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Mike Duke Letter

To our shareholders, associates and customers

Almost 50 years ago, Sam Walton started Walmart with a single store in Rogers, Ark., dedicated to providing customers with a broad assortment of merchandise at great prices. Sam told Walmart associates: "Customers are the reason why we're in business. And when we exceed their expectations, we're at our best." From the day the doors opened in Rogers, on July 2, 1962, Walmart's culture has been built on a common purpose: saving people money so they can live better. That one store changed the way that retail works, and that change continues to this day.

Today Walmart operates more than 10,000 retail units under 69 different banners in 27 countries. We have more than 2 million hard–working associates who serve 200 million customers and members every week. We appreciate all that our associates do in delivering on our mission and in growing our business.

Our growth is a remarkable achievement. But as far as we have come, there is so much more that we will do to make a difference for our shareholders, customers, associates and communities around the world.

Fiscal 2012 review and key strategies

Last year, Walmart delivered a strong financial performance. Net sales increased by 5.9 percent to $443.9 billion, and consolidated operating income grew by 4 percent to $26.6 billion. Our diluted earnings per share from continuing operations attributable to Walmart were $4.54 per share, up from $4.18 the previous year. We leveraged operating expenses for two consecutive years. Our strong financial position is best illustrated by our ability to grow. We added 52.2 million square feet through 1,160 additional units, including acquisitions in the U.K. and South Africa.

We continue to deliver strong returns to shareholders and returned $11.3 billion to them through dividends and share repurchases during the year. We were disciplined and focused on improving our business, and we made good progress.

Our Walmart U.S. strategy is working. Assortments are back. We are making real improvements in merchandising and operations and investing in lower prices. We were pleased to close the year with two quarters of positive sales comps, including positive traffic in the fourth quarter. We remain focused on improving comp sales in the year ahead and are confident that positive trends will continue. Our commitment to price leadership has never been stronger. Beginning in February, we initiated our quest to invest $2 billion in price through expense reductions and productivity improvements during the next two years.

Walmart International is delivering strong sales and remains our company's primary growth engine. With $125 billion in sales, it is remarkable that our international business alone would now be among the three largest retailers in the world. Our top priority is improving returns through increased profitability, especially in Brazil and China. We are gaining share and are well–positioned to serve the expanding needs of middle–income customers in high–growth markets. The "Powered by Walmart" initiatives will strengthen productivity and reduce expenses.

Sam's Club continues to drive sales momentum, increasing comp sales 8.4 percent (which includes 3.4 percent of fuel) in fiscal 2012. We are pleased with the consistency of operations across the U.S. clubs, and merchandise quality and value continue to get better. Sam's Club also made real progress in growing the membership base, and that remains a key goal this year.

Walmart Employees

There is no doubt Walmart is the best–positioned global retailer. We believe that we have all the pieces in place to build on our success and deliver value for our customers and shareholders again this year. We continue to strengthen our next generation Walmart efforts, investing in people, technology, innovation and infrastructure. It is rooted in our culture to stay out in front of change. The world moves more quickly each day, and we aim to be at the forefront of bringing about change in retail, both in our stores and through e–commerce.

Five key strategies are central to our future:

  1. Developing our people;
  2. Driving the productivity loop;
  3. Winning in Global eCommerce;
  4. Reinvigorating our customer–focused culture; and
  5. Leading on social and environmental issues.
Developing our people

Nothing is more important to delivering on our mission than our people. We have the best talent in global retailing, both at the leadership level and deeper in the organization. We are extremely focused on developing existing talent through programs like our Business Leadership Series, the Walton Institute and Merchant Development. We are also recruiting exceptional new talent where we need it. One area that I am asking every leader and manager to focus on is appreciating and listening to our front–line associates. More than anyone in our company, our store and club associates take care of our customers and members, and they make incredible contributions to our success.

