1. Annual
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ho
w h DOW!!
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tthe
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MAKING THE
• Strategy pays off
• Asset management
• Shareholder value
• Tech leadership
• Inventory control
PLUS
PLUS
• PEOPLE POWER
• SUPERCENTERS
• GLOBAL GROWTH

2. Table of contents 1 9 9 8
Annual 4 The attributes that made Wal-Mart a
success in the United States are also lead-
LETTER FROM THE PRESIDENT ing to success in the global arena.
¢
4 Growth by design
With a strategy for improving returns on our
investment base, Wal-Mart focuses on customer
and shareholder value.
UP FRONT
6 Letters to Wal-Mart
Our customers don’t just shop at Wal-Mart, they also
let us know how they liked it! Here is a sampling from
our mailbox in 1997.
16 Continuous learning drives the refinements
in merchandising that keep Wal-Mart growing.
7 Giving back to our communities
¢
The Children’s Miracle Network is just one of the
causes that Wal-Mart associates support.
8 People power!
“Our People Make the Difference” — shareholder
value and customer service built on respect for
the individual.
10 The Wal-Mart nobody knows
Only a major real estate and transportation company
could move $118 billion in product and house
825,000 people. And that company is Wal-Mart!
C O V E R R E P O RT: M A K I N G T H E G R A D E
12 People + Product + Price = (Shareholder) VALUE!
1997 was another record-setting year for Wal-Mart,
as we lead the industry in sales and earnings.
14 Managing for results
Improvements in merchandising, asset manage-
ment, inventory control and technology keep
Wal-Mart earnings growing steadily.
16 Engine for earnings
Wal-Mart, Supercenters and SAM’S Club drive
U.S. growth — and refinements in merchandising
are revving the engine.
17 Driving force
Meet the 14 men and women who offer their
diverse business talents and experience to Wal-Mart
as members of our Board of Directors.
18 A world of opportunity
The Wal-Mart Way wins customers worldwide —
and we learn more with each country we serve.
20 Financials
39 Corporate information
2

3. 1 9 9 8
DIRECTORS
Jeronimo Arango
Paul R. Carter
John A. Cooper, Jr.
Stephen Friedman
Stanley C. Gault
David D. Glass
Frederick S. Humphries
E. Stanley Kroenke
Elizabeth A. Sanders
Jack C. Shewmaker
Donald G. Soderquist
Dr. Paula Stern
John T. Walton
S. Robson Walton
S. Robson Walton
CHAIRMAN
OF THE BOARD
¢
Wal-Mart value translates into any culture. CEO, PRESIDENT David D. Glass
Just ask John Evanson of Store 3064 in Oakville,
18 Ontario, Canada. VICE CHAIRMAN, COO Donald G. Soderquist
Paul R. Carter
E X E C U T I V E V P,
P R E S I D E N T-
W A L - M A R T R E A LT Y
EXECUTIVE VP- Bob Connolly
6 Who’s Number One? The customer! MERCHANDISING
Read what they think about Wal-Mart.
¢
E X E C U T I V E V P, C O O - Thomas M. Coughlin
O P E R AT I O N S
WAL-MART STORES
DIVISION
EXECUTIVE VP- David Dible
S P E C I A LT Y D I V I S I O N
Mark Hansen
E X E C U T I V E V P,
-
PRESIDENT
SAM’S CLUB DIVISION
Bob L. Martin
E X E C U T I V E V P,
-
PRESIDENT
I N T E R N AT I O N A L D I V I S I O N
John B. Menzer
E X E C U T I V E V P, C F O
H. Lee Scott
E X E C U T I V E V P,
-
PRESIDENT
WAL-MART STORES
DIVISION
EXECUTIVE VP- Nick White
SUPERCENTER
S E N I O R V P, S E C R E T A R Y - Robert K. Rhoads
GENERAL COUNSEL
S E N I O R V P, F I N A N C E - J.J. Fitzsimmons
TREASURER
Meet the Board of Directors that guides Wal-Mart.
17 Pictured here, Dr. Paula Stern and John Walton.
¢
3

4. LETTER FROM THE PRESIDENT
almost 20%.
Seldom can you count on every-
thing coming together as well as it
did this year. We believe we could
always do better, but we improved
more this year than I can ever
remember in the past. Our results
exceeded our own aggressive
internal goals and the stock market
rewarded us for our accomplish-
ments. As much as I would like to
tell you that the stock price will
increase this year by another 73%,
I can’t. If I did, I am sure some of
you would remind me that there
were years in recent history when
the share price didn’t increase at
all. However, over time our stock
will reflect the results of our
efforts. This year’s increase was a
well-deserved reward for our asso-
ciates and shareholders.
