Credit Research and Analysis Summary

Company: WAL MART STORES INC

Credit Recomendation: B   STRONGLY SUPPORTING
Date Issued: 04/29/1999
US National Industry: 452111  Mass Merchandisers - Discounters
Account Status: B   GOOD
Long Term Trend: STR  STRENGTHENING
Annual Sales: $ 137,634,000
Tangible Net Worth: $ 21,112,000
Comparable Store Sales: 9.00  ( 4Q ) 1998
Stock Symbol: WMT
Stock Price: 0.375
52 Week Range: 1 - 3

Credit Opinion: CHARGING INTO THE 21ST CENTURY

Wal-Mart, bigger than Sears, Kmart and J C Penney combined is the world’s largest retailer with some 3,600 Wal-Marts, Sam’s Club membership-only warehouse stores, and Wal-Mart Supercenter combination discount and grocery stores. Since its founding in 1962, by Sam Walton, Wal-Mart Stores Inc has grown at a phenomenal pace achieving record sales and earnings growth for each of the past 28 consecutive year-ends. Domestically, at January 31, 1999, the Company operated 1,869 discount stores and 564 Supercenters, and 451 SAM’s Clubs. Internationally, the Company operated units in Argentina (13), Brazil (14), Canada (154), Germany (95), Mexico (416), and Puerto Rico (15), and under joint venture agreements, in China (5) and Korea (4).

The company’s strategy since its beginnings has been to provide products of unbeatable value with the best possible customer service and for that the company has emerged the leader in the mass merchandising industry. In addition to its focus on offering merchandise at a low markup in order to drive sales volume, and its focus on customer service, the other key to the company’s success is its realization that information technology is not only the way to the future but it is a major force in keeping the company ahead of the competition. Wal-Mart leads the industry in information technology, investing some $500 million a year in technology and communication advancements. The investments in its information systems contribute significantly to efficiency, which in the long term equates to savings that the company passes it on to its customers. Any way you slice it, it’s a “win/win strategy” for the company, the customer and the shareholder.

The Company is principally engaged in the operation of mass merchandising stores, which serve customers primarily through the operation of three segments. The Company identifies segments based on management responsibility within the United States and geographically for all international units. The Wal-Mart Stores segment includes the Company's discount stores and Supercenters in the United States. The SAM'S Club segment includes the warehouse membership clubs in the United States. The International segment includes all operations in Argentina, Brazil, Canada, China, Germany, Korea, Mexico and Puerto Rico.

Over the past two years all three of the Company’s segments have grown in both sales and income with International showing the greatest growth. Wal Mart stores leads the Company in both sales and profitability and continues to grow at double digit rates with SAM’s Club beginning to show much improved operations. However, we believe that the Company’s investment in international operations will begin to surpass the investment in domestic operations within the next couple of years.

The Company has been extremely successful over the past five years. Sales have grown from $82.5 billion in 1995 to $137.6 billion in 1998, a compound annual growth rate of 13.7%. Over the same time period the Company’s operating income has increased from $3.3 billion in 1994 to $5.7 billion in 1998, a compound annual growth rate of 14.5%. Of particular note is the fact that the Company is not only increasing sales at double digit rates, but also improving its margins at the same time. Gross margin has increased from 20.5% in 1994 to 21.0% in 1999 reflecting continuous improvement in purchasing and distribution operations. The Company also monitors its overhead costs continuously with SG&A held at approximately 16% of sales over the last five years. As further evidence of the Company’s concern for controlling costs, interest expense as a per cent of sales has dropped from 0.86% in 1994 to 0.58% in 1999. Perhaps the best indicator of a Company’s operating efficiency is return on assets - reflecting how well the Company utilizes its assets. The Company, which had a good return on assets in 1994 of 8.2%, has improved to its current return on assets of 8.9%, a truly remarkable achievement.

While paying so much attention to the income statement the Company has not been nearly as successful in managing its balance sheet. Just as the operations have improved every year over the last five years so has the balance sheet deteriorated. Of greatest concern to us is the Company’s working capital position. Since 1996 the Company's working capital has declined by approximately 50% from $6.7 billion in 1996 to $3.3 billion in 1998. The reduced working capital can be attributed to several factors. Over the last two years the Company has been implementing a stock repurchase program buying back approximately $2.7 billion of stock while at the same time increasing its acquisition and expansion programs. In March 1999, the Company announced plans to increase the stock repurchase program by another $1.2 billion. Additionally the Company increased its dividend 29% to $.20 per share (after the two-for-one stock split, which was also announced in March 1999) for 1999.

Working capital coverage currently is at 1.72 months, which we consider to be extremely low. We consider 3 months to be adequate. However, the Company does have access to large amounts of capital. Borrowings under the Company’s 2.4 billion revolver remain at zero. The revolver, which was designed to support short-term borrowings and commercial paper, has not been drawn on for well over two years. Working capital requirements are satisfied through cash flows from operations and credit terms provided from the trade community. Cash flows from operating activities were $7.6 billion in 1998 up from $7.1 billion in 1997.

In our latest survey dated April 21, 1999, vendors contacted stated they were shipping this account and approving future orders for the most part. It is important to note however, that the Company’s per cent past due has increased to 23.7% compared to the previous survey where vendors reported past dues at 12.9%. The most recent survey also showed an increase in average days slow from 5 days in August 1998 to 8 days currently. Numerous vendors did mention problems with the Company taking unauthorized deductions for substituted merchandise and deliveries from sealed trailers coming up short of merchandise. While these comments were very similar to previous surveys, some vendors have reported a noticeable increase in charge-backs and an increase in average days slow.

The Company, which prides itself on its information technology systems utilizes the EDI process to pay invoices. We believe they did not understand what this would do to cash flow and are now looking for ways to delay payments including requesting extended terms. Because the Company is the leader in the mass merchandising industry, it is not mystery that it uses its position to get exactly what it wants from vendors. The fact that the Company’s revolving credit line is unused and has been for some time should not be a total surprise as the Company uses its suppliers to a large extent in improving cash flow. This account is certainly worthy of substantial credit lines on terms, however vendors must be aware of the maintenance required with the account. The drawback is on the basis that the Company wants to do business with the vendor. Margins are always squeezed and the Company seeks to keep cost at the lowest possible level and passes the savings onto the customer.
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Working Capital Reconciliation

Company: WAL MART STORES INC

Date: 04/22/1999    WORKING CAPITAL DROPPING LAST TWO YEARS

Since 1996 the Company's working capital has declined by approximately 50% form $6.7 billion in 1996 to $3.3 billion in 1998. The reduced working capital can be attributed to several factors. Over the last two years the Company has been implementing a stock repurchase program buying back approximately $2.7 billion of stock over the last two years while at the same time increasing its acquisition and expansion programs. In March 1999, the Company announced plans to increase the stock repurchase program by another $1.2 billion. Additionally the Company increased the dividend 29% to $.20 per share (after the two-for-one stock split, which was also announced in March 1999) for 1999.

We are becoming mildly concerned with the working capital decline over the last two years. Working capital coverage currently is at 1.72 months, which we consider to be extremely low. We consider 3 months to be adequate. However, the Company does have the ability to raise large amounts of capital quickly.

