2000 WALWALMARTMART 2000 Annual Report BannerYear for International Expansion Management Q&A: Q&A:Domestic Operations Drive Earnings Growth

Retailer of the Century TABLE OF CONTENTS

On the Cover: The flags of the United States, Mexico and Germany show just a few of the places where Everyday Low ROB WALTON Prices can now be found. 2. Question & Answer Session Wal-Mart leaders discuss the year’s events and answer the questions every shareholder wants to ask. 4. Clear Vision, Through Glass David Glass shares his view of the positive role of change. 5. Where the Elite Meet Introducing a new era of value at SAM’S Club. 2000 6. Wal-Mart’s World Wal-Mart’s global presence shown in store counts by state and nation. 7. Welcome, Wal-Mart “Clickers” Wal-Mart.com shifts into cyber-speed. 8. Friendly in Any Language The acquisition of ASDA in the United Kingdom is only a sampling of fiscal year 2000’s international flavors. 12. Celebration of the Century Discount Store News bestows a once-in-a-lifetime honor upon the Wal-Mart culture. 14. Sam’s Best Friend It all started with a dog named “Ol’ Roy.” Today, the namesake dog food leads a pack of private- label brands at Wal-Mart. 16. The Gift is in the Giving Community involvement and charitable giving set an all-time record. 18. FINANCIALS 11-Year Summary Management’s Discussion & Analysis Financial Statements Corporate Information DIRECTORS: John A. Cooper, Jr Stephen Friedman Stanley C. Gault WALMART David D. Glass WAL MART Roland Hernandez ANNUAL REPORT 2000 Dr. Frederick S. Humphries E. Stanley Kroenke FINANCIAL HIGHLIGHTS Elizabeth A. Sanders H. Lee Scott Jack C. Shewmaker Donald G. Soderquist Dr. Paula Stern Net Sales Earnings Per Share Jose Villarreal John T. Walton $165.0 S. Robson Walton $1.21

OFFICERS: $137.6 S. Robson Walton Chairman of the Board $.99 H. Lee Scott $118.0 President & CEO

David D. Glass $104.9 $.78 Chairman, Executive Committee of the Board Donald G. Soderquist $93.6 Senior Vice Chairman $.67 Paul R. Carter $.60 Executive Vice President & President, Wal-Mart Realty Bob Connolly 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 Executive Vice President, Merchandise Thomas M. Coughlin Executive Vice President & President & CEO, Wal-Mart Stores Division Return On Assets Return On Shareholders’ Equity David Dible Executive Vice President, Specialty Division Michael Duke 9.8%* Executive Vice President, Logistics 9.6% 22.9% Thomas Grimm 22.4% Executive Vice President & President & CEO, SAM’S Club Don Harris 8.5% Executive Vice President, Operations John B. Menzer 7.9% 19.9% 19.8% Executive Vice President & 7.8% President & CEO, International Division 19.2% Coleman Peterson 7.8% Executive Vice President, People Division Thomas M. Schoewe Executive Vice President & Chief Financial Officer Robert K. Rhoads Senior Vice President, General Counsel & Secretary

J. J. Fitzsimmons 1996 1997 1998 1999 2000 1996 1997 1998 1999 2000 Senior Vice President, Finance & Treasurer *Reflects ASDA acquisition activities and excludes one-time litigation charge. 1 Wal-Mart Management Answers the Most

Frequently SODERQUIST DON Asked Shareholder

Wal-Mart is the largest retailer Questions he impressed me so much that we Q in the world, with sales of $165 hired him to run our truck fleet. Lee billion last year. With that in mind, sustainable. However, our objective is established himself as such a tremen- how will you continue to grow to deliver consistent earnings growth dous leader and innovator in our sales and profits into the future? logistics areas that we asked him to Where will the growth come from? that allows the value of our Company to continue to grow over time. lead our merchandising efforts for the entire buying organization. Over the WALTON: Over the next five years, David, you recently announced last four years he has served as 60 to 70 percent of our growth in sales Q you were stepping down as CEO President and CEO of the Wal-Mart and earnings will come from the to become Chairman of the Division, and most recently, as COO domestic markets with our Wal-Mart Executive Committee. After such and Vice Chairman of the Company, stores and Supercenters, and another a great year, and with great where he led all of our retail 10–15 percent from SAM’S Club and prospects for the future, why operations worldwide. The one McLane. The remaining 20 percent of would you choose to make this characteristic that may best equip the growth will come from our move now? him as a leader is his willingness and planned growth in the international GLASS: First, let me remind everyone desire to surround himself with pas- markets. This means we have a great that I’m not going anywhere; I’ll be sionate and talented people that opportunity to drive our growth doing around to give everyone more help complement each others’ skills. the things that we do best today in the than they probably would like! U.S. market. Seriously, one of the greatest responsi- The International Division is bilities of leadership is to ensure the Q continuing to be a growing Wal-Mart stock has been down ongoing success of an organization, piece of the business. What are since the beginning of the the prospects for that division, Q and I believe that my primary duty to and where are the challenges of calendar year. Considering the my fellow Associates and shareholders tremendous growth in sales and the future? earnings last year, what has creat- is to place this Company’s future in the ed this pressure on the stock? hands of the best possible leaders. In SCOTT: The most pleasing news is any relay race there are times when that the Wal-Mart culture transcends teammates run in tandem, and some- international boundaries. Customers SODERQUIST: Our sales and earn- where in that period the baton is all over the world want and appreciate ings were up significantly this last passed. We have been working togeth- value, service and broad merchandise year, but the market reacts to many er for some time and this point assortments. In less than 10 years, the macro-economic pressures, and our appeared right to me to hand the International Division has grown to stock, along with that of other retailers baton to the next group of leaders and over 1,000 stores and should exceed and fellow members in the “Dow 30,” then run beside them for a while. $30 billion in sales this year. The excit- is susceptible to those movements. ing thing about this division is that it is Fortunately, if we continue to perform, What is Lee Scott’s background still in its infancy. We are serving cus- we believe that the stock price ulti- and why does the Company Q tomers in nine markets, but there is so mately will track our performance. believe that he is the one to lead much more opportunity worldwide. In Over the last three calendar years, the Company into this new fiscal year 2000, we were very pleased Wal-Mart stock has appreciated 70, millennium? with the acquisition of ASDA, which 106 and then 73 percent. This was GLASS: I first met Lee over 20 years gave us a major presence in the U.K.; clearly an exceptional period of stock ago when he was working for a truck- the level of operating performance we growth and we commented in each of ing firm that serviced Wal-Mart, and experienced in Canada; and also those years that it was probably not

