On Friday, CNBC aired various reruns to fill time, as the markets were closed for the Good Friday holiday. One of these is their old standby, David Faber's program about Wal-Mart.
I have seen some of this piece before, as it is by now at least a year old. However, the portion which I viewed Friday left me awestruck. A former chairman of the firm, whose name I do not recall, related in an interview that the senior management of Wal-Mart "...wakes up everyday worrying about how the company is going to survive and continue to grow...." Seldom have I seen such a visceral statement of an attitude which must be present in a firm which has a chance at attaining consistently superior total returns for its shareholders.
The Faber piece also featured video clips of Wal-Mart's intensive focus on employee (yes, I know, "associate") training and the sharing of best practices. These people are nothing if not commited to learning from their mistakes, as well as their successes. When asked about some recent public gaffes, CEO Lee Scott freely admitted that, even in Wal-Mart, some managers are going to be "knuckle heads," and he could not control that. However, it was clear that the firm assiduously tries to minimize its mistakes, both in hiring and managing, as it moves forward in time.This discipline shows in the company's performance history. While, like Ford, Wal-Mart has had periods of underperformance, over 25 years, they have pretty consistently outperformed the S&P500 index. For the past 5 years, they have only begun to experience a performance decline about 12 months ago.
Of course, no company can control all the variables which affect its success. In Wal-Mart's case, it appears that two things happened to cause this failure to continue its attainment of consistently superior total returns.
One has been, evidently, the ever-present "wheel of retailing" phenomenon, in which customers move up the retail ladder to more expensive, more service-intensive and better assortment-offering chains. In the middle of last year, as the business media began to grudgingly admit that maybe the US was in the midst of a continued low-inflation, solid expansion, concern began to arise that perhaps Wal-Mart's target market was leaving it behind and moving upscale.
The second challenge Wal-Mart has begun to face is, quite simply, the penalty for large-scale success in the US. Like IBM, CDC, Xerox, and Microsoft before it, to name but a few, Wal-Mart has drawn the ire of various consumer and governmental organizations. "Follow the money," as it were.
Nevertheless, it was refreshing to see interviews with former and current senior officers of a company that "gets it." That they can never become complacent, resting on their laurels. That they continue to manage and execute with discipline. Whether Wal-Mart's planned move upmarket into more fashionable goods will succeed (and I have argued here that it is unlikely to do so) or not, I give them credit for being hungry and concerned all the time. It's a trait a few other large US companies, such as Ford, GM and Time Warner, would do well to emulate.