“I estimate they get a better return on investments with the supercenters because the supercenters turn over inventory faster. … They’re moving into lower margin areas. The important thing is return on investment.”
Usmani: The return on sales will continue to come down because of higher operating expenses associated with building supercenters and going into international markets.
Increased volume in sales will bring in more money to the bottom line.
Shareholder: Wal-Mart isn’t paying much in dividends. Rumor is supercenters will be going into smaller and smaller towns. Will people keep buying the stock?
Wal-Mart: Fitzsimmons: “This year, we did increase the dividend by 29 percent, buying back $2 billion worth of the shares. The shares this year, if you look at USA Today’s list of the 10 most widely held stocks, Wal-Mart is up more than any other stock at over 30 percent. So I think, in terms of returnings to the shareholders, the things we are doing now, including going into the small downs with the supercenters … should be a win for the shareholder and should be a win for us in terms of shareholder value.”
Barry: “A growth company [which uses profit to grow rather than paying dividends] generally doesn’t pay out much in dividends.”
Last year, Wal-Mart paid 21 cents per share of stock in annual dividends. In the first quarter of 1997, they increased that amount to by 29 percent to 27 cents per share.
Usmani: “Last year, cash flow from operations more than funded capital expenditures, working capital needs and dividend payments. We expect that to continue going forward. The shareholders will be the ultimate beneficiaries.
“The company will continue to buy back stock and increase dividends. … They are basically becoming a cash cow.”
In 1996, the company paid about 16 percent of its annual profits to shareholders in dividends.
“It’s fair for a growth company. It’s reasonable.”
Shareholder: David Glass, Wal-Mart’s chief executive officer, received a $300,000 raise last year, while associates in some stores, such as one in Topeka, Kan., had their hours cut back.
“They asked me to ask you, ‘When will we get a full week? When is our income going to be up? When will we be truly able to support our families by full employment in our jobs?'”
‘In past years, relatively low hourly wages for store employees were offset by stock that was growing at a healthy rate. But that’s not true now.
Wal-Mart: Kendall Schwindt, senior vice president for operations for Wal-Mart Stores Division: “When we do have a payroll budget to meet, and as volume changes you know you do have to adjust accordingly, and we do have flex hours in that schedule. Sometimes, instead of doing the right thing, the manager takes the short-term approach and is cutting everybody’s hours instead of having the right number of associates.”
Menzer: “When we look at the Fortune 500, David was 284th in compensation at the fourth largest company. I personally think he’s well worth this and more.”
Barry: Compared to his peers, Glass isn’t making that much money.
“Seems to be a justifiable raise, particularly since he’s a shareholder and he’s not doing well either (with the stock).”
Usmani: Agrees with Barry and Menzer.