2 LEE SCOTT

ROB WALTON DAVID GLASS DAVID

improvements we saw in Mexico. straints. As with anything we do, which will result in less volatility in We still have a tremendous amount customers will ultimately decide if slower economic environments. of work to do in some of our new and this model serves their needs. emerging markets, but the lessons Why doesn’t Wal-Mart pay more in dividends to the shareholders? will make us better able to serve our Why did you put Wal-Mart.com Q into a separate company? customers in the future. Q WALTON: Although we are not neces- SCOTT: Our opportunity to grow the sarily a dividend company, we have Until Wal-Mart purchased online business will be improved by increased our dividend every year Q ASDA, you indicated that the creating this separate company. since 1974, and returned to sharehold- U.K. was not a key priority. What Wal-Mart.com will be located in ers over $1 billion in Company profits changed your mind, and why did this year. We believe it’s important to you make this particular acquisition? California, allowing us to attract the best possible Internet and technology pay a dividend, but we also think it’s prudent and beneficial for the Company WALTON: ASDA was a to reinvest its cash and earn- business we had watched Over the next five years,60 to 70 percent ings back into its growth. We and admired for years. of our growth in sales and earnings will have tremendous opportunities They had a great manage- to serve new markets with our ment team, a similar culture, come from our Wal-Mart stores and Stores and Clubs, and new and their philosophy on Supercenters in the domestic markets. growth allows us to support retailing was almost identi- the valuation of our Company. cal to ours. We didn’t have any immedi- talent to lead this effort. Under the ate plans to go to the U.K., but another SAM’ S Club experienced good “dotcom” business, we are establishing company offered to buy ASDA in early results this last year. How a dynamic team that uses the strength Q spring. They were our logical entry can you continue to address the of the Wal-Mart brand, new technolo- point into the U.K. and we could changing marketplace and remain gies, our existing store base and an industry leader in the ware- accomplish the transaction at a price current logistics to create a compelling house-club business? which would produce fair returns to shopping experience for online customers. our shareholders. Therefore, we decid- SCOTT: SAM’S Club did have a good ed it was time for us to go ahead and The U.S. has enjoyed one of the year, with same store sales increases step into the market. longest periods of economic of 6.7% and operating profits of $759 Q million. But we think we can do even Is there an update on the status expansion in history. How will of the Neighborhood Markets? Wal-Mart be affected if the better with the warehouse-club business. Q economic environment becomes SODERQUIST: We ended the year more difficult? We believe we must continue to create with seven Neighborhood Market excitement at the Clubs through item merchandising, and by providing such stores and we plan to add five to 10 GLASS: Although there are no cur- great savings and value to people that more throughout this year. We believe rent signs the economy is slowing, a they want to become members and this complements the existing correction at some point in the future return frequently to shop. Our new Supercenter strategy and offers extra is possible. Historically, we have pros- Elite card provides SAM’S Club cus- convenience. The smaller format also pered during such periods, as our cus- tomers unmatched buying power in gives us the flexibility to serve markets tomers become more value conscious. non-traditional service areas, and where we may not have a Supercenter Also, we now have a larger food and takes our membership services to a due to demographic or real estate con- pharmacy component to our business, new level.

3 ““NNEVEREVER they’ve provided our principal focus since we opened our first store in ESIST 1962. It took us until 1980 to reach RRESIST $1 billion in sales. Only 16 years later, we hit $100 billion in sales. That’s how fast this Company has grown. CCHANGE”HANGE” In 1982, the investment community said we would soon run out of growth by David Glass opportunities and needed an alternate growth strategy. We were studying the Simply put, we have a better manage- club concept at the time, and soon that ment group today in this Company alternate growth strategy became than we’ve ever had. The managers SAM’S Club. have momentum, size, resources, experience and good people on their Over time, we developed some of the side, and that’s exciting. best innovations of the wholesale-club business, including extensive apparel I could have changed roles later and and frozen-food lines. But in order to David Glass Shows the Way for left soon afterward, but I felt it was compete effectively, we also had to a New Generation of Leaders time to start the succession process. improve continuously. No one was Actually, I’m not really going any- talking about simply managing the where. In fact, I’ll be around to help existing business; we wanted to keep In the entire history of Wal-Mart, we everyone out for just about as long as improving so that we would be better have had only three CEOs including they can stand to be helped. than the competition. the newly-appointed CEO, Lee Scott. Sam Walton, the Company’s founder, In making changes like this, I can’t When we launched the Supercenter served as CEO until 1988 when David help but reflect on the years that have concept, everyone said it wouldn’t Glass assumed the postion. During transpired. When I came to Wal-Mart work because we didn’t know any- the 12 years that David held the posi- we had just finished a year of $340 mil- thing about food. And indeed, our tion, sales grew from $16 billion to lion in sales and $12 million in profit. first Supercenter in Washington, $165 billion. Today, that’s roughly the output of a Missouri, wasn’t as sharp as the com- few SAM’S Clubs, but we were work- petition when it came to food. But In this speech to the SAM’S Club ing very hard then to build the we learned from our competitors and Associates at the year-beginning meet- Company. Back then, our competitors made continuous improvement within ing, David recounts his memories. were both bigger and better than we the Company. were. We had to catch up, change, This year, I decided to change my improve and innovate or they would Today, as the Company faces new role with the Company. I’ve been with simply run us out of business. Sam led challenges and opportunities, the Wal-Mart since the mid 1970s and I’ve this charge. worst thing we can do is to let our- seen a great deal of change along the selves think we have “arrived”; for way. One of my principal responsibili- By the late 1970s, everyone speculat- if we do, we’ll let our customers ties as CEO has been to build the ed that we couldn’t compete with the and members down. We have to be next generation of management so big discounters. No one took us seri- able to place a store or club side-by- this Company can rise to the next ously, but we worked very hard to side with the competition and beat level of success. And that’s exactly improve. Luckily, there was little them every time. That takes continu- what is happening. resistance to change in the Company ous improvement. then and there’s very little today. We Lee Scott, our new President and studied our competitors and our strat- I say all of this just to make this point: CEO, will take this Company to that egy, and before long, we were better If we’re going to reach new heights at next level, along with other talented than the competition. Wal-Mart, we cannot resist change, leaders like Tom Grimm at SAM’S and we must dedicate ourselves to the Club, Tom Coughlin at the Wal-Mart The idea we were driving in the continuous improvement of this Division and John Menzer internation- Company was “continuous improve- Company. Always. ally. And the same goes for our ment.” These two words describe leaders at all levels of the Company. what this Company is all about, and

