Message from Sam Walton
Big K Acquisition – A Major Opportunity For Wal-Mart
My friends, I’d like to cover with you some important aspects of the Big K merger that was just recently announced. First, however, I’d like to comment briefly on our November/December results.
November was another good one – thanks to all of your fine efforts. We were up some 28% in sales, doing $179.8 million and up 9% in comparable stores. For the year to date we’re sitting at +31% total company increase – 34% increase in profits. Again I say to you, and we can point with pride, that we’re definitely swimming against the stream. Most all other retailers are having a real “down” year, and I don’t know any that can rival our numbers. December is also beginning to look better for us. We are carrying fairly heavy inventories, but I must admit I developed a slight case of “butterflies” a week ago when our sales flattened to a 5% same store number. However, last week we again hit a 13% increase on a comparable basis, and sales this week are fairly strong also.
As of now, from all reports we’re getting from our District Managers and Regionals, a great job is being done throughout our Company in zone defense, merchandise presentation, running clean, neat stores - and most importantly – good up-front customer service. So I’m convinced we’ll come through good in December and January. We need to really do a conversion job on these inventories – both in our distribution centers and stores. All of us, in ordering for 1981, need to be especially concerned with improving our merchandise turnover rate but still have the right basics and promotional merchandise, especially with the interest rates skyrocketing about 20% for the first time in history. This would make a good subject for discussion each week with our associates. How can we do it better in 1981?
It is an uncertain economic time, but one that also has created an opportunity for Wal-Mart, and I’m talking about the Big K merger.
Big K, as most of you probably know, is a 116 store discount chain similar to ours, based in Nashville, Tennessee. They have 42 stores in Tennessee, 21 in Kentucky, 21 in Alabama, 5 in Mississippi, 18 in South Carolina, 2 in Missouri, 1 in Arkansas and 6 in Georgia.
I’ll not be able to cover this situation in detail, obviously, as we have only signed a letter of intent as of this time and final agreement has not been reached, and approval is also necessary from the Federal Trade Commission.
I’m excited about our prospects – I’ve had an opportunity to visit their General Office and many of their stores and find some very capable and excellent people in place. I’m certain they’ll be able to help us in many, many ways; in fact, do a great job for our Big K Division and Wal-Mart as we develop our program in those stores.
One of our major stated objectives will be to manage this merger and the conversion of these Big K stores to our Wal-Mart programs and maintain our profitable ongoing Wal-Mart goals and objectives with continued expansion and no dilution in sales momentum and profit. And knowing our Company and the people we have, I’m confident we can do that. What I’m saying is that we’ll continue our present Wal-Mart expansion plans of 60 new stores in 1981, 75 probably in 1982, and lay on top of that program the Big K merger and conversion and do them both correctly and profitably.
Big K this year will do about $290 million in sales and have for the first 9 months lost $4 million in profits. Probably they’ll end the year with about this loss. Their stores are doing only about half the sales volume per square foot that we are, but as we see it, they have excellent locations in the right size towns and markets, and we’re confident once we remodel and set up our merchandising and promotional programs, plus providing the right leadership and people programs, that we can at least double sales and achieve a respectable return on our investment. I hope you feel likewise.
We’ve also agreed that we’ll take some of our best management talent in our Company to head up that transition Big K program. As of now, that will include Paul Carter, our very capable Vice President of Special Divisions, who will head up our Wal-Mart team, Vice President Ray Thomas – Operations, and Vice President Colon Washburn – Merchandising. A few others will be added as needed; however, our avowed objective will be to utilize all the people available in the Big K organization, and as I stated, we’re convinced there’s much talent there.
Another major advantage for us will be the utilization of the 570,000 square foot Big K distribution center located in Nashville and the adjoining real estate. That will be a natural for us as we were planning to build one in that general area by 1982. It is a new facility with excellent equipment and people and should be a tremendous benefit for us.
Lastly, and probably most important advantage for our Company, is the widespread market saturation and coverage these additional stores will provide us. We will, when the conversation is completed, have a very dominant marketing and sales promotion advantage over our competitors, as we can utilize effectively the larger TV stations and newspapers out of Nashville, Huntsville, Alabama and Birmingham, to name only a few of the new areas. We’ll have approximately 50 stores in Tennessee, 35 in Kentucky, 35 in Alabama - which will provide us some kind of a promotional wallop and advertising umbrella in those states!
That is a brief overview of our first major acquisition or merger. We, of course, were very successful with our Mohr-Value acquisition of 17 stores some three years ago, and in checking our records today, we find that we did exactly what we said we would do. In three years’ time we have more than doubled our sales, and more importantly, Mohr-Value stores this year are among the top 30% of our most profitable stores. I believe we have the same opportunity with the Big K Company.
So there you have it, my friends, on the table – as straight as I can tell you. It means, of course, they’re going to be a lot of hard work ahead for all of us to make it come through right. If you haven’t read it, our President, Jack Shewmaker, has also addressed this Big K acquisition subject in this issue, covering some additional points that I’m sure you’ll find interesting.
We’ll also make our share of mistakes as we walk though the various stages of this merger and the necessary corrections will also, I’m sure, be made quickly. But overall, I’m real enthused over the excellent prospects it offers to all of us and our Company, and I’m 100% confident we can plan, manage, and effectively mesh these Big K stores into our Wal-Mart program, and in the end, have it be real good for all the Big K personnel, as well as our Wal0-Mart associates.
We’ll need everybody’s best thought and efforts to carry out this merger successfully, and still keep our Wal-Mart program rolling. Together we can do it, and I know we will!
We’ve received so many wonderful Christmas card and messages from so many of you this year. I wish I could respond individually to you all, but I’m sure you understand that is not possible.
Helen and I thank you for thinking of us and your expressions are sincerely appreciated. How blessed we are to have all you associates in our Wal-Mart Family!
Thanks, and Happy new year to you in 1981. It should be a most challenging and interesting year for all of us in the Wal-Mart World. Good luck!
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