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Wal-Mart holds annual meeting; announces $15 billion more in stock buybacks

BY Marianne Wilson

Bentonville, Ark. — Wal-Mart Stores Inc. announced a $15 billion share buyback program at its annual shareholder meeting on Friday. It also said it expects to generate $10 billion in global e-commerce sales by the end of the fiscal year.

The new buyback program replaces the previous $15 billion plan, which had about $712 million remaining under the 2011 authorization.

“Our strong cash flow enabled the company to invest in growth and repurchase over $14 billion of our stock during the last two years,” said Charles Holley, Walmart executive VP and CFO.

The annual meeting, held at the University of Arkansas at Fayetteville’s Bud Walton Arena, included the usual mix of celebrities and entertainment. Hugh Jackman, star of "X-Men" and "Les Miserables," served as the host, and there were performances by singers John Legend and Kelly Clarkson.

The meeting also had a serious side as the chain faces ongoing scrutiny from investors over how it has handled the allegations of bribery regarding its Mexican operations, and some displeasure over its response to the factory building collapse in Bangladesh that killed more than 1,100 garment workers.

The New York City Pension Funds had been vocal about what it called the board’s poor oversight of compliance and lack of overall independence. It said it would vote its more than 5.1 million shares against nine of Wal-Mart’s 14 board nominees — including chairman S. Robson Walton and CEO Mike Duke. However, the vote is largely symbolic as members of the Walton family collectively own just over half of Wal-Mart’s shares.

There were also protests by OUR Walmart, a union-backed group that hopes to get the attention of the Walton family and other shareholders who attend the meeting. The group wants the chain to publicly commit to providing full-time work with a minimum wage of $25,000 a year.

In remarks at meeting, Duke credited associates for the retailer’s financial strength and personally welcomed on stage several dozen associates who he said represented the significant range and number of job and career opportunities offered by Wal-Mart, which is the world’s largest private employer.

"No company provides more opportunity to more people to go from where they are to where they want to be than Walmart," said Duke. "Associates join Walmart for so many different reasons. When it comes to our careers, what we all have in common is that we started somewhere. What matters most is that we get the chance to go as far as hard work and talent will take us."

Duke also highlighted the company’s strong financial results, net sales growth at its operating segments, and management’s confidence in its long-term business strategies.

In his address to shareholders, Robson Walton defended the company’s integrity and the independence of its board.

"We have the finest board of any company," said Walton. "As board members, integrity, transparency and openness guide our decisions."

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Penney’s New Home Makeover

BY Marianne Wilson

J.C. Penney has a lot riding on its new home department makeover. Industry analysts say the revamp, a central element of former CEO Ron Johnson’s plan to transform the chain, is critical to the department store’s future. Home represented 12% of Penney’s sales in 2012, down from 15% in 2011. It was the worst performing category last year.

It’s too early to predict, of course, how the new merchandise will fare with Penney customers. Some of the price points may be too high, particularly the furniture in the Happy Chic by Jonathan Adler collection. The same goes for the furniture in the Design by Conran furniture. While both lines are well designed, I’m just not sure that Penney customers will take to the upmarket prices or the stylings, which may be too sophisticated (Conran) or too whimsically-hip (Adler). As for that infamous “Hitler” tea kettle from the Michael Graves line, it sells for $40 and is on backorder, with a promise ship date on or before the end of August. See what a little viral buzz can do!

One thing customers are going to like is the chain’s renewed emphasis on promotions. To support the launch, Penney is offering 20-40% off on select items throughout the home department, plus an extra 10% off on purchases made June 6-June 9. Customers who sign up for JCP Home text alerts receive a $10 off $30 coupon.

Overall, the influx of the new merchandise into Penney is a breath of fresh air. And the presentation of the brands in the stores is first rate, with updated flooring, accent lighting, custom fixtures, and wider aisles.

In a report entitled “High Hopes for Home: Highlights from JCP’s Home Launch Event,” Citi Research analyst Deborah Weinswig said she was impressed with the product quality of the new home merchandise. And while she noted that many of the brands are offered at the company better/best price points and above the average price point in home, she believes that the return to traditional promotional pricing will help sell-through rates.

In the same report, Weinswig brought up another important point: “With the launch now behind it, JCP can focus on remerchandising the store, rebuilding inventory levels, marketing to loyal customers, and reinvigorating online,” she wrote.


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J.GREEN says:
Jun-10-2013 03:05 pm

Great thoughts Marianne. My concerns are that the "home" department typically performs at a lower sales/square foot productivity than the rest of the store. Is this really where they should be putting their energies? In contrast, I am happy to see JCP spending some money to inform the general public that there are changes occurring!

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Acquisition of Heinz complete

BY CSA STAFF

PITTSBURGH — Berkshire Hathaway and an investment fund affiliated with 3G Capital have completed their acquisition of H.J. Heinz Company.

Heinz shareholders will receive $72.50 in cash for each share of common stock they owned as of the effective time of the merger, without interest and less any applicable withholding taxes. As a result of the completion of the merger, the common stock of Heinz will no longer be listed for trading on the New York Stock Exchange and Heinz expects no further trading after the close of business on June 7.

Bernardo Hees has become CEO of Heinz, effective immediately.

“I am honored today to become Heinz’s seventh CEO in the company’s renowned 144-year history. I look forward to building upon Heinz’s incredible platform and delivering world-class products for all of our consumers around the world, while maintaining the company’s unwavering commitment to quality, safety and superior customer service,” said Hees, regarding his appointment.

Meanwhile, William R. Johnson, who the company credits with having transformed Heinz into a high-performing global leader in the packaged foods industry, has retired as Heinz’s chairman, president and CEO. He was with the company for 31 years — 15 of those years as its CEO. Going forward, Johnson will serve as a part-time advisor to Hees on certain specific industry and strategic non-operating matters.

Heinz also announced that Paulo Basilio has become CFO, and will report directly to Hees.

“Paulo will be an invaluable partner to me as Heinz transitions to a private company, while positioning ourselves for continued domestic and global growth,” added Hees.

Basilio, 38, is a partner at 3G Capital. Previously, he served as CEO of America Latina Logistica from 2010 to September 2012, after having served as ALL’s COO, CFO, commercial officer and analyst. Basilio holds a M.Sc. in economics from Fundacao Getulio Vargas in Brazil.

Berkshire Hathaway and its subsidiaries engage in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services.

3G Capital is a global investment firm focused on long-term value, with a particular emphasis on maximizing the potential of brands and businesses. The firm works in close partnership with management teams at its portfolio companies and places a strong emphasis on recruiting, developing and retaining top-tier talent.

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