Wal-Mart battlefield: Bronx

John Seward
DOW JONES NEWSWIRES

By Marcy Gordon
Associated Press
Friday, June 30, 2006                 [back to top] 

Legislation Gaining to Block Special Industrial Banks, House Lawmaker Says WASHINGTON -- With Wal-Mart and Home Depot among a record number of companies awaiting federal approval to open banks, legislation to block this special kind of bank is gaining momentum, a senior House lawmaker said Friday.

Thirteen companies, a record number, have joined controversy-stirring Wal-Mart Stores Inc. in the pipeline for approval from the Federal Deposit Insurance Corp. to establish what is called an industrial loan corporation, agency records show. The Home Depot Inc., Warren Buffett's Berkshire Hathaway Inc. and the others are seeking permission to set up the industrial banks -- products of a regulatory loophole that allows commercial companies to own a bank.

"I think pressure is building for something to happen," said Rep. Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee.

Frank said that he and Rep. Paul Gillmor, R-Ohio, plan to propose legislation soon that would close the ILC loophole.

There is strong bipartisan support among House members for the proposal, likely sufficient for it to pass. Nearly 100 lawmakers from both parties in early June asked the FDIC to halt any new approvals of industrial banks to give Congress a chance to consider such legislation. Prospects in the Senate are clouded, however.

If the FDIC begins granting new ILC charters, "then the pressure is going to increase very significantly" for congressional action, Frank said in a telephone interview.

The FDIC has not commented on the issue. Sheila Bair, a former Treasury Department official who recently became FDIC chairman, was not asked during her Senate confirmation hearing for her views on Wal-Mart's bank application nor on the broader issue of whether commercial companies should be allowed to own banks.

There are now 61 industrial loan corporations in the country with a total of around $141 billion in assets and $98 billion in deposits. Thirty-three are based in Utah, one of only seven states that grant charters for them.

The ILCs are allowed to issue credit cards, take deposits and make loans. What they cannot do is offer standard checking accounts if their assets exceed $100 million.

Wal-Mart's bid to own one -- which has been before the FDIC for more than a year -- sparked a wave of opposition from banks, unions, lawmakers, and consumer and community organizations. The world's largest retailer insists that it has no plans to compete with community banks and has pledged to the FDIC to stay out of branch banking and consumer lending.

Rather, the newly chartered bank would be used to handle the 140 million credit, debit card and electronic check payments it processes each year, Wal-Mart says.

The 14 companies with industrial banking applications before the FDIC represent the largest number ever pending at the same time, an examination of agency records shows. The precedent was first reported Thursday by Dow Jones Newswires. Of the applicants, four have been awaiting approval for at least 11 months -- longer than any company has waited since the agency began approving ILCs in 1984.

The hopefuls also include The Blue Cross and Blue Shield Association, automakers Ford Motor Co. and DaimlerChrysler AG, and information services provider Ceridian Corp.

The ILCs are federally insured, with deposits in individual accounts guaranteed up to $100,000 if any of them failed. The FDIC insurance fund, standing at some $49.2 billion currently, is financed by premiums paid by banks.

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Lee & Me: My Meeting With Wal-Mart's CEO, The World's Most Powerful Businessman

Seventh Generation
Friday, June 30, 2006             [back to top] 

If you spend your days immersed in the corporate world, there’s really only one way to describe a business trip I took last December: I was invited to an audience with the King. I was called to the commercial realm that is ostensibly the world’s 20th largest economy and the home of more indentured servants than any other. And so it was that I went to the very palace of the corporate kingdom some people love and others love to hate—to Bentonville, Arkansas, and the headquarters of Wal-Mart, for my meeting with CEO Lee Scott.

I have spent over a month contemplating this journey. Why does the president of the world’s largest company want to spend time with me—the president of a tiny Vermont business, author of a book about corporate responsibility, and a frequent, harsh, and vocal critic? How can I engage with the essence of a giant like Wal-Mart to meaningfully alter its trajectory and harness its potential to be a power for equity, justice and environmental sustainability? It’s a tall order.

A story that appeared in the Economist magazine the week before my trip goes a long way toward explaining why they called and why I went. According to the article, a survey by Zogby International has found that 38% of Americans have a negative opinion of Wal-Mart, and that 55% have formed a less favorable opinion of it “based on what they have recently seen, heard or read.” Those aren’t good numbers no matter how high your sales are. (And Wal-Mart sales are high. The company is responsible for an astounding 2% of the country’s GDP and accounts for 8.90 out of every $100 spent in U.S. retail stores.)

The factors that account for Wal-Mart’s low standing in the polls are neatly summarized at http://www.walmartwatch.com. Suffice it to say that Wal-Mart hasn’t been the most responsible corporation on the planet, and people have started to notice.

So there I am. Monday morning, December 19th, 2005. Burlington International Airport. The announcement about my 7:10 am Delta flight from Burlington to Atlanta sends a shiver down my spine. The gate agent says that 14 of the 37 passengers will be selected to be taken off the flight. Light snow on the runway requires that the plane lighten its load due to limited braking ability. Removing over 35% of the passengers from a single flight goes beyond anything I have ever experienced. Mentally I prepare my argument as to why I shouldn’t be one of the 14. How many people are granted a meeting with Lee Scott, president of the world’s biggest company? Thankfully the need to argue my case isn’t necessary. I win this particular lottery.

I’m honestly not quite sure where Northern Arkansas Regional Airport even is. The fellow sitting next to me on the flight out of Atlanta to Arkansas tells me 95% of the passengers on the plane are headed to Wal-Mart. He spends three weeks out of every month in Bentonville working for a warehousing & distribution company based in Boston. We talk about my trip. I mention my not infrequent concerns about Wal-Mart. Almost reflexively, he seems to defend his client. He talks about what good people they are, how hard they work to meet the social and environmental challenges they face. A fact that, if true, is lost on most of the people I know. He’s perplexed that I have no interest in selling them anything except perhaps some new ideas!

Driving from the airport to the year-old South Rogers store, I stop repeatedly to make sure that I’m not lost. The deeply rural scenery seems to lack enough people to keep a super center in business, but after a 15 minute drive I find a highway and then the store.

Andy Rubin, the VP of Corporate Strategy, meets me along with a collection of buyers responsible for infant & toddler products from Wal-Mart and Sam’s Club, including diapers, wipes, pacifiers, clothing, and furniture. We discuss chlorine, PVC, phthalates, organic cotton, toxic chemicals, the Precautionary Principle, and the power that Wal-Mart has to change the world.

By the time we’re done we’re running late, and I’m not happy. Now 15 minutes of meeting time with Lee Scott has been lost, due to our not paying attention to the time we spent in the store.

No matter how much one tries to prepare for a meeting about the current state and future direction of this gigantic company, you’re always left with a feeling that it’s just too big to get your arms around. After weeks of preparation, I have what I believe is a clear perspective and some sound strategic advice to compliment the years of relatively blistering critiques of Wal-Mart that I have delivered as part of almost every speech I have given.

Lee, dressed in a dark grey suit and a black sweater, stands holding the door open as I enter the building. I need to look down at his name badge to be sure it’s him. I’m impressed that he’s humble enough to greet me himself!

I enter a nondescript conference room where the senior management team is immersed in a conversation about holiday sales. Present are Lee Scott , CEO & President of Wal-Mart Stores, Inc; Lawrence Jackson, Wal-Mart EVP People; John Westling, Wal-Mart SVP; Andy Ruben, VP Corporate Strategy; Doug McMillon, President of Sam’s Club; Greg Spragg, EVP Sam’s Club; and Lee Tappenden, VP International Merchandizing. It’s quite an assembly!

Saturday’s numbers were off, even though same-store sales on holiday items were up 40% over last year. Lee explains the challenges of customers waiting later and later to do their holiday shopping. He’s received an unhappy call from his boss S. Robson Walton, Chairman of the Board of Directors of Wal-Mart Stores, Inc. and son of the legendary Wal-Mart founder Sam Walton. Walton phoned early Sunday morning wanting a sales update, and the news was not great. Lee called him back midday on Monday to let him know that the week was off to a better start. Sales are an obsessive focus, an almost unconscious part of every conversation. But why are they discussing this in front of me? They didn’t bring me down here to figure out how to run a sales promotion on Christmas ornaments.

I am lost and frankly a bit confused as the conversation drags on for several minutes. Lee stops and admits that this is a conversation that never quits this time of year and is, in fact, an obsession. He talks with some pride about the incredible sales of the company’s different divisions, how much toilet paper and laundry detergent they sell. It’s billions isn’t it? he asks the President of Sam’s. And you’ll do how many billion this year? he asks the head of U.S. Wal-Mart stores.

Finally we get to the introductions. Lee says he doesn’t know much about me and asks for a description of who I am and what I’ve done, other than write a book that he and his management team have read. This catches me off guard. I thought for sure that someone had prepared the equivalent of an FBI dossier on me for Lee’s review before I arrived.

I run through the two minute version of the story of my life, and then seize the opportunity to ask my own questions. I ask Lee to describe the legacy he wants to be remembered for at Wal-Mart. He struggles with the question, falls back on the Sam Walton story, and describes himself as continuing a tradition rather then designing a new purpose for the giant company. Pressing him again for a better answer, he talks about the team he wants to build and leave behind when he “turns out the lights in the office for the last time.” In effect, he keeps saying it’s not about him.

Pressed again, at this point a little uncomfortably, he talks about being the best they can be, about diversity programs, environmental initiatives, the careers they help their associates build. But nothing that feels like a clear purpose or focused direction.

I take a different tact. I admit that I, like hundreds of other critics, have my own perspective on what Wal-Mart is doing right (not much) and wrong (a lot) when it comes to corporate responsibility. On how to proactively manage the endless bad press they get. How they could go about seizing their potential. Did they want to hear my thoughts? Why not, they answer. Everyone else comes down here and tells us what they think we should do. We’re used to it at this point.

(I didn’t know it at the time, but I was part of a large parade of impressive visitors making the trip to Bentonville, from McKinsey to Eddleman Communications, hundreds of environmental NGOs, and the leaders of America’s most well respected companies. I had no idea at the time how good I had to be. Wal-Mart, as Charles Fishman writes in his excellent new book, The Wal-Mart Effect, is like a gigantic, humungous deer caught in the headlights of an oncoming meteorite.

Well I’m not here to take you to task, I say. You know the drill, what everyone thinks you’re doing wrong. I want to share a vision of possibility based on real transparency, self criticism, engagement with your toughest critics, and a disciplined understanding of your footprint on the planet. I want to help lead you to a clear and rational plan for what you’re going to do, how long it will take, and why certain issues can’t be addressed now; all in a way that everyone who’s interested can understand and get their heads around.

Look, says Lee. We’re already doing that. We talk to the activists. We have launched hundreds of initiatives. We have nothing to hide.

What about those initiatives? In a recent speech titled “Twenty First Century Leadership,” Lee asked, “What would it take for Wal-Mart to be that company, at our best, all the time? What if we used our size and resources to make this country and this earth an even better place for all of us: customers, Associates, our children, and generations unborn? What would that mean? Could we do it? Is this consistent with our business model?

“As one of the largest companies in the world, with an expanding global presence, environmental problems are OUR problems. The supply of natural products (fish, food, water) can only be sustained if the ecosystems that provide them are sustained and protected. There are not two worlds out there, a Wal-Mart world and some other world. Our environmental goals at Wal-Mart are simple and straightforward: to be supplied 100 percent by renewable energy. To create zero waste. To sell products that sustain our resources and environment. These goals are both ambitious and inspirational, and I’m not sure how to achieve them, at least not yet. This obviously will take some time.”

Sounds good doesn’t it? So how come no one believes him? That’s the $64 million question. And so it is that we move on to issues of transparency and credibility.

Doug McMillon, President of Sam’s Club says that with over 1.6 million employees Wal-Mart as a company has no secrets.

Yes, I say. You’ve got over one million people, all telling their own version of your story. That’s why it’s so confusing to understand. When you don’t tell your own story, but let everyone else do it instead, you end up with a chaotic picture that ensures that what ever message you want to communicate is lost.

Look at your website, I continue. There’s little meaningful information about your company from a social and environmental perspective. So you effectively force people like me to visit the websites of your most ardent critics to get that information, because I can’t get it directly from you. You’re letting your critics frame the story and tell it from their point of view. Your voice is lost.

There’s a pause that’s more than pregnant. I’ve struck a cord. They get it. There’s transparency and then there’s transparency. They’re starting to get what it means to take that next step.

Lee, who has been president for only five years, says that they’ve spent most of their time bringing in the sandbags to reinforce their bunker. They’ve effectively helped organize the whole activist community by refusing to engage in any meaningful dialogue. The labor community (WalmartWatch, WakeupWalMart) has seized this opening that Wal-Mart has inadvertently created.

