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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Winnipeg Wal-Mart to be country's first with 24-hour service

CBC News
Wednesday, August 29, 2007                     [back to top]  

Bargain shoppers in Winnipeg will soon be able to indulge their search around the clock at a Wal-Mart store that is to be the first in the country to open 24 hours a day.

The Arkansas-based retailing giant will open its Garden City location in the city's north end 24 hours a day — with the exception of Sundays — starting in the fall.

Kevin Groh, a spokesman for Wal-Mart in Canada, told CBC News on Wednesday that the Winnipeg market has always responded well to special events where the store has stayed open around the clock for brief periods, such as during the back-to-school or Christmas rushes.

"Winnipeg has always been one of the most enthusiastic retail markets," he said.

That popularity has prompted the company to select the Winnipeg store to test the 24-hour experiment full-time.

"We haven't actually released a concrete date, but it will be this fall," he said.

"We are currently talking to our associates — the people who work in our store — and also the customers to get a sense of what makes sense, but it will be coming soon."

The Sunday closure is a concession to local retail bylaws that restrict most shopping to certain hours on Sundays, and it will also allow the store and staff to regroup once a week, Groh said.

Concerns have not been raised over stressed or overworked staff, he added, noting that in past 24-hour events, the store had more staff volunteer to work overnight shifts than there were shifts to fill.

The company has no plans to expand 24-hour shopping at other stores, Groh said, until it's determined whether the Winnipeg store is a success.

"Ultimately, this is about serving our customers," he said.

Many of the company's stores in the United States are already open 24 hours a day.

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Surfing Lessons at Wal-Mart

Rick Aristotle Munarriz
The Motley Fool
August 29, 2007                            [back to top]  

Wal-Mart (NYSE: WMT) is the Big Kahuna of retailing, so it's only natural for it to strike up an exclusive direct-to-retail deal with legendary surfwear brand Ocean Pacific. The partnership will help stock the world's largest chain's mostly unhip clothing racks with a brand that once defined surf apparel.

Sure, this isn't the mid-'70s, when Iconix Brand Group's (Nasdaq: ICON) Ocean Pacific (and its signature Op logo) exploded on the scene, with sales tripling on an annual basis. But we're also not talking about the bleakness that Ocean Pacific suffered during the '90s, when the brand that had expanded into nearly all facets of extreme sports -- from skateboard to snowboarding to motocross -- was neglected by fickle enthusiasts moving on to the next big thing.

The brand has had a bit of a renaissance in recent years. New ownership brought back the once iconic Op Pro annual surfing competition in 1998. Ocean Pacific then went on to find celebrity endorsers on this side of the millennium, extending itself to alternative rockers like Hoobastank and Fu Manchu, as well as electronica pioneer The Crystal Method.

Extreme sports offer compelling apparel opportunities. Just check out the success of companies like Volcom (Nasdaq: VLCM), on the apparel design side, or retailers like Zumiez (Nasdaq: ZUMZ), Pacific Sunwear (Nasdaq: PSUN), and Quiksilver (Nasdaq: ZQK).

The challenge for Iconix will be to cash in without appearing to have sold out. It's a delicate balance, especially if the brand is eventually perceived as an in-house Wal-Mart label. However, if you ink an exclusivity deal, you can't go wrong by hooking up with the country's leading apparel retailer. By the time the new product lines roll out next year, you're going to be seeing a whole lot of Op around.

Even if most of those Ocean Pacific-donning kids think "hang ten" is something you do when you blow $10 at the local arcade, it's the easiest way to ride the biggest wave.

Wal-Mart is an active stock pick for Inside Value newsletter subscribers. Zumiez and Volcom have been recommended to Hidden Gems subscribers. Pacific Sunwear is a Stock Advisor selection. Whether or not you have an old pair of Op surf trunks, Hawaiian silk shirt, or T-shirt in your apparel arsenal, a free 30-day trial subscription to either newsletter service is yours for the taking.

Longtime Fool contributor Rick Munarriz has wiped out plenty of times on Flowrider surfing simulators. He does not own shares in any of the companies in this story. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a gnarly disclosure policy.

©1995-2006 The Motley Fool. All rights reserved.

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Pioneering Environmental Group Settles Into Wal-Mart's Hometown

Environmental Defense News
Earthtimes.org
2007-08-29                                              [back to top]  

BENTONVILLE, Ark., Aug. 29 /PRNewswire-USNewswire/ -- Environmental Defense announced today that it has ramped up its work with Wal-Mart by completing and staffing an office across the street from the Wal-Mart Home Office in Bentonville, Arkansas to advise the company on environmental initiatives.

"Decisions at Wal-Mart move quickly, with huge global environmental repercussions," said David Yarnold, Executive Vice President at Environmental Defense. "A local presence helps us provide timely, effective input to Wal-Mart and ensure that measurable progress is being made as quickly as possible."

The new Environmental Defense office in Bentonville will be co-led by Dr. Andrew Hutson and Michelle Mauthe Harvey, who are advising Wal-Mart on issues ranging from climate change and alternative fuels to sustainable seafood and packaging. Hutson will focus primarily on Wal-Mart's environmental impacts related to climate change, as well as impacts in China. Harvey will work on sustainable seafood and environmental health issues, among others.

Environmental Defense began working with the company almost two years ago, prior to CEO Lee Scott's announcement in October 2005 outlining Wal-Mart's far-reaching goals on environmental sustainability. Since then, Wal-Mart has raised fuel-efficiency in its truck fleet, cut energy use in stores and reduced packaging on hundreds of its products, all while cutting its costs. The company is also helping its customers save money and capture environmental benefits by promoting the use of compact fluorescent lightbulbs (CFLs), an initiative supported by Environmental Defense.

"With 175 million customers a week and a global supply chain of over 60,000, Wal-Mart has unique potential for change," Gwen Ruta, Director of Corporate Partnerships at Environmental Defense. "Given this market reach, the ability to achieve powerful environmental progress may be as great in the halls of the Wal-Mart Home Office in Bentonville as it is in the halls of Congress."

Environmental Defense has been partnering with leading businesses like DuPont, FedEx and McDonald's for nearly 20 years on projects that improve both environmental and business performance. Environmental Defense accepts no funding from Wal-Mart or from any other corporate partners. For more about Environmental Defense's work with Wal-Mart, visit http://www.environmentaldefense.org/partnerships.

Environmental Defense, a leading national nonprofit organization, represents more than 500,000 members. Since 1967, Environmental Defense has linked science, economics, law and innovative private-sector partnerships to create breakthrough solutions to the most serious environmental problems.

© 2007 earthtimes.org. All Rights Reserved.

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Wal-Mart homes in on threat from Tesco

Jonathan Birchall
August 28, 2007                           [back to top]  

Wal-Mart is considering acquisitions in its home market for the first time in more than 25 years as it seeks to open smaller stores and cut its reliance on its giant Supercenters for future growth.

The world’s largest retailer, whose US stores had sales of more than $64 billion last year, is seeking an executive to assess the “strategic implications of any possible M&A on our overall portfolio”, according to a Wal-Mart job posting.

Wal-Mart made its previous retail acquisition in the US in 1981 but has made repeated international acquisitions in the past decade. In the US, growth has been focused since the 1990s on organic expansion of its Supercenter stores. The position is part of a new team at headquarters in Bentonville, Arkansas, that will develop a “comprehensive multi-format growth strategy” — mirroring the approach taken by Tesco in the UK in the 1990s.

The move is seen as a response to the imminent opening in the US of Tesco’s “Fresh & Easy” small format neighbourhood grocery markets with about 10,000 sq ft of selling space. Wal-Mart has already established a new business development team based in the suburbs of San Francisco that will experiment with new pilot projects.

Mike Griswold, a retail analyst at AMR Research, said the news “reinforces my view that Wal-Mart is taking Tesco very seriously. They want any format they can get to try counter Tesco”. Wal-Mart has more than 2,300 Supercenters, which at about 187,000 sq ft sell groceries and general merchandise. It also has more than 1,000 discount stores without groceries that average 107,000 sq ft.

Plans for giant Wal-Mart stores in California, New York and Chicago have met local political opposition, while Tesco’s smaller format stores do not require the same level of planning approval.

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Ex-Wal-Mart Officer Coughlin May Face Prison Sentence

By Cynthia Cotts
and Bob Van Voris
Bloomberg                                        [back to top]  

Aug. 28 (Bloomberg) -- Thomas Coughlin, the former Wal- Mart Stores Inc. executive convicted of stealing from the company, may have to go to prison after an appeals court said his house-arrest sentence was too lenient.

The court in St. Louis today tossed out a trial judge's sentence of the ailing Coughlin, 58, to 27 months' house arrest. Coughlin, a former Wal-Mart vice chairman, didn't prove his poor health justified a nonprison sentence, the court said.

``The district court clearly erred in finding Coughlin suffers an extraordinary physical impairment and abused its discretion,'' a three-judge panel said in a 2-1 ruling.

Defense lawyers claimed Coughlin's heart condition, diabetes, obesity and sleep apnea made him too fragile to survive the stress of prison. Prosecutors argued in an appeal that thousands of inmates get adequate care for similar conditions. Both sides can present new evidence before Coughlin is sentenced again, the court said today.

The former executive, admitting he falsified expense reports and stole Wal-Mart gift cards, pleaded guilty to fraud and failing to report illegal income for his 2000 taxes.

Federal guidelines call for as much as 33 months in prison, the government said in the appeal. Prosecutors last year asked the sentencing judge for as long as a year.

Coughlin was once the second-highest executive at Bentonville, Arkansas-based Wal-Mart, the world's largest retailer. His lawyer, William Taylor, didn't immediately reply to a voice-mail message seeking comment on the decision.

No Company Comment

``We're not a party to the case,'' Wal-Mart spokesman John Simley said. ``It wouldn't be proper for us to comment on it.''

Coughlin in January 2006 admitted five counts of wire fraud and the tax charge. He used company money to buy goods including hunting gear, dog food, underwear and a stuffed wild boar, he acknowledged.

Besides home detention, the former executive was sentenced to five years' probation and a $50,000 fine. He was ordered to pay $411,218 in restitution to Wal-Mart and the government.

U.S. District Judge Robert T. Dawson in Fort Smith, Arkansas, said he took Coughlin's health into consideration before passing sentence.

``I think it's clear Mr. Coughlin is an exemplary citizen who has risen to the top, but he has had a pretty spectacular fall,'' the judge said at the time. ``Considering the worldwide ridicule and embarrassment, the worst punishment may have already been administered.''

Alcohol, Dog Care

In his 2006 guilty plea, Coughlin admitted using a stolen gift card in a Joplin, Missouri, store of the company's Sam's Club unit to buy a cooler, two cases of Miller beer, two cases of Smirnoff vodka, a container each of Jack Daniel's and Crown Royal whisky, a carton of Patron tequila and a patio torch. He admitted falsifying expense reports to get reimbursement for care for his dogs and to upgrade his truck.

Judge Kermit Bye argued today in a dissent that imprisonment poses a grave danger to Coughlin's health. Saying Coughlin has had ``multiple life-threatening cardiac episodes,'' Bye cited a doctor's testimony that the former executive would have limited access to prescription drugs and a cardiologist.

The panel majority consisted of judges James Loken and William Jay Riley.

Wal-Mart fell 42 cents, or 1 percent, to $43.40 at 4:03 p.m. in New York Stock Exchange composite trading. The shares have declined 6 percent this year.

The case is U.S. v. Coughlin, 06-3294, U.S. Eighth Circuit Court of Appeals (St. Louis).

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Will You Marry Wal-Mart?

Rick Aristotle Munarriz
The Motley Fool
August 28, 2007                          [back to top]  

The writing is on the wall at Wal-Mart (NYSE: WMT), or at least on its corporate job listings website. The Financial Times unearthed new openings at the world's leading retailer that hint the company may be looking to make some acquisitions to get back on the growth track.

Calls for executives to help lead the New Format Development team were posted on the Wal-Mart site five weeks ago. The job descriptions suggest that the "multi-format strategy team" will develop concepts in-house -- but there's a tantalizing entry in the requirements for the position of Senior Director, Multi-Format Strategy.

"Assess strategic implications of any possible M&A on our overall portfolio," is the sixth responsibility listed for the opening (it's job post number 16984, if you're curious or want to apply).

Hmmm. Inserting "possible" merger and acquisitions activity is intriguing. The article's angle is that Wal-Mart is concerned over the stateside expansion of Tesco, England's popular chain of grocery stores, although there's more to it than that.

Tesco is an impressive operator with nearly 2,000 stores in the United Kingdom, but it has expanded into 11 more countries and has no more than 370 units in any single country (and that would be Thailand, where Tesco has been for nine years).

So it's not Tesco that is forcing Wal-Mart's hand here. It is the company's recent weakness relative to its domestic competitors -- and apathetic customers -- that must be at the root of this "possible" push to snap up smaller chains.

Where the best buys are One would argue that Wal-Mart is a couple of years too late. It could have cleaned house on West Coast grocers and rival discounter Kmart when they were trading at a pittance earlier in the millennium.

Thankfully, there is still plenty of blood in the aisles. But instead of going for the obvious department stores and supermarket chains, Wal-Mart is about to find that the biggest bargains to be had are in small, specialty retail concepts.

They may not seem like much of a match with Wal-Mart, but consider the sad fates of some of these distressed chains:

This eclectic lot of chains is trading at significant discounts to recent highs. Now before you say there's no way Wal-Mart would ever want to tail the Hot Topic emo and goth kids around its stores, ask yourself what each of these brands would do in reinvigorating the vanilla bean brand that is Wal-Mart.

Wal-Mart made a commitment to consumer electronics last year, but that basically involved slashing prices. Imagine if it could refashion its consumer electronics departments after the proven Circuit City format, taking advantage of the rising popularity of Firedog to get into the home theater installations and tech repairs markets.

Pier 1 and Restoration Hardware would help bring a new clientele to the company's home decor department. Chico's FAS is a play on appealing to middle-aged fashion-savvy women, and Hot Topic is an outreach program for kids who feel that Wal-Mart is cool only as an object of derision once you get on the intercom system.

All these concepts would be enhanced in their current stand-alone state with Wal-Mart's inventory control mastery, while also providing attractive "store within a store" enhancements to the charisma-free Wal-Mart.

Yes, blood in the aisles It doesn't have to look too hard to find compelling third-party concepts. Some are practically being given away. Tired retailers are out to unload underperforming chains. Forth & Towne was shut down two months ago. Yesterday we learned that Paiva's days are numbered.

When you get down to it, even something as out of the ordinary as Build-A-Bear Workshop (NYSE: BBW) -- which is on the block, by the way -- would do wonders to breathe new life into Wal-Mart's toy department.

Wal-Mart may sell more toys than anyone else in the country, but good luck finding a pulse of personality there. It's the same story throughout most of the superstore's departments. It needs an inoculation to cure it from the mundane, and the bloodied brand injections are pretty darn cheap.

If Wal-Mart takes its "low prices" mantra to heart, there is no reason why its "possible" concept nibbling shouldn't break out into an all-out feast.

Wal-Mart is an Inside Value recommendation. Now there's a newsletter that lives the "low prices" mantra. Find out how with a free with a 30-day trial subscription.

Longtime Fool contributor Rick Munarriz wonders why Walmart.com isn't as popular as Target.com according to Alexa, but it isn't keeping him up at night. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

The Fool has a disclosure policy, and it's got the keys to Sam Walton's pickup truck.

©1995-2006 The Motley Fool. All rights reserved.

 [back to top]  

Court: New Sentence for Wal-Mart Exec

By MARCUS KABEL
Associated Press
08.28.07                                        [back to top]   

A federal appeals court said Tuesday that despite his poor health and good works, former Wal-Mart executive Thomas Coughlin got off too easy after admitting he had cheated his company and the IRS.

If anything, the 8th U.S. Circuit Court of Appeals said, Coughlin's standing in his community made his crimes appear worse. It directed an Arkansas federal judge to resentence Coughlin - rejecting a term that included only home detention and probation.

Coughlin pleaded guilty in January 2006 to felony wire fraud and tax evasion charges after embezzling cash, gift cards and merchandise from Wal-Mart Stores Inc. (nyse: WMT - news - people ), where he worked for 28 years and served as Sam Walton's protege. Wal-Mart estimated the loss at nearly $500,000.

The former No. 2 Wal-Mart executive faced more than 28 years in prison and fines of $1.35 million, but U.S. District Judge Robert T. Dawson handed down 27 months of home detention and 33 months of probation. Coughlin was fined $50,000 and ordered to make $411,218 in restitution.

The sentence "does not fall within the range of reasonableness," Judge William Jay Riley wrote for the majority.

While Dawson gave Coughlin credit for his being a pillar of the community, prosecutors still wanted him to impose a prison term of at least six months. The 8th Circuit, in a split decision, agreed with prosecutors that, based on what was said in court, Coughlin's sentence seemed too light.

"Perhaps Coughlin's family ties and station in the community, as well as his lofty corporate position of trust and power, exacerbate the nature of his crimes, especially for Coughlin's victims: Wal-Mart, and more generally, American businesses," the majority wrote.

In the new hearing, the court said, prosecutors and Coughlin could raise new arguments.

A spokesman for Bentonville, Ark.-based Wal-Mart declined to comment. In the past, Chief Executive Lee Scott has called the Coughlin case "an embarrassment" for the company. Prosecutor Bob Balfe said he appreciated the court's consideration. Coughlin did not return telephone calls made to his Centerton, Ark., home.

Coughlin can seek a rehearing before the full nine-judge panel in the 8th Circuit or appeal to the U.S. Supreme Court, said Sam Perroni, a former U.S. assistant attorney and white-collar crime defense lawyer in Little Rock.

"The fact that the decision was split could mean a better chance for a rehearing or a hearing before the full appeals court," Perroni said.

In Tuesday's decision, the court rejected arguments that Coughlin's health problems - heart failure, obesity, diabetes and gout - might not receive satisfactory treatment in prison.

Courts use sentencing guidelines that weigh the severity of a crime against aggravating or mitigating circumstances. Judges must justify their decisions when they part from them.

"The district court clearly erred in finding Coughlin suffers an extraordinary physical impairment and abused its discretion by departing downward eight levels" from the guidelines, the appeals court wrote.

In a dissent, Judge Kermit E. Bye said the district judge had properly found that Coughlin suffered from poor health and that the sentence should stand.

"I do not find the court abused its discretion in imposing a sentence of home detention rather than incarceration," Bye wrote.

Coughlin retired in January 2005. Months later, the company accused him of using Wal-Mart money and gift cards to pay for about $500,000 in personal items that ranged from hunting trips and hunting dog training to clothes, alcohol and work on his car.

In his guilty plea in January 2006, Coughlin specifically admitted defrauding the company to pay for the care of his hunting dogs, lease a private hunting area, upgrade his pickup truck, buy liquor and a cooler, and receive $3,100 in cash. Then 58, his lawyers argued against a prison term.

Coughlin's plea came two months after his former subordinate, Robert E. Hey Jr., agreed to testify for the government about the alleged embezzlement. Hey received parole instead of prison in return for his testimony and guilty plea.

Separately, Wal-Mart is trying to break a $12 million and $15 million retirement pact with Coughlin, saying it wouldn't have agreed to it if it knew about Coughlin's crimes.

Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed

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Wal-Mart Considers Acquisitions in U.S. Source

Reuters
27/08/2007                             [back to top]  

New York, August 27 - Wal-Mart Stores Inc. is considering acquisitions in its home market as it seeks to open smaller stores and limit its reliance on giant supercenters for growth, the Financial Times reported in its online edition. Daily News Alerts - We respect your privacy - The move is seen as a response to the imminent opening in the United States of Tesco's "Fresh & Easy" neighborhood grocery markets, the report said.

The world's largest retailer is seeking an executive to assess the "strategic implications of any possible M&A on our overall portfolio," according to a Wal-Mart job posting cited by the FT.

The position is part of a new team that will develop a "comprehensive multi-format growth strategy," the report said.

Mike Griswold, a retail analyst at AMR Research, said the news "reinforces my view that Wal-Mart is taking Tesco very seriously," according to the report.

Wal-Mart did not immediately respond to a request for comment.

[back to top]  

Wal-Mart says hiring execs to evaluate stores

by Lewis Krauskopf
and Nicole Maestri
Reuters
Mon Aug 27, 2007                              [back to top]  

NEW YORK, Aug 27 (Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) is hiring middle-management level executives to help evaluate the type of stores that it operates ahead of the arrival of British grocery Tesco (TSCO.L: Quote, Profile, Research) to the United States.

But the world's largest retailer said it would be "wrong to speculate" on what those job openings might mean for future M&A activity.

Earlier on Monday, the Financial Times reported the retailer was considering acquisitions in the United States, citing a Wal-Mart job posting for an executive to assess the "strategic implications of any possible M&A on our overall portfolio."

Wal-Mart spokesman John Simley said, "Two months ago we posted a number of middle-management level positions to evaluate our existing formats to achieve better customer relevance. It would be wrong to speculate how that might translate to future M&A activity."

Tesco is preparing to open its "Fresh & Easy" neighborhood grocery markets in the U.S. later this year, and many are waiting to see if Wal-Mart will introduce a new, smaller store concept to compete with the Tesco stores.

Tesco is seeking to woo U.S. shoppers with smaller convenience stores of around 10,000 square feet emphasizing ready-to-eat meals and fresh produce in areas that are underserved by supermarket and grocery store chains.

In the U.S., Wal-Mart currently operates its namesake discount stores that average 107,000 square feet; its "Supercenters" that average 187,000 square feet and combine general merchandise with groceries; and its smaller "Neighborhood Markets" that average 42,000 square feet and sell groceries, pharmaceuticals and general merchandise.

It also operates its Sam's Club warehouse division.

On Wal-Mart's Web site is a job posting from July 26 for a "Senior Director Multi-Format Strategy."

The Web site says the director is expected to "develop a comprehensive Multi-Format growth strategy for WM (Wal-Mart) and to propose the development of new formats to complement our current format portfolio and to address new markets' opportunities by meeting the different customers' needs."

It also says that position would "assess the strategic implications of any possible M&A on our overall portfolio."

There is another posting from July 19 for a "Senior Director, New Format Design."

Once the strategy team has identified business opportunities for new store formats development, "this position will take responsibility for the development of one specific format," the listing states.

Wal-Mart shares rose 8 cents to $43.82 in early afternoon New York Stock Exchange trading.

((Reporting by Lewis Krauskopf and Nicole Maestri, editing by Derek Caney;

(C) Reuters 2007. All rights reserved.

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Technology Dell Stumbles at Wal-Mart

By Alexei Oreskovic
TheStreet.com 
8/27/2007                                            [back to top]  

SAN FRANCISCO -- After dissing retail stores for years, Dell (DELL) has changed its tune.

The PC maker teamed up with retailing powerhouse Wal-Mart (WMT) earlier this summer to sell a portion of its desktop and notebook PC models.

Now, as Americans honor the new school year by treading department store aisles, Dell is set to benefit from its bricks-and-mortar presence and potentially revive its tepid sales.

Expectations about Dell's renewed focus on the consumer, with founder Michael Dell once again serving as CEO, have helped buoy the company's stock, which is up about 25% since mid-March.

In recent visits to five Wal-Mart stores in the San Francisco Bay Area, however, TheStreet.com found a company still struggling to find its footing in the rough world of retail.

With competitors like Hewlett-Packard (HPQ) , Toshiba and Acer well entrenched in Wal-Mart stores, Dell PCs appeared to be at a distinct disadvantage in the battle for shelf space and promotional material.

Demonstration units of Dell PCs were nowhere to be found, and the Dell PCs in stock varied from store to store. The salesman at one Wal-Mart store said they had received only a single Dell laptop, and having sold it a couple of weeks ago, was unsure when, or if, any others would be coming in.

Certain stores, on the other hand, featured what seemed like an ample supply of Dell desktop PCs on the shelves, with the machines sporting a compelling set of features and specifications vis-à-vis the competing offerings.

"I would say Dell is probably two years behind the competition in terms of understanding the consumer marketplace. So there's a lot of learning that has to go on," says Samir Bhavnani, analyst at market research firm Current Analysis West.

Bhavnani says moving to Wal-Mart is the right move for Dell, and could help the company put PCs in consumers' hands at a time when logistical glitches appear to be limiting Dell's ability to fulfill some of its online orders.

But the immediate impact on Dell's top line from Wal-Mart will likely be limited, Bhavnani reckons.

"They're in the very early stages of a bigger strategy, so people can't expect too much too soon," he says.

Dell is keeping tight-lipped about its retail sales results so far, though Wal-Mart has hinted that things are going well.

During Wal-Mart's second-quarter conference call earlier this month, Eduardo Castro-Wright, CEO of Wal-Mart Stores USA, said the company was "very pleased with the response we're seeing to the sales of Dell personal computers in our stores," although he did not provide any specific details.

Dell began to sell PCs at more than 3,500 North American Wal-Mart stores in June, a striking shift from the company's traditional business model of selling directly to consumers through Internet and phone orders.

While the direct, build-to-order strategy revolutionized the PC business and helped transform Dell into the world's No.1 PC maker for several years, the business model has begun to show signs of wear in recent years.

The rise in popularity of laptops, in particular, favors companies like H-P that sell in old-fashioned retail outlets, where consumers can touch and feel the machines and get a first-hand look at a product's physical dimensions, according to analysts.

Last year, H-P overtook Dell to become the world's top PC seller. In its most recently ended quarter, H-P said its notebook revenue increased 54% year-over-year. Dell is scheduled to report its quarterly results Thursday.

Analysts have applauded Dell's move to Wal-Mart, predicting that it will finally put Dell on a level playing field with the competition.

To judge by the admittedly limited survey of Wal-Mart stores though, Dell's initial foray into retail doesn't address a key issue: Prospective customers hoping to see what a Dell laptop looks like may actually be better off visiting the company's Web site than visiting the local Wal-Mart.

At all five Wal-Mart stores visited, Dell was a no-show among the out-of-box laptops on display in the PC section, where consumers could inspect machines from the likes of Acer and Toshiba.

