Wal-Mart Strikes Back

This is a partial transcript from "Your World with Neil Cavuto," January 13, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: After getting battered in the press, Wal-Mart (search) takes on the press.

For years now we have certainly heard enough from the lawyers going after them. Thursday, Wal-Mart responds to them. In full page ads taken out around the country, Wal-Mart boss Lee Scott tries to set the record straight.

I asked him earlier why the heck it took him this long.

(BEGIN VIDEOTAPE)

CAVUTO: Mr. Scott. Welcome. Good to have you.

LEE SCOTT, PRESIDENT AND CEO OF WAL-MART (WMT): It's good to be here and it's Lee, please.

CAVUTO: Oh. I'm flattered. I'm Neil. Because Cavuto is too hard to pronounce.

Let me ask you, why are you doing this now?

SCOTT: Well, I think just what the ad says. We want to set the record straight and talk about our associates and talk about our benefits, our wages and the opportunity we have at Wal-Mart (search) and what we mean to the communities that we're in.

CAVUTO: But this has been going on for years now. So what made you wake up and say, "Gee, I gotta do something!"?

SCOTT: Well, for me, in some ways the catalyst was really the Friday after Thanksgiving. And we just weren't as aggressive as maybe we could have been on that day and as you think about it, I thought it doesn't just apply to merchandise, pricing and other things, it really applies to our outreach and communication with the outside world. For too long we have allowed people to say things about us that are just not true.

CAVUTO: Why didn't you answer it earlier in a public venue?

SCOTT: Oh, lack of sophistication. And we've always believed that what we do is take care of associates, take care of customers, that ultimately we'll be fine. And in some ways we let the momentum build against us and we allowed people to get on television and pontificate and say things that weren't true and you didn't hear any of our critics get on TV and say that's Wal-Mart's wage is about twice the minimum wage and that Wal-Mart has health insurance benefits for their people and 401Ks (search).

CAVUTO: But actually I did hear some of them get on television and say that in the case of individual store managers, they willy-nilly fix some employees' hours, take benefits away, have them work days without pay. That's the kind of stuff I heard. Was that true?

SCOTT: And it's going to take Lee Scott to be on TV to say every associate knows, because right by the time clock is a big sign that says if your manager does something with your pay that is inappropriate, asks you to work hours that they're not going to pay you for, you call this number and we'll fix it. People aren't going to talk about it except me and that is communication and the visits I have personally had in our meetings with our store managers saying if you do these things you will be terminated, period.

CAVUTO: But you also give your managers, Lee, do you not, great freedom to make their on decisions and moves. Is it possible, you've got what, 3,600 stores in just this country, that you had a couple of bad apples that were doing that kind of stuff?

SCOTT: I would guess that any criticism about Wal-Mart could have some element of truth with 1,500,000 people. The thing you can ensure in my job is that when those things come to light that you will deal with them effectively and that you will aggressively reach out to your associates to make sure that they do come to light and because once your associates know that you will stand up for what is right, then when they see a wrong occur, they are more likely to contact you and we have a very aggressive program underway to make sure — and have had now for the last couple of years, including taking our systems group and forcing back systems on the back side to better help us understand what people are doing.

CAVUTO: But sir, I guess the read is where there's smoke, there's got to be fire and that's the media's knee jerk reaction. When they hear cases of illegal immigrant janitors who claim that the company violated labor laws. When they hear better than 1.6 million female past and present workers claiming sex discrimination ...

SCOTT: Excuse me just a second, but I believe it is six who are claiming discrimination and they would like to represent 1.6 million. There's a big difference.

CAVUTO: You're absolutely right. But the fact that they are looking at a class-action suit of that size and feel confident that they can get it, do you think that there's a trickle of truth to some of these?

SCOTT: I think I have said that. If you had all the small businesses who employed 1.5 million people collectively, would there be individual instances of issues? I can guarantee there would be, the same as there are at Wal-Mart. Is there a trickle of truth in many of the criticism. Yes sir.

CAVUTO: So even the same among minority truckers who feel that they were disadvantaged at your company, or is this just people glomming on because they think it's lawsuit heaven?

SCOTT: Well, I think you have to be careful, because when you lump all of that together, does it mean because there is an element of truth in one thing, that there is then truth in all of it? Or if you have one store manager that makes a bad decision, is that indicative that that is somehow what your company represents? No.