4 ELITEELITEVVALUEALUE NewNew FeaturesFeatures DriveDrive MembershipMembership andand ShareholderShareholder ValueValue

SAM’S Club is moving into the brokerage, coupon new century with a heightened books, member sense of purpose. That purpose is checks and a phar- to attract and retain members with macy card. Also an exciting focus on new values included in the list that will build a partnership with of Elite services is a the member. special membership rate with Telebank where members can Among the new values are deli- ber’s wallets – especially with the benefit from excellent rates on cious meat and bakery items, new Elite benefits,” says Tom certifcates of deposit, money-mar- exciting merchandise and a new Grimm, President and Chief ket and interest-bearing checking design program for many existing Executive Officer of SAM’S Club. accounts. And, it provides this clubs. But, perhaps the most excit- “Our members trust SAM’S Club amazing average value of over ing member benefit is the new to negotiate the very best benefits $1,700 to the member for an annu- premium value package called the and services available, just as they al membership fee of only $100. Elite Membership. count on us for top-quality merchan- “The SAM’S Club card has become dise at the very best prices,” Grimm The Elite package offers a the most valuable card in our mem- says. “And we’re not going to let valuable, convenient array of them down.” benefits for SAM’S Club members — even beyond the The ultimate benefit of this reliable perks of the standard strategy is that in driving value Advantage and Business to the club’s members, the memberships which are cur- Company also drives value to its rently enjoyed by more than shareholders. “We believe that if 38 million card members. we can attract and retain mem- bers with services and benefits This new service features like these, we will not only drive other advantages such as our sales, but we will drive the emergency roadside assis- value all the way to our share- tance, discounted business holders,” Grimm says. insurance, Internet and long-distance service, auto

5 Fiscal 2000 End-of-Year Store Count

State DiscountSupercenters Stores SAM’S Clubs State DiscountSupercenters Stores SAM’S Clubs State DiscountSupercenters Stores SAM’S Clubs

Alabama 43 38 8 Minnesota 35 1 9 Vermont 4 0 0

Alaska 4 0 3 Mississippi 34 25 4 Virginia 26 37 10

Arizona 31 5 9 Missouri 69 43 12 Washington 24 0 2

Arkansas 44 33 4 Montana 9 0 1 West Virginia 8 18 3

California 113 0 25 Nebraska 13 6 3 Wisconsin 54 4 11

Colorado 23 16 12 Nevada 13 0 2 Wyoming 9 0 2

Connecticut 14 0 3 New Hampshire 18 3 4 US Total 1801 721 463 Delaware 3 1 1 New Jersey 22 0 6 Florida 89 50 35 New Mexico 9 13 3 Country DiscountSupercenters Stores SAM’S Clubs Georgia 59 35 16 New York 52 9 18 Argentina 0 10 3 Hawaii 5 0 1 North Carolina 66 26 16 Brazil 0 9 5 Idaho 9 0 1 North Dakota 8 0 2 Canada 166 0 0 Illinois 85 22 26 Ohio 75 11 24 China 0 5 1 Indiana 56 24 14 Oklahoma 52 27 6 Germany 0 95 0 Iowa 36 11 7 Oregon 24 0 0 Korea 0 5 0 Kansas 37 11 5 Pennsylvania 49 27 18 Mexico 397* 27 34 Kentucky 39 33 5 Rhode Island 7 0 1 Puerto Rico 9 0 6 Louisiana 48 29 10 South Carolina 32 25 9 United Kingdom 0 232 0 Maine 17 3 3 South Dakota 8 0 2 INT’L Total 572 383 49 Maryland 25 1 11 Tennessee 49 38 14 Worldwide Grand Total 2373 1104 512 Massachusetts 32 1 3 Texas 154 94 53 * Includes: 36 Aurreras, 68 Bodegas, 51 Michigan 52 1 21 Utah 14 0 5 Suburbias, 38 Superamas, and 204 Vips.

