U.S. Has Lots of Room for More Wal-Marts

Some people say America is saturated with Supercenters, but that doesn’t deter Mike Duke, the new head of Wal-Mart’s U.S. stores division.

“Even when you think about Texas, Arkansas and Oklahoma, there’s a lot of room for a lot more Supercenters,” Duke said. “We’ll open about 210 Supercenters this year. Clearly, the Supercenter format has much more growth ahead.”

Although the media have focused lately on Wal-Mart’s international growth, Duke said there’s plenty of elbow room in the U.S.A.

After all, there are 3,717,810 square miles of land in the United States and only 1,536 Wal-Mart stores, 1,309 Wal-Mart Supercenters and 51 Neighborhood Markets.

That calculates out to be one Wal-Mart store of some kind for every 1,283 square miles of U.S. soil (not including the 526 domestic Sam’s Clubs). That’s an area slightly larger than the state of Rhode Island and 513 square miles smaller than Arkansas’ Washington and Benton counties combined.

In the South, however, the Wal-Mart presence is a bit more dense than it is for the United States as a whole (see saturation graphic, page 12).

But that doesn’t mean all the growth will be in Northern and Western states. Duke said many towns want a Wal-Mart store, but the problem is hiring enough good managers.

“We have communities that want us to come,” he said. “What becomes the metering factor is growing the people to manage those stores.”

Duke will get a chance to talk more about his division on June 6 at Wal-Mart’s annual shareholders meeting at Walton Arena in Fayetteville.

Wal-Mart Stores Division

The Wal-Mart Stores segment had net sales of $157.1 billion in fiscal 2003, which ended Jan. 31, a 12.9 percent increase from sales of $139.1 billion in 2002. The segment brought in $121.9 billion in fiscal 2001.

So, in the last fiscal year, the Wal-Mart Stores Division accounted for 55.6 percent of the corporation’s revenue.

Within the Wal-Mart Stores segment, food accounted for the majority of sales — 24 percent, or $37.7 billion — during the last fiscal year. One business newspaper reported that Wal-Mart now has 15 percent of the nation’s supermarket business, but Duke said that figure is high.

After food, hard goods accounted for 20 percent and pharmaceuticals accounted for 18 percent of sales for the Wal-Mart Stores Division.

Although the International Division led Wal-Mart’s growth in the first quarter of fiscal 2004 with a 13.3 percent increase, the Wal-Mart Stores Division was close behind with an 8.1 percent increase.

In addition to 210 Supercenters, Wal-Mart also plans to open about 50 non-Supercenter Wal-Mart stores this year and about 20 of the company’s smaller Neighborhood Market stores.

Realignment

On May 1, Duke became president and CEO of the Wal-Mart Stores Division of the world’s largest retailer. He also has the title of executive vice president of Wal-Mart Stores Inc.

Duke replaced the energetic Tom Coughlin, who was promoted to vice chairman and executive vice president of the Bentonville-based corporation, broadening his oversight of Wal-Mart’s U.S. retail operations by adding responsibility for areas such as logistics, real estate, global purchasing and the company’s online operation, Walmart.com.

In his new role, Coughlin continues to be responsible for the entire U.S. retail operations of Wal-Mart discount stores, Supercenters and Sam’s Clubs. Kevin Turner, who reports to Coughlin, replaced the retiring Tom Grimm last year as president and CEO of the Sam’s Club Division.

Coughlin joined Wal-Mart in 1978. With the promotion, Coughlin replaced Don Soderquist, who retired from the company in 2000 and remained on the board until last year. Soderquist was known for promoting the Wal-Mart culture that Sam Walton made legendary throughout the business world.

Duke is now responsible for the operations and merchandising of the company’s Wal-Mart discount stores, Supercenters and Neighborhood Markets in the United States. Duke, who reported to Lee Scott in his previous role as executive vice president of administration, now reports to Coughlin.

Coughlin and Duke are both 53 years old. Scott, president and CEO of Wal-Mart Stores Inc., is 54.