I'm pleased with the progress that we've already made on diversity and inclusion, and especially with our global women's strategy. We are championing opportunities for women to advance in Walmart, and to develop women at all levels throughout the company.

Driving the productivity loop
Low Prices

Delivering everyday low prices is premised on everyday low cost. There is no doubt that the productivity loop is back in Walmart's DNA. Over the past two years, I have personally talked a lot about the productivity loop and its importance. We are very proud that we have leveraged operating expenses for two consecutive years. Walmart is operating for less, so we can sell for less and drive increased sales. And we are just getting started.

Last October, we committed to reducing operating expenses as a percentage of sales by at least 100 basis points over five years. To achieve that, we are bringing even more discipline and focus to being as productive and efficient as possible. Just as important, we are rekindling the spirit of innovation that Walmart has been known for throughout our history. We want to drive full global leverage throughout such areas as information systems, sourcing, business processes and shared services.

Winning in Global eCommerce
Walmart Mobile

E–commerce will become even more important to serving customers in the coming years. In the U.S. and the U.K., we operate successful online businesses, and our Brazil and Canada e–commerce businesses are growing rapidly. With a trusted brand operating more than 10,000 stores and serving 200 million customers weekly, Walmart has the assets to build on and deliver a multichannel experience in all of our markets. We're investing in people and capabilities. Last year, we launched @WalmartLabs and acquired some strong talent in social and mobile media. We plan to continue our investments to leverage additional opportunities in e–commerce. This year, pending government approval, we plan to increase our investment to 51 percent in Yihaodian, a fast–growing e–commerce website in China.

Reinvigorating our customer–focused culture
Sam's Club

The customer is #1 in the Walmart culture, and we are putting tremendous effort into understanding customers and serving them in new ways. Our Global Customer Insights group is developing world–class analytics to identify customer trends and support merchandising and marketing decision–making within the business. At the same time, I am emphasizing throughout our ranks the importance of getting even closer to our customers. One way we are doing this — whether it's me, other members of the leadership team or store–level management — is in–home visits. We share a responsibility to get closer to our customers by talking with them, listening to them and understanding their needs. Gaining better insights into how our customers shop will help us lay the groundwork for the next generation Walmart stores.

Leading on social and environmental issues

Doing what is right is mandatory at all levels, and integrity is rooted in our decisions and our culture. Sam Walton understood the link between integrity and reputation. Our strength in doing what's right and good for business is a competitive advantage. Thanks to our leadership on big issues, our relationships with government leaders and NGOs are stronger than they've ever been. We are so proud, for instance, of our new Global Women's Economic Empowerment Initiative. The program empowers women through job training, increased sourcing, philanthropic support and education around the world. We are increasing affordability of healthy foods and making significant donations to food banks. Our sustainable agriculture program helps farmers earn more and become better stewards of the environment. We continue to reduce greenhouse gases in our supply chain. In our communities, associates spend countless hours serving as volunteers to many organizations.

Our Global Responsibility Report is expanded this year to include more data and metrics and looks at our progress and opportunities on social and environmental issues. We continue to expand our focus on these and other areas that are important to communities around the world.

Looking ahead

Though we are never satisfied, I am pleased with our progress over the past year. Looking ahead, we have a clear understanding of what we need to do at Walmart to drive long–term shareholder value and deliver on our mission.

Fifty years ago, there was a single Walmart discount store. Today, there are thousands of stores, millions of associates and hundreds of millions of customers shopping every week. As I travel around the world, it is always inspiring to see the images and words of Sam Walton in our stores. One quote of Sam's that I really like is this: "I had no vision of the scope of what I would start ... but I always had confidence that as long as we did our work well and were good to our customers, there would be no limit to us."

Looking to the future, I share that optimism. There is no limit to the difference Walmart associates can make for our shareholders, customers and the world around us.

Michael T. Duke Signature

Michael T. Duke
President and Chief Executive Officer
Wal–Mart Stores, Inc.