Is The Bank of the WalMart Back?

Wal-Mart's decision prompts city to look elsewhere for economic boost

By Paula King
Contra Costa Times
02/29/2008                                                   [back to top]

OAKLEY -- Following the news that Wal-Mart had withdrawn its application for a Supercenter in Oakley, city officials announced this week that they are still actively pursuing commercial businesses and economic development. Due to the nation's poor economy and stagnant stock values, Wal-Mart has opted not to build Supercenters across the nation, including the proposed 24-hour Supercenter in Oakley's River Oaks Crossing commercial center on the north side of Main Street.

At the Oakley City Council meeting this week, city leaders stressed that the city has been working hard to lure businesses to the city for years and will continue that effort. Councilwoman Pat Anderson said that bringing businesses to Oakley has been a long process.

"We are actively pursuing lots of businesses. It is not a simple task to pick a business and they say 'OK,' " she said.

The task of attracting businesses is even harder in tough economic times, Anderson said. She added that the sales and property tax revenue from retail development funds many city services, including new parks and police services.

River Oaks was tentatively planned as a major commercial hub with 76 acres of businesses, including other big-box retailers, restaurants and retail shops. The Supercenter was also expected to bring more than 450 new jobs and $700,000 annually in sales tax revenue.

Another reason that Wal-Mart pulled out of its plans is because the property owner was requiring Wal-Mart to purchase all 77 acres of the commercial center land, although the mega retailer only needed 20 acres for its Supercenter. "This was a major strike against the project since Wal-Mart would have to initially front the cost of the entire site which tipped the scales to not be in the project's favor," Economic Development Director Barbara Mason said.

An additional strike against the city in retaining new businesses is that Brentwood and Antioch planned their commercial hubs on the borders of Oakley, Councilman Brad Nix said. According to Nix, Oakley's neighboring cities used the number of homes in Oakley to convince businesses like J.C. Penney Co. to locate along the Lone Tree Way corridor.

"It is economic warfare," he said.

Nix added that it is the retailer's choice whether to locate in Oakley, but the city keeps trying to bring them in. When the announcement was made last Friday, city officials vowed to aggressively proceed with River Oaks Crossing by luring other major retailers.

As the organizer of Save Oakley Now, Bob Caughron urged the city to pursue smart growth now that Wal-Mart has revoked its application. Save Oakley Now is a grassroots organization that gathered about 2,000 signatures for an anti-Wal-Mart petition.

"We are not going to go away. We want to work with you on this," Caughron said.

Fellow Save Oakley Now member Mark Gagliardi asked the city to promote local businesses and consider a big-box ordinance like other cities.

"Now that they have pulled out, I'm about moving forward," Gagliardi said.

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Wal-Mart Wins Appeal in Quebec Union Dispute

By Luis Millan
Lawyers Weekly
February 29, 2008                                          [back to top]

Quebec’s well-deserved reputation as having the most progressive labour laws on the continent has taken a hit after a recent Quebec Court of Appeal ruling determined that Wal-Mart Canada Corp. did not transgress the province’s Labour Code when it closed down a store shortly after employees became the first to earn union accreditation in North America.

In a unanimous ruling that overturned a decision by the Quebec Labour Relations Board, a provincial judicial body that oversees labour legislation, the appeal court stated that it is well established that an employer’s decision to close down its enterprise, “even if its motives behind its actions are socially debatable,” constitutes a just and sufficient cause to lay off its employees.

On February 2005, Wal-Mart closed down its store in the remote town of Jonquière on the day that an arbitrator was given a mandate to impose its first collective agreement. Nearly 80 complaints were then lodged by the laid-off employees before the board against the Wal-Mart, arguing that s. 15 of the Quebec’s Labour Code should come into effect, namely that the employer took reprisals against them because they exercised a right arising from the Labour Code.

On September 2005, after examining four of the complaints, the board concluded that three of the four complainants established a “presumption in their favour,” that is, that the sanction imposed upon them was taken because they exercised their rights, as per s. 17 of the Labour Code. Under s. 17 an employee must demonstrate that he was a salaried employee, that he was the object of a sanction and that he exercised a right under the Labour Code. If the employee passes the test, then the burden of proof is upon the employer to demonstrate that it resorted to the sanction or action against the employee for “good and sufficient reason.”

The commissioner ruled that Wal-Mart did not provide “good and sufficient reason” because it kept its options open to re-open store No. 3643, given the absence of an explanation over the future of the locale it rented for a period of 20 years.

“Wal-Mart did not satisfy the burden of proof to convince the Board that the closing of the establishment was definitive that can be considered as good and sufficient cause as required as per s. 17 of the Labour Code,” said the board. The board had still reserved its judgment regarding a remedy when its decision was appealed.

The ruling was upheld by Quebec Superior Court after it determined that the board did not commit a manifestly unreasonable error in the appreciation of the evidence given the criteria developed by jurisprudence.

But in a ruling that was applauded by business while denounced by labour, the Court of Appeal determined that the board erred in its interpretation of s. 17 of the Labour Code by imposing a burden of proof on the employer that the law does not demand.

While under s. 17 an employer must demonstrate, if it intends to “definitely close down its establishment,” that it has good and sufficient reason for its actions against employees, it does not have “the obligation to prove that the decision is not a subterfuge,” said Justice Paul-Arthur Gendreau in the eight-page ruling.

He added that it would be “unreasonable to oblige employers to demonstrate the absence” of a ruse that disguises its intentions of an eventual re-opening of its enterprise. On the contrary, it is up to employees to provide evidence that demonstrates that the employer’s contentions are false and hide ulterior motives, said Judge Gendreau.

