Early Wal-Mart shareholders invest on faith

by The City Wire staff ([email protected]) 2,408 views 

Joyce and George Redden borrowed $700 from an insurance policy and gathered up money in savings to in 1971 place a bet on an upstart company. At the time, the Reddens had faith in their friend Claude Harris. They didn’t know that much about Harris’ boss, Sam Walton.

“We were a young couple in 1970 when Wal-Mart stock went public shortly after our good friend Claude Harris (part owner in a local Ben Franklin store) told us about the young company’s growth potential. We lived in Springdale at the time and occasionally shopped the Wal-Mart there (Store No. 3) but didn’t really have the money to buy the stock,” Joyce Redden said.

At the time Wal-Mart stock was trading at roughly $18 a share.

The Reddens, who live in south Sebastian County, said they trusted their good friend who had left his manager’s post at Ben Franklin — a retail enterprise then much larger than the pre-Wal-Mart business Walton operated — to become the first buyer for Walmart, in its infancy.

“We knew Claude had taken a leap of faith and our whole church prayed often for that young company where many of our other friends had gone to work,” she said.

With faith in Harris, the Reddens purchased the 100 shares of Wal-Mart stock. That gamble paid off with nine stock splits by June of 1990. For those who purchased 100 shares of the original offering, they would have held 51,200 shares by June 1990 with a value of around $3 million.

Harris said he was running a Woolworth’s in east Memphis when Sam Walton ventured into the store to see someone else.

“The fellow he wanted to see was out but he talked with me for a couple of minutes. I had never heard of Wal-Mart or Sam Walton at the time,” Harris said.

It was 1960 and Woolworth was the model retailer of the day, with a rich history dating back to 1879. In contrast Walton had nearly a dozen variety stores operating under Ben Franklin partnerships between himself and store managers. Walton’s namesake Wal-Mart wouldn’t be introduced until two years later.

Harris said he spent nearly 12 years with Woolworth where he had great mentors in retailing and merchandising. But after several visits with Walton, Harris accepted a partnership in a Ben Franklin store in Fayetteville and moved the family to Northwest Arkansas.

Harris joked, “My wife always said Sam Walton could charm a bird out a tree.”

As an early partner with Walton, Harris operated a store on one side of the Fayetteville square, across the street from another Walton variety store operated by Charlie Baum. To make matters worse there also was a Gibson’s franchise on the square.

Gibson’s, a discount chain headed up Herb Gibson, originally from Berryville, opened his first store in Abilene, Texas, in 1958 and eventually had 500 stores in 29 states by 1972. The retailer’s expansion was done mostly via franchising.

In his memoirs, Walton said Gibson’s philosophy, “Buy it low, stack it high and sell it cheap” resonated with him. Walton said when GIbson’s came to Fayetteville in 1960 and began competing directly with his stores, he couldn’t just sit back and watch.

Rogers was ripe for a discounter but Harris remembers there were plenty of doubters ahead of Store No. 1.

He said veteran variety store managers like himself had little desire to oversee a Wal-Mart as it was a different business plan — modeled after Gibson’s discounting across the board on whatever merchandise could be readily sourced.

Wal-Mart No. 1 opened July 2, 1962. The original ledger displayed in the Wal-Mart Visitor’s Center, shows the store had gross sales of $43,078 with profits of $9,452 in that first month.

Before Store No.1 could prove itself, Walton opened a store each in Harrison and Springdale.

Harris became Wal-Mart’s first buyer in 1968 and remembers well the opening of Store No. 12 in Claremore, Okla. — Helen Walton’s hometown.

“We were standing there chatting when Helen said to Sam, ‘I think we probably have enough of these stores,’” Harris recalled during an interview with The City Wire. “Sam answered, ‘You are probably right.’ But then we just kept on opening more.”

Harris said when he took over the buying for Wal-Mart there were no paper records to speak of. Starting from scratch, Harris modeled the merchandising record keeping and business practices after Woolworth’s. He said buyers had to tightly control expenses because Walton was financing the inventory on a personal line of credit.

Once Wal-Mart went public in 1972, early partners like Harris, Willard Waker and Charlie Baum had their shares converted to Wal-Mart.

Wal-Mart in the early years was a calculated gamble and succeeded out of sheer necessity because the company was undercapitalized and operating in areas off the beaten path, Walton admitted in his memoirs.

But employees and investors who stayed in the game would be aptly rewarded.

In the 40 years following the 1970 public stock offering, a $1,650 investment would have grown to $10 million.

George Redden said his family added to its Wal-Mart holdings over the years in part because the company is one that gives back to communities.

“I remember going to purchase some additional shares around 1990 shortly after Sam Walton was diagnosed with cancer. A broker in Fayetteville told me to sell what I had and buy something else because when Sam died the company would too. I didn’t believe him and bought 100 more shares,” Joyce Redden said.

She said owning Wal-Mart stock has allowed her family to live a comfortable life.

“It’s been a true blessing for our family and so many others, who also believed.”