How to Fix Wal-Mart? Ask Its Managers

Store managers from across the country—who know Wal-Mart's customers best—have a few ideas to get the retailer back on track

by Pallavi Gogoi

H. Lee Scott Jr., chief executive officer of Wal-Mart Stores (WMT), has been tirelessly upbeat in recent quarters even as the retailing giant has floundered through two of the most difficult years in its history. But on Aug. 14, Scott sounded downright glum as he reported financial results for the second quarter. He lowered the company's profit forecast for the rest of the year and made no effort to conceal his disappointment with its performance. "[This] was not what we expected of ourselves," he said (see BusinessWeek.com, 8/14/07, "Wal-Mart's Earnings Warning"), and 8/14/07, "The Implications of Wal-Mart's Warning").

Clearly, the brain trust in Bentonville is struggling to get the company back on track. Growth is faltering, with same-store sales inching up just 1.9% in 2006, the worst performance in the company's history. Several new initiatives to boost revenues have come up short, particularly an effort to move upscale into products like higher-end apparel and home goods (see BusinessWeek.com, 4/3/07, "Wal-Mart's Midlife Crisis"). Wal-Mart's stock, at $43.59 a share, is hovering around its 52-week low. And some Wall Street analysts are already expressing doubt that Wal-Mart will be able to meet even the reduced earnings forecast it just provided. "Fourth-quarter expectations could be a stretch if merchandise missteps continue," says Adrianne Shapira, a retail analyst at Goldman Sachs (GS).

How to fix the giant? To uncover fresh ideas, BusinessWeek decided to go to those managers who are closest to its customers. We spoke with a dozen managers at Wal-Mart stores across the country, some currently employed and others recently departed. A few declined to participate, citing the company's tight restrictions on talking to the press. But many wanted to talk. Some even felt more comfortable discussing the company's challenges with an outsider since their ideas aren't consistent with the corporate orthodoxy.

An Insider's Eye

These managers care deeply about the retailer. Clearly, the company's future is central to their lives and their professional prospects. Beyond that, they truly believe in what has long been the quintessential American success story. These managers have a wealth of knowledge gleaned from spending so much time at Wal-Mart. Those interviewed have more than 100 years of combined experience working at Wal-Mart Stores. Several quote regularly from founder Sam Walton's book Made in America, including one current Missouri manager who cited Sam to make it clear he didn't always agree with his superiors in Bentonville: "There's only one boss: The customer."