Not many years ago, it was widely
believed in the investment commu-
nity that Wal-Mart was a maturing
company in a maturing industry.
No matter how well we did,
according to many on Wall Street,
our prospects for growth were lim-
ited because we had simply gotten
too big. The “law of large numbers”
David D. Glass, President and Chief Executive Officer would hold us back. I am happy to
say that was not the case.
The Wal-Mart division had an
GROWTH excellent year. Sales increased by
10%, while inventory actually
by design declined. This inventory reduction
was accomplished without reduc-
With a strategy for improving returns on our ing assortment or affecting in-stock
investment base,Wal-Mart focuses on customer and shareholder value. levels. Gross margin improved
through better merchandising,
A without raising prices. Operating
came at some personal cost
s I reflect on the year just
expenses declined as a percentage
though. I promised our team that I
ended, I cannot help but
of sales, without sacrificing service.
would work as a People Greeter in
feel proud of what our
Supercenters, our vehicle for
one of our stores if we exceeded
Wal-Mart associates have accom-
domestic growth, continued its
15% earnings growth. This is a
plished. Fiscal 1998 was another
rapid unit growth while improving
promise I am happy to keep.
record year. Every one of our oper-
profitability. Since we began that
Our focus on asset management
ating divisions increased their
business in 1987, Wal-Mart
continued to produce results, as
sales, earnings and return on
Supercenters have grown to be the
our return on assets improved
assets.
largest hypermarket chain in the
0.6% to 8.5%. We achieved this
Sales increased by $13 billion,
world and one of the largest gro-
improvement while continuing to
or 12%, in fiscal 1998. More
cery retailers in the United States.
invest in the growth of the business
importantly, earnings per share
The Supercenter was not really a
through an aggressive capital
grew by more than 17%, which
new idea but a logical extension of
expenditure program and interna-
combined with our dividend yield,
the discount store. Throughout
tional acquisitions. Further, our
exceeded our 15% total sharehold-
Wal-Mart’s history, we have added
return on equity improved to
er return target. This last result
4

5. We will aggressively expand
Our first international goal was
merchandise categories to provide
with budgeted capital expenditures
to be the dominant retailer in each
a broader assortment and a one-
of approximately $4 billion in the
country in North America. We
stop shopping experience. The
coming year and, at the same time,
accomplished that goal this year.
Supercenter is the next step in
we will look for further opportuni-
Canada had an outstanding year.
those efforts, offering the customer
ties to increase our international
This year’s double-digit sales gains
a full range of general merchandise
presence. Additionally, our cash
allowed us to almost triple sales
and food in one location. The result
flow and earnings growth will
since we acquired 122 Woolco
is a new retail format that competes
allow us to continue our share buy-
stores four years ago. Profits
effectively worldwide with dis-
back with the expectation that we
exceeded even our own estimates,
count stores and grocery stores
will repurchase $2 billion more in
and market share continues to
alike. Acceptance of these stores
stock over the next 12 to 18
grow. With the tender offer
has exceeded our expecta-
months. Despite the law of large
for Cifra shares and
tions, and we plan to add
numbers, we believe that our stat-
merger of the joint
an additional 120 to
ed target of total annual sharehold-
ventures in Mexico,
125 units domestical-
er return of 15% remains quite
we now have a con-
ly in the coming
achievable.
trolling interest in
year.
My congratulations and grati-
Mexico’s largest
The SAM’S Club
tude to our associates for their
retailer. Cifra now
division had a good
sacrifices, dedication and enthusi-
operates stores with a
year, with improve-
asm that translated into one of the
variety of concepts in
ments in both sales and
best years this company ever expe-
every region of Mexico,
earnings. Mark Hansen
rienced. Thanks also to our
ranging from the nation’s largest
joined the talented team at SAM’S
shareholders and customers for
chain of sit-down restaurants to a
Club as president, and together
your support. I truly believe that
softlines department store.
they will reposition the concept for
with the momentum we have, fiscal
Our second goal was to pene-
the 21st century, offering members
1999 will be even better.
trate South America, and our start-
even greater value and service.
up operations in Argentina and
Our enhanced membership bene-
Brazil are progressing as planned.
fits and efforts to define the
Our emerging market focus in Asia
“Millennium Club” will establish
began in China, where we have
SAM’S Club as the best ware-
vs. the combined
good customer acceptance but
house club in the business. I
DJIA** 30
insufficient critical mass, as yet, to
believe Mark and his team will take
DJIA 30
sustain profitability. Finally, on
the concept to a new level in the
Dec. 30, 1997, we completed the
coming year and re-ignite growth
% growth in stock price 1997
acquisition of 21 hypermarkets in
in the SAM’S Club business. 73%
Germany, marking our first entry
If Wal-Mart had been content to
into Europe, one of the largest con-
be just an Arkansas retailer in the
sumer markets in the world.