6 WWal-MMart.com Joint-Venture Opens New Frontier for Shareholders

Wal-Mart fast-forwarded its online will benefit from any increased Jackson has acquired expertise in retailing plans recently by forming a sales and profits that result from retail brands while working for sever- promising new partnership with the Internet business. al top-name firms. She was even respected Internet venture-capital named by Fortune as one of the “50 firm, Accel Partners. Wal-Mart.com will even have a sepa- Most Powerful Women” in U.S. busi- rate management team and board of ness, and by The new venture, Wal-Mart.com Inc., directors. Board members will Business Week is expected to benefit Wal-Mart include Wal-Mart Chairman Rob as one of the shareholders by further accelerating Walton; Wal-Mart President and CEO nation’s top development of the Company’s online Lee Scott; new Wal-Mart.com CEO 25 business retailing model — a model that pro- Jeanne Jackson and Accel Managing managers. vides opportunities for even greater Partner James Breyer. Jeanne’s expe- sales growth, future profits and rience gives shareholder value. “This puts Wal-Mart.com right the Company where it needs to be and should a great start Wal-Mart moved into the Internet allow us to further develop our e-com- on building an in 1996 with the introduction of merce business at both Wal-Mart and even stronger Jeanne Jackson, Wal-Mart On-line, then relaunched Internet speed,” Scott says. “Our presence on Wal-Mart.com CEO the site on January 1, 2000. The focus is to grow our market through the Internet and attracting new cus- original Internet business model the Internet — not just cannibalize tomers to the Wal-Mart brand. was designed and operated in-house the existing Wal-Mart customer base.” at the Company’s Bentonville, Ark., Wall Street’s reaction to the new headquarters, but the new Scott says Wal-Mart’s new online dot-com venture has been ovewhelm- Wal-Mart.com will be based in model approaches the Internet as a ingly positive. Merrill Lynch called Palo Alto, Calif., in the middle of fresh new market with totally differ- the new partnership “a smart move Silicon Valley’s vast information ent retailing rules — much like a for- for Wal-Mart” and other analysts and technology talent pool. eign country. The formation of this congratulated the Company for har- new company offers advantages in nessing the power of the technology Ultimately, Wal-Mart.com might recruiting Internet talent; eliminates market to develop Wal-Mart’s online choose to go public. But even if there disadvantages that impact Wal-Mart retailing program into a world leader. is a public offering, Wal-Mart Stores customers; and levels the Internet will retain a majority ownership of playing field. Accel, the first venture-capital firm to the new venture, ensuring that the invest in the Internet, gained wide- “online store” builds on the Wal-Mart Fortunately, the new company was spread acclaim for backing UUnet, brand and takes full advantage of the able to attract a top retail manage- which grew into one of the world’s traditional “bricks-and-mortar” ment talent in Jeanne Jackson, who is largest Internet service providers stores. Since Wal-Mart Stores, Inc. is the former CEO of a leading specialty and a unit of MCI WorldCom. Accel the majority shareholder, the results retailer and also directed that retail- also backed RealNetworks, the online from the Internet business will be er’s efforts in catalog and Internet audio/video company. consolidated into Wal-Mart’s business. In her 22-year career, financials, so Wal-Mart shareholders O . C M

7 A Banner Year For WALWALMARTMART International ASDA Purchase Leads Way for Wal-Mart’s International Expansion Call it a merger of old chums. A pair the outside. Now, it’s a bit like having it makes us determined to prove other of natural allies joined ranks last the key to the chocolate factory. Before, people wrong.” summer when Wal-Mart acquired the we had to look in the window at the British supermarket chain ASDA, its goods. Now we can go in and have a While the culture and pricing strategies largest acquisition to date and contin- look around the shop, and we’re taking of the two companies are nearly identi- ued to build a strong base for future the opportunity to reinvent our business.” cal, ASDA and Wal-Mart are learning store operations in Europe and other from their many differences, primarily international markets. One reason for ASDA’s similarity to the size and retail mix of the stores. Wal-Mart — and for its offbeat reputa- The average Wal-Mart Supercenter is With its own price rollbacks, people tion among British retailers — is its 180,000 square feet in size and does greeters, “permanently low prices for- policy of “borrowing shamelessly” ideas about 30 percent of its sales in gro- ever” and even “Smiley” faces, ASDA and concepts from other companies. ceries. In sharp contrast, the average has cheerfully imitated Wal-Mart’s store From one company, ASDA borrowed ASDA store has only 65,000 square feet culture for many years. ASDA, based in the concept of treating employees as and does 60 percent of sales in grocery Leeds, England, was purchased for 6.7 treasured “Colleagues” — much like items. But although Supercenters are billion pounds — or about $10.8 billion Wal-Mart’s “Associates.” three times larger, a typical ASDA store — adding 232 stores in England, does as much in sales as the average Scotland and Wales to Wal-Mart’s rap- “To a large degree ASDA is based on Supercenter. idly growing international operations. Wal-Mart,” says Leighton, who joined It’s a match made in heaven for ASDA in 1992 and became the com- “ASDA’s sales per square foot are the Wal-Mart shareholders and the cus- pany’s CEO in 1996. “We always wanted highest in the Company,” says John tomers of both stores, leading Mergers to have everyday low prices because we Menzer, President and CEO of & Acquisitions magazine to name the felt we had the sort of economics to do Wal-Mart International. “That’s partly transaction Cross-Border Deal of the it. But at the same time we wanted to because ASDA has a much bigger food Year for 1999. inject some personality into the stores. business and because the U.K. has far We started borrowing from Wal-Mart fewer grocery stores per capita. But it’s “The businesses are so similar that it’s with very simple things. We saw the also because ASDA works hard to man- almost spooky,” says Allan Leighton, greeter idea, rollbacks and the VPI (vol- age their business and drive sales Chief Executive Officer of ASDA and ume-producing item) idea and we took through offering value to their customers.” President of Wal-Mart’s operations in them back to the stores.” the United Kingdom. “The integration Domestic Supercenter operations prom- has been fantastic. Our people can Maverick Brits ise to be Wal-Mart’s primary growth engine over the next five to 10 years. come over to the states, or the U.S. ASDA marches slightly out of step with Associates can come over to the U.K. But beyond that window, Wal-Mart’s other United Kingdom retailers. “At growth potential will be more depend- and it feels like home. It’s all in home, we’re scoffed at and seen as the culture.” ent on the international scene. Menzer crazy mavericks,” Leighton says. hopes that 30 percent of Wal-Mart’s Apt Pupils “People wonder what we’re doing earnings growth will come from inter- knocking all our corporate offices national division profits in the future. “We have been students of Wal-Mart,” down, and having everyone wear a For the year ended January 31, 2000, Leighton says, “but until recently the badge and calling each other by their international sales accounted for only things we could do were to read first names. That’s good, though, 14 percent of Wal-Mart’s total sales and about the Company and see things from because we’re always the underdog and