In a couple of stores, Dell had a special glass kiosk display promoting its laptops and the back-to-school theme. But instead of displaying one of Dell's laptops, the kiosk simply featured an "actual size" picture of Dell's laptop. The laptops were all in boxes locked in a cage underneath the display.

So much for the hands-on shopping experience.

Dell spokesman David Frink says he can't comment on the way Wal-Mart chooses to display its merchandise, but notes that the brands of PCs on display vary from store to store.

Asked how important out-of-box PC displays are to Dell's overall retail strategy, Frink said there is no way to answer the question.

"Obviously, we think our relationship with Wal-Mart and Sam's Club is an important part of our evolving retail strategy," said Frink.

A representative from Wal-Mart couldn't be reached for comment.

Dell says the Wal-Mart partnership is only the first example of many more deals the company expects to strike with retailers.

Despite being the world's largest retailer, and having recently remodeled its electronics department, Wal-Mart may not be the best venue for selling PCs.

The PC section at each of the Wal-Mart stores visited consisted of a single desolate and disorganized aisle in the electronics department. Missing or mislabeled pricing and product specification tags were the norm. And despite it being the back-to-school shopping season, foot traffic in the PC section was sparse.

In fact, during a full day visiting Wal-Mart stores, only a single person was observed purchasing a PC.

However, in a sign that a well-known brand can trump a less-than-ideal retail experience, the PC buyer's choice proved insightful.

The box in his shopping cart: Dell.

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Skype Partners With Wal-Mart

by Mike Sachoff
WebProNews.
Mon, 08/27/2007                    [back to top]  

Internet communications company Skype is partnering with retailer Wal-Mart to offer its hardware in the Internet and voice communications area of Wal-Mart's 1,800 stores in the U.S.

The partnership gives shoppers access to headsets, webcams and handsets designed to work with Skype, along with pre-paid cards for Skype.

The Skype partnership with Wal-Mart comes at a time when Voice over Internet Protocol (VoIP) adoption among U.S. households is growing. According to the Telecommunications Industry Association, 9.9 percent of all landlines in the U.S. were VoIP lines in 2006, and this will increase to 34.1 percent by 2010.

"We applaud Wal-Mart for recognizing the popularity of Skype and making it more accessible to Wal-Mart shoppers. This relationship with Wal-Mart will increase exposure for Skype and our hardware partners in a single dedicated Internet communications section," said Don Albert, vice president and general manager of Skype North America.

"Our research suggests that when users add a Skype Certified accessory like a headset, handset or webcam, it greatly enhances their experience and they use Skype more to connect with family, friends and business colleagues."

Skype is used by 196 million registered users worldwide. Users download Skype software to make free voice and video calls and send instant messages over the Internet.

"We have taken a sharp focus to launch the products and brands that consumers are moving toward at the most affordable prices," said Kevin O'Connor, vice president and general merchandise manager, Wal-Mart Electronics.

"The Skype hardware and pre-paid cards are a great fit with Wal-Mart because they offer long-term money-saving solutions at the right time for many customers."

[back to top] 

Wal-Mart Seeks Executive to Examine New Store Formats

By Lauren Coleman-Lochner
Bloomberg                                      [back to top] 

Aug. 27  -- Wal-Mart Stores Inc., the world's largest retailer, is seeking an executive to evaluate possible acquisitions and new store formats as it faces slowing sales growth and new competition in the U.S.

The retailer, which hasn't acquired a U.S. company in at least 13 years, wants someone to ``assess the strategic implications of any possible M&A on our overall portfolio,'' according to a job posting on the Bentonville, Arkansas-based company's Web site.

Wal-Mart's U.S. sales growth at stores open at least 12 months last year was 2.1 percent, the slowest since it began reporting the data in 1980. Wal-Mart is bracing for the entry of Tesco Plc, the largest U.K. retailer, to the U.S. this year. Tesco plans to open a chain of convenience stores, called Fresh & Easy Neighborhood Markets, featuring prepared foods.

``The company should be focusing on improving its core stores,'' David Strasser, an analyst at Banc of America Securities in New York, wrote in a report today. ``We believe they need to fix this business before diversifying further.'' He rates shares ``buy.''

Wal-Mart spokesman John Simley called the posting ``one of several middle-management-level positions that really was aimed at evaluating our existing formats with the aim of achieving better customer relevance.''

In terms of adding new formats, ``we would never rule anything out,'' he said today in an interview.

The listing was reported earlier in the Financial Times.

U.S. Acquisitions

Wal-Mart historically has preferred to expand in the U.S. through opening stores rather than acquiring other retailers.

The company, founded in 1962 with the opening of the first location in Rogers, Arkansas, made its first acquisition 15 years later, buying 16 Mohr-Value stores in Illinois and Michigan, it said on its Web site. Wal-Mart has made only a handful of U.S. purchases since then, mostly of individual stores, according to data compiled by Bloomberg.

Alternatively, Wal-Mart has bought several companies or stakes to allow it to expand internationally, including last year's purchase of a majority interest in Carhco NV in Central America.

Last year, 22 percent of Wal-Mart's $345 billion in sales came from its international division, where sales increased 30 percent. It operates about 7,000 stores, including more than 2,900 locations outside of the U.S.

Wal-Mart rose 8 cents to $43.82 as of 4 p.m. in New York Stock Exchange composite trading. The shares have declined 5.1 percent this year.

[back to top] 

ID Systems (IDSY) Executes Additional Order From Wal-Mart (WMT)

StreetInsider.com
08-27-2007                                      [back to top] 

In Today's 8-K Filing From ID Systems (Nasdaq: IDSY): On August 22, 2007 Wal-Mart Stores, Inc. (NYSE: WMT) executed orders with I.D. Systems, Inc. for the Registrant's Wireless Asset Net® industrial vehicle management system to be located at 13 additional Wal-Mart sites in the United States. The order brings the total number of Wal-Mart facilities utilizing the Wireless Asset Net to 21. This order was made in connection with the agreement between the Registrant and Wal-Mart dated July 14, 2006, which sets forth the terms and conditions under which the Registrant has agreed to provide, and Wal-Mart has agreed to license and/or purchase, software, hardware and support and/or professional services associated with the Wireless Asset Net.

[back to top] 

Wal-Mart Looking For U.S. Acquisitions

Angela Moore
Financial Times
August 27, 2007                           [back to top] 

Wal-Mart Stores Inc. (WMT) is looking to make acquisitions in the U.S. for the first time in more than 25 years, the Financial Times reported in its online edition Monday.

The world's largest retailer had been recently focusing on international growth as it slowed the pace of its U.S. growth.

Wal-Mart wants to hire an executive to explore "strategic implications of any possible M&A on our overall portfolio," the FT reported, citing a Wal-Mart job posting.

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Wal-Mart owes back taxes, state says

Paying rent to itself cuts millions off retailer's tax bill

By STEVEN WALTERS
and AVRUM D. LANK
journalsentinel.com
Aug. 25, 2007                                                                [back to top] 

Madison - Wal-Mart Stores Inc. has avoided millions of dollars in state taxes by paying rent on 87 Wisconsin properties in a way that the state Department of Revenue calls an "abuse and distortion of income."

As a result, state tax auditors say, Wal-Mart owes more than $17.7 million in back corporate income taxes, interest and penalties for 1998, 1999 and 2000. More could be due for later years.

Revenue Department lawyer Mark Zimmer argues that the world's largest retailer is not paying its fair share of taxes that support public schools, local police and fire departments and the highways it uses to transport what it sells in Wisconsin.

As a result, Wal-Mart shifts the burden of paying for those services "to individuals and small businesses who are unable to set up such elaborate mechanisms," Zimmer told the Tax Appeals Commission, which is considering the matter.

The charges are unusually aggressive for the state's tax-collection agency, and the case is being closely watched by tax professionals. Legislators, too, have become involved; some want to change state law to end the technique Wal-Mart is using.

Wal-Mart says it has not done anything wrong but is merely taking advantage of an overlap of state and federal tax laws: To reduce its taxes and costs, it sets up one subsidiary to run its stores and another subsidiary to own its real estate. The operating subsidiary pays rent to the real estate subsidiary and takes a tax deduction for the rent, even though that money eventually ends up in the corporation's own pocket.

"Anything Wal-Mart can do to lawfully lower its costs allows the company to pass it along through lower prices," said company spokesman John Simley. "This is a lawful (tax) structure in Wisconsin."

Wal-Mart paid $26.2 million in state and local Wisconsin taxes, including property, state income and unemployment taxes and licenses and fees, in the last year, Simley said.

He declined to break down the $26.2 million by type of taxes. But City of Milwaukee records say the company will pay $1.2 million in property taxes on its five stores in the city this year. In Madison, the company will pay $151,654 in property taxes on four properties.

Simley said Wal-Mart also collected $187.2 million in sales taxes for the State of Wisconsin last year - or 4.5% of all yearly sales tax collections in the state.

Caught up in the budget The Tax Appeals Commission case is part of the Capitol impasse over the next state budget.

In their version of the state budget, Democrats who control the state Senate outlawed the tax-lowering technique used by Wal-Mart.

The sponsor of that change, Sen. Russ Decker (D-Schofield), said Wal-Mart and others who use the deduction are "scamming the system, and we ought to plug the loophole."

Wal-Mart is the "poster child" for corporations that don't pay their fair share of taxes, Senate Majority Leader Judy Robson (D-Beloit) said at Thursday's meeting of the special legislative committee trying to negotiate a compromise state budget.

"There are many taxes that we pay in Wisconsin," Simley said.

Other companies use a similar technique, he said, although Wal-Mart is the only company fighting the state about it before the Tax Appeals Commission. In other states, companies including AutoZone Inc. of Memphis, Tenn., have fought similar cases.

A representative of Kohl's Corp., Menomonee Falls, which owns department stores across the nation, said it does not use the tactic. A Sears spokesman said it also does not use the strategy.

Wal-Mart's use of the technique also is part of a larger Capitol debate over whether Wisconsin should modify its entire corporate income tax system by instituting "combined reporting." Under that system, all related companies file one income tax return. Now, all companies doing business in Wisconsin file their own returns, even if two or more of them are owned by a single parent company.

It is only because of this separate reporting status that the technique used by Wal-Mart works.

Decker and Senate Democrats have proposed combined reporting as part of the budget talks. But Gov. Jim Doyle, also a Democrat, opposes it, as does the Republican-dominated Assembly.

Doyle won't make a decision on whether to sign into law Decker's proposal to outlaw the Wal-Mart technique until he knows whether it is part of the final budget passed by the Legislature, said Doyle aide Matt Canter.

If that change becomes law, Simley said he did not know what it would mean for Wal-Mart's prices, expansion plans or employment in Wisconsin.

Wal-Mart is Wisconsin's largest private employer, with 28,920 workers. The average hourly wage of Wal-Mart's full-time workers in Wisconsin is $10.91, Simley said.

How it works Many states are trying to crack down on the technique used by Wal-Mart, commonly called a "captive REIT," or real estate investment trust.

"In effect, Wal-Mart pays rent to itself and takes a deduction for doing so," according to the Revenue Department claim.

Here's how it works:

Wal-Mart sets up two subsidiaries - a company to run its stores, and another entity, called a real estate investment trust, to own the real estate they sit on.

The operating company pays rent to the REIT, taking the rent as a deduction and thus lowering its profits taxed by Wisconsin.

The REIT in turn pays the rent as part of a dividend to the parent company. The dividend is tax-free under state and federal law.

The state Revenue Department contended that the company is organized that way merely to avoid taxes and therefore disallowed the deduction, resulting in the multimillion-dollar dispute.

Simley said that although the structure does save taxes, there are other reasons to be organized that way, including letting specialists in real estate manage the properties while other managers actually run the stores.

States have usually lost their attacks on the REIT strategy elsewhere, said Michael Martens, a lawyer and certified public accountant. He is managing director of the UHY accounting firm in Boston and an expert in the cases.

Wisconsin officials declined to say how their case might differ from those in other states. They noted that decisions of the Tax Appeals Commission can be reviewed by the courts. Both sides expect that to happen in this case.

Richard Pomp, a professor at the University of Connecticut Law School and an expert in state tax law, said he is surprised by Wisconsin's challenge of Wal-Mart over the REIT deduction. The solution, he said, is not a petition to the Tax Appeals Commission but rather legislation to require combined reporting.

"For a state to not have combined reporting, and then to complain about strategies that are facilitated by a lack of combined reporting, is somewhat disingenuous," he said.

Decker, the sponsor of Wisconsin's combined-reporting legislation, said the state should be doing whatever is necessary to collect its fair share of taxes from Wal-Mart.

"It's just a fairness issue," he said. "Go down on Main Street - these businesses are being economically disadvantaged to these big corporations."

Martens said the increasing number of challenges to captive REITs is a sign of the times.

"Everyone is being a little more conscious about how things appear, and states want you to pass the 'red face test,' " he added. "Can you explain what you are doing and do it without a red face?"

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Facebook users resisting Wal-Mart's latest Web 2.0 endeavor

Heather Havenstein
Computerworld
August 24, 2007                                [back to top] 

Analysts have applauded Wal-Mart Stores Inc.'s new "Roommate Style Match" group on Facebook.com, created to help college roommates link up online to coordinate back-to-school purchases at the retailer. However, most of the 100-plus comments posted on the site so far from its 932 members are critical of the retail giant's business practices.

One post, signed by Janine Carmona, wrote that "Facebook should take the number of negative comments on this page as a note that we don't support this company [for] its use of a space for social networking. This space is for people talking to other people. Facebook, get your priorities straight."

While a minority of the comments were positive about Wal-Mart in general, none focused on the company's goal for the site -- having users "chat with other college students by posting their comments about dorms, decorating and college life."

In a statement e-mailed to Computerworld, Wal-Mart spokeswoman Jami Arms said that the company is glad so many of its customers are visiting Facebook and interacting with each other.

"We recognize that we are facilitating a live conversation, and we know that in any conversation, especially one happening online, there will be both supporters and detractors," she wrote. "We're happy that so many of our customers are talking on Facebook about why they like Wal-Mart. Most of all, we're glad that soon-to-be roommates are using our site to come together and make choices about their dorm rooms."

Josh Bernoff, an analyst at Forrester Research Inc., said that any company that puts itself on Facebook is likely face detractors. "Wal-Mart has more enemies than most people," he noted. "Wal-Mart has a PR weakness. If you give people an opportunity, they are going to come after you."

Despite the critical posts, Bernoff said he expects the Facebook effort will lead to more sales than the company's previous two Web 2.0 projects. Wal-Mart got egg on its face when it was revealed last year that a blog supposedly written by two independent consumers was backed by an initiative funded by Wal-Mart's public relations firm. In addition, a Wal-Mart social network called The Hub was closed after 10 weeks last year.

"For Wal-Mart, this is the right approach," Bernoff said. "This is a great way to reach college students. It is much easier to get someone on Facebook to join your group than to get someone to come to your Web site and join your community."

Jeremiah Owyang, a blogger who writes about Web strategies and who is also director of corporate media strategy at PodTech.net, blogged that Wal-Mart shouldn't give up the effort even though he expects that the "battering of the [Wal-Mart] brand" on Facebook will probably continue. He recommends that Wal-Mart start discussion group forums to try to "segment the conversations about going back to school and even consider keeping folks on topic. Continue to allow critics (you can't stop it anyway) but try to use the forums as a guide to a discussion about school."

He commends Wal-Mart for being "bold" enough to continuing to try social networking efforts despite previous failures, and for not abandoning the Facebook site despite the criticism from users.

"I highly recommend that Wal-Mart consider trying a community strategy using a transparent and authentic blog or video blog series that addresses the very brand issues that they are getting slammed on," he wrote. "I took a look online for a 'Wal-Mart blog' and didn't see any from the company. It's going to be very difficult to try a community marketing strategy with eCommerce hooks without first addressing the brand detractors."

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Wal-Mart Tightens Toy-Safety Program

By Ylan Q. Mui
and Renae Merle
Washington Post
Friday, August 24, 2007                                [back to top] 

Wal-Mart officials said yesterday they were asking toy suppliers to submit recent safety documentation or re-test their products in response to the wave of recalled merchandise from China that has cast a shadow over the upcoming holiday shopping season.

The efforts are part of a five-step plan to improve safety that the company is calling the Toy Safety Net Program. It has promised to work with the Toy Industry Association, a trade group, on new safety standards later this month and help Chinese leaders who are implementing new testing procedures.

"We know this is an issue at the top of mind with our customers, and we know we can play a role to reassure them that we have great, safe toys in our stores," said Laura Phillips, Wal-Mart's merchandise manager overseeing toys.

About 80 percent of the toys sold in the United States are made in China. Phillips said the majority of toys on Wal-Mart's shelves are manufactured there but declined to give a specific figure. The Bentonville, Ark., retailer controls roughly one-third of the U.S. toy market, according to Eric Johnson, a management professor at the Tuck School of Business at Dartmouth College.

"They have an obviously huge stake in this thing as a retailer, making sure that consumers feel that toys are safe," he said. "They are exceedingly powerful in the toy industry."

Under the new program, Wal-Mart's suppliers must provide evidence that their toys have been tested for safety by a third party within the past three months. Typically, toys are inspected during preproduction, production and in the store, said Kyle Holifield, director of product compliance and product safety for Wal-Mart. Suppliers that do not meet the three-month standard must undergo additional inspection.

Wal-Mart has hired three firms to help retailers test their products: Bureau Veritas of Belgium, Intertek Group of London and Consumer Testing Laboratories of Bentonville. Chuck Rogers, who oversees quality in global procurement for Wal-Mart, said he expected the number of toys tested by the company to rise to an average of 200 per day, a 15 to 20 percent jump over normal levels.

Wal-Mart's move comes after two major recalls by Mattel this month encompassing more than 10 million toys, including such popular lines as Barbie, Batman action figures and Thomas the Tank Engine, all made in China.

Wal-Mart Watch, a frequent critic of the company financed by the Service Employees International Union, said the retailer's efforts to improve product safety do not go far enough. "Wal-Mart's not addressing the larger problem of why Chinese toy suppliers are cutting corners with lead paint and melamine," spokesman Nu Wexler said, referring to a harmful additive found in pet food made in China. "It's because they're under enormous pressure from buyers like Wal-Mart, and they're sacrificing child safety to keep costs low."

© 2007 The Washington Post Company

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Wal-Mart Town Center Project Is Missing The Town Center

Plantizen
23 August 2007                                  [back to top] 

In North Lauderdale, Florida, a Wal-Mart-anchored town center is struggling to live up to its promises.

"Wal-Mart officials reportedly have told city staff that they haven’t had any luck finding restaurants and stores to move in next door, as they are contractually obligated to do, because 'nobody wants to come to North Lauderdale.'

City leaders are outraged that instead of a Town Center destination site, they could end up with nothing more than a giant Wal-Mart at the former U-Pick farm along McNab Road.

The 43-acre Town Center project — two years in the making — was supposed to feature a 207,204-square-foot Wal-Mart, an 80-room hotel, restaurants and 36,000 square feet of shopping, according to the city."

Source: South Florida Sun Sentinel, Aug 13, 2007

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H&R Block to Offer Services at Wal-Mart

Associated Press
08.23.07                                   [back to top] 

NEW YORK - H&R Block Inc. signed a kiosk license agreement with Wal-Mart Stores Inc. to provide tax preparation services in certain Wal-Mart locations, according to a regulatory filing.

In a filing with the Securities and Exchange Commission late Wednesday, H&R Block said the deal with the world's largest retailer expires on May 30, 2009, although either party may terminate the agreement between April 16 and May 1 of each year.

Unless terminated, the Wal-Mart agreement will automatically renew for one year after the initial term ends.

Copyright 2007 Associated Press. All rights reserved.

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U.S. Is Checking Dog Treats Wal-Mart Says Are Tainted

By THE ASSOCIATED PRESS
August 23, 2007                                           [back to top] 

The Food and Drug Administration said yesterday that it was checking dog treats recently withdrawn from Wal-Mart’s shelves but had not yet detected any chemical or biological contamination in the Chinese-made products.

A spokeswoman for Wal-Mart Stores, the world’s largest retailer, said it was aware of other companies’ selling the suspect products to pet owners.

And China, on the defensive over the safety of its products, lashed out at the United States yesterday by claiming that American soybean exports contained pesticides, poisonous weeds and dirt.

Wal-Mart, based in Bentonville, Ark., said this week that it had stopped selling Chicken Jerky Strips from the Import-Pingyang Pet Product Company and Chicken Jerky from Shanghai Bestro Trading in July, after customers said the products sickened their pets.

Wal-Mart said 17 tests showed trace levels of melamine, the same pesticide byproduct that led to a widespread pet food recall in March after an unknown number of dogs and cats died.

An F.D.A. spokeswoman, Kimberly Rawlings, said yesterday the agency was actively investigating Wal-Mart’s products in light of the store’s removal of the items from its shelves.

She also said in an e-mail message to The Associated Press that the agency had reviewed Wal-Mart’s lab report that mentioned 20 parts per million of melamine. “This level of melamine would not be expected to result in any animal illness,” she said.

A Wal-Mart spokeswoman, Deisha Galberth, said that with such small amounts of melamine found, its laboratory recommended more testing.

Ms. Galberth said Wal-Mart was aware of other retailers that were selling the products, but she declined to identify hem.

More than 150 brands of pet food were recalled this year after American inspectors said wheat gluten from China that had been used to make the food was tainted with melamine. An unknown number of dogs and cats died.

Since then, other Chinese products, including tires, toothpaste, seafood, juice and toys decorated with lead paint have been recalled or come under scrutiny.

A distributor has announced a recall in Australia and New Zealand of Chinese-made blankets found to contain high levels of formaldehyde, a potentially cancer-causing chemical preservative that gives a permanent-press finish to clothes.

Beijing has tried to defend its safety record and reassure consumers by highlighting similar problems in other countries.

“Numerous quality problems” have been found with American soybeans, the General Administration of Quality Supervision, Inspection and Quarantine, a Chinese watchdog agency, said in a notice posted yesterday on its Web site.

In February, one batch of beans was found to contain pesticides that constituted a “great potential hazard to the food safety of Chinese consumers,” it said.

Soybeans, which are mainly crushed for oil and used as animal feed, are the biggest single United States farm export to China, according to the American Soybean Association.

Copyright 2007 The New York Times Company

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H&R Block sets Wal-Mart kiosk license deal

The tax preparer reached an agreement with the discount retailer to operate tax preparation offices in certain stores.

Reuters
August 22 2007                          [back to top] 

NEW YORK (Reuters) -- H&R Block Inc said Wednesday that it had reached an agreement with Wal-Mart Stores Inc under which the tax preparation firm will operate tax preparation offices in certain of the discount retailer's stores.

The agreement expires on May 30, 2009, though either party may terminate it between April 16 and May 1 of each year. Otherwise, it will be automatically renewed for a year once the initial term expires.

H&R Block's (Charts, Fortune 500) shares were down 1 percent in after-hours trading while Wal-Mart (Charts, Fortune 500) shares edged slightly lower on the New York Stock Exchange Wednesday.

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FDA testing dog treats Wal-Mart pulled off store shelves

Canadian Press
Wednesday, August 22, 2007                         [back to top] 

LITTLE ROCK, Ark. (AP) - The U.S. Food and Drug Administration said Wednesday it is checking dog treats recently pulled from Wal-Mart's shelves but has not yet detected any chemical or biological contamination in the Chinese-made products.

Meanwhile, a spokeswoman for Wal-Mart Stores Inc. said the world's largest retailer was aware of other companies selling the suspect products to pet owners.

Bentonville-based Wal-Mart said this week it stopped selling Chicken Jerky Strips from Import-Pingyang Pet Product Co. and Chicken Jerky from Shanghai Bestro Trading in July, after customers said the products sickened their pets.

Wal-Mart said 17 tests showed trace levels of melamine, the same pesticide byproduct that led to a widespread pet food recall in March after an unknown number of dogs and cats died. More than 150 brands of pet food were recalled after U.S. inspectors said wheat gluten from China that was used to make the food was tainted with melamine.

FDA spokeswoman Kimberly Rawlings said Wednesday the agency was "actively" investigating Wal-Mart's products in light of the store's pulling the items from its shelves.

"We have tested numerous samples of chicken jerky pet treats for possible contaminants including melamine," she said in an e-mail.

"To date, we have NOT detected any contaminants. We are continuing to test."

She also said the FDA had reviewed Wal-Mart's lab report that mentions 20 parts per million of melamine.

"This level of melamine would not be expected to result in any animal illness," Rawlings said.

Wal-Mart spokeswoman Deisha Galberth said with such small amounts of melamine found, its laboratory recommended more testing.

Galberth said Wal-Mart was aware of other retailers selling the products but she declined to name them. Rawlings could not be reached for further comment late Wednesday.

Wal-Mart said Tuesday customers should be especially wary of jerky from Shanghai Bestro Trading with the UPC number 0087784900006 and item number 839751. The company said customers who bought one of the products could return it to the nearest store for a refund.

Wal-Mart pulled the products from shelves July 26 and placed a computerized block on all cash registers to prevent workers from selling the products. Galberth has said Wal-Mart didn't make a public announcement at that time because it wanted to complete its testing first.

As recently as 2005, the FDA blocked some pet treat imports from Pingyang Pet Product Co. because of contamination with salmonella.

© The Canadian Press, 2007

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Michigan judge dismisses Roehm's Wal-Mart suit

By Gina Keating
Wed Aug 22, 2007                              [back to top]  

LOS ANGELES, Aug 22 (Reuters) - A Michigan state judge has dismissed a breach of contract lawsuit brought against Wal-Mart Stores Inc. <WMT.N> by a former marketing executive, saying the action should have been filed in Arkansas, where the world's largest retailer is headquartered.

Julie Roehm had sued Wal-Mart in Michigan's Oakland County Circuit Court shortly after she was terminated last December. Roehm said in the lawsuit that she was a Michigan resident who had temporarily relocated to Arkansas for the Wal-Mart job.

Her departure came amid speculation that she had violated company policy by accepting a costly dinner hosted by Interpublic Group of Companies Inc <IPG.N> agency DraftFCB while she was reviewing advertising agencies for Wal-Mart.