  
Dollars in thousands 1994 1995 1996 1997 1998 % Change
ASSETS
DEFERRED ASSETS
1,936,000 1,722,000 1,655,000 2,858,000 3,950,000 104.03
PLANT & EQUIPMENT
15,874,000 18,894,000 20,324,000 23,606,000 25,973,000 68.01
LIABILITIES & EQUITY
LONG TERM LIABILITIES
10,120,000 11,331,000 11,504,000 12,421,000 12,122,000 19.78
NET WORTH
12,726,000 14,756,000 17,143,000 18,503,000 21,112,000 45.47
SOURCES AND USES
BEGINNING W/C
 4,318,000 5,036,000 5,471,000 6,668,000 4,460,000 3.29
LT ASSETS SOURCES (USES)
 ( 3,093,000 ) ( 2,806,000 ) ( 1,363,000 ) ( 4,485,000 ) ( 3,459,000 )
LT LIAB&EQ SOURCES (USES)
 3,811,000 3,241,000 2,560,000 2,277,000 2,310,000
ENDING W/C
 5,036,000 5,471,000 6,668,000 4,460,000 3,311,000 -34.25
MONTHLY EXPENCES
 1,130,333 1,319,917 1,469,417 1,678,500 1,930,000 70.75
MONTHLY COVERAGE
 4.46 4.14 4.54 2.66 1.72 -61.49
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Bank Reference

Company: WAL MART STORES INC

Date: 04/22/1999    COMPANY NOT UTILIZING REVOLVER

Borrowings on the Company’s 2.4 billion revolver remain at zero. The revolver which was designed to support short-term borrowings and commercial paper has not been drawn on for well over two years. Working capital requirements are satisfied through cash flows from operations and credit terms provided from the trade community. Cash flows from operating activities were $7.6 billion in 1998 up from $7.1 billion in 1997.

Bank:   FIRST NATIONAL BANK

Fin Type:  REVOLVING LOAN

Top 5 Bank References (000's)

   Trans  Start  Credit  Covenant  Covenant  Due  CleanUp  CleanUp  # Days 
# Date Date Facility Owing Avail Compliance Tested Date From To Required
1 04/22/1999 06/30/1996 2,350,000 0 2,350,000 IC QUA 06/30/2001 0 0 0
2 08/26/1998 06/30/1996 3,300,000 0 3,300,000 IC QUA 06/30/2001 0 0 0
3 05/19/1998 06/30/1996 3,300,000 0 3,300,000 IC QUA 06/30/2001 0 0 0
4 01/31/1998 06/30/1996 3,300,000 0 3,300,000 IC QUA 06/30/2001 0 0 0
5 07/14/1997 06/30/1996 3,300,000 0 3,300,000 IC QUA 06/30/2001 0 0 0
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Detail Trade Survey

Company: WAL MART STORES INC

Address: 702 SOUTHWEST 8TH ST
BENTONVILLE ,AR 72712
Clearance Date:04/21/1999
Total # Suppliers:123
Total Owing:829,592
Total Past Due:184,660
Avg Days Slow:9

Dollars in thousands
ID # H.Credit Owing 1-30 31-60 61-90 Ovr 90 Days Slow Terms Codes Comments
177754 231,911 72,372 0 0 0 0 0
402430 161,730 47,371 2,005 638 247 1,767 0 N30
401136 100,889 99,758 23,880 2,138 609 1,421 7
196561 80,000 80,000 29,000 1,000 240 218 0 VAR
30840 76,788 61,918 18,970 3,694 158 0 10 VAR G
234501 71,812 15,461 7,454 500 444 0 18 VAR
420000065 59,000 6,400 0 0 0 0 0
400623 57,275 51 43 0 0 0 0
226347 57,180 27,710 0 0 0 0 0 2% 22 N 23
400484 32,466 17,614 4,080 932 1,050 1,000 10 2% 30 N 31
420000477 29,457 8,110 1,925 0 0 2 12
294312 28,153 22,729 7,607 0 0 0 18 N 30
402118 28,000 17,500 0 0 0 0 0 Varoius
118071 27,023 26,676 2,268 0 314 423 7 N 60 B
204383 25,531 17,945 13,459 114 34 0 10 VAR G
401739 25,223 25,223 2,140 0 0 0 4 G
401800 24,000 11,000 1,900 196 112 99 10 N 60 G
420000739 22,000 12,000 2,500 42 0 0 7 N 30
420000601 21,755 955 38 83 152 506 20 1%10 N30/SEASON B
420002451 19,768 10,639 0 0 0 0 20
420000249 17,800 17,800 6,700 25 9 98 12
96364 17,288 16,427 802 986 211 186 15 VAR B
420000281 14,603 5,034 2 0 0 0 13 N 30 ROG B
400986 14,300 5,000 351 23 55 0 10 N 60
420002384 14,105 14,105 3,525 87 74 355 13 STANDARD G
402192 14,000 1,200 2 0 0 0 4 VAR B
401561 13,083 13,083 144 24 33 184 40 N 90
200242 11,089 9,699 1,297 39 18 144 11 N 60 DOI
143820 10,744 10,744 0 0 0 0 8 8% 10 EOM B
46818 10,000 5,000 123 0 0 0 0 N 60
400483 10,000 10,000 0 0 0 0 10 N 30 B
401556 10,000 8,700 13 171 103 0 14 N 30 G
420001428 9,990 4,079 0 0 0 0 0 VAR
401985 9,417 9,417 3,651 0 0 0 0 VAR
401714 9,200 1,000 0 0 0 0 0 N 90
95684 9,000 5,600 600 0 0 0 12 VAR
420002987 8,319 8,037 3,995 3,893 34 105 25 N 30
400245 7,637 7,554 859 30 5 235 38 N 30
401942 7,396 6,749 0 0 0 0 15 N 30 G
142259 6,260 3,741 1,683 83 33 290 12 N 30 B
420002566 6,250 616 51 4 0 13 0 N30 G
400975 6,100 3,100 576 17 81 95 13 N 60 G
401552 6,000 2,000 0 0 0 0 8 N 10 EOM B
420001603 6,000 2,100 0 0 0 0 0
37998 5,700 3,000 479 13 2 53 23 REG G
402284 5,171 1,336 1,257 22 14 43 15 N 30 L/C's 2 million
117628 5,030 2,135 1,893 216 7 19 6 N 30 B
170324 5,000 2,000 0 0 0 0 15 VAR
420000248 5,000 3,000 848 23 33 0 11 VAR G
402041 4,915 894 359 0 0 0 12 N 60
420000061 4,800 1,226 39 12 7 5 108 VAR
420001318 4,707 4,684 198 90 0 0 0 VAR
189505 4,685 3,927 1,261 0 0 0 17 N 60 B
401103 4,600 2,200 275 812 55 0 0 N 30 B
401113 4,524 4,524 1,177 506 231 95 18 C/L's $9 Million
401984 4,500 2,900 0 0 0 0 15 N 60 B
420002155 4,219 1,004 384 0 0 0 5
402331 4,000 30 14 0 0 0 0 VAR
420003310 4,000 1,804 0 0 0 0 23 N30
420000256 3,804 888 0 0 0 0 0 N 60
10068 3,543 3,541 0 0 0 0 52 N 45
214572 3,000 3,000 0 0 0 0 0 2% 30 N 31
401532 3,000 100 0 0 0 0 0 N 60
420000269 2,911 2,301 581 33 0 3 0 N 30 G
212549 2,840 996 474 0 0 0 16 VAR
401838 2,687 0 0 0 0 0 0
420001465 2,615 2,080 846 1 1 1 0 N 30 B
420000279 2,600 2,600 1,374 270 0 56 5 N 30 B
401186 2,557 1,709 79 23 27 41 0 N 21
420000929 2,499 1,712 157 0 0 0 0 2% 60 N 61
401953 2,436 356 73 47 8 19 19 N 30 B
401181 2,334 970 0 0 0 0 0
420003317 2,246 685 102 0 0 10 5 N 35 G
402258 2,163 15 0 0 0 0 0 N 30 B
401799 2,104 1,885 1 93 30 0 10 1% N 30
38261 2,000 1,920 101 24 12 21 25 N 30 G
138987 1,814 0 0 0 0 0 13 VAR
401713 1,800 749 0 0 0 0 0 N 30
400824 1,621 1,193 0 0 0 0 0
401484 1,614 10 0 0 0 0 9 2% 30 N 31
420001109 1,612 1,563 0 0 0 0 0 2% 30 N 31 G
420000278 1,568 941 437 436 52 0 10 Various G
420001254 1,568 1,509 0 0 0 0 0 N 30
420001330 1,500 1,100 0 0 0 0 0 N 60
420002375 1,500 975 14 0 0 17 0 2% 10 N 30
420000029 1,333 1,333 0 0 0 0 19 N 30
420000090 1,285 628 0 0 0 0 10 N 30
420000138 1,284 591 0 0 0 0 0
60689 1,066 5 0 4 0 0 14 VAR G
235903 1,000 1,000 0 0 0 0 0
400950 1,000 0 0 0 0 0 0
420002370 900 850 1 0 0 0 0 N 60 PROX
35505 760 331 0 0 0 0 15 N 60 B
400812 639 113 0 0 0 0 0 N 30
420000104 600 600 0 0 0 0 0 N 30
420002399 600 594 107 0 0 0 20 2% 15 N 30 G
401521 560 377 152 4 1 6 56 N 30
420002379 503 503 25 28 0 0 0 N 30
401832 500 447 87 53 0 0 5 N 30 B
401563 482 482 0 0 0 0 0
420000741 467 218 158 0 0 0 14 N30
402002 370 370 0 0 0 0 0 N 60 L/C's 550,995
400621 320 271 9 2 14 8 4 VAR
401693 300 207 197 30 2 0 15 N 30 G
402409 300 251 99 0 0 0 8 N 21
420002682 250 115 0 0 0 0 0 2% 10 N 15
40403 200 0 0 0 0 0 0 N 30
420000287 200 0 0 0 0 0 0 2% 10 N 30
160420 199 0 8 0 0 0 0 1% 30 N 60
420002121 150 128 0 0 0 0 0 B
401562 127 127 1 1 46 74 12 N 60 DEBIT BALANCE
420002159 120 25 0 0 0 0 0 N 30 L/C's 500,000
56669 100 55 7 2 1 4 16 N 30 G
402365 87 87 2 1 0 2 0 N 30 G
401918 81 77 24 41 12 0 30 N 90
420002355 69 39 0 0 0 0 0 2% 30 N 31
420002917 67 0 0 0 0 0 0 N 60
420002128 56 6 0 0 0 0 0 2% 10 N 30
12521 50 0 0 0 0 0 0 N 45
420000043 50 42 1 0 0 1 0 N 30
3825 29 29 0 0 0 0 0 N 60
401945 16 0 3 0 0 14 6 G
400622 15 12 3 0 0 0 10 B
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Vendor Trade Survey