8 eight percent of the operating profit, move to build market share, ASDA Around the Planet but Menzer envisions both will con- pledged last year to continue reducing tinue to grow throughout the decade. prices, some by five to 10 percent, Wal-Mart’s German opera- through its ongoing rollback program. tions got a big boost from ASDA will be an important part of that the purchase of 74 Interspar growth. In 1998, the British retailer The merger with Wal-Mart also has hypermarket stores in fiscal 1999. By had $14 billion in sales, and since the accelerated ASDA’s price-rollback plan, September, Wal-Mart had rebranded all Wal-Mart merger, ASDA’s monthly with the Company promising to cut 95 of its German stores and begun comparable-store sales have risen 10,000 prices in calendar-year 2000. stocking them with a new and 11 percent. revamped selection of merchandise. “The changing retail landscape in Store renovations also began last year Two-Way Learning Europe has caused all retailers to think and half of all the German stores about the future,” Leighton says. “The should be renovated by late 2000. There are plenty of oppor- net effect is that prices have dropped, tunities for the two compa- certainly in the U.K., and I think that Although German shoppers are hur- nies to learn from each will happen in Germany, too, as our ried by local laws that force early store other. ASDA, for example, can teach rollback programs really begin to ‘buy closings and forbid Sunday sales, Wal-Mart about its line of high-quality, a home.’ There are a group of competi- German Wal-Mart stores are setting private-label fashion apparel — a prod- tors who take the attitude that ‘this too the bar for the rest of the Company in uct line rarely seen in grocery stores. will pass,’ and will probably not sur- sales volume. The store in Karlsruhe, George, ASDA’s private-label apparel vive. But there are also some very for example, is one of the highest brand, is Europe’s fastest growing line good competitors who will take this volume Wal-Mart stores in the world, of apparel, with annual sales of more opportunity to reinvent themselves and though it is open less than 12 hours a day. than $830 million. At large ASDA will come out of it much stronger.” stores, the company devotes around Wal-Mart has already made a major 15 percent of the floor space to the The Company plans to spend in excess change in the shopping culture of clothing line. of $100 million over the next five years Germany simply by opening stores two to open 50 stores in the new 25,000- hours earlier than the 9 a.m. standard. ASDA also receives high marks for the square-foot ASDA “fresh” format, German laws allow shopping to begin quality of its in-store home-meal which stresses fresh foods and at 7 a.m., but most shops in the coun- replacement departments. The com- prepared meals. Two new ASDA try wait at least two more hours to open. pany is now the U.K.’s biggest retailer Supercenters — ala Wal-Mart — also of Indian food and the world’s largest are in the works. Germans seem to enjoy browsing the Indian “takeaway” retailer. And ASDA stores when crowds are smaller. is lending its expertise in the areas of Though they were initially Puerto Rican Associates show smaller store formats and the fresh- Wal-Mart’s international energy. (continued on next page) food supply chain.

On the other side of the coin, Wal-Mart stores offer ASDA a wealth of needed experience in general-merchandise retailing, along with the best store- information systems in the industry. Wal-Mart systems are being rolled out through- out ASDA between now and October this year, and will bring real improvements in service and in-stock for customers.

Changing European Retail

ASDA is the third-largest supermarket chain in the U.K, but that could change with the Wal-Mart merger. In a bold Buddies Cross Atlantic For Fresh Ideas

(continued from previous page) alarmed to find greeters talking to them when Andy has made the most of the they entered the stores, the friendly, smiley- buddy program by involving all his faced Wal-Mart culture has now established a firm foothold. store “colleagues,” who are excited about the association with Wal-Mart. Lessons Learned “At my store, I’ve got two plaques up with pictures of the two of us visiting But cultural transitions haven’t always been Collin’s store,” Andy says.“Then this smooth for Wal-Mart International. we’ve got a notice board where any- In Argentina, for example, thing that Collin sends me through Wal-Mart initially faced chal- e-mail or fax is posted, such as lenges in adapting its U.S.-based weekly store sales and the items that retail mix and store layouts to the local cul- sold well. It’s almost like having a ture. From the meat counter to the hardware pen pal. We share a lot of information and jewelry departments, Wal-Mart had to Andy Davies (L) and Collin Claunch and we speak once a week.” learn quickly and work hard to adjust the stores’ offerings to Argentine tastes. U.S. and U.K. store managers quickly “Twice a day now in our store, we turned into exchange students when actually do a ‘rap’ Collin taught us Compounding the challenges, Wal-Mart didn’t ASDA became part of the Wal-Mart that’s very much like the Wal-Mart anticipate the heavier Argentine customer family last summer, joining a trans- Cheer,” Andy says. traffic, which temporarily overwhelmed the Atlantic buddy program that’s given stores’ relatively narrow aisles. Today, Likewise, Collin says the buddy pro- both sides new retailing ideas and Wal-Mart has adjusted to all these cultural gram has energized his Denton enduring friendships. nuances, and offers Argentine shoppers the store. “My folks think Andy is just products they desire in a comfortable environ- neat,” he says. “They might have had “It’s a very interesting experience, ment with wider aisles. Specialized cuts of really,” says Andy Davies, manager of some apprehension about ASDA, but meat have been added to the stores, and the an ASDA store in Burnley, England, they know Andy, so if Andy says jewelry line has been retooled to emphasize and one of the first to make the that’s how it is, that’s fine. ASDA has simple gold and silver, in keeping with the exchange in October, 1999. such phenomenal sales per square local fashion. “Regardless of the location, it seems, foot that my people are amazed. ” our people make the difference.” “It wasn’t such a good idea to stick so closely Outside the stores, Andy and Collin to the domestic Wal-Mart blueprint in The feeling is shared by Collin made sure to share important cul- Argentina, or in some of the other interna- Claunch, Andy’s “buddy” and manager tural experiences. Collin took Andy tional markets we’ve entered, for that matter,” of the Wal-Mart Supercenter in to a Dallas Cowboys football game, says John Menzer. “In Mexico City we sold Denton, Texas.“The ASDA colleagues for example, and Andy reciprocated tennis balls that wouldn’t bounce right in the are just like us,” Collin says. “They’re with tickets to a big soccer match high altitude. We built large parking lots at not in the banana business, they’re not between England and Scotland. some of our Mexican stores, only to realize in the George clothing business. that many of our customers there rode the Andy came away from the states fas- They’re in the people business. That’s bus to the store, then trudged across those cinated with some of the products why the acquisition has gone so well.” large parking lots with bags full of merchan- carried at the Supercenters, espe- dise. We responded by creating bus shuttles cially hot dogs in a can. Inspired, he By the end of this year, every ASDA to drop customers off at the door. These were plans to bring canned Frankfurters to store manager will visit a Wal-Mart all mistakes that were easy to address, but his ASDA store and promote them as Supercenter in the states, and the we’re now working smarter internationally to his personal VPI (volume- respective U.S. store managers will avoid cultural and regional problems on the make the trip to the United Kingdom producing item). front end.” to study an ASDA store. Collin, on the other hand, was awed Lifting Off in Latin-America The interest of the media was intense by ASDA’s efficient milk-stocking on both sides of Andy and Collin’s system, in which milk racks roll Overall, Wal-Mart’s future in Latin America exchange. Collin did interviews with a directly off the truck and into a looks bright. In this decade, Wal-Mart plans local school in England and the BBC. recessed refrigerator in the wall, to capture a greater share of the Argentine And when Andy came to the states, he removing the need to hand-stock the retail market, estimated at $69 billion by lead- actually filmed a documentary for jugs on refrigerated shelves. It’s an ing analysts. Currently, Wal-Mart has 10 the BBC. idea he’d love to steal. Supercenter stores in Argentina. In China, a homemade hat promotes this Associate’s personal “VPI” product.

