Wal-Mart Inks Deal To Enter India

Ed Roberts,
Washington Bureau Chief

Some shoppers feel betrayed by decision to end layaway, remove fabric

By Allison Linn
MSNBC.com
Aug 31, 2007                               [back to top]  

Even though most parents are still focused on shopping for their kids’ back-to-school items, Carrie Munns is already thinking about Christmas.

That in itself is not unusual. What is unusual is that, instead of pondering what toys she should buy at her local Wal-Mart, the 43-year-old mother of two is wondering how she’s going to play Santa Claus this year without the layaway option she had relied on.

“It’ll be less, let me put it that way,” she said. “They won’t get as much.”

Long after most mainstream department stores eliminated layaway plans, Wal-Mart continued to offer the old-fashioned service, which appeals mainly to consumers who either don’t have credit cards or already are carrying high credit card debt. But that ended last year when Wal-Mart eliminated the layaway program, leaving many customers seething about the change — and fretting about what to do this holiday season.

The move is especially jarring to some families because it has come amid other changes Wal-Mart has made, including cutting back on fabric departments and stocking more trendy clothes, as the discounting titan tries to appeal to a broader swath of shoppers, including more upscale consumers. Those changes, some longtime shoppers say, has made them feel like the store is less interested in catering to its traditional and loyal market of family shoppers on tight budgets.

“I always believed that they’re always trying to give us the lowest prices and they’re not for the rich man, you know?” said Jennifer Reynolds, a 28-year-old mother of four who used to depend on layaway for her children’s school uniforms and holiday gifts. “I just can’t believe that they would get rid of layaway and say, ‘Here, well, here’s a credit card.’ ”

Reynolds was, in fact, so angered by the decision that she started an online petition aimed at restoring the service, and sent two e-mails to Wal-Mart. She said the company never responded, although she continues to hear from other Wal-Mart shoppers disappointed by the change.

Layaway programs allow people to make a down payment on an item and then pay off the rest over a set period of time before taking it home. The system is still offered by rival Kmart, although most large retailers have long since gone exclusively to more modern payment forms including credit and debit cards, citing the cost and hassle of managing layaway programs.

Linda Brown Blakley, a spokeswoman for Bentonville, Ark.-based Wal-Mart, said the company decided to stop offering layaway because fewer people were using it and it was costing the company more.

Blakley also said more people now have access to other financing options, such as credit cards, than when layaway first started. For customers without credit cards, she said the company simply tries to offer the best value.

Patricia Edwards, an analyst with investment firm Wentworth, Hauser and Violich who owns shares in Wal-Mart, remembers visiting a Wal-Mart on the day after Thanksgiving a couple years ago and being surprised to see that the longest line in the store was for the layaway department.

From a financial perspective, she said, allowing shoppers to put items on layaway instead of buying them outright is a big risk because some people will never pay them off. That leaves Wal-Mart stuck with merchandise it could have sold during peak demand times but instead has to offer at clearance prices.

On the other hand, Edwards noted, the decision to end layaway was a blow to many loyal Wal-Mart customers.

“It hasn’t helped reputationally, and it hasn’t helped especially with their core (low-income) customers,” she said.

Reynolds, who lives on the military base in Fort Hood, Texas, said she still shops at Wal-Mart about once a week, but she’s stopped doing her grocery shopping there and also has noticed that some other items are now cheaper elsewhere.

Wal-Mart has recently acknowledged that many of its most loyal customers are being pressured by high gas prices and other costs, and it has lowered prices on some items.

Reynolds bought some school uniforms at Wal-Mart this year, although she said she also scoured garage sales and secondhand stores. For the coming holidays, she’s thinking of putting items on layaway at her local Kmart instead of shopping at Wal-Mart.

Munns doesn’t have that option, because there isn’t a Kmart in her community of Horn Lake, Miss., and the other big department and toy stores there don’t offer layaway, either. She said she and her husband have been trying to put money away in a savings account for the holidays, but she worries it won’t be enough for the pricier items her 6-year-old and 13-year-old will want for Christmas.

Munns goes to Wal-Mart for her groceries, and she likes the convenience of also being able to pick up other items at the Supercenter. But she said she’s been disappointed by changes she’s seen at the store over the past few years, including poor customer service and boxes in the aisles.

She also has cut back on buying clothes at Wal-Mart, because the store has started stocking trendier clothes that don’t appeal to her.

‘I’m 43 years old. I can’t wear pants that (hang) off your hips and shirts that show your belly button,” she said.