As a result, the Quebec Court of Appeal granted Wal-Mart’s motion for a request for judicial review of the Commissioner’s ruling.

According to lawyers representing both parties, the ruling not only quashes the Commissioner’s judgment but also puts an end to the case – something that does not sit well with Bernard Philion, a Montreal lawyer who pled the case for Wal-Mart’s former employees.

“The court, from my understanding, is saying that employers will now have to only demonstrate that when they close down an establishment that it is definitive. They are under no obligation to prove that it is a subterfuge,” said Philion of the Montreal law firm Philion, Leblanc, Beaudry.

Philion is currently examining the possibility of requesting leave to the Supreme Court of Canada. He argues that the case also deals with an issue that the Court of Appeal did not examine, namely the right to freedom of association – an argument he plead before the board.

“The board, given that it came to the conclusion that the company did not prove that the closing of its store was definitive, felt it did not have to render judgment over the Charter of Rights argument,” said Philion. “It was therefore something that was not debated before Quebec Superior Court. It is our contention that since the Court of Appeal granted the motion for judicial review, the case should have been sent back to the board so that it can rule over the Charter of Rights argument.”

According to Richard Gaudreault, a partner with Heenan, Blaikie that successfully pleaded the case, the ruling thwarts a “canny argument” by labour that attempted to shift the burden of proof onto employers who close down their establishments to demonstrate that it is not a ploy.

“We maintained that when an employer definitively closes down his establishment, the good and sufficient reason for laying off the employees is that they no longer need their services,” said Gaudreault. “To compel an employer to provide evidence indicating the absence of subterfuge is almost impossible. It becomes an extremely onerous burden.”

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Wal-Mart loophole

By Ed Merz Hayes,
The Daily Press
February 26th, 2008                                 [back to top]

Reference "$6M tax loophole remains open," Feb.14: Thanks to Del. Timothy Hugo (R-Centerville) and his Republican-dominated subcommittee for helping Wal-Mart remain profitable. Because of the inaction of the subcommittee that he chairs, the Wal-Mart conglomerate retains the opportunity to pay rent to itself and write it off as an expense, thus avoiding a large tax payment to the state of Virginia. As noted in the article, Wal-Mart and other large companies have been astute enough to legally take advantage of this flaw in Virginia's and most other states' laws.

Unfortunately, as an infrequent shopper at Wal-Mart, I am unable to reap the benefits of the resulting lower prices passed along to the consumers, as touted by the Wal-Mart lobbyist, Kelly Hobbs.

I do have one question for Hobbs: Is it true that Wal-Mart has increased prices in stores in Vermont, New York and West Virginia to compensate for the additional corporate state tax it has to pay to those states since they have closed the loophole? Or, are they sharing in the $6 million cost-savings that Wal-Mart realizes in Virginia, thus helping keep everybody's prices low? If so, residents of those states owe us Virginians a hearty "thank you."

Six more states either have closed, or are in the process of closing, this tax loophole — six more states that can thank Virginia for the cost-savings their consumers reap along with the added corporate tax revenue in their state coffers.

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Stop the Wal-Mart Bank

Dear maria,                                     [back to top]

Last year, we won an important victory when Wal-Mart withdrew its application for an ILC (Industrial Loan Corporation) bank, which is a way for a non-banking company such as a retailer to operate a bank. Then, the mere idea of a Wal-Mart Bank provoked an unprecedented backlash. When the dust settled, the chances of a Wal-Mart Bank seemed like a remote possibility. Unfortunately, it isn't. The FDIC moratorium on corporate industrial bank charters has expired. Today, there is nothing keeping Wal-Mart from pursuing a special ILC bank that would operate with little government oversight and dangerously blur the line between commerce and banking. Commercially owned banks will have an incentive to steer credit away from competitors and towards favored clients. Additionally, if a commercial company that owns a bank fails, it may put the bank and FDIC insurance funds at risk.

Until the loophole allowing for ILCs is closed for good, corporations like Wal-Mart will continue to pose a threat to America's banking industry. Senator Chris Dodd has proposed a piece of legislation that will patch the defect in our banking policy, but the bill is bogged down in a partisan debate. Unless we all act now, the bill may not even make it to the floor for a vote.

We need your help in getting this vital legislation through the Senate. Write your Senators today and tell them to take a stand for sound banking policy. Together, we can keep Wal-Mart out of the American banking industry.

Stop the Wal-Mart Bank: Write a letter to your Senators today

Wal-Mart already has a history of unfair financial dealings. Last November, Wal-Mart de Mexico opened the first of a string of in-store Wal-Mart banks. Today, those branches prey on poor and under-served customers, offering predatory loans with outrageous 75% interest rates.

In America, Wal-Mart pushes credit cards that downplay absurd 25% APRs and pre-paid Visas chock-full of hidden fees. In 2006, while Wal-Mart pursued an American ILC, it went so far as to lie under oath while giving testimony to FDIC regulators.

Clearly, the facts speak for themselves. We can't allow an irresponsible corporation like Wal-Mart to threaten our nation's banking industry. Please, take action today—tell your Senators to take a stand for consumers and for responsible banking.

Write your Senators in support of Senator Dodd's bill

Don't forget to forward this message on to your friends and family. With your help, we can end Wal-Mart's banking ambitions for good.

Thanks for all that you do,

The Team
WakeUpWalMart.com

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Wal-Mart eyes productivity to offset China inflation

Reuters
February 25th, 2008                                 [back to top]

Wal-Mart Stores will use productivity improvements to help offset inflationary pressures in China, where it sources many of its products, Mike Duke, vice chairman of Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research), said on Monday.