Canadian Operations as the BUM® line, a great product targeted Serve as Model to young, fashion-conscious customers. In the most recent development, Wal-Mart Over the years, naysayers opened 50 in-store One Source® Nutrition have scoffed at Wal-Mart’s Centers in fiscal 2000, providing pharmacy international aspirations, customers with more than 1,500 natural claiming that the Company’s culture and healthcare products. business practices would never translate In Mexico, Wal-Mart operates beyond U.S. borders. Skeptics even doubted So far, Wal-Mart has captured more than seven different retail formats. that Wal-Mart could succeed in Canada. 35 percent of the Canadian discount-and Most of these relate to the But, six years in Canada have proven the department-store retail market and has 1997 acquisition of a controlling interest in critics wrong. Wal-Mart now has 166 dis- become the largest retailer in Canada, the the leading Mexican retail conglomerate, count stores in Canada, and the Company’s United States and Mexico. Cifra, which is now Wal-Mart de México. operations there are considered as a model In Asia, meanwhile, Wal-Mart Wal-Mart operates 397 Cifra outlets in for Wal-Mart’s expansion into other interna- has six Supercenters and Mexico, in addition to 27 Wal-Mart tional markets. SAM’S Clubs in China and Supercenters and 34 SAM’S Club stores. When acquired, the 122-store Canadian five Supercenters in South Korea. The Cifra is the largest retailer by far in Mexico. Woolco chain was losing millions of dollars unique and developing retail environments Mexico remains an important market for annually, but operations became profitable of those countries throw Wal-Mart because of its huge potential. within three years. Today, Canadian opera- some challenges into the mix, As the country continued to recover from tions are among the most profitable in the but the potential for Wal-Mart its 1995 economic crisis, Cifra opened 39 Company. The productivity of the stores in Asia is tremendous, considering that new units in fiscal 2000. In December, all rivals that of U.S. Wal-Mart stores, and South Korea has the highest population Supercenters were closed for a day as the Company added 17 new stores in fiscal density of any country on the planet, and prices on 6,000 different items were rolled 2000. Wal-Mart has also added an interest- China has the most people: an amazing back. Cifra had $6 billion in sales in fiscal ing flair in its Canadian operations, with 1.2 billion residents. 2000, a figure that Wal-Mart plans to emphasis on quality fashion apparel such increase this year. Brazil also offers great oppor- Selected Wal-Mart International tunities, with the fifth largest population in the world, and Retail Sales for Fiscal Year 2000 with nine Supercenters and five SAM’S Clubs already on the ground. The country’s recent economic problems have presented a ($U.S. Billions) challenge, but Brazil’s tendency to follow U.S. cultural cues has been very encourag- $15 ing for Wal-Mart. This year, the Company plans to expand its Brazilian presence by $ opening three more SAM’S Clubs in the 10 country, with locations in Parana, Rio de Janeiro and Sao Paulo. The three clubs will $5 create 600 new jobs — a tangible symbol of Wal-Mart’s commitment to the country.

Puerto Rico is nicely positioned to host a Wal-Mart growth spurt. With 15 Stores and Clubs already built on the island, Wal-Mart seems prepared to benefit from a continued economic upturn as the country bounces back from the devastation of 1998’s Hurricane Georges. And with the typical annual income for a Puerto Rican family of four running about $27,000, the island has a strong need for everyday low prices. Wal-Mart will continue to meet those needs. 11 WAL-MARTWAL-MART NAMEDNAMED 2000RETAILERRETAILER OFOF THETHE CENTURYCENTURY BYBY DISCOUNTDISCOUNT STORESTORE NEWSNEWS AA Tribute Tribute to to a a Culture Culture By: Tony Lisanti, Editor & Associate Publisher Discount Store News

In 1999, Discount proud of their work — a spirit Store News hon- where the Associates know that the ored Wal-Mart Company is interested in them, and Stores, Inc. as pass that same level of interest on “Retailer of the to their individual customers. Century” with a To me, this unique environment is commemora- amplified by the fact that the tive 200-page organization doesn’t slot anyone issue of our into a particular job or category. magazine. As editor of the Store managers can be moved to “ The reason we magazine I’d like to take a moment headquarters or to international to explain why we chose Wal-Mart chose Wal-Mart as operations. Distribution experts can for this rare honor. suddenly find themselves in the Retailer of the Century Wal-Mart and Discount Store News financial area. And believe it or not, is that Wal-Mart cares essentially grew up together. The you can even move from human first issue of DSN was published in resources to become President of about the individual, 1962, the same year that Sam Wal-Mart Stores, just as Tom whether he or she Walton opened the first Wal-Mart Coughlin did. Wal-Mart believes in store in Bentonville, Ark. And as is an Associate or the decades passed, we had time to a customer.” learn what makes this Company truly special — the secret that has allowed Wal-Mart to outpace every other retailer in history. Tony Lisanti The difference, we believe, is the spirit that pervades the Company’s culture. It’s obvious to anyone who visits a Wal-Mart store, district office or company headquarters. It’s a spirit where individuals are