Wal-Mart has conceded that it has had problems with its push toward trendier items, and it has blamed apparel difficulties for contributing to weakness in some store sales.

As part of its push to broaden its appeal, Wal-Mart also recently finished remodeling many of its stores. While shoppers have welcomed the cleaner stores and better signage, some remodels and new store openings have angered longtime customers because they included replacing fabric departments with areas featuring party supplies.

Wal-Mart spokeswoman Tara Raddohl said that she didn’t know exactly how many stores no longer have fabric departments and that the company is still evaluating the project. But in general, she said, fabric has been a declining business for the company, and officials have been happy with sales in stores where it has replaced those items with party supplies.

Edwards, the analyst, said adding party supplies was probably a smart decision in the more urban areas where sewing has become less common. But in rural communities, where sewing is more popular and Wal-Mart may have been the only place to buy fabric, such a change doesn’t necessarily make as much sense.

In Joan Jennings’ retirement community of Bullhead City, Ariz., Wal-Mart was the only store where the many older women could buy quilting, sewing and craft supplies. Now, she said, the only options are to drive nearly two hours to Las Vegas — a trek that’s difficult for many retirees — or to ask someone in another part of the country to send supplies by mail.

Jennings, who is 70, has started asking her daughter in California to buy fabrics she uses to make clothes for her grandchildren, doll’s outfits and other items. With the added cost of shipping, she said her projects have become more expensive.

She scoffs at the idea of ordering fabric over the Internet instead.

“Most of these older women don’t even have computers,” she said. “I have a computer, but I probably wouldn’t it order online, either. I’d want to look at it.”

© 2007 MSNBC

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Wal-Mart Signs Lease Agreement for Bedding Shops in Vestibule Space of Wal-Mart Super Centers

PRNewswire                                   [back to top]  

GREENVILLE, S.C., Aug. 31 /PRNewswire/ -- With its distinctive red, white and blue logo, Mattress Works -- an independent bedding company -- has signed a lease agreement with Wal-Mart to establish bedding shops in the vestibule space of Wal-Mart Super Centers. The first three independently operated sleep shops have opened in South Carolina-based Wal-Mart Super Centers in North Myrtle Beach, North Charleston and Travelers Rest.

"Each Mattress Works location will be located in a Wal-Mart Super Center, and each will be managed by a local Operating Partner -- an established bedding retailer who knows the local market, is seasoned in the bedding business and operates the store as an independent retailer," said David Karr, CEO of Mattress Works. "Mattress Works sleep shops offer a 'full service mattress shopping experience' with knowledgeable sleep consultants available to assist the customer through the purchasing process," according to Karr.

"Today's mattress buyers demand value-priced products to fit their budget, layaway and financing, home delivery, removal of their old mattress and set-up of their new purchase," Karr stated. "Mattress Works delivers this entire spectrum of top-quality service."

Mattress Works locations occupy 450-1150 square-foot footprints at the front of Wal-Mart Super Center stores. Product assortments within each store include velocity price points between $299 and $1,299, including two memory foam mattress options. "Our goal is to provide Wal-Mart shoppers with the 'value experience' that they have come to expect," Karr emphasized.

"With store roll-outs now underway, Mattress Works is actively seeking key retail Operating Partners to operate their own Mattress Works location in all markets served by Wal-Mart Super Centers," stated Edwin Shoffner, COO of Mattress Works.

"I am very excited to be a part of Mattress Works. My sales volume is going as expected, and the daily traffic through my store is unbelievable. Even though we are very early in the game, I am already making plans to accelerate the growth of this business," commented Chad Hill, North Myrtle Beach (SC) Operating Partner.

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U.S. Brokers' Value, Wal-Mart `Sell,' Carrefour Model: Timshel

By David Wilson
Bloomberg                                         [back to top]  

Aug. 31 (Bloomberg) -- More than one method of stock valuation shows the biggest U.S. securities firms dropped in August to the lowest prices since the 1990s. That doesn't make them cheap -- at least not yet.

Goldman Sachs Group Inc., the world's largest brokerage, changed hands at a record low of 7.3 times earnings on Aug. 15. The price-earnings ratio for Goldman, which went public in May 1999, hadn't dropped below eight before this month, according to data compiled by Bloomberg.

Lehman Brothers Holdings Inc. and Morgan Stanley both traded at less than seven times earnings for the first time since November 1998. Merrill Lynch & Co.'s ratio hit bottom at 7.7, the lowest since November 1996.