Company: WAL MART STORES INC

Date: 04/23/1999    DEDUCTIONS SYNONYMOUS WITH WAL-MART

In our latest survey dated April 21, 1999, vendors contacted stated they were shipping this account and approving future orders for the most part. It is important to note however, that the Company’s per cent past due has increased to 23.7% compared to the previous survey where vendors reported past dues at 12.9%. The most recent survey also showed an increase in average days slow from 5 days in August 1998 to 8 days currently. Numerous vendors did mention problems with the Company taking unauthorized deductions for substituted merchandise and deliveries from sealed trailers coming up short of merchandise. While these comments were very similar to previous surveys, some vendors have reported a noticeable increase in charge-backs and an increase in average days slow.

The Company, which prides itself on its information technology systems utilizes the EDI process to pay invoices. We believe they did not understand what this would do to cash flow and are now looking for ways to delay payments including requesting extended terms. Because the Company is the leader in the mass merchandising industry, it is not mystery that it uses its position to get exactly what it wants from vendors. The fact that the Company’s revolving credit line is unused and has been for some time should not be a total surprise as the Company uses its suppliers to a large extent in improving cash flow. This account is certainly worthy of substantial credit lines on terms, however vendors must be aware of the maintenance required with the account.

Trade Survey by Date (000's)

Date Total # Suppliers Total Owing Total Past Due Average Days Slow
04/21/1999 123 829,592 184,660 9
08/24/1998 85 729,252 94,066 6

Trade Survey Summary by Line of Business (000's)

# Ref Total Total Total Past Days Appr
# Date Line of Business Sppls H.Cred Owing PstDue Prc Slow Ftrs
1 04/21/1999 Factoring/Sales Financing 6 116,982 94,946 26,085 81 13 10,000
2 04/21/1999 Cross-Industry Mix 6 44,175 24,823 8,027 56 9 800
3 04/21/1999 Sporting and Athletic Goods Ma 6 8,608 7,797 3,372 91 17 124
4 04/21/1999 Home Furnishing Wholesalers 5 87,956 84,272 32,578 96 4 0
5 04/21/1999 Electric Housewares and Househ 4 31,147 19,558 2,700 63 9 0
6 04/21/1999 Athletic & Licensed Apparl Mfr 3 74,912 15,616 8,412 21 11 0
7 04/21/1999 Broadwoven Fabric Mills 3 38,538 29,656 9,415 77 19 47
8 04/21/1999 Power-Driven Hand Tool Manufac 3 37,323 22,426 7,350 60 3 21
9 04/21/1999 Electrical Apparatus and Equip 3 31,832 20,545 157 65 6 0
10 04/21/1999 Nonupholstered Wood Household 3 27,194 25,724 5,697 95 16 0
11 04/21/1999 Household Cooking Appliance Ma 3 23,637 18,354 1,416 78 17 0
12 04/21/1999 Game, Toy, and Children's Vehi 3 15,167 1,903 0 13 0 50
13 04/21/1999 Other Snack Food Manufacturing 2 161,780 47,413 4,659 29 0 0
14 04/21/1999 Polish and Other Sanitation Go 2 102,389 100,733 28,079 98 4 0
15 04/21/1999 Sheer Hosiery Mills 2 17,203 7,634 1,702 44 9 2,435
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Company Status and Trend Analysis

Fourth Quarter ended 01/31/1999


Company: WAL MART STORES INC

Dollars in thousands 1994 1995 1996 1997 1998
STATUS AND TRENDS
STATUS
 B B B B B
SHORT TERM TREND
 STR WEA STA EI SD
LONG TERM TREND
 DET DET WEA STA STR
 
INCOME STATEMENT
NET SALES REVENUE
82,494,000 93,627,000 104,859,000 117,958,000 137,634,000
COST OF GOODS SOLD
65,586,000 74,564,000 83,663,000 93,438,000 108,725,000
GROSS PROFIT
16,908,000 19,063,000 21,196,000 24,520,000 28,909,000
GENERAL & ADMIN.
12,858,000 14,951,000 16,788,000 19,358,000 22,363,000
FINANCIAL EXPENSE
706,000 888,000 845,000 784,000 797,000
TOTAL EXPENSES
13,564,000 15,839,000 17,633,000 20,142,000 23,160,000
OPER. PROFIT (LOSS)
3,344,000 3,224,000 3,563,000 4,378,000 5,749,000
OTHER INCOME
918,000 1,122,000 1,287,000 1,341,000 1,574,000
INCOME TAXES (CREDITS)
1,581,000 1,606,000 1,794,000 2,115,000 2,740,000
OTHER EXPENSES
0 0 0 78,000 153,000
NET PROFIT (LOSS)
2,681,000 2,740,000 3,056,000 3,526,000 4,430,000
RATIOS
WORKING CAPITAL
5,036,000 5,471,000 6,668,000 4,460,000 3,311,000
EBITDA
5,120,000 5,416,000 5,871,000 6,796,000 8,418,000
EBIT
4,050,000 4,112,000 4,408,000 5,162,000 6,546,000
TOTAL LIABILITIES
20,093,000 22,785,000 22,461,000 26,881,000 28,884,000
TANGIBLE NET WORTH
12,726,000 14,756,000 17,143,000 18,503,000 21,112,000
DEPRECIATION&AMORTIZATION
 1,070,000 1,304,000 1,463,000 1,634,000 1,872,000
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Five Year Financial Statement Review