Wal-Mart buys $9 billion in directly sourced products from China, but executives declined to give estimates for indirectly sourced products.

Duke, who oversees Wal-Mart's international operations, told reporters in Beijing that productivity improvements would help to counter inflation, which is running at the highest levels in 11 years.

"Some (product lines) might move to another country, but another thing moves to China," Duke said, adding that China was becoming an increasingly sophisticated manufacturer of high-tech goods.

"The consumer is under a lot of pressure," Duke said but added: "We are perfectly positioned for this time."

Wal-Mart last week unveiled strong growth in its operations in 15 countries outside the United States.

The company is increasingly turning to its international operations to impress investors as its U.S. business struggles with limited growth and flagging sales at its near-4,100 stores.

In China, Wal-Mart's full-year sales significantly outpaced French rival Carrefour (CARR.PA: Quote, Profile, Research), Duke said last week. (Reporting by Chris Buckley, editing by Ken Wills)

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Wal-Mart Says China Procurement Steady

By JOE McDONALD
02.25.08                                                [back to top]

BEIJING - Wal-Mart Stores Inc., a major buyer of Chinese-made shoes, toys and other goods, expects procurement in China to hold steady this year at about $9 billion despite a rising exchange rate and product safety concerns, the retailing giant's vice chairman said Monday.

Chinese suppliers have stayed competitive amid higher inflation and a rise in China's currency, the yuan, by improving efficiency and product quality, said Michael Duke.

"I wouldn't see any major variation" in procurement from the 2007 total of $9 billion, Duke told reporters. "China will continue to be a major production portion of direct purchases by Wal-Mart (nyse: WMT - news - people ) for a long time."

Duke's comments were a positive sign for Chinese exporters that have been squeezed by the yuan's rise against the U.S. dollar, which makes their goods more expensive in the United States. The yuan has risen by 16 percent against the dollar since July 2005, when Beijing ended a direct link between the currencies. Some exporters have been forced to close, while others are trying to switch to more competitive products.

Exporters also have been hurt by a surge in prices at home that propelled inflation in January to an 11-year high of 7.1 percent.

"There could be certain categories of products that may be decreasing from China, but there are other categories of products that are increasing from China," Duke said.

He declined to give a global total for Wal-Mart procurement or say what percentage is from China.

China's trade surplus with the United States in January shrank 6.7 percent to $12.1 billion as demand for Chinese goods weakened, according to government data reported last week.

Duke said Wal-Mart also is watching product quality closely in China.

Wal-Mart and another major toy retailer, Toys "R" Us Inc., announced last week they were tightening standards for lead allowed on paint for toys shipped to their stores. The companies are also phasing out chemicals found in PVC, or vinyl, that have raised safety concerns in products for infants and young children.

"We are pleased to see the focus and the priority" by Chinese suppliers on safety efforts, he said. "And we are happy to be helping both the government and our suppliers to produce safe, quality products."

Wal-Mart, based in Bentonville, Ark., also has been expanding retail sales rapidly in China, and opened 30 outlets last year, bringing its mainland total to 102.

Duke and Wal-Mart's president for China, Ed Chan, declined to give sales forecasts or the number of new stores that will open in 2008. But they said China sales were growing faster than the 18 percent rate for the rest of Wal-Mart's non-U.S. operations.

Duke said relations with the communist government are good despite a high-profile campaign to form unions at Wal-Mart stores and complaints by foreign business groups that Beijing is trying to support Chinese companies by hampering foreign investment in some industries.

"I believe we're being treated very fairly and we have very good relationships with both the government and nongovernment organizations," Duke said.

Chan said nearly all of Wal-Mart's outlets in China now have unions affiliated with the government-sanctioned All-China Federation of Trade Unions. The group, which launched its campaign to unionize Wal-Mart in early 2006, had accused its managers of trying to block its effort before the company agreed to cooperate in forming unions.

Wal-Mart has resisted efforts to organize unions at its stores in the United States.

Copyright 2008 Associated Press. All rights reserved. 

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Always low prices; Wal-Mart

By Staff, Economist
February 23rd, 2008                               [back to top]

As the American economy turns down, Wal-Mart is looking up

"WE know the economy will be a critical factor this year," said Lee Scott, the boss of Wal-Mart, as the world's biggest retailer released its quarterly results on February 19th. Wal-Mart's prospects do indeed reflect those of the economy at large—but not in the way you might expect. With America tipping towards recession, Wal-Mart is doing much better than in the past couple of years when the economy was booming. Sales increased by 8.3% compared with the same period last year, to a record $106.3 billion. Mr Scott concluded that in a volatile economy Wal-Mart was "well positioned to succeed".

The secret of Wal-Mart's meteoric rise over the past five decades has been its obsession with low prices. It got into trouble in 2005-07 when it focused less on "always low prices" (its longstanding motto) and more on expansion. Sales growth, productivity and profits fell, while Target and other upmarket rivals snatched market share. Wal-Mart, the biggest private employer, became a favourite public whipping boy because of its health-care, gender and labour policies. In February last year Mr Scott's job was said to be on the line.

"We used to be quite negative on the stock, because the company threw too much money at new stores," says Gregory Melich, a retail analyst at Morgan Stanley, an investment bank. Wal-Mart has over 7,100 stores worldwide and more than 4,000 in America. Last summer Mr Melich upgraded his verdict on Wal-Mart, because he saw a "big strategic shift": it reduced its capital expenditure to $14 billion for the fiscal year, from $18 billion the year before, slowing its expansion to spruce up existing shops instead. It opened far fewer new shops in January than in previous years.