The average price-to-book-value ratio for the four brokers and Bear Stearns Cos. was the lowest relative to the Standard & Poor's 500 Index since November 1999, according to a report by Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. Book value is a company's assets minus liabilities.

Yet the firms' share prices have dropped far less than the readings would suggest. Although the S&P 500 Investment Banking & Brokerage Index has tumbled 18 percent this year, it's still 3.2 percent higher for the past 12 months.

And their third-quarter earnings reports may bring more bad news on the effects of disarray in credit markets. Bear Stearns, Goldman, Lehman and Morgan Stanley finish the quarter today, a month before Merrill. All the firms are based in New York.

Analysts' Reductions

Analysts braced for the worst by lowering investment ratings and earnings estimates this week. Bear Stearns and Lehman were reduced to ``neutral'' from `` buy'' by Merrill's Guy Moszkowski, the top-rated U.S. brokerage analyst among money managers surveyed by Institutional Investor magazine.

Moszkowski cut profit forecasts for the two firms as well as Citigroup Inc., the largest U.S. bank, and JPMorgan Chase & Co., the third largest. Citigroup was downgraded to ``neutral'' from ``buy'' as well.

While the New York-based analyst raised his estimates on Goldman and left his Morgan Stanley numbers unchanged, Lehman's Roger Freeman was less discriminating. Freeman, also based in New York, yesterday reduced estimates through 2008 for Goldman and Morgan Stanley, along with Bear Stearns and Merrill.

Forecasts for Bear Stearns, stung by the failure of two hedge funds because of a pickup in mortgage defaults, took the biggest hit. Freeman reduced his estimate for the third quarter by 56 percent, to $1.45 a share. He lowered his fourth-quarter and 2008 numbers by 44 percent and 24 percent, respectively.

Unpleasant Surprises?

It's possible that these cuts, and others like them, may simply help the brokers keep up their track record of beating estimates. Bear Stearns is the only one that failed to do so last quarter, and the shortfall was the first since 2001.

Then again, the surprises in next month's round of third- quarter reports may be unpleasant. Standard & Poor's estimated this week that revenue from investment banking and trading may tumble 47 percent in the second half. Until the numbers arrive, it's safe to conclude brokerage stocks are cheap for a reason.

* * *

The Merrill Lynch analyst who broke ranks with her peers by slapping a ``sell'' rating on Wal-Mart Stores Inc., the world's largest retailer, would have advised clients to buy less than three weeks ago.

Virginia Genereux, a New York-based analyst, raised the Bentonville, Arkansas-based company to ``buy'' from ``neutral'' on March 16. In a report, she attributed the increase to growth in Wal-Mart's international divisions, including the U.K.'s Asda chain and stores in China and Latin America.

The rating stuck until Aug. 14, when the company reported a smaller second-quarter profit than analysts had forecast and cut its full-year earnings estimate. Genereux reduced the stock to ``neutral'' in anticipation of lower profit margins, also the rationale for yesterday's downgrade.

Nineteen analysts have ``buy'' recommendations and five rate Wal-Mart ``neutral'' or an equivalent, according to data compiled by Bloomberg. The shares fell 2 percent yesterday in the wake of Genereux's call.

* * *

Carrefour SA, Europe's biggest retailer, took three years to decide on the initial public offering of a real-estate unit that was announced yesterday. Casino Guichard-Perrachon SA's success with a similar share sale in the interim might have persuaded the Paris-based company to proceed.

Casino, the largest supermarket chain in Paris, set up Mercialys SA to own its stores and shopping malls and took the unit public in October 2005.

Mercialys has climbed 42 percent since its debut, beating a 26 percent gain for its parent company, though the lead narrowed this year after Casino reported a surge in earnings. Both are based in Saint-Etienne, a city in southeastern France.

Carrefour said in September 2004 that it would start a company to manage its French, Spanish and Italian real estate and consider an IPO for the unit, Carrefour Property. The plan to proceed with the share sale follows pressure from billionaire Bernard Arnault and the Colony Capital LLC investment firm, who jointly own a 10 percent stake in Carrefour, to unload property.

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THE RATINGS GAME: Wal-Mart Cut To Sell On U.S. Margin Concerns

Dow Jones
August 30, 2007                                [back to top]  

NEW YORK (Dow Jones) -- Merrill Lynch cut its rating on Wal-Mart Stores Inc. to sell from neutral Thursday, highlighting concerns that margins at the world's largest retailer could be compressed "dramatically."

