Make That Sale, Mr. Sam Wal-Mart's

By Stephen Koepp

When a Wal-Mart discount store opens in your town -- which could happen soon if it has not already -- keep an eye out for a gray-haired 69-year-old wearing a flannel shirt and khaki pants. He may suddenly appear behind any Wal-Mart checkout counter to help the clerk approve a personal check. Or you may see the same grandfatherly figure driving his red-and-white 1984 Ford pickup through the parking lot, counting customers' cars as he goes. Or he may show up at the loading dock with a bag of doughnuts for a surprised crew of workers. Or, at a new-store opening, he may round up the employees for a pep rally at which he will serve as head cheerleader. "Give me a W! Give me an A!" he will yell, all the way to the last T. "Wal-Mart, we're No. 1!"

Who is this tireless senior citizen? He insists on being addressed as just Sam -- or Mr. Sam, if you must -- but people who have assessed his net worth call him America's richest man. He is Sam Walton, and the fortune he has amassed as founder and chairman of Wal-Mart Stores is estimated at $4.5 billion and growing. But Walton spends virtually no time counting his money, or even bothering to spend it. He is too busy as one of America's most restless and evangelical corporate leaders. Thanks to his uncanny ability to motivate employees and slash expenses, the chain of discount stores Walton started just 25 years ago has become the fastest-growing and most influential force in the retailing industry. "It's the best-managed company I've ever followed, and I've looked at hundreds," says Margaret Gilliam, a vice president at the First Boston investment firm.

Wal-Mart's growth is phenomenal. The company has been able to expand for the past decade at a dizzying annual pace exceeding 35%, more than triple the rate of the retail industry as a whole. Last year Wal-Mart posted profits of $450.1 million on sales of $11.9 billion, up from only $2.4 billion five years earlier. The company, which ranks as the fourth largest U.S. retailer, is poised to supplant the No. 3 chain, J.C. Penney (1986 sales: $14.7 billion), and is moving up fast on the industry behemoths, K mart ($23.8 billion) and Sears ($44.3 billion). This week Wal-Mart plans to open eight more stores in towns ranging from Canon City, Colo., to Hickory, N.C., bringing its total to 1,031.

Right now Sam Walton's company is at a critical turning point as it expands beyond its regional, Sunbelt base to become a truly national presence. Can a folksy company with headquarters in the Ozark hill town of Bentonville, Ark. (pop. 9,900), cater to customers from California to New York? So far, shoppers say yes. The chain has opened stores in 23 states, having recently crossed into the Frost Belt states of Wisconsin, Minnesota and Indiana.

At the same time, Wal-Mart is expanding in other directions. It has opened 52 outlets of Sam's Wholesale Club, which are warehouse-style stores of 100,000 sq. ft., or about 2 1/2 acres, that serve mainly as one-stop suppliers for small businesses. Next, taking a cue from Europe's successful hypermarkets, Walton plans to open a chain of Wal-Mart Supercenters, which will offer consumers everything from groceries to hardware in one sprawling 220,000-sq.-ft. emporium. The first one, a test model, will debut this fall in a Dallas suburb.

Wal-Mart's frenetic growth has made the company a star on Wall Street, where its stock has skyrocketed almost nonstop since it went public in 1970. An original investment in 100 shares, which sold for about $1,650 back then, would be worth more than $700,000 today.

Even so, a first-time visitor to a Wal-Mart store is likely to be underwhelmed initially. The outlets are mostly linoleum floored and arrayed with row upon row of simple racks and counters, punctuated by signs pointing to particular bargains. But the no-frills atmosphere suits the predominantly blue-collar clientele just fine. From shotgun shells to laundry soap, most products are well-known brands at deep discounts. Wal-Mart, unlike many other discount outlets, offers more: well-scrubbed aisles, fully stocked shelves and relentlessly upbeat clerks. "It's attitude," explains Wal-Mart Vice Chairman Jack Shewmaker. "Give me workers with the right attitude."

