Wal-Mart structure is changing

LITTLE ROCK, Ark. — Perhaps it was inevitable. After the decades of expansion that turned Wal-Mart Stores Inc. into the world's largest retailer, the discounter's sales growth is no longer phenomenal, and the culture of founder Sam Walton has started to change.

The resignation last Friday of a Wal-Mart director in an alleged expense scheme was one of a series of setbacks the company has suffered in recent months, but it was also a sign that the guard is indeed changing at Wal-Mart. Tom Coughlin was a 28-year Wal-Mart Stores Inc. veteran who had led the company's discount and warehouse stores divisions until late last year and was also the retailer's vice chairman.

Coughlin's departure from the board could provide some welcome change to the political structure inside Wal-Mart's Bentonville headquarters, according to John Plummer, who runs retail executive recruiting firm Plummer & Associates in Rowayton, Conn. As older executives leave, some are being replaced by recruits from other companies.

"The old operations group at Wal-Mart is probably what caused a lot of the problems they are having now," Plummer said, adding that the group "was very incentivized to keep costs as low as possible, which meant violations of . . . labor laws and good practices."

Wal-Mart recently paid a fine to settle federal charges that underage workers operated dangerous machinery, and the company also agreed to pay $11 million to settle charges that its cleaning contractors used illegal immigrants. In addition, the company is appealing a judge's decision to certify class action status for up to 1.6 million female employees who charge they were victims of gender-based discrimination at the company.

The company is also contending with the fact that its sales, which once bounded higher at a double-digit rate, are leveling off. In the year that ended in late January, sales from stores open at least a year, known as same-store sales, rose just 3.3 percent.

Burt Flickinger, managing director at Strategic Resources in New York, said same-store sales at Wal-Mart's core discount store division are shrinking when relatively new product lines like groceries and gasoline are excluded.

"That's a real cause for concern," Flickinger said. Aggravating the situation is the company's difficulty in making money in Asia and continental Europe, he said.

Retail analyst Kurt Barnard said Wal-Mart's expansion into food, prescription drugs, gas and other merchandise categories has been necessary for growth to continue. He said he wouldn't be surprised if the goods that were once Wal-Mart's core items — discount store staples — have been tracking in the negative.