In a written opinion filed on Monday, Judge Denise Langford Morris noted that Roehm had signed an agreement providing that any legal action relating to her employment would be brought in state or federal courts in Benton County, Arkansas.

As a result, Roehm's claims must be brought to Arkansas, the judge ruled.

Roehm's lawyer and her spokesman both said she would decide "soon" whether to appeal the case in Michigan or to refile in Arkansas, and they emphasized that the judge had not ruled on the merits of her claim.

"When you are litigating against one of the world's largest corporations and you are just an individual, it is a pretty daunting task financially," attorney B. Andrew Rifkin, who represents Roehm, told Reuters.

Rifkin also said a settlement was possible.

Wal-Mart spokesman John Simley said the company was "pleased with the judge's decision to dismiss the case," but would not comment on whether Wal-Mart would refile its countersuit against the former employee in Arkansas court.

Roehm initially sued Wal-Mart for fraud and breach of contract, contending that she did not receive severance payments promised in her employment contract.

She has denied any inappropriate activity and claims she was told by Wal-Mart that she was fired for not "fulfilling the expectations of an officer of the company."

Roehm, who was abruptly dismissed on Dec. 4 after less than a year on the job, was hired to help Wal-Mart attract more affluent and sophisticated consumers who would spend money on higher-priced electronics and trendier clothes.

A former marketing executive at DaimlerChrysler <DAIGn.DE>, she was known for pushing the limits in her ads.

© Reuters 2007. All rights reserved.

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Wal-Mart selling digital music free of copy curbs in US

stuff.co.nz
Wednesday, 22 August 2007                               [back to top] 

Wal-Mart Stores is now selling digital music downloads on its website without the customary copy-protection technology that limits where consumers can play the songs.

Wal-Mart, the world's largest retailer, said its new MP3 music catalogue included thousands of albums and songs from major record labels like Vivendi's Universal Music and EMI without copy-protection software, known as digital rights management.

Wal-Mart said it would sell the "DRM-free" MP3 downloads of music by artists like the Rolling Stones, Amy Winehouse and Maroon 5 for 94 cents per track or $9.22 (4.65 pounds) per album. It said the new format let customers play music on almost any device, including iPods, iPhones and Microsoft Corp's Zune portable media player.

The announcement comes as major record labels debate whether dropping DRM will hurt digital music sales or encourage piracy. Copy protection software prevents unauthorized copying of a digital song bought from an online store, but it also limits where an owner can listen to it.

Apple founder and Chief Executive Steve Jobs has called on the music industry to allow online retailers like iTunes to sell songs without restrictions to give the digital music sector a boost and to give consumers what they want.

Universal, the world's largest music label, said earlier this month that it was testing the sale of songs without copy-protection software and said vendors including Google, Wal-Mart and Amazon.com, would participate in the DRM-free trial.

EMI has also agreed to drop DRM, but Sony BMG and Warner Music are still testing the impact of such a move on digital music sales.

Apple, whose iTunes online music stores is the third-largest music retailer in the United States, has launched iTunes Plus, a copy-protection-free music download service.

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Wal-Mart's DiBenedetto to Speak at Event

Associated Press
08.21.07                                     [back to top] 

MOUNTAIN VIEW, Calif. - SumTotal Systems Inc. said Tuesday that Wal-Mart Stores Inc. training executive John DiBenedetto is scheduled to speak at the TotalConnection 2007 conference in September.

DiBenedetto, the retailer's vice president of talent planning and development, will be the keynote speaker at the Dallas conference on Sept. 19. Other companies represented at the event, which runs from Sept. 18 to 20, include Baker Hughes Inc., GEICO and Wells Fargo & Co.

SumTotal makes e-learning and business optimization software.

Copyright 2007 Associated Press.

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How to Fix Wal-Mart? Ask Its Managers

Store managers from across the country—who know Wal-Mart's customers best—have a few ideas to get the retailer back on track by

Pallavi Gogoi
BusinessWeek.com.
August 21, 2007                                               [back to top]  

H. Lee Scott Jr., chief executive officer of Wal-Mart Stores (WMT), has been tirelessly upbeat in recent quarters even as the retailing giant has floundered through two of the most difficult years in its history. But on Aug. 14, Scott sounded downright glum as he reported financial results for the second quarter. He lowered the company's profit forecast for the rest of the year and made no effort to conceal his disappointment with its performance. "[This] was not what we expected of ourselves," he said (see BusinessWeek.com, 8/14/07, "Wal-Mart's Earnings Warning"), and 8/14/07, "The Implications of Wal-Mart's Warning").

Clearly, the brain trust in Bentonville is struggling to get the company back on track. Growth is faltering, with same-store sales inching up just 1.9% in 2006, the worst performance in the company's history. Several new initiatives to boost revenues have come up short, particularly an effort to move upscale into products like higher-end apparel and home goods (see BusinessWeek.com, 4/3/07, "Wal-Mart's Midlife Crisis"). Wal-Mart's stock, at $43.59 a share, is hovering around its 52-week low. And some Wall Street analysts are already expressing doubt that Wal-Mart will be able to meet even the reduced earnings forecast it just provided. "Fourth-quarter expectations could be a stretch if merchandise missteps continue," says Adrianne Shapira, a retail analyst at Goldman Sachs (GS).

How to fix the giant? To uncover fresh ideas, BusinessWeek decided to go to those managers who are closest to its customers. We spoke with a dozen managers at Wal-Mart stores across the country, some currently employed and others recently departed. A few declined to participate, citing the company's tight restrictions on talking to the press. But many wanted to talk. Some even felt more comfortable discussing the company's challenges with an outsider since their ideas aren't consistent with the corporate orthodoxy.

An Insider's Eye

These managers care deeply about the retailer. Clearly, the company's future is central to their lives and their professional prospects. Beyond that, they truly believe in what has long been the quintessential American success story. These managers have a wealth of knowledge gleaned from spending so much time at Wal-Mart. Those interviewed have more than 100 years of combined experience working at Wal-Mart Stores. Several quote regularly from founder Sam Walton's book Made in America, including one current Missouri manager who cited Sam to make it clear he didn't always agree with his superiors in Bentonville: "There's only one boss: The customer."

There are plenty of radical ideas lurking in the minds of Wal-Mart's best and brightest. Many believe the company's relentless focus on whittling down costs—for products and workers—is beginning to have a negative impact on the overall operation. Others take issue with the command-and-control approach currently in vogue at headquarters. For example, Bentonville uses sophisticated computers to decide when to swap out certain products in stores, but they don't account for the gut instinct of managers on the ground. Mark Fisher, who managed the furniture department at the Wal-Mart in Moberly, Miss., says that can lead to big missteps. He cites the decision to replace a pair of $14.99 bookshelves that was a consistent best seller among college students with a higher-quality pair that cost $39.99. "[They] totally lost that entire segment of students," says Fisher, who worked at Wal-Mart for 11 years and now works at Party America, a party-supply store.

Many of the managers' ideas are just as simple, even obvious, if you spend time talking to customers and listening to what they want.

Take chocolate doughnuts. Freshly baked doughnuts and muffins don't make much money for stores, and managing an in-store bakery can be a hassle because it requires a more skilled staff and different hours. That's why headquarters has been cutting back on such operations. But talk to store managers and they shake their heads. The point, they say, is that chocolate doughnuts get people into a Wal-Mart, often every day. Then they buy other stuff—profitable stuff like a cup of coffee or a bottle of water.

Competitors such as Safeway (SWY) and Kroger (KR) see the logic. That's why they're increasing their fresh bakery offerings just as Wal-Mart is cutting back. They're also starting to regain market share in key areas of the country.

A Wal-Mart spokesman declined to respond to specific questions raised by the managers' suggestions. He wrote in an e-mail: "We know that our store managers and associates are great ambassadors for the company and generate some of the best ideas for making our stores an even better place to shop and work."

Pound-Foolish?

Perhaps the most far-reaching advice from Wal-Mart's managers is that the penny-pinching approach at headquarters can prove pound-foolish at the store level. The company is notoriously and proudly tightfisted, in part because Sam Walton built the company by keeping costs low and passing the savings on to customers. But managers say the focus on costs, taken to extremes, can lead to broader errors. For example, while top brass wants to cut back on low- and no-margin products such as guns and live fish, managers say that has been a mistake in some cases.

Why? If you don't sell fish, it's difficult to sell the high-margin fish tanks and cleaning supplies that go with them. And if you don't sell guns, it's harder to sell all the extras people want with them. "The sundry items, from camouflage clothing, cleaning supplies for the weapons, ammunition, and the hunting kits, all have huge margins," says Fisher.

The same penny-pinching mentality has hurt the workforce—and by extension, managers say, the company's service. While many outsiders have criticized Wal-Mart for the wages and benefits it provides workers, what has received much less attention is how these policies are affecting Wal-Mart stores internally. Consider Wal-Mart's decision to transform its workforce to 40% part-timers, up from 25% to 30% now, to trim costs. Many store managers are finding it difficult to hire people under those conditions, especially because Wal-Mart requires part-timers to be available for different shifts from week to week. "There are many applicants for jobs, but they turn away when they hear it's part-time," says Carolyn Garland, a former manager who oversaw several departments during her 19 years at the Wal-Mart in East Ellijay, Ga. She says her store used to have around 200 employees three years ago and now has about 150.

Those kinds of cuts can take their toll. Daniel Jackson, who managed four Wal-Mart stores from Texas to Arizona for 12 years remembers a lesson he learned from the late Helen Walton, wife of founder Sam. She was embarrassed by the poor state of Wal-Mart's restrooms and told a group of managers: "If I walk into one more store where the bathrooms are not clean, I don't know what I will do." With that in mind, Jackson had at least two maintenance people on duty at all times, cleaning up spills, and making sure the bathrooms were clean. Today, his former Arizona store has one maintenance person during the day. "One person can't be expected to sweep up a store, mop spills, and also keep the bathrooms clean," Jackson says.

Customers have noticed. In February, in the University of Michigan's American Customer Satisfaction Index, Wal-Mart scored near the bottom in the discount-and-department-store category. Its score was 72, behind Costco Wholesale (COST) and Target (TGT), and 10 points lower than Wal-Mart's score in 1994.

Centralized Decision-Making

Wal-Mart's managers know this is a critical issue. Asked if there is any area he thinks needs the most improvement, Rick Scott, now manager of a Wal-Mart in Guymon, Okla., says: "There's always room for improvement, but the key one is customer service, from checking people out at the registers to making sure things are in stock to helping people find something at the store." Scott wouldn't elaborate when asked if he needs more staff.

More and more, Bentonville is calling shots that store managers used to handle. Point-of-sale data are analyzed and crunched at the Arkansas headquarters, spitting out results for what's selling and what's not, what to restock and what to pull from store shelves. Workers' schedules are determined at the home office to keep costs low when possible and to place the maximum number of people in the store at the busiest times of the day. There's even a central 800 number that workers at the 3,500-plus stores must call when they need time off for illness or other emergencies.

Wal-Mart uses centralization and sophisticated technology because it has worked so well in the past. As the largest retailer in the world, Wal-Mart had long been able to spot consumer trends before its rivals and adjust its merchandising accordingly. The approach is particularly well suited to CEO Scott, who came up through the logistics side of the business and is considered a master of efficiency and operations.

But managers say Bentonville may now be pushing the command-and-control approach too far. Many managers say their operations would run better if they had more flexibility to handle all sorts of issues, from employee scheduling to restocking store shelves. Garland, the manager from East Ellijay, Ga., says when her store started using the point of sale system to automatically order cosmetics, it was a direct hit to cosmetic sales. That's because cosmetics are a frequent target of shoplifters, given their small size. Since stolen cosmetics never show up as sold, they never get replaced on the shelves under the new system, so customers looking to buy end up disappointed.

Previously, Garland says, she would place special orders to refill any cosmetics items that were down to their last two packages in the aisles, which she checked several times a day. "Taking away the option from the department manager to order products for customers was a mistake," says Garland, who left Wal-Mart in February. "That ordering system worked well in some other departments, like domestics, where you sold large items, like pillows and rugs or furniture, but was a disaster here."

When in Oklahoma…

Nowhere were the shortcomings of the centralized approach more apparent than in Wal-Mart's recent effort to move upscale in several product categories. The initiative began two years ago, after company research found that affluent people with annual incomes over $75,000 were shopping at Wal-Mart for basics like paper towels and detergent. In short order, the company took out an eight-page ad insert in Vogue magazine to promote a new fashion line, sponsored a fashion show in New York's Times Square, and started pushing clothing that managers say they knew wouldn't sell in their stores. "We're rural America," says Scott Thompson, a store manager at a Wal-Mart in Guthrie, Okla. "In the heartland, we're rather conservative, and we don't think in any extremes."

Wal-Mart has since pulled back on its upscale push, acknowledging the difficulties. Scott, in an interview with BusinessWeek earlier this year, said the company had moved "too far, too fast." (See BusinessWeek.com, 3/30/07, "Wal-Mart: 'On the Side of the Angels'").

The company's top officials often trumpet their adaptability and explain that merchandise is tailored for what they call "the store of the community." But Jackson says that flexibility is limited. He says there are six general formats that headquarters will try to fit the stores into—rural, urban, upscale, African American, Hispanic, and inner city. But Jackson says rural Texas is very different from rural Montana. And a Hispanic store in El Paso is very different from one in Albuquerque because El Paso will have shoppers from Mexico who are looking to buy American goods to take back to Mexico, while Hispanics in Albuquerque are more likely to be looking for ethnic supplies. "You cannot have each store fit into six cookie-cutter ideologies," says Jackson. "Listen to each manager, because they know their customer."

"Can't Sit Still"

Wal-Mart has shown an impressive ability to adapt during its rapid growth over the past few decades. Now it may need its most radical overhaul yet to keep Wal-Mart the world-beater its managers still believe it is.

In Fairhope, Ala., soft-spoken Kevin Smith runs a different kind of store for the company. It's a brand-new supercenter, but one that was modified to appease town residents who had protested Wal-Mart's entry into the retirement community. The store's exterior was designed to resemble a row of village shops, and more than 500 trees were planted outside, along with landscaping to match its locality. In addition, the store was built with an environmentally friendly design, with skylights and energy-efficient lighting. In the month since its opening, the store has become a hit with both lower-income customers and those who splurge on organic meats and eggs. Smith has run two stores previously, and now he's all for dramatic change. "We can't sit still and grow stagnant," he says. "Nothing ventured, nothing gained."

Gogoi is a contributing writer for BusinessWeek.com.

Copyright 2000-2007 by The McGraw-Hill Companies Inc. All rights reserved.

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World's biggest retailer Wal-Mart, Bharti Enterprises today said the two would form a 50:50 partnership for front-end retail if allowed by the government

India Daily
Aug. 21, 2007                               [back to top] 

On the heels of announcing a joint venture for wholesale cash-and-carry business with the world's biggest retailer Wal-Mart, Bharti Enterprises today said the two would form a 50:50 partnership for front-end retail if allowed by the government.

"The issue is FDI in retail is not allowed (for multi brand). In the event FDI is opened up to 100 percent, there will be a 50:50 joint venture for front-end retail," Bharti Enterprises Chairman Sunil Bharti Mittal told reporters on the sidelines of the CII Marketing Summit here.

He said the partnership would largely depend on the government policy. "If the government allows only 26 percent FDI, then Wal-Mart will have only 26 percent."

Asked if Wal-Mart would choose to go alone in case the FDI norms were completely relaxed, he said Bharti was a partner of choice for the US-based retailer.

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Wal-Mart quietly pulls dog treats, but no recall

Retailer blocks sales after customers complained that animals falling sick

Contessa Brewer
MSNBC
Aug 21, 2007                                    [back to top] 

LITTLE ROCK, Ark. - Wal-Mart Stores Inc. quietly stopped selling two brands of dog treats in July, after customers voiced concerns that the Chinese products may have caused their pets to fall ill, but no recall has been announced, a company spokeswoman confirmed.

The world’s largest retailer started pulling Chicken Jerky Strips from Import-Pingyang Pet Product Co. and Chicken Jerky from Shanghai Bestro Trading on July 26, spokeswoman Deisha Galberth said late Monday.

Wal-Mart also placed a computerized block on all cash registers to prevent workers from selling the products, Galberth said.

'Testing process' “When we took it off shelves at the end of July, we pulled it based on the customer feedback so we could do testing prior to announcing anything publicly,” Galberth said. “That’s why did not make a public announcement — it was still going through the testing process.”

Wal-Mart’s action follows a massive pet food recall in March, when retailers began pulling products made in China that included the chemical melamine — a contaminant that’s a byproduct of several pesticides.

Galberth said she did not know what the specific customer complaints were about the dog treats, nor when the testing would be complete.

Galberth said she did not immediately know if the treats were sold at every Wal-Mart store.

“We are diligently testing this product,” she said.

© 2007 The Associated Press. All rights reserved.

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Wal-Mart Toys With Your Children's Health

David Nassar
Wal-Mart Watch                             [back to top]   

Dear johnny,

Want to know the price of "every day low prices"? Just take a look at the empty toy shelves at your local Wal-Mart. Over the past two weeks, Mattel has recalled over 10 million Barbie, Polly Pocket, Dora the Explorer and Sesame Street toys for hazardous lead paint and dangerous magnets. Thousands of concerned parents are rushing to pediatricians' offices to have their children tested for lead poisoning. Mattel has taken responsibility for the safety of its products, but Wal-Mart has to be held accountable as well. As it stands, you can't trust that the toys Wal-Mart is selling you are safe. As the world's largest retailer, Wal-Mart sets the standard for product safety -- and by bullying companies like Mattel to produce toys and other products at bottom dollar costs, it's pushing American companies into shady overseas operations. Tell Wal-Mart to care about its customers' health, and demand a higher quality for its products: http://action.walmartwatch.com/madeinchina Maybe Wal-Mart doesn't care what it takes to get its suppliers to sell their goods at cheaper prices. That's probably why 70% of Wal-Mart's products are made in China, where quality guidelines and worker standards are less stringent. In recent months, we've seen story after story about Chinese-made products: faulty tires, tainted toothpaste, toxic pet food, and now poisonous, dangerous toys. Wal-Mart currently has dozens of products listed on its "product recall" web page -- and those are just the ones the company has told us about. Plus, in factory after factory that supplies goods for Wal-Mart, widespread cases of blatant illegal and unethical labor abuses have been uncovered in recent years. In light of the recent toy recalls, it's not a stretch to draw a connection between Wal-Mart's pressure on its suppliers for low cost merchandise, the problems at these factories and the safety of these toys and other products. Just last week, we released a report from Students and Scholars against Corporate Misbehavior (SACOM) that shows serious labor violations in toy factories in China. While Wal-Mart looks the other way at its Chinese manufacturers, American children suffer the consequences. Wal-Mart must use its massive marketing power to improve its suppliers' working conditions and wages. The company has the ability to require that foreign and domestic suppliers adhere to all internationally recognized labor standards and national laws, if it chooses to do so. It can start by not pushing suppliers to race to the bottom on cost, resulting in both labor violations and safety concerns. Tell Wal-Mart to make the right choice: http://action.walmartwatch.com/madeinchina It's not an easy fight. As one Wal-Mart Watch member commented, "Responsibility costs money, and money is what Wal-Mart hates spending." But this is a fight that we need to have -- to improve our global economy, and to keep our kids out of harm's way.

Sincerely,
David Nassar
Wal-Mart Watch

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Wal-Mart Stores Director Buys Shares

Associated Press
08.21.07                                       [back to top] 

NEW YORK - A director of Wal-Mart Stores Inc., the world's largest retailer, bought 5,000 shares of common stock, according to a Securities and Exchange Commission filing Monday.

In a Form 4 filed with the SEC, James Breyer reported he bought the shares for $42.92 to $44.54 apiece.

The stock purchase was conducted under a prearranged 10b5-1 trading plan, which allows a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of material nonpublic information.

Insiders file Form 4s with the SEC to report transactions in their companies' shares. Open market purchases and sales must be reported within two business days of the transaction.

Wal-Mart Stores (nyse: WMT - news - people ) is based in Bentonville, Ark.

Copyright 2007 Associated Press. All rights reserved.

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Retail Reports A Mixed Shopping Record

Joshua Lipton,
08.21.07                                   [back to top] 

Big-name retailers based in the U.S. might have been nervous that the housing sector slump and the rising cost of food and gas would make consumers close their wallets. But, judging by the latest financial results, at least some retailers are weathering the worries just fine.

Target kicked off the day on Tuesday morning by telling traders that its second-quarter earnings jumped 12.6%, landing inline with analyst expectations. The company also reaffirmed its full-year guidance.

For the period ended Aug. 4, Target (nyse: TGT - news - people )reported net income of $686 million, or 80 cents per share, versus $609 million, or 70 cents per share, for the year-ago period.

Sales climbed 9.5% to $14.62 billion.

Analysts had forecast earnings of 80 cents per share on sales of $14.67 billion.

Target also said it continued to believe that $3.60 remains within the range of "likely outcomes" for full-year 2007 earnings per share.

Target has been going head-to-head with rival Wal-Mart (nyse: WMT - news - people ) for the title of retail king. The company has performed well, benefiting from its designer-sponsored clothing lines and generic drug discounts.

In the first-quarter, Target beat the Street, reporting that profits climbed 17.5% to $651 million, or 75 cents a share, up from the $554 million, or 63 cents a share, reaped in the first quarter of 2006.

These results handily exceeded analyst expectations of 71 cents a share. Sales also ticked up 9.2%, to $14.04 billion, below analyst predictions of $14.17 billion. In the first quarter of 2006 revenues were $12.9 billion. (See: " Target Beats Targets.")

The results posted on Tuesday come as a well-known activist investor has reported a significant stake in the retailer.

William Ackman's hedge fund, Pershing Square Capital Management, owns a 9.6% stake, or 81.8 million shares, in Target. Ackman thinks Target shares are undervalued, and he's going to chat with the executives about ways to boost the stock price. (See: " Ackman Draws Bulls-Eye On Target.")

In afternoon trading on Tuesday, shares of Target increased 0.3%, or 18 cents, to $59.27.

Other retailers that reported included American Eagle Outfitters, which told traders on Tuesday that solid sales lifted its second-quarter results to a consensus-beating performance.

For the period ended Aug. 13, American Eagle (nyse: AEO - news - people )said it achieved its 14th consecutive quarter of record sales and earnings. Net income jumped 19%, increasing to $81.3 million, or 37 cents per share, versus $72.1 million, or 31 cents per share, in the year-ago period.

Sales rose 17% to $703.2 million.

Those numbers beat the Street's predictions. Analysts had forecast a profit of 36 cents per share on sales of $697.8 million.

Looking ahead, American Eagle said it predicts third-quarter profit of 47 cents or 48 cents per share, up from 44 cents per share last year.

Analysts are guiding for profit of 50 cents per share.

That bit of news seemed to disappoint traders, who pushed down the shares in afternoon trading by 1.1%, or 26 cents, to $22.75.

Still, analysts and investment pros are fans of the company. They point it its relatively cheap price for its rate of growth and the fact that it has no long-term debt. (See: " Gurus Agree On American Eagle.")

Not every retailer presented a rosy picture, however.

Staples (nasdaq: SPLS - news - people ) Chief Executive Ron Sargentsaid Tuesday that consumer jitters about those rising energy costs and sagging housing sector discouraged shoppers.

Staples told investors that it's second-quarter profit climbed 11%, a jump driven by the company's overseas and product delivery businesses. But same-store sales fell 2%.

Shares of Staples slipped 1.8%, or 42 cents, to $22.89.

The Associated Press contributed to this article.

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Wal-Mart: Melamine Traces in Dog Treats

By JON GAMBRELL
08.21.07                                             [back to top] 

LITTLE ROCK, Ark. - Tests of two Chinese brands of dog treats sold at Wal-Mart stores found traces of melamine, a chemical agent that led to another massive pet food recall in March, a spokeswoman said Tuesday.

Wal-Mart Stores Inc. (nyse: WMT - news - people ) quietly stopped selling Chicken Jerky Strips from Import-Pingyang Pet Product Co. and Chicken Jerky from Shanghai Bestro Trading in July, after customers said the products sickened their pets.

No recall was announced at that time, but Wal-Mart said in a statement Tuesday that customers who bought one of the products should return it to the nearest store for a refund.

Company spokeswoman Deisha Galberth said 17 sets of tests done on the products found melamine, a contaminant that's a byproduct of several pesticides.

"There were very small amounts of melamine found," Galberth told The Associated Press. "The amounts were so small the laboratory recommended more testing."

Galberth had said late Monday that Wal-Mart pulled the products off store shelves based on the customer feedback but wanted to complete the testing before announcing anything publicly.

More than 150 brands of pet food were recalled earlier this year after U.S. inspectors said wheat gluten from China that was used to make the food was tainted with melamine. An unknown number of dogs and cats died.

Since then, other Chinese products including tires, toothpaste, seafood, juice, and toys decorated with lead paint have been recalled or have come under scrutiny.

Galberth said she couldn't say if the amount of melamine found in its dog treats would be enough to sicken or kill a dog that ate the suspect products. The Delaware County (Pa.) Daily Times reported last week that a woman claimed her 2-year-old Chihuahua died after eating some of the products. According to the report, an autopsy found the dog died of an infection caused by toxic bacteria.

Wal-Mart's statement Tuesday said customers should be especially wary of jerky from Shanghai Bestro Trading with the UPC number 0087784900006 and item number 839751.

The Food and Drug Administration did not list the two Wal-Mart products on its recall Web site Tuesday. As recently as 2005, the FDA blocked some pet treat imports from Pingyang Pet Product Co. because of contamination with salmonella.

Galberth said she was not aware of the FDA's previous concerns with Pingyang but said the company was working with the FDA and manufacturers. She said she did not immediately know where the Chinese companies were based.

Bentonville-based Wal-Mart, the world's largest retailer, pulled the products from shelves July 26 and placed a computerized block on all cash registers to prevent workers from selling the products. Galberth said she did not know how many stores sold the treats.

"Generally, we won't do a pull-and-hold unless most stores are impacted," she said. "There's a high likelihood many of our stores would have been impacted by this one."

Copyright 2007 Associated Press. All rights reserved.