Drafting Duke

Duke graduated from Georgia Tech in 1971 with a degree in industrial engineering.

Needing a job, he heard Rich’s Department Stores in Atlanta was looking for an engineer. Duke interviewed with John Weitnauer at Rich’s and went home to tell his wife how excited he was about the prospect of working in retail.

“I went home and told my wife how fun this business sounded,” Duke said.

He went to work for Rich’s in early 1972. The company later became part of Federated Department Stores.

“I was in it for 30 days, and my wife said, ‘You really have this in your blood,'” Duke recalls. “The fun, speed and pace I’ve enjoyed ever since … It’s really about looking at people resources and seeing how you get the best investment from people and facilities.”

Duke said he studied customer flow, staffing and how stores were designed — “the micro-level design of a store that would translate into future adaptations of the store.”

Initially, he spent all of his time with Rich’s working inside the store in Atlanta.

Duke spent a total of eight years with Rich’s — two years as an engineer, a year and a half in human resources and the remainder of that time in store operations.

“I was with what was at the time the dominant retailer in the Atlanta market,” he said.

In 1979, a friend lured him away to work for Hecht’s Department Store in Washington, D.C., which was owned by the May Department Stores Co. of St. Louis. At Hecht’s, Duke worked in customer service, making “incremental improvements” in how the stores operated. He also worked for the company’s logistics and distribution centers and soon became vice president of logistics.

After eight years in Washington, May Co. moved him to St. Louis to be vice president of distribution for its Venture stores division. He was later promoted to senior vice president of operations.

Duke was still working for Venture in October 1994 when Lee Scott, who was head of logistics at the time, and Coleman Peterson, executive vice president of Wal-Mart’s “people division,” began calling him.

Peterson had worked for May Co., so he knew Duke personally.

Duke didn’t take the job at first because of a personal matter involving his family’s 2-year-old foster child in St. Louis.

But that situation was worked out within about four months. In the meantime, Duke attended a lecture about Wal-Mart’s culture by David Glass, the former president and CEO of Wal-Mart Stores Inc.

“It all seemed to fit so well with the way I thought business should operate,” Duke said of Glass’ lecture.

Duke then read “Sam Walton: Made in America,” the autobiography co-written by John Huey.

Duke said the book swayed him over totally to Wal-Mart’s side. At about that time, Soderquist called to give Duke one last chance to come to work for Wal-Mart.

He said “Yes.”

Supercenter Superman

Duke joined Wal-Mart in 1995.

Since then, his rise through the ranks has been somewhat meteoric.

He began with Wal-Mart as senior vice president of distribution. Three months later, Scott left logistics to head up merchandising for Wal-Mart.

“David Glass and Don Soderquist called to visit and said, ‘We think you’ve done very well in your first 90 days, we’d like for you to take over the whole logistics area” Duke recalls.

When Soderquist retired in 2000, Duke became executive vice president of administration. He remained in that job until he was promoted to head the Wal-Mart Stores division.

Duke said his management style will complement that of Coughlin.

“I’m looking forward to learning from Tom’s experiences,” Duke said. “I walked in saying, ‘I’m going to ask a lot of questions.'”

Duke said he has three main objectives in his new job:

• To make it easier for stores to operate. That includes working on aspects such as staffing, training, technology and customer service.

• To better manage inventory flow. Even though Wal-Mart is famous for its logistics and distribution, Duke said, “When something is good, you then realize how much better it can be.”

• Focus on one store and one associate at a time. Perfecting operations on a store-by-store basis will enable Wal-Mart to take those ideas to all of the company’s stores at the right time.

Duke’s enthusiasm mirrors that of his boss Coughlin. Duke arrives at work early and leaves late — 6 a.m. to 6 p.m.

“I’ve had eight years of busy days here at Wal-Mart,” he said. “I sleep really, really well once I do crash. Then I wake up, and I’m ready to go again.”