Shares of the Dow Jones Industrial Average component fell 1.5% to stand at $ 43.52 in midday trading, recovering from a session low of $43.16. The shares touched a 52-week low at $42.92 on Aug. 16.

The Merrill downgrade comes as the Wal-Mart's been grappling with a spending slowdown as customers have struggled with rising prices for food and gasoline. The company's also been focusing recently on international expansion as management slows the pace of U.S. growth.

"Following years of weak comps, declining new door productivity and aggressive expense management, margin erosion in the core U.S. division looks set to continue, and may, in fact, accelerate in the years ahead," analyst Virginia Genereux wrote in a note to clients. "The macroeconomic backdrop is not the center the centerpiece of our argument, but it is certainly an incremental headwind."

This marks the first time in 2007 that any investment house has issued a " sell" rating for Wal-Mart (WMT) , according to Thomson Financial, although there have been a few sell ratings over the years.

Merrill's Genereux said her "best case" for the shares indicates they are likely to trade down into the high-$30 range, while her "worst case" foresees Wal-Mart moving into the low $30s.

Last month, Wal-Mart said it was slashing prices on 16,000 items to prepare for the crucial back-to-school shopping season -- traditionally the second-most important for retailers, after the end-of-year holidays.

When it reported sales results for July, Wal-Mart said sales of apparel and home goods overall continued to be soft and are expected to remain so through the company's third quarter.

In recent months, Wal-Mart has seen more robust sales in lower-margin areas such as perishables and grocery and weakness in higher-margin categories. Clothing and home goods have been tough areas for the discount giant, as it strives to compete more effectively against Target Corp. (TGT) , considered by many a trendier rival.

A recent Deutsche Bank analyst's note said heavy apparel inventories at retailers, including Wal-Mart, could drive markdowns and clearance, although the situation may not be as bad as had been originally feared.

"The consumer continues to spend, though Wal-Mart has reported that spending is more closely aligned to the paycheck cycle, indicating some weakening," Deutsche Bank's William Dreher wrote in a note to clients earlier this week.

(c) 2007 Dow Jones & Company, Inc.

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Out of the Gate: Wal-Mart cut to "Sell"

The Associated Press
August 30, 2007                                 [back to top]  

NEW YORK - Shares of Wal-Mart Stores Inc. fell after the opening bell Thursday after Merrill Lynch reportedly downgraded the world's largest retailer to "Sell."

The Dow Jones industrial average component was down 87 cents, or 2 percent, to $43.33 in morning trading.

According to multiple media reports, the brokerage cut its rating on the shares from "Neutral," citing concerns that profit margins are eroding at its U.S. stores as the economy slows. A Merrill spokeswoman would not confirm the rating change, and said they do not release their equity research to the media.

When it reported second-quarter results earlier this month, Bentonville, Ark.-based Wal-Mart cut its profit forecast for the full year. And when it released sales figures for July, the retailer posted a slim gain but warned that increased discounting is hurting profit margins.

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Wal-Mart Wounded By Merrill Downgrade

Carl Gutierrez
08.30.07                                    [back to top]  

Wal-Mart investors got still more bad news on Thursday. The firm's long-suffering shares fell 1.9%, or 82 cents, to $43.37 in early-afternoon trading after Merrill Lynch downgraded the world’s largest retailer to “sell.”

Merrill analyst Virginia Genereux cut her rating on the Bentonville, Ark.-based company from “neutral” due to concerns that profit margins are eroding at its stores in the United States.

In her report, Genereux said she anticipates margin erosion in the company's U.S. division is set to continue, and may even increase, due to years of weakening same-store sales and poor expense management.

Genereux added that the macroeconomic backdrop, such as expensive oil and a deeply troubled housing sector, "is certainly an incremental headwind" to the firm, too.

For 2008, 2009, and 2010, Genereux anticipates earnings per share of $3.02, $3.16, and $3.37 respectively.

According to Thomson Financial, analysts polled on average anticipate 2008, 2009, and 2010 earnings per share of $3.04, $3.40, and $3.74 respectively.

This year has been difficult for Wal-Mart (nyse: WMT - news - people ) and its investors, as its shares have fallen 8.0% over the last three months, and 10.3% over the last six months. By contrast Wal-Mart's rival Target (nyse: TGT - news - people ), has seen its shares rise 4.7% over the previous three months, and 4.0% over the last six. On the other end of the spectrum Sears Holdings (nasdaq: SHLD - news - people ) has seen shares drop 22.6% and 21.3% over three and six months respectively.

