of Wal-Mart Stores, Inc. has been overall a very successful tenure.

Under Scott's leadership, Wal-Mart has put a relentless strategic and operational focus on value that has clicked with shoppers facing myriad economic concerns. He has also put a major emphasis on revamping merchandise assortment, improved store layouts and shored up Wal-Mart's environmental and labor image, positioning the chain as a Wall Street darling after a prior streak of criticism by the media, labor and environmental groups. Wal-Mart currently is the only company on the Dow Jones listing that's up for the year, for example.

Additionally, Wal-Mart has also become the number one seller of food and grocery products in the United States in terms of overall national market share. Prior to Scott's taking the helm as CEO nine years ago Wal-Mart wasn't even close to achieving that distinction.

As CEO Lee Scott launched a massive new store opening program in the U.S. and internationally, focusing mostly on the retailer's mega-Supercenters and Sam's Club warehouse format club stores, but also on its discount stores and Wal-Mart Neighborhood Market supermarkets.

The CEO also has led an aggressive new format development program at Wal-Mart. All of the new Wal-Mart formats in the United States for example -- the small-format Marketside grocery and fresh foods stores; the "Community Market" Hispanic prototype store, the first of which opened in Texas earlier this year, the new smaller (100,000 square feet) Sam's Club prototype; the new Supercenter prototype design, and the new hybrid, smaller Supercenter located in vacant buildings (the first one, at 100,000 square feet located in a former big box supermarket building, opened in Modesto, California on November 12 -- have one basic thing in common: They all offer lots fresh foods and groceries for sale in them.

That all these new formats sell food and groceries as a primary or key feature isn't an accident. What likely could be seen historically as one of the two most important contributions Scott has made during his nine year run as CEO at Wal-Mart could very well be his decision to put the retailer on the path to becoming the dominant seller of food and grocery products in the United States -- and eventually the world. In fact it's this ficus on consumables that most analysts attribute to Wal-Mart's current success in the U.S. and globally during the severe economic recession and financial meltdown.

Scott's relentless pursuit of consumers' food and grocery dollars also led to a decision earlier this year at Wal-Mart USA to start converting scores of its Wal-Mart discount format stores throughout the U.S. in hybrid Supercenters by adding 15,000 -to- 50,000 (depending on the available space) square feet to the discount stores, all of it and then some being devoted to consumables, including fresh produce and meats.

Most of these ideas and concepts for the U.S. came from Eduardo Castro-Wright, who yesterday was the CEO of Wal-Mart USA and today is the company's new vice chairman. However Lee Scott gets CEO credit just like he gets faulted for the negatives, as it should be.

Lee Scott's other major historic contribution has been push as CEO to make Wal-Mart an even bigger global retailer than it was when he took over the head office eleven years ago.

Under Scott's leadership Wal-Mart acquired the Asda chain in the United Kingdom, making it that nation's second-largest retailer after Tesco.

The company grew business in Latin and Central America dramatically.

He did a joint venture deal bringing Wal-Mart into India, which has the world's second-fastest growing economy after China.

Scott grew Wal-Mart-China in a huge way, even saying it will someday in the not too distant future become the retailer's largest market, eventually surpassing the United States in terms of sales.

Most recently Scott inked a deal to bring Wal-Mart stores to Russia, which also has one of the world's fastest-growing economies, although that growth has slowed considerably since oil dropped from $142 per-barrel to $50 a barrel in just the last couple months. But it will rise once again -- the price of oil that is.

By naming Mike Duke, the head of its global business, as the new CEO, Wal-Mart is clearly sending a message that it plans on becoming an even bigger international retailer. The retailer's international division, which Duke heads, accounts for more than a quarter of Wal-Mart's $400 billion in annual sales. The company's future growth is globally. Although there's still room to grow sales in the U.S., it's the retailer's most mature market and pales in comparison to the opportunities internationally.

During his tenure as head of international operations, Duke had some hits, but also some big misses. For example, In 2006, Wal-Mart withdrew from Germany and Korea, two big setbacks for the company. And despite taking control of its Japanese business in 2007, Wal-Mart continues to struggle there.

Successes though include Brazil, which has experienced phenomenal growth and serves as a model for Latin America, and India, where Wal-Mart scored a coup by forming a partnership with Bharti Enterprises to expand in that country despite local opposition from mom-and-pop retailers. Add China to the list as well.

And Asda in the United Kingdom is doing extremely well despite that country's economic recession and its position as a distant number two to Tesco. Tesco has a 31% UK market share to Asda's about 17% share. But Asda has consolidated its lead over number three Sainsbury's, which was neck-to-neck with Wal-Mart-owned Asda just two years ago for number two, but now has about a 14.5% share to Asda's about 17%.

Beginning next year when he takes over Mike Duke will have a much different political agenda to contend with as CEO than Lee Scott did during the last eight years of the Republican Bush Administration. With a new Democratic President, Barack Obama, and a Democratic majority in both the U.S. house of Representatives and U.S. Senate, issues such as unionization, which Wal-Mart has been able to keep at bay, are going to become much more pressing for the company -- and for the new CEO.

If organized labor can get the Employee Free Choice Act passed, a provision of which ("quick check") allows workers to merely check a box if they want to be represented by a union rather than going through the current and sometimes elaborate secret ballot voting process, it will make it much easier for unions like the United Food & Commercial Workers (UFCW) to organize store-level Wal-Mart employees, something the union has failed to do for decades. President-Elect Obama and a majority of House and Senate Democrats support the Employee Free Choice Act. Therefore its prospects for passage in 2009 currently look strong.

New CEO Duke also will have some political fences to mend globally; fences he has yet to mend as head of Wal-Mart's international operations.

For example, in September, Mexico's Supreme Court chastised Wal-Mart for paying employees partially in vouchers that could only be used at company stores. The court compared Wal-Mart to the Mexican dictator Porfirio Diaz, who ruled the country from the late 1880s to 1911.

Wal-Mart is now Mexico's number one retailer of food and grocery products. As such it can't afford to get on the wrong side of the government.

Other global issues include its Asda chain in the United Kingdom. That nation's top three retailers -- Tesco, Wal-Mart's Asda and Sainsbury's -- have been involved in a multi-year battle with the British government involving charges of anti-competition and price fixing. Earlier this year Asda CEO Andy Bond directed executives of the chain to cooperate with British government authorities against competing chains in return for a promise that the retailer wouldn't be prosecuted or fined. The issue is still taking shape but Asda isn't completely in the clear yet either.

It will be extremely interesting to see who Wal-Mart names to replace Mike Duke in the key position of head of international operations.

Additionally, with Eduardo Castro-Wright moving from CEO of Wal-Mart USA to his new position as vice chairman of Wal-Mart, that opens up the key position of head of U.S. retailing, which remains Wal-Mart's single-largest division in terms of annual gross sales.

We will be watching this closely because since so much of Wal-Mart USA's strategy is focused on selling consumables, and developing new formats that feature food and grocery products, we would expect a person with a food and grocery retailing background perhaps to assume Castro-Wright's position.

Of course that's far from a given since Wal-Mart is fairly deep with food and grocery sector talent below the USA CEO position. However, naming a person with extensive food and grocery retailing experience, either from inside or from outside Wal-Mart Stores, Inc., would send a strong signal that Wal-Mart is even more serious than ever before about becoming the dominant force in food and grocery retailing in the U.S.

[Photo Credit: Wal-Mart Stores, Inc.]