early days, we probably would not
The year was marked by other
be where we are today. State bor-
notable accomplishments. Return
ders were not barriers, and people
on assets and equity continued to
and ideas moved freely from one
improve as we eliminated $1.4 bil-
area to another. The retailer who
lion from inventories. While the
incorporated the best practices,
23%
financial community assumed the
gathered from various regions of
impact of our asset management
the country, and who offered the
would be on the interest expense
best prices, assortment and service,
line in the financial statements, the
earned the customer. We believe DJIA WAL-MART
effect was even more far-reaching.
the successful retailers of the future
*Dow Jones Industrial Average
Sales increased as we offered cus-
will be those that bring the best of
Allied Signal, Inc., Aluminum Co. of America,
tomers fresher inventory, margins
each nation to today’s consumer. American Express Co., AT&T, Boeing, Caterpillar,
Chevron, Coca-Cola, E.I. DuPont, etc.,
improved as markdowns and
We call it “global learning.” We are Eastman Kodak, Exxon, General Electric,
shrink declined, and expenses
committed to being a successful General Motors, Goodyear Tire & Rubber,
Hewlett-Packard, IBM, International Paper Co.,
decreased as merchandise handling
global retailer and we believe the J.P. Morgan, Phillip Morris Cos., Johnson & Johnson,
McDonald's, Merck, 3M, Procter & Gamble,
was reduced in the stores. All this
attributes that made us successful Sears Roebuck,Travelers Property/Casualty,
allowed us to end the year with
in the United States will also lead Union Carbide, United Technologies,
Wal-Mart, Walt Disney Co.
almost $1.5 billion in cash.
to success internationally.
5

6. UP FRONT
Our customers don’t just shop at Wal-Mart, they also let us know
Letters to Wal-Mart how they liked it! Here is a sampling from our mailbox.
ery was made.
courtesy desk, where my
We were so excited wondering
purse was returned by Regina
what was happening 500 miles
Murphy and Terri Stehley,
away! We called Karen back in two
who found it after looking
hours and learned the associates
through many carts. All my
had just left the store. She had
papers and credit cards were
wrapped the box in plain brown
inside, but all the cash was
paper, put a bow on it with the card,
missing.
and had even sent along a camera
The following Sunday,
to capture the event for us.
I received a call to come to
About 20 minutes later, our
Wal-Mart. To my surprise,
parents called. They said two guys
Regina and Terri gave me an
with Santa hats had just delivered
envelope filled with cash in
Fit for a halo a TV to their home! They were
the amount I lost! They had baked
We want you to know what so excited and surprised. They
chocolate chip cookies and held a
a great lady Claudene Nichols is! weren’t expecting Christmas to come
bake sale for employees so they
(Store 90, Grove, OK). Our son early, and especially delivered by
could return my money!
was in a serious car accident and Wal-Mart.
Terri (domestic department) and
broke his neck, requiring him to Your employees went way
Regina (housewares department)
wear a “halo.” He really needed beyond the call of duty. It would
deserve the highest award Wal-Mart
some shirts that he could easily put have been very easy for Karen to say
can give. I also want to recognize
on and take off. Claudene offered she couldn’t help us. I don’t know
Manager Sam Gortney and all the
to sew them for us. She did a won- the names of the young men who
employees of the Altoona Wal-
derful job and wouldn’t take a played Santa, but they are to be
Mart. I am deeply grateful to all at
penny for all the work! commended for their extra efforts.
that store.
You couldn’t have a better With people always grumbling
Thank you,
employee. We would like to see her about poor customer service, I think
HELEN L. MAURO
nominated for employee of the it’s time to recognize Wal-Mart
HOLLIDAYSBURG, PA
month. employees who put the “Merry” in
Thank you, our Christmas!
Santas with Smileys Sincerely,
MRS. JIM ROUTH
Two weeks ago, I called Wal-Mart
GROVE, OK JEFF, JENNY AND
(Store 1162, Washington, IN) with
LILY ROSE HUNTER
a special request. I was given
BLUE SPRINGS, MO
Assistant Manager Karen Burr. We
were trying to arrange a Christmas
surprise for my husband’s parents
in Washington.
