2006 Annual Report BUILDING SMILES – Rob Walton Building smiles today and tomorrow. I am asked often what my father, Sam Walton, who founded Wal-Mart in 1962, would think of our Company today. There is no doubt he’d be proud of our success and the 1.8 million associates who serve our customers every day. He also would be proud that we remain true to the fundamental principles of leadership and business that he was so instrumental in establishing. As Wal-Mart chairman, I assure you, our It was not an easy change, but a necessary one are designed to help conserve and sustain the shareholders and associates, that our entire that will better serve our customers and associ- natural resources of our planet in the future, organization is more committed than ever to ates over the long term. We are driving similar as well as save money for the Company and Dad’s founding principles. improvement in other important business ultimately our customers. And, these plans areas, including compliance, diversity, and will continue to expand during the next Being a good and health care benefits for our associates. several years. respectful employer: Wal-Mart offers tremendous opportunities for Community citizenship: Integrity: our associates to develop their professional We have a responsibility and an opportunity to There is no area of leadership more important skills and pursue a long-term career if they improve the quality of life in every community than this one. Our culture is built on the high- choose. Our management teams foster an we serve. The tremendous potential we have est level of integrity, and we will continue to environment where people are treated honestly was underscored in 2005 with the way our hold all associates to these high standards. and with respect. associates and Company responded to the As a company and as individuals, we must hurricane disaster. The positive impact of our continue to lead in these principles. Powerful Improving the associate and response was unparalleled in Wal-Mart’s history leadership comes at all levels – from the board customer shopping experience: and clearly strengthened our reputation as a room, from store managers, and from cashiers, We must improve every day in what we offer corporate leader and good citizen. truck drivers and overnight stockers – who live our associates and our customers. Our every Actions like our hurricane response daily the principles that make Wal-Mart day low price position is the basis for our efforts provide a return on investment to a retail leader around the world. business. While this core principle is critical our business – both short- and long-term. to our growth and business strategy, by itself We are committed to applying our scale and it is not enough anymore. efficiencies toward the public good around This year, for example, our management the world. Recently, we launched initiatives team took the initial steps to revamp the to take a leadership role in improving our field organization structure of Wal-Mart U.S. operations and products for our custom- Rob Walton The new structure gives more authority and ers that will benefit the environment. Our Chairman of the Board of Directors responsibility to those closest to the customer. efforts, some of which are already in place, Wal-Mart Stores, Inc. I’m smiling because there is more selection at Wal-Mart than ever before. – Stephanie, customer and associate 1 Electronics Organic and healthier food choices Today, a trip to Wal-Mart can consist of a basket fi lled with diapers, salsa, and electronic products with the latest technology. Flat panel televisions (plasma and liquid crystal display or LCD) are our fastest Today’s consumers want healthier and more responsible food growing TV segment in both our U.S. SAM’S CLUBs and Wal-Mart choices. That’s why we are doubling the organic product and stores. You can fi nd fl at panel televisions in our stores worldwide, socially responsible offerings in select U.S. Wal-Mart stores. as well as online at www.walmart.com and www.samsclub.com. Did SAM’S CLUB also is expanding its array of organic and socially you know that in the U.S. retail channel, we are the fi rst to make responsible products by more than 100 new items, such as available RoHS (Restriction on Hazardous Substance) compliant Brazilian Marques de Paiva USDA organic coffee. products? This refl ects our commitment to our customers who want to protect and sustain the environment, and buy products at every day low prices. By July 2006, we expect all personal computers sold at U.S. Wal-Mart stores will meet the RoHS standard. ™ In October 2005, Wal-Mart debuted its exclusive Metro 7™ collection – a distinct line of women’s apparel designed specifi cally for the fashion- savvy customer. The Metro 7™ line appeals to a more urban customer and features styles that are both feminine and contemporary. All items are designed with high-quality fabrics, and