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Wal-Mart offers new MP3 download format

The Associated Press
August 21, 2007                                   [back to top] 

Wal-Mart Stores Inc. said Tuesday it has launched a catalog of MP3 music downloads in a new digital format without copy protection.

The "DRM-free" (digital rights management-free) MP3 music downloads are available at the Wal-Mart Web site for 94 cents per track and $9.22 per album. The Bentonville, Ark., retailer is also offering discounted pricing for older albums.

Wal-Mart said the MP3 catalog will include major record labels like Universal and EMI Music and include hundreds of thousands of songs and albums.

The music downloads can be played on Apple Inc.'s iPod and iPhone and Microsoft's Zune, as well as other media players.

Wal-Mart will continue to offer its existing WMA-format music downloads for 88 cents per track.

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Reliance Retail to take on Bharti-Wal-Mart

Central Chronicle                           [back to top]  

New Delhi, Aug 19: On the heels of Bharti Enterprises and Wal-Mart announcing their joint venture for wholesale cash and carry business, Mukesh Ambani-promoted Reliance Retail is entering the same business segment with plans of supplying to kirana stores and institutional buyers.

The business-to-business initiative from Reliance Retail will see it supplying to other retailers and even small neighbourhood stores.

"We will ensure supply materials to small kirana stores and institutional buyers like hotels, restaurants and other contractors," Reliance Retail President and Chief Executive Raghu Pillai said.

He said the company has already set up a team in place to execute the project and the pilot store was expected to be up and running in next 6-9 months.

Asked about the size and the locations of the planned stores he said, "We will be selling at large stores which may or may not be co-located with other retail formats of the company."

On the issue of competition which Reliance Retail was likely to face from the world's biggest retailer entry into India, Pillai said, "Our company has never been scared of competition and Reliance is not worried about Bharti's tie-up with Wal-Mart."

Bharti Enterprises and Wal-Mart had earlier this month announced a 50:50 joint venture for wholesale cash and carry business and plans to supply to institutional buyers like hotels, restaurants and other contractors.

The first facility of the JV is expected to come up by end of 2008 and another 10-15 facilities in the next seven years. Each facility will be spread over an area of 50,000-100,000 square feet and will sell vegetables, groceries, fruits, staples, footwear, stationery, clothing, consumer durables and other products.

Reliance Retail's plan to enter the wholesale segment comes soon after its launching the country's biggest hypermarket 'Reliance Mart' in Ahmedabad. Bharti Wal-Mart Private Ltd would also be a business-to-business venture and focus on setting up of supply chain and back-end logistics infrastructure.

Last year, Ambani had announced an ambitious plan of foraying into India's retail market with an investment of Rs. 25,000 crore that would generate employment to at least 500,000 people across the nation.

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Wal-Mart Considers Convenience Store Format

NACS Online
August 20, 2007                               [back to top] 

NEW YORK – Wal-Mart is anticipating the British invasion of Tesco by considering new store formats, including an "urban" convenience store format and high-end stores, reports The Wall Street Journal.

Wal-Mart is "doing everything it can" to stop Tesco from "crashing its last big growth business: groceries." Wal-Mart's plan of attack is apparently to open "urban convenience stores less than a tenth of the size of the company's supercenters and stocked with groceries geared to more affluent tastes." The other plan is to open stores that offer health services and products – both of which could open as early as next year, writes the Journal.

However, Wal-Mart's battle plan may be too late. According to analysts, "Wal-Mart has seemed tone-deaf to consumer trends" and high gasoline prices are "eating into supercenter visits." But, opening convenience stores could prove effective to combat Tesco. According to the Journal, Wal-Mart has been "shut out" from high-income and urban markets; therefore, smaller stores are less likely to stir up opposition.

Wal-Mart is eyeing California as the launch pad for its convenience and health-care store formats, perhaps as early as next year. This move is one to watch: California has been "an embarrassing stumbling block" for Wal-Mart, writes the Journal.

"Wal-Mart doesn't have a format that works in California," commented Burt P. Flickinger III of retail consultant Strategic Resource Group.

By February 2008, Tesco is planning to open 30 Fresh & Easy Neighborhood Market Stores in the U.S. Southwest market. The retailer is investing $2 billion over the next five years in its U.S. operations, a Tesco spokesperson told the Journal.

"The impact on the competition depends on how fast Tesco rolls out. I think it'll be fast," Citigroup's David McCarthy told the Journal, noting that he estimates Tesco could have about 500 stores up and running in the United States by 2010.

Meanwhile, Wal-Mart is not alone in the move to consider new store formats. Some major grocery chains are "testing ideas that combine convenience and grocery stores," writes the Journal, although the newspaper did not cite specific examples.

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UK competition watchdog seeks Tesco, Asda emails

By Pete Harrison
Reuters
Sun Aug 19, 2007                                 [back to top] 

LONDON, Aug 19 (Reuters) - Britain's competition watchdog has asked supermarkets Tesco <TSCO.L> and Asda <WMT.N> to hand over millions of emails as it investigates whether they are exerting undue pressure on suppliers.

The Competition Commission said on Sunday it had sent out legal notices to two supermarkets demanding confidential information. Both Asda and Tesco said they had been approached and were providing emails sent to suppliers this summer.

The watchdog has been investigating Britain's 125 billion pound ($247 billion) grocery market since March 2006 after complaints about their rapid expansion, predatory pricing, their relationships with suppliers, and their entry into the convenience sector.

"The Commission is looking at how the bigger retailers are treating their suppliers," a source close to the inquiry said of the demand for emails. "There's been a couple of interesting emails brought to the Commission's attention."

A spokesman for Asda said the firm would help the Commission with its request for emails from this summer, adding that it might have to sift through 11 million of them.

A spokesman for Tesco said the group had nothing to hide.

"We are doing what we can to assist the Commission with this enormous data request," he said. "We expect the Commission to conclude that at Tesco relationships with suppliers are professional and act to the ultimate benefit of the customer."

The Competition Commission said in January there were few signs that grocery suppliers profits were being squeezed by the supermarket giants.

It also signaled that predatory pricing by the largest grocery retailers could be acceptable if it benefited the consumer, even though the practice could unintentionally drive smaller players out of business.

Yet it cautioned the investigation was ongoing and that it would not tolerate any company's abuse of its dominant position.

It also said that the picture might not be complete, because a "climate of fear" was hampering its inquiry and suppliers were not willing to provide evidence for fear of retaliation by supermarkets.

Final conclusions from the agency, which has wide powers to act, short of issuing fines and changing the law, is expected by the end of 2007.

© Reuters 2007. All rights reserved.

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Wal-Mart Stores launches $2.75 bln in two part sale

Reuters
Fri Aug 17, 2007                    [back to top] 

NEW YORK, Aug 17 (Reuters) - Wal-Mart Stores (WMT.N: Quote, Profile, Research) on Friday launched $2.75 billion debt in a two-part sale, with pricing expected later on Friday, said a market source familiar with the sale.

The sale includes $500 million in 10.5-year notes expected to yield 1.15 percentage points over U.S. Treasuries and $2.25 billion in 30-year bonds expected to yield 1.50 percentage points over Treasuries.

The joint lead managers on the sale are Banc of America Securities, Citigroup Global Markets, Credit Suisse and Goldman Sachs.

© Reuters 2006. All rights reserved.

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Wal-Mart deploys new data security system

Antony Savvas
ComputerWeekly.com
17 Aug 2007                                  [back to top]  

Wal-Mart Stores has deployed a data security and encryption system to secure data going over its global network.

Wal-Mart went to SSH Communications Security to supply its SSH Tectia solution to enable secure remote access and deliver secure end-to-end data file transfer throughout the retailer's international network.

The SSH Tectia client/server solution secures sensitive company data in transit, delivering strong encryption, support for heterogeneous computing platforms and multiple authentication technologies, along with enhanced SFTP (Secure File Transfer Protocol) capabilities.

Wal-Mart has also selected SSH Tectia Manager, a communications security management platform to manage the enterprise-wide SSH Tectia security solution.

"With the size and complexity of our environment, it was important to find a solution that could be used on all platforms," said Kerry Kilker, Wal-Mart vice president of information security.

"The centralised management of SSH Tectia Manager will enable us to quickly deploy, easily maintain and simplify configuration management in our environment.

That is where we expect to see the most return on investment with this technology," said Kilker.

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Wal-Mart practices hurt schools, group says in ad

By Steve Painter,
NWANews.com
August 17th, 2007                            [back to top] 

A political group critical of Wal-Mart Stores Inc. ’s pay levels and health benefits began airing a new television commercial Thursday that claims schools suffer as a result of the company’s practices. Wake Up Wal Mart?. com says tax money spent on health care for Wal-Mart workers could go to schools instead. The group, based in Washington, gets much of its funding from the United Food and Commercial Workers Union.

The 30-second spot aired Thursday in 26 markets, including Little Rock, the group said. The commercial says, in part, that “every tax dollar that comes out of your pocket to subsidize a company with billions in profits is a dollar that isn’t being spent to build better schools, hire more teachers and help children learn.” Wal-Mart spokesman Dave Tovar dismissed the group’s charges as inaccurate.

“Our associates choose to work at Wal-Mart because they know we offer real career opportunities and provide competitive pay and affordable health care,” he said. Tovar said Wal-Mart creates thousands of jobs each year, “many of those jobs in neighborhoods that desperately need the kinds of opportunities Wal-Mart brings to communities.”

Wake Up Wal Mart?. com says taxpayers spent $ 1. 37 billion on health care for Wal-Mart workers in 2005.

In March 2005, Arkansas ’ Department of Health and Human Services said that 3, 971 of Wal-Mart’s workers in the state — 8. 8 percent of its total at the time — received some public aid, mostly Medicaid, the Arkansas Democrat-Gazette reported at the time. That study, which found 9, 698 workers from the state’s top nine employers received some form of public aid, has been discontinued.

Wake Up Wal Mart?. com said it intends to stage protests at more than 100 Wal-Mart locations urging shoppers not to buy school supplies at the Bentonville-based company’s stores.

Don Delzell, a partner in the consulting group Retail Advantage in Redondo Beach, Calif., said Wal-Mart’s shoppers are more likely thinking about high gasoline prices than television commercials.

“I don't think Wal-Mart being attacked for having lesser health benefits is making a significant impact on the overall consumer’s impression of Wal-Mart,” he said. Wake Up Wal Mart?. com also announced new staff members, all with political experience in Democratic campaigns.

Meghan Scott is deputy campaign director. She said no replacement has been named for former campaign director Paul Blank, who earlier left the organization along with spokesman Chris Kofinis to work on the presidential campaign of John Edwards, a former U. S. senator from North Carolina.

Scott worked on Edwards ’ 2004 presidential campaign. Nick Baldick, Richie Ross and Jeremy Van Ess joined the group as senior advisers.

Baldick is managing partner of a Washington public affairs firm and also worked on the 2004 Edwards campaign. Van Ess is a partner in the same firm, and previously was chief speech writer and deputy communications director for Senate Majority Leader Harry Reid, D-Nev. Ross has been involved in political and union campaigns in California and will expand Wake Up Wal Mart?. com’s activities in the western United States, Scott said. Wal-Mart shares closed at $ 43. 50, up 22 cents or 0. 51 percent in trading Thursday on the New York Stock Exchange. Shares have traded as low as $ 43. 09 and as high as $ 52. 15 over the past year.

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No big box limits planned in Lodi; Supercenter vote to come this fall

By Chris Nichols
News-Sentinel                                   [back to top] 

While city leaders in Stockton, Galt and Elk Grove have moved this summer to limit the size of future big box stores, their counterparts in Lodi have no plans to do the same.

Instead, the city will likely decide next month whether to allow a new 226,000 square-foot Wal-Mart Supercenter at the corner of Kettleman Lane and Lower Sacramento Road — across from the existing Wal-Mart.

In considering the project, city leaders say they're following the will of the public. Lodi voters in November 2004 shot down a proposal to curb the size of retail stores, by a 57 percent to 42 percent margin.

"We had a vote ... Am I supposed to second guess the citizenry?" said Mayor Bob Johnson, noting he would "absolutely not" support size limits on future big box stores.

The City Council, including Johnson, approved an earlier version of the Supercenter plans in 2005. But a San Joaquin County Superior Court judge overturned that approval, citing the need for more study of the project's effects.

Critics of the Supercenter plans have remained quiet during the past few months, waiting for Wal-Mart consultants to complete the new reports. Those will address the Supercenter's effect on Lodi's economy, agriculture and its draw on the city's electric utility.

Aaron Rios, Wal-Mart's Central Valley spokesman, could not be reached for comment

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Labor union gives Wal-Mart failing grades, protest

By Patrick Linsey,
Wilton Villager
August 17th, 2007                            [back to top] 

NORWALK — As area retailers gear up for the back-to-school season, a labor group has already issued Wal-Mart's report card for the mega-chain's treatment of its workers: Straight Fs.

Members of United Food and Commercial Workers Local 371 protested outside the Wal-Mart on Route 7 in Norwalk Wednesday afternoon, complaining Wal-Mart breaks child labor laws, discriminates against women and forces the government to fund its workers' health care.

CT Jobs

"To afford a one-bedroom apartment in Norwalk, you have to make $25 per hour," said Brian A. Petronella, president of UFCW Local 371. "Wal-Mart workers are lucky if they make $12 per hour." Protesters handed pamphlets to drivers as they entered the parking lot — undeterred by the August heat, even as the mercury climbed to 95 degrees.

"A little bit of sweat never hurt anybody," said Jean Federici, the union's shop steward at a Stop & Shop down the road.

Union members cited fines Wal-Mart has paid for breaking child labor laws and a class-action lawsuit against the retailer alleging it discriminated against women.

But some of the harshest criticism was leveled at Wal-Mart's health benefits. Wal-Mart has the most employees of any Connecticut business receiving HUSKY state health insurance. Last year, the state estimated more than 2,000 Wal-Mart employees and their children were on the HUSKY roles, costing the government more than $5 million this year.

"We get better health benefits, higher wages," said Federici, comparing unionized workers to those at Wal-Mart. "We're protected by the union. A lot of (Wal-Mart employees) don't have any of that."

The protesters remained outside the store for an hour, one of many labor demonstrations outside the nation's Wal-Marts this back-to-school shopping season. Petronella said he is confident Local 371's effort will have an impact.

"We have had an impact on Wal-Mart's business," Petronella said. "The stock has remained stagnant. Five years ago, did the consumer care? No, but now they do care."

Labor groups across the country have long sparred with Wal-Mart, which has a record of discouraging union organization among its workers.

A Wal-Mart spokeswoman did not directly respond to the UFCW's criticisms but said the retailer "knows it's tough right now" and has a "single-minded focus on bringing families savings where it counts."

"We understand that students need their crayons, calculators, notebooks, backpacks and other back-to-school items and we continue to work with our suppliers to bring Wal-Mart customers the best value on quality items every day," said Marisa Bluestone, a Wal-Mart spokeswoman. "That's a trust that our customers have in us and we're determined to keep that trust." Petronella suggested shoppers seek that value somewhere else.

"You can go to Staples; Staples has a nice sale on this week," Petronella said. "You can go to Stop & Shop; they have a nice sale on this week. You can go elsewhere and get a better deal where people are treated fairly."

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Wal-Mart Eyes Smaller And Higher-End Stores

By GARY MCWILLIAMS
Wall Street Journal
August 17, 2007                                              [back to top] 

Twelve years ago, Wal-Mart Stores Inc. executives welcomed Terry Leahy to the company's Bentonville, Ark., headquarters. Mr. Leahy, newly promoted at Tesco PLC and considering an overhaul of the British retailer, spent an afternoon discussing operations with Wal-Mart executives.

Today, Wal-Mart is doing everything it can to stop Mr. Leahy from crashing its last big growth business: groceries. It has a team of executives hunkered down far from Bentonville in the San Francisco Bay area devising two new small-footprint stores, including a response to the November launch of Tesco's U.S. grocery stores, according to people familiar with the group.

Their brainchildren represent an unlikely step for staid Wal-Mart: One idea calls for urban convenience stores less than a tenth of the size of the company's supercenters and stocked with groceries geared to more affluent tastes. Another plan calls for stand-alone stores offering a variety of health services and products. The new outlets are being prepared for introduction early next year, the people say.

David Wild, the Wal-Mart senior vice president of new business development, is leading the initiatives. He declined to comment. A Wal-Mart spokesman wouldn't provide specifics but said, "Our business is constantly evolving, and we're always looking for new and innovative ways to serve our customers."

The company may have waited too long to develop successors to its big-box U.S. stores. Analysts now chopping their profit estimates for this and next year say Wal-Mart has seemed tone-deaf to consumer trends. Failed pushes in women's fashions and home decor continue to sap profits, and high gasoline prices are eating into supercenter visits. Recently, Wal-Mart has tried running ads promoting its low prices as worth the extra travel.

Nonetheless, the smaller stores could help Wal-Mart do more than fend off Tesco. The retailer has been largely shut out from upper-income and urban markets, including those in California and New York. High land costs and local opposition have limited the discounter to just 28 supercenters in California, a tenth of the number in Texas. Smaller stores are less likely to stir up opponents than the hulking 200,000-square-foot big-box stores.

In health care, Wal-Mart sees itself providing an array of services and home-health equipment along with the prescription eyeglasses and pharmaceuticals that it already sells, according to a person familiar with the effort. "In five years, Wal-Mart wants to be on its way to becoming the No. 1 health-care company in America," that person said.

In April, the retailer announced that over the next three years it would open up to 400 in-store clinics, offering basic services, including school physicals and treatments for sinus infections and allergies. It also said it hoped to have 2,000 clinics in operation in five to seven years. Wal-Mart has already teamed with some big employers hoping to improve employee health by providing standards for electronic health records. If that effort succeeds, it would give the Wal-Mart clinics a boost.

The world's largest retailer hopes to begin rolling out the new convenience and health-care stores early next year, and it's looking at locations in California for the pilots. A Wal-Mart spokesman said the company "regularly tests new formats" but declined to describe the effort further.

California has been an embarrassing stumbling block for the Arkansas retail giant. "Wal-Mart doesn't have a format that works in California," says Burt P. Flickinger III, managing director of retail consultant Strategic Resource Group. He believes the convenience-store effort is based in the San Francisco area because it is home to the Trader Joe's chain, retailer of prepared foods and groceries, and it has become the biggest market for Whole Foods Inc. "Wal-Mart really needs to take a strategic stand" in the state, he says.

Tesco's impending arrival in the U.S. Southwest has accelerated Wal-Mart's plans. The British retailer is expected to open 30 Fresh & Easy Neighborhood Market stores by February and invest $2 billion in the U.S. rollout over the next five years, according to a spokesman for Tesco's U.S. operation, which is based in El Segundo, Calif. After the first stores are launched, the company has 70 more stores in its pipeline for early 2008.

"The impact on the competition depends on how fast Tesco rolls out. I think it'll be fast," says David McCarthy, a London-based deputy head of equity research for Citigroup. He estimates Tesco could have 500 U.S. stores and U.S. revenue of $5 billion by 2010.

The proposed Wal-Mart stores would fit with U.S. chief Eduardo Castro-Wright's goal of localizing the retailer's business. As part of its effort to appeal to a broader range of consumers, Wal-Mart has begun tailoring merchandise and food selections to regional and ethnic groups and tastes. It recently asked fruit vendors to package apples, now sold in plastic bags, in paper sacks similar to those at roadside orchards. And it is reaching out to major suppliers, including Johnson & Johnson and Procter & Gamble Co., for advice.

Wal-Mart could use an injection of new ideas. Its earnings are expected to rise just 3.5% this year, to $12.52 billion, compared with a 10.2% increase just two years ago. The company remains the world's largest retailer, with sales this year projected to hit $370 billion. But its rivals -- Costco Wholesale Inc., Target Corp. and J.C. Penney Co. -- have been turning in better comparable-store sales for more than a year.

Food sales are a double-edged sword for Wal-Mart. They represent its fastest-growing business, with revenue rising 14% last quarter and comparable-store sales up about 5% this year. But slim profits mean the company's overall margins weaken as food's share of the business gains. Wal-Mart shares hit a new 52-week low yesterday before bouncing back to close at $43.50, up 22 cents on the day.

In addition, Wal-Mart hasn't successfully incubated new-store concepts since the first supercenter was created in 1988. Its effort to build a conventional grocery business via Neighborhood Market stores has been a modest success at best. The 40,000-square-foot outlets were designed to fill the gap between supercenters. But the company has opened just 124 of them since 1998.

Efforts to start new retail outlets overseas in countries like Germany were stark failures. In contrast, Wal-Mart has had some success entering into joint ventures with local retailers, as it did with Mexico's Cifra SA in 1991, buying majority control after it understood the market.

Wal-Mart isn't the only company readying new store formats. Major grocery chains are testing ideas that combine convenience and grocery stores. The third-largest U.S. supermarket chain, Safeway Inc., recently opened Citrine New World Bistro, a restaurant that uses its private-label brands.

FamilyMart Co., the third-largest convenience store operator in Japan, has opened 12 Famima convenience stores in the Los Angeles area and plans 250 U.S. stores by 2009. "This is a big, big target," says Hidenari Sato, Famima's vice president of U.S. operations.

Analysts say Wal-Mart hasn't been able to penetrate the markets where wealthier America resides. "In the Northeast Corridor, California and Chicago you have 33% of U.S. income and retail sales. Yet these areas account for 10% of [Wal-Mart] stores and less than 2% of their supercenters," says Greg Melich, a retail analyst at Morgan Stanley.

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Standards Report Released by Wal-Mart

Chain Store Age
Thursday, August 16, 2007                        [back to top] 

Wal-Mart Stores Inc. found a decrease in the worst types of labor violations at foreign factories last year during inspections of nearly 8,900 plants where it buys clothes, toys, shoes and other products. In an annual report released Wednesday, the world's largest retailer said its inspection program found that a smaller percentage of factories had severe violations of safety, labor and environmental standards.

According to the report, Wal-Mart conducted more factory audits than any other company in the world in 2006. The audits occurred at 8,873 factories producing goods for Wal-Mart. Unannounced audits made up 26% of the audits undertaken, a 6% increase over 2005. High-risk violations of the Wal-Mart Standards for Suppliers code decreased 23.5% in 2006, mainly due to educational outreach merchandise for sale by Wal-Mart.

“The Wal-Mart Ethical Standards program is in place to do what is right for factory workers and the environment,” said Rajan Kamalanathan, VP of ethical standards for Wal-Mart Stores Inc. “The only way to achieve our objective is by moving beyond monitoring factories to working in collaboration with stakeholders. In this manner, we not only bring sustainable and positive change to working conditions in factories, we also help build ladders to a better life in the countries where we're sourcing.”

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Wal-Mart Selects C.R. England

UTAH BUSINESS                                   [back to top] 

C.R. England, Inc., a Salt Lake City-based trucking company, announced it has been selected to be a carrier for Wal-Mart Stores, Inc. at its distribution center in Sterling, Ill.

“We are thrilled with this opportunity,” said Dave Robbins, vice president of the England North American division at C.R. England. “England is committed to growing our dedicated business unit and expanding the company’s leadership role in the industry. Our partnership with Wal-Mart moves us closer to our business goals.”

Previously, Wal-Mart awarded C.R. England dedicated business in Cheyenne, Wyo. and McCarren, Nev.

England Dedicated has enjoyed a successful fiscal year with an estimated 40 percent growth in revenue. England Dedicated provides dedicated contract carriage services for several customers including ConAgra Foods, Sorrento-Lactalis Inc., Daylight Transport, Nestle and Pilgrim’s Pride.

Scheduled to start up in September 2007, Wal-Mart’s refrigerated distribution center will serve stores in Illinois and Wisconsin. Approximately 10 England employees will be on-site and there will be nearly 80 C.R. England drivers.

“We have partnered with C.R. England for several years. They have provided a good breadth of services along with outstanding performance,” said Tim Harris, regional transportation manager for Wal-Mart. “We feel awarding C.R. England as our dedicated provider in Sterling is a good step in furthering our business partnership.”

Established as a service dimension of C.R. England in 1994, England Dedicated provides customized transportation solutions and services. With annual revenues in excess of $170 million, England Dedicated has grown more than 40 percent in 2007. C.R. England expects another banner growth year in 2008 with estimated revenues targeted to reach over $240 million

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Quick Take: Wal-Mart Loses Another Online Round

Katrina Chan
The Motley Fool
August 16, 2007                        [back to top] 

It's that time again. College students everywhere are picking out last-minute furnishings for their dorm rooms and apartments. They're haggling with parents to add a few more dollars to the bank account. And right before they power off their laptops, they hop on Facebook.

Facebook has expanded beyond its beginnings as a network for college students. Its recent efforts to accommodate third-party developers have increased the site's stickiness factor and allowed greater interactivity for its users. And this increasing popularity has caught the attention of corporations trying to reach a younger audience.

One such company, Wal-Mart (NYSE: WMT), started a sponsored Facebook page targeting college students last week. At first glance, this page -- Wal-Mart Roommate Style Match -- bodes well for college-bound students. It offers a fresh and appealing format that includes a shopping checklist, roommate style quiz, environmentally friendly dorm choices, and even tips on avoiding the infamous freshman 15.

What Wal-Mart ironically forgot to take into account is the social networking aspect of the site, which is what makes Facebook so popular among college students. The Facebook generation craves interactivity and transparency.

And the crowd has created just that. The 550-plus members who have joined the Wal-Mart group have contributed 63 comments and six pictures. That might not seem like a lot, but all six pictures are clearly anti-Wal-Mart. The comments also have steered away from the page's light, college-related vibe to an intense debate about topics such as unfair wages and unions. This profile page has become an outlet of positive and increasingly negative information.

This isn't the first time that Wal-Mart has flubbed when it comes to the Internet. Just last year, Wal-Mart was exposed for its use of sponsored bloggers to improve its public image. This recent attempt may not have been intentional, but it's providing users a vehicle to speak their mind and possibly influence a crowd.

Companies shouldn't pass on these sponsored opportunities. A quick search on Facebook revealed that Target (NYSE: TGT) launched a similar sponsored page last month. By amassing almost 6,000 members having college-related discussions with pictures of Target-inspired dorm rooms floating around , this is exactly the kind of social networking effect that companies desire. Scrolling through the comments reveals that many college students are very happy with Target and often share personal stories about working at the company.

