Wal-Mart's Big Goals Are a Huge Challenge


Wal-Mart (WMT) CEO Michael Duke made two audacious comments at the company's annual meeting on Friday. The first is that the company will serve 1 billion customers a week in 20 years' time. The second is that the chain of stores will add 500,000 jobs in the next five years.

Duke may not remember what cost Starbucks (SBUX) Chief Executive Jim Donald his job. In 2006, Donald said his company would eventually have 40,000 stores, well over triple its size then. The recession and more realistic goals made him look like a fool.

Rocky Track Record Overseas

Duke made at least three assumptions when he discussed his goals. The first is that Wal-Mart will continue to grow overseas. Sales outside the U.S. are about 25% of the company's $408 billion in sales. His second assumption is that his company can expand its share in the U.S. And the third is that online sales will grow rapidly.

Duke did not mention that Wal-Mart pulled out of Germany in 2006 with a $1 billion loss. Germany has the world's fifth-largest GDP. The same year, the world's largest retailer sold its South Korean stores and left that market. Wal-Mart has also struggled in Japan for years. In sum, the company's efforts to break into several of the world's largest retail markets have been a failure.

In the U.S., Wal-Mart's same-store sales have begun to shrink. Duke said Wal-Mart will open smaller stores in the future and move into cities. That's assuming Wal-Mart's competition isn't already waiting for it in these areas -- both his large rivals like Target (TGT) and smaller, local retailers.

Strong Web Competition

Wal-Mart's best hope for growth is probably online. It has the second-most-visited retail site in the U.S. after Amazon.com (AMZN), according to comScore. The e-commerce market is getting crowded as the cost of entry into the business drops. Amazon is also a formidable competitor, as are most of Wal-Mart's bricks-and-mortar retail rivals who are also online.

Wal-Mart's sales are up from $316 billion in 2006. That's only an increase of 29%. In the last two years, revenue is only up 8%. Duke's goals are audacious and may be very tough to achieve.