A big mistake, says Lee. We helped organize our enemies better than they could have done themselves. (In fact, Wal-Mart has unintentionally succeeded in uniting a diverse collection of activists, from labor and environmental advocates to health care and women’s rights campaigners, that otherwise rarely even speak to each other.)

But they say they’ve changed. Starting 18 months ago, for some reason that wasn’t entirely clear, Wal-Mart launched an initiative of conversation and engagement. We talked about all the NGOs and activist groups that have secretly made the trip down to Bentonville to see if Wal-Mart was really willing to own up to its problems and consider substantive change. We talked about the fact that none of them would ever even admit to having made the trip. The company has become a giant social pariah, the ultimate embodiment of corporate evil. So bad, that NGOs are afraid to let their peers, donors and friends know that they had even talked to Wal-Mart. The blight it would leave on their reputation would cost them donor support and credibility, they say. I say that Wal-Mart shouldn’t accept that these organizations want to work with them but won’t risk their reputations to openly talk about the good and bad that they find.

Lee talks about secret meetings with politicians who were terrified of the fallout from labor unions if the meetings were to become public. He talks about entering buildings through secret entrances, conversations that “never happened.” The secrecy sounds painful.

Lee also talks about how horribly ugly their stores are, and the negative impact they have on a community because they look so inappropriate and out of place. He talks about what it feels like to watch the news, and to see Wal-Mart pop up in those ubiquitous text “crawls” at the bottom of the screen on all the news channels. “Airplane crashes in Florida, 20 feared dead… Wal-Mart store manager abuses African-American in Florida Store… Global warming talks in Canada at a standstill.”

He says that moments before he walked into the room, AP broke a story about a federal investigation into the company’s handling of merchandise classified as hazardous waste. Lee asks why every single negative act by any Wal-Mart employee anywhere seems to make the headlines. They are out to get us, he says, meaning the labor unions. In any way they can.

We talk about the failure of Wal-Mart to create a coherent and understandable framework for the huge enterprise they run. I suggest a more aggressive approach to setting expectations around what they can and can’t control; but not without making firm and clear commitments about what they’re willing to change and by when. Remember, I say. Transparency, in its most absolute sense, is about both the good and the bad things you’re doing.

Look, I continue, here’s just one example: you could revolutionize the household cleaner business overnight if you required full ingredient disclosure on the label of every cleaning product you sold. You could take the industry to task on an exemption that is enjoyed by almost no other consumer product. Not only would the entire industry comply, but most of the toxic and carcinogenic chemicals would be removed from their formulas before the new labels were printed.

Doug McMillon, an extremely open and likeable guy, says they’re the most critical people you’ll ever find. No one gives us a harder time than we do ourselves, he says. You wouldn’t believe what goes on inside this room.

Maybe, I respond, but unfortunately most of that criticism doesn’t make its way outside these walls. No one really knows who you guys are or what you believe. The fact that you’re thoughtful and compassionate is lost on the entire world.

Lee explains that they’ve got a $25 million activist campaign against them, a campaign that seeks to put the company out of business. This labor issue, that’s one place we can’t go, he says. There are people who believe that the best thing that could happen is that we simply shut down. That’s just not going to happen. (The truth is that the last thing that Andy Grossman, Executive Director of Wal-Mart Watch, ever expects to happen is the complete shut down of Wal-Mart. He knows full well that’s never going to occur.)

Lee strikes me as a passionate, authentic and, at times, embattled soul. He was humble, self-critical, and gently defensive at first, but sensing my true earnestness to help, he increasingly opens up and seems to become more deeply engaged with the possibilities here. He seems to see this challenge and the opportunity it represents with new eyes.

I end the meeting by asking if I can help. Absolutely, they say. And so I will. I’m eager to test the boundaries of change here. Because when you think about it, there’s not much greater good that I can do than corral this giant and get it to see its work as nothing more and nothing less than a labor of love for the next generations.

As fellow business people, citizens of our nation, members of the human race, and residents of a planet in trouble, we have no option but to help, cajole, push and even shove this retail behemoth onto the side of sustainability and responsibility, open dialogues, and new choices. It’s not only the best answer, it’s probably the only answer.

The opportunities are endless. Imagine a Wal-Mart committed to ending poverty and revolutionizing the U.S. healthcare system to provide preventative health care for all. Think about a Wal-Mart pushing for transparency on its products’ social and environmental impacts. Picture a Wal-Mart promoting an agricultural system that relies primarily on sustainable methods and lobbying for a world in which the United States is the primary engine for a just and equitable future.

They can do it. And I’ll go even further and say that after my meeting, I very much suspect they would like to.

P.S. Andy Rubin, the VP of Corporate Strategy, and I are still talking. We’ve exchanged phone calls, emails, and have shared a dinner together up here in my neck of the woods. We’ve reviewed the outline for their first ever Corporate Responsibility report, talked about a policy for chemicals, and discussed designing a meeting to work on the process of redefining their corporate culture. Progress is slow. But the news has been a bit more positive of late. Stay tuned…

And in case you’re wondering―despite some pretty passionate interest in selling Seventh Generation at Wal-Mart, the answer is still no. At least for now.

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Neighborhood board opposes Wal-Mart plans

By Nina Wu
Star Bulletin
Friday, June 30, 2006             [back to top] 

Kapolei residents showed up in full force at a neighborhood board meeting Wednesday night to criticize a proposed Wal-Mart store in the area, prompting the board to vote to oppose the store's development. "It was quite a night," said Maeda Timson, chairwoman of the Makakilo/Kapolei/Honokai Hale board. She estimated an audience of about 200 at the meeting. "It was very emotional. This meeting was originally intended to get information, not to take action."

Timson said she is drafting a letter this week to Wal-Mart Stores Inc., Honolulu councilmembers and Campbell Estate, asking the big-box store to look elsewhere.

"There were many questions," she said, "but there were at least 17 times when they said they didn't know. And these were basic questions."

Wal-Mart spokesman Kevin McCall said he could not answer many questions because the project is still in early stages of development. The developer is still in the due-diligence phase, he said, and no deal on the site at the mauka-Diamond Head corner of Makakilo Drive has been finalized yet.

"We were here more to listen," McCall said. "We believe that as more information becomes available, it will become more clear that this project is appropriate for that area."

He added that Wal-Mart is trying to be forthcoming with its plans.

"We've come forward that this is not a supercenter," he said. "We've come forward that traffic is our predominant issue of concern and it needs to be addressed."

The Wal-Mart planned for Kapolei will be similar in size to the one in Pearl City, which measures about 148,000 square feet.

A supercenter, McCall said, typically includes a grocery store and can measure up to 200,000 square feet.

Wal-Mart announced last week it plans to open only after scheduled traffic improvements are made in 2008.

"We think that the opportunity is there," McCall said. "It is zoned commercial, and we believe it is an appropriate place to be within the community after the improvements are done."

Theresia McMurdo, spokeswoman for the Campbell Estate, said she has received comments both for and against the Wal-Mart project.

When the deal is finalized, she said Wal-Mart's designs would need to be approved by the city's design review board.

But the core members of Kapolei First, which number about 50, are not about to stop their opposition to Wal-Mart, according to spokeswoman Carolyn Golojuch.

"This is not the end," said Golojuch, whose husband, Michael Golojuch, is vice chairman of the Kapolei neighborhood board. "It's not over until it's over. We need to continue to stand up for the welfare of the community."

She said the group would continue waving signs, knocking on doors and gathering signatures for its petition against Wal-Mart.

Some alternative uses for the site suggested by community members, she said, include a park, another school or parking for mass transit.

The issues brought before the neighborhood board were not apparently just over traffic and the size of the proposed Wal-Mart, but over the Bentonville, Ark.-based Wal-Mart's corporate practices, which have prompted class-action suits, critical books and a film.

Small-business owners at the meeting said the big-box store would put them out of business. Residents from Kapolei Knolls wanted a statement in writing, assuring them that the new Wal-Mart would not be a supercenter.

Neighborhood board member Brent Buckley, who made the lone dissenting vote, said he simply wanted more dialogue.

"I have concerns, as much of the community does, but I think we need to keep a door open to dialogue," he said. "By saying no, I'm afraid we already shut the door ... and I don't think we stopped Wal-Mart (Wednesday) night."

Buckley added that some community members in the audience did approach him afterward, saying they wanted to support Wal-Mart but were too intimidated to get up and speak.

Commentary went on for close to two hours, pushing other items on the agenda to next month's board meeting. No additional presentations by Wal-Mart were scheduled with the board.

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Angry Corona homeowners put feelings onto banners

WATER DAMAGE: They say a retaining wall between a Wal-Mart and their neighborhood caused it.

By MELANIE C. JOHNSON
The Press-Enterprise
Friday, June 30, 2006                            [back to top] 

CORONA - A group of homeowners suing Wal-Mart and developer Fieldstone Communities plan to air their grievances today at a protest of sorts.

Residents of the Vista Grande Development, which overlooks the Wal-Mart on Ontario Avenue, said they are frustrated by stalled talks with the retail and construction companies and plan to voice their displeasure in the form of huge banners visible to shoppers and passersby.

The group is angry about water damage to their backyards and homes they say was caused by a poorly constructed retaining wall between Wal-Mart and the neighborhood above it.

After more than two years of imploring the companies to fix the damage, they are taking their message to the public.

Resident Mark Stahovich said the public display is a reaction to the lack of action on the part of Wal-Mart and Fieldstone, whom he said have been largely unresponsive.

"We've invested our life savings in these homes," he said. "Our American dream has turned into an American nightmare because our lives have been on hold."

John Simley, a Wal-Mart spokesman, confirmed the lawsuit but said it would be "disrespectful to the court" to talk about the case.

"The proper place for the arguments to be handled is in court and we prefer it that way," he said.

Fieldstone said in a statement that the company is "committed to working with its homeowners and to seeing a satisfactory resolution to this problem" but said residents should look to Wal-Mart for a fix.

"As Wal-Mart designed and built the wall and slope and as it still owns and maintains them, Fieldstone Communities, Inc. believes Wal-Mart has the responsibility and ability to repair the problem."

Stahovich said Wal-Mart may have built the wall but he believes that Fieldstone knew it was unstable before the homeowners went through escrow, an allegation the company's attorneys refuted in court documents.

Stahovich moved into his newly built 3,500-square-foot home on Radcliffe Circle in February 2002. In February 2003, the first heavy rains came and about two days later, residents noticed that their backyards were sliding down the slope, he said.

Fieldstone referred the homeowners to Wal-Mart, and the retailer didn't respond at all to the complaints, Stahovich said. Several residents then retained an attorney and filed suit against the two companies.

Fieldstone said even though it didn't create the problem, it installed slope- and groundwater-monitoring devices, covered backyards with plastic sheeting to keep water from further seeping into the soil and agreed to pay the cost to repair any damage to landscaping resulting from the plastic sheeting.

Wal-Mart is nearing completion on repairs to the retaining wall, Simley said.

For Stahovich, just fixing the wall does not repair the permanent damage done to his home and others.

"Wal-Mart has not been impacted by the damage they have caused nor has Fieldstone Homes," he said. "It is just us homeowners that are struggling with the added burden of big companies taking advantage of hardworking families..."

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No Break for Wal-Mart on Its Meal Policy

Marie-Anne Hogarth
The Recorder
Thursday June 29               [back to top] 

According to plaintiffs lawyers, a $172 million verdict -- including $115 million in punitive damages -- wasn't enough to stop America's largest retailer from continuing to violate California's meal and rest break law. The question of compliance by Wal-Mart Stores Inc. -- and whether the company should have a court-appointed supervisor watching over its shoulder -- is playing out this week in a trial before Alameda County, Calif., Superior Court Judge Ronald Sabraw.

The case, Savaglio v. Wal-Mart Stores, is one of the few meal and rest break class actions to reach a trial verdict, as opposed to a settlement, lawyers say. And so the outcome of the injunctive relief phase could offer a rare glimpse into what measures a court might be willing to impose on a recalcitrant company.

"Wal-Mart is hypercontrolling and super-sensitive when it comes to their business operations," said Jessica Grant, a principal at The Furth Firm, which is representing the plaintiffs. "To see a case of this magnitude seeking an order on how they do business in California is unique."

Yet Wal-Mart argues the plaintiffs' allegations are ancient history. Since the company has worked hard to comply with all meal and rest laws, its attorneys argue, an injunction isn't appropriate, since that relief should be based on the likelihood of future behavior.

Even though Sabraw might not issue a final decision in this phase of the trial until August, some plaintiffs lawyers in the wage-and-hour arena are following the proceedings closely. If Sabraw rules against the retailer, they believe such a decision could have a positive impact in their settlement negotiations against other large corporations.

"Depending on the extent that the court imposes injunctive relief on Wal-Mart and that it is viewed by Wal-Mart as being an onerous requirement, it may impact [defendants'] willingness to take a case to trial," said Eric Grover, a partner with employment firm Keller Grover.