12 al-Mart proudly part, with fiscal 2000 revenue of $165 billion and with the 70.4 moved up in percent annual return that W Fortune’s list of investors received on the the top 10 “America’s Company’s stock. Most Admired Wal-Mart received another Companies” in 2000, major honor last year when the rising to fifth on the Company was named by CIO list and being flanked by magazine as a recipient of the CIO-100 award for excellence in the likes of General the information systems field. Electric, Coca-Cola, It was the 12th year for the CIO- Microsoft, Dell Computer, 100 program, and Wal-Mart has Berkshire Hathaway, been chosen for the honor in the individual and has faith in their Southwest Airlines, Intel, 11 of those 12 years. In other distinctions, the ability to learn and succeed. Merck and Walt Disney. Foundation Center recently The reason we chose Wal-Mart as The Bentonville, Ark.-based ranked the Wal-Mart Foundation Retailer of the Century wasn’t its retailer made its first top-10 fifth in giving out of all U.S. foun- appearance on Fortune’s Most dations, and Wal-Mart also was size, its profits, or its phenomenal Admired list in 1987 and has ranked first in the 1999 Cone/ growth record (though those things been included eight times since Roper Report, an annual national certainly don’t hurt.) The reason is then. In ranking the top 10, public survey on philanthropy that Wal-Mart cares about the individ- Fortune surveyed more than and corporate citizenship. ual, whether he or she is an Associate 10,000 executives, directors and Wal-Mart also has been recog- or a customer. securities analysts, who were nized recently both by Hispanic asked to choose the companies Magazine and Latina Magazine On my desk I keep a copy of Sam they admired most, regardless as one of the best 100 companies Walton’s “Rules for Building a of industry. to work for in the United States Business,” and my favorite is No. 7: Wal-Mart earned its inclusion for Hispanics and Latinas. in the Most Admired List, in “Listen to everyone in your company. Figure out ways to get them talking. Children's department mannequins are guests at The people on the front line — the an Associate's impromptu ones who actually talk to the cus- “tea party.” tomers — are the only people who really know what’s happening.”

Wal-Mart still has the courage and good sense to follow these universal operating principles. Congratulations, Wal-Mart, for both recognizing and continuing to implement a great business philosophy. You have my admiration and respect.

13 OL’ROY’SOL’ ROY’S NEWNEW TRICKSTRICKS PrivatePrivate BrandsBrands FillFill ValueValue GapGap WithWith QualityQuality MerchandiseMerchandise

t all began with the Ol’ RoyTM tant opening prices. An brand, the private- innovative brand, Great Ilabel dog food named Value was the first line to for Sam Walton’s favorite introduce a fat- and sugar- hunting companion. free coffee creamer, and Introduced to Wal-Mart has also led the way in devel- stores in 1982 as a low- oping convenient and user- price alternative to the friendly packaging, like the national brands, easy-grip bottles used for Ol’ Roy steadily grew to Great Value juice drinks. More become, pound for than 800 Great Value products pound, the biggest seller are now offered in the deli, of all dog-food brands in dairy, dry grocery, meat and the country. produce departments.

Today, thousands of other Wal-Mart has applied a similar private-label Wal-Mart products concept to the pharmacy and are trotting along in Ol’ Roy’s health-and-beauty-aids depart- tracks, offering value to ments with the high-quality ® cost-conscious con- Equate product line. Several sumers around the world. Equate items have become top Wal-Mart’s own line of sellers in their categories, including garden fertilizer, for exam- Equate Ibuprofen and Equate ple, has become the best-selling Pain Reliever. brand in the country. In the end, this loyalty improves Focus-group studies reveal that cus- “We are a brand-oriented company Wal-Mart’s sales and profit margins, tomers actually think of Equate as a first,” says Bob Connolly, Executive which also helps investors. national brand. The products are so Vice President of merchandising of popular, in fact, that suppliers get “We want our prices to be accessible Wal-Mart Stores, Inc. “We became letters from customers asking why to everyone — not just a select the largest retailer in the world by they can’t buy Equate products at group,” says Connolly. “So part of offering quality, well-known brands other retail chains. our strategy with the private-label at everyday low prices. But we also brands is to offer opening price Spring Valley®, Wal-Mart’s private- use private labels to fill a value or points — the lowest price available label vitamin line, is another top- pricing void that, for whatever rea- in the store for a particular type of seller in the over-the-counter son, the brands have left behind. item. The national brands will some- pharmacy area, already becoming The market has really dictated times abandon a traditional opening the largest brand of vitamins sold every move we’ve made in private- price to emphasize higher-end prod- in the United States. Recently, the label brands. We don’t create them ucts with better profit margins.” product line was recognized in a to improve our profit margins; we nationally known consumer maga- create them to improve value to cus- Often, Wal-Mart uses its Great zine for its quality and value. tomers, which builds customer loyalty.” Value® brand to offer those impor-