So, is there a lesson to be learned from all of this? Sure: Make sure you're loved by the crowd before entering unknown territory.

Wal-Mart is a Motley Fool Inside Value recommendation. Try our value investing newsletter on for size free for 30 days to find out how this newsletter is beating the S&P 500.

Foolish research associate Katrina Chan does not own shares in any of the companies mentioned but does have a Facebook account. The Motley Fool has a disclosure policy that does not discriminate between Wal-Mart and Target.

©1995-2006 The Motley Fool. All rights reserved.

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Deceptive Planning Brings Wal-Mart To Disgruntled Community

by: Nate Berg
The Roanoke Times
16 August 2007                           [back to top] 

This piece from The Roanoke Times laments the coming of a Wal-Mart Supercenter, and blasts the planning process that let a proposed mixed-use walkable town center transform into a "big-box juggernaut".

"I'm angry about the bait and switch the developers pulled. Fairmount Properties pitched a mixed-use, upscale project to the town. People envisioned a pedestrian-friendly retail center with trees and benches."

"The developers and their backers stoked those dreams while seeking a zoning change."

"Then they showed up with a Wal-Mart, low-end hangers-on, fast food and a sea of asphalt. The promised "traditional neighborhood" design vanished."

"I'm infuriated that the town council changed the zoning to allow the project without getting everything in writing first. In the rush to boost Blacksburg's economy, council members let this happen."

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Group sets new anti-Wal-Mart campaign

By Jessica Wohl
Thu Aug 16, 2007                                      [back to top] 

CHICAGO (Reuters) - A union-backed group ramped up its efforts against Wal-Mart Stores Inc. on Thursday with a new commercial and a letter from the president of the American Federation of Teachers asking the retailer's chief executive to change some labor practices.

WakeUpWalMart.com, which calls itself "America's Campaign to Change Wal-Mart," also added four staffers a few weeks after two left to join U.S. Democratic presidential candidate John Edwards' campaign staff. The new workers all worked on Democratic campaigns in the past.

Groups such as WakeUpWalMart.com have begun various grass-roots campaigns to draw attention to what they say are poverty-level wages, inadequate health care benefits and other issues with the world's largest retailer.

The advertising campaign, called "Send Wal-Mart Back to School," highlights issues such as taxpayers dealing with the burden of Wal-Mart employees' health care costs. A television commercial is set to air on Thursday in 26 U.S. markets including Boston and Las Vegas, the group said.

WakeUpWalMart.com will also ask shoppers to sign a pledge promising not to buy school supplies at Wal-Mart this year unless the company agrees to pay a living wage, end discrimination against women, not stand for any illegal child labor and provide employees with more affordable health care.

That move comes after Wal-Mart in late July slashed prices on back-to-school merchandise such as pencils, pens and notebooks by 10 to 50 percent to try to reignite sales.

"We know it's tough right now and Americans are looking to us to provide the best value on back-to-school shopping lists," a Wal-Mart spokesman said.

Wal-Mart reported a lower-than-expected quarterly profit on Tuesday and cut its earnings forecast as economic pressures such as higher fuel prices leave shoppers with less to spend.

The letter from American Federation of Teachers President Edward McElroy asks CEO Lee Scott to address evidence of "illegal child labor, violating wage and hour laws, paying poverty-level wages, discriminating against women, and shifting the burden of employee health care to taxpayers."

A Wal-Mart spokesman said the company creates thousands of jobs each year, many in areas in need of opportunity.

"Our associates choose to work at Wal-Mart because they know we offer real career opportunities and provide competitive pay and affordable health care," the spokesman said.

The new WakeUpWalMart.com staffers named on Thursday are Deputy Campaign Director Meghan Scott and Senior Advisers Nick Baldick, Richie Ross and Jeremy Van Ess.

The announcement comes a day after Wal-Mart issued a report outlining its impact on factory working conditions and the lives of factory workers. Wal-Mart said it audited 8,873 factories in 2006, 15 percent more than it looked at in 2005.

© Reuters 2006. All rights reserved.

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Wal-Mart to pay underpaid workers

By Reuters
August 15th, 2007                           [back to top] 

LOS ANGELES (Reuters) -- Wal-Mart Stores Inc. has agreed to pay more than $3.9 million US to about 50,000 current and former employees in California who were underpaid overtime and other wages, the state's labor commissioner said Tuesday.

The world's largest retailer also agreed to pay $198,900 in civil penalties to the state, Labor Commissioner Angela Bradstreet said in a statement.

In 2005, Wal-Mart voluntarily notified the labor commissioner that errors in its payroll processes had led to underpayment of overtime and other wages. It pledged to correct the problem and pay affected workers all they owed.

"This is a matter we discovered and reported ... and the situation has been corrected," said Wal-Mart spokesman John Simley.

"Everyone who was owed money is being paid with interest and we have added safeguards so that these errors don't happen again." The payment errors affected all of Wal-Mart's California workers from Feb. 1, 2002 through Jan. 19, 2007.

Many of the affected employees have already received cheques for overtime and interest, and remaining payments will be issued within 45 days, the commissioner's statement said.

Bradstreet said Wal-Mart had "set a positive example for other employers who may be out of compliance because it illustrates how they can work with us to properly compensate workers as well as meet legal requirements."

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Wal-Mart in Japan Posts Loss, Slashes Outlook

By HIROYUKI KACHI
and JAMES TOPHAM ,
WSJ.com
August 15th, 2007                              [back to top] 

TOKYO -- Seiyu Ltd. posted first-half losses and slashed its full-year outlook, underscoring how Wal-Mart Stores Inc.'s efforts to return its Japanese unit to profitability have stalled.

The Tokyo-based retailer has been mired in red ink for five years. In the recent period, cost cuts and other changes failed to cancel out weak sales of clothing and other seasonal goods.

Seiyu Chief Executive Edward Kolodzieski said the company is making the right moves but must accelerate its progress. The measures have been taken under guidance from Wal-Mart.

Seiyu narrowed its group net loss to 6.92 billion yen ($58.5 million) in the half ended June 30 from a year-earlier loss of 54.03 billion yen, when it was hit by a 47.6 billion yen asset-valuation loss.

Its group-operating loss widened to 2.25 billion yen from a loss of 1.36 billion yen. Group revenue fell 1.4% to 461.56 billion yen. The results prompted the company to slash its group net outlook to a loss of 5.9 billion yen for the year, from a previous forecast for an 800 million yen profit. Last year it posted a group net loss of 55.79 billion yen.

In an effort to compete with rivals such as Aeon Co. and Seven & I Holdings Co., Seiyu had pressed ahead with store renovations and expanded the number of 24-hour shops. Those moves led to a 0.6% rise in same-store sales last year -- the first gain in 15 years. Results for the latest half, though, suggest the retailer isn't getting as much support recently from overhauls Same-store sales in the first half were down 1.1%. Seiyu was operating 392 stores as of June 30.

Its CEO said Seiyu remodeled 41 stores in the first half and will bring the number for the year to close to the 73 it had done the previous year.

Seiyu's top executive stressed the commitment of Wal-Mart, the world's largest retailer, to Japan, saying the country "is considered one of the key strategic areas of growth."

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Wal-Mart Reports Labor Violations

By MARCUS KABEL
08.15.07                                   [back to top] 

BENTONVILLE, Ark. - Wal-Mart Stores Inc. found a decrease in the worst types of labor violations at foreign factories last year during inspections of nearly 8,900 plants where it buys clothes, toys, shoes and other products.

In an annual report released Wednesday, the world's largest retailer said its inspection program found a smaller percentage of factories had severe violations of safety, labor and environmental standards.

It said challenges remain, including how to collaborate with other big companies and local governments in other countries, to make lasting improvements for workers.

What Wal-Mart (nyse: WMT - news - people ) calls "higher risk" violations includes failure to pay overtime, and were found in 40 percent of inspections in 2006. That is down from 52 percent the year before.

The rate for moderate violations, such as failing to document worker pay, rose to 52 percent from 37 percent in 2005.

About 5 percent of the inspected factories had only minor or no violations, down from 10 percent in 2005.

The percentage of factories barred permanently from selling to Wal-Mart for egregious violations, such as using prison labor or child workers, remained stable at 0.2 percent.

The executive in charge of the inspection program, Rajan Kamalanathan, said the drop of the most severe violations reflected Wal-Mart's stepped-up efforts to educate facory managers rather than just punish them by withdrawing orders.

"Orange rates have improved, which is a good sign," said Kamalanthan, vice president of ethical standards. Orange is the color code Wal-Mart uses for high-risk violations.

"On the other side, we recognize that it is not significant enough of a change to talk about making a huge impact on the supplier factories," Kamalanthan said.

He said Wal-Mart must collaborate with other companies that buy from foreign factories, governments and activist groups to make permanent improvements.

Wal-Mart is starting to consider how to do that, including talking with the United Nation's International Labour Organization and a trade group called Business for Social Responsibility.

Religous investors who work with big companies to improve labor standards in foreign factories said Wal-Mart's report showed progress but much remains to be done.

"It is beginning to help," said the Rev. David Schilling, director of the global corporate accountability program of the Interfaith Center on Corporate Responsibility.

Schilling said Wal-Mart's 2006 report acknowledges that factory inspections by big buyers are not enough to force lasting improvements for workers in mainly developing countries. Instead, the companies have to work with labor groups, governments and activists.

"Wal-Mart is recognizing this now and talking about the need to go beyong monitoring. What remains to be seen is what they will do," Schilling said.

Wal-Mart does not own factories but instead buys from others who do.

Wal-Mart says it uses the inspections to encourage factory owners to improve conditions. If violations are found, inspectors give a list to the owners and return for a re-audit. Repeated violations, as well as some grave problems such as physical abuse, can lead to being banned from selling to Wal-Mart.

Wal-Mart's 2006 Report on Ethical Sourcing:

Copyright 2007 Associated Press. All rights reserved.

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Ahead of the Bell: Wal-Mart Stores

Associated Press
08.15.07                                         [back to top] 

NEW YORK - A number of analysts are hoping Wal-Mart Stores Inc.'s return to its traditional strategy of low prices and cost-cutting efforts can boost shares of the world's largest retailer, following a disappointing second-quarter earnings report and weak outlook.

The company's lower-income customers have been struggling with high gas and food prices, along with falling home values, for more than a year. The economic troubles have caused a downturn in retail spending, as more consumers try to hang on to their dollars.

Wal-Mart is expected to turn away from a newer, mostly unsuccessful merchandising strategy designed to entice higher-income shoppers and return its focus to "rollbacks," or discounts.

Shares of Wal-Mart sold off 5.1 percent Tuesday, following a disappointing quarterly report and slashed outlook.

Bear Stearns & Co. analyst Christine Augustine, in a client note, kept an "Outperform" rating on shares, though she noted the company's margins are seeing pressure from higher discounts and an unfavorable product mix.

"As such, we expect the retailer to at least maintain (if not step up) its already high promotional stance and for sales in discretionary areas such as apparel and home to be challenging," the analyst wrote. "We believe these higher promotions, coupled with additional markdowns that Wal-Mart probably needs to take to clear excess apparel and home product, will weigh on margins in the second half of 2007."

Sales of items for the home have suffered with the broader housing lag. Still, the analyst said she is encouraged by expense and inventory control efforts.

Deutsche Bank Securities Inc. analyst William A. Dreher Jr. kept a "Buy" rating and $58 target price on the stock, which closed at $43.82 Tuesday.

"We anticipate that consumers will remain under pressure in the coming months, which could keep the company's sales mix weighted towards less discretionary, lower-margin grocery and consumables with relatively softer sales in the higher-margin apparel and home categories," the analyst wrote. "Rollbacks should help build traffic to see the new merchandise and store layout."

The analyst said that while softness in the retailing environment could persist, Wal-Mart might be a good defensive retail investment if consumers turn to the discount chain to save a few dollars amid broader economic uncertainty.

Wachovia Capital Markets LLC analyst Peter Benedict kept an "Outperform" rating on shares, noting the troubles but saying the stock is a good price.

"While near-term fundamentals remain weak, management's adoption of a more disciplined approach to U.S. store growth and capital-expenditure investment should work to drive higher returns on capital and ultimately multiple expansion longer term," he wrote.

Copyright 2007 Associated Press. All rights reserved.

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Wal-Mart misses profit view, cuts outlook

Nicole Maestri
Reuters
August 15, 2007                               [back to top] 

WAL-Mart Stores Inc reported a lower-than-expected quarterly profit overnight and cut its full-year earnings forecast, saying "economic pressures" like higher fuel prices have depleted shoppers' wallets.

"It is no secret that many customers are running out of money toward the end of the month," said Lee Scott, chief executive of the world's largest retailer.

The company's shares fell 5.5 per cent and helped drag down the overall market.

US retail stocks have fallen in recent days as investors fret that turbulence in the housing market and high petrol prices have curbed consumer spending.

Those difficulties appear to be rippling across the globe, and Mr Scott said on a recorded call that higher fuel prices, interest rates, utility costs and "more financial pressure" were hurting sales in markets like Mexico and Canada.

Wal-Mart's earnings rose to $US3.1 billion ($3.69 billion), or 76 cents per share, in the second quarter ended July 31, from $US2.08 billion ($2.47 billion), or 50 cents per share, a year earlier, when the company took a charge for selling its German stores.

Earnings per share from continuing operations were 72 cents per share before a gain of 4 cents.

Analysts on average were expecting 76 cents, according to Reuters Estimates.

Sales rose nearly 9 per cent to $US91.99 billion ($109.44 billion).

US sales at stores open at least a year, a key retail gauge known as same-store sales, rose 1.9 per cent. Same-store sales increased 1.2 per cent at Wal-Mart stores and 5.9 per cent at the Sam's Club warehouse division.

At international stores, sales were up almost 16 per cent at $US21.6 billion ($25.7 billion).

In an interview, Chief Financial Officer Tom Schoewe said Wal-Mart expected many of the trends it saw in the second quarter to continue in the current period, but the retailer was still "feeling pretty good" about prospects for the holiday season.

With more than 127 million customers visiting a US Wal-Mart store or Sam's Club location every week, the company is considered a barometer of the health of the nation's retail sector.

But Wal-Mart has been struggling with slowing US sales growth and announced plans earlier this year to cut the number of US supercentres it will open.

It has also returned to emphasising its low prices after efforts last year to play down its discount roots backfired with its core low-income shoppers.

For this back-to-school shopping season, which began in July, it has slashed prices on thousands of items by as much as 50 per cent to boost sales at its US stores.

The retailer said last week that while the price cuts attracted shoppers, they also hurt margins.

"While we still think Wal-Mart is taking the appropriate steps to 'right the ship,' we think the turnaround has been extended and today's unfavourable macro backdrop is creating a slippery slope for Wal-Mart to climb," wrote JP Morgan analyst Charles Grom.

He downgraded the company's shares to "neutral" from "overweight."

Mr Schoewe said the back-to-school season had gone "OK," but more consumers were waiting until closer to the first day of classes to make their purchases.

"We're pretty encouraged by back-to-school, but surprised by how late it's coming," he said.

On the recorded call, Eduardo Castro-Wright, CEO of Wal-Mart's US operations, said the company still faced poor clothing sales and was cutting prices to move out merchandise.

He also said strong sales of low-margin items like groceries and weak sales of higher-margin goods like clothes were hurting profit margins.

In addition, Mr Schoewe said Wal-Mart was contending with higher levels of "shrink" - inventory that is lost employee theft, shoplifting, errors in paperwork or vendor fraud.

"If you think about the macro environment, where customers are under pressure, there's generally a correlation between theft and macro economic pressure," Mr Schoewe said. "Unfortunately, that's what we're seeing."

For its third-quarter, Wal-Mart forecast earnings per share of 62 cents to 65 cents from continuing operations, while analysts on average were expecting 68 cents.

For the full year, the company said it expected earnings of $3.05 to $3.13 per share from continuing operations, down from an earlier view of $3.15 to $3.23. Analysts were expecting $3.16. Mr Schoewe said the company had some "very aggressive marketing and sales plans" for the fourth quarter to help spur holiday sales.

Separately, Wal-Mart's Japanese retail unit, Seiyu Ltd. said it now expected to post its sixth straight annual loss on sluggish sales.

Wal-Mart stock was down $2.53 at $43.64 in late-morning New York Stock Exchange trading.

Through Monday, the company's shares were nearly unchanged year to date. Close rival Target Corp. was up almost 11 per cent while the S&P Retail Index was down more than 5 per cent.

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Stocks Tumble on Credit Fears

Wal-Mart Worries about credit contagion in Canada, troubles at a U.S. fund, and gloomy news from big retailers prompted selling

by David Bogoslaw
BusinessWeek                                      [back to top] 

That globe-trotting Mr. Credit Crunch is at it again. After dashing from his home base in the U.S. to make surprise stops in places like France and Australia, the shadowy figure has been spotted in Canada. And his latest appearance sparked a big sell-off in U.S. equity indexes Tuesday.

Negative earnings outlooks from Wal-Mart (WMT) and Home Depot (HD) -- widely regarded as bellwethers for U.S. consumer spending -- also added to Wall Street's gloom.

On Tuesday, the Dow Jones industrial average tumbled 207.61 points, or 1.57%, to 13,028.92. The broader S&P 500 fell 26.38 points, or 1.82%, to 1,426.54. The tech-heavy Nasdaq composite index shed 43.12 points, or 1.7%, to 2,499.12.

The VIX index, a measure of volatility widely regarded as a stock-market fear gauge, was higher on Tuesday, up 5.2% to 27.96. The VIX has remained near its 52-week high amid the recent gyrations in equity markets.

The rising VIX is a bearish sign, notes S&P technical analyst Chris Burba, because price

tends to fall faster than it rises, so increased volatility generally accompanies a declining market.

Investors Tuesday looked anxiously at developments in The Great White North. Canadian ratings agency Dominion Bond Rating Services said 17 issuers have requested funding from their liquidity providers, reports S&P MarketScope. This followed a report that Canadian investment firm Coventree (COF.TO) has been unable to place asset-backed paper on Tuesday. Coventree shares tumbled 64% on top of a 34% slide Monday.

The Bank of Canada declined to comment on asset-backed commercial paper problems hitting the credit markets, according to Reuters.

The Canadian stock market benchmark, the S&P/TSX composite index, fell 1.4% Tuesday.

Meanwhile, U.S. investors had their own worries. Sentinel Management Group, a small Illinois firm that manages short-term cash for commodity trading firms and hedge funds, stopped allowing its clients to withdraw funds. The company asked the Commodity Futures Trading Commission for permission to halt redemptions, but the regulator said does not have the authority to grant the request.

In an Aug. 13 letter to regulators, Sentinel said it was worried it would not be able to meet any significant redemption requests. "We do not see an alternative and we don't believe it is anyone's best interest if a run on Sentinel took place and we were in a forced liquidation mode," Sentinel's management said.

Lehman Brothers analysts said Tuesday that the "market has become concerned about a more significant liquidity drain".

Traders are still waiting for the next subprime loan problem to emerge, watching as the European Central Bank injected more funds into the banking system while Asian banks held back and the Federal Reserve considers its next move, said Standard & Poor's.

Retailers were in the spotlight Tuesday. Wal-Mart posted a 49% leap in profits for the second quarter to 76 cents a share from 50 cents a share a year ago on $93.01 billion in revenue. But world's largest retailer trimmed its outlook for earnings from continuing operations for the full year to between $3.05 and $3.13 a share from its earlier forecast range of $3.15-$3.23 per share amid signs U.S. consumers are tightening their purse strings. The stock slid 5.1%, helping send the S&P hypermarket & supermarket industry index lower by 4.8%.

Home Depot reported earnings from continuing operations of 77 cents a share for the second quarter, down from 82 cents a share a year ago on a 5.2% drop in same-store sales and 1.8% lower total sales. The company reaffirmed its fiscal 2008 forecast for earnings from continuing operations to fall by 12% to 15%. The shares slid 4.9% Tuesday.

Shares of mortgage outfits were under pressure Tuesday, with the S&P industry index down 2.4%. Countrywide Financial (CFC) reported that July mortgage funding volume fell 14% on sequential basis, which reflects tighter lending guidelines that have curtailed total loan production. In addition, shares of residential mortgage company Thornburg (TMA) tumbled amid concerns the secondary market for mortgage loans and related securities remains illiquid. Trading in the stock was halted on the NYSE Tuesday afternoon pending news.

Shares of homebuilders were also lower, with the S&P industry index faling 4.2% amid news Moody's Investor Services placed all ratings on Beazer Homes (BZH) under review for downgrade. Also, Fitch Ratings placed Beazer's rating on Rating Watch Negative.

Investment banking shares were lower, with the S&P industry index posting a 3.6% decline. Investors remained nervous as liquidity concerns continued on reports credit crunch spread to Canada and elsewhere.

The credit concerns overshadowed a fresh batch of U.S. economic data. The July producer price index, a gauge of wholesale inflation, rose 0.6%, while the core PPI, which excludes food and energy prices, edged up 0.1%. The core index was restrained by a 3.3% drop in computer prices, partially offset by a hefty 1.1% gain in truck prices, according to Action Economics. The gains follow a 0.2% decline in the June PPI and 0.3% rise in the June core PPI.

The U.S. trade deficit fell by 1.7% to $58.1 billion in June from $59.0 billion in May on stronger exports.

Meanwhile, the U.S. dollar index has been up for the past few days, with the greenback strengthening against the euro, yen and other key currencies on anxiety about a potential global liquidity crisis in the credit markets, according to CNBC Business News.

European markets erased earlier gains after losses on Wall Street accelerated. In London, the FTSE 100 index fell 1.21% to 6,143.5. Germany's DAX index shed 0.66% to 7,425.07. In Paris, the CAC 40 index tumbled 1.63% to 5,478.66.

Asian markets finished higher. In Japan, the Nikkei index edged up 0.27%, at 16,844.61. In Hong Kong, the Hang Seng index rose 0.53% to 22,007.32. The Shanghai composite index climbed 1.09% to 4,872.78.

On Tuesday, oil prices regained some of their recent losses. September West Texas Intermediate crude futures rose 76 cents to $72.38 per barrel, while September natural gas futures rose 14.6 cents to $6.94 per million cubic feet on speculation a storm forming in the South Atlantic could move into the Gulf of Mexico, were scores of wells and natural gas pipelines are located. Traders were also taking positions before Wednesday's inventory report, which is expected to show crude oil supplies fell in the past week.

Among stocks in the news on Tuesday, shares of VMware surged 76% in their first day of public trading in a rare bright spot for the market. The EMC (EMC) unit priced its IPO at $29 a share.

Sanford C. Bernstein maintained its outperform rating on Citigroup (C), saying it expects the bank to have between $2 billion and $3 billion in damage to its assets from fallout from the subprime debacle.

Mattel Inc. (MAT) is close to announcing a second major recall of toys made in China, just two weeks after pulling $1.5 million worth of pre-school toys from retailers' shelves, according to the Wall Street Journal.

American Railcar Industries (ARII) reported lower-than-expected earnings for the second quarter of 52 cents a share, vs. 51 cents a share in the year-ago period on a 38% rise in revenue.

Treasury Markets

Treasuries recovered from early weakness to close higher, as ongoing concerns over tightening liquidity as a result of the fallout in the subprime lending industry drove a flight to safety.

The 10-year note rose 06/32 in price to 100-04/32 for a yield of 4.06%. The 30-year bond edged up 03/32 to 100-03/32 for a yield of 4.99%.

Bogoslaw is a reporter for BusinessWeek's Investing channel.

Copyright 2000-2007 by The McGraw-Hill Companies Inc. All rights reserved.

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Credit crisis and Wal-Mart data send stock markets down sharply

MALCOLM MORRISON
August 14, 2007                                   [back to top] 

TORONTO (CP) - Losses piled up on stock markets Tuesday afternoon, with losses led by financial shares amid a deepening credit crunch. "It'll take some time before markets really have the conviction and investor appetite for buying the dip here," said Vincent Delisle, portfolio manager at Scotiabank in Montreal. "Volatility will continue to linger on in Canada until we get the banks to finally report their third-quarter earnings, to get more clarity on where they're impacted with the lending crisis and how they're impacted or not impacted." Toronto's S&P/TSX composite index fell 148.13 points to 13,279.32 at midafternoon, with all sectors negative save for slight gains in consumer staples and tech stocks. The Dow Jones industrials tumbled 147.45 points to 13,089.08 amid tightening credit conditions and weaker-than-expected quarterly results from Wal-Mart Stores Inc. Markets have been pummelled since hitting record highs in mid-July as deepening defaults in the U.S. subprime mortgage sector have spooked investors elsewhere in financial markets. Deteriorating credit conditions continued to slam Coventree Inc. (TSX:COF), a Toronto-based specialist in structured financial instruments. It disclosed that some lenders are resisting its call for funds to support its shaky asset-backed commercial paper and it could face defaults and lawsuits. It also reported that it lost $45.7 million in the April-June quarter. "You're going to continue to hear stories like that and it's going to continue to weigh down on confidence," said Delisle. Coventree shares tumbled $5.85 or 69 per cent to $2.65, after a 34 per cent plunge Monday. The TSX Venture Exchange moved down 82.08 points to 2,803.8. The Canadian dollar fell 1.19 cents to 93.76 cents US on suspicions that the Bank of Canada will hold off raising interest rates next month. Statistics Canada reported that Canada's merchandise trade surplus narrowed to $5.3 billion in June from $5.9 billion in May, as exports declined one per cent. In New York, the Nasdaq composite index declined 28.16 points to 2,514.08 while the S&P 500 index was off 17.76 points to 1,435.16. Dow component Wal-Mart saw its second-quarter profit increase 49 per cent. But the world's largest retailer fell short of Wall Street expectations and lowered its forecast. Wal-Mart said some of its customers are straining under economic pressures, and its stock fell 4.7 per cent to US$44.01. On the U.S. economic front, prices at the wholesale level jumped sharply in July, rising by 0.6 per cent powered by sharply higher energy prices. But core wholesale inflation, which excludes volatile food and energy costs, was a much more moderate 0.1 per cent, encouraging investor hopes that the Federal Reserve will cut interest rates later in the year to keep credit problems from creating a recession. Also, the U.S. trade deficit declined to a four-month low of US$58.1 billion in June. On the TSX, the financial sector dropped 1.6 per cent as Royal Bank (TSX:RY) lost $1.02 to $51.73. Coventree was joined by commercial-paper issuers Metcalfe & Mansfield Alternative Investments Corp., Skeena Capital Trust and Westshore Capital Partners in seeking liquidity support from lenders. And in the U.S., Sentinel Management Group Inc., which oversees US$1.6 billion in assets, is seeking to halt investor redemptions. Other funds are said to have similar problems as they face withdrawal demands at a time it has become difficult to value low-quality debt. The TSX energy sector turned down 0.6 per cent as the September crude contract on the New York Mercantile Exchange moved up 62 cents to US$72.24 a barrel. EnCana Corp. (TSX:ECA) eased 44 cents to $62.80. The metals and mines sector dropped almost three per cent as Teck Cominco Ltd. (TSX:TCK.B) lost 98 cents to $42.53. Overseas markets were mixed as the European Central Bank injected another US$10.5 billion into money markets Tuesday and said again that conditions are normalizing.

