WHERE THEY CAME FROM
Sam Walton opened the first Wal-Mart store in Rogers, Arkansas, in 1962, the same year that Kmart and Target were born. The early shops were five-and-dimes, but over time Wal-Mart evolved into its now ubiquitous big-box form. The company went public with 18 outlets in 1970; by 1999 it had become the largest private-sector employer in the world.

WHAT THEY DO
Wal-Mart sells everything from gasoline to boxer shorts at discount prices to the 176 million customers who visit its stores each week.

The low prices are a result of hard-nosed negotiations with suppliers, sophisticated inventory management, and a famously efficient supply-chain-management system that serves a network of stores located in small towns. The business model counters lower-than-average markups with huge sales volume.

As of December 2006, Wal-Mart employed 1.8 million people and owned nearly 6,500 stores around the world.

WHY THEY’RE CONTROVERSIAL
Wal-Mart is simultaneously the most admired and most disliked company in the country.

Wal-Mart prides itself on being a place that helps the little guy buy what he otherwise could not afford. And according to one study (commissioned by Wal-Mart), American consumers devote a smaller portion of their incomes to food and goods because of Wal-Mart.

But critics say these savings come at a high cost: Wal-Mart is frequently accused of encouraging American manufacturers to save money by producing their wares overseas, and the company has been slammed for its labor practices and perceived negative impact on local communities.

Walton said that he originally opened his stores in small towns because his wife refused to move to a place with more than 10,000 residents. Keeping stores outside of urban centers has helped the company maintain lower costs and prices, but has also resulted in pressure on mom-and-pop stores. Since 2005, Wal-Mart has nixed plans for at least three different New York City stores amid opposition from the community, labor organizations, and city government.

Low hourly pay and limited access to health insurance are just the tip of the iceberg when it comes to labor complaints. In late 2006, the company was ordered to pay $78 million after losing a class-action suit brought by employees in Pennsylvania who said they were forced to do work off the clock. Wal-Mart lost a similar $172 million lawsuit in California in 2005 for denying employees meal breaks. The chain is also the defendant in the largest civil rights class-action lawsuit in history, which alleges that Wal-Mart systematically discriminated against 1.5 million female employees.

Labor unions have long criticized Wal-Mart, but since 2005, two union-funded watchdog groups—Wal-Mart Watch and Wake Up Wal-Mart—have hounded the company. Bad press may also be taking a toll: According to a 2004 McKinsey & Co. study, 2 to 8 percent of Wal-Mart customers surveyed stopped shopping at the chain because of its negative image.

WHAT’S NEXT
While sales and profits remain strong, Wal-Mart’s stock has been down since 1999—and during the entire tenure of C.E.O. H. Lee Scott, who took the reins in 2000. Scott has been moving the company away from classic Wal-Mart practices in order to expand its customer base.

In 2006, Wal-Mart began targeting niche demographics—including wealthy shoppers, African Americans, baby boomers, and Hispanics—with specialized merchandise. It has had success in some urban locations by featuring groceries selected to appeal to Hispanic buyers, but the retailer may yet return to its successful all-low-prices, one-inventory-fits-all strategy.

The company has pledged to become greener by reducing its energy use in stores, improving the energy efficiency of its vehicles, and cutting back on the amount of solid waste its stores produce. It has also begun to promote organic food and long-lasting lightbulbs. These policies could make a significant impact: Wal-Mart is the largest private user of electricity in the U.S. and operates one of the nation’s biggest truck fleets. —S.E. Kramer