The economic downturn is another boost for the recovery of the Bentonville behemoth, as cost-conscious consumers defect (or return) to the cheapest of the big retailers. Prices for oil and many foods are at record highs, but Wal-Mart can pass some inflation on to shoppers without losing its low-price leadership. And it is in the right line of business in hard times. Its biggest strength is grocery sales, which are not slowing down, and are unlikely to, since they are essential purchases.

Other retailers are in a far harder spot. Home Depot, America's number two retailer, is in its sixth quarter of falling sales. The home-improvement market has been badly hit by the subprime-mortgage meltdown. Fashion retailers are in trouble, since most people think they can put off buying clothes. Ann Taylor, a fashion retailer, says it will close 117 of its 921 stores over the next three years.

Even so, analysts predict that overall, retailing will escape a recession this year. They forecast 3% growth (excluding cars and petrol) compared with 4% last year. Retailers with international reach gain from the weak dollar. Wal-Mart's operations abroad, which represent one-quarter of sales, grew by 18.8% in the past three months. The American government's fiscal-stimulus package of up to $168 billion will give retailers an extra $15 billion or so, and Wal-Mart is likely to get the lion's share. In tune with the times, the firm with always low prices changed its slogan last year to a new variation on the theme: "Save money. Live better."

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Wal-Mart drops Oakley store plans

Slow economy, sagging stocks prompt company to withdraw proposal for Supercenter that some opposed

By Paula King
Contra Costa Times
02/23/2008                                        [back to top]

OAKLEY -- The nation's sluggish economy coupled with stagnant stock values have prompted the world's biggest retailer to retract plans for a Supercenter in Oakley. Wal-Mart officials announced Friday afternoon that the company has withdrawn its application for the proposed anchor store in the future River Oaks Crossing commercial center on the north side of Main Street. In all, Wal-Mart has decided not to construct more than 140 planned stores.

"We have regrettably made the decision to withdraw our application to build the Supercenter," local Wal-Mart spokesman Kevin Loscotoff said. "It is based on various economic factors at this time."

Oakley Economic Development Director Barbara Mason said the city is disappointed in Wal-Mart's move because the retail giant would have brought in significant sales and property taxes for the city. The Wal-Mart proposal was slated to go before the Oakley Planning Commission and City Council soon.

According to Mason, several factors made the retail project not economically feasible for Wal-Mart. River Oaks was tentatively planned as a major commercial hub with 76 acres of businesses, including other big-box retailers, restaurants and retail shops.

"In Oakley's case, Wal-Mart was being required by the property owner to purchase all 77 acres of the River Oaks Crossing project, but only needed about 20 acres for the Supercenter," Mason said. "This was a major strike against the project since Wal-Mart would have to initially front  the cost of the entire site, which tipped the scales to not be in the project's favor." Nationally, Wal-Mart has announced plans to slow down the growth of its Supercenters to improve sales, returns and productivity, Wal-Mart Public Affairs Manager Chris Buchanan said in a news release.

Some Wal-Mart opponents were thrilled with the news Friday, including Save Oakley Now founder Bob Caughron, who has gathered signatures for an anti-Wal-Mart petition. He had collected about 2,000 signatures from Oakley residents.

"I think it is real good news for Oakley, and now they need to do smart growth. They can redevelop the downtown area, and they would get more tax dollars from downtown," Caughron said. "It is good for the economy. It is good for traffic and good for less crime."

City Manager Bryan Montgomery and Loscotoff said that this decision has nothing to do with the local opposition voiced against Wal-Mart. Montgomery said that the Wal-Mart would have brought revenue to pay for public services such as police protection, parks, recreational programs and road upgrades.

The Supercenter was expected to bring more than 450 new jobs and $700,000 annually in sales tax revenue. City officials vowed Friday to aggressively proceed with River Oaks Crossing by luring other major retailers.

Wal-Mart is always looking for ways to serve its customers and will continue to survey options to bring Oakley its own store, Loscotoff said. He added that Wal-Mart will serve Oakley residents through the Antioch location.

"We recognize there was a tremendous amount of support in the community and that it makes the decision that much more difficult," Loscotoff said.

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LeRay facing suit by retailer

By KATHRYN SCHOENBERGER,
Watertown Daily Times
February 22nd, 2008                                 [back to top]

EVANS MILLS — The town of LeRay is facing a lawsuit by Wal-Mart contesting its assessment of the company's supercenter on Route 11.

Wal-Mart Real Estate Business Trust and Wal-Mart Stores East LP is challenging its $13 million assessment in state Supreme Court, saying the actual assessment should be less than half that amount, about $5.7 million. The company filed the lawsuit in July.

However, town Assessor Terry L. Buckley argues that his assessment is fair and that the company is trying to get out of paying its share of taxes.

"They're just trying to get by and pay nothing," he said.

Wal-Mart's store, which opened in February 2006, and the lot in front of it are assessed at a combined $13,180,800 on the town's 2007-08 tax rolls.

The company argues that assessments on other properties within the town are calculated at a rate not exceeding 75 percent of true value. Wal-Mart said that while its properties are assessed at $13.2 million, the true total value of the properties does not exceed $7.2 million, meaning the assessment, based on a 75 percent equalization rate, should be $5.7 million, or $7,480,800 less than the town claims.

According to Mr. Buckley, he used the values of other Wal-Mart stores in the area to complete his assessment. He said the LeRay store is assessed at less per square foot than some other stores.

Mr. Buckley said the LeRay Wal-Mart is valued at $63 per square foot, while stores in Malone and Lowville are each assessed at about $70 per square foot.

"I think I've got a very good assessment," he said.

