Message from Mr. Sam

This 1986 year is racing by at an unbelievable pace – at least it seems that way to me. Here it is August 10th, with school starting soon again in most all areas with the fall season upon us. Let me use my time and space to review with you how I'm seeing our Company at this time, which will include some of my concerns, as well as my very positive attitude as to our present position of Wal-Mart and the unlimited future opportunities for our Wal-Mart family and our Wal-Mart Stores, Inc.

With July – just completed – and the 2nd quarter soon to be released, it is apparent that even though we've had a respectable 2nd quarter, it was not as good as it should have been, and could have been, in my opinion. It would appear now that our quarter ending July 31 will be up in sales about 43%, but only up in profits in the 32% range. I really had hoped that with our 12% same store sales increases that we'd do better than that, and that we'd be in the 36 to 40% range for net profit for the quarter – only slightly below our sales increase.

The short-fall appears to be in a number of places, and mostly in our expense and overhead areas. So, as you well know in Wal-Mart, if our management and our associates feel that we need to make corrections – they react! And that's what's going on now throughout our Company. We're all getting exercised about all facets of Wal-Mart. From top to bottom – with our associates' help – we'll be looking for new and better ways to run our Wal-Mart Company and still achieve that bottom line most important goal of giving our customers #1 service and value.

We'll look carefully at our General Office areas in regard to the best way to structure our various divisions to give our stores, our store associates, and customers the very most efficient and productive support. We'll do the same for all our other support divisions – Distribution Centers, Transportation, etc. Our objective, long-term, must continue to be to involve and communicate with our associates throughout the Company. Listen to their suggestions. Pass on maximum responsibility to them, and through the process, help them be all that they can be. If that be the case – our Wal-Mart partners will have positive attitudes, they will enjoy their work, and our customers will be feeling that extra good Wal-Mart friendly service every day.

So let's get on with it. Let's tighten up the ship, and all of us do all we can to eliminate unnecessary expense and functions that don't contribute to our overall goals of serving customers better and seeing that they get the very best values on the street.

I say the above, recognizing, as does the retail industry, that we have consistently been #1 in the U.S. in controlling our expenses and offering our customers the very best values at the lowest prices. Even so, with our present opportunities in the marketplace, and realizing the tremendous dedication and capacity of our associate-partners, I feel we can do better, and that this is the time to prove we can, and will! Look at the field of players at this time. TG&Y is being dismantled. Alco is closing some of their stores in our territory. Howards has just announced a decision to shut down their chain or sell it off. Never before have we had such an opportunity to increase our market penetration and market share. We will, if we do our jobs well – making sure we comply with Wal-Mart's fundamental two rules – #1, customer is always right. Rule #2 – if he or she should be wrong, refer to Rule #1.

Yes, some of our competitors have fallen for various reasons. But most of us feel some of our other direct competitors have definitely improved and are getting more difficult to compete with – and I'm referring to Kmart, Venture, Target, and Roses in the general merchandise discount field, as well as some of the various specialty type stores and combination food, drug, and general merchandise units.

Again, as I've said so often – we have so much for which to be thankful, and I've never felt better about our Company and the morale and attitude of our associates throughout Wal-Mart.

This has been too long, so let me end it. As we make our corrections to strengthen and improve our Company, let’s listen carefully to one another, and above all, let's be careful that we don't do anything to jeopardize getting those #1 best values to our stores on time, and seeing that our customers receive #1 service and attention throughout our stores, and especially as they're ready to check out.

Good luck, my friends. The die is cast in this competitive business that we're in. We have to keep improving and changing. Our gross margins for our merchandise must trend down to stay competitive and with it our expenses, too, must be reduced accordingly. Only in that way can we still be a profitable company, with profit to share and with stock that will appreciate. We are blessed to be living in the U.S.A. and to be participating partners of Wal-Mart. Thanks to all of you who care. Good luck.

SAM

P.S. Just a reminder that our Wal-Mart United Way Drive to support the needs of our local communities will soon be underway throughout the nation and our Wal-Mart Country. Let's do all we can to support this very worthwhile charitable program.