Earlier in August Wal-Mart warned earnings would be weaker than investors expect as consumer spending tightens (See “Wal-Mart Sees Global Drop-Off").

At the same time it said second quarter profits rose 49% to $3.1 billion. Despite these positive results, the company lowered its fiscal 2007 guidance by 10 cents, predicting that earnings per share on a continuing operations basis will be in the ballpark of $3.05 to $3.13. The previous estimate was $3.15 to $3.23.

Like its retail peers, the aforementioned troubles in the housing market and high gas prices have weakened consumer appetite and, in Wal-Mart’s view, this weakness will be felt across the globe, as foreign customers also cut back on spending.

With demand softening, Wal-Mart has been under pressure to aggressively markdown merchandise.

The weakened market comes at a time when Wal-Mart works to rejuvenate its brand via improved lighting, nicer displays, and wider aisles. The firm hopes to encourage customers to stay longer, and, as a result, spend more money (See “A Whole New Wal-Mart”).

Wal-Mart said Monday it is considering new store sizes and types in the U.S. market but played down the possibility of acquisitions as it faces slowing sales growth at its older stores and new competition from British rival Tesco PLC. (nasdaq: TESO - news - people ).

Earlier this month, the company announced a long-planned venture to jointly build wholesale outlets in India and a nationwide supply chain with local partner Bharti Enterprises (See "Wal-Mart Inks Deal To Enter India"). But Wal-Mart's attempts to enter India has sparked protests from politicians and retailers, who fear the impact of competition on the country’s 12 million mom and pop shops.

In early May Forbes.com listed Wal-Mart's Chief Executive Officer H. Lee Scott as one of the five most overpaid bosses, with a six-year average compensation of $9.1 million, despite the company's stock being down 16% over the last five years.

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Wal-Mart falls after Merrill downgrades to 'sell'

by Nicole Maestri
Reuters
Thu Aug 30, 2007                            [back to top]  

NEW YORK, Aug 30 (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) shares fell in trading on Thursday after Merrill Lynch downgraded the retailer to "sell" from "neutral," saying its operating margins are likely to compress further.

"Following years of weak comps, declining new door productivity and aggressive expense management, margin erosion in the core U.S. division looks set to continue, and may in fact accelerate in the years ahead," wrote Merrill Lynch analyst Virginia Genereux in the note.

She said "new door productivity" is a measure of the sales generated by a new store relative to the comparable store base.

Genereux outlined a "best case scenario" in which Wal-Mart's earnings growth would slow to the mid- to high-single digit percentage range and the stock would trade in the high $30s.

She also outlined a "possible worst case scenario" in which comparable-store sales would turn negative and earnings declines would accelerate, with the stock dropping to the low $30s.

Wal-Mart shares fell 69 cents or 1.6 percent to $43.50 in late morning New York Stock Exchange trading.

Analysts and investors have been pushing Wal-Mart to rein in U.S. expansion plans as sales gains at its existing stores, known as comparable store sales, have slowed and it has saturated many markets.

In its last fiscal year, its U.S. comparable store sales notched their smallest increases since the retailer began reporting such figures in 1980.

In June, Wal-Mart said it would cut the number of supercenters it plans to open this year by as much as 30 percent to try to boost sales at U.S. stores.

(C) Reuters 2007. All rights reserved.

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DJIA Leaders & Laggards

Associated Press
08.30.07                             [back to top]   

NEW YORK - Shares of Wal-Mart Stores Inc. fell to the biggest loss Thursday on the Dow Jones industrial average.

An analyst downgrade weighed on shares of the retailer, which lost 87 cents, or 2 percent, to finish at $43.32.

The index lost 50.56 to close at 13,238.73, with only six of its 30 constituent stocks rising.

Citigroup Inc. (nyse: C - news - people ) reversed gains from Wednesday and declined 72 cents to $46.23.

And Honeywell International Inc. (nyse: HON - news - people ) declined 71 cents to $56.29.

On the rising side, Home Depot Inc. (nyse: HD - news - people ) climbed for the second day, gaining 49 cents to $37.04. Earlier this week, Home Depot agreed to a lower sale price for its wholesale supply unit.

On a strong day for technology stocks, Intel Corp. (nasdaq: INTC - news - people ) emerged as one of several companies building on the previous day's advances, gaining 19 cents to $25.28.

Shares of International Business Machines Corp. (nyse: IBM - news - people ) moved up 80 cents to $115.37. After trading ended Wednesday, the Federal Trade Commission cleared IBM's buyout of data management software company Princeton Softech Inc. (otcbb: SOFT.OB - news - people )

Copyright 2007 Associated Press. All rights reserved.