Town attorney Eugene J. Langone said he is in preliminary talks with Wal-Mart's attorneys, Kavinoky Cook LLP, Buffalo, over the lawsuit. He said it is too soon to speculate what the outcome of the lawsuit will be. Mr. Langone said he hopes it can be settled without going to court.

However, Mr. Buckley said he is not interested in negotiating with the company.

"We're going to trial," he said.

According to court documents, the earliest trial date for the lawsuit would be this summer.

While there is no indication at this point who will win the lawsuit, Indian River Central School District already is preparing for a Wal-Mart victory.

According to district business manager James R. Koch, if Wal-Mart wins the challenge, the district will have to pay back up to $40,000 in excess taxes. He said district officials are planning to vote on creating a reserve fund in that amount within the next few weeks.

Mr. Koch said the district wants to put the fund in place so that money would not have to be cut from any programs in the school's budget if it has to pay back taxes.

"That's what we're trying to avoid," he said.

If the district approves the fund, the next step would be determining where in the budget the money should come from. Mr. Koch said residents would then have their say on it as part of the overall 2008-09 budget vote in May.

Neither the town nor the county has made any budget adjustments because of the lawsuit and has no plans to at this time. LeRay Supervisor Ronald C. Taylor said he was not concerned about its effect on town funds.

"I don't think this is that serious of a challenge," he said.

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The Mall of America

By Harold Meyerson,
Washington Post
February 21st, 2008                            [back to top]

In the 20th century, American production was the marvel of the world. In the 21st century, American consumption is the marvel of the world. As news goes, this is both big and bad.

It was American production, after all, that won World War II. It was the exports of American manufacturing and agriculture that revitalized postwar Europe and Asia -- indeed, one of the Marshall Plan's goals was to ensure that Europe had enough funds to buy America's products.

In today's world economy, however, we have become the consumers of last -- and first -- resort. No nation with an advanced economy consumes at anywhere near our level. In 2006, our purchases constituted 70 percent of U.S. gross domestic product. Britain ranked second among nations in the Organization for Economic Cooperation and Development, at 61 percent, then came Italy, at 59 percent, with Japan, Germany, France and Canada all hovering around 55 percent.

If 19th-century England was a nation of shopkeepers, the United States today is a nation of shoppers, and our role in the world economy is to buy what other countries -- or U.S.-based corporations with factories in other countries -- make. It was not ever thus. In the four decades following World War II, our largest employer was General Motors; for the past decade, it's been Wal-Mart. GM followed in the footsteps of Henry Ford, who by 1913 had concluded that he needed to pay his workers enough that they could afford to buy a new Ford. Wal-Mart, by contrast, pays its workers so little that they are compelled to shop at Wal-Mart.

But even if Wal-Mart weren't a downward force on wages throughout much of the economy, consider the implications of a nation whose chief economic activity is personal consumption -- more particularly, personal consumption at a time when incomes are stagnating. The only way such a nation can get along is to go into debt, which is precisely what Americans have done.

This transformation of America from manufacturer to shopper was anything but accidental. In the early 1980s, the rise of Japan and the decline of U.S. manufacturing spurred unions and liberals to advocate domestic content requirements for products, such as autos, sold in the United States. A few years later, unions and liberals were promoting industrial policy -- that the U.S. government should make strategic investments in certain key industries to keep them stateside (Rust Belt champions pushed for auto and steel; "new economy" advocates plumped for investments in high tech). In the late '90s, unions and liberals opposed permanently normalizing trade relations with China. But orthodox economists and even more orthodox editorialists heaped scorn on all these ideas, which died quiet deaths -- even as the governments of nations that have supplanted us as the world's manufacturers (most notably, China) adhered to domestic content regulations and invested heavily in strategic industries, to the betterment of their citizens.

Today, 20 years after we decided not to have an industrial policy, we have an industrial base that employs an ever-smaller number of Americans. What has kept us afloat during the current decade hasn't been our productive capacity but the inflation of our assets -- the rising value of our homes, against which we've borrowed to purchase the things we could not afford out of our stagnant paychecks. To the extent that the United States had a macro-economic strategy, it was Shop Till You Drop.

So we've shopped. And now we've dropped.

One of the crucial differences between the two parties this year is that Hillary Clinton and Barack Obama have both revived the idea of a national industrial strategy -- better late than never -- while John McCain still acts as if banks and corporations, left to their own devices, would revive our economy through their investments. Problem is, we've left banks and corporations to their own devices for decades, and they've funded the rise of low-wage, high-profit East Asia.

Nonetheless, McCain calls for across-the-board corporate tax cuts, though that money may well be bound for Shanghai. Clinton and Obama, by contrast, call for the public sector to take up the slack created by the private sector's reluctance to invest in the United States. Each proposes a construction, transportation and manufacturing strategy to retrofit America and create millions of "green" jobs. Each advocates public health insurance when private employers decline to cover workers. Each wants to make it easier for workers to boost their incomes by joining unions (and our economy still has 50 million private-sector jobs that can't be offshored in such industries as construction, transportation and health care).

The Democrats' incomes-and-industrial policy won't bring back, say, Big Steel, but it will raise wages and put more Americans to work actually making things. As a national economic strategy, that sure beats shopping.

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Walmart Reports $100 Billion in 4Q Sales

By Greg Feirman,
Seeking Alpha
February 21st, 2008                              [back to top]

Tuesday morning before the open, retailing behemoth Wal-Mart (WMT) reported the first $100 billion in sales in a quarter ever by a retailer.