are versatile enough to allow women to dress fashionably around the clock – at the affordable prices customers expect from Wal-Mart. The line recently expanded to acces- sories, including belts, handbags, shoes and jewelry. The collection is available in misses and plus sizes in select Wal-Mart stores and online at www.walmart.com. 2 For your home Gift cards We have new product offerings in our home area Gift cards are the perfect gift! They can be used for all to provide stylish and affordable solutions for home purchases in our stores and clubs, as well as online at decorating, from furniture to linens, storage to enter- www.walmart.com and www.samsclub.com. Wal-Mart gift taining. Our collection of products is for the customer cards are available for in-country use around the world. seeking quality and style at affordable prices. By the Customers can personalize gift cards either online or at our way, in the U.S., we are now aligning with furniture one-hour photo labs at stores and clubs, so they can carry suppliers who can certify that the wood in their prod- a photo of loved ones. Wal-Mart was fi rst to market with ucts is sustainably grown. this exciting in-store innovation. Wal-Mart was also one of the very fi rst retailers to market an environmentally friendly, corn-based, plastic PLA (Polylactic Acid) gift card from NatureWorks™. Excellent values and services Great products and services at every day low prices continue to drive our business model. Every day, we fi nd more ways to improve the standard of living for our customers. According to Global Insight, Inc., an internationally recognized fi rm providing economic anal- ysis, we save the average American working family more than $2,300 a year. Our Great Value® and Sam’s Choice® products are examples of quality products at every day low prices. And it doesn’t stop there. In our U.S. Wal-Mart stores, we save our customers hundreds of millions of dollars per year through many fi nancial services – from money orders and money transfers, to check cashing and product care plans. Did you know we also offer fi nancial services around the globe, including pet insurance in the United Kingdom? The George™ apparel line started as a small unknown brand in 100 ASDA stores in the United Kingdom and today is sold in more than 240 stores in the U.K., plus stores in 9 other countries, including the U.S. George™ products are available for men, women, and children and include apparel, shoes, handbags and even eyeglass frames in select stores. In the United Kingdom, we recently launched a line of George™ homeware prod- ucts. The George™ brand is recognized as a stylish, high quality brand at a great value and continues to grow and develop as a favorite fashion choice across the globe. 3 – Antonio Galafassi and Associates, Tramontina USA, Inc. A win-win situation It’s not often that something can be so beneficial in so many ways, but when Tramontina, a Brazilian company with facilities in Houston, opened a second plant in Manitowoc, Wisconsin, to produce “Made in the USA” cookware for Wal-Mart and SAM’S CLUB, everyone came out ahead. Tramontina USA, Inc., headquartered in Houston, Texas, Manitowoc is a town of about 35,000 people who has facilities around the world, and has supplied Wal-Mart thought cookware production jobs were gone forever when since 1988. The relationship began with a simple claw a cookware plant closed in 2003. But thanks to Tramontina, hammer, sold in Wal-Mart’s hardware department. Today, the factory reopened on July 5, 2005, with plans for 200 as a major cookware and cutlery supplier, Tramontina sup- employees to be located there. The opening celebration plies over 60 different items. The company was Wal-Mart’s also marked the day Mr. Galafassi became a U.S. citizen. housewares Supplier of the Year in fi scal 2005 and 2006. “We are relying on the long tradition of cookware “There is no doubt that Wal-Mart has contributed manufacturing in Manitowoc,” Mr. Galafassi explained. to our phenomenal success in the U.S. We have grown “The savings we realized by revitalizing an existing Midwest 30% year over year since 2000 and added over 400 facility and the fact that raw materials are produced right in new jobs,” says Antonio Galafassi, President and Chief the plant give us the ability to produce ‘Made in the USA’ Executive Offi cer of Tramontina USA, Inc. “Wal-Mart cookware for Wal-Mart and SAM’S CLUB at highly com- has been the main motivator to build our business and petitive prices.” has given us 100% support, particularly in our effort The partnership between Tramontina and Wal-Mart is an to bring jobs back to the U.S. by opening a facility example for all of our global suppliers of the benefi ts that in Manitowoc.” result from a strong working relationship. 