If you put a bad program on FOX, if it's a lousy program, does it mean the entire network is lousy? I don't think so. I just think that it's maybe fashionable today to try to take individual actions and individual failures and take the broadest possible brush and try to paint a company. It's not appropriate, but I think it's fashionable. I think we have things that we're terribly proud of. I'm proud of the fact that we have the benefits that we have and that we have the wages we have and the fact that 76 percent of our management team started as hourly associates in Wal-Mart stores, pushing carts, checking people out and have built a management career without having a requirement of a college degree or anything else, but have been able to move up the economic ladder because the opportunities provided to them.

CAVUTO: What do you think of trial lawyers? Because they're the ones pushing this.

SCOTT: I don't think of trial lawyers.

CAVUTO: You must say some colorful things.

SCOTT: I do not. I do try to watch "Law & Order" as many times as possible...

CAVUTO: Be careful, that's an NBC show.

SCOTT: Well, it's also on every other network.

CAVUTO: That's true. Very good point. But they are the ones who are pouncing on these opportunities and saying that Wal-Mart is vulnerable and the reason why your stock has essentially not budged dramatically over the last few years is this pall that's over you. Were you ever, or are you ever tempted just to settle nuisance suits to move on?

SCOTT: No.

CAVUTO: Is this your way of saying you will never settle any of these?

SCOTT: That's different. You said nuisance suits — where we're wrong. Where we have been incorrect in what we have done, then I think we have an obligation to settle. Where we're not wrong or where the cost of settling is so much that it is totally disproportionate to the harm or the error that we made, we're not going to settle...

CAVUTO: Let me ask you. On the female issue and on the minority issue, where there could be potential class action status, you're not interested in settling.

SCOTT: It wouldn't be appropriate for me on this show to discuss any of those cases. It would be appropriate for you, but not for me.

CAVUTO: OK. What do you make of the fact that — I can remember, I'm probably showing my age — in the days of Sam Walton, 20 years ago when Wal-Mart was just taking off, but now you have become this behemoth where small town guys protest the big store coming in. Customers love you, they still feel they get the best deals from you but you lost that sort of magic luster you had. What's happened?

SCOTT: Oh, I think in some ways being the underdog — America is a country that loves the underdog. I think in some ways, too, people are skeptical of size and I think in other ways. Sitting in Bentonville, Arkansas and believing if you took care of the associates and you took care of the customers that the world would leave you alone and just respect you, and not doing this kind of thing. Not doing the outreach. Not telling our story. I think in some ways we have allowed other people to set the agenda. Other people to define who we are.

CAVUTO: You've been on the job since what, 2000, right? Now, I know you're a very low-key kind of guy, but if this were me — and I'm Italian, OK? — I would have a temper tantrum. I would just say, "Hey you, gavone, what are you saying about me? This is wrong, it's not true." So why did you let it fester to the point that now it's become this huge media campaign years after the fact?

SCOTT: Well, I think that's a fair question. Probably a fair criticism. On the other hand, we've done a number of things, whether it be television programs with different people, allowed people more access into Wal-Mart to try to get the message out but maybe it's unfair to the media but there is just not very much of a positive story about the fact that we employ 1.2 million people in America and we provide these opportunities.

CAVUTO: Well does it bug that you accounted for the lion's share of retail hiring in this country among major conglomerates and you don't get an etch of credit for that?

SCOTT: No. Because I didn't expect to get an etch of credit for that.

CAVUTO: Well, let me be a little darn impolitic. It's one thing not to get a thank you. But day in and day out in the press, you got a screw you.

SCOTT: I guess I don't see it that way. Because in our clippings I see a lot of articles that are very positive about all the stores that are voted by local communities. You know, we opened a record number of stores last year. We will open a record number of stores this year. We had record sales this year. We had double digit earnings this year. We are beating Wall Street's expectations.

CAVUTO: But Wall Street's so tough on you.

SCOTT: Oh, I think in some ways when you start at a multiple of 59 times earnings, you have to assume that you're going to have some multiple contraction as the market changes.

CAVUTO: But you also play a part, right? As soon as you don't meet your lofty estimates, you come off a little bit on those, the Street punishes you. At first it looks you had a good holiday shopping season, then it wasn't a great holiday shopping season. The management itself, sir, seems to give a split read to Wall Street. And then Wall Street analysts turn around and tell me, "We don't know what their headset is."