To put that number in context, the personal consumption part of Gross Domestic Product (GDP) in 2007 was $9.7 trillion (total GDP was $13.8 trillion (BEA 4Q GDP Release) (pdf file)). At an annualized rate of $400 billion, then, Wal-Mart represents about 4% of all consumer expenditures in the United States.

Wal-Mart reported earnings of $1.04 per share, excluding items - beating analyst expectations by 2 cents. Its forecast was a little weak (WMT FY 4Q Earnings Release) but, of all retailers, Wal-Mart, with its relentless focus on costs and prices, should hold up best in a difficult, possibly recessionary, environment.

At a forward multiple around 14, a 1.75% dividend and its stock acting well of late, Wal-Mart is somewhat attractive here (around $50).

The only problem is that being such a massive company, it takes a lot to move the dial. Even if Wal-Mart performs superbly, it probably can’t grow earnings more than 8-10% a year which corresponds to an 8-10% annual gain in share price as long as the mulitple stays the same.

One way to juice your returns a bit is to buy Wal-Mart shares, and sell covered calls on them. For example, you could buy the shares at $50, and sell the Jan.2009 $50 calls for $5 each. That gives you a 10% return on your investment right off the bat.

If Wal-Mart’s shares appreciate 10% to $55 or higher, then you turn over your shares and the premium is eaten up. But, if Wal-Mart shares go nowhere, the calls expire worthless. You would make 10%, plus collecting the 2% dividend, for a 12% total return - even if the shares go nowhere.

Even if the shares go to $60, because you own them, you don’t lose money. The only way you lose money on this trade is if Wal-Mart’s shares lose more than 12% of their value - which would take them down around $44. In that case, the premium you got from selling the calls would be eaten up by the share price decline. That’s your breakeven for this trade.

As long as they stay above that, you make money. And the less they move the better.

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The Best And Worst Companies For Customer Satisfaction

Tom Van Riper,
02.20.08                                                  [back to top]

When tumbling home values and high gas prices already have consumers spending less at stores, car dealerships and airline ticket counters, how does a company minimize the pain?

One way is to offer superior customer service, the better to compete for the fewer number of dollars out there, and set yourself up with loyal customers for the inevitable economic rebound. A new report finds a lot of companies like Wal Mart (nyse: WMT - news - people ) and Home Depot (nyse: HD - news - people ) seem to have a different plan.

In Pictures: The Best And Worst Companies For Customer Satisfaction The University of Michigan's year-end 2007 customer satisfaction survey shows a flat year for customer happiness. The study, known as the American Consumers Satisfaction Index (ACSI), weighed in with a score of 74.9 on a 100 point scale, unchanged from a year ago.

"We had a clear slowdown in [satisfaction] growth this year, and an outright decline during the last two quarters," notes Claes Fornell, the report's author. Traditionally, movement in the score has been reflected in consumer spending patterns a quarter or two out.

Industries generally scoring well were online retail (83 out of 100), led by Amazon.com (nasdaq: AMZN - news - people ), and autos (82), thanks to a strong score from Toyota's (nyse: TM - news - people ) Lexus division and a 3.9% improvement by Ford. Laggards include airlines (63), dragged down by big drops from United and Delta, and cellphone service (68), where Sprint-Nextel (nyse: S - news - people ) saw its score drop more than 3% and AT&T (nyse: T - news - people ) remained week despite an improvement over 2006.

Retail stores came in very close to their year-earlier levels, as a big improvement at Macy's (nyse: M - news - people ) was offset by falling scores at Wal-Mart and Best Buy (nyse: BBY - news - people ). By tumbling 5.6%, Wal-Mart hit its lowest customer satisfaction rating since the ACSI began its survey in 1994.

Indeed, the solid fourth-quarter profit that Wal-Mart reported on Tuesday was driven by growth in its international business. Same-store sales edged up just 0.5% from last year, not a sign that customers are breaking the door down. Meanwhile, Home Depot, which recently made a strategic decision to replace knowledgeable store workers with clerks, suffered a 4.3% drop in its satisfaction rating to its lowest score since 2001.

During a vibrant economy, getting consumers to spend more and more at your stores is easy. Just stock up on the apparel, electronic gadgets or home project materials they need, then sit back and watch them keep coming back for more. But when the economy hits some turbulence, as it's done lately, you need to try a little bit harder to get customers back in the door. But by and large, companies haven't turned to customer service to do it.

"If people are spending less, then they are really going to be thinking more about where they will go," says Tom Gruca, a University of Iowa marketing professor who has studied correlations between customer satisfaction and cash flow.

Gruca's latest study shows that for each point a company improves its rating in the ACSI survey, net cash flow improves by $55 million a year later. And that rate includes auto companies and other sellers of durable goods, which rarely make a follow up sale to the same customer a year later. So for retailers, banks and other companies that sell goods more frequently, that rate is even higher. If the trend holds up, expect Lowe's (nyse: LOW - news - people ), with an ACSI rating of 75, to grab a lot more business from Home Depot (67) once consumers get back in the home project groove.

Cutting back on service is an easy way to save a buck when things slow down, but it's also short-sighted. Gruca is putting the finishing touches on a follow-up report that measures a firm's willingness to invest in service and spruced up stores against long term profitability growth. He doesn't have final numbers yet, but he says the preliminary results show a strong link.

That jibes with a 2002 McKinsey & Co. study he cited of 1,000 industrial companies from 1982 to 1999. Research showed that those companies able to maintain market share leadership in their industries over the long haul spent 14% more on selling, general and administrative expenses during the 1990-91 recession than those companies that lost their leadership positions did (leadership being defined as the top quartile of an industry). The basic lesson: Customers have long memories, and tend to resent the brush off when things are slow.