4 I’m smiling because Wal-Mart makes a real difference in my community. – James Sexton, Mayor, Evergreen Park, IL 5 Wal-Mart is having a On many communities’ economies Savings for our customers, job opportunities, increased tax revenues and charitable support for local programs are just some of the economic benefits communities can count on when Wal-Mart becomes their neighbor. Nobody understands the benefi ts Wal-Mart provides better impact on communities – increasing shoppers’ buying power, than the man pictured on the previous page, James Sexton, creating jobs, stimulating business for existing operations and mayor of Evergreen Park, Illinois. Not only did Wal-Mart even revitalizing areas while improving real wages by 0.9%. bring much-needed jobs to his community just outside of The same benefi ts we generate in America are being Chicago – 25,000 applications were taken for just 325 store refl ected around the world as our international segment has positions – but, in addition, the village benefi ted from the raised and contributed over $42 million to their communities $35,000 we donated to local charities. in the last year. In November 2005, an independently-certifi ed study by We are committed at every level – including as a successful Global Insight detailed the effects Wal-Mart has on communi- business and as a leader in sustainable business – to being a ties throughout the U.S. Results indicated we have a positive positive force in America’s communities and around the world. Local success story Local Chinese men and women account for 99% of Wal-Mart China’s senior managers. Du Limin is a shining example of such talent. She started at Wal-Mart knowing nothing about retailing, but today is director of China’s three SAM’S CLUBs. Ms. Du is proud of the contributions Wal-Mart is making to China’s future. 6 positive impact: On many associates’ lives For those seeking a career with Wal-Mart, more than three-fourths of U.S. store management started with the Company in hourly positions. By promoting diversity and inclusion in the workplace, we incentive compensation and performance evaluations. impact our associates’ lives in an important way. Wal-Mart’s In fact, all offi cers achieved their diversity goals in diversity initiatives are being recognized by such reputable orga- fi scal 2006. nizations and publications as DiversityInc®, Black Enterprise® Our survey results as of September 2005 show that more and Hispanic Network Magazine®. When you work at Wal-Mart, than 30% of the over 1.3 million associates in the U.S. are you work with a diverse group of associates. minorities, and more than 60% are female. Many associates Wal-Mart drives results by holding our senior leaders are seniors who supplement their income or students who accountable for meeting diversity goals, which are tied to gain valuable professional experience. Local success story Can a mom with only a high school diploma become Local success story manager of an exciting multi-million-dollar operation? She can Tony Perez started out pushing carts at SAM’S CLUB in if she’s high-energy Sherry Bryan, manager of our Lexington, Kenner, Louisiana. Today he manages a Miami, Florida Kentucky Wal-Mart on Richmond Road. This Wal-Mart raised SAM’S CLUB so successfully – stocking the ethnic foods funds to support their local community’s military unit in his local Hispanic members want – that in just two years, Iraq, contributed to their local food bank, and helped a local the CLUB has grown sales by more than 60%. The result is child’s Make-a-Wish® dream come true. more sales tax for the local community and more associate jobs, all with great career potential. 7 Going organic for our customers and for our environment In October 2005, Wal-Mart CEO, Lee Scott, committed to associates and to the public that the Company will take a leadership position in sustainability. We are convinced that this endeavor is consistent with our business model, that we can make the earth a better place for all of us and that we can be an efficient, profitable enterprise. An essential part of Wal-Mart’s mission is to provide Our product offering includes many that can help the sustainable, healthy, value-oriented products to meet environment and save money for our customers. customers’ needs. We are proud of the progress we have Businesses like Wal-Mart must bring about effi ciencies made to deliver such goods. Our George Baby Organic™ in renewable energy, waste elimination, fuel effi ciency cotton clothing line (as pictured above), available in and resource conservation. Most importantly, we continue U.S. Wal-Mart and U.K. ASDA stores in the summer of to uncover more and more instances where we can do 2006, is just one great example of what can be done. In something good for everyone who shares this planet. Find the next year, we are signifi cantly increasing our organic out more about our efforts in sustainability by looking food offering in Wal-Mart stores and SAM’S CLUBs in online at www.walmartstores.com/environment. the U.S., as well as around the world. 8