Jeffrey’s parents needed a new
television, and we knew Wal-Mart
had a RCA 26” set on sale. Since we
live in Missouri, we didn’t know
how to get it to them. I asked Karen
if they made deliveries. Not usually,
she replied, but asked what we
Chocolate chips to the rescue!
needed. I explained, and without
I was shopping at Wal-Mart (Store
hesitation she said she had a few
2049, Altoona, PA.) on Tuesday,
associates who could help. I then
Sept. 16. After arriving home,
requested another favor: Would
I discovered I had left my purse
Karen mind putting a big bow on
in a cart outside Wal-Mart.
the box and signing our names to a
My daughter and I immediately
card? She said no problem and she
went back to Wal-Mart, but the
would let us know when the deliv-
cart was not there. We went to the
6

7. Baby Grace, all ready to go home with her
mother, Libby, and grandmother.
five major community outreach
programs. The bulk was $34 million
in Community Matching Grants,
in which the Wal-Mart Foundation
matches funds raised by local stores.
Wal-Mart associates proved that
“Voluntarism Pays,” as the founda-
tion contributed $400,000 to local
charities. $100 was given for each
15 hours of volunteer work per
Giving BACK
quarter contributed by associates.
The giving included $47,220
in Associate Matching Grants as
Wal-Mart matched associates’
donations of $25 to $250 to colleges
of their choice.
As part of America’s Hometown
Leader Program, local stores select-
Wal-Mart associates generate $102 million in gifts in 1997.
ed outstanding teachers - 1,800
across the country - and the foun-
F Their generosity was repaid when
rom the beginning, Sam dation donated $500 to each
Walton believed that each Grace Young was born at just 23 honoree’s school.
Wal-Mart store should reflect weeks, weighing 15 ounces. Wal-Mart invests heavily in the
the values of its customers and Baby Grace, as she’s known in latest technology, and our faith in
community. That’s why local asso- the Wal-Mart family, was the small- the future extends to tomorrow’s
ciates are at the heart of Wal-Mart est baby ever to survive in McLeod leaders, with sponsorship of five
community outreach programs. Children’s Hospital in Florence, college scholarship programs for
Guided by associates, Wal-Mart S.C. State-of-the-art care helped deserving young people.
has helped countless individuals At the local level, each Wal-Mart
her reach five pounds after four
and organizations, from tiny Baby store provides a $1,000 Sam
months in the Neonatal Intensive
Grace, a Children’s Miracle Network Walton Community Scholarship to
Care Unit. Only then was she able
child, to the Cullman, AL schools, one student for his or her freshman
to come home with her mother,
where Distribution Center 6006 year of college. This program, funded
Libby Young, a 12-year Wal-Mart
raised $15,000 to help replace a by the foundation, has awarded
associate at Store 643.
building destroyed by fire. nearly $20 million in scholarships
Companywide, associates and
This emphasis on giving back since 1981.
customers initiated giving of more
has benefited Wal-Mart, as well.
than $63.1 million last year through
It’s no coincidence that the top
stores in sales generally are the
most involved in the community.
$50 million in scholarship contributions
Associates’ involvement is key to
Wal-Mart’s role as the official mass
merchandise sponsor for Children’s Competitive Edge Scholarship
Miracle Network, a group of 170
$5
children’s hospitals. Local stores have Community Scholarship
$1.5
$20
sponsored a variety of activities
over the past decade to raise $104 Foundation Scholarship
million for CMN — $20 million in
$23
1997 alone. In Myrtle Beach, S.C.
Associates Scholarship
(Store 643), associates have done
their part, holding bake sales, fund-
raising meals and shopping sprees.
7

8. UP FRONT
PEOPLE POWER
“Our People Make the Difference” - shareholder value and customer service built
on respect for the individual.
8

9. record level of payout was award-
ong before “empowerment”
L ed to associates. We believe there is
became a corporate buzz-
a direct correlation between record
word, Wal-Mart associates
incentive award levels and the
were empowered, not just
company’s record-setting perfor-
allowed, but encouraged to make
mance last year.
decisions, take risks and, yes, even
Even traditional associate bene-
make mistakes in the cause of cus-
fits also show the Wal-Mart touch.
tomer service.
They provide the best available ser-
Who makes the customer
vice at the lowest possible price.
Number One? “Our People Make
“We have health plans to fit any-
the Difference!”
one’s budget,” said Tom Emerick,
At Wal-Mart, our people make
Vice President of Benefits. “I’m
the difference for each other, too.
proud to say that we have a health
“Our division’s mission for our
plan, with no lifetime caps. Very few
associates is to ‘Get’ them, ‘Keep’
benefit plans will cover a major
them and ‘Grow’ them,” said
health problem as well as ours.