While many companies do implement programs and policies even before a settlement is reached, Grover said there are still many who find it cheaper to deny employees certain benefits and risk liability rather than comply with the law -- even after they have paid out a settlement.

He is currently representing plaintiffs suing Baker's Square restaurants over missed meal and rest breaks and managerial misclassifications. The company previously settled a similar case in California several years ago, said Grover, whose suit is pending in San Francisco Superior Court.

Plaintiffs in the Wal-Mart action are asking the court to appoint Emeryville, Calif.-based legal services provider LECG Inc. to act as a monitor, for Wal-Mart to undertake audits and report its compliance, and for the store to give its own employees notice of the injunction. The lawyers seek an additional $5 million in restitution for meal break violations between October and December 2000.

That was the period just before the implementation of California Labor Code §226.7, which charged employers payments for missed meal breaks. The extent of that liability is currently at issue before the California Supreme Court in Murphy v. Kenneth Cole Productions.

Plaintiffs want a court order enjoining Wal-Mart from asking employees to sign away their right to meal breaks, something they say often occurs at the retailer under coercive conditions.

The lawyers also say Wal-Mart should stop using a system that automatically clocks employees in and out for their meal breaks, which masks the true duration of their lunch, they say. The injunction is necessary since Wal-Mart has a history of ignoring even its own studies showing it was not following the law, Grant argues.

"Even today, after the jury in this case found Wal-Mart liable for punitive damages, Wal-Mart continues to violate specific provisions of both the California Labor Code and Industrial Welfare Commission Wage Orders," the plaintiffs contend in their brief.

Meanwhile, Wal-Mart lawyers and the company's outside counsel at Susman Godfrey argue an injunction isn't needed, since the retailer has demonstrated "phenomenal" compliance in California over the past three years. They fault plaintiffs for basing their argument on 5-to-8-year old documents, where injunctive relief under the Unfair Competition Law should be based on the probability of future misconduct instead.

During the jury trial, "this Court recognized the important distinction between current practices at Wal-Mart, rather than the events from 1998 through 2001, for the purposes of issuing an injunction," argued Steven Sklaver, an attorney for Wal-Mart with Susman Godfrey, in his trial brief.

Wal-Mart argued it has worked hard on the issue of meal and rest break compliance in its stores, making technological enhancements that include an automated procedure that keeps track of employee meal breaks.

Wal-Mart attorneys at Susman Godfrey didn't return telephone calls by press time. Gibson, Dunn & Crutcher partner Theodore Boutrous Jr. is representing the company in the appeal of the jury verdict.

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Wal-Mart's British Unit Agrees to a Union Contract

By Heather Timmons
New York Times
Thursday, June 29, 2006             [back to top] 

LONDON, June 29 — Wal-Mart may be anti-union at home, but overseas the company sometimes sings a different tune. The chain's British arm, Asda, which accounts for a tenth of total sales for Wal-Mart Stores, narrowly averted a costly strike on Thursday, after reaching an agreement with a union.

Employees at Asda's distribution centers were threatening a five-day strike starting Friday, during what is expected to be one of the busiest shopping weekends of the year. England plays Portugal in the World Cup on Saturday, and Asda estimates it will sell 10 million bottles of beer on Friday afternoon and Saturday morning in preparation for the game.

The agreement establishes nationwide collective bargaining for distribution center employees. In the past the union representing these employees generally negotiated agreements with Asda covering each workplace.

Unions will have a say on issues from health and safety to the technology used at work, and they will be able to recruit new members on the job. Next, the union plans to turn to employees in Asda's retail stores, and hopes to establish a national collective bargaining agreement there.

"This is a very different ethos and approach" than Wal-Mart has in the United States, said Paul Kenny, the acting general secretary of the G.M.B., the union involved. Wal-Mart bought Asda in 1999.

The agreement represents a shift in Asda's approach to unions, he said. "There had been a philosophy of excluding employees from meaningful discussions about the basics," Mr. Kenny said. "The company has realized that the system needs to change."

Asda was fined £850,000 ($1.48 million) in February after a British employment tribunal found that it was offering employees at one distribution depot raises to give up their rights to collective bargaining; such offers are illegal in Britain.

On Thursday, Asda focused on the strike's being called off. "We're pleased to have signed an agreement acceptable to both sides to end the current dispute — good news for our customers and colleagues alike," Asda's chief operating officer, David Cheesewright, said in a statement.

He said Asda expected to serve 24 customers every second on Friday afternoon and Saturday morning. "A crack team of footy-filling shelf stackers is on hand throughout the weekend to restock our stores as quickly as customers try to empty the shelves," he said. "Footy" is slang for football, known as soccer in the United States.

Asda been stockpiling basic necessities like diapers and toilet paper on its shelves in anticipation of the strikes. In some stores, the company took big-ticket items like televisions off the shelves to make more room for necessities.

The agreement is "exactly what the union demanded," said Jan Furstenborg, the commercial director of Union Network International, a global group with 900 union members that has been pushing Wal-Mart to negotiate with unions. "This means the company must begin to realize that they can't ignore the will of their employees to join and be represented by trade unions," Mr. Furstenborg said.

Unlike its United States parent, Asda has a decades-long relationship with unions, and about a third of its distribution center employees are union members.

Wal-Mart has long been known for vigorously fighting unions, and no workers in North America are represented by unions. The company says that unions would hurt its profitability and that it treats its employees fairly without them.

When Wal-Mart employees at an outlet in Canada voted last year to unionize, the retailer shut the store, contending that it was unprofitable. In 2000, shortly after 11 Wal-Mart meat cutters in Texas voted to form a union, the company eliminated meat-cutter jobs companywide and announced that it would use packaged meat instead.

British retail unions have a relatively benign reputation. "At the end of the day, the unions are very cooperative, provided you give them the chance to have their say," said Richard Ratner, a retail analyst with Seymour Pierce. "To try to ignore them entirely is a mistake."

Asda and unions have not had problems in the past, he said.

Asda is Britain's No. 2 retailer behind Tesco, another superstore that sells everything from groceries to clothing. Competition is fierce in British retailing, and Asda is struggling against rivals who aim at customers who are interested in more than just low prices, analysts say. Tesco has 31.4 percent of Britain's grocery market, while Asda has 16.5 percent, according to the research firm TNS.

Wal-Mart's ownership of Asda has not always gone smoothly, and there has been a great deal of turnover at top management positions. Analysts say that stems from innate differences between the companies.

"When you juxtapose the Wal-Mart, small-town America, Southern states culture with the British slightly self-deprecating, slightly cynical, slightly skeptical culture, they're uncomfortable bedfellows," said Richard Hyman, an analyst at Verdict Research, which focuses on retailing.

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UPDATE 2-Asda agreement with union avoids depot strike

(Adds comment from Asda, more detail)

By Gavin Haycock
Reuters                               [back to top] 

LONDON, June 29  - British supermarket chain Asda and the GMB union reached a settlement in a dispute over union recognition on Thursday, averting a five-day strike set to coincide with consumer demand fuelled by the soccer World Cup.

The deal came shortly before Asda, the British arm of the world's biggest retailer, Wal-Mart Stores Inc. <WMT.N>, was due to go to the High Court in London to try to block the strike.

The GMB called the strike as part of a drive to get national collective bargaining rights at Asda's 24 distribution depots.

As part of the deal, a new distribution National Joint Council will be established, union-management meetings will be held at least twice a year and talks will be held on updating existing collective bargaining agreements at nine Asda depots.

"This new agreement which GMB and Asda Wal-Mart have worked very hard to achieve heralds a new fresh approach to representation and bargaining between the company and the GMB," said the union's General Secretary Paul Kenny.

"It is the clear intention of this new agreement that issues beneficial to the growth of the company (and) the economic benefit of its employees will be dealt with through the new National Joint Council," Kenny said in a statement.

Asda said that due to the anticipated sales boost from the World Cup and an ongoing spell of hot weather it expects to sell around 10 million bottles of beer between Friday afternoon and Saturday morning ahead of the England match -- more than it would sell on the busiest day in the run-up to Christmas.

KEY MATCH

The timing of the industrial action provided an important test for Asda's Andy Bond, who became chief executive in March, 2005.

The protest, had it gone ahead, would also have coincided with England's quarter-final match against Portugual in Germany on Saturday afternoon, threatening to disrupt the retailer's ability to keep shelves fully stocked.

Major retailers such as Asda, Tesco Plc <TSCO.L> and J Sainbsury <SBRY.L> have seen sharp spikes in consumer spending ahead of key World Cup soccer matches.

"We're pleased to have signed an agreement acceptable to both sides to end the current dispute ...," said Asda Chief Operating Officer David Cheesewright.

The GMB balloted depot workers over a strike in March, with members voting on June 21 to take industrial action. Since then Bond and the GMB's Paul Kenny have hosted extensive talks aimed at finding a settlement.

© Reuters 2006. All rights reserved.

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UK Asda Warehouse Workers Call Off Strike Action

London Bureau
Dow Jones Newswires
06-29-06                                    [back to top] 

 LONDON -(Dow Jones)- Warehouse workers at Wal-Mart Stores Inc.'s (WMT) Asda Group Ltd., the U.K.'s second-largest supermarket chain, have called off a strike planned for Wednesday, Sky News television reported Thursday.

The strike was called after a row with the company over pay and union recognition. Last week, Asda was reportedly considering taking legal action against the GMB to stop the strike action.

Asda has a 16.5% share of the U.K. market.

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Planned Asda strike called off

This is LONDON
29/06/06                [back to top] 

A planned strike by thousands of workers at supermarket giant Asda was called off at the last minute.

Members of the GMB union at 20 distribution depots across the country were due to walk out for five days from Friday, threatening to disrupt deliveries to supermarkets.

But following talks between the two sides a breakthrough was achieved and the strike will not go ahead.

The workers have been involved in a long-running dispute over pay, health and safety and national bargaining which threatened one of the biggest bouts of industrial action involving a leading supermarket for many years.

The company had been due to seek an injunction in the High Court after alleging there had been irregularities in a recent ballot of workers.

But the work action will not go ahead following the agreement, which was thrashed out between company officials and union leaders during several hours of talks at TUC headquarters in central London.

©2006 Associated New Media

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Critics: Wal-Mart Flip-Flopped

By Tory Newmyer
Roll Call
Wednesday, June 28, 2006            [back to top] 

Last October, Wal-Mart chief executive Lee Scott made waves by urging Congress to consider raising the federal minimum wage - something many retailers had long opposed. He noted that the store's own customers are "struggling to get by," then added that "while it is unusual for us to take a public position on a public policy issue of this kind, we simply believe it is time for Congress to take a responsible look at the minimum wage and other legislation that may help working families."

The declaration came as part of a broader push by the low-cost retailer to put a friendlier face on its often troubled corporate image.

But now, with both chambers of Congress mulling hikes to the federal pay standard, Wal-Mart's critics are charging that the company has abandoned Scott's pledge to support a higher wage. They say that after reaping good public relations from Scott's statement last fall, Wal-Mart has cynically dumped the issue, even as major trade groups it belongs to, primarily the U.S. Chamber of Commerce and the Retail Industry Leaders Association, help lead the fight against a higher minimum wage.

"They did this for PR reasons, and then the true colors come out when the talk no longer meets up with that action. In this case, it's pretty obvious," said Chris Kofinis, spokesman for Wake Up Wal-Mart, a group that's critical of the company's practices.

Wal-Mart officials acknowledge, and several Congressional aides confirm, that the retail giant is sitting out the debate on the minimum wage increase. But the company disputes the notion that the move amounts to an about-face from the position Scott represented last fall.

Instead, Lee Culpepper, the company's top lobbyist in Washington, D.C., said the chief executive's statement was misinterpreted. Scott was not calling for Congress to raise the minimum wage, Culpepper said - he simply was asking lawmakers to consider the issue.

"We haven't said anything more or less," Culpepper said on Tuesday. "I think what he said was clear. He said Congress should take a look at it. If reporters want to report differently from that, I can't speak to that."

Culpepper said the company's lobbyists have communicated Wal-Mart's position on the issue to its trade groups.

"We've just made them aware that we've encouraged Congress to take a look at an increase in the minimum wage," he said. But he said the company has not gone so far as to ask the trade groups not to lobby on the issue, leaving it up to them "to determine their association position."

To Wal-Mart's critics, the company's inaction, combined with the robust opposition to a wage hike thrown up by trade groups it belongs to, add up to a backdoor push by the nation's largest employer to stifle a higher pay standard.

Wake Up Wal-Mart, a group primarily funded by labor groups, last week challenged the company to endorse raising the minimum wage from $5.15 to $7.25 per hour, after plans put forward by Sen. Edward Kennedy (D-Mass.) and Rep. George Miller (D-Calif.), and then to lobby in support of the change.

With any such outcome facing long odds, the company's detractors are trying to tell the story of what they call Wal-Mart's "Potomac two-step" on Capitol Hill.