"People aren't stupid," Gruca says. "The question is where you want to be positioned when things come back." Not in the customers' dog house, that's for sure.

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Wal-Mart Apologizes to Muslim Woman

Associated Press
02.20.08                                            [back to top]

RIVERDALE, Utah - Wal-Mart Stores Inc. apologized to a Muslim woman who said she was mocked because of her face veil.

"Please don't stick me up," a cashier told the shopper on Feb. 2, according to The Council on American-Islamic Relations.

Wal-Mart (nyse: WMT - news - people ) apologized Monday in a letter signed by Rolando Rodriquez, a vice president and regional general manager. It was released Tuesday by the council's Nevada chapter.

"I can assure you that the associate in question was disciplined in accordance with our employment policies as a result of the situation," Rodriguez said without disclosing details.

Rodriguez said employees at the Riverdale store would undergo "sensitivity training," specifically in the Islamic faith and Muslim culture.

At Wal-Mart headquarters in Bentonville, Ark., spokesman Phillip Keene confirmed the letter and declined further comment.

"We applaud Wal-Mart for taking appropriate action to resolve this incident," said Yasser Moten, executive director of the council's Nevada chapter. The group doesn't have an office in Utah.

Copyright 2008 Associated Press. All rights reserved.

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Wal-Mart Apologizes To Muslim Woman Mocked

By Cashier
Dow Jones Newswires
February 19th, 2008                        [back to top]

RIVERDALE, Utah (AP)--Wal-Mart Stores Inc. (WMT) apologized to a Muslim woman who said she was mocked because of her face veil.

"Please don't stick me up," a cashier told the shopper on Feb. 2, according to The Council on American-Islamic Relations.

Wal-Mart apologized Monday in a letter signed by Rolando Rodriquez, a vice president and regional general manager. It was released Tuesday by the council's Nevada chapter.

"I can assure you that the associate in question was disciplined in accordance with our employment policies as a result of the situation," Rodriguez said without disclosing details.

Rodriguez said employees at the Riverdale store would undergo "sensitivity training," specifically in the Islamic faith and Muslim culture.

At Wal-Mart headquarters in Bentonville, Ark., spokesman Phillip Keene confirmed the letter and declined further comment.

"We applaud Wal-Mart for taking appropriate action to resolve this incident," said Yasser Moten, executive director of the council's Nevada chapter. The group doesn't have an office in Utah.

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Wal-Mart Ranks Lowest Among Discounters in Survey

By Tim Catts,
Bloomberg
February 19th, 2008                         [back to top]

Feb. 19 (Bloomberg) -- Wal-Mart Stores Inc. ranked lowest among U.S. discounters and department store chains in an annual survey of customer satisfaction as shoppers said they found less value in the world's largest retailer's prices.

Wal-Mart fell to 68 from 72 last year on a scale of 1 to 100, according to the University of Michigan's American Customer Satisfaction Index, released today. Minneapolis-based Target Corp., the second-largest discounter, held steady at 77. The average score for department and discount stores was 73, the lowest since 2001.

Customers may be increasingly dissatisfied with the goods Wal-Mart is carrying, said Claes Fornell, the professor who led the study. Chief Executive Officer H. Lee Scott has turned the company's focus back to groceries and household items after an ill-fated attempt to boost sales by luring fashion-conscious shoppers with silk camisoles and distressed jeans.

``It's perceived by the customers that quality is declining but price is not coming down correspondingly,'' Fornell said. Wal-Mart's score for customer service was also the lowest among discounters and department stores, Fornell said.

Scott discounted more items earlier in the holiday season to drum up revenue last year. The Bentonville, Arkansas-based retailer's sales at stores open at least a year rose 1.7 percent during the fourth quarter, outpacing Target for the first time in 3 1/2 years.

``We survey more than 2 million customers every quarter, and they're indicating new highs in all five of the areas we measure, including faster, friendlier and cleaner stores,'' spokesman John Simley said.

`Customer Service'

``Certainly with about 140 million Americans shopping at our stores every week, Wal-Mart remains the most popular shopping destination in the country, and our attention to customer service is an important reason why.''

Fourth-quarter profit rose 4 percent to $4.1 billion, or $1.02 a share, compared with $3.94 billion, or 95 cents a share, a year earlier, the retailer said today. Revenue climbed to $107.4 billion.

Wal-Mart rose 30 cents to $49.74 at 10:45 a.m. in New York Stock Exchange composite trading. The shares gained 2.9 percent in New York trading in 2007 for the first increase in three years. The Standard & Poor's 500 Retailing Index fell 18 percent during that time.

Target said Feb. 7 that fourth-quarter same-store sales rose 0.2 percent.

Bargains Vs. Service

Growing customer dissatisfaction probably will have less impact at Wal-Mart than other retailers because shoppers visit its stores for bargains, not service, said George Whalin, president of Retail Management Consultants in Carlsbad, California. Consumers have trimmed spending in the face of falling U.S. home values and rising food and energy prices.

``The customer just doesn't stop at Wal-Mart because they know they're going to get this great Neiman-Marcus experience,'' Whalin said. ``They're going to get a big selection and low prices and they're going to get in and out of there.'' Whalin isn't affiliated with the University of Michigan survey.

Consumers in the survey gave Nordstrom Inc. a score of 80, placing it first in customer satisfaction among discount and department stores. Wal-Mart's grocery business tied with Winn- Dixie Stores Inc. for last place among supermarkets, with a score of 71, up from 69 a year earlier.

Wal-Mart has been at the bottom of the supermarket category in all of the four years that the university began tracking it. In the year ended Jan. 31, 2007, groceries comprised 31 percent of the discounter's sales, according to its annual report.