Coleman Peterson, Senior Vice
“And yet, thanks to diligent nego-
President of the People Division.
tiations with providers and the great
“Everything we do comes out of
work our associates do in control-
our basic Wal-Mart principle of
ling costs, our total cost of benefits is
‘Respect for the individual.’
below industry averages.”
“And when we put all that
Perhaps the biggest benefit
together, it translates into great ser-
news in fiscal 1998 came when we
vice to the customer.”
rolled out our 401(k) savings plan,
In addition to an industry-lead-
which has been so well received
ing array of health and other
that we expect it to become the
benefits, Wal-Mart offers associ-
largest such plan, in number of
ates a variety of incentive pro-
participants, in the United States.
grams. Most of these incentives are
The 401(k) plan, which provides
based directly on the performance
a tax-deferred opportunity to save
of an associate’s store or division -
for retirement, came about after
improvement in profits, reduction
associates suggested it in Wal-Mart’s
in shrink, etc. Virtually all Wal-
“Grass Roots” communications pro-
Mart associates are eligible for
gram. This year, Wal-Mart divided
some type of performance-based
the company’s annual contribution
incentive plan.
equally between the Profit Sharing
From an associate’s point of
and 401(k) plans.
view, the equation is obvious:
Nowhere is the link between
Better service to the customer
associates’ interests and the suc-
means better profits, which means
cess of the shareholders more visi-
higher incentives and increased
ble than in the Profit Sharing pro-
shareholder value. And yes, Wal-
gram, which has 70 percent of its
Mart associates care deeply about
assets invested in Wal-Mart stock.
shareholder value, because so
“Thanks to the 73 percent increase
many are shareholders themselves.
in the stock price, the Profit
Our associates are kept informed
Sharing plan’s assets increased 57
about the stock price, so everyone
percent in the last year,” said Chief
understands the connection
Financial Officer John Menzer.
between Wal-Mart’s performance
That’s what can happen when
and their own financial success.
Wal-Mart people, the best in the
Last year, the total company and
retail industry, focus on creating
every division but one met or
value for customers, shareholders
exceeded its maximum profit
and the company as a whole.
improvement goals. As a result, a
Coleman Peterson (foreground), Senior Vice President, People Division, with the people he serves.
9

10. UP FRONT
The
Nobody Knows
Only a major real estate and transportation company could move $118 billion in product and
house 825,000 people. And that company is Wal-Mart!
Wal-Mart expects to add, relocate
centers and SAM’S Club units
A roof over our heads
or expand about 200 stores a year.
across the United States. Decisions
W
alk in any Wal-Mart
Supercenters will lead Wal-Mart’s
on new stores take into account sev-
store and you’re imme-
domestic growth in the future, which
eral factors: potential market satura-
diately drawn to the
means an even larger role for Wal-
tion, competition, expansion or relo-
friendly associates, the attractive dis-
Mart Realty. As the division rolls out
cation alternatives, total capital
plays and cheery Mr. Smiley ( )
new Supercenter prototypes (rang-
expenditure, cash-on-cash incre-
signs. Wal-Mart strives to make
ing from 110,000 to 220,000 square
mental rate of return and a market-
shopping enjoyable and convenient,
feet), it also must find uses for exist-
ing plan for the existing real estate if
even as it offers the lowest prices on
ing relocated stores after they are
the project involves relocation.
items for every member of the family.
closed.
With about 310 million square
Part of Wal-Mart’s formula for
In the past four years, Wal-Mart
feet of property, Wal-Mart Realty
success is the convenient location
Realty has implemented an aggres-
is the largest owner and manager of
of its more than 2,800 U.S. operat-
sive marketing plan for once-occu-
retail space in the country; far larg-
ing units, with easy access to major
pied stores. Its goal: sell or lease
er than the nation’s next-largest
highways and ample parking. In
the unused space.
shopping center manager.
addition, each store has roomy
In the latest fiscal year, Wal-Mart
And Wal-Mart’s real estate hold-
aisles and abundant space for dis-
Realty leased or sold more than 10
ings will only continue to grow. The
plays of items as varied as cook-
million square feet of once-occu-
company added, relocated or
ware, tents and sneakers.
pied space. Some non-retail uses
expanded 147 stores in the fiscal
A little-known division of our
include call centers, light manufac-
year ended January 1998 and
company, Wal-Mart Realty Co.,
turing, storage, physicians’ offices,
plans 180 to 200 more in the year
selects and manages the sites for
family entertainment and commu-
ending January 1999. In the future,
Wal-Mart discount stores, Super-
10

11. nity centers, all of which help cre-
ate jobs in the local community.
