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Wal-Mart staying ahead of SARS

Wal-Mart's got a message for suppliers — and even its own employees — who've recently traveled to parts of Asia: Stay home. For at least 10 days, that is.

With continuing fears surrounding the SARS outbreak, the world's largest retailer has reacted swiftly in an effort to prevent the disease from infecting its Bentonville, AR, headquarters and global buying offices — or at least contain it, if it does, according to Jay Fitzsimmons, senior vp, finance and treasurer.

He offered a glimpse of the company's SARS strategy while speaking to investors during last week's Lehman Brothers' Sixth Annual Retail Seminar.

Vendor salesmen who recently have been to SARS-infected areas have been asked to stay away, and Wal-Mart executives returning from those areas — notably China, Singapore and Vietnam — are being told to stay home for at least 10 days, the virus' incubation period, according to Fitzsimmons.

As a result, buyers in the company's northwest Arkansas offices are now getting up in the middle of the night for videoconferences with their overseas agents and suppliers, he said.

The company's Chinese global sourcing office is in Guangdong province, where the SARS outbreak first occurred late last year, and it employs several hundred people. Wal-Mart has broken up the office into three working groups at separate locations and has also taken steps to limit employee-to-employee contacts, he said.

Perhaps surprisingly, the world's largest retailer might not be the nation's largest importer, Fitzsimmons indicated, adding that the company does less direct importing than many of its competitors.

But with in-house global procurement facilities now fully up to speed, it has the ability to orchestrate group buys and go direct to the mills, "cutting out the middleman."

Wal-Mart used "to move on a nickel," he said, but it learned that was very shortsighted and now benefits from more stable relationships, working with firms in 50 countries.

Wal-Mart still sees pockets of opportunity throughout its organization, including the growth of its youngest division, international, along with converting domestic discount stores to supercenters, Fitzsimmons added.

The international division, now second largest after the Wal-Mart division, is a "real opportunity," he told investors.

Though it has $41 billion in sales, which alone would place it at No. 34 on the Fortune 500, and is the largest retailer in the United States and Canada, he said, "there's a whole lot of places [in the world] where we are not."

Domestically, he said, "there's a lot of growth in just converting discount stores to [supercenters]," though some locations would have limits in space or configurations.

Moreover, Wal-Mart might still double its discount and supercenter units, based on assumptions that a single store can serve as few as 50,000 people, Fitzsimmons said.

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