The survey analyzes data from interviews with at least 250 customers at each of about 200 companies studied. The University of Michigan surveys about 65,000 shoppers every year, according to its Web site.

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Wal-Mart Statement on the University of Michigan Customer Service Report

WalMartFacts.com
February 19th, 2008                           [back to top]

This survey of a handful of Wal-Mart shoppers doesn’t come close to being a true reflection of customer satisfaction with Wal-Mart.

We survey about two million customers every quarter, and our ratings have continued to improve all year. All five of our service metrics hit new highs in the fourth quarter, including those on faster, friendlier and cleaner stores. Even the financial analysts who cover our company have noted the improvement in their communications to their clients.

Certainly, with about 140 million Americans visiting our stores every week, Wal-Mart remains the most popular shopping destination in the country, and our attention to customer service is one of the reasons why.

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International Sales Drive Wal-Mart 4Q

Associated Press
02.19.08                                            [back to top]

BENTONVILLE, Ark. - Wal-Mart Stores Inc. said profit for its fiscal fourth-quarter grew 4 percent in line with Wall Street expectations on improved performance in its U.S. stores and strong international growth.

The world's largest retailer said net income was $4.096 billion, or $1.02 per share, in the quarter that ended Jan. 31. It was $3.94 billion, or 95 cents a share, a year earlier.

Net sales grew 8.3 percent to $106.27 billion, helped by 18.8 percent international growth and 5.0 percent growth at U.S. Wal-Mart (nyse: WMT - news - people ) stores.

Analysts surveyed by Thomson Financial had expected profit of $1.02 per share on revenue of $106.9 billion.

Wal-Mart forecast earnings per share for the 2009 fiscal year of $3.30 to $3.43.

Copyright 2008 Associated Press. All rights reserved. 

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Wal-Mart 4Q Profit Rises 4 Pct

Associated Press
02.19.08                                             [back to top]

BENTONVILLE, Ark. - Wal-Mart Stores Inc., the world's largest retailer, said Tuesday its focus on low prices paid off with a 4 percent rise in profit for its fourth quarter. International growth also helped boost profit and sales.

Wal-Mart (nyse: WMT - news - people ) said net income in the quarter ended Jan. 31 rose to $4.096 billion, or $1.02 per share, compared to $3.94 billion, or 95 cents a share, a year earlier.

Net sales grew 8.3 percent to $106.27 billion, helped by 18.8 percent international growth and 5.0 percent growth at U.S. Wal-Mart stores. Overall revenue including membership fees rose to $107.43 billion from $99.078 billion a year earlier.

Analysts surveyed by Thomson Financial had expected profit of $1.02 per share on revenue of $106.9 billion.

Wal-Mart forecast earnings per share for the 2009 fiscal year of $3.30 to $3.43. The range of 23 analyst estimates for the full year was $3.30 to $3.55, according to Thomson.

Chief Executive Lee Scott said Wal-Mart's decision last year to refocus on low prices after a brief foray into fashion and trendier merchandise had paid off in a time of mounting economic uncertainty.

"The price leadership strategy we put in place at the beginning of the year was exactly the right strategy for our customers around the world in a tough economic environment," Scott said.

Scott said the economy remains a critical issue for consumers this year.

"Customers were more cautious in their spending in January. In a volatile economy, I believe we are well positioned to succeed."

Copyright 2008 Associated Press. All rights reserved. 

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Wal-Mart Picks Blu-Ray Over HD DVD

By MARCUS KABEL ,
Washington Post
February 15th, 2008                         [back to top]

Wal-Mart Stores Inc. has picked Blu-ray over HD DVD in the market battle for the format of high-definition video.

The nation's largest retailer said Friday it has decided to sell only Blu-ray DV Ds? and hardware in its 4,000 U.S. stores and no longer carry rival HD DVD offerings.

The announcement comes five days after Netflix Inc. said it will stop carrying rentals in Toshiba Corp.'s HD DVD format and instead go exclusively with the rival Sony Corp. technology favored by five major movie studios.

Toshiba and Sony have been vying to set the standard for high-definition DV Ds? and players.

The stakes are high because the winner will also get a boost in sales of DVD players needed to read the new format.

Several large retailers have come down on Blu-ray's side, including Target Corp. and Blockbuster Inc.

"We've listened to our customers, who are showing a clear preference toward Blu-ray products and movies with their purchases," Gary Severson, head of home entertainment for Wal-Mart's U.S. stores, said in a statement.

Wal-Mart said it will phase out all HD DVD offerings by June. Wal-Mart stores and Sam's Clubs membership warehouses will continue to sell standard definition movies and DVD players as well as converter technology.

Sony has taken a considerable lead in the format rivalry in recent months, gaining the endorsement of The Walt Disney Co., Sony Corp.'s Sony Pictures, News Corp.'s Twentieth Century Fox, Metro-Goldwyn-Mayer and Time Warner Inc.'s Warner Bros. Entertainment.

Viacom's Paramount Pictures, which also owns Dream Works? SKG, and Universal Pictures, a unit of General Electric, have opted to release films only in HD DVD. Still, many consumers have held off on buying a high-definition DVD player until the dominant format is decided.

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Globalization crimps retail traditions in China

By Craig Simons,
Atlanta Journal Constitution
February 12th, 2008                                     [back to top]

BEIJING — When Tang Qiliang began selling handmade toys in the 1970s, children rushed to buy the fur-covered rabbits and tiny clay mice his family made.

But this year, in advance of last week's Lunar New Year holiday, parents mostly bypassed his family's stor