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Wal-Mart seeks Web users
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June 1, 2001: 1:27 p.m. ET
World's biggest retailer to offer Internet access; cites tighter competition
By Staff Writer John Chartier
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NEW YORK (CNNfn) - Wal-Mart Stores Inc. acknowledged Friday that competition from rival discount store chains is tightening in the slowing economy, and said it would begin offering customers Internet access this fall in order to drive more traffic to its Web site.
Jeanne Jackson, chief executive officer of Walmart.com, the company's e-commerce site, told shareholders at Wal-Mart's (WMT: down $0.03 to $51.72, Research, Estimates) annual meeting in Fayetteville, Ark., Friday that the division planned to offer customers Internet access and instant messaging services for less than $10 a month.
The new service, in partnership with AOL Time Warner's (AOL: up $0.56 to $52.75, Research, Estimates) America Online, is called Wal-Mart Connect, and is set for launch in the fall. AOL Time Warner is the parent company of CNNfn and CNNfn.com.
The plans come as the world's biggest retailer, based in Bentonville, Ark., said Friday it logged $191 billion in sales last year, about 16 percent more than a year ago. But first-quarter profit, which the company reported on May 15, grew just 4 percent, down sharply from the 19 percent growth it posted in the year earlier quarter.
Chief Financial Officer Thomas Schoewe told shareholders that stiffening competition from other discount chains, along with rising layoffs and a slowing economy, contributed to the slower performance. But he pointed out that the company's first-quarter growth was not bad, given the sluggish performance of the Dow Jones Industrial average and the S&P 500.
As of Thursday's close, the Dow was up just 1 percent for the year. The Nasdaq Composite was down 14.6 percent for the year and the S&P 500 was down 4.8 percent.
"Companies are feeling the pressure and they're having to lay off people," Schoewe said. "If you look at business confidence, we're having some of the worst confidence we've seen in 10 years."
But Schoewe added that the demise of competitors Montgomery Ward and Bradlees, both of which went bankrupt in the last year, and restructuring measures being taken at Kmart (KM: down $0.23 to $11.05, Research, Estimates), Sears (S: down $0.22 to $39.66, Research, Estimates), and others, gave Wal-Mart a slight edge in a tough economy.
Retailers have been struggling with profit margins during the last year as swaths of layoffs, rising energy prices, and cooler-than-normal weather dampened consumer demand and confidence. Many retailers have posted monthly sales declines and were forced to offer huge markdowns, which cut into profit despite helping to boost sales.
As the market seesawed, more consumers have turned to the discount chains like Wal-Mart and its chief rivals, Troy, Mich.-based Kmart and Target Corp., (TGT: unchanged at $37.80, Research, Estimates), based in Minneapolis. And the competition to retain customers is rapidly turning fiercer.
"Our competitors are getting better. Across this world our competitors are getting better," Wal-Mart CEO Lee Scott told shareholders at Friday's meeting. "The weaker links are having to drop out because they can't compete. The bar is being raised in this competitive arena so it's on our shoulders to do the right thing in this environment."
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In other action at the meeting, shareholders rejected a resolution calling for stricter measures to clamp down on overseas sweatshops that do business with Wal-Mart.
However, a substantial number, 9 percent, voted in favor of the resolution, which stemmed from a published report last October that Wal-Mart bought Kathie Lee Gifford pocketbooks manufactured at a Chinese plant where workers were routinely beaten and forced to work long hours for pennies a day. 
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