"We want to hold Lee Scott to his word," said Nu Wexler, spokesman for Wal-Mart Watch, another labor-funded group targeting the company.

Tom Kiley, a spokesman for House Education and the Workforce ranking member Miller, said Democrats are disappointed with Wal-Mart's absence from the debate.

"At the time [of Scott's statement], we welcomed that," he said. "Since then, we haven't heard from them at all. That's unfortunate, obviously."

This sparring comes as the company, expanding into urban areas dominated in Congress by Democrats, has stepped up its outreach to members of the minority party.

Wal-Mart in recent years has directed an increasing portion of its political donations to Democrats, giving them nearly 30 percent of their political action committee dollars so far this cycle. That's still just a fraction of what the company gives to Republicans, but it's up from the minuscule 2 percent a decade ago, according to figures available from PoliticalMoneyLine.com.

Scott, the chief executive, huddled with members of the Congressional Hispanic Caucus in February, and top Wal-Mart officials met with members of the Congressional Black Caucus last spring.

But Republicans have remained the company's most stalwart defenders on tax, health care and labor issues, among other things. And this summer, debate over a minimum wage increase has taken on a highly partisan tone. While most GOPers argue bumping up the pay standard would hurt small businesses, Democrats counter that the current wage, untouched in a decade, traps millions below the poverty line.

The minority party is rallying around the issue as an antidote to flag-burning, gay marriage and estate tax debates stoked by Republicans to rile their own base for the upcoming elections.

Last week, eight Senate Republicans joined 43 Democrats and an Independent in supporting a wage hike, but the votes fell short of the 60 required to clear its passage. Senate Democrats are vowing to keep the issue front and center, with Minority Leader Harry Reid (Nev.) now tying the matter to a Congressional pay increase.

On the House side, Democrats are trying to attach a minimum wage increase to spending bills. After successfully adding it to the Labor-HHS appropriations bill, House Republican leaders pulled the bill from the floor schedule. House GOP leaders are signaling they will not allow a floor vote on the minimum wage this year, and it is unclear how that standoff will be resolved.

In addition, a flurry of minimum-wage initiatives may end up on ballots nationwide, designed both for their ability to improve Democratic voter turnout as well as for the goal of improving pay for low-income workers.

For his part, Wal-Mart lobbyist Culpepper said he remains available to explain Wal-Mart's position on the wage issue.

"One of our key missions is to meet with Members on Capitol Hill to correct the record about what our critics have said about us," he said.

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Asda union debacle goes to court

DSN Retailing Today
Wednesday, June 28, 2006           [back to top] 

In its ongoing saga to prevent a strike by union workers, Wal-Mart's British supermarket division Asda is taking its arguments to the High Court in London this week in an effort to get an injunction. The move is in reaction to threats of a 5-day strike on the part of the union workers at Asda's distribution centers. According to published reports, truck drivers and DC employees at 20 Asda facilities are scheduled to strike starting June 30.

The union, known as the GMB, called a vote as part of a drive to secure national collective bargaining rights at all the retailer's distribution depots. It said members voted three to one to take action and that they were determined to win greater union recognition.

Asda said about two-thirds of its depot workers were not union members and that it would do all it could to keep stores stocked.

"The GMB's left us with no choice but to take legal action to try and put a stop to this," an Asda spokesman said. "We're sad we feel we have to do this, but there were serious flaws in the ballot process with people who don't even work for Asda being sent ballot papers."

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Workers & Labor Strike looms for Wal-Mart UK subsidiary

By Simon Basketter
AxisofLogic.com
Jun 28, 2006                            [back to top] 

Workers ready to take on Asda

Thousands of workers are in a battle for union rights with the world's largest retailer. The dispute pits a multinational firm against low paid workers and their union. The workers deserve the backing of everyone who is sick of the domination of food supply by huge corporations.

The workers - members of the GMB union - were set to to hold a five day strike from Friday at the delivery depots of the supermarket Asda.XX The company is using the anti-union laws to attempt to hold off the action. As Socialist Worker went to press, the supermarket was due to apply for an injunction to stop workers from walking out on Friday, claiming that there were irregularities in the strike vote.

The GMB sent out 5,347 ballot papers, with 57 per cent of its members taking part in the voting. They backed strikes by 2,209 to 771, while action short of a strike was supported by 2,483 votes to 487.

Asda's case is that allegedly there are 160 people who were wrongly included in or excluded from the ballot. Even if this were true, it could not have affected the result of the vote.

During the ballot for action, shop stewards accused Asda of bullying tactics. These included putting CDs in drivers' cabs urging them to vote against the strike, making lorry drivers go for interviews with senior management to persuade them not to strike and writing to workers' families warning them against strike action.

One shop steward was briefly suspended by the company for flying an England flag with "vote yes" written on it.

The strike is due to affect 20 distribution depots including Bedford, Chepstow, Dartford, Didcot, Erith, Falkirk, Grangemouth, Ince George in Wigan, Lymedale in Staffordshire, Lutterworth in Leicestershire, Portbury in Bristol, Skelmersdale, Teesport, ADC Wigan, Wakefield and Washington.XX Paul Kenny, the GMB's general secretary, said, "GMB members in the 20 Asda distribution depots have spoken. They have voted by three to one to take strike action despite all of the company's attempts to dissuade or intimidate them to vote no. GMB members have been subjected to unprecedented interference and propaganda by Asda.

"GMB members tell us that the company is gearing up and may illegally attempt to use agency labour to do our members' jobs.

"Doing this during an official trade dispute is illegal. Any attempt by outside agencies to interfere or undermine this lawful industrial action by GMB members will be responded to with full vigour."

Workers believe the company, owned by the US company Wal-Mart, will seek to break the strike. Asda told the Guardian the company had been recruiting a significant number of staff but attributed this to an upsurge in trading brought on by the World Cup and the sunny weather.

Asda plans to bus staff into work during the strike, claiming to the Sunday Times that it is in an effort to protect the identity of those who cross picket lines.

The union is calling for the establishment of proper national bargaining structures between the company and the GMB covering pay, conditions and union facilities in all 20 Asda distribution depots.

The workers are also campaigning for outstanding bonus payments from 2005 and fighting against higher workloads for depot staff.

At the current 1,100 pick rate each worker shifts between two and 10 tonnes of product each day - about the weight of five cars. Asda has attempted to increase this to 1,400 each day.

After the five day strike workers will then begin a ban on overtime and a work to rule aimed at stopping the company's attempts to recover from the walkout.

GMB Swindon organiser Kevin Brandstatter was at the shop stewards meeting that called the strike. He said, "It was a very, very determined meeting. The shop stewards voted unanimously.

"Asda don't have much room for fresh and frozen produce. The strike is for five days so people will notice they haven't got much food in."

One Washington Asda depot worker said, "Taking five days action is not something the shop stewards have taken lightly. They feel very strongly about this. Asda say they are a family, caring company, but I haven't seen that side."

Wal-Mart's record

Asda is owned by Wal-Mart, the infamous US multinational. Wal-Mart is the largest US private sector employer with more than 1.3 million workers.

Wal-Mart is the world's largest retailer, and made profits of £5.5 billion in 2004. It has kept unions out of stores in the US.

Last year in Canada, when workers at one outlet successfully formed a union, Wal-Mart closed the store.

Lee Scott, the Wal-Mart president, got $17.5 million in 2004, while four of the ten richest people in the world come from the Walton family, heirs to the Wal-Mart fortune.

The US National Labour Committee found workers for Wal-Mart suppliers in China's Guangdong province working 130 hours per week for an average of 16.5 cents an hour.

In 2004 year the US retail group paid $77,000 to settle charges of 24 child labour violations in the US. The same year an internal audit found 1,370 similar problems and in 2000 it paid $206,650 to resolve similar charges.

The GMB union sponsors over 100 Labour MPs, yet the government upholds the anti?union laws that Asda's bosses are trying to use to stop the strike.

In February Asda was fined £850,000 at an employment tribunal. Asda had brought the PR company Portland into its depot in Washington, Tyne and Wear, to draw up anti-GMB leaflets before a ballot on union rights.

Staff were sent literature described in the tribunal judgement as "very hostile to trade unions and highly disparaging of the collective bargaining process".

Portland was founded by Tim Allan, a former New Labour spin doctor who worked for Tony Blair for six years in the 1990s, including a year as Alistair Campbell's deputy in Downing Street.

The tribunal found the supermarket chain guilty of promising 340 distribution staff a 10 percent pay rise if they agreed to give up the collective bargaining right negotiated by their union. This action is illegal under 1992 labour relations law.

Copyright Socialist Worker (unless otherwise stated). You may republish if you include an active link to the original and leave this notice in place.

http://www.axisoflogic.com/artman/publish/article_22365.shtml

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Asda seeks injunction to block depot strike

Julia Finch
Guardian
Wednesday June 28, 2006             [back to top] 

The supermarket group Asda will go to the high court this afternoon seeking an injunction to stop a five-day strike at its supply depots due to start on Friday. The strike could leave shelves empty within days and Asda executives are working on contingency plans, including bussing in depot staff who are not union members. In recent days the company has been discounting bulky items such as TVs to make space in its back-of-store warehouses for extra food and drink.

Asda said bussing was necessary because "electronic surveillance" by the GMB union might intimidate staff.

The GMB has accused Asda of recruiting agency staff to cover for striking workers but the company said any extra staff had been brought in to cover for the busy World Cup period. "We are a law-abiding company," a spokesman said. "That [allegation] is claptrap."

Asda's attempt to get an injunction is the latest step in a long-running dispute over pay, health and safety issues, and national bargaining. A strike ballot achieved a 57% turnout and three-to-one vote in favour of a walkout.

Asda claims there were "serious flaws" in the ballot process and that the GMB sent out voting papers to many people who no longer worked for the company.

The spokesman for Asda, which is part of the US Wal-Mart empire, said the company had " a very strong case" and added: "It is absolutely appalling that 165,000 Asda colleagues [staff] are being held to ransom and their livelihoods being put in jeopardy by 2,000 people."

John Longworth, legal and external affairs director, said: "Only one in six [of depot staff] voted for the strike and two-thirds of the depot staff aren't even in the union." The company was not anti-union, he said. "We have said to the union, 'Come down to the depots and recruit members, and when you get enough members we will recognise you.' You don't often get employers telling their staff to join the union but we can't force people to join."

A GMB spokesman said it would oppose the injunction application "vigorously" and that Asda was to blame for any ballot papers being sent to former employees because the company refused to tell the union who was paying dues. "They send the money but will not say who paid it."

The spokesman said the union had complained to the Department of Trade and Industry about the problem six months ago. If the ballot was ruled unlawful, "Asda will have caused it, which will be pretty rough justice."

Guardian Unlimited © Guardian Newspapers Limited 2006

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Teacher gives Wal-Mart a lesson in civic activism

Steve Kirby
Contra Costa Times
June 27, 2006                   [back to top] 

If it weren't for a luxury housing developer and the world's largest retailer, Steve Kirby might be just an energetic schoolteacher and man-about-Hercules with a million hobbies.

But today Kirby is an anti-Wal-Mart poster boy on the strength of an impassioned speech last month to the Hercules City Council, which invoked eminent domain to strip the retail giant of a lot near the waterfront.

Wal-Mart had wooed the city with promises of jobs and sales taxes. Kirby and Friends of Hercules, the grass-roots group he co-founded, warned that a big-box store would ruin the pedestrian-friendly new neighborhoods west of San Pablo Avenue.

"Wal-Mart will never, ever understand what we want," Kirby told the council. "I say, throw the bums out."

That sound bite, carried on radio, television, the Internet and in newspapers, also made the rounds at Castro Elementary School in El Cerrito, where Kirby has taught since 1983.

"A couple of first-graders came up to me when I was on recess duty and said, 'Hey, Mr. Kirby! Throw the bums out!' and we had a big laugh," he said.

He turned the episode into a writing exercise for his third-graders. "I'm trying to teach them to write certain kinds of essays, to inform and influence opinion. It became a good civics lesson."

Wal-Mart spokesman Kevin Loscotoff, without naming Kirby or Friends of Hercules, described Wal-Mart opponents as out of touch with mainstream Herculeans, who, he said, widely support a Wal-Mart store and are being denied a chance to evaluate the company's latest store proposal.

The Wal-Mart fight is not Kirby's first against a well-heeled applicant. In 2001, a Southern California developer announced plans to build more than 500 houses, a hotel, offices and stores on a wildland tract on the eastern edge of Hercules.

Kirby and some other residents formed the Friends of Franklin Canyon -- which later would evolve into Friends of Hercules -- to fight the development.

They canvassed neighborhoods, set up tables in front of stores, started a Web site, made phone calls and wrote to a growing e-mail tree, warning of an environmental debacle. Eventually, they sponsored a successful ballot initiative that rewrote the city's general plan for the Franklin Canyon area, restricting land use there largely to agriculture and recreation.

The Franklin Canyon area remains undeveloped.