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Activists pledge not to shop Wal-Mart for school supplies

By Michael Moore ,
workdayminnesota.com
August 14th, 2007                                [back to top]  

ST. PAUL - Rallying outside the Midway Wal-Mart in St. Paul, labor and community activists joined students and teachers in calling on American families to do their back-to-school shopping elsewhere this year.

The event last Thursday kicked off the “Send Wal-Mart Back to School” campaign, spearheaded locally by United Food and Commercial Workers Local 789. The St. Paul action coordinated with similar events in 50 other cities nationwide.

Wal-Mart's failing report card Rally participants held up a sign giving Wal-Mart a failing grade. Union Advocate photo Wal-Mart "has a lot to learn if they want to do business in our community," said Don Seaquist, president of Local 789. Seaquist cited the retailer’s record of failure – represented visually at the rally in a banner titled "Wal-Mart's Failing Report Card" – when it comes to gender discrimination, paying living wages, child-labor practices and, of course, providing affordable health coverage for its employees. "In 2005, Wal-Mart received $1.3 billion in health-care subsidies from taxpayers," Seaquist said. "Imagine what that money could do in our communities on a positive aspect rather than subsidizing an employer that needs no help from us."

The money taxpayers spend on health care for Wal-Mart employees could provide dramatic improvements to the nation's public schools, said Mary Catherine Ricker, president of the St. Paul Federation of Teachers. "Wal-Mart could be a community partner," Ricker said. "That's why we need to keep telling Wal-Mart, 'We're ready to welcome you into a partnership, but you need to be accountable.'"

Still, union leaders and activists pledged that until the world's largest retailer becomes a more responsible employer, they will urge families to shop for school supplies elsewhere. And at the rally, supporters signed cards pledging to do just that. "We will teach Wal-Mart that there's a retail model that works in our community," Seaquist said. "We will teach Wal-Mart until they go from an 'F' to an 'A.'"

St. Paul School Board Member John Brodrick said he doesn't expect Wal-Mart to learn its lesson overnight.

"It's a sad, sad thing that we have to come back here again and again," Brodrick said. "But we've got to be like a bulldog – bite on and don't let go."

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Wal-Mart Cuts Outlook

By James Covert,
WSJ.com
August 14th, 2007                          [back to top]  

Wal-Mart Stores Inc. posted a 49% rise in fiscal second-quarter net income from a year ago, when it recorded a big charge for its exit from Germany.

But the Bentonville, Ark., discount chain said operating results were disappointing. It cut its fiscal-year earnings forecast, citing a sluggish economy and stores that need improvement.

The world's largest retailer, which like many peers, is battling slower sales growth tied to sluggish home sales and tightening credit, reported net income of $3.11 billion, or 76 cents a share, for the quarter ended July 31, up from $2.08 billion, or 50 cents a share, a year earlier. The latest quarter's results included a net gain of four cents a share, as accounting accruals and real-estate gains more than offset money set aside for various contingencies. The prior year's results included a charge of 22 cents a share from the sale of Wal-Mart's German operations to Metro AG. The company had been projecting earnings of 75 cents to 79 cents a share.

Shares of Wal-Mart traded at $44.15 in recent premarket activity, compared with Monday's close of $46.17.

Revenue rose 8.9% to $93.01 billion as U.S. same-store sales excluding the impact of fuel increased 1.9%, in line with the firm's 1% to 2% growth outlook. Wal-Mart's namesake brand reported a 1.2% rise, and Sam's Club had a 5.9% jump.

"Our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us," said President and Chief Executive Lee Scott in a statement. "For the remainder of this year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards."

In a prerecorded conference call, Mr. Scott noted that Wal-Mart's customers continue to cite "money and finances, the increase in cost of living and gas prices" as top concerns. "It is no secret that many customers are running out of money towards the end of the month," Mr. Scott said. "The paycheck cycle is, in fact, more pronounced now than it ever has been."

Sales of groceries increased 14%, with comparable sales up in the mid-single digits, as budget-minded shoppers flocked to Wal-Mart's giant supercenters in search of rock-bottom prices. Electronics sales also were stronger as Wal-Mart introduced more name brands, including Hewlett-Packard, Apple and Sony. But home-related goods and apparel, which carry higher margins and are crucial to overall profits, remain a challenge. Apparel sales saw "pressure in all areas," said Eduardo Castro-Wright, president of U.S. stores. The company expects apparel to remain soft through the third quarter, although it said it was "encouraged" by demand for some back-to-school merchandise in August.

On Thursday, when it posted stronger-than-expected July sales figures, Wal-Mart said profit margins were being squeezed by aggressive product discounts, though the price cuts and grocery sales had helped it boost U.S. store traffic.

Wal-Mart on Tuesday cut its fiscal-year earnings forecast by 10 cents a share, to a range of $3.05 to $3.13 a share. Chief Financial Officer Tom Schoewe said the reduction "reflects the need to continue to improve our underlying operating performance" and "the economic trends that have developed in many of our major markets."

The firm also projects fiscal third-quarter earnings of 62 cents to 65 cents a share, with U.S. same-store sales rising 1% to 3%. The mean estimate of analysts surveyed by Thomson Financial was for earnings of 68 cents a share. Wal-Mart has completed $13.6 billion in share repurchases under a $15 billion program authorized by the company's board in early June. Capital spending is now up 2.3%, on track with the company's reined-in budget of $15.5 billion this year, which includes plans to slow the company's store growth slightly.

--Kevin Kingsbury and Mike Barris contributed to this article. 

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Wal-Mart Cuts Profit Guidance for Year

By ANNE D'INNOCENZIO
08.14.07                                                [back to top] 

NEW YORK - Wal-Mart Stores Inc. reported a 49 percent increase in second-quarter profits, but the world's largest retailer cut its profit outlook amid weak economic conditions that are crimping consumer spending globally.

The Bentonville, Ark.-based discounter reported a net income of $3.10 billion, or 76 cents per share, for the three months ended July 31. That compared with $2.08 billion, or 50 cents per share in the year-ago period.

The quarter included three items that provided a net benefit of $171 million after tax, or 4 cents per share. Accruals for general liability and workers' compensation claims were reduced by $196 million after tax. The company also recognized $41 million in after tax gains from the sale of real estate. These benefits were offset by charges of $66 million after tax for legal and other contingencies.

Analysts polled by Thomson Financial expected 76 cents per share.

Wal-Mart (nyse: WMT - news - people ) reported revenue of $93.01 billion, up from $85.43 billion in the year-ago period. Analysts had expected $92.68 billion in the quarter.

The company said that for the full year, earnings per share from continuing operations is now estimated to be between $3.05 per share and $3.13 per share. The company's initial forecast was in the range of $3.15 per share and $3.23 per share.

"Our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us," said Lee Scott, Wal-Mart president and chief executive officer. "For the remainder of this year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards."

Copyright 2007 Associated Press. All rights reserved.

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Stocks Lower After Wal-Mart Results

By JOE BEL BRUNO
08.14.07                                             [back to top] 

NEW YORK - Wall Street pulled back on Monday as investors grew concern about the pace of consumer spending after Wal-Mart Stores Inc. reported weaker-than-expected quarterly results.

The world's biggest retailer cut its profit outlook amid weak economic conditions that are crimping consumer spending. Home Depot Inc., the world's largest home improvement chain, said Tuesday that weakness in the housing market caused its quarterly profit to slip almost 15 percent.

The pair of disappointing earnings reports offset government data released before the market open that indicated that inflation remains in check. The Labor Department said wholesale prices rose in July for the fifth time in six months, while the Commerce Department said the U.S. trade deficit fell to a four-month low in June.

Despite the decline in major indexes, analysts said the tone of the market appears more stable compared to the recent volatility triggered by a widening credit and debt crisis. The Federal Reserve, which has injected some $64 billion of liquidity into the U.S. banking system since Thursday, said Tuesday it stood ready to act again should market conditions warrant.

"Wal-Mart aside, you're still seeing a bit of stability in the market due to central banks around the globe providing liquidity to the financial markets," said Mike Malone, a trading analyst at Cowen & Co. "Given the fact there's very little visibility about how the economy and credit markets will play out, this kind of market is encouraging because there is still a tremendous amount of risk out there."

The European Central Bank injected another $10.5 billion into money markets on Tuesday and said conditions were normalizing after several days of volatility. There was no action Tuesday by the Fed.

In late morning trading, the Dow Jones industrial average fell 151.27, or 1.14 percent, to 13,085.26.

Broader stock indicators were lower. The Standard & Poor's 500 index shed 14.12, or 0.97 percent, at 1,438.80, and the Nasdaq composite index fell 17.93, or 0.71 percent, at 2,524.31.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.76 percent from 4.78 percent late Monday. The fixed-income market has risen as stock investors move into securities deemed less volatile.

The Labor Department reported its producer price index advanced 0.6 percent amid higher energy costs. Excluding often volatile food and energy costs, however, what's known as core PPI rose a modest 0.1 percent.

Meanwhile, the Commerce Department said the trade deficit fell because of highest-ever exports of farm goods and automobiles offset a jump in energy prices. The trade deficit dropped to $58.1 billion in June, a 1.7 percent decrease from May and the lowest imbalance since February.

Wal-Mart, one of the 30 stocks included in the Dow, fell $2.26, or 4.9 percent, to $43.91. The company lowered its profit forecast amid weak economic conditions that it blames for hurting consumer spending globally. Major retailers have been reporting largely lackluster sales results for months.

The retailer's second-quarter profit rose 49 percent but results excluding one-time items fell short of Wall Street's expectations. Wal-Mart said some of its customers were straining under economic pressures such as higher oil prices.

Home Depot, the world's largest home improvement store chain, reported a 14.8 percent decline in its second-quarter earnings as sales slipped, particularly among stores open at least a year. Quarterly figures topped Wall Street's forecasts and the company reiterated that it expects its earnings per share from continuing operations to decline for fiscal 2007. The company said, however, that a sluggish housing sector could make conditions difficult. Shares fell $1.03, or 2.9 percent, to $34.21.

Mattel Inc. shares fell 81 cents, or 3.4 percent, to $22.76 after it announced the recall of 8.8 million toys. It was the second big recall of Chinese-made toys in just two weeks.

Also hurting stocks was the financial sector, which has tumbled during the past month on signs of a tightening credit environment. Goldman Sachs Group Inc., which on Monday said three of its hedge funds have been slammed by recent volatility, fell $4.52, or 2.6 percent, to $172.98.

Declining issues outpaced advancers by a 2 to 1 basis on the New York Stock Exchange, where volume came to 379.4 million.

Light, sweet crude rose 49 cents to $72.11 on the New York Mercantile Exchange. The dollar was mixed against other major currencies, while gold prices edged higher.

The Russell 2000 index of smaller companies rose 1.11, or 0.14 percent, to 780.92.

Overseas, Japan's Nikkei stock average rose 0.27 percent. Britain's FTSE 100 fell 0.10 percent, Germany's DAX index slipped 0.52 percent, and France's CAC-40 fell 0.82 percent.

Copyright 2007 Associated Press. All rights reserved.

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Stocks Mixed on Wal-Mart, Economic Data

By JOE BEL BRUNO
Associated Press
08.14.07                                 [back to top] 

NEW YORK - Wall Street was narrowly mixed Tuesday after a drop in the trade deficit and a tame core inflation report helped investors absorb weaker-than-expected quarterly results from Wal-Mart Stores Inc.

Investors appeared somewhat buoyed following economic readings that came amid a drop in volatility compared to recent weeks. The Federal Reserve, which has injected some $64 billion of liquidity into the U.S. banking system since Thursday, also said it stood ready to act again on Tuesday should market conditions warrant.

The pair of government reports released before the open indicated the economy continues to grow while inflation excluding energy costs remains in check. The Labor Department said wholesale prices rose in July for the fifth time in six months, while the Commerce Department said the U.S. trade deficit fell to a four-month low in June.

However, a drop in Wal-Mart shares dragged blue chip stocks lower. The world's biggest retailer's second-quarter report stirred concerns about whether consumers will cut back their spending. That report and stronger-than-expected results from Home Depot Inc. returned some of investors' attention to the fate of the consumer.

In the first hour of trading, the Dow Jones industrial average fell 18.20, or 0.14 percent, to 13,218.33.

Broader stock indicators were mixed. The Standard & Poor's 500 index was up 1.65, or 0.11 percent, at 1,451.27, and the Nasdaq composite index added 5.44, or 0.21 percent, at 2,547.68.

Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.79 percent from 4.78 percent late Monday. Fixed-income investors were unsettled by the overall wholesale inflation reading in the Labor Department's Producer Price Index. Rising prices could make it more difficult for the Fed to cut interest rates.

The Labor Department reported the PPI advanced 0.6 percent amid higher energy costs. Excluding often volatile food and energy costs, however, what's known as core PPI rose a modest 0.1 percent.

Meanwhile, the Commerce Department said the trade defecit fell because of highest-ever exports of farm goods and automobiles offset a jump in energy prices. The trade deficit dropped to $58.1 billion in June, a 1.7 percent decrease from May and the lowest imbalance since February.

Wal-Mart, one of the 30 stocks included in the Dow, fell $2.29, or 5 percent, to $43.88. The company lowered its profit forecast amid weak economic conditions that it blames for hurting consumer spending globally. Major retailers have been reporting largely lackluster sales results for months.

The retailer's second-quarter profit rose 49 percent but results excluding one-time items fell short of Wall Street's expectations. Wal-Mart said some of its customers were straining under economic pressures such as higher oil prices.

Home Depot, the world's largest home improvement store chain, reported a 14.8 percent decline in its second-quarter earnings as sales slipped, particularly among stores open at least a year. Quarterly figures topped Wall Street's forecasts and the company reiterated that it expects its earnings per share from continuing operations to decline for fiscal 2007. The company said, however, that a sluggish housing sector could make conditions difficult. Shares fell 15 cents to $35.09.

Light, sweet crude rose 58 cents to $72.20 in premarket electronic trading on the New York Mercantile Exchange. The dollar was mixed against other major currencies, while gold prices edged higher.

The Russell 2000 index of smaller companies rose 1.11, or 0.14 percent, to 780.92.

Overseas, Japan's Nikkei stock average rose 0.27 percent. In afternoon trading, Britain's FTSE 100 rose 0.40 percent, Germany's DAX index slipped 0.16 percent, and France's CAC-40 fell 0.22 percent.

Copyright 2007 Associated Press. All rights reserved.

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Wal-Mart Sees Global Drop-Off

Evelyn M. Rusli,
Market Scan
08.14.07                                  [back to top] 

Wal-Mart investors better buckle in, 2007 is going to be a rocky ride.

On Tuesday, the retailer said second-quarter profits rose 49.0% but warned that earnings will be weaker than investors expect for the rest of this year as consumer spending tightens.

The company knocked down fiscal 2007 guidance by a dime. The discount retailer now predicts 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, Wal-Mart (nyse: WMT - news - people ) has struggled to energize sales as housing woes and high gasoline prices limit the American consumer's appetite. Wal-Mart, the largest retailer in the world, believes that this tightness will be felt across the globe, as foreign customers also cut back on spending.

The disappointing news sent Wal-Mart's shares down 4.9%, or $2.26, to $43.91, in Tuesday afternoon trading.

"Many customers around the world continue to be under economic pressure, and they expect Wal-Mart to be their advocate," the company's chief executive officer, Lee Scott, said on Tuesday. "We will continue to be the undisputed price leader, from Asda in the United Kingdom, to every market in the United States." With demand softening, Wal-Mart has been under pressure to aggressively mark down merchandise.

The softness in the global market comes as Wal-Mart struggles to rejuvenate its brand. As the biggest gorilla in the pack, Wal-Mart has nearly ever corner of the U.S. covered. The company plans to complete the renovation of some 1,800 stores by this fall. Improved lighting, displays and wider aisles should encourage customers to stay longer at the mega-centers and thus, spend more money.

The company announced that its second-quarter profit rose to $3.1 billion, or 76 cents a share, from $2.1 billion, or 50 cents a share, for the year-ago period. These figures include one-time items, such as real estate sales and accruals for compensation claims, that totaled $171 million, or 4 cents a share. Thus, on a continuing operations basis, the company realized 72 cents a share in profit, below the Street's estimate of 76 cents a share.

Meanwhile, sales climbed 8.9%, to $93.1 billion, from $85.4 billion-- that exceeded analyst expectations of $92.7 billion. Excluding the impact of fuel, sales at Wal-Mart stores jumped 1.2%, while its Sam's Club chain saw sales rise an impressive 5.9%.

However, despite the positive figures, management was less than thrilled. "Our underlying operating performance this quarter is not what we expect of ourselves, and not what our shareholders expect of us," Scott said. "For the remainder of the year, our management team is focused on inventory improvements, delivering quality products at low prices, and store execution at the highest standards."

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Retail Wal-Mart's Margins May Bleed From Price Cuts

By Pia Sarkar
thestreet.com
8/13/2007                                   [back to top] 

SAN FRANCISCO -- Persistent price cutting likely will weigh on Wal-Mart's (WMT) gross margins when the world's biggest retailer reports its second-quarter earnings on Tuesday.

The Bentonville, Ark.-based company has backed its forecast for a profit of 75 cents to 79 cents a share for the second quarter, in line with analysts' average estimate of 76 cents and up from 72 cents a year earlier. But ongoing promotions -- amped up in July on more than 16,000 products -- will have their consequences.

"Customers are responding to the pricing initiatives and traffic trends are improving," said Eduardo Castro-Wright, Wal-Mart Stores U.S. president and chief executive, in a statement Thursday, when the company reported July sales. "However, this is impacting gross margins."

Wal-Mart posted a 1.9% increase in July same-store sales, or sales at stores open at least a year, beating analysts' estimates for a 1.5% rise. But the company noted ongoing weakness in its home furnishings and apparel categories, which is expected to show through in its earnings results.

Wal-Mart has attempted to change its apparel by making it more fashion-forward. But so far, it hasn't caught on with customers, at least not in the same way as at rival Target (TGT) , which has successfully kept up with the latest trends.

"Target has for a couple of dozen years been what you'd expect from a discounter coming out of a department store heritage," says Edward Weller, an analyst for ThinkEquity Partners.

Christine Augustine, an analyst for Bear Stearns, said she does not expect a meaningful pickup in Wal-Mart's apparel sales until the end of the third quarter.

"We believe inventory and clearance still have room for improvement," she wrote in a research note.

Sales in home furnishings, which have been hurt by a sluggish real estate market, remain slow, and Augustine said she does not anticipate improvement until the end of the fourth quarter.

For the second quarter, Augustine expects Wal-Mart to report a gross margin decline of 10 basis points because of the weak sales and increased markdowns in the apparel and home furnishings areas, which usually carry higher margins than other products.

"All in all, rollback levels throughout the store, at around 15,000-16,000, are significantly higher than the usual 10,000," she wrote. Augustine expects Wal-Mart to report earnings of 75 cents a share for the second quarter.

Groceries have been the company's saving grace, as have consumer electronics such as TVs and portable electronics. In the second quarter, it rolled out Dell (DELL) computers, giving it a boost in that category.

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Earnings Preview: Wal-Mart Stores Inc.

The New York Times Company
August 13, 2007                                                [back to top] 

NEW YORK --Wal-Mart Stores Inc., the world's largest retailer, reports earnings for the fiscal second quarter on Tuesday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Wal-Mart Stores Inc., based in Bentonville, Ark., has been focusing on low prices since last year's holiday season, when a strategy to play up trendy merchandise led to sluggish sales.

In July, Claire Watts, executive vice president of apparel merchandising, one of the executives behind the strategy to focus on trendy apparel, left the company. Dottie Mattison, formerly chief merchant for Walmart.com, was promoted to senior vice president over women's apparel, jewelry, shoes and accessories as well as product development.

Also in July, Wal-Mart Stores said it would cut prices on 16,000 items to drive back-to-school sales.

Same-store sales were positive during the quarter, up 1.1 percent in May, 2.4 percent in June and 1.9 percent in July. Same-store sales, or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.

Generally, grocery sales have been stronger than general merchandise at Wal-Mart. Apparel and home products sales have been weak as the housing market sags.

BY THE NUMBERS: Total sales for the fiscal 2008 second quarter, which ended July 31, totaled about $92 billion, according to Wal-Mart. The company predicts second-quarter earnings will be between 75 cents and 79 cents per share.

Analysts polled by Thomson Financial expect a profit of 76 cents per share on revenue of $92.8 billion.

ANALYST TAKE: JPMorgan analyst Charles Grom expects earnings will come in at the low end of Wal-Mart's forecast, due to pressure on its gross profit margin from higher-than-planned markdowns in apparel and home divisions plus price cutting on back-to-school items. On Monday, Grom, who rates Wal-Mart "Overweight," lowered his earnings forecast by a penny to 76 cents per share.

Morgan Stanley analyst Gregory Melich indicated in a note to investors on Monday that he also expects earnings to be at the low end of guidance. He expects earnings of 75 cents per share.

He expects Wal-Mart to continue to slow U.S. square-footage growth. The company previously said it will cut growth to 4 percent from 7 percent next year.

"While it is only about one third of what we were looking for, in our view it remains the critical first step in increasing sustainable returns and shifting a cultural mindset from maximizing top line growth," Melich wrote.

In terms of earnings, he expects international results to buffer the impact of domestic margin pressure.

© Copyright 2007 The New York Times Company

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Wal-Mart export sales seen to expand as US stores slow

China Economic Net
2007-08-13                                            [back to top] 

For Wal-Mart Stores Inc, the road to a higher share price is paved with chicken feet and Spam, Bloomberg News said.

The world's largest retailer, long the biggest importer of goods into the United States, last year joined a list of the top 100 US exporters for the first time. It sent 39 percent more shipping containers overseas than General Motors Corp and surpassed cigarette maker Altria Group Inc.

Although only a fraction of the US$18 billion in goods it bought from China alone in 2005, exports will increase further as Wal-Mart targets a third of its sales growth from abroad amid the slowest gains at US stores in at least 27 years.

International sales will expand to 30 percent of Wal-Mart's total in 2010, up from 22 percent last year, estimates Citigroup Inc analyst Deborah Weinswig.

International markets "could be like a savior for Wal-Mart," said David Abella, an analyst at Rochdale Investment Management in New York, with US$2.4 billion in assets including Wal-Mart shares.

The expansion may help end the seven-year stock slump for Bentonville, Arkansas-based Wal-Mart. The shares will rise 29 percent in the next 12 months, says Weinswig.

Since reaching a record US$69.44 in December 1999, the per-share price has dropped by a third. Wal-Mart will report quarterly financial results on Tuesday.

Shareholders have yet to credit Wal-Mart for its overseas growth, Abella said.

"Retail investors don't yet know how to view international operations," he said.

Wal-Mart has set a goal of attaining a third of sales and profit growth from outside the United States. It exceeded that last year, with international accounting for half of sales gains.

Loaded ships

To fill Wal-Mart shelves overseas, three ships a week leave the docks of Seaboard Marine in Miami, pointing toward Central America, said Jose Perez-Jones, senior vice president of the Miami-based shipping company. They contain products from 35 states and Puerto Rico, Wal-Mart spokesman Kevin Gardner said.

Labor groups and politicians blame Wal-Mart for hastening the demise of American manufacturing jobs as it purchased low-priced toys, electronics and clothing from Asia and Latin America. It brought in 715,000 standard shipping containers last year, holding its perennial spot as the top importer, the Journal of Commerce says.

As an exporter, Wal-Mart ranked 38th, sending 26,200 containers, surpassing 25,100 for Altria and 18,800 for GM, says the journal.

This year Wal-Mart will ship US$2 million of shopping carts made by Wagoner, Oklahoma-based Unarco Inc to its Central American stores, up from none two years ago.

Sales to Wal-Mart's international stores are "just getting warmed up," said Taft O'Quin, president of closely held Unarco.

Wal-Mart's first foray outside the United States was in 1991, with the purchase of two Mexico City stores. As of July, 42 percent of 7,022 stores were international, including a stake in 101 Trust-Mart stores in China.

Wal-Mart sends soup, shelving, packaged goods and perishables like beef to stores, as well as commodities such as cotton to provide the material for items made overseas and sold in the United States.

"We have much more robust growth overseas," said Sarah Thorn, director of international trade, who said the company directly shipped US$671 million of goods to stores outside the United States in 2006.

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Woes mount for Wal-Mart

By David Olive,
TheStar.com
August 13th, 2007                          [back to top] 

It was business as usual for Wal-Mart last Tuesday for a superstore opening in Peru, Ill., which is to say the mood was of righteous self-assuredness. A marching band played "The Star-Spangled Banner," store manager Mitch Lippert whipped up his troops ("Who's fired up!"), and Rev. Oscar Shepherd of Christ Family Foursquare Church sought the Almighty's blessing "as we interact with each other in the marketplace."