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Chico's FAS, Goldman, King, TiVo, Wal-Mart: U.S. Equity Movers

By Alexander Ragir
Bloomberg                                         [back to top]  

Aug. 30 -- The following is a list of companies whose shares are having unusual price changes in U.S. exchanges today. Stock symbols are in parentheses after company names. Share prices are as of 9:40 a.m. in New York.

Lehman Brothers Holdings Inc. said four of the five largest U.S. securities firms will earn less than expected through next year after a rout in subprime mortgages. Lehman analyst Roger Freeman trimmed his share-price estimates for Goldman Sachs Group Inc. to $214, for Morgan Stanley to $81, for Merrill Lynch & Co. to $106 and for Bear Stearns Cos. to $142, the company said in a note sent to clients.

Morgan Stanley (MS US) fell 1.5 percent to $60.30. Merrill (MER US) dropped 0.9 percent to $72.48. Goldman (GS US) lost 1.6 percent to $170.96. Bear Stearns (BSC US) declined 1.2 percent to $105.84.

Chico's FAS Inc. (CHS US) declined the most since November, losing $1.33, or 7.6 percent, to $16.20. The clothing retailer said it earned 22 cents a share from continuing operations in the second quarter. Analysts anticipated 26 cents, on average, according to a Bloomberg survey.

Citi Trends Inc. (CTRN US) fell the most since Aug. 14, losing $1.43, or 6 percent, to $22.41. The clothing retailer reduced its annual forecast, predicting earnings of as much as $1.44 a share. The average estimate from analysts was $1.51, according to Bloomberg.

Coldwater Creek Inc. (CWTR US) retreated the most since December 2001, losing $3.93, or 23 percent, to $13.46. The women's clothing retailer reported profit of 9 cents a share in the second quarter, missing the 12-cent average estimate from analysts in a Bloomberg survey.

King Pharmaceuticals Inc. (KG US) fell the most since Aug. 9, losing 79 cents, or 5.1 percent, to $14.82. King and Palatin Technologies Inc. delayed an advanced study of an experimental drug for erectile dysfunction, citing increased blood pressure in patients.

H&R Block Inc. (HRB US) fell the most since Aug. 15, losing 62 cents, or 3.2 percent, to $18.88. The biggest U.S. tax- preparation company may stop making new loans through its Option One Mortgage Corp. unit to revive a planned sale of the business. ``The loan-originations market is in the midst of the most severe dislocation it has seen in years, maybe the most severe since the 1930s,'' Chief Executive Officer Mark Ernst said on a conference call with analysts.

Sigma Designs Inc. (SIGM US) rose the most since Jan. 29, gaining $4.60, or 12 percent, to $43.23. The maker of computer chips said that, excluding some items, it earned 48 cents a share in the second quarter. Analysts on average expected 35 cents, according to data compiled by Bloomberg.

TiVo Inc. (TIVO US) fell the most since Aug. 13, losing 40 cents, or 6.5 percent, to $5.80. The digital video recorder pioneer said its fiscal second-quarter loss almost tripled on an inventory writedown. TiVo also added fewer new subscribers.

Wal-Mart Stores Inc. (WMT US) fell the most since Aug. 14, losing 80 cents, or 1.8 percent, to $43.39. The world's largest retailer was cut to ``sell'' from ``neutral'' by Merrill Lynch & Co. analysts, who said the ``erosion'' in the profitability of Wal-Mart's U.S. stores may accelerate over the next few years as the domestic economy slows.

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Wal-Mart owes back taxes, according to State of Wisconsin

Wikinews
August 29, 2007                          [back to top]  

According to the state of Wisconsin, Wal-Mart has avoided paying millions of dollars in state taxes by paying rent on 87 Wisconsin properties. The Wisconsin State Department of Revenue call this behavior "abusive and distortion of income."

Wal-Mart is doing this by setting up one subsidiary to run all its stores and setting up another subsidiary to own its real estate. The operating subsidiary then pays the rental cost to the real estate subsidiary and takes a tax deduction for the rent. This money will, however, end up in the corporation's own pocket.

As a result of Wal-Mart's actions, the state tax auditors say that Wal-Mart owes more than $17.7 million in back corporate income taxes, interest and penalties from 1998-2000.

The Wal-Mart corporation claims that they are doing nothing wrong, rather they are taking advantage of an overlap of state and federal tax laws in an effort to reduce their taxes and costs.

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