Fourth Quarter ended 01/31/1999


Company: WAL MART STORES INC

Dollars in thousands 1994 1995 1996 1997 1998
ASSETS
CASH/CASH EQUIV.
45,000 83,000 883,000 1,447,000 1,879,000
ACCTS. REC. (NET)
900,000 853,000 845,000 976,000 1,118,000
INVENTORY
14,064,000 15,989,000 15,897,000 16,497,000 17,076,000
TOTAL CURRENT ASSETS
15,009,000 16,925,000 17,625,000 18,920,000 20,073,000
PROP., PLANT & EQUIP.
14,308,000 17,098,000 18,333,000 21,469,000 23,674,000
PROPERTY UNDER CAPITALIZ.
 1,566,000 1,796,000 1,991,000 2,137,000 2,299,000
TOTAL PLANT & EQUIPMENT
15,874,000 18,894,000 20,324,000 23,606,000 25,973,000
PPD. EXPS. & O.C.A.
329,000 406,000 368,000 432,000 1,059,000
OTHER ASSETS
1,607,000 1,316,000 1,287,000 2,426,000 2,891,000
TOTAL DEFERRED ASSETS
1,936,000 1,722,000 1,655,000 2,858,000 3,950,000
TOTAL ASSETS 32,819,000 37,541,000 39,604,000 45,384,000 49,996,000
LIABILITIES & EQUITY
ACCOUNTS PAYABLE
5,907,000 6,442,000 7,628,000 9,126,000 10,257,000
BANKER ACCEPTANCES PAYABL
 1,795,000 2,458,000 0 0 0
LONG TERM DEBT-CURRENT PO
 23,000 271,000 523,000 1,039,000 900,000
ACCRUED EXPENSES
1,819,000 2,091,000 2,413,000 3,628,000 4,998,000
ACCRUED TAXES
365,000 123,000 298,000 565,000 501,000
CAPITAL LEASE OBLIGATION
64,000 69,000 95,000 102,000 106,000
TOTAL CURRENT LIABILITIES
9,973,000 11,454,000 10,957,000 14,460,000 16,762,000
LONG TERM DEBT
7,871,000 8,508,000 7,709,000 7,191,000 6,908,000
DEFERRED INCOME TAX PAYAB
 411,000 731,000 463,000 809,000 716,000
CAPITAL LEASE OBLIGATION
1,838,000 2,092,000 2,307,000 2,483,000 2,699,000
MINORITY INTEREST
0 0 1,025,000 1,938,000 1,799,000
TOTAL LONG TERM LIABILITIES
10,120,000 11,331,000 11,504,000 12,421,000 12,122,000
COMMON STOCK
230,000 229,000 228,000 224,000 445,000
CAPITAL IN EXCESS OF PAR
539,000 545,000 547,000 585,000 435,000
RETAINED EARNINGS
12,213,000 14,394,000 16,768,000 18,167,000 20,741,000
CURRENCY TRANSLATION ADJ.
 -256,000 -412,000 -400,000 -473,000 -509,000
TOTAL NET WORTH
12,726,000 14,756,000 17,143,000 18,503,000 21,112,000
TOTAL LIABILITIES & EQUITY 32,819,000 37,541,000 39,604,000 45,384,000 49,996,000
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Five Year Trend on Key Ratios and Performance

Fourth Quarter ended 01/31/1999


Company: WAL MART STORES INC

Dollars in thousands 1994 1995 1996 1997 1998 % Change
MARGIN ANALYSIS
Net Sales - $
82,494,000 93,627,000 104,859,000 117,958,000 137,634,000 66.84
GROSS MARGIN- %
20.50 20.36 20.21 20.79 21.00 2.48
SG&A EXPENSES - %
15.59 15.97 16.01 16.41 16.25 4.24
OPERATING MARGIN - %
4.05 3.44 3.40 3.71 4.18 3.04
FINANCIAL EXPENSE - %
0.86 0.95 0.81 0.66 0.58 -32.34
DEP.&AMORT. - %
1.30 1.39 1.40 1.39 1.36 4.86
INCOME TAX - %
1.92 1.72 1.71 1.79 1.99 3.88
NET INCOME - %
3.25 2.93 2.91 2.99 3.22 -.96
CAPEX - %
4.53 3.81 2.52 2.23 2.71 -40.06
EBITDA MARGIN - %
6.21 5.78 5.60 5.76 6.12 -1.45
LIQUIDITY RATIOS
CURRENT ASSETS - $
15,009,000 16,925,000 17,625,000 18,920,000 20,073,000 33.74
CASH/CL - X
0.00 0.01 0.08 0.10 0.11 2,384.36
QUICK RATIO - X
0.09 0.08 0.16 0.17 0.18 88.69
CURRENT RATIO - X
1.50 1.48 1.61 1.31 1.20 -20.43
CASH/TOTAL ASSETS- %
0.14 0.22 2.23 3.19 3.76 2,640.97
INVENTORY RATIOS
INVENTORY - $
14,064,000 15,989,000 15,897,000 16,497,000 17,076,000 21.42
INVENTORY/SALES
0.17 0.17 0.15 0.14 0.12 -27.23
INVENTORY DAYS TURN
77.20 77.20 68.40 63.56 56.54 -26.76
ACCOUNTS PAYABLE RATIOS
ACCOUNTS PAYABLE - $
5,907,000 6,442,000 7,628,000 9,126,000 10,257,000 73.64
% INVENTORY FINANCED
42.00 40.29 47.98 55.32 60.07 43.01
A/P DAYS TURN
32.42 31.10 32.82 35.16 33.96 4.75
LEVERAGE RATIOS
TOTAL LIABILITIES - $
20,093,000 22,785,000 22,461,000 26,881,000 28,884,000 43.75
TOT.LIAB./NET WORTH - %
157.89 154.41 131.02 145.28 136.81 -13.35
TOT.LIAB/TOTAL ASSETS - %
 61.22 60.69 56.71 59.23 57.77 -5.64
DEBT/EBITDA - X
1.98 2.14 2.05 1.98 1.55 -21.91
DEBT/TOTAL CAP - %
44.30 43.44 40.16 40.17 36.47 -17.66
TOTAL DEBT - $
16,050,000 18,044,000 19,655,000 22,586,000 23,279,000 45.04
WORKING CAPITAL RATIOS
WORKING CAPITAL- $
5,036,000 5,471,000 6,668,000 4,460,000 3,311,000 -34.25
AVG.MONTHLY EXP.- $
1,130,333 1,319,917 1,469,417 1,678,500 1,930,000 70.75
WORKING CAPITAL CVG. - X
4.46 4.14 4.54 2.66 1.72 -61.49
SALES/W/C
16.38 17.11 15.73 26.45 41.57 153.76
PROFITABILITY ANALYSIS
NET INCOME - %
3.25 2.93 2.91 2.99 3.22 -.96
NET PROFIT - $
2,681,000 2,740,000 3,056,000 3,526,000 4,430,000 65.24
RETURN ON EQUITY - %
21.07 18.57 17.83 19.06 20.98 -.40
RETURN ON ASSETS - %
8.17 7.30 7.72 7.77 8.86 8.47
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE- $
900,000 853,000 845,000 976,000 1,118,000 24.22
A/R/SALES - %
0.01 0.01 0.01 0.01 0.01 -25.54
A/R DAYS TURNOVER
3.93 3.28 2.90 2.98 2.92 -25.54
Z-SCORE RATIOS
WORKING CAPITAL/TA - %
15.34 14.57 16.84 9.83 6.62 -56.84
NET WORTH/TA - %
38.78 39.31 43.29 40.77 42.23 8.90
EBIT/TA - %
12.34 10.95 11.13 11.37 13.09 6.10
MARKET CAP/TD - X
0.00 0.00 0.00 0.00 0.00 0.00
SALES/TA - X
2.51 2.49 2.65 2.60 2.75 9.52
COVENANT ANALYSIS
EBITDA - $
5,120,000 5,416,000 5,871,000 6,796,000 8,418,000 64.41
DEPRECIATION COVG- %
20.90 24.08 24.92 24.04 22.24 6.41
INTEREST EXP. COVERAGE-X
7.25 6.10 6.95 8.67 10.56 45.64
TAXES COVERAGE- X
3.24 3.37 3.27 3.21 3.07 -5.13
EBITDA/XTRA EXPENSES-X
0.00 0.00 0.00 87.13 55.02 -36.85
EBITDA/DEP+TAX+INT- X
1.53 1.43 1.43 1.50 1.56 2.04
CAPEX COVERAGE - X
1.37 1.52 2.22 2.58 2.25 64.41
RENT - $
0 0 0 0 0 0.00
FIXED CHARGE COVERAGE-%
0.35 0.40 0.39 0.36 0.32 -8.60
OPERATING EFFICIENCY
OPERATING EFFICIENCY
3.25 2.93 2.91 2.99 3.22 -.96
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Rolling Income Statement