"David brought down Goliath," Jeffra Cook, another founding member of the group, said after the November 2004 vote.

Kirby is not the leader of Friends of Hercules, he said, nor does it have any leaders.

"We're a coalition, a network, a committee," Kirby said. "We're on HOA boards, the chamber (of commerce), the NAACP, youth groups. We're an eclectic group of people.

"We receive information and disseminate information. We're not Republicans or Democrats. We're not that kind of political group."

Kathy Parsons does not know Kirby well on a personal level but, like many other Hercules residents, knows him through Friends of Hercules.

"He is certainly one of my heroes," Parsons said. "I would hate to think what Hercules would be like without him and his vigilance with issues, big and small, in our community."

In 2004, frustrated by what they perceived as waffling by the council over Franklin Canyon, Kirby and his group ran a slate of three candidates. One, Charleen Raines, won.

The slate lacked a campaign manager, so Kirby volunteered

"He just comes through," Raines said, "time after time after time."

Kirby, 56, was born in Berkeley and lived in El Cerrito until 1988. He attended Harding Elementary, Portola Middle and El Cerrito High schools and received a bachelor of arts in psychology and a master's in education administration from UC Berkeley.

He is not the kind of single-minded, single-issue activist who invites the comment, "Get a life."

"Steve is active in so many things, I don't know how he keeps so many balls in the air," Raines said."

Kirby is the past board president of Contra Costa Civic Theatre in El Cerrito, where he acted in four musicals, one of which he also produced. He has been his school's union representative for most of his career and has been a delegate to the National Education Association. He is president of his Bay Pointe Homeowners Association in Hercules and a member of the executive committee of the Sierra Club's West County chapter.

He plays guitar and sings with Scouts of the Cascades, a cowboy trio. He is a scuba diver and a photographer. He plays golf. He is the announcer for the Hercules Fourth of July parade. He develops Web sites and teaches in the UC Berkeley Graduate School of Education's academic talent development program. He has been a mentor teacher, master teacher and summer school principal and has a long list of academic awards.

He moved to Hercules in 1988, he said, "to be nearer to the open spaces, hills, hiking areas."

Although he helped block development in Franklin Canyon, elsewhere in the city, hills were flattened, traffic worsened and commercial areas went "south," Kirby said.

A series of city-sponsored neighborhood planning sessions in 2000 culminated in the Hercules Waterfront Plan and the Central Hercules Plan.

The plans favor pedestrian-friendly development such as live-work studios, houses with back alleys for car access, upscale boutiques and restaurants, a Capitol Corridor train station and a ferry terminal.

"I'd like to see it as a real nice destination for people to come to and meet friends, go to the restaurants, have some coffee, read the paper. Maybe an Internet cafe," Kirby said.

Wal-Mart's tract is 171/4 acres roughly midway between San Pablo Avenue and the Bay. A 2003 development agreement limits store size there to 64,000 square feet. Wal-Mart's latest scaled-down application calls for 99,000.

Wal-Mart is reviewing its legal options, Loscotoff has said. He disputed that the 64,000-square-foot figure is binding and added, "How is it fair to the residents of Hercules that they cannot see this project? The fact is residents have not been acquainted with our recent application."

Kirby said he hopes talks between the parties result in a deal in which "we'll buy the land and Wal-Mart will leave."

"We're not afraid that they (the city) are going to have legal fees. We want them to stay the course. We want them to prevail," he said.

"Meanwhile, we can be an inspiration to other cities bullied by Wal-Mart."

BIOGRAPHY

NAME: Steve Kirby

AGE: 56

RESIDENCE: Hercules

OCCUPATION: Teacher

CLAIM TO FAME: His fight against Wal-Mart's plan to build a store near the Hercules waterfront, culminating in a call to the Hercules City Council to "Throw the bums out." Those words, which made the rounds of the Internet, have become a battle cry of Wal-Mart opponents and made Kirby an anti-Wal-Mart poster boy.

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NATO group tours Arkansas Wal-Mart boom

By MARCUS KABEL
Associated Press               [back to top] 

JUN. 27 5:50 P.M. ET The economic boom in northwest Arkansas as Wal-Mart has grown is a case study in the positive side of globalization and trade with China, visiting NATO parliament members said Tuesday.

Members of the economic and security committee of NATO's Parliamentary Assembly, which represents parliaments from NATO's 26 member and 13 associated countries, were in the state for three days as part of a study of globalization and the implications of Chinese growth.

Hugh Bayley, a Labor member of the British House of Commons and chairman of the committee, said concern in the U.S. and Europe about losing jobs overseas sometimes overlooked the creation of jobs from globalization.

"You can't wish away globalization, you have to find ways to turn it to your advantage," Bayley told The Associated Press during a meeting with companies that sell products to Wal-Mart Stores Inc., the world's largest retailer. "If Wal-Mart is an example, it is one of creating jobs," Bayley said.

Kurt Bodewig, a former German transportation minister and now member of the Bundestag, said northwest Arkansas was "a positive example of local economic development through global business activity".

Bayley said the Arkansas visit, arranged by U.S. Rep. John Boozeman, R-Ark., was aimed at looking at the impact of global trade and especially trade with China. The second and final stop of their trip will be San Francisco.

Bayley said it was too early to draw conclusions, but he pointed to the growth of the supplier business as companies that sell to Wal-Mart have set up shop near its Bentonville headquarters, helping drive an economic boom.

"There is a lot of concern in the United States about jobs going overseas, but there is also job creation here," he said.

Bayley said there were similar concerns in Europe about job losses to globalization.

Analysts say supplier growth is one of the main factors that has driven a red-hot economy in northwest Arkansas. The number of supplier offices around Wal-Mart headquarters has grown from less than 50 in 1994 to over 1,200 currently. Per capita income in the region rose 19 percent, nearly twice the national rate, from 2000 to 2004 and job growth was 4.2 percent in February from a year earlier.

Copyright 2006, by The Associated Press. All rights reserved.

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ATTORNEYS SEEK INJUNCTION AGAINST WAL-MART FOR BREAKS

BayCityNews
06/26/06                [back to top] 

Attorneys for plaintiffs who won a $172 million jury verdict against Wal-Mart for not providing paid meal and rest breaks for its California employees are back in court today seeking an injunction that would force the retail giant to change its practices.

San Francisco attorney Fred Furth represents 116,000 current and former hourly workers at Wal-Mart and Sam's Club stores in California who won their trial last Dec. 22 on their claim that Wal-Mart violated their rights under state labor laws by denying them their meal and rest breaks and by secretly deleting hours worked from their paychecks.

Following a three-month trial and two-and-a-half days of deliberations, an Alameda County Superior Court jury awarded the plaintiffs $57.3 million in compensatory damages and $115 million in punitive damages.

The lawsuit was filed in February 2001 and took more than four years to go to trial.

Furth and Wal-Mart attorneys are back before Judge Ronald Sabraw today for a non-jury hearing that's expected to take at least a week. Furth wants Sabraw to issue an injunction ordering Wal-Mart to have all its employees punch in and punch out for their paid rest breaks.

Following the jury verdict, Wal-Mart attorney Neal Manne said the company admits that it initially violated California law but he said the company has been in compliance with the law since the end of 2003.

In a recent court brief, Manne said "the alleged need to impose the extraordinary remedy of a meal period injunction is moot" because Wal-Mart employees have been able to take their breaks more than 99 percent of the time since mid-2003.

Manne said Sabraw himself has found that there is no evidence that Wal-Mart had an express policy of discouraging rest breaks.

Manne said wage costs as a percentage of sales at Wal-Mart have increased and "turnover is low and associate morale is high, results that could not have occurred in a fictional world of uniform understaffing."

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Walmart: price strategy does not always prevail

People's Daily Online                        [back to top] 

The world largest retailer Walmart was glad to see its sales revenue up by 12.3 %, profit up by 6.3% and shares up by 5 cents for the first quarter of the year but was sad to declare its withdrawal from the South Korean market after selling its shares there to Shinsegae for US$ 882 million. A report on July 17th said that Wal-mart plans to close more loss-making stores in Germany following the shutdown of two stores in Duesseldorf.

Two major reasons underlie Walmart's withdrawal from South Korea. Most of supermarket consumers there are female. They like selecting goods carefully and are not sensitive to prices. Wal-mart's high racks make the shopping space look narrow, which does not cater to the female consumers' preference as a comfortable and bright environment.

The location of Wal-mart stores is another problem. Wal-mart normally overcomes the cost of expensive land by buying it in blocks in order to reduce cost. However this does not help Wal-mart impress consumers with its convenience of service.

The most serious mistake that Wal-mart has ever made however, lies in the cultural arrogance embedded in its operating strategy. Analysts held that Wal-mart had to give up the South Korean market because it expected local consumers there to adapt to Wal-mart instead of adapting to local consumers.

Wal-mart made the same mistake in Germany. The corporate culture of German business developed out of the social market economy is different from the American free market economy and therefore pays more attention to social welfare and union's rights.

The controversy sparked by Walt-mart's codes last year proved exactly that. One article of its code of conduct consisting of many pages and 27 terms for dozens of Wal-mart Germany stores forbids relationships at work and encourages employees to report any breach of regulation through a hotline. Instead being concerned about the effectiveness of the rule on preventing sexual harassment, trade unions and ethicists questioned angrily whether the hotline would be abused, intrude privacy and lead to job loss of innocent staffs under false charges.

The local labor court then ruled that this part of Wal-mart's ethics code was against the law and ordered it to consult with the trade union before implementing such code. Besides, Walmart's preference for part-time workers also contravenes the German common practice.

Walmart's worldwide success - for example, it opened its first German store in 1997 and has more than 80 now, is built on its commitment to individuals, consumers and quality. In East Germany where planned economy long prevailed, Walmart's management works particularly well.

But its withdrawal from South Korea and closure of some of its German stores suggest that Walmart's lack of understanding in Asia and Europe, culturally and psychologically, for which it has now paid the costs for.

The implication of Walmart's experience is that a business culture boosts business only when it is ready to be adaptive.

By People's Daily Online

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DeStefano Slams Wal-Mart

TV Ads Attack Retailer For Lack Of Health Care Coverage

By MARK PAZNIOKAS
Courant Staff Writer
June 26 2006                        [back to top] 

On the eve of asking the AFL-CIO to endorse him for governor, New Haven Mayor John DeStefano Jr. is airing a commercial attacking one of labor's least favorite employers: Wal-Mart.

A TV ad debuting today touts DeStefano's universal health care plan and jabs at the nation's largest retailer for relying on state-subsidized insurance for hundreds of its Connecticut workers.

"Connecticut taxpayers pay over $5 million a year to provide health care to Wal-Mart workers, because the company won't pay for it themselves," DeStefano says in the 30-second commercial.

The commercial is DeStefano's second in a week to address universal health care, signaling a shift in emphasis from Connecticut's lagging performance in creating jobs under Republican Gov. M. Jodi Rell and her predecessor, John G. Rowland.

DeStefano and Stamford Mayor Dannel P. Malloy, his opponent in the Aug. 8 Democratic primary, are to address the AFL-CIO convention Tuesday in New Haven.

With DeStefano already endorsed by the AFL-CIO's executive board and dozens of unions, he is the favorite to win the two-thirds vote necessary for the broader convention endorsement.

In an interview Sunday, DeStefano said the timing of the new ad was coincidental. The ad was less an appeal to organized labor than a message to working families struggling to afford health care, he said.

"I am going to stand with families who don't have access to health care, whether or not they are families at Wal-Mart," DeStefano said. "I will take their side against big corporations."

His previous ad began a week ago and promoted universal health care and his working-class roots as the son of a New Haven police officer. Malloy has yet to go on television, though he has the budget for a television blitz likely to begin after the July 4th holiday, when television audiences might be larger.

"We're proud of the fact that Dan was the first candidate in the race to lay out a vision on health care, first with a plan for children," said Roy Occhiogrosso, a consultant advising Malloy.

DeStefano and Malloy each have called for universal health care, differing on how to pay for their plans. Malloy would increase the cigarette tax by 95 cents to $2.46 per pack, while DeStefano would make employers pay by closing corporate income tax loopholes.

"As governor, my universal health care plan closes corporate loopholes and uses the money to provide affordable health care for everyone," DeStefano says in the new ad. "And if Wal-Mart won't cover their workers - we will. And we'll send Wal-Mart the bill."

DeStefano would eliminate exemptions that allow many companies to pay only $250 in corporate income taxes, but he also would allow employers to avoid half of the increase by providing health benefits.

According to the Connecticut Health Policy Project, 824 Wal-Mart employees and twice as many dependents rely on the state-subsidized HUSKY program for health coverage at an annual cost in 2004 of $5.6 million.

The problem of uninsured workers is far larger: an estimated 356,000 Connecticut residents, most of whom are employed, are without health coverage.

"I see universal health care as part of any job-creation strategy, just as I see transportation policy and health policy as part of economic growth," DeStefano said. "They're all related."

