Wal-Mart CEO Says Low Prices, Plant Safety Are Compatible

Wal-Mart Stores Inc. Chief Executive Officer Mike Duke
Wal-Mart Stores Inc. Chief Executive Officer Mike Duke said, “We will not buy from an unsafe factory.” Photographer: Jin Lee/Bloomberg

Wal-Mart Stores Inc. Chief Executive Officer Mike Duke said he sees no conflict between paying low prices to suppliers that source merchandise from overseas and being able to maintain safe conditions at garment factories.

“We will not buy from an unsafe factory,” Duke said in an interview yesterday with Bloomberg LP President and Chief Executive Officer Dan Doctoroff at the New York offices of the Council on Foreign Relations. Bloomberg LP is the parent company of Bloomberg News.

“This is not a price discussion,” Duke said. “This is just a case if a factory is not going to operate with high standards then we will not purchase from that factory, and there’s no discussion about price,” Duke said.

A fire at a Bangladesh factory that made clothes for Wal-Mart killed more than 100 people last month, prompting labor-rights groups to call for the world’s largest retailer and other Western companies to do more to make garment factories safer. Wal-Mart said the factory was not authorized to make its clothes and fired a supplier that was using it.

In a wide-ranging conversation that covered everything from wages paid to workers in U.S. stores to questions about the retailer’s e-commerce, Duke said his company faces high expectations from the public because of its size. Duke also took questions from the audience at the event.

Latest Challenge

The Bangladesh fire was just the latest challenge faced by Wal-Mart overseas. Earlier this year, the U.S. Justice Department and the Securities and Exchange Commission began investigating possible violations of the Foreign Corrupt Practices Act at Wal-Mart’s Mexico unit. Meanwhile, at home, union-backed protesters demanding better pay and benefits have picketed the company’s U.S. stores.

On the Mexico probes, Duke said the company “will take appropriate action upon the conclusion of this investigation.” “We use every experience like this to try to be a better company,” Duke said.

In response, Wal-Mart has spent $30 million revamping its corporate structure. It’s also investigating its operations in Brazil, China and India for possible violations.

The retailer has seen its stock surpass $70 this year for the first time ever after sales improved in the U.S., its largest market. Duke and Bill Simon, head of Wal-Mart U.S., have changed course by returning thousands of items to stores that had been removed and invested in cutting prices to reinforce its slogan of “Save Money. Live Better.”

E-Commerce Regrets

Duke has been reducing prices to lure U.S. shoppers who are still suffering amid sluggish economic growth and high unemployment. Discount chains such as Dollar General Corp. and Dollar Tree Inc. have attracted some of those customers with smaller-format stores that allow for quicker trips and by adding food items.

Duke said since the presidential election, Wal-Mart customers have become increasingly aware of negotiations between President Barack Obama and Congress to avert automatic tax hikes and spending cuts in January and that 15 percent of Wal-Mart customers “are telling us this discussion about the fiscal cliff will affect what they spend on Christmas.”

Asked about his regrets, Duke said he wished Wal-Mart had been more aggressive with e-commerce, where it has faced increasing competition from online retailers such as Amazon.com Inc.

“We should’ve moved faster,” said Duke, who has been in the job for almost four years.

Wal-Mart fell 2.8 percent to $68.94 at the close in New York, the biggest drop in almost four weeks. The shares have gained 15 percent this year.

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