FOOL PLATE SPECIAL
An Investment Opinion
Big Changes at Big Retail
By
Dave Marino-Nachison (TMF Braden)
January 14, 2000
Two of America's top broad-line retail companies, Wal-Mart (NYSE: WMT) and Dayton Hudson (NYSE: DH), closed out the week with interesting announcements that aren't necessarily earthshaking today but should bear watching in the future.
Wal-Mart's first. The world's largest retailer said CEO President David Glass will step down from his posts, effective immediately, after 12 years in the driver's seat and more than twice that with the company. He won't be leaving the company completely, though, as he'll remain chairman of the board's executive committee for at least a year.
Moving in is COO and Vice Chairman Lee Scott, 50, who has spent most of his 20-year history with Wal-Mart working in logistics. Distribution is generally considered one of, if not the, biggest tactical advantage Wal-Mart holds over its competitors, an increasingly impressive feat as the company has grown exponentially, and internationally, in recent years. It should also serve the company well as it continues its aggressive move into the Internet space.
Scott now becomes the second man to step where the legendary Sam Walton, founder of the Bentonville, Arkansas, steamroller, once treaded. "The key to Wal-Mart is our people," Chairman Rob Walton said. He'll keep his post. "We have no doubt that the same collaborative culture which has always driven the success of our company and served our leaders so well will also help make Lee Scott successful in his new role."
Investors didn't react strongly to the news this morning, probably in part because of Scott's long and impressive experience with the company but also because change is a lot less unsettling when a company has a succession plan ready to go. It certainly appears that way with Wal-Mart today.
Also interesting, if not pretty much expected, was Thursday's news that Dayton Hudson will change its name to Target Corp. when the company's new fiscal year begins Jan. 30. A ticker symbol change to "TGT" will be included.
It's just semantics, but it reflects the company's primary focus -- it's Wal-Mart-like and more than 900-store Target chain, which accounts for about three-fourths of the company's pre-tax profit and sales. Mervyn's, Dayton's, Marshall Field's, and Hudson's make up the rest and the company stresses that the change won't mean the other lines will fall by the wayside. "These divisions are important contributors to the company now and as we move forward as Target Corporation," said Chairman and CEO Bob Ulrich.
But there's no denying the company's focus on growing the Target chain; 70 net new Targets are planned for 2000. Despite Ulrich's words, some observers believe this is a sign that the company is preparing to eventually cut away at least some of its non-Target divisions, since the company's stated goal is annual earnings growth of at least 15% annually and Target is by far the retailer's strongest operation.
Anticipation of that is probably why the shares moved a bit yesterday and added a point or so this morning. Still, for the time being it's just a name change -- just as, for the time being, Wal-Mart appears to be doing little more than handing stewardship over to another qualified captain.
Related Links:
Wal-Mart Page
Wal-Mart Message Board
Dayton Hudson Page
Dayton Hudson Message Board