The fervor among Wal-Mart's 151,000 employees is inspired by a Walton philosophy in which ideas and profits are freely shared. All store employees, even the lowliest shelf stockers, are given the title "associate." Wal-Mart operates a liberal profit-sharing plan (1986 disbursements: $52 million) and offers bonuses for specific accomplishments like reducing pilferage. Workers are exhorted to make suggestions. "Most of the good ideas come from the bottom up," says Wal-Mart President David Glass. "We keep changing a thousand little things."

Wal-Mart now has tremendous momentum, but the founder is still a prime force. The son of an Oklahoma farm-mortgage broker, Walton earned an economics degree from the University of Missouri and joined J.C. Penney in 1940 as an $85-a-month trainee. After serving in the Army, he pooled his savings and borrowed $25,000 to buy a Ben Franklin store in Newport, Ark., in 1945. By the late 1950s he owned more than a dozen similar stores, but decided that the future was in discounting rather than in five-and-dimes. After studying a K mart in Chicago, Walton and his younger brother James, now a company senior vice president, opened the first Wal-Mart Discount City outlet in 1962, in Rogers, Ark. At the turn of the decade his stores had spread to more than 30 locations.

Today visitors to Wal-Mart's plain, red brick offices in Bentonville soon get an insight into how Walton manages to offer such low prices. The company's frugal quarters are outfitted like a bus station, complete with plastic seats. The chairman's office, covered in bargain-basement paneling, is appointed mostly with strewn-about books and computer printouts.

Humility is Wal-Mart's watchword, which filters down from Mr. Sam. The billionaire, whose family owns 38% of the company's stock, lives in Bentonville with his wife Helen in a modest brick-and-wood ranch-style house. Their names are on the mailbox, and it was only a few years ago that they installed a security system. All their children, three sons and a daughter, are grown. Walton typically rises before dawn and eats breakfast at the Ramada Inn coffee shop on his way to work. Along the way he may stop at Barber John Mayhall's for his monthly haircut, for which he pays $5 (no tip). While Bentonville offers few diversions, a favorite Friday-night spot for the Waltons is Fred's Hickory Inn, known for its ribs and cheesecake.

Walton's hobbies always take a backseat to his company. He plays a fine game of tennis, but he reportedly can be easily distracted by canny opponents who bring up the topic of Wal-Mart. Another favorite pastime is quail hunting; Walton often takes his two pointer dogs along with him on his business trips in case any opportunities arise. His only obvious material luxury is a twin- engine Cessna, which he frequently pilots on his constant travels from store to store.

Though Walton has achieved folk-hero status in small-town America, his company has its critics. The country's 100,000 independent manufacturer's representatives are currently incensed at Wal-Mart, claiming that the chain is trying to run them out of business by dealing directly with its suppliers. Meanwhile, Mom-and-pop-store owners contend that Wal-Mart's cut-rate prices have helped wipe out Main Street shopping. In the past, Wal-Mart's conservative management has drawn some flak for being too slow to promote women, which the company says is untrue, and for being too quick to submit to Preacher Jimmy Swaggart's plea to ban rock magazines like Rolling Stone from store racks.

But that just highlights the paradox of Wal-Mart. For all its lingering Bible Belt ways, the company is in most other respects forward thinking. When it comes to technology, Wal-Mart leads the industry. The company is now installing a satellite communications system that will enable a constant stream of sales and inventory data to flow between each store and headquarters. Such information is quickly relayed to ten giant warehouses, which keep the stores well stocked at all times. Every Wal-Mart is within a day's drive of one of these storage depots.

The largest question looming over Wal-Mart is what will happen to the company when Mr. Sam is no longer in charge. The founder, who has a mild form of leukemia, which is now in remission, has gradually turned over day-to-day control to Glass, 51, and Shewmaker, 49, one of whom is likely to become the next chief executive. The titular position of chairman may go to the founder's eldest son, S. Robson Walton, 42, who is at present one of the company's vice chairmen. But Mr. Sam shows no signs of giving up his trademark store visits. For some time to come, Wal-Mart employees will have to be on the lookout for the gray-haired gentleman who loves to exclaim, "Give me a W!"

With reporting by B. Russell Leavitt/Bentonville