Fourth Quarter ended 01/31/1999


Company: WAL MART STORES INC

1994 1995 1996 1997 1998
Dollars in thousands Fiscal Fiscal Fiscal Fiscal Rolling
STATUS AND TRENDS
STATUS
 B B B B B
SHORT TERM TREND
 STR WEA STA EI SD
LONG TERM TREND
 DET DET WEA STA STR
 
INCOME STATEMENT
NET SALES REVENUE
82,494,000 93,627,000 82,494,000 117,958,000 137,634,000
COST OF GOODS SOLD
65,586,000 74,564,000 65,586,000 93,438,000 108,725,000
GROSS PROFIT
16,908,000 19,063,000 16,908,000 24,520,000 28,909,000
GENERAL & ADMIN.
12,858,000 14,951,000 12,858,000 19,358,000 22,363,000
FINANCIAL EXPENSE
706,000 888,000 706,000 784,000 797,000
TOTAL EXPENSES
13,564,000 15,839,000 13,564,000 20,142,000 23,160,000
OPER. PROFIT (LOSS)
3,344,000 3,224,000 3,344,000 4,378,000 5,749,000
OTHER INCOME
918,000 1,122,000 918,000 1,341,000 1,574,000
INCOME TAXES (CREDITS)
1,581,000 1,606,000 1,581,000 2,115,000 2,740,000
OTHER EXPENSES
0 0 0 78,000 153,000
NET PROFIT (LOSS)
2,681,000 2,740,000 2,681,000 3,526,000 4,430,000
RATIOS
EBITDA
5,120,000 5,416,000 5,120,000 6,796,000 8,418,000
EBIT
4,050,000 4,112,000 4,050,000 5,162,000 6,546,000
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Merchandise Strategy Summary

Company: WAL MART STORES INC

Date Headline
09/01/1998 LOWER MARKUPS AS A SECRET FOR SALES INCREASES

Date: 09/01/1998    LOWER MARKUPS AS A SECRET FOR SALES INCREASES

Wal Mart discount stores and the general merchandise area of the Supercenters are generally organized with 40 departments and offer a wide variety of merchandise, including apparel for women, girls, men, boys and infants. Each store also carries domestics, fabrics, and notions, stationery and books, shoes, housewares, hardware, electronics, home furnishings, small appliances, automotive accessories, horticulture and accessories, sporting goods, toys, pet food and accessories, cameras and supplies, health and beauty aids, pharmaceuticals and jewelry. Additionally, the stores offer an assortment of grocery merchandise with the assortment in Supercenters being broader and including meat, produce, deli, bakery, dairy, frozen foods and dry grocery.

Nationally advertised merchandise accounts for a majority of sales in the stores. The company markets lines of merchandise under store brands including but not limited to “Sam’s American Choice”, “One Source”, “Great Value”, “Ol’ Roy” and “Equate”. Through the fiscal year ended January 31, 1998, sales in discount stores and Supercenters by product category were as follows:

1. Hardgoods 22% 2. Softgoods/domestics 21% 3. Grocery, candy and tobacco 16% 4. Pharmaceuticals 9% 5. Records and electronics 9% 6. Sporting goods and toys 7% 7. Health and beauty aids 7% 8. Stationery 4% 9. Shoes 2% 10. Jewelry 2% 11. One-hour photo 1%

Wal Mart’s strategy since the origination of the first Wal Mart discount center in 1962 was to provide products of unbeatable value with the best possible customer service. The company employs the “Everyday Low Price” philosophy, which encourages cost reduction so that savings can be passed on to customers. The company realizes the essence of discounting: by cutting price points, you can boost sales to a point where it is possible to earn far more at cheaper retail than by selling an item at a higher price point. The company has mastered achieving increased volume with a lower markup.

Another key point in its merchandising strategy is customer service. Since the company was founded by Sam Walton in 1962, customer service has been a major focus. Some of the techniques used to ensure good customer service are as follows:

* Sundown Rule – It is standard to get things done today – before the sun goes down. * The Founder’s Three Basic Beliefs: respect for the individual, customer service and striving for excellence. * Exceeding Customer Expectations – aggressive hospitality, being the most friendly, offering a smile and a welcome and assistance to all who do the company a favor by entering the store. Going above and beyond the customer’s expectations. * The Ten-Foot Attitude – A pledge that associates take that whenever they come within 10 feet of a customer, they will look them in the eye, greet them and ask them if they need help.

In addition to the everyday low price strategy and customer service that goes above and beyond, the company has proved especially successful in identifying exactly what customers want and need and it shows in its merchandise offerings. As Wal-Mart realized that customers wanted convenience, it began the Supercenter concept which offers a full line of groceries plus the traditional general merchandise category offerings in order to provide a one-stop shop where customers would not have to go elsewhere for anything. Wal-Mart was the first to offer everything that a customer need under one roof and although other retailers have attempted to do the same, no others are able to do it with the same amount of success. In recognizing yet another customer need, the company this year is introducing the Wal Mart Neighborhood Market which is a smaller store at 40,000 square feet designed to complement and support Wal mart Supercenters by meeting the shopping needs of consumers who live between Supercenter locations. The Neighborhood Market will offer produce, deli foods, fresh meats and general grocery items, in addition to a selection of health and beauty aids, stationery and paper goods, pet products, cosmetics and household chemicals. The Neighborhoods will also feature convenient drive-through pharmacies. This new format will be tested in 3 Arkansas locations in the fall of 1998.

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Store Operations Analysis

Company: WAL MART STORES INC

Date: 04/22/1999    INVESTMENT SHIFTING TO INTERNATIONAL OPS

The Company is the world's largest retailer measured by total revenues. During the fiscal year ended January 31, 1999, the Company had net sales of $137.6 billion. The Company is principally engaged in the operation of mass merchandising stores, which serve customers primarily through the operation of three segments. The Company identifies segments based on management responsibility within the United States and geographically for all international units. The Wal-Mart Stores segment includes the Company's discount stores and Supercenters in the United States. The SAM'S Club segment includes the warehouse membership clubs in the United States. The International segment includes all operations in Argentina, Brazil, Canada, China, Germany, Korea, Mexico and Puerto Rico.

The Wal-Mart Stores segment, which includes the Company's discount stores and Supercenters in the United States, had sales of $95.4 billion, $83.8 billion and $74.8 billion for the three fiscal years ended January 31, 1999, 1998, and 1997, respectively. The Company operates Wal-Mart discount stores in all 50 states with the average size of a discount store being approximately 94,300 square feet. Wal-Mart Supercenters are located in 29 states and the average size of a Supercenter is 181,200 square feet. The Supercenter prototypes range in size from 110,000 square feet to 234,000 square feet.

The SAM'S Club segment, which includes the warehouse membership clubs in the United States, had sales of $22.9 billion $20.7 billion and $19.8 billion for the three fiscal years ended January 31, 1999, 1998, and 1997, respectively. The Company operates SAM'S Clubs in 48 states with the average size of a SAM'S Club being approximately 121,200 square feet. Club sizes generally range between 90,000 and 150,000 square feet of building area. SAM'S Club also carries software and electronic goods, jewelry, sporting goods, toys, tires, stationery and books. Most clubs have fresh food departments, which include bakery, meat and produce. In addition, some clubs offer one-hour photo, embroidery departments, pharmaceuticals and gas stations.