But DeStefano said that his emphasis has shifted to health care.

"I've heard it from small business. I've heard it from workers and I've heard it from [health care] providers," DeStefano said. "It is across geography and interest groups, and it's creating a greater sense of urgency about the issue in my mind."

Copyright 2006, Hartford Courant

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CHINA: Wal-Mart Advances Plans For Chinese Card

Namnews
Monday 26th June 2006         [back to top] 

Wal-Mart is advancing plans to launch its own credit card in China in a partnership with GE Money and Shenzhen Development Bank. The card will be the first of its kind to be issued by a foreign retailer in China, and would be issued by SDB, with support from GE's consumer finance unit. GE Money currently issues Wal-Mart's private-label credit cards in the US, and in Latin America.

GE Money is recruiting an account manager to handle Wal-Mart's relationship with SDB, as well as a card product risk manager. It is also recruiting an executive for SDB to oversee the business development of partnerships with other foreign retailers in China.

The move to create a private-label credit card reflects Wal-Mart's commitment to expand its China operations, where it is rolling out its stores to secondary inland cities.

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Can Wal-Mart buy off the neighbors?

The king of retailers plans to offer cash grants to stores near some new locations.

Susanna Hamner,
Business 2.0 Magazine
June 26 2006                            [back to top] 

(Business 2.0 Magazine) -- During its 40 years in business, Wal-Mart has been attacked for forcing mom-and-pop shops out of business by underselling them. But only now has the criticism started to seriously threaten expansion into new neighborhoods, writes Wal-Mart CEO H. Lee Scott Jr. in a letter on the company's internal website. So the $316 billion retailer has come up with an unusual strategy: offering cash and benefits to keep tiny rivals afloat.

In April, Wal-Mart (Charts) announced plans to spend $1.5 million in financial grants, ads, and training seminars for small firms near 10 of the 50 stores set to open in blighted urban areas over the next two years. The chamber of commerce in each city gets a $50,000 donation, and Wal-Mart promises to share its internal report on business trends. Spokesman Dan Fogleman calls it "a commitment to help communities that need the most help."

In return for this investment, which is less than a week's revenue for an average Wal-Mart store, the company gets to produce newspaper ads and in-store radio spots highlighting the small businesses it's helping. Will that be enough to reverse the perception that a new Wal-Mart is a curse on local retailers--and gain the company entry into ever more communities?

The Experts Sound Off Richard Lipsky, Lobbyist, Neighborhood Retail Alliance

It's a futile gesture. Whatever good they'd generate through this program would be more than offset by the damage they'd do by taking sales away from existing business. Are we to believe that they are going to nurture these businesses and not sell competing products?

Lawrence Gelburd, Lecturer, Wharton Business School

They have mishandled their PR for so long that they are now furiously backpedaling, trying to say the right thing. But I don't think they're licking their chops, saying "Gee, I wish these small companies would go out of business." They actually have an interest in having these stores stick around.

Wal-Mart Employee, San Leandro, Calif., store

Time will tell if it's a PR stunt. Other businesses, I've heard, often close because of Wal-Mart, but I've never seen it. I've actually seen businesses open near my former store, like Trader Joe's and Whole Foods (Charts). So Wal-Mart can help business and the community grow at the same time.

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Asda to bus in workers as strike looms

Richard Fletcher
The Sunday Times
June 25, 2006                      [back to top] 

ASDA, the supermarket chain, is to bus staff into work in an effort to protect the identity of those who cross picket lines.

The GMB union has announced plans to film staff entering and leaving depots during this week’s strike in an attempt to prove that the supermarket chain is illegally using agency staff to break the strike.

Under new legislation it is illegal for agencies to supply temporary staff to replace strikers. But Asda has accused the union of intimidating staff and bullying them.

A spokesman said: “Colleagues are calling us saying that the GMB’s plans are equivalent to electronic bullying — so we are doing all we can to ensure anyone who wants to work can do, without having their numberplate recorded by the GMB.

“Two-thirds of our depot colleagues aren’t even in the union, many want to work, are intending to work during the strike, and we will be giving them our full support so they can turn up as usual,” he added.

The GMB has boasted that staff continuing to work at the 20 depots at the centre of the strike will be greeted by notices saying: “Smile you are on camera when you cross this picket line”.

However, a spokesman for the GMB insisted that there were no plans to intimidate workers. “The plan is to gather evidence,” he said.

If a last-ditch legal challenge by Asda — which claims to have identified irregularities in the strike ballot — fails, the five-day strike is due to begin on Friday.

Asda insists that shoppers will not be affected, despite claims by the union that the strike could leave gaps on the shelves of the supermarket.

The strike follows a dispute about union recognition in the supermarket’s distribution depots. The accusations of bullying are the latest twist in the increasingly bitter dispute.

Copyright 2006 Times Newspapers Ltd. e .

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Wal-Mart working hard to polish its poor image

Company seeks to broaden appeal, gain customers

by Sarah Duxbury
East Bay Business Times
June 23, 2006                                [back to top] 

Wal-Mart Stores Inc. is working hard to earn the smiley-faced image of its longtime yellow-dot mascot.

The $312 billion Bentonville, Ark.-based discount retailer, which has been decried for driving mom and pop under while promoting a new class of working poor, is on a charm offensive.

From a sponsorship of a San Francisco lesbian, gay, bisexual and transgender employee advocacy nonprofit to store redesigns and merchandising tailored to appeal to upscale shoppers, Wal-Mart seems to be trying to re-create itself in Target Corp.'s image.

That Minneapolis-based retailer has played well in the Bay Area.

While it is waging, and sometimes losing, battles to grow in California. On May 23, the Hercules City Council voted to seize through eminent domain 17 acres where Wal-Mart plans to build. Wal-Mart shelved plans to open a store in a Los Angeles neighborhood in January - the company is changing in ways that might appeal to the Californians it wishes to court.

Wal-Mart CEO Lee Scott said at a shareholders meeting this month that the company is undergoing a transformation that includes broadening Wal-Mart's appeal to different customers, making the company a better place to work and supporting the communities where it operates.

Wal-Mart has 144 discount stores and 17 supercenters statewide. It employs more than 69,000 Californians and paid more than $20 billion to California suppliers.

Back in February, Wal-Mart announced that it was expanding employee health benefits to part-timers to include their children.

In April, it announced the creation of a Jobs and Opportunity Zones program to offer small-business owners in urban areas financial aid and training on how to co-exist with Wal-Mart. That same month, Wal-Mart announced "Acres for America," its commitment to preserve one acre of wildlife habitat for every acre it develops.

"This is all part of what we call the store-of-the-community concept, from merchandising to architecture to our associates," said Wal-Mart spokesman Kevin Thornton.

Promoting diversity is a major part of that effort.

HSBC analyst Mark Husson said it would be "cynical" to suppose Wal-Mart was only instituting changes as a PR stunt to win the hearts, minds and dollars of shoppers in regions such as the Bay Area, Southern California and New York City. In those areas, the retailer has less than 2 percent of market share and faces fierce community resistance.

Foes of the company dismiss the announcements as hype.

"The company is in a serious public relations crisis and is desperately trying to crawl its way out of it," said Chris Kofinis of WakeUpWalmart.com, a grass-roots group committed to changing Wal-Mart practices. "They have not changed whatsoever in terms of their basic culture and you could even say they've gotten worse because they're more disingenuous now."

Wal-Mart insists that real change is afoot.

The company announced this month that it would focus on five store formats based on demographics and location: suburban affluent, urban multicultural, Hispanic, baby boomers and rural markets. Four of those five describe the Bay Area. Each market will be merchandised according to sophisticated consumer research.

Wal-Mart's sponsorship of the Out & Equal summit can be seen as an effort to woo gay shoppers much as it has begun courting African American, Hispanic and female shoppers.

According to statistics from Harris Interactive and marketing firm Witeck-Combs, the purchasing power of lesbian, gay, bisexual and transgender customers will grow to $641 billion this year, up from $610 billion in 2005.

When quality and value are equal, 46 percent will buy products from companies that support nonprofits serving the gay and lesbian community and 55 percent of LGBT consumers do business with corporations that support diversity and equal treatment of all employees.

Those kinds of figures speak to Wal-Mart, which has introduced a line of rainbow-themed pride jewelry in select markets that is said to be selling well.

Wal-Mart is a $60,000 plenary sponsor of September's Out & Equal summit in Chicago. Only GlaxoSmithKline plc and Booz Allen Hamilton Inc. are bigger sponsors.

Winning approval to build urban Wal-Marts in the Bay Area is no guarantee they will succeed.

"I'm not sure of the return on investment, if you charge an ultra-low price and pay ultra-high rent," Husson, the HSBC analyst, said. "It's not just a question of labor costs. There are also asset costs and what prices you can charge.

"Can Wal-Mart actually charge different prices at stores 10 miles apart? Can it charge more for Tide in a more affluent area?" he asked.

Duxbury is a reporter for the San Francisco Business Times

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Wal-Mart 'not walking away' from downtown Louisville

by Brent Adams
Business First of Louisville
June 23, 2006                                  [back to top] 

Business First Staff Writer Despite allowing its option on the former Philip Morris USA property to expire, Wal-Mart Stores Inc. hasn't given up on the idea of building an urban Louisville store.

The Bentonville, Ark.-based retailer allowed its six-month option on the 23-acre site near the intersection of Broadway and Dixie Highway to expire in late May.

Wal-Mart turned its attention away from the site because it could not come to an agreement with the property's owner, Louisville-Jefferson County Metro Government, before the option expired, said Jason Wetzel, director of community relations for Wal-Mart's Midwest region.

Wetzel said officials with the company and with the city disagreed about plans for the site.

"Different people had different ideas about how the property should be developed," Wetzel said.

But Wal-Mart "is not walking away from downtown Louisville," he said.

"We're always looking for opportunities to serve underserved urban areas, and Louisville is definitely one of the cities that qualifies."

Wal-Mart officials are scouting other urban sites near downtown but declined to disclose the locations of those sites, Wetzel said.

"There are plenty of sites around Louisville," Wetzel said.

David Morris, director of the Louisville-Jefferson County Metro Development Authority, said the city never entered formal negotiations with Wal-Mart.

Morris said that because of a change in management at Wal-Mart, new management officials overseeing development in the Louisville market didn't want to commit to a project with which they were unfamiliar.

"I think it wasn't a high-priority project for them, and it just fell through the cracks," Morris said. "The new people didn't have time to review the deal, but they did indicate that once they got their legs under them they may revisit it."

Wetzel acknowledged that there was a management change, but he said such a shift wouldn't cause the company to lose interest in a project.

Louisville still might be 'Opportunity Zone' Although he wouldn't discuss it, Wetzel didn't rule out the possibility of Louisville being included among the 50-plus cities where Wal-Mart will develop urban stores as part of its "Jobs and Opportunity Zones" initiative.

In April, Wal-Mart CEO Lee Scott announced that the retailer would build stores in 10 disadvantaged urban "zones" across the United States.

The stores will be built in areas with high crime or unemployment rates, on sites that are environmentally contaminated or in vacant buildings or malls in need of revitalization.

The initiative is expected to create 15,000 to 20,000 jobs and generate more than $100 million in state and local tax revenue.

In the areas where Wal-Mart will build the stores, the company plans to work with small businesses to provide them with insight into how to compete against the world's largest discount retailer.

Wal-Mart will highlight neighboring small businesses in print ads and in-house radio spots. The company also will provide the businesses with demographic information.

TMG picks up option on Philip Morris land After Wal-Mart allowed its option on the Philip Morris property to expire, Louisville-based development company TMG Prop­erties Inc. bought an option on the property.

TMG, a company owned by The Mardrian Group Inc. owners Teresa Bridgewaters and Frank Bridgewaters, paid the city $1,000 for a 30-day option on the property that was set to expire at the end of June.

This week, the company paid an additional $24,000 to extend the option for another five months, said Robert Holmes Jr., assistant vice president for The Mardrian Group.

The Mardrian Group is in the due diligence phase of exploring the feasibility of a 450,000-square-foot mixed-use commercial development that would include large and small retailers, office space, restaurants, light industrial and distribution space.

Holmes said the group has identified potential retailers but has not begun contacting them. He declined to disclose the names of those retailers.

Wetzel said Wal-Mart officials have not been contacted by The Mardrian Group.

TMG expects community to 'embrace' plan for site TMG is the third company to have bought an option on the property. A group of high-profile minority business owners, including Charlie Johnson, Wade Houston, William Harmon, Winston Pittman and Ulysses S. "Junior" Bridgeman, tried unsuccessfully to attract Target Corp. and other big-box retailers to the site. They allowed their yearlong option to expire last July.

Holmes said officials with The Mardrian Group believe their plans for the site will prove successful.

"We have been building and developing in West Louisville for years, and we think we have a reasonable connection with what the community needs," Holmes said. "We think once we present our plan, people in the community will embrace it."

