Some Wal-Mart Vendors Question Strategy, Survey Says

The majority of Wal-Mart Stores Inc. suppliers say Chief Executive Officer Mike Duke and his managers aren’t explaining their business plans clearly enough, according to a survey.

More than half the 139 suppliers surveyed in a study by recruitment firm Cameron Smith & Associates didn’t agree that “senior leadership is aligned behind a strategic vision that is consistently communicated and well understood by the supplier community.” The Rogers, Arkansas-based group surveyed a small sample of Wal-Mart’s more than 60,000 suppliers.

To win back shoppers, Duke and new U.S. stores chief Bill Simon changed tactics this year and began restoring thousands of products removed during the tenure of former merchandising chief John Fleming. The company has weathered six consecutive quarters of declining sales at U.S. stores open at least a year, and Duke, 61, has projected “positive” sales for this period.

“They are rather frantically returning to past practices by bringing back products and going after their core low-income shopper,” said Leon Nicholas, Cambridge, Massachusetts-based director at consulting firm Kantar Retail, which works with Wal- Mart suppliers. “The big question for a lot of our clients seems to be, ‘Is this going to work?’ So far, it doesn’t seem to be working.”

‘Clear Vision’

“The 139 people polled in this survey cannot accurately represent the more than 60,000 suppliers that we work with,” said David Tovar, a company spokesman. “That said, almost all suppliers will tell you that Wal-Mart has a clear strategic vision and our goal is to make sure it is well understood by absolutely every one of them.”

The survey -- the first of its kind -- was conducted in October and November. Half the suppliers surveyed said they have worked for Wal-Mart for 12 years or more. About two-thirds of respondents come from companies with 10 employees or less based near Wal-Mart’s headquarters. More than 40 percent of suppliers polled sell food and other consumables to Wal-Mart.

Duke has overhauled his management team since taking the helm in February 2009. In June, Simon replaced Eduardo Castro- Wright, who is now running global sourcing and e-commerce, and Charles Holley succeeded Tom Schoewe as chief financial officer Nov. 30. Fleming’s role was split between four senior merchandising executives, and apparel chief Dottie Mattison resigned in July.

‘Lesson’

“I hope Mike Duke takes a lesson from this survey,” said Cameron Smith, founder of the recruiter, which works with Wal- Mart suppliers in and around its Bentonville, Arkansas, headquarters. “There have been closed-door meetings inside Wal- Mart about this.” Smith conducted the survey along with Connecting Northwest Arkansas, a trade publication.

More than half the suppliers deemed “adjusting to shifting personnel” an area of “great concern,” according to the survey. The survey can be accessed at Connecting Northwest Arkansas’ website.

The vendors also said dollar stores like Dollar General Corp. and Family Dollar Stores Inc. posed the single biggest threat to Wal-Mart over the next five years, followed by Target Corp, Kroger Co. and Amazon.com Inc. Drug chains CVS Caremark Corp. and Walgreen Co. were next, followed by Costco Wholesale Corp.

“That really surprised me,” Smith said. “I expected suppliers to say that Target was the No. 1 threat.”

Wal-Mart dropped 64 cents, or 1.2 percent, to $53.77 at 4 p.m. in New York Stock Exchange composite trading. The shares have risen less than 1 percent this year, compared with a 38 increase for Dollar General. Target had risen 21 percent over the same period, while Amazon has gained 36 percent.

To contact the reporter on this story: Matthew Boyle in New York at Mboyle20@bloomberg.net.

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net.

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