SAM'S Clubs are membership only, cash-and-carry operations. However, a financial service credit card program (Discover Card) is available in all clubs and the "SAM'S Direct" commercial finance program and "Business Revolving Credit" are available to qualifying business members. Also, a "Personal Credit" program is available to qualifying club members. Any credit issued under these programs is without recourse to the Company. Club members include businesses and those individuals who are members of certain qualifying organizations, such as government and state employees and credit union members. In 1998, business members paid an annual membership fee of $30 for the primary membership card with a spouse card available at no additional cost. The annual membership fee for an individual member is $35 for the primary membership card with a spouse card available at no additional cost.

The Company's International Segment is comprised of wholly owned operations in Argentina, Canada, Germany and Puerto Rico; through joint ventures in China and Korea; and through majority-owned subsidiaries in Brazil and Mexico. Sales for the three fiscal years ended January 31, 1999,1998, and 1997 were $12.2 billion, $7.5 billion, and $5.0 billion respectively. Operating formats vary by country, but include Wal-Mart discount stores in Canada and Puerto Rico; Supercenters in Argentina, Brazil, China, Korea and Mexico; SAM'S Clubs in Argentina, Brazil, China, Mexico, and Puerto Rico; Hypermarkets in Germany and Superamas (traditional supermarket,) Bodegas (discount store,) Aurreras (combination store,) Suburbias (specialty department store) and Vips (restaurant) in Mexico.

McLane, a wholly owned wholesale distributor, sells its merchandise to a variety of retailers, primarily to the convenience store industry. McLane also services Wal-Mart discount stores, Supercenters and SAM'S Clubs. Sales to third parties for the three fiscal years ended January 31, 1999, 1998, and 1997 were $7.1 billion, $6.0 billion and $5.2 billion respectively. McLane offers a wide variety of grocery and non-grocery products, including perishable and non- perishable items. The non-grocery products consist primarily of tobacco products, hardgood merchandise, health and beauty aids, toys and stationery. McLane has 19 distribution centers from which its customers, including the Company, are served.

The Company has been extremely successful over the past four years. Sales have increased from $82.5 billion in 1995 to $137.6 billion in 1998 a compound annual growth rate of 13.7%. Over the same time period the Company’s operating income has increased from $3.3 billion in 1994 to $5.7 billion in 1998 a compound annual growth rate of 14.5%

Over the past two years all three of the Company’s segments have grown in both sales and income with International showing the greatest growth. Wal Mart stores leads the Company in both sales and profitability and continues to grow at double digit rates with SAM’s Club beginning to show much improved operations. We believe that the Company’s investment in international operations will begin to surpass the investment in domestic operations within the next couple of years.

While the Company’s income statement has continued to grow at double digit rates the balance is beginning to show some strain. Working capital has declined over the last two years as management has begun to repurchase a significant amount of stock will continuing to invest heavily in the business. We were not happy to hear that the Company has recently announced their plans to purchase more stock in 1999. The Company still maintains the ability, however to raise large amounts of capital quickly.

Dollars in thousands 1994 1995 1996 1997 1998 % Change
Comp Store Sales Average % 7.00 4.00 5.00 6.00 8.92 27.43
 
# OF STORES SOLD 0 0 0 0 0 0.00
# OF STORES OPEN 2,721 2,858 2,946 3,406 1,869 -31.31
# OF STORES ACQUIRED 0 0 0 0 0 0.00
# OF STORES CLOSED 17 4 8 2 1 -94.12
# OF STORES OPNED THIS YR 285 141 96 462 37 -87.02
# OF STORES TO OPN NEXT Y 0 0 0 0 0 0.00
# STORES REFURBISHED 69 80 92 75 0 -100.00
 
CAPITAL EXPENDITURES 3,734,000 3,566,000 2,643,000 2,636,000 3,734,000 0.00
DEPRECIATION / AMORT. 1,070,000 1,304,000 1,463,000 1,634,000 1,872,000 74.95
INVESTMENT IN FUTURE 2,664,000 2,262,000 1,180,000 1,002,000 1,862,000 -30.11
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Information System Strategy

Company: WAL MART STORES INC

Date Headline
04/22/1999 LEADER IN TECHNOLOGY & Y2K
08/31/1998 WAL-MART AS A LEADER IN INFO TECHNOLOGY...

Date: 04/22/1999    LEADER IN TECHNOLOGY & Y2K

With an annual technology and communication budget of $500 million and as information systems staff of 1,200, it is no surprise that Wal-Mart leads the industry in information technology. The company realizes that its future earnings growth has to come from a combination of increased market share and increased productivity, which is a direct result of giving associates the technological tools that are needed to work smarter each and every day.

In an effort to identify, order, inventory and replenish any one of its more than 70,000 standard items in stock, the company uses a device known as a magic wand, which is a handheld computer that is linked by a radio-frequency network to in-store terminals. The device is actually a high-tech conduit to an internal information system that gives every associate a window on the world of Wal-Mart merchandise. The “magic wand” helps to keep up-to-the-minute track of the inventory on hand, deliveries and backup merchandise in stock at Wal-Mart distribution centers.

The company’s investment in MIS provides it with better, quicker and more accurate information to manage and control every aspect of the business. Another example of leveraging technology is through its item locator system. This system enables associates to scan an item and electronically check on its availability in other area stores, which translates into better customer service. All of the initiatives it takes in terms of advancing information technology systems adds to efficiency which in the long run lowers merchandising costs and saves the customer money as the savings are passed on to them.

The Company has been evaluating and adjusting all of its known date-sensitive systems and equipment for Year 2000 compliance, including those systems and equipment that support the Company's International segment. The assessment phase of the Year 2000 project is substantially complete and included both information technology, such as point-of-sale computer systems, as well as non- information technology equipment, such as warehouse conveyor systems. All internal coding conversions are complete. Some third-party applications representing less than 1% of the total application inventory remain to be converted; these applications are dependent on vendor upgrade availability and will be completed by October 1999. Virtually all the conversions were performed or are expected to be performed by Company associates.

The next phase of the Company's Year 2000 project, complete system testing, began during the second quarter of 1998. The first phase of testing has been completed on critical systems. Thus far, no significant issues have been detected in the testing. A second, more comprehensive phase of testing is scheduled for the March 1999 to July 1999 timeframe. A final test cycle is planned for October 1999 to ensure all version levels, upgrades, new releases and enhancements are Year 2000 compliant.

The total incremental estimated cost directly related to the Year 2000 remedy is $27 million. Approximately $17.5 million of the cost is related to reprogramming, replacement, extensive testing and validation of software, which is being expensed as incurred, while approximately $9.5 million is related to acquisition of hardware. Approximately $8 million of the $27 million cost of conversion has been incurred as of the end of the fourth quarter of fiscal 1999. The majority of the remaining costs include future testing of the systems and the purchase of additional equipment. All of these costs are being funded through operating cash flows. These costs are not a significant component of the Company's overall information technology budget. The Company's Information Systems Division did not defer any information technology projects last year to address the Year 2000 issue. During 1999 the Company still plans to complete and implement over half of the normal project load in priority sequence.

In addition to internal Year 2000 implementation activities, the Company is communicating with other companies with which its systems interface or on which it relies to determine the extent to which those companies are addressing their Year 2000 compliance. Testing began during the third quarter of 1999 and will be substantially complete by October31, 1999. Thus far, no significant issues have been detected in the testing process. There can be no assurance that there will not be an adverse effect on the Company if third parties, such as utility companies or merchandise suppliers, do not convert their systems in a timely manner and in a way that is compatible with the Company's systems. However, management believes that ongoing communication with and assessment of these third parties should minimize these risks.