Morris expressed optimism about The Mardrian Group's approach to developing the site.

He said officials with the city and the company met on Wednesday, "and they brought in engineers and demolition experts. It has been my experience that if a developer is spending money to do those things, that's a good sign that they're serious."

Holmes said that officials with The Mardrian Group will meet with city and state leaders, as well as representatives of Greater Louisville Inc., the metro chamber of commerce, to identify incentives or grants that might be available for the project.

"The significance of this development means no less to this community than what Fourth Street Live or Main Street or the proposed arena mean to downtown or what Park DuValle means to West Louisville," Holmes said. "The proper development of this site could be a catalyst that will have an economic impact for generations to come."

Brokers have differing views on viability Robert Schwartz, partner and senior vice president of CB Richard Ellis/Louisville, said he doubts Wal-Mart will opt to build a store near downtown Louisville. He said he's not aware of any vacant parcels within the 16-acre to 20-acre parameter the company typically seeks.

Schwartz also doubts there is enough critical mass to sustain a big-box retailer.

"Downtown Louisville is not large enough to support an urban Wal-Mart or Target," Schwartz said. "The trade area is already serviced by grocery, drug and general merchandise stores in Portland and at the Lyles Mall."

Residents of West Louisville can travel to Dixie Highway or New Albany to shop at big-box retailers, Schwartz said, adding that a Wal-Mart store planned for 5212 Terry Road in Southwest Jefferson County also might fill a retail void for West Louisville residents.

But Walter Wagner Jr., president of Walter Wagner Jr. Co., said he believes the western or southern fringes of downtown could sustain an urban store.

Wagner, who has sold land to Wal-Mart in the past, said his company plans to pitch the former Buehler Foods Inc. store at Fourth and Oak streets to Wal-Mart in an attempt to lure one of the retailer's neighborhood grocery store concepts.

If Wal-Mart isn't interested in the site, or if the company wants to develop a larger store than the 36,000-square-foot building on 2.4 acres that Wagner has to offer, the veteran commercial real estate broker believes Wal-Mart still could thrive in the downtown area.

"They try to fill in pockets where there is need," Wagner said. "There are a lot of people in those areas who are having to go way out to get to a Walgreens or a Kroger. Building a Wal-Mart in that area would certainly fill a need."

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Wal-Mart is dressing up for the Bay Area

New store designs, new philanthropy signal an urban push

by Sarah Duxbury
San Francisco Business Times
June 23, 2006                               [back to top] 

Wal-Mart is working hard to earn the smiley-faced image of its longtime yellow-dot mascot.

The $312 billion Bentonville, Ark.-based discount retailer, which has been decried for driving mom and pop under while promoting a new class of working poor, is on a charm offensive -- one that may have some teeth.

From a $60,000 sponsorship of a San Francisco lesbian, gay, bisexual and transgendered employee advocacy nonprofit to store redesigns and tailored merchandising, Wal-Mart seems to be trying to recreate itself in Target's image. That Minneapolis-based retailer has played well in the Bay Area, where many continue to oppose Wal-Mart's big city dreams.

Wal-Mart has made no secret of its urban ambition and that California will play a starring role. While it is waging, and sometimes losing, battles to grow in California -- nearby Hercules recently voted to seize through eminent domain 17 acres where Wal-Mart plans to build, and Wal-Mart shelved plans to open a store in a Los Angeles neighborhood in January -- the company is changing from the inside out in ways that might appeal to urban, affluent Californians.

Wal-Mart CEO Lee Scott said at a shareholders meeting earlier this month that the company is undergoing a five-pillared transformation that includes broadening Wal-Mart's appeal to different customers, making the company a better place to work and supporting the communities where it operates.

Each of those pillars, done right, could help build the market for Wal-Mart in urban California. Already, Wal-Mart has 144 discount stores and 17 supercenters state-wide. It employs over 69,000 Californians and paid over $20 billion to California suppliers. It is currently building in Richmond, Fremont and American Canyon.

First Wal-Mart must overcome the hostility it faces here.

Back in February, Wal-Mart announced that it was expanding employee health benefits to include part-timers' children. In April, it announced the creation of a program to offer small business owners in urban areas financial aid and training on how to co-exist with Wal-Mart. That same month, Wal-Mart announced "Acres for America," its commitment to preserve one acre of wildlife habitat for every acre it develops.

"This is all part of what we call the store-of-the-community concept, from merchandising to architecture to our associates," said Kevin Thornton, a Wal-Mart spokesman.

Promoting diversity is a major part of that ongoing effort.

Motives for change HSBC analyst Mark Husson said it would be "cynical" to consider Wal-Mart's changes as a PR stunt to win the hearts, minds and dollars of shoppers in regions like the Bay Area, Southern California and New York City where the retailer has under 2 percent of market share and fierce community resistance. Though Husson acknowledged "there's clearly a lot less to dislike about Wal-Mart now."

(Wal-Mart is an investment banking client of HSBC, but neither HSBC nor Husson owns stock in Wal-Mart.)

Foes of the company dismiss the announcements as hype.

"The company is in a serious public relations crisis and is desperately trying to crawl its way out of it," said Chris Kofinis of WakeUpWalmart.com, a grass-roots opposition group. "They have not changed whatsoever in terms of their basic culture and you could even say they've gotten worse because they're more disingenuous now. Last year they just said: this is the way we do business. They realized that didn't sell well and now they are trying to PR their way out of it."

Newness on order Wal-Mart insists that real change is afoot.

The company plans to focus on five store formats based on demographics and location: suburban affluent, urban multicultural, Hispanic, baby boomers and rural markets. Four of those five describe the Bay Area. Each market will be merchandised accordingly.

If the changes now being tested in stores in Chicago, Kearny, N.J. and Plano, Tex. do find their way into the Bay Area, they won't come cheap. But they could pay off big by opening up new markets.

Wal-Mart's sponsorship of the Out & Equal summit can be seen as an effort to woo homosexual shoppers much as it has begun courting African American, Hispanic and female shoppers.

According to statistics from Harris Interactive and marketing firm Witeck-Combs, LGBT purchasing power will grow from $610 billion in 2005 to $641 billion this year.

Wal-Mart is a $60,000 plenary sponsor of September's Out & Equal summit in Chicago. The company signed on to support the workplace advocacy group just two years after Ken Pearson, a Wal-Mart executive, attended his first summit and reported his findings to Bentonville.

Those close to the company and this sponsorship say it is not just a façade and reflects a growing commitment by Wal-Mart to 'do the right thing.'

"I think the company, with it's mission and focus on diversity, really wanted to make an impact, knowing that the support would be well-received within the LGBT community," Pearson said. Wal-Mart "has been making great strides in moving the needle in LGBT workplace equality."

Out & Equal executive director Selisse Berry sold Wal-Mart executives on Out & Equal in two days of meetings on LGBT issues in Bentonville last December.

"What struck me about that was that the culture at Wal-Mart is changing," Berry said. "They were eager to learn and kind of catch up."

While $60,000 is "a drop in the bucket" compared to Wal-Mart's $200 million corporate philanthropy budget, Berry said it's "a way of putting a toe in the water around LGBT equality and being able to say to this concentrated group of people: This is important to us."

Telling its story Thornton, the company spokesman, said that Wal-Mart isn't implementing a radical culture change so much as telling its story better. He said a commitment to workers and communities is nothing new.

But going urban is new.

Building urban Wal-Marts in the Bay Area is no guarantee they will succeed.

"I'm not sure of the return on investment, if you charge an ultra-low price and pay ultra-high rent," Husson, the HSBC analyst, said. "It's not just a question of labor costs. Can Wal-Mart actually charge more for Tide in a more affluent area?"

Wal-Mart is now testing the answers to these questions, bolstered by sales data on more "luxury" items collected by Walmart.com, based in Brisbane.

What is certain in the near term is that Wal-Mart will market all changes, small and large, and its involvement with diverse community partners, from the United Negro College Fund to Out & Equal.

Sarah Duxbury covers retail for the San Francisco Business Times.

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Asda depot workers to strike next week

David Hencke
The Guardian
Friday June 23, 2006               [back to top] 

Workers at Asda's main distribution depots announced yesterday that they are to go on strike next Friday for five days after a ballot by the GMB union backed industrial action in a dispute over pay and conditions. The union said Asda, owned by American firm Wal-Mart, was gearing up to try to break the strike in an effort to keep supermarket shelves stocked. The GMB warned employment agencies it will take legal action if they supply temporary staff to Asda to cover for strikers. Asda said it expected non-union depot staff, which it put at about two-thirds of its complement, would work.

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Wal-Mart Lawsuit over Maryland Law Heads to Court

Associated Press
June 23, 2006                     [back to top] 

Baltimore - Wal-Mart goes to court this morning to try and block the new Maryland law requiring the retailer to spend more on employee health care.

The Retail Industry Leaders Association - of which Wal-Mart is a member - is suing over a bill approved earlier this year. It requires companies employing more than 10,000 people to spend at least eight percent of payroll on health care or contribute the difference to the state Medicaid fund.

Wal-Mart is the only employer that size in Maryland that does not meet that threshold.

The retail group and lawyers for the state will trade oral arguments this morning in Baltimore. The judge has no timetable for a ruling.

The retailers argue that state and local governments are not allowed to mandate levels of health care coverage by private companies. They want to prevent enforcement of Maryland's law.

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Wal-Mart's Asda depot workers to hold 5-day strike

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LONDON, June 22 (Reuters) - Thousands of workers at British supermarket chain Asda are to strike for five days later this month in a dispute over union rights, union chiefs said on Thursday.

Warehouse staff and drivers at 20 distribution depots will walk out from June 30, which could hurt supplies during the height of the busy soccer World Cup period, the GMB union said.

Asda, the UK arm of the world's biggest retailer Wal-Mart Stores Inc. <WMT.N>, said about two-thirds of its depot workers were not union members and that it would do all it could to keep stores stocked.

GMB called a vote as part of a drive to secure national collective bargaining rights at all the retailer's distribution depots.

It said members voted three to one to take action and that they were determined to win greater union recognition.

"There appears to be a clear clash of cultures between the way workers do business in Britain and the way Wal-Mart does business," GMB National Secretary Phil Davies said in a statement.

Wal-Mart has long resisted attempts to unionise its 1.2 million U.S. workers. U.S. unions have pressed Wal-Mart to offer better pay, healthcare and benefits. The company, which calls its staff "associates", says it offers excellent opportunities.

The union will consider legal action if Asda attempts to minimise the effects of the strike by hiring casual workers from employment agencies, Davies added.

The strike will take place during the World Cup quarter finals and one of the semi-finals. Retailers enjoyed a sales boost in the run-up to the tournament in what some analysts described as a "World Cup effect", which boosted demand.

Asda has offered to hold more talks to avert the strike. The retailer said it expected none-union workers to turn up for work as normal.

"As we have said all along, we will work hard to ensure they can and that our customers don't notice a thing," Asda said in a statement.

The Asda workers move 30,000 tonnes of produce from 20 distribution depots to 300 Asda Wal-Mart Stores around Britain each day, the GMB said.

Asda says nine of its depots already have local collective bargaining agreements and a process is in place that could see other depots get them.

Asda has threatened to take legal action against the union over the way the vote was handled.

© Reuters 2006. All rights reserved.

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Asda warehouse workers vote in favour of strike

GlobeandMail                   [back to top] 

Warehouse workers at Wal-Mart Stores Inc.'s Asda, Britain's second-largest supermarket chain, voted yesterday to strike in a bitter row with the company over pay and union recognition. The GMB union said its members voted three to one in favour of a walkout, which could be timed to coincide with a World Cup soccer game that features England. Most retailers have reported increased sales on days when England plays as fans stock up ahead of the game. The union and Asda are in dispute over how many workers it represents at the supermarket chain, which has a 16.4-per-cent share of the market. Union leaders will meet today to discuss the union's next move, and potential strike dates. WMT (NYSE) rose 47 cents (U.S.) to $48.90. AP

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Asda depot staff vote to strike

Reuters
Wed Jun 21, 2006               [back to top] 

LONDON (Reuters) - Thousands of warehouse workers at supermarket chain Asda have voted to strike in an increasingly bitter row over union recognition, their union said on Wednesday.

The GBM union said members had voted three to one to take industrial action at Asda, the UK arm of the world's biggest retailer, Wal-Mart Stores Inc.. It could disrupt supplies during the busy World Cup period.

"This ballot result shows that it is time for Asda Wal-Mart to wake up and smell the coffee," GMB General Secretary Paul Kenny said in a statement.

The union called the vote as part of a drive to secure national collective bargaining rights at all the retailer's distribution depots.

Union leaders will meet in northern England on Thursday to consider the vote's result and set dates for industrial action, Kenny added.

Wal-Mart has for years resisted unionisation in the United States. Some workers in South America and Europe are already unionised because of Wal-Mart acquisitions.