14 Sometimes, the best way The new detergents can be for Wal-Mart to fill a “We don’t create private- purchased in either liquid value gap is to buy an or powdered form, and are existing brand — often a label brands to improve our sold at the high end of the line recently abandoned profit margins; we create opening price point in the by a manufacturer. For detergent category. example, in the summer them to improve value to of 1999 Wal-Mart started The Company grabbed selling diapers and toilet customers, which builds even more attention last tissue under the White year for introducing its own line of disposable alkaline Cloud® label, a former customer loyalty.” brand of Procter & batteries marketed under — Bob Connolly TM Gamble Co. Wal-Mart the name EverActive . used the same strategy Wal-Mart also has a popu- in the blue-jeans catego- lar line of automotive bat- ry by buying the Faded Private-label brands are helping teries called EverStart®. The prod- ® Glory brand. Wal-Mart succeed in the extremely uct launch was backed by an competitive grocery business, “Part of our philosophy on opening aggressive television advertising where consumers have learned to prices is that they aren’t always the campaign centered on sports pro- accept — and even expect — cheapest prices on a type of item, as gramming. So far, EverStart appears “store brands” as a cost-cutting with a cordless phone, for example,” to be catching on; the batteries alternative. The private brands are Connolly says. “It, might, instead, be already are being installed as stan- expected to prove particularly the best price on the most impor- dard equipment in all Ranger boats. useful at our smaller Neighborhood tant part of the category, such as MarketSM stores. SAM’S Club also has a line of 900-MHz cordless phones.” private-label products sold under One of Wal-Mart’s recent ventures This premium-value concept has the Member’s Mark™ label. The into private-label branding was the been the foundation of the Sam’s brand was created in 1997 and launch of a new line of laundry focuses on providing premium prod- American Choice® brand. Every detergents under the Sam’s item in the Sam’s American Choice ucts at exceptional values to SAM’S American Choice line is tested to ensure that it is at Club members. Items in the line name. least equal to the national brands. include blue jeans, vitamins, dish- And in many cases, they’re washing detergent and many other better. The percentage of consumable products. actual fruit juice in Sam’s “One of the long-term benefits of American Choice fruit Wal-Mart’s private-label expansion drinks, for example, is higher is that it could create strong global than that of the national brands, brands,” Connolly says. Wal-Mart and there are more raisins in the Germany, for instance, recently Sam’s American Choice raisin moved to crank up its private- bran than in any of the national label offerings from 32 items brand cereals. All Sam’s American to about 1,000. Ol’ Roy® is Choice products are grown, pro- among the brands already duced and manufactured in the sold there, along with United States. In fact, the tea offered Special Kitty® cat food and by Sam’s American Choice is the Great Value® orange juice, only tea still grown and produced at iced tea and tissues. a tea plantation in the United States.

15 GGood.Works.ood.Works. From Free Eyeglasses to School Breakfast Programs, Wal-Mart Cherishes Role as Community Partner

zIn Thunder Bay, Ontario, a Wal- children. Each child in the program “It makes a big difference for the Mart store manager shaves his head receives a thorough eye exam kids,” says Stephanie Morris, a to raise money for an elementary and a perfectly fitted pair of glasses licensed optician with Wal-Mart school. In Shenzhen, China, from their friends Vision Centers. “You feel really Associates bring gifts and cheer at Wal-Mart. proud when they walk out with to the elderly during the their shiny new glasses.” Chinese New Year. And in Little Rock, Arkansas, the Wal-Mart also sponsors a vast net- Company donates $1.8 work of elementary and secondary million to help Arkansas schools through its Adopt A School Children’s Hospital. program. And in October, 1999, the Company brought Canada into It all happened in fiscal the program, adding one-year 2000, but it could have sponsorships for 166 been any year in the Canadian schools — community-centered one school for every heart of Wal-Mart. The Wal-Mart store Company was ranked as in the country. the number-one good cor- porate citizen by the 1999 These stores Cone/Roper Report. In an provide their adopted effort to improve the quality schools with merchandise dona- of life in all of its store commu- tions, in-store fundraising events nities, Wal-Mart raised and and volunteers for special school contributed $163.8 million to projects. At some Canadian stores, charitable causes in fiscal 2000 Associates have even started break- and participated in a wide range fast clubs to feed students who can’t of volunteer programs, many of eat at home before they start the them dedicated to helping children. school day. Eyes on the Future “Working one-by-one on projects in their communities, Wal-Mart For example, more than 13,000 kids Associates are probably the largest got a helping hand last year from charitable fundraising force in Project Insight, a program created Canada,” says Dave Ferguson, by the Associates of the 680 President and Chief Executive Wal-Mart Vision Centers worldwide. Officer of Wal-Mart Canada. In its seventh year, the program pairs each Vision Center with a local A young girl shows off a new pair of glasses provided through Operation Insight. elementary school, orphanage or shelter that serves underprivileged

16 Support for Children’s Wal-Mart Associates and partners and Exploited Children. Since 1996, Hospitals raised last year’s donation through the Company has posted boards in local fundraisers, often donning funny every Wal-Mart and SAM’S Clubs hats and wacky costumes to drum up store with the names and photos of One of Wal-Mart’s favorite causes the contributions. All hats were off, missing or abducted children. each year is the Children’s Miracle though, to Jane Pack of SAM’S Club Network, which raises money 6402 in Greensboro, North Carolina, With 100 million people shopping for 170 children’s hospitals across who raised an amazing $10,878 for each week at Wal-Mart stores and the United States. In June, 1999, CMN between March 8 and May 16 SAM’S Clubs, odds are good that Wal-Mart donated $29 million to by kindly asking every club member the posters can help locate many of CMN, the largest single contribution she met for a donation to the cause. these missing children. Since the ever made to the cause. Wal-Mart is formation of the Missing Children’s the largest corporate sponsor of Wal-Mart also is a devoted sponsor Network, 850 children featured on CMN, and has raised more than of the Missing Children’s Network, display boards have been found — $160 million for the network during a cooperative project with the non- more than 30 of them as a direct its 12 years of sponsorship. profit National Center for Missing result of Wal-Mart’s efforts.

Wal-Mart Stores, Inc. – A Clear Vision of Community Involvement in Fiscal Year 2000

Economic Development Grants $3,006,565 Other Donations Make A Difference Day $4,392,581 $2,466,023 Holiday Charitable Contribution Environment $5,100,000 $1,495,922 Scholarships Teacher of the Year $8,018,467 $1,287,500 United Way Volunteerism Always Pays $12,464,896 $1,104,900 Local Community Giving Food Bank Contributions $18,648,642 $12,000,000 Children’s Miracle Network Community Matching Grants $29,000,000 $64,848,847

Total = $163,834,343

17 With your pennies, dimes and dollars, you said “Thanks” to your parents and grandparents, husbands and wives, aunts and uncles, your brothers and sisters... the millions who did nothing less than bring peace to the world.

With your contributions, the World War II Memorial in Washington, D.C. will finally become a reality.

And because of you and millions like you, the selfless sacrifice of these great heroes will never be forgotten.

Thank you.

© 2000 Wal-Mart Stores, Inc.