Although the Company has not finalized its contingency plans for possible Year 2000 issues, initial analysis and planning is underway. Where needed, the Company will establish contingency plans based on its actual testing experience with its supplier base and assessment of outside risks. The Company anticipates the majority of its contingency plans to be in place by October 31, 1999.

.
 
 

Corporate Management and Changes

Company: WAL MART STORES INC

Date: 04/20/1999    TRYING TO FIND A LEADER FOR SAM'S CLUB

The Company has maintained a very stable senior management team over the last five years with the exception of the SAM’s Club division. In June of 1997 Mark Hansen was brought in as the Executive Vice President and President and Chief Executive Officer of SAM’s Club Division. Mr. Hansen was formerly with the Phoenix-based PetSmart as President and Chief Executive Officer prior to joining the Company. In addition to Mr. Hansen several senior level managers were reassigned into the Division. Mr. Hansen was credited with turning around the suffering division. After joining SAM’s Club, the company increased its revenue growth and cut $125 million in costs in 1997. In September 1998 however, the Company announced that Mr. Hansen had resigned. The Company announced that the resignation was a personal decision on Mr. Hansen’s part. No explanation was given for Mr. Hansen’s departure, although a spokesman remarked that the move did not reflect any changes in the management of the division.

In October 1998 the Company announced the hiring of Thomas R. Grimm to serve as the new Executive Vice President and President and Chief Executive Officer of SAM’s Club Division. From 1994 to 1998 Mr. Grimm had been retired but had been serving as a consultant to various organizations. Prior to June 1994, Mr. Grimm had served as President and Chief Executive Officer of Pace Membership Warehouse, a Division of K-Mart Corporation.

The Company made several changes effective January 1, 1999. Donald G Soderquist, who was Vice Chairman and Chief Operating Officer was promoted to Senior Vice Chairman of the Board. Considering that Mr. Soderquist is 65 years old we anticipate that Mr. Soderquist may be retiring in the near future.

Mr. H. Lee Scott, Jr. was also promoted on January 1, 1999 to the position of Vice Chairman and Chief Operating Officer. He had served previously as Executive Vice President and President and Chief Executive Officer of Wal-Mart Stores Division. It would appear to us that Mr. Scott is being groomed to succeed David Glass as President and Chief Executive Officer of the Company.

Replacing Mr. Scott as Executive Vice President and President and Chief Executive Officer of Wal-Mart Stores Division is Thomas M. Coughlin. Mr. Coughlin was Executive Vice President and Chief Operating Officer of Wal-Mart Stores Division prior to his promotion. The Company has not as yet named Mr. Coughlin’s replacement.

Company Officers

First Name Last Name Title
BOB L. MARTIN EXEC V.P./PRES/CEO
DAVID DIBLE EXEC. VICE PRESIDENT
DAVID D. GLASS PRESIDENT/C.E.O.
DONALD G. SODERQUIST VICE CHAIRMAN/COO
H. LEE SCOTT, JR. VICE CHAIRMAN/COO
JAMES A. WALKER, JR. SR. VICE PRES./CONTROLLER
JOHN B. MENZER EXEC. VICE PRES./C.F.O.
NICHOLAS J. WHITE EXEC. VICE PRESIDENT
PAUL R. CARTER EXEC. V.P./PRESIDENT
ROBERT CONNOLLY EXEC. V.P.- MERCHANDISING
S. ROBSON WALTON CHAIRMAN OF THE BOARD
THOMAS R. GRIMM EXEC V.P./PRES/CEO
THOMAS M. COUGHLIN EXEC V.P./PRES/CEO
WILLIAM G. ROSIER PRESIDENT/C.E.O.
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Corporate History Summary

Company: WAL MART STORES INC

Date Headline
04/22/1999 WORLD'S NUMBER 1 RETAILER
08/25/1998 Wal-Mart's Corporate History...

Date: 04/22/1999    WORLD'S NUMBER 1 RETAILER

When Sam Walton opened the first Wal-Mart store in 1962, it was the beginning of an American success story that no one could have predicted. A small town merchant who had operated variety stores in Arkansas and Missouri, Walton was convinced that consumers would flock to a discount store with a wide array of merchandise and friendly service.

Although Wal-Mart was incorporated in October 1969, the businesses conducted by its predecessors began in 1945 when Sam M. Walton opened a franchise Ben Franklin variety store in Newport, Arkansas. In 1946, James L. Walton, the brother of Sam Walton opened a similar store in Versailles, Missouri.

By 1962 Sam Walton and his brother Bud had 15 Walton owned 5&10 stores in operation in Arkansas and Missouri. In 1962, the company’s business deviated from its exclusively variety store operation as the first Wal- Mart Discount City, a discount store was opened in Rogers, Arkansas. In 1969 when the Company was incorporated as Wal-Mart Stores, Inc., the Walton brothers were operating 18 Wal-Marts and 15 Ben Franklins in Arkansas, Missouri, Kansas and Oklahoma. In 1979 the Walton’s phased out the Ben Franklin stores and were operating 276 Wal-Mart stores in 11 states – mostly in towns of less than 25,000 population. Sales had grown from $44 million in 1970 to $1.25 billion in 1979.

In 1983, the first SAM’s Club was opened in Midwest City, OK. SAM’s Club is one of the nation’s leading members-only warehouse club operating as a supplier of name-brand merchandise at warehouse prices for office use, resale to customers or for personal use. SAM’s Club offers a merchandise mix of 3,500 items which include a complete line of food products and frozen foods; janitorial products; tires, batteries, and auto supplies; small building equipment and hardware; candy and snack items; and office supplies, computers and equipment. Merchandise is typically in larger institutional sizes or multi-packs of like or assorted items.

In 1988, the first Wal-Mart Supercenter was opened which was located in Washington, MO. This concept provides one-stop shopping combining a full line of groceries and a general merchandise department store under one roof. Supercenters feature 36 general merchandise departments including a complete apparel department with accessories, an extensive fine jewelry department, a lawn and garden center, a large health and beauty aids department, a full line of electronics and a pharmacy department. Additionally, grocery areas generally feature a bakery, delicatessen, frozen food section and meat and dairy and fresh produce departments. The centers also can include Wal-Mart Specialty Shops such as the Vision Center, Tire & Lube Express and One-Hour Photo Processing.

In 1991, the company began its first international initiative when it entered into a joint venture where it had 50% interest with Cifra. On September 1, 1997, a merger of the Mexican joint ventures owned by the company and Cifra with and into Cifra was consummated. The company received 33.5% of outstanding voting shares of Cifra in exchange for the joint venture interests. The company also acquired 593 million shares of the Series A common shares and Series B common shares of Cifra in a cash tender offer resulting in the company holding approximately 51% of the outstanding voting shares of Cifra.

On December 30, 1997, the company acquired Wertkauf hypermarket chain in Germany. Through the acquisition, the company gained 21 stores that were set up as one-stop shopping centers offering a broad assortment of high quality general merchandise and food similar to the Wal-Mart Supercenter format.

In 1998, the Company took possession of 74 units from the Interspar hypermarket chain in Germany. The units were acquired from Spar wholesale operations throughout German. Also in 1998, the Company extended its presence in Asia with an investment in Korea. The Company acquired a majority interest in four existing units as well as six underdeveloped sites. Korea Makro previously operated the four acquired units.

Domestically, at January 31, 1999, the Company operated 1,869 discount stores and 564 Supercenters, and 451 SAM’s Clubs. Internationally, at January 31, 1999, the Company operated units in Argentina (13), Brazil (14), Canada (154), Germany (95), Mexico (416), and Puerto Rico (15), and, under joint venture agreements, in China (5) and Korea (4).