“Wal-Mart will accelerate its
aggressive strategy to identify uses
for once-occupied properties as it
plans a significant number of
store relocations in the future,”
said Jim Vawter, Director of Finan-
cial Management for Wal-Mart
Realty.
Regardless of whether it is
building or relocating, the realty
company’s most important goal,
like that of all other Wal-Mart divi-
sions and each Wal-Mart associate,
is to provide a solid return on
investment. The project must gen-
erate acceptable returns for our
company, or it won’t get off the
ground.
Pictured at left, 18-wheelers stand ready at the Wal-Mart Distribution Center in Ottawa, KS. Above, Wal-Mart
Realty’s marketing led to the reuse of a closed SAM’S Club building (inset) as this Florida Mercedes dealership.
Carrying the load
Anywhere you travel along the
drivers often help strangers along-
million miles last year as 3,800
highways and byways of America,
side the road by changing tires,
drivers made more than 900,000
it’s no surprise to see a tractor-trail-
driving stranded motorists to service
deliveries.
er rig painted with the familiar blue
stations or offering the use of cellular
Just as impressive as these
Wal-Mart logo. With 3,300 trucks,
telephones to call for help. In the
statistics is the division’s safety
Wal-Mart’s company-owned truck
Wal-Mart tradition of voluntarism
record. Last year, Wal-Mart drivers
fleet is among the nation’s largest –
and community service, our drivers
averaged 1.2 million miles without
with dispatch locations from Oregon
help out because they want to, not
an accident, an enviable achieve-
to New Hampshire to Florida to “all
because they have to.
ment for any transportation com-
over,” said Larry Duff, Vice
We recognize drivers’ good
pany. That means Wal-Mart dri-
President of Transportation.
deeds with the “Good Sam” award.
vers’ safety record is far superior
“We’re a pretty good-sized trans-
The award, a ballcap with a halo
when compared with the national
portation company in our own
around it, has a double meaning:
average.
right,” Duff said. “But we’re obvi-
It honors our founder, Mr. Sam,
Wal-Mart drivers are the epitome
ously in the retail business, a point
and our “Good Samaritans” of the
of our company’s belief in giving
we continue to make clear.”
roadways as well.
back to our communities. Our
The Wal-Mart fleet logged 455
Wal-Mart hires only experienced
drivers, with at least 300,000
Wal-Mart to the moon and back accident-free miles and no major
traffic violations. In trucking
industry terms, Wal-Mart offers a
premium driving job, which allows
drivers to be home frequently and
does not require them to load and
unload trucks.
The truck fleet is the visible link
between stores and a critical distri-
bution network. Combined, these
are the associates who ensure that
every item in our stores arrives in
Wal-Mart trucks traveled 455 million miles (in the U.S.) in 1997.
good shape and on time, which
At a distance of 238,857 miles from the earth to the moon,
provides Wal-Mart with a compet-
Wal-Mart drivers could have gone from the earth to the moon --
itive advantage in delivering mer-
and back! -- 952 and a half times.
chandise to our customers.
11

12. C O V E R R E P O R T: M A K I N G T H E G R A D E
(shareholder)
VALUE!
Fiscal 1998 was another record-setting year for Wal-Mart as we led the industry in sales and earnings.
1997, Wal-Mart followed up by
magine a company with rev-
I making 1998 the biggest year in its
enues of nearly $120 billion.
SHORTHAND history, setting another sales record
This hypothetical company is
with revenues of $118 billion.
the largest in its industry -
When Wal-Mart first went
Not only did Wal-Mart extend
not just in the United States, but in
public, a foresighted investor
its standing as the largest retailer in
the world.
could have bought 100 shares
the world, but our fiscal 1998
How likely is it that this company
of the stock for $1,650.
increase in sales ($13.1 billion), by
could continue to be a growth stock?
Today, that investor’s 100
itself, would make Wal-Mart the
Not very, the conventional wisdom
shares would have grown
ninth-largest retailer in the nation.
would respond - but then, Wal-Mart
to 102,400 shares, worth more
than $5.1 million, for an “Pound for pound in fiscal 1998,
has never paid much attention to con-
average gain of more than we had the best year in the history
ventional wisdom.
$180,000 per year. of the company,” said David Glass,
After passing the milestone of
President and Chief Executive
$100 billion in revenues in fiscal
12

13. arrived at the level we are always
disciplined financial management,
Officer of Wal-Mart Stores, Inc.
striving to achieve.”
have combined to produce
The investment community sat
Wal-Mart’s dedication to value -
improved results.”
up and took notice. Analyst after
for our customers, our associates
By concentrating on the basics
analyst has given Wal-Mart ratings
and our shareholders - has pro-
of its business, Wal-Mart continues
of “buy” (Credit Suisse First
duced what Don Soderquist, Vice
to build shareholder value.
