'The Big 3' tell it to the letter

Annual reports are great things. Like those long-winded form letters sent out prior to the holidays by far-flung acquaintances and distant relatives, they tell you a lot of stuff you already know, provide you with some factual inform you never quite remember on your own and engage you here and there with some legitimate news.

New annual reports from the big three discount companies — all recently posted on their websites — follow suit. Each uniquely reflects the personality of its company at this point in its existence.

The difference is evident from each retailer's opening pages.

Wal-Mart's letter to shareholders from president and ceo Lee Scott uses up eight paragraphs simply describing all of the multi-national company's many business divisions. Message: We've got a whole lot of avenues for driving revenue.

Target Corp. chairman and ceo Bob Ulrich's letter to shareholders mentions the Target discount stores, supercenters or brand image 15 times, as opposed to Mervyn's, which receives just three mentions, and stores in its department store division, which gets two mentions. Message: Most of our capital and energy is directed toward continuing to groom the prize pony in our stable.

Kmart chairman and ceo Chuck Conaway's letter is less a review of the year past than a manifesto pointing the way to the future. Message: We've got a new team in place; give us time to implement our strategy before you judge us.

But the best parts are the tidbits — the vague references that really portend strategic shifts or the insights one can glean from comparing year-to-year results.

Wal-Mart, for example, came within inches of reaching $200 billion in sales last year — and the fact that the year's $191.3 billion revenues fell below expectations suggests that 200 was the number Wal-Mart was actually gunning for. But what's most significant about the number is what it represents in terms of the velocity of Wal-Mart's growth. Remember, the company broke the $100 billion barrier only five years ago. In other words, in five years Wal-Mart has added revenues nearly equal to the combined annual sales of Kroger Corp. and Sears, Roebuck & Co. — the second and third largest retail companies in the country.

Between the lines at Kmart one finds proof that an old mess has a way of hanging around. Kmart is still legally bound to guarantee $343 million in leases from the OfficeMax, The Sports Authority and the Borders Group chains it spun off in 1994. That's a hangover that hails from two regimes ago, back in the turbulent Joe Antonini era. More importantly, that's $343 million weighing in against a company that has shown a net loss of $200 million or more for two out of the past five years.

And for the Target discount store chain, its thrust into the Northeast has been the prevailing focus of expansion for the past three years. Now, according to the annual report, that strategy is beginning to shift. The new mandate: "densifying" more mature markets such as Atlanta, Phoenix and Dallas/Ft. Worth.

There's more, of course, and more yet to come as Bed Bath & Beyond, Linens 'N Things, J.C. Penney, Sears and Kohl's release their reports in the coming weeks.

Happy reading.