SCOTT: I don't know. I mean, we report sales every week. I wish we didn't. In fact, we have an ongoing debate in the company about how helpful that is. Some people believe that it discourages volatility...

CAVUTO: Why don't you stop it?

SCOTT: You have to be a little careful because when you back off of that, the first thing that then comes out is, "What are you hiding?" And so if you're going to back off you have to do it at the right time, so we're kind of working through that.

CAVUTO: But you had a battleaxe successful holiday shopping period but the view seemed to be that you had to cut prices a lot to make that happen. Is that true?

SCOTT: No.

CAVUTO: So you felt it was a successful Christmas season?

SCOTT: I thought it was a solid Christmas season. I didn't think it was as good as we could have had. Retailing, it's always true that there is some items that I wish we had a lot more of like the iPod and there is some items I wish we had a lot less of.

CAVUTO: Will you push more tech items in the future? I know it's been dicey for Circuit City, but will you push more of those in the future?

SCOTT: We already do.

CAVUTO: Yeah, but obviously to keep with this new interest.

SCOTT: More and more, more and more digital, in particular, I think you'll see in our stores next year, as we start combining these digital products and they interface with each other, you'll see that represented in Wal-Mart. It's hard for us in our stores to be a leader in technology. Our customer base is not necessarily a leader, an early adopter. But what you see in Wal-Mart today, we're selling plasma TVs, we're selling LCD TVs, we're selling different kinds of PDAs. We're selling a lot of cell phones. And you're going to se us start to integrate that digital media into one place and take a leadership role in that.

CAVUTO: Each store is still going to have the greeters?

SCOTT: Every store has a greeter, because you know, the key to this company is really the Wal-Mart associate. And the greeter is what sets the tone for this company and I've been on TV a little bit this morning. You can not believe the number of e-mails that I already have from associates out there in the field — one is from a store manager, I was just reading before this program, and the store manager said, I hate to say I saw you on TV, but I overslept and I was late to get to my store and I turned on the TV to check the weather and I saw you. It means so much to our associates to have someone who is speaking up for us.

CAVUTO: So you're speaking today to your associates, to Wall Street, your customers ...

SCOTT: First of all I am speaking to the associates. Secondly I am speaking to the customers. Thirdly to those people in those communities who are approving those new stores. And what I am trying to say to them that through our ads and through our discussions is if you don't want us in your community, that's your choice, but don't say it's because of wages. Because the truth is our wages are really competitive and they're good. Don't say it's because of benefits, because our benefits are good. Don't say it's because of our community relations because we gave $156 million back last year, the largest cash donator in the U.S. among corporations and we're not the most profitable.

So if you have a different issue with us, if you don't like our customers, then say it. But don't say it is because of these things because they're just not true.

CAVUTO: So if any one of them came out and just told the truth a lot of times, we just don't want a football stadium sized store in our community, what would you say to them?

SCOTT: I would say what could we do, how could we position that store? Could we put two level marking? Could we put additional trees? Could we put vegetation that causes us to better fit into your store? Could we change the elevation of our store so it fits into you community? Like we did in Gulf Shores, Alabama, where the mayor was at first concerned about us, but at the grand opening that I went to was so proud of it because that Wal-Mart looks like it belongs in a resort.

So I think we have an obligation with our size to make sure that we are open to what people have to say to us because the people who criticize us, they're not all mean-spirited. Many of those people are not just doing it for self-serving reasons. Many of them are doing it because they are concerned about smart growth. We need to listen to them. They don't need to be our enemy. We need to figure out how do we in fact work together to cause them to want to have a Wal-Mart?

There are going to be some people who never want Wal-Mart. That's OK. There's a whole lot of people who do. Those three Supercenters that we've got in California. Can't tell you how much they did in December, I'm going to tell you, we had a great month in California with those first three Supercenters. The customers want those Supercenters. We've got to figure out a way to cause communities to also want them, the political, organized bodies. Because their constituents are well-served by us being here and I think you would agree with this. The beauty of this country and what people participate in is the competitive nature that we allow to exist and the fact is that we are better because we have great competitors. But they are also better, our competitors are better because Wal-Mart exists.

CAVUTO: All right. Lee Scott. Thank you very much. Good seeing you. We wish you well.

SCOTT: Thank you.

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