Boston Corp. and Genesis
Chairman and Chief Operating
Wal-Mart’s growth, in the future
Merchant Group) or “strong buy”
Officer, calls “the most incredible
as well as the past, is based ona tight
(Salomon Brothers).
story ever told in American
focus on the Wal-Mart equation:
No doubt the largest single
business.”
“People + Product + Price =
Wal-Mart investor in fiscal
When Wal-Mart first went pub-
VALUE!”
1998 was Wal-Mart
lic, in October 1970, a foresighted
H. Lee Scott Jr.,
itself. In a move to
investor could have bought 100
President and CEO of
improve shareholder
shares of the stock for $1,650.
the Wal-Mart Stores
value, the Board of
Today, that investor’s 100 shares
Division, identified
Directors autho-
would have grown to 102,400
four key legacies of
rized a $2 billion
shares, worth more than $5.1 mil-
Wal-Mart Founder
share repurchase
lion at Wal-Mart’s recent closing
Sam Walton that contin-
program. In March
price of 50, for an average gain of
ue to guide the company’s
1998, management
more than $180,000 per year. In
quest for ever-greater value:
expanded the share repur-
addition, that holding would have
1) Every Day Low Prices (EDLP)
chase program to the level of $2
paid $27,000 in dividends in 1997.
2) Customer Service
billion over the next 12 to 18
“This is a long-term game,” Glass
3) Leadership
months.
said. “We don’t have any short-
4) Change
“Our share repurchase program
term plans at Wal-Mart.
“We have never been afraid of
really sends a message of confi-
Everything we do is designed to
change,” Scott said, noting that
dence in the company to Wall
build shareholder value over the
Mr. Sam was always willing to take
Street,” said Executive Vice
long haul. Our opportunities are
risks for the sake of change.
President and Chief Financial
unparalleled in the history of retail-
“At Wal-Mart, we are always
Officer John Menzer, “and it was a
ing because of where we are now,
challenging ourselves to continue
great investment for us, too. We
and the capability and determina-
to improve, because we can’t allow
started buying in the low 20s, and
tion we have to keep getting
ourselves to become complacent,”
the stock ended up rising 73 percent
better.”
Scott said. “We have not yet
in the last calendar year. Wal-Mart
had the second-highest return to
shareholders among the 30 blue-
chip stocks that make up the Dow Sales (in billions)
Jones Industrial Average.”
Wal-Mart shareholders also saw $160
an immediate increase in their
returns in fiscal 1998 when the div-
140
idend was increased by 29 percent.
$118
Combine those actions with
120 $105
Wal-Mart’s ongoing drive to do
$94
business better, increasing profits
100 $83
while managing our capital, and
management believes the company
$67
80
is on track to achieve its goal of 15 $56
percent total annual shareholder
60 $44
returns. Analysts agree.
“Wal-Mart’s improved execu-
40
tion is more than simply a focus on
improving the return on invest- 20
ment,” Analyst Michael Exstein of
Credit Suisse First Boston wrote in 0
92 93 94 95 96 97 98
late 1997. “Instead, a number of ini-
Fiscal year
tiatives, including merchandising
and operational changes and more
13

14. C O V E R R E P O R T: M A K I N G T H E G R A D E
Now, associates who spent their
days filling out forms can spend
that time serving customers.
This kind of improved efficiency
at the individual level can be seen
every day among 825,000 Wal-Mart
associates worldwide. In the stores,
where the rubber meets the retail
road, Wal-Mart customers benefit
directly from the company’s tight
focus on continuing to improve its
operating strategy.
“Focus is the key,” said Thomas
M. Coughlin, Wal-Mart’s Executive
Vice President of Operations. “As a
company, we have to stay very
intense about the things that are
most important in our business -
Managing
our customers, our associates and
our shareholders, who often are
one and the same person.”
In the stores, where strategy
rolls up its sleeves and goes to
for Results work, some of our most visible
strategic initiatives include the
improved management of assets
Improvements in asset management, inventory control and and inventory, stronger-than-ever
merchandising initiatives and con-
technology will keep Wal-Mart earnings growing steadily.
tinuous development of informa-
T
here was a time when
Wal-Mart associates, like
their counterparts at other
retailers, spent much of their time
simply trying to keep track of
inventory. They manually counted
items and filled out endless order
forms in the hope that, eventually,
the paper trail would lead the right
products back to their shelves.