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Management Antecedent Information

Company: WAL MART STORES INC

Company Officers

First Name Last Name Title
BOB L. MARTIN EXEC V.P./PRES/CEO
DAVID DIBLE EXEC. VICE PRESIDENT
DAVID D. GLASS PRESIDENT/C.E.O.
DONALD G. SODERQUIST VICE CHAIRMAN/COO
H. LEE SCOTT, JR. VICE CHAIRMAN/COO
JAMES A. WALKER, JR. SR. VICE PRES./CONTROLLER
JOHN B. MENZER EXEC. VICE PRES./C.F.O.
NICHOLAS J. WHITE EXEC. VICE PRESIDENT
PAUL R. CARTER EXEC. V.P./PRESIDENT
ROBERT CONNOLLY EXEC. V.P.- MERCHANDISING
S. ROBSON WALTON CHAIRMAN OF THE BOARD
THOMAS R. GRIMM EXEC V.P./PRES/CEO
THOMAS M. COUGHLIN EXEC V.P./PRES/CEO
WILLIAM G. ROSIER PRESIDENT/C.E.O.

BOB L.  MARTIN  ,  EXEC V.P./PRES/CEO
Mr. Martin is currently the Executive Vice President and President and Chief Executive Officer of Wal-Mart International Division and has been since 1993. Prior to 1993, he served as Executive Vice President Corporate Information Systems. Prior to 1992, he held the position of Senior Vice President – Information Systems.

DAVID  DIBLE  ,  EXEC. VICE PRESIDENT
Mr. Dible is currently the Executive Vice President of Wal-Mart’s Specialty Divisions. Prior to 1995, he served as Senior Vice President – Merchandising.

DAVID D.  GLASS  ,  PRESIDENT/C.E.O.
He joined the company in 1976 and became President and Chief Executive Officer in 1988. From 1967 to 1976 he was active with Consumers Markets Inc, Springfield, MO as Vice President. From 1957 to 1967 he was employed with Crank Drug Co, Springfield, MO as general manager.

DONALD G.  SODERQUIST  ,  VICE CHAIRMAN/COO
Mr. Soderquist was promoted to Senior Vice Chairman of the Board on January 1, 1999. He joined Wal-Mart in 1980 and became Vice Chairman and Chief Operating Officer in 1988. From 1958 to 1980 he was employed with City Products Co as President of Ben Franklin Stores Division.

H. LEE  SCOTT, JR.  ,  VICE CHAIRMAN/COO
Mr. Scott was promoted to Vice Chairman and Chief Operating Officer of the Company effective January 1, 1999. Prior to January 1999 he served as the Executive Vice President and President and Chief Executive Officer of Wal-Mart Stores Division. Prior to January 1998, he served as Executive Vice President – Merchandising. Prior to October 1995, he served as Executive Vice President Logistics. Prior to that, he served as Senior Vice President – Logistics.

JAMES A.  WALKER, JR.  ,  SR. VICE PRES./CONTROLLER
Mr. Walker is currently the Senior Vice President and Controller and has been since 1995. Prior to 1995, he served as Vice President and Controller.

JOHN B.  MENZER  ,  EXEC. VICE PRES./C.F.O.
Mr. Menzer is currently the Executive Vice President and Chief Financial Officer of the company and has been since 1995. Prior to September 1995, he served as President and Chief Operating Officer of Ben Franklin Retail Stores Inc.

NICHOLAS J.  WHITE  ,  EXEC. VICE PRESIDENT
Mr. White is currently the Executive Vice President of the Food Division and has been since 1989. He joined the company in 1973 and from 1980 to 1983 was the Vice President and Regional Operations Manager, from 1983 to 1985 was the Vice President and Divisional Merchandise Manager and from 1985 to 1989 was Executive Vice President and General Manager of Sam’s Clubs. Prior to joining the company, he was employed with Spartan Atlantic Department Stores from 1967 to 1973.

PAUL R.  CARTER  ,  EXEC. V.P./PRESIDENT
Mr. Carter is currently the Executive Vice President and President of Wal-Mart Realty Company and has held this position since 1995. Prior to 1995, he served as Executive Vice President and Chief Financial Officer.

ROBERT  CONNOLLY  ,  EXEC. V.P.- MERCHANDISING
Mr. Connolly joined the company in 1996 and since early 1998 has served as the Executive Vice President of Merchandising. Prior to January 1998, he served as Senior Vice President – General Merchandise Manager. Prior to October 1996, he served as Vice President – Jewelry and Shoes. Prior to February 1996, he served as Executive Vice President of Montgomery Ward. Prior to January 1994, he served as Senior Vice President – General Merchandise Manager of Wal-Mart Stores, Inc.

S. ROBSON  WALTON  ,  CHAIRMAN OF THE BOARD
He joined the company in 1969 and served as Vice Chairman from 1985 until 1992 when he was elected Chairman of the Board. He has been the Chairman of the Board of Wal-Mart Stores Inc since 1992.

THOMAS R.  GRIMM  ,  EXEC V.P./PRES/CEO
Mr. Grimm joined the Company in October 1998 as Executive Vice President and President and Chief Executive Officer of SAM’s Club Division. Prior to October 1998, he was retired and served as a consultant to various organizations. Prior to June 1994, he served as President and Chief Executive Officer of Pace Membership Warehouse, a Division of K-Mart Corporation.

THOMAS M.  COUGHLIN  ,  EXEC V.P./PRES/CEO
Mr. Coughlin was promoted to Executive Vice President and President and Chief Executive Officer of Wal-Mart Stores Division on January 1, 1999. Mr. Coughlin previously was the Executive Vice President and Chief Operating Officer of Wal- Mart Stores Division effective January of 1998. Prior to January 1998, he served as Executive Vice President – Store Operations. Prior to 1995, he served as Senior Vice President – Specialty Divisions.

WILLIAM G.  ROSIER  ,  PRESIDENT/C.E.O.
Mr. Rosier is currently the President and Chief Executive Officer of McLane Company Inc. Prior to 1995, he served as Senior Vice President – Marketing and Customer Services for McLane. McLane operates as a wholesale distributor that sells its merchandise to a variety of retailers, primarily to the convenience store industry and it also services Wal-Mart discount stores, Supercenters and Sam’s Clubs.

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News Release Summary

Company: WAL MART STORES INC

Date Headline
08/27/1998 WAL-MART NAMES NEW RETAILING CONCEPT...
08/26/1998 CARLOS CRIADO-OEREZ NAMED SVP-COO OF INT'L...

Date: 08/27/1998    WAL-MART NAMES NEW RETAILING CONCEPT...

WAL-MART NAMES NEW RETAILING CONCEPT: THE WAL-MART NEIGHBORHOOD MARKET

BENTONVILLE, ARK, July 10, 1998 – Wal-Mart Stores, Inc today announced the name of the company’s newest retailing experiment: The Wal-Mart Neighborhood Market.

The Neighborhood Markets, to be tested in a handful of Arkansas locations, will be 40,000 square-foot facilities designed to compliment and support Wal-Mart Supercenters by meeting the shopping needs of consumers who live between Supercenter locations.

Wal-Mart Neighborhood Markets will offer produce, deli foods, fresh meats and general grocery items, in addition to a selection of health and beauty aids, stationery and paper goods, pet products, cosmetics and household chemicals. The Neighborhood Markets will also feature convenient drive-through pharmacies.

“We are excited about testing this new format.” said David Glass, President and CEO of Wal-Mart. “They will serve as laboratories for our merchants to experiment with our merchandise mix and assortment.”

The Wal-Mart Neighborhood Markets will operate under the principles that have made Wal-Mart the world’s No. 1 discount retailer, quality products, low prices and friendly service.

Wal-Mart plans to open its first two Neighborhood Markets, located in Bentonville, Arkansas and Sherwood, Arkansas, by mid-October. The grand opening date for the third test sight, located in Springdale, Arkansas, has not been announced.

In the United States, Wal-Mart Stores, Inc operates 1,921 Wal-Mart Stores, 441 Wal-Mart Supercenters and 444 SAM’s Clubs. With 1997 sales of more than $118 billion, the company employs more than 720,000 associates in the United States.

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