You'd never know Wal-Mart Stores Inc. was in a heap of trouble. The company's growth rate has slowed to a crawl, overtaken by rivals once thought to be no match for the "beast of Bentonville." Average annual profit growth lags that of Target Corp., Costco Wholesale Corp. and other competitors. Wal-Mart's repeated efforts to push upscale merchandise have ended in tears. Expansion at home is still thwarted by hundreds of U.S. communities; and several forays abroad are struggling or have been scrapped. The stock price is down 32 per cent since the turn of the century, when CEO Lee Scott took the reins, while the Morgan Stanley retail index has soared 180 per cent.

If Wal-Mart wasn't 40-per-cent controlled by the heirs of founder Sam Walton, an "activist investor" like Carl Icahn or Kirk Kerkorian would be calling for Scott's head and the spin-off of Sam's Club, an also-ran to Costco.

As it is, many on Wall Street are convinced Scott will be out of a job come next year if he can't show some progress over the next six months in breathing new life into the world's largest retailer. He isn't given much hope of doing so. "[This] is the end of the age of Wal-Mart," Richard Hastings of U.S. retail ratings agency Bernard Sands told Business Week in April. "The glory days are over."

At 45, Wal-Mart is showing its age. With sales of $345 billion (all figures U.S.) last year at 6,779 stores in 13 countries employing a total of 1.9 million people, Wal-Mart still has the clout to dictate pricing and package design to giant suppliers like Procter & Gamble, Campbell Soup Co. and Dell Inc., which rely on Wal-Mart's 3,443 U.S. stores and thousands more abroad as one of their biggest, if not their largest, distribution channels. But last year, Wal-Mart eked out same-store sales growth, at outlets open at least a year, of just 1.9 per cent, a mighty comedown from the routine double-digit increases of the 1990s. Scott has responded with top-level management shuffles, an overdue store-remodeling campaign, and a renewed determination to crack foreign markets. Yet Scott has not been able to budge the needle.

Last week, Wal-Mart reported anemic same-store sales growth of 1.9 per cent for July, the kick-off of the important back-to-school season, trailing the industry average of 2.6 per cent. Wal-Mart blames financial pressure on shoppers from high fuel prices and a weak housing market. Yet those factors didn't hobble Target, which posted a same-store sales gain of 6.1 per cent, Costco (up 7 per cent) or J.C. Penney Co. (up 10.8 per cent).

Probably more ink has been spilled on Wal-Mart's phenomenal success than any firm save Microsoft Corp. But the firm turns out to be a one-trick pony. It's a discounter that thrives on selling high volumes of low-margin goods at knock-down prices in small-town monopoly or near-monopoly markets. As it has tried to move into higher-margin apparel and other goods, and expand into large urban markets in the U.S. Northeast, upper Midwest and the West Coast, and into Europe and Asia, far from its U.S. flyover territory origins, Wal-Mart has run into every kind of trouble imaginable. Wal-Mart's vaunted logistics prowess, the advantage for which it is most feared, is no longer able to keep the fastest-moving inventory reliably in stock. Discriminating shoppers in its newest, urban markets are accustomed to higher standards of quality, selection and customer service than Wal-Mart has ever had to offer. And the firm, as it tries to retain its profitability of old, has shown a curious response to that challenge, recently capping wage increases for clerks who already are underpaid, scarce and lacking in product knowledge.

Many Wal-Mart outlets remain an aesthetic dead zone. The company's belated store-remodeling efforts have been half-hearted, even though an alarming internal Wal-Mart survey in late 2005 found that one-quarter of the company's U.S. stores fall short of minimal standards in everything from adequate lighting, prompt check-out time and even cleanliness – standards few Wal-Mart observers would describe as especially high in the first place.

Foreign expansion has borne scarcely more encouraging news than the home front. Fifteen years after first venturing outside the United States, Wal-Mart garners only 22 per cent of its total sales abroad, and a far smaller percentage of profits. And most of that business comes from Canada and Mexico.

Those few Wall Street analysts who anticipate a Wal-Mart renaissance pin their hopes on international growth. But Wal-Mart last year quit Germany and South Korea, and has made little headway in other giant markets including China and India. In Japan, the company has lost money five years running. At home, meanwhile, Wal-Mart is caught in a squeeze between "cheap-chic" merchants like Target, H&M and Zara, whose higher-income clientele it has not been able to lure; and the proliferation of "dollar stores" and convenience marts nibbling away at its core customer base of 42 million lower-income shoppers. Wal-Mart has trouble holding on to executives initially touted as architects of a coming transformation. Senior marketing executive Julie Roehm was fired in December, accused by Wal-Mart of an improper romantic involvement with a subordinate, taking gifts from suppliers and misusing her expense account. Roehm disputes the allegations, claims her famously conservative employer resisted her fashion-forward sensibilities, and has accused Scott and other top Wal-Mart executives of indulging in the same practices of which the company accuses her.

And last month, Claire Watts, head of apparel merchandising, abruptly quit after Wal-Mart appeared to be scaling back its upscale-product strategy.

A more fundamental problem is Wal-Mart's paucity of high-level merchants. Scott, 58, a Wal-Mart lifer, came up through the company's logistics and trucking ranks. (Wal-Mart owns the U.S.'s second-largest private trucking fleet.) And Eduardo Castro-Wright, who has so far failed to impress in his mandate to fix the core U.S. operations he has headed since 2005, is a veteran of tobacco giant RJR-Nabisco and defence contractor Honeywell International Inc.

Wal-Mart seems to be its own worst enemy in public relations. Already the target of class-action lawsuits from employees claiming to have been locked inside stores after closing time to perform extra work without pay, and the biggest sexual discrimination class-action suit in U.S. history, Wal-Mart's Threat Research and Assessment Group – set up to curb "shrinkage," or employee theft, and pro-union sentiments among employees – was found to have spied on company critics including consultants, irate shareholders, financial reporters and even members of the company's own board.

In May, Human Rights Watch, better known for raising alarms about civil-rights abuses in repressive regimes, accused Wal-Mart of violating labour laws. In fairness, Wal-Mart is confronted with the daunting law of large numbers. It has to grow by $35 billion this year just to post a respectable growth rate of 10 per cent, which means finding new revenues equal to the total sales of Walt Disney Co. or Intel Corp.

The keys to a Wal-Mart revival include adjusting to local customs abroad – Germans were put off by its overly familiar greeters – and wringing more profits from its core operations at home. It's actually good news that Wal-Mart's 800 best-run stores boast sales growth 10 times higher than its 800 worst-run outlets – a shocking revelation the firm made a year and a half ago. And it's good news that Wal-Mart has bungled in so many different ways this decade – in rushing into upscale merchandising without realizing you don't roll out an ad campaign until the advertised goods are in the stores; and that failing to rehabilitate shabby stores is an expensive bargain. Good news, because those are fixable issues that offer significant growth prospects. But the long-term dilemma for Wal-Mart remains that its reputational damage runs so deep that any reclamation project will come too late. In a damning 2006 report for Wal-Mart by the firm's former ad agency, based on interviews with scores of customers, rival merchants with superior product selection and customer service were identified as the preferred choice over Wal-Mart in dozens of categories, including apparel, electronics, prescriptions, home décor and even groceries, where Wal-Mart is the U.S. market leader. "Shop there if you must" seems to be Wal-Mart's unofficial tag line.

If Wal-Mart is not to go the way of General Motors Corp., Sears, Roebuck or Xerox Corp., whose long success bred an arrogance that blinded them to changes in the market and doomed them to fail at reinventing themselves, the company will need a top-to-bottom cultural makeover that rejects shoddy stores, outlets understaffed by poorly paid employees with little product knowledge, and a consistent drive to somehow upgrade its merchandise without alienating its base of low-income consumers.

It's a tall order that may require divine intervention. It might help if Rev. Shepherd remembers the beleaguered Wal-Mart CEO in his prayers.

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India: Moving Up The Food Chain

Promod Haque
08.13.07                                 [back to top] 

I lived in New Delhi until 1972, when I came to the United States to go to school. Looking back 35 years, I think the biggest changes to India have been to the economy. Back then, the country was a controlled economy. The country didn't quite gain independence until the late 1980s and early '90s, when the economy began to transition into a capitalistic free-enterprise market system.

The initial growth of information technology in India was providing staff augmentation. You had companies in the U.S. that were looking to employ support staff and engineers at lower salaries. That built some confidence in India's technology expertise, and led to India becoming a resource for the Y2K problem. Then came the dot-com bust and the recession in the U.S., which led to even more IT work going to India. In the last few years, more of the work began shifting beyond outsourcing into product development.

Someday, many U.S. companies will have more employees in India than in the U.S. IBM (nyse: IBM - news - people ) has around 57,000 employees in India and plans to get to 80,000. The company has 130,000 domestic workers.

There is a lot of talk about the fact that salaries continue to rise in India and that retention is a big problem. People want to know if they should stop outsourcing to India and find a lower cost-center somewhere else.

I don't think that has to happen. There are some interesting parallels between what happened in the U.S. 20 years ago and what is happening in India right now. If you go back to the mid-1980s in the U.S., the cost of technology was dropping and the cost of human labor was starting to rise. And because of the rising wages, the country tried to increase productivity, and that led to the massive use of technology in the U.S. enterprise system.

Cisco (nasdaq: CSCO - news - people ), Oracle (nasdaq: ORCL - news - people ) and SAP (nyse: SAP - news - people ) were all making products that were aimed at increasing productivity for a workforce that was becoming more and more expensive. That paid off, and eventually productivity gains went up faster than the wages. I think you will see the same thing in India; the economy will continue to grow, and the use of technology will continue to grow.

Another challenge India has had to face is that the country is too far away from most markets. The challenge is that the best leading-edge products and disruptive technologies are always built in collaboration with customers that are early adopters of technologies. Silicon Valley companies work very closely with companies such as Fed Ex, DHL, Morgan Stanley (nyse: MS - news - people ) and Goldman Sachs (nyse: GS - news - people ).

When India starts using technology to increase the productivity of its own companies, innovation will happen on a more accelerated basis, and the early adopters will become corporations in Delhi, Chennai and Bangalore.

Reliance Industries wants to revolutionize retail in India. No longer will there be hundreds of small merchants, but big malls and grocery stores like in the U.S. Reliance is now using technology aggressively to improve the supply chain. Wal-Mart (nyse: WMT - news - people ) wants to do the same thing and is partnering with Pharti, a very large enterprise in India that runs a large wireless operator called Airtel. Wal-Mart is bringing the latest and greatest technology from the U.S., and Reliance will have to do so as well. Whoever does not use the best technology will fall behind.

In 2009, the banking sector in India is going to be totally open for foreign banks to come in. Only Citicorp is there now. It is still highly regulated and very difficult for banks to enter. When Bank of America (nyse: BAC - news - people ), Barclays (nyse: BCS - news - people ) or ING (nyse: IND - news - people ) walks in there and starts buying local banks, they too will bring in their latest and greatest technologies.

Large Indian enterprises will be forced, for competitive reasons, to use technology very aggressively so that productivity gains outpace wage increases.

We are also seeing Indian enterprises beginning to buy companies in the west. Tata Group just put in a bid to buy Jaguar from Ford. Another Indian company, Mahendra (the equivalent of Caterpillar (nyse: CAT - news - people ) in India), is also bidding for the business. A few weeks ago, the U.S. sold Yipes, a market leader in Ethernet services, to Reliance, a giant company in India.

This is similar to what happened with the Japanese in the 1980s. Fujitsu, Hitachi (nyse: HIT - news - people ) and Sumitomo were investors with us in a lot of our startups. Hitachi bought the IBM disk-drive division.

As more and more technology develops and more talent becomes available in India, the world is starting to see India move up the food chain.

Promod Haque is managing partner of Norwest Venture Partners.

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Wal-Mart given time to search for tenants

Lisa J. Huriash
South Florida Sun-Sentinel
Sunday, August 12, 2007                                  [back to top] 

Aug. 12--NORTH LAUDERDALE The city commission pledged Saturday to continue working with Wal-Mart so the corporate giant will build a Supercenter at a former U-Pick farm.

At a hastily called commission meeting, a developer blamed the delay on the city, saying construction would have started if City Manager Richard Sala hadn't vetoed the tenants Wal-Mart wants to bring in.

"We are not going to get a Morton's Steakhouse, Bonefish Grill, Houston's," said David Lipp, principal of Boca Raton-based Atlantic Commercial Group, which is the leasing group seeking tenants for the outparcels next to the proposed Wal-Mart site.

The 43-acre Town Center project is supposed to feature a 207,204-square-foot Wal-Mart, a hotel and free-standing restaurants and shops. The city's agreement with Wal-Mart specifies that Wal-Mart must find the tenants for the outparcels.

On Saturday, the commission agreed to give Wal-Mart a six-month extension on its site plan application to buy more time. That deadline had been Aug. 28. But the commission also declined to renegotiate the developer's agreement.

Commissioner Gary Frankel said the proposed location was the largest piece of undeveloped land left in the city.

"This is our last and only remaining child at home and we're kind of pampering it," he said.

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'Nobody wants to come': Wal-Mart tells North Lauderdale it can't find tenants

By Lisa J. Huriash
South Florida Sun-Sentinel
August 11, 2007                                 [back to top] 

NORTH LAUDERDALE Wal-Mart officials reportedly have told city staff that they haven't had any luck finding restaurants and stores to move in next door, as they are contractually obligated to do, because "nobody wants to come to North Lauderdale."

City leaders are outraged that instead of a Town Center destination site, they could end up with nothing more than a giant Wal-Mart at the former U-Pick farm along McNab Road.

They've called a special City Commission meeting for 4 p.m. today to decide what to do next. Mayor Jack Brady said he wants an explanation from the corporate giant.

"Let them come in," Brady said. "I want to hear this ... face to face. I want them to look at me in my face."

But Michelle Azel, a Wal-Mart media relations spokeswoman in Miami, said the company would not be there because "no one in our Wal-Mart corporate office was notified nor invited to attend."

The 43-acre Town Center project — two years in the making — was supposed to feature a 207,204-square-foot Wal-Mart, an 80-room hotel, restaurants and 36,000 square feet of shopping, according to the city.

North Lauderdale officials said the developer's agreement specifies that Wal-Mart must find the tenants for the center's out-parcels. But City Manager Richard Sala told commissioners last week that a Wal-Mart official at Arkansas headquarters told him "nobody wants to come to North Lauderdale and they've tried everything they can."

He said the store wants to get building permits just for the Supercenter because they cannot find tenants for the outparcels.

"They called me to flex some muscle that they are Wal-Mart and they can do whatever they want," Sala said.

City leaders are exasperated that their original plans might not come to fruition.

"A lot of people have been waiting for this. I'm not selling out," Brady said.

"Very aggravating," said Commissioner Gary Frankel. "We threw out the red carpet for them."

Brady spent Friday at City Hall calling big chain restaurants about possibly coming to the Town Center, attempting to accomplish what Wal-Mart could not.

"I've just about had it," said Commissioner John Cangemi, whose district includes the Wal-Mart location.

He said he has also tried to entice restaurants but has been turned down because too many other restaurants exist in nearby cities.

"You have no idea how much I've put into this," he said. "I'm just very disgruntled about this because I promised residents in my district there would be something soon."

Copyright © 2007, South Florida Sun-Sentinel

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Wal-Mart plans a slow ‘hockey stick’ curve in India

John Elliott
Riding The Elephant                         [back to top] 

Wal-Mart is going slow in India. Its executives of course won’t admit this, but it is showing no hurry to begin selling in a country where its every move meets opposition.

This was not the scenario envisaged by its Indian partner, Sunil Mittal of Bharti Enterprisers, when he decided to link up with Wal-Mart (WMT) at the end of last year in preference to Britain’s Tesco. Mittal switched from Tesco because he hoped to move ahead faster with Wal-Mart, chasing Reliance Retail - part of one of India’s biggest groups that is headed by Mukesh Ambani. Reliance has now opened about 230 smallish neighborhood supermarkets and plans to open more than 30 hypermarkets by next March and 500 by 2010, so the Wal-Mart/Bharti combine has no chance of catching up this decade, if at all.

Wal-Mart does not seem unduly worried. Raj Jain, its president for emerging markets who has just been appointed to head the India operations, told me earlier this week that it would grow in India with a “hockey stick curve” - slow at first and then accelerating. On August 6, it announced that it had formally signed its joint venture agreement with Bharti to develop wholesale cash-and-carry stores but - and here came the signal of going slow - these stores would not open until the end of next year and there would only be 10 to 15 in the following six years.

I chided Jain over the speed, saying 10 or 15 stores was minuscule over so many years for the world’s largest retailer, and was much slower than had seemed likely when the initial MOU was signed with Bharti last November. Replying, he produced his hockey stick curve and said there “could be three times as many” outlets in that period, once they’ve gotten the first ones right. He could have added, I suppose, that at least he will be ahead of Tesco and France’s Carrefour, which have backed off until the potential for opening up is clearer.

So why the go-slow? Jain listed three reasons (though he didn’t like the word slow). First, of course, there is India’s current regulatory regime that bans Wal-Mart from retailing, but allows it to do wholesale activities and advise Bharti on retail stores planned for opening early next year. The chances of that ban being relaxed have reduced significantly since last year, and there is no discernible chance of it being removed before India’s next general election that is due by 2009.

Next is the current state of India’s escalating real estate market, with record prices being achieved in all areas, including the sort of shopping sites that Reliance and others are taking and that Wal-Mart and Bharti will want. Jain believes (probably over-optimistically) that current “prohibitive” prices will “have to correct and stabilize in the next two to three years”. He said they will “wait and see, rather than rush in”, adding that real estate developers are only now learning what retailers need. Until now, he said, many had unrealistically assumed that they only had to build a mall and wait for it to fill up.

Third, India currently has few established supply chains, and few cold stores or refrigerated vehicles to preserve produce on its way to market. Farmers and small manufacturers are not geared up to supply stores, and there are few food processing companies. All that has to be developed.

In addition of course, there have been the street protests against Wal-Mart and Reliance. (Other expanding retail chains with less emotive names such as Pantaloon’s Food Bazaar, Spencers, Birla’s Trinethra, and Subhiksha seem to generate less heat). Jain says the opposition, led by traders and other middle-men, is cashing in on a “lack of understanding” among owners of small mom-and-pop shops (called kirana stores in India) because Wal-Mart will be offering better quality and lower prices than are available now. “Any change will always require a certain reaction,” he says.

Yesterday, the reaction was evident when several hundred protesters staged demonstrations in Delhi and elsewhere, burning effigies of demons whose heads carried the names of international retail groups. The demonstrations were far smaller than the organizers had hoped - but that is not surprising, given that Wal-Mart is being so inactive. Wal-Mart is focusing far more on China, where Jain was working. Here in India, it looks to me as if it has no intention of speeding up the hockey stick curve until the regulatory regime allows it to open retail stores. I wonder if Sunil Mittal is wishing he’d stayed with Tesco.

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Wal-Mart’s India plans draw protests

United Press International
Aug. 10, 2007                                  [back to top]

NEW DELHI, Aug. 10 (UPI) -- Wal-Mart’s signing of a joint venture brings it closer to making its entry into India, but the world’s largest retailer faces resistance from protesters.

The joint venture signed this week with Bharti Enterprises, a large Indian cell phone company, calls for setting up 15 large wholesale outlets in the next seven years. However, The International Herald Tribune says the backdoor approach to grow its international presence drew protests Thursday against Wal-Mart.

The consumers -- who cannot shop directly from the outlets under Indian rules that bar foreign retailers from selling directly to them -- fear the giant retailer’s presence would drive out small retail outlets on which much of the country depends, and throw millions out of work.

The protests drew attention to the efforts of other global retailers, who want a share of the India market valued at $350 billion.

One activist told the newspaper the traditional Indian small-scale retail operations -- such as cart-drawn vendors -- are environmentally more efficient than the international operations because they use no fossil fuels, produce zero emissions and bring products directly to the consumer.

Wal-Mart officials have said they plan to buy more India-made goods and locally-grown items to help small manufacturers and farmers.

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Wal-Mart Uses Chicken Feet, Spam to Spur Sales Abroad

By Lauren Coleman-Lochner
Bloomberg                                                [back to top]

Aug. 10 (Bloomberg) -- For Wal-Mart Stores Inc., the road to a higher share price is paved with chicken feet and Spam.

The world's largest retailer, long the biggest importer of goods into the U.S., last year joined a list of the top 100 U.S. exporters for the first time. It sent 39 percent more shipping containers overseas than General Motors Corp., and surpassed cigarette maker Altria Group Inc.

Although only a fraction of the $18 billion in goods it bought from China alone in 2005, exports will increase further as Wal-Mart targets a third of its sales growth from abroad amid the slowest gains at U.S. stores in at least 27 years.

International sales will expand to 30 percent of Wal-Mart's total in 2010, up from 22 percent last year, estimates Citigroup Inc. analyst Deborah Weinswig.

International markets ``could be like a savior for Wal- Mart,'' said David Abella, an analyst at Rochdale Investment Management in New York, with $2.4 billion in assets including Wal-Mart shares.

The expansion may help end the seven-year stock slump for Bentonville, Arkansas-based Wal-Mart. The shares will rise 29 percent in the next 12 months, says Weinswig. She is top-ranked by Institutional Investor and rates the stock ``buy.''

Falling Shares

Since reaching a record $69.44 in December 1999, the per- share price has dropped by a third. Wal-Mart will report quarterly financial results Aug. 14.

Shares of Wal-Mart fell 38 cents to $46.07 at 4:01 p.m. in New York Stock Exchange composite trading. They are little changed this year.

Shareholders have yet to credit Wal-Mart for its overseas growth, Abella said.

``Retail investors don't yet know how to view international operations,'' he said.

Wal-Mart has set a goal of attaining a third of its profit growth from outside the U.S. along with its aim to get a third of its sales gains from abroad. It exceeded the latter goal last year, with international accounting for half of sales gains.

To fill Wal-Mart shelves overseas, three ships a week leave the docks of Seaboard Marine in Miami, pointing toward Central America, said Jose Perez-Jones, senior vice president of the Miami-based shipping company. They contain products from 35 states and Puerto Rico, Wal-Mart spokesman Kevin Gardner said.

Labor groups and politicians blame Wal-Mart for hastening the demise of American manufacturing jobs as it purchased low- priced toys, electronics and clothing from Asia and Latin America. It brought in 715,000 standard shipping containers last year, holding its perennial spot as the top importer, the Journal of Commerce says.

38th Place

As an exporter, Wal-Mart ranked 38th, sending 26,200 containers, surpassing 25,100 for Altria and 18,800 for GM, says the Journal of Commerce.

This year Wal-Mart will ship $2 million of shopping carts made by Wagoner, Oklahoma-based Unarco Inc. to its Central American stores, up from none two years ago.

Sales to Wal-Mart's international stores are ``just getting warmed up,'' said Taft O'Quin, president of closely held Unarco.

Wal-Mart's first foray outside the U.S. was in 1991, with the purchase of two Mexico City stores. As of July, 42 percent of the company's 7,022 stores were international, including a stake in 101 Trust-Mart stores in China.

Soup to Cotton

Wal-Mart sends soup, shelving, packaged goods and perishables like beef to stores, as well as commodities such as cotton to provide the material for items made overseas and sold in the U.S.

``We have much more robust growth overseas,'' said Sarah Thorn, director of international trade, who said the company directly shipped $671 million of goods to stores outside the U.S. in 2006.

The export figure based on containers is understated because it only counts cargo where Wal-Mart is the shipper of record, excluding goods sent by manufacturers under their name to Wal-Mart stores, said Perez-Jones.

``They will probably triple or quadruple that because of all the stores that are opening up,'' he said. Next year, a majority of the more than 500 new stores Wal-Mart plans to open will be outside of the U.S., the company said.

Exporting Brands

Wal-Mart sends such iconic American brands as chocolate kisses from Pennsylvania-based Hershey Co., and Head & Shoulders shampoo from Procter & Gamble Co. of Cincinnati. It ships Spam from Hormel Foods Corp. in Austin, Minnesota. Spam's 70-year history includes a role as humanitarian aid during World War II.

U.S. sales at Wal-Mart locations open at least a year, a key retail gauge because it excludes recently opened or closed stores, rose 2.1 percent in the year through January, the slowest growth since the company began tracking the data in 1980.

Total international sales jumped 30 percent. They have surged 15-fold in the past decade, to $77.1 billion.

``Their best opportunities are overseas,'' said Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, with $77 billion in assets including Wal-Mart shares.

Responding to local tastes and customs is key. Wal-Mart scrapped greeters in German stores following complaints from shoppers. After struggling to compete with merchants such as Aldi Group, Wal-Mart spent $863 million to exit Germany last year, causing its first profit decline in more than a decade.

Savannah Customer

At the port of Savannah, Georgia, Wal-Mart is probably the largest customer, spokesman Robert Morris said. Its exports include chicken feet sent to supermarkets in China, Morris said, where they are considered a delicacy.

U.S. companies shipped $1 trillion of goods abroad last year, according to the Census Bureau. Mainland China, with a population of 1.3 billion, ranked as the fourth-largest market, with $55.2 billion, behind Canada, Mexico and Japan.

Chinese consumers ``are acquiring a taste for and knowledge of American products,'' said Henry Levine, senior vice president at Stonebridge International LLC, a Washington consulting firm.

Perez-Jones can attest to that as he watches the shopping carts make their way overseas along with underwear from North Carolina-based Hanesbrands Inc., Ocean Spray cranberry juice from New England and soups from Camden, New Jersey-based Campbell Soup Co.

``Wal-Mart sells everything,'' Perez-Jones said. ``You name it, they ship it.''

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Meijer Eliminates 500 Jobs

Associated Press
08.10.07                                        [back to top]

GRAND RAPIDS, Mich. - Retail giant Meijer Inc. has eliminated 500 managerial jobs as part of a restructuring of its supercenters.

Spokeswoman Stacie Behler said Friday that 500 managers were given severance packages, while others were relocated to other Meijer stores and assigned different positions.

Meijer announced three weeks ago that it was restructuring how its 180 Midwest stores operate and serve customers. The process was completed within the past week, Behler said.

The number of jobs eliminated at each supercenter in Michigan, Ohio, Indiana, Illinois and Kentucky were about the same, she said.