But today, thanks to Wal-Mart’s
industry-leading information tech-
nology, computers handle most of
those chores, far faster and more
efficiently than a paper-based sys-
tem. Wal-Mart leads the retail
industry with its
SHORTHAND version of a “just in
time” supply sys-
Despite a 12 percent increase tem in which
in sales in 1998, the company computers track
saw only a 4 percent increase every product and
in inventories, saving about
automatically
$1.4 billion. This makes more
alert warehouses
capital available for
when it’s time
productive uses. Top photo: Bobby Martin, President of the International Division, and Mark Hansen, President of
to restock the
SAM’S Club. Lower photo: H. Lee Scott Jr., President of the Wal-Mart Stores Division,
shelves.
and Thomas M. Coughlin, Executive Vice President of Operations.
14

15. tion technology. These initiatives
FISCAL 1998 END OF
show their value not only in the
YEAR STORE COUNTS
financial results of fiscal 1998, but
are designed to continue to deliver
Supercenters
Discount Stores SAM'S Club
improved results, now and in the
future.
Alabama 50 27 8 16 0
Alberta 0
In turn, greater efficiency in the
Alaska 0 3
3 12 0
British Columbia 0
stores will have a direct impact on
Arizona 34 0 7 9 0
Manitoba 0
Wal-Mart’s value to shareholders.
Arkansas 50 27 4 4 0
New Brunswick 0
An example of how Wal-Mart’s
California 100 0 24 7 0
Newfoundland 0
operational improvements build
Colorado 31 5 10 7 0
Nova Scotia 0
returns to investors: Despite a 12
Connecticut 14 0 3 1 0
NW Territories 0
percent increase in sales in 1998, the
Delaware 1 1
2 52 0
Ontario 0
company saw only a 4 percent
Florida 102 33 31 28 0
Quebec 0
increase in inventories, saving
Georgia 62 25 16 8 0
Saskatchewan 0
about $1.4 billion. This makes
Hawaii 0 1
5 144 0 0
CANADA TOTAL
more capital available for other
Idaho 0 1
9
productive uses. 6
0 3
Argentina
Illinois 95 11 24
According to Bob Connolly, 5
0 3
Brazil
Indiana 60 15 14
Executive Vice President of 27 28
Mexico 347*
Iowa 43 2 7
Merchandising, there are four keys 0
9 5
Puerto Rico
Kansas 40 8 5
to this dramatic improvement in 2
0 1
China
Kentucky 45 23 5
inventory management: 21
0 0
Germany
Louisiana 56 19 9
1) Systematic reduction of un-
Maine 19 0 3 500 61 40
INT'L. TOTAL
productive inventory
Maryland 22 1 10
2) Reduction of orders by 15 *Includes 36 Superamas,
Massachusetts 27 0 3 62 Bodegas, 33 Aurreras,
percent, enabling stores to 178 Vips and 30 Suburbias
Michigan 45 0 21
manage their own inventory
Minnesota 34 0 9
Discount Stores
3) Reduced pack sizes across
Mississippi 42 14 4
many categories
Missouri 79 30 12
4) Timely markdowns
Montana 0 1
9
Rather than blindly slashing
Nebraska 13 5 3 U.S. INT'L.
inventory, Wal-Mart has used the
Nevada 13 0 2
data gathered by technology to
New Hampshire 17 0 4
make more inventory available in
New Jersey 16 0 6
the key items that customers want
New Mexico 16 3 3
most, while reducing inventories
New York 51 5 18
overall. Supercenters
North Carolina 78 8 14
This is where today’s information
North Dakota 0 2
8
technology meets merchandising.
Ohio 77 4 23
Continuous learning has been a
Oklahoma 57 21 6
constant thread in Wal-Mart’s his- U.S. INT'L.
Oregon 23 0 0
tory, and with modern technology
Pennsylvania 49 12 18
for understanding what customers
Rhode Island 0 1
6
do in the store, we have been able
South Carolina 41 12 9
to focus more precisely on serving
South Dakota 0 2
8
their needs.
Tennessee 57 30 11 SAM'S Club
Wal-Mart’s record-breaking per-
Texas 169 72 52
formance in fiscal 1998 was, as
Utah 14 0 5
Coughlin puts it, a matter of focus.
Vermont 0 0
3
By focusing simultaneously on rais-
Virginia 31 21 10 U.S. INT'L.
ing profits and restraining expenses,
Washington 20 0 2
our results show what can happen
West Virginia 12 6 3
when we combine inventory man-
Wisconsin 55 1 11
agement, leading-edge technology
Wyoming 0 2
9
and increased financial discipline.
U.S. TOTAL 1,921 441 443 2,421 502 483
GRAND TOTAL
GRAND TOTAL
15