By Chris Burritt
June 8 (Bloomberg) -- H. Lee Scott, Wal-Mart Stores Inc.'s chief executive officer for the past eight years, is reaping the benefits of demand for his retailer's discounted goods as the economy slumps and prices soar.
Rising gasoline, food and medical costs will drive more customers to Wal-Mart's more than 3,400 U.S. discount stores and supercenters, Scott told 15,000 shareholders and employees gathered at the company's annual meeting in Fayetteville, Arkansas, on June 6. The world's largest retailer is luring customers with $4 prescription drugs and energy-efficient light bulbs.
``I thank God we are positioned like we are this year,'' Scott told analysts after the meeting, where celebrities including country singer Tim McGraw and ``American Idol'' winner David Cook performed. ``If you had this economy at this time last year when we were positioned like we were, I wouldn't be up here.''
Last year Scott turned the Bentonville, Arkansas-based company's focus back to basic clothing after an attempt to attract higher-income customers with more fashionable apparel failed to drum up sales.
For the 59-year-old Scott, who oversaw the loss of $115 billion of stock market value in his first seven years at the helm, rising sales are a sign the company is turning around. This year, Wal-Mart is the biggest gainer on the Dow Jones Industrial Average, gaining 23 percent in New York trading.
A year ago, Scott addressed investors after posting the smallest annual increase in individual-store sales in at least 27 years. This year the annual meeting followed a 3.9 percent increase in May sales at stores open more than a year, higher than the company or analysts had predicted.
`Sleepy'
``He doesn't think, and I don't think either, that if they had had this economic downturn a year ago, they would be in the same situation,'' Patricia Edwards, who helps manage $14.8 billion at Wentworth, Hauser & Violich in Seattle, said in a Bloomberg Television interview. ``They had been a little bit sleepy behind the wheel for a while, and they had to turn things around.''
Wal-Mart said last week that lower prices on groceries, medicines and laptop computers attracted shoppers. Tax rebates also spurred sales as consumers grappled with job losses and the worst U.S. housing market in a quarter century.
Rising costs are ``eating up more and more from our customers' pockets,'' Scott, who took the helm in 2000, told shareholders. ``Wal-Mart is uniquely positioned to succeed, not just in this economy, but in these times.''
Queen Latifah
The meeting was held in the Bud Walton Arena -- named for the late James L. Walton, who co-founded Wal-Mart with his brother Sam in 1962 -- on the University of Arkansas campus near Wal-Mart's Bentonville headquarters. Hip-hop artist and actress Queen Latifah hosted the four-hour session.
Investors pushed Wal-Mart to a four-year high in New York trading last week, nine months after the stock hit the lowest of Scott's tenure. Wal-Mart fell $1.43, or 2.4 percent, to $58.37 on the New York Stock Exchange June 6, mirroring a decline in the broader market after the biggest jump in the unemployment rate since 1986 and oil prices surged $10 a barrel to $138.54 in New York. Wal-Mart has a stock market value of $231.6 billion.
The retailer's fortunes might still falter should the economy begin to recover. Scott's attempt earlier in the decade to push into trendier clothes, such as its George line of cashmere sweaters and blazers, didn't boost revenue even as the economy grew. Same-store sales growth in last year's fourth quarter was 1.4 percent, compared with 6.3 percent during Scott's first quarter as CEO in early 2000.
Trading Up
Customers are ``likely to get snobbier and trade back up,'' Harvard Business School Professor Nancy Koehn said in a Bloomberg Radio interview. ``I don't think those customers are necessarily very long for Wal-Mart.''
Wal-Mart is now focusing on its main customers, families in lower-income brackets with little money to spend on luxuries. In late April, the company started cashing rebate checks for free and cut prices on shampoo, cereal and groceries, targeting Americans who are to receive more than $100 billion in tax rebates through July.
That has paid off by bringing in shoppers. Wal-Mart has cashed $350 million in rebates, and an undetermined amount has been spent in the stores, Chief Financial Officer Thomas Schoewe said last week. The results reflect the changes the company has made in the past year after its earlier missteps.
``I felt like I should lose the support of the board if we didn't turn it around,'' Scott told reporters after the meeting. ``But I wasn't worried that I would.''
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