Company officials interviewed 4,200 managers at its supercenters across the Midwest, the Grand Rapids Press reported Friday.

Behler said Meijer recognized it didn't need as many managers after reviewing the size and volumes of each supercenter.

The Grand Rapids-based retailer has about 65,000 employees, including 8,000 in West Michigan. Corporate and hourly workers were not affected by the restructuring.

Behler said Meijer wanted the right people in certain roles as it competes in the retail market, primarily with Wal-Mart Stores Inc. (nyse: WMT - news - people ) Wal-Mart is building supercenters throughout the Midwest.

Copyright 2007 Associated Press. All rights reserved.

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Global retailers watch Wal-Mart's entry into India

Reuters
August 09, 2007                          [back to top]

Mumbai: Wal-Mart Stores Inc's final entry into India after a long delay may fuel intense opposition to foreign retailers, forcing the government to move even more cautiously and slowing the ambitions of other incomers.

Protests against Wal-Mart and even newly-opened stores by India's Reliance Industries Ltd. are a lightning rod for Indians fearful of modern corporate retail and its impact on family-run stores, as well as for politicians with an eye on national elections in 2009.

And they have given foreign retailers who want a bite at India's $350 billion retail pie pause for thought.

Foreign companies entering the Indian market have struggled with a restrictive investment policy which limits their ownership in certain sectors like retail, banking and aviation.

Even before Monday's Wal-Mart deal with Bharti Enterprises was announced, protests were planned by hawkers, farmers and trade unions against the "back-door entry of Wal-Mart", a campaign they say is modelled on the "Quit India" call against the British.

"India is too big a market to ignore, so I expect continued and increased interest from foreign retailers, but I do not expect the floodgates to open," said Manoj Ladwa, chief executive of MLS Chase Solicitors in London.

"What foreign retailers need is for the government to set out a clear process towards further liberalisation. It's not so much the pace, as the direction that needs to be properly defined."

Wal-Mart and Bharti Enterprises said on Monday they would form an equal joint venture for cash-and-carry, or wholesale, and back-end supply chain management, more than eight months after Bharti first said it would partner the world's biggest retailer.

Wal-Mart, which plans to significantly step up its sourcing of locally-made goods, stressed the venture's investments in the supply-chain will benefit farmers and small manufacturers.

But Carrefour and Tesco have shelved their plans until there is greater clarity on policy, and Wal-Mart's entry is not going to convince them to rush in now.

"They are probably waiting to see how Wal-Mart does, how it handles the opposition, and for some of that to die down," said said Umesh Madhavan, an analyst at Euromonitor in Singapore.

"The opposition is not going to die soon as it's become a big political issue. In fact, there's more opposition now, and I don't see rules being relaxed at least for another couple of years, with national elections coming up," he said.

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For Wal-Mart, the future is India

Posted By: Edward M. Gomez 
August 08 2007                                    [back to top]

Will friendly, paunchy "greeters" chirping, "Have a nice day!", and handing out smiley-face stickers to arriving customers be the newest addition to the cultural-commercial landscape of one of the world's oldest civilizations?

Wal-Mart is coming to India.

The world's largest, most influential retailer has just inked a joint-venture deal with India's Bharti Enterpises to create a cash-and-carry wholesale operation that will serve big retailers, such as hotels, restaurants and offices. "In the next seven years, 10 [to] 15 wholesale facilities are expected to be opened. Each...facility [will] be spread over an area of 50,000-100,000 square feet." They will "sell vegetables, groceries, fruits, staples, footwear, stationery, clothing, consumer durables and other products...." (Press Trust of India in the Hindu; see also the Hindustan Times)

India's economy is booming, and its eager-to-shop middle class is growing. With these trends in mind, Wal-Mart and Bharti intend to inaugurate services in the not-too-distant future aimed at retail customers after their wholesale operation is well established.

A senior Wal-Mart corporate official said: "Through our wholesale cash-and-carry joint venture, we will help drive efficiencies across the supply chain and work towards the betterment of India's farmers, small manufacturers and retailers, in line with our global vision of saving people money so they can live better...." (Indo-Asian News Service in the Economic Times, India)

However, over time, as Wal-Mart digs into India's wholesale and retail sectors, could the corporate giant end up crushing smaller players at the regional and national levels?

For now, "Wal-Mart will have to wait for some time before the Indian government is able to change it[s] law that presently does not allow foreign, multi-brand retail stores to set up shop, as they are seen as a threat to the small, neighborhood retailers that dot the country's retail scene and give employment to tens of thousands." But the Indian market is enticing to big, foreign companies. Current research data show that India's retail sector "is expected to be worth $427 billion by 2010" (up from its current $328 billion value). Thus, it's no surprise that global retailers like Britain's Tesco and France's Carrefour "have also expressed their desire to enter India's booming retail industry...." For now, though, they "are being stopped from doing so due to the country's stringent foreign-investment restrictions...." Those rules don't apply to the wholesale sector, however - offering the loophole through which Wal-Mart has jumped in order to set up its joint venture and get its foothold in India. (Indo-Asian News Service in the Economic Times)

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Wal-Mart sees no political opposition in India venture

The Hindu Business Line                                     [back to top]

NEW DELHI: Global retailer Wal-Mart, whose India entry has been mired into controversy, on Wednesday said that it does not see any "political opposition'' as the company has been educating customers, bureaucracy and political parties. "On our entry (int o India) concerns were raised and we have been constantly trying to educate customers, bureaucracy and political parties that Wal-Mart is engaged only in the back-end operations where 100 per cent FDI is allowed,'' Wal-Mart India chief Raj Jain told PTI.

Mr Jain also sought to allay apprehensions about opposition from the political class, with even UPA Chairperson Sonia Gandhi writing to Prime Minister Manmohan Singh over concerns raised in various quarters at the time of announcement of Wal-Mart's India plans.

"My experience with India has been (that) irrespective of the party in government reforms have continued. And we are absolutely within the realms of existing law of the land.'' Asked if it was a big challenge for Wal-Mart to convince that the company wa s not circumventing any law to enter the retail business, Mr Jain said, "people are not willing to see beyond the obvious... so it is a big challenge''. He said law in India was very clear and so was its deal and joint venture with Bharti Enterprises. " We are not retailing. We are only in supply chain and business-to-business wholesale operations catering to small kirana stores, business owners and restaurants among others.''

Wal-Mart has entered into agreement with Bharti for a 50:50 joint venture to start cash and carry operations. The US firm will also provide technical assistance to Bharti for its retail venture. Bharti Wal-Mart Pvt Ltd, the joint venture, plans to open u p to 15 wholesale stores in big cities in next 5-7 years and will expand later. - PTI

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Wal-Mart To Face Class-Action Lawsuit In South Carolina

Namnews
Wednesday 8th August 2007                           [back to top]

Wal-Mart must face a class-action lawsuit by its employees in South Carolina who claim that the retailer forced them to work through breaks and off the clock. A judge in Walterboro, S.C., said that current and former hourly workers from July 31, 1999 can sue the retailer in a single case. He added that the group of about 100,000 workers is large enough and their claims are similar enough to allow a class action.

Wal-Mart currently faces over 70 US suits by employees claiming it failed to pay for all hours worked. This decision is the fourth since May which has allowed the lawsuit a class-action status. The class-action status allows all the workers' claims to be decided in one case, increasing pressure on Wal-Mart to settle, and lets workers who couldn't afford to sue individually, get a share in any payment for damages. The workers have said they will ask the judge for a trial in 2008.

Wal-Mart said it may appeal the ruling, and is currently “reviewing our options”. It pointed out that “Even more courts around the country have found that cases like this are not properly suited for class treatment". However, it said that it could not give details on how many cases have been denied class status as the suits are in different stages of litigation.

Since December 2005, juries in Pennsylvania and California have awarded Wal-Mart workers a total of $251m in pay and damages over the same claims.

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Wal-Mart Inks Deal To Enter India

Ruth David,
Market Scan
08.07.07                                     [back to top]

MUMBAI - Wal-Mart on Monday announced a long-planned venture to jointly build wholesale outlets in India and a nationwide supply chain with local partner Bharti Enterprises.

The Bentonville, Ark.-based retail giant’s attempt to enter India’s highly protected retail sector has sparked howls of protest from leftist politicians and small-scale retailers, who fear the impact of competition on the country’s 12 million mom and pop shops, which hold 97% of the market.

The companies are establishing a joint venture called Bharti Wal-Mart that will open a chain of wholesale cash-and-carry outlets to supply Indian retailers, in line with government regulations, Bharti said in a statement.

The world’s largest retailer will also give back-end support to a chain of retail stores that Bharti will set up through a subsidiary, Bharti Retail.

The companies signed an initial agreement in November that has received plenty of political scrutiny.

Single-brand retailers are only allowed to own up to 51% of Indian companies; multi-brand retailers like Wal-Mart are barred from opening their own stores in the country.

Bharti Wal-Mart’s first wholesale cash-and-carry store is likely to open by the end of next year. Over the next seven years, the venture is expected to open 10 to 15 such stores and employ about 5,000 people.

The wholesale outlets will be 50,000 to 100,000 square feet in size, and sell groceries, fresh produce, stationery, footwear, clothing, consumer durable goods and other general merchandise, Wal-Mart said.

Bharti had earlier said it would spend $2.5 billion over the next eight years to set up supermarkets, hypermarkets and small retail chains in cities with a population of over a million.

Wal-Mart’s global expertise in logistics will improve retail efficiencies in India, said Bharti CEO Sunil Mittal. Around a third of India’s agricultural produce goes to waste every year because of the lack of proper storage and sourcing networks across the country.

Wal-Mart’s international success is based on local sourcing, and it will follow the same pattern in its wholesale venture, said Raj Jain, country president for Wal-Mart’s India operations. It sourced goods worth $600 million from Indian suppliers last year.

The companies didn’t disclose the financial details of the venture. Bharti also has a joint venture, FieldFresh, with a unit of British finance group Rothschild to export fresh produce.

India’s retail market, estimated to be worth about $300 billion a year, is growing at about 20% annually, and Wal-Mart has a first-mover advantage among the foreign retailers eyeing the country. Carrefour and Tesco (nasdaq: TESO - news - people ) were in talks with Indian businesses, but concerns over government restrictions remain.

But foreign competition isn’t all Wal-Mart has to worry about. Indian giants like Reliance Industries, the Tatas and the country’s largest retailer, Pantaloon, are also aggressively expanding their chains across cities, and they have the advantage of brand recognition in India.

A group of small shopkeepers, traders and unions called the Movement to Save Trade Livelihoods said it would hold nationwide protests against the deal Thursday. They accused Wal-Mart and Bharti of circumventing existing laws to enable the U.S. company’s “backdoor entry,” saying retail chains would deprive millions of small-scale business owners of their livelihoods.

Wal-Mart (nyse: WMT - news - people ) garners 20% of its annual sales from overseas markets, but after abandoning operations in Germany and South Korea, the company could use another overseas success story. India is the largest market it has entered in around a decade. (See: “ A Whole New Wal-Mart”).

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Wal-Mart, Bharti launch India joint venture

AFP
8/7/2007                                    [back to top]

NEW DELHI • Indian telecom firm Bharti Enterprises and US-based retail giant Wal-Mart yesterday announced a 50:50 joint venture for a new chain of wholesale stores in India to serve small retail shops.

The “partnership of equals” would be named Bharti, Wal-Mart Private Ltd, said Rajan Bharti Mittal, managing director of Bharti Retail.

“We have signed the joint venture which will be a cash and carry to serve small retailers,” Mittal told a press conference in New Delhi.

Eight to 15 initial stores are planned, said Raj Jain, the country president for Wal-Mart operations in India.

He said the first store would be open by late 2008 or early 2009. Germany’s Metro AG already operates several wholesale stores aimed at small retailers in India, including in the southern high-tech hub of Bangalore.

The stores are not open to retail shoppers.

India does not allow foreign investment in the retail sector except for single-brand stores such as Nokia or Nike and foreign groups including Wal-Mart have to sign franchise deals with local companies to enter the market.

Key communist allies of the Congress party-led coalition government object to major overseas retailers entering India, saying it would wipe out millions of mom-and-pop shops across the country.

A rapidly-growing affluent middle class estimated to make up as much as a third of India’s 1.1 billion population spends an estimated $300bn annually on shopping.

That figure is expected to double by 2015, according to consultants PriceWaterhouseCoopers.

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INTERVIEW - Wal-Mart sees surge in India sourcing

By Unni Krishnan
Reuters
Tue Aug 7, 2007                                  [back to top] 

NEW DELHI (Reuters) - Sourcing of products from India by Wal-Mart Stores Inc. could rise to billions of dollars annually in coming years once the U.S. retailer starts operations there, the firm's country president said on Tuesday.

Wal-Mart and Bharti Enterprises announced an equal joint venture on Monday for cash-and-carry, or wholesale, and back-end supply chain management. The tie up is scheduled to open its first store in north India by the end of 2008.

"Today Wal-Mart is sourcing over $600 million of products from India directly ... in very few items, limited to textiles, footwear and jewellery," country president for Wal-Mart's India operations, Raj Jain, told Reuters in an interview.

"My own view is over a period of time this will not grow in 10-15 or 20 percent but probably grow in multiples of three or four or five once we have a good relationship and understanding of the supply business."

India's retail industry, valued at nearly $350 billion, is forecast to double in size by 2015, with modern retail's share of that also quickly increasing from about 3 percent now.

But multiple-brand retailers like Wal-Mart are limited to wholesale and franchise deals. Single-brand foreign retailers can take up to 51 percent in a joint venture with a local firm.

Jain said Wal-Mart is keen to enter the retail sector once foreign investment is permitted.

"Are we interested in getting into retailing when the law permits? Absolutely."

ANGER OVER JOBS

Opening up India's fragmented retail industry, which is dominated by family-run shops, has triggered opposition from some political parties and small shop owners, who fear massive job losses.

In May, hundreds of street vendors armed with iron rods and sticks attacked three food marts, owned by Reliance Industries Ltd., one of India's biggest private conglomerates, blaming Reliance for taking away their customers.

More protests against the arrival of big corporations are planned for this week.

The communist party, which props up the ruling coalition, has urged the government to establish a licensing system for retail chains and to prevent the entry of foreign players like Wal-Mart.

"I think a lot of Indian customers are ready for organised retail," said Jain. "I think the real issue is making the other constituent understand, which may be the existing retailer, the wholesaler, the government bodies ... as to how it will benefit the organisation of wholesaling and retail."

India's retail sector is forecast to more than double in size by 2015.

Bharti Wal-Mart will open 10 to 15 cash-and-carry facilities over seven years, employing about 5,000 people. A typical store should occupy 50,000-100,000 sq. ft., dwarfing the average Indian store of about 200 sq. ft.

"I think India is going to be a very important part of global strategy for the next 50 years and our perspective on India is in that time frame," Jain said.

© Reuters 2007. All rights reserved.

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Wal-Mart reveals Indian wholesale plans

Sanjay Jha and
Randeep Ramesh
Guardian
Tuesday August 7, 2007                                  [back to top]

Wal-Mart, the world's largest retailer, yesterday gave a vote of confidence in the booming Indian economy with plans to introduce a network of cash-and-carry superstores across the country. The venture, with Indian conglomerate Bharti, will see 10 to 15 wholesale stores in the next seven years beginning in 2008. The companies will each have an equal stake in the venture, which will be branded Bharti Wal-Mart and will employ at least 5,000 people.

Rather than targeting Delhi, Kolkata, Mumbai or Chennai - India's four main cities - the joint venture is placing its bets on fast-growing smaller urban centres.

"India has 12 million pop-and-mom stores and less than 1 million are catered for at the moment," said Raj Jain, India country president of Wal-Mart.

A company spokesman denied the venture would end up like Sam's Club, a successful US wholesale exercise by Wal-Mart that became virtually a retail operation.

No foreign direct investment is allowed in the retail sector, except for single-brand stores such as Nike. By entering the wholesale market, Wal-Mart will gain a foothold ahead of its many competitors should the government allow foreign retailers to expand. But it is years behind German retailer Metro, which has a presence in five Indian states and last month offered to spend 6.5bn rupees (£82m) on a wholesale operation in north India.

"The wholesale model is poised for big success in India," said Arvind Singhal of KSA Technopack, a retail consultancy. Mr Singhal said sales through store chains were projected to increase eightfold to £49bn in five years.

Bharti, which owns India's largest mobile phone network and has a farm business, has the reach and distribution but not the technical know-how to run a large retail business.

"I think by improving the cold-chain technology and getting the logistics right, Wal-Mart could help India become an agribusiness exporter," Mr Singhal said.

Guardian Unlimited © Guardian News and Media Limited 2007

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Wal-Mart taps into booming Indian market

RAJESH MAHAPATRA
Associated Press
August 7, 2007                                        [back to top]

NEW DELHI -- Wal-Mart Stores Inc. and India's Bharti Enterprises signed a deal yesterday to jointly build wholesale outlets that will buy goods from farmers and small manufacturers and sell to retailers through a nationwide supply chain.

The deal may help the U.S. company eventually gain a foothold in India's booming, but much protected, retail business, which is currently dominated by an estimated 12 million mom and pop shops.

Indian laws do not allow multibrand foreign retailers to sell directly to consumers, but they can run wholesale operations and provide back-end support to Indian retailers. Indian companies are also allowed to operate stores selling foreign brands under franchise from their producers.

Bentonville, Ark.-based Wal-Mart and Bharti Enterprises appeared to have worked around these rules, hoping to get the U.S. retail giant an entry into the massive Indian market.

The companies signed two separate agreements, which Bharti's managing director Rajan B. Mittal said conform to existing rules and regulations.

Under the first agreement, the two companies will set up "a 50-50 venture for wholesale cash-and-carry and backend supply chain management operation in India," a statement said.

The joint venture "will help drive efficiencies across the supply chain and work toward the betterment of India's farmers, manufacturers and retailers," Wal-Mart vice-chairman Mike Duke said in the statement.

A separate franchise agreement signed yesterday would allow Wal-Mart to share its technology and expertise with a chain of retail stores that Bharti plans to build through its fully owned subsidiary, Bharti Retail Ltd. It is not yet clear if Bharti's retail chain would be able to display the Wal-Mart brand.

The deal faces political opposition and scrutiny from the government.

Wal-Mart is not the only company eyeing India's retail market, which is estimated to be worth more than $250-billion and growing at 20 per cent each year.

Global retailers like Carrefour SA of France, Tesco PLC of Britain and Metro AG of Germany have lobbied the Indian government to liberalize retail trade. Opposition from powerful leftist allies has, however, prevented the Indian government from allowing foreign retailers to open their own stores here.

Over the next seven years, the Wal-Mart-Bharti venture is expected to open 10 to 15 such facilities and employ about 5,000 people. Both companies declined to comment on financial details.

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Residents appeal approval of Plaza Collina

By Robert Sargent,
Orlando Sentinel
August 7th, 2007                                [back to top]

Group also opposes county planners' decision to let developers change proposal

Angry residents are fighting Lake County's approval of the controversial Plaza Collina shopping center.

Nine residents have filed an appeal arguing that master site plans for the massive commercial project on State Road 50 near the Orange County line have changed from the concept that Lake commissioners originally approved more than a year ago.

They also say that county planners, who approved those site plans July 2, did not adequately account for extra traffic and other impacts created by the changes.

The complaint will go before Lake's Board of Adjustment on Sept. 13, when residents hope to get the county's latter approval overturned. In a separate effort, the state Department of Community Affairs has agreed to county commissioners' recent request to look at changes to Plaza Collina. Commissioners approved Plaza Collina in January 2006 as an upscale development with stores, offices and residential units along nearly a mile of S.R. 50. Officials in Clermont and Oakland have complained about potential impacts to the fast-growing area. Then many residents joined the dispute when partners Phoenicia Development and The Goodman Co. floated plans by the county to create a mostly commercial layout of 988,000 square feet of buildings anchored by a 207,000-square-foot Wal-Mart Supercenter.

Rich Dunkel, who is among the nine residents who filed the appeal, said he fears how the dense development will impact County Road 50 -- also known as Old Highway 50 -- and south Lake's recreational trail, which cuts across the northern border of the 142-acre Plaza Collina site. Dunkel said he does not like the way Lake County approves developments at public meetings and then allows county planning staff to give the final green light without much public oversight.

"I don't think they're representing us well," Dunkel said about the county Department of Growth Management. "Board approval is given on a DRI [Development of Regional Impact], and then the details are worked out behind closed doors with the planning staff."

The appeal before the Board of Adjustment argues that Plaza Collina improperly changed from what was originally approved as a mixed-use development of retail, homes and offices to mostly retail.

"Plaza Collina is no longer a mixed-use development; rather, it is one large shopping center or retail development," according to the appeal.

The appeal also argues that the addition of a Wal-Mart will have round-the-clock impacts on traffic and surrounding developments -- something county commissioners did not consider when they approved the project last year. Residents say commissioners should get another chance to review the project.

"Lake County must require that Plaza Collina return to the County for a Notice of Proposed Change in order to evaluate these changes," according to the appeal.

The residents say a Wal-Mart would exceed some traffic impacts that Lake County allowed for Plaza Collina. They also say three traffic signals proposed along S.R. 50 are too close together and the Wal-Mart does not have enough space for trucks.

Growth Management Director Carol Stricklin said even though developers of Plaza Collina have talked about plans to include a Wal-Mart Supercenter, they have not submitted formal plans for the large store. Sections of the large development must still come back for further review.

The developers had negotiated for a 16-screen movie theater, but those plans fell through. Plaza Collina could have about 17 outparcels along S.R. 50.

Past plans submitted to the county showed a nearly 12,000-square-foot ABC Fine Wine and Spirits store and a 37,000-square-foot Rooms to Go outlet, although those business names have since been removed. Developers have yet to officially confirm any tenants.

Following planning-staff approval, county commissioners voted July 10 to ask the state Department of Community Affairs to look at Plaza Collina and to decide whether plans are substantially different from what the county had approved last year. The county also has suspended preliminary land grading around the northern portion of the project where the trail cuts through.

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Wal-Mart Hires Bush Health Official

Associated Press
08.07.07                                                 [back to top]

BENTONVILLE, Ark. - Wal-Mart Stores Inc. has hired Assistant U.S. Health Secretary John Agwunobi for the company's health and wellness business unit, the company said Tuesday.

Agwunobi, beginning Sept. 4, will be a Wal-Mart (nyse: WMT - news - people ) senior vice president and president of the company's professional services division.

Wal-Mart is to open as many as 400 in-store health clinics in the next three years and may open as many as 2,000 within seven years. Agwunobi's duties will include overseeing those clinics.

"John is the country's expert on public health, and I look forward to his contributions in furthering Wal-Mart's health and wellness efforts," Wal-Mart Chief Operating Officer Bill Simon said in a news release.

"He will bring new perspective, diverse talents and tremendous expertise to our company in his new role," Simon said.

Agwunobi, a pediatrician, said, "Wal-Mart touches many lives in many communities and this position provides me with a new opportunity to reach people in the places where they live, work and shop."

As assistant health secretary, Agwunobi oversaw preventative health efforts.

Before his federal post, Agwunobi was state health officer and secretary of health in Florida.

Copyright 2007 Associated Press. All rights reserved.

Retail Trade Group Spent $200K Lobbying

Associated Press
08.07.07                                                        [back to top]

WASHINGTON - The Retail Industry Leaders Association, which counts Wal-Mart Stores Inc. as a member, spent $200,000 in first half of 2007 to lobby the federal government, according to a disclosure form.

The Arlington, Va.-based group, which represents retailers, suppliers and manufacturers, lobbied on numerous issues, including energy efficiency, immigration, trade and others, according to the form posted online Thursday by the Senate's public records office.

In addition to Congress, the group - whose 250 member companies also includes Procter & Gamble Co. and Cisco Systems Inc. - lobbied the Treasury, Commerce, Labor and Homeland Security departments and Federal Deposit Insurance Commission.

Stephanie Lester, former staff member of the House Ways and Means trade subcommittee, Faith Cristol, who served as legislative counsel to Sen. Jim Talent, R-Mo., and Allen Thompson, former House Homeland Security Committee staff member, are among those registered to lobby for the trade group.

Under a federal law enacted in 1995, lobbyists are required to disclose activities that could influence members of the executive and legislative branches. They must register with Congress within 45 days of being hired or engaging in lobbying.

Copyright 2007 Associated Press. All rights reserved. 

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Wal-Mart, Bharti JV To Tap India Wholesale Market

By Nitin Luthra and
C.R. Jayachandran,
Dow Jones Newswires
August 6th, 2007                              [back to top]

NEW DELHI -(Dow Jones)- Bharti Enterprises Ltd. and Wal-Mart Stores Inc. (WMT) Monday signed a pact to create a joint venture marking the global retail giant's foray into India's fragmented wholesale market business.

Indian laws don't allow foreign multiple-brand retailers like Wal-Mart to sell directly to the end-consumer, but do allow them to run wholesale operations and provide back-end support to Indian retailers.

"This is very significant for Wal-Mart because it is the formal entry of Wal- Mart in India into the cash-and-carry (or wholesale) business," Raj Jain, country president for Wal-Mart operations in India said.

If and when foreign multi-brand retailing is permitted in India "then absolutely, we'd like to come to the front-end," he added.

The 50:50 joint venture, Bharti Wal-Mart Pvt. Ltd., is for cash-and-carry or wholesale, supplying goods to smaller retailers, manufacturers and farmers. It will also carry out back-end supply-chain management operations, the companies said in a joint statement.

Bharti Wal-Mart will also supply retailers like Bharti Retail, a unit of Bharti Enterprises that is setting up a separate wholly-owned chain of retail outlets in India.

Bharti said in February that its retail arm would invest $2.5 billion by 2015 to establish multi-format retail stores in India employing about 60,000 people.

Earlier Monday, another agreement was signed between Bharti Enterprises and Wal-Mart for Wal-Mart to provide technical support to Bharti Retail's yet-to-be named chain of retail stores.

"This venture promises to bring great value to millions of farmers, artisans, small manufacturers and retailers across India," Bharti Enterprises Chairman Sunil Bharti Mittal said in a statement.