The company says unions are unwanted and unnecessary for its 1.2 million U.S. workers, whom it calls "associates".

Asda said it was prepared to reopen talks with the GMB union to avert any strikes.

"We are doing everything we lawfully can to make sure our customers won't notice a thing when they are shopping at our stores," the company said in a statement.

"It makes us really sad the GMB is threatening strike action when there is already a great offer on the table."

Union officials have raised concerns Asda, the second-largest supermarket group behind Tesco, has hired agency workers to help cope if the strike goes ahead.

The GMB, which says it has 25,000 members out of Asda's total 140,000 staff, is in dispute with Asda on a number of issues including profit-related bonus pay.

However, the strike ballot focussed on the union's aim to have national negotiating rights covering all Asda's depots.

Asda says nine of its depots already have local collective bargaining agreements and a process is in place that could see other depots get them.

Asda has threatened to take legal action against the union over the way the vote was handled.

The two sides differ over how many of Asda's 12,500 depot workers belong to the union at its 24 depots around the country.

The union says the figure is 7,000 while Asda thinks the number is closer to 4,500.

© Reuters 2006. All rights reserved.

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In Wal-Mart's Home, Synagogue Signals Growth

By MICHAEL BARBARO
The New York Times Company
June 20, 2006                                   [back to top] 

BENTONVILLE, Ark. — Residents of Benton County, in the northwest corner of Arkansas, are proud citizens of the Bible Belt. At last count, they filled 39 Baptist, 27 United Methodist and 20 Assembly of God churches. For decades, a local hospital has begun meetings with a reading from the New Testament and the library has featured an elaborate Christmas display.

Then the Wal-Mart Jews arrived.

Recruited from around the country as workers for Wal-Mart or one of its suppliers, hundreds of which have opened offices near the retailer's headquarters here, a growing number of Jewish families have become increasingly vocal proponents of religious neutrality in the county. They have asked school principals to rename Christmas vacation as winter break (many have) and lobbied the mayor's office to put a menorah on the town square (it did).

Wal-Mart has transformed small towns across America, but perhaps its greatest impact has been on Bentonville, where the migration of executives from cities like New York, Boston and Atlanta has turned this sedate rural community into a teeming mini-metropolis populated by Hindus, Muslims and Jews.

It is the Jews of Benton County, however, who have asserted themselves most. Two years ago, they opened the county's first synagogue and, ever since, its roughly 100 members have become eager spokesmen and women for a religion that remains a mystery to most people here.

When the synagogue celebrated its first bar mitzvah, the boy's father — Scott Winchester, whose company sells propane tanks to Wal-Mart — invited two local radio D.J.'s, who broadcast the event across the county, even though, by their own admission, they had only a vague idea of what a bar mitzvah was.

"Jesus was Jewish," one D.J. noted in a dispatch from the reception at a local hotel. The other remarked, "I love Seinfeld."

Shortly after he moved to the area, Tom Douglass, a member of the synagogue who works in Wal-Mart's logistics department, made a presentation about Hanukkah to his son's kindergarten class. The lesson, complete with an explanation of how to play with a spinning dreidel and compete for chocolate coins, imported from New York, proved so popular that the school's librarian taped it for future classes.

Then there is Ron Haberman, a doctor and synagogue member, who has introduced Jewish cuisine to the county. His new restaurant, Eat This, next door to a new 140,000-square-foot glass-enclosed Baptist church, serves knishes, matzo ball soup and latkes. To guide the uninitiated, the menu explains that it is pronounced "LOT-kuz."

Not everyone is ordering the knishes, but Christians throughout Benton County are slowly learning the complexities of Jewish life. Gary Compton, the superintendent of schools in Bentonville and a member of a Methodist church in town, has learned not to schedule PTA meetings the night before Jewish holidays, which begin at sundown, and has encouraged the high school choir to incorporate Jewish songs into a largely Christian lineup.

"We need to get better at some things," he said. "You just don't go from being noninclusive to being inclusive overnight."

Surrounded by Christian neighbors, Bible study groups, 100-foot-tall crucifixes and free copies of the book "The Truth About Mary Magdalene" left in the seating area of the Bentonville IHOP, the Jews of Benton County say they have become more observant in — and protective of — their faith than ever before.

Marcy Winchester, the mother of the synagogue's first bar mitzvah, said, "You have to try harder to be Jewish down here."

Which may explain why what began as a dozen families, almost all of them tied to Wal-Mart and almost all of them sharing only a passing familiarity with one another, managed to create a free-standing synagogue in just under a year. Tired of being asked which church they attended, they decided to build the answer.

For several years, many of them had attended a small synagogue attached to the University of Arkansas about 30 miles south of Bentonville. But the drive was long and the university temple, a converted fraternity house, never felt like home.

So in 2004, the families — most of them like-minded transplants from big cities largely in their 30's — decided it was time to create a permanent Jewish community in Benton County. They bought a former Hispanic Assembly of God church a few blocks from the first five-and-dime store operated by Sam Walton, Wal-Mart's founder, and renamed it Congregation Etz Chaim, or Tree of Life.

A dozen families quickly turned into 20 families, then 40.

There were, for example, Betsy and Marc Rosen, who moved to Benton County from Chicago in 2000 after Mr. Rosen was offered a job in Wal-Mart's technology department. The family did not attend a synagogue in Chicago because, Mrs. Rosen said, "you didn't need a synagogue to have a Jewish identity." There were Jewish neighbors, Jewish friends, Jewish family.

But not in Bentonville, where her daughter brought home from day care a picture of Jesus to color in. Suddenly, a synagogue did not seem like a luxury anymore, but a necessity to preserve her family's Jewish heritage.

The Jewish community here is a demographic anomaly. For decades, the Jewish population has plunged in small Southern towns like Bentonville, as young Jews have been lured to big cities like Atlanta and Houston. The Jewish population in Arkansas was 1,700 in 2001, down from 6,500 in 1937, according to the most recent numbers available from the American Jewish Yearbook, forcing synagogues in towns like Blytheville and Helena to close their doors.

"Bentonville is the exception," said Stuart Rockoff, a historian at the Goldring/Woldenberg Institute of Southern Jewish Life, a nonprofit group that supports synagogues like Etz Chaim.

But as Etz Chaim nears its second anniversary, Benton County's only synagogue — and by extension, its fledgling Jewish community — faces several unexpected challenges.

The members of the congregation come from observant religious families in Connecticut, reform synagogues in Kansas City, Mo., and everything in between. Though they agreed to share one roof, they are struggling to reconcile varied backgrounds and traditions, which has made for hours-long debates over, among other things, whether congregants can take photos inside the synagogue on the Sabbath. (The answer is yes, but only with the flash turned off.)

Then there is the pressure from the outside. Eager to gain a foothold in what they consider a fast-growing Jewish community, several major Jewish movements have begun wooing the synagogue. In the last year, representatives from the Reform, Conservative and Reconstructionist movements have all visited the temple.

After learning there was a sizable Jewish population in the area, a rabbi from the strictly observant Chabad-Lubavitch movement moved to town, creating a potential competitor to Etz Chaim. The rabbi has had some success offering residents prayer services in his home — which has its own Torah — and a hard-to-find amenity in these parts: a kosher meal.

Members of the synagogue's board said they were in no rush to pick a religious affiliation but conceded the decision was inevitable.

Turnover has also proved to be a problem. Wal-Mart's suppliers like Procter & Gamble and Walt Disney, which set up satellite offices to be closer to their largest retail client, replace their Wal-Mart teams every few years, so Etz Chaim has already lost some founding members.

David Hoodis, the synagogue's president and an executive in Wal-Mart's operations department, said he expected to lose two to three families a year, forcing the temple to recruit aggressively. Members of the congregation are encouraged to invite new Wal-Mart employees over for dinner on the Sabbath to talk to them about Etz Chaim. And, to build the congregation, the synagogue has created associate memberships, with lower dues, for businesspeople who make frequent overnight trips here to visit Wal-Mart.

"I still think we are fragile," Mr. Hoodis said.

But the synagogue's roots are deepening. It recently celebrated its first renewal-of-wedding-vows ceremony. It received a Torah from a temple seven hours away in El Dorado, Ark., that closed because of a dwindling congregation. And after relying on borrowed rabbis, it has hired one of its own, a member of a Conservative temple, who travels to Bentonville once a month from Tulsa, Okla., with his wife, a singer who serves as Etz Chaim's cantor.

With its purple carpet and orange pews, both vestiges of the Assembly of God church it once was, Etz Chaim is not the synagogue that all of its members envisioned growing old in. But in a short time it has become the center of the Jewish community here — and has begun to weave its way into this overwhelmingly Christian community.

This year a prominent local faith-based charity, consisting exclusively of churches, invited Etz Chaim to join. The charity promptly reworded it mission statement, replacing "churches" with "congregations."

Copyright 2006 The New York Times Company

Trouble at Asda Wal-Mart ...

BST
Tuesday, June 20                  [back to top] 

GMB Asda depots dispute

GMB members working in the Asda Wal-Mart depots are balloting for strike action. Workers want collective bargaining at all 20 distribution depots, payment of the 2005 bonus and safe working practices. The ballot result is due on 21 June.

Earlier this year Asda Wal-Mart announced that 70% of its workers would not get any bonus for their work in 2005, despite making £770m profits for the company. Asda Wal-Mart said the majority of workers will get nothing because the firm did not meet its profit target of £850 million. The GMB estimated that the “saving” pocketed by the company is £12 million.

Asda Wal-Mart also announced that it would become a minimum wage employer in October, when it will bring its basic pay rate in line with the £5.35 an hour minimum rate. Currently around a fifth of staff get the current minimum of £5.23 per hour. Last year the firm has also tried to cut Christmas discounts and working rosters to save money.

Asda Wal-Mart is also trying to impose ridiculous workloads on warehouse and depots staff, putting them at risk from serious injury. At present workers move up to 1,100 boxes every shift. The firm wants to increase this to 1,400 per shift – equivalent to the weight of a car extra every day.

Asda Wal-Mart has waged a consistent campaign of victimisation and discrimination against workers and trade union reps. It has frequently suspended GMB stewards and obstructed their rights.

The GMB has 25,000 members working in Asda Wal-Mart's 302 stores and 20 distribution depots out of the total workforce of 140,000. In the stores GMB is the recognised union but collective bargaining rights have been withdrawn. The union has collective bargaining rights in nine of the depots. It has members in the other eleven depots but is not recognised for bargaining purposes.

In February this year an employment tribunal penalised Asda Wal-Mart the tune of £850,000 for inducing employees to give up collective bargaining. The firm was ordered to pay £2,500 in compensation to each of the 340 GMB members.

Asda Wal-Mart has torn up agreements with the GMB. The current ballot was called after the firm reneged on an agreement worked out at the House of Commons covering recognition, bargaining rights and access for the union in the distribution depots and access in the stores.

Asda Wal-Mart has also had to make payouts for race and disability discrimination cases.

In January this year, Asda agreed to pay £750 to each of 37 GMB members employed at Asda Lutterworth warehouse and depot in Leicestershire and make a public apology for the racial discrimination workers were subjected to by management. Managers asked workers with foreign sounding names to bring into work proof of identity and proof that they had a right to work in the UK.

And in March this year, an employment tribunal in Manchester ruled that Asda was in breach of the Disability Discrimination Act in sacking Paul Turner. He was sacked in May 2005 for taking seven minutes to administer his epilepsy medication, a condition he had suffered since childhood and which Asda was aware of.

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New Analysis Refutes Findings of Wal-Mart Price Study

Institute for Local Self-Reliance
Jun. 19, 2006                                   [back to top] 

Last November, the consulting firm Global Insight (GI) released a study that found that Wal-Mart saved U.S. consumers $263 billion in 2004. That works out to $2,329 for the average household—a striking degree of economic benefit.

This $2,329 figure has subsequently appeared in hundreds of news stories about Wal-Mart. It forms the backbone of the primary argument advanced by Wal-Mart supporters, who contend that the depressing effect the retailer has had on income—as a result of its low wages, impact on local businesses, and transfer of manufacturing jobs abroad—has been more than offset by its lower prices.

But a rigorous new analysis by the Economic Policy Institute (EPI), a non-profit think-tank, concludes that the GI study is "fraught with problems." EPI identified major internal inconsistencies in GI's figures and found that the firm's statistical analysis "fails the most rudimentary sensitivity checks."

Read more:  The New Rules Project - http://www.newrules.org/

Copyright 1999-2006 - Institute for Local Self-Reliance

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Makeover Artist

Wal-Mart turns to Eduardo Castro-Wright to motivate its managers, spice up its stores, and put the smile back in its numbers

By David LaGesse
6/19/06                                [back to top] 

Speaking at a recent investment conference, the new head of Wal-Mart's U.S. stores apologized if his accent was a bit hard to understand--what Eduardo Castro-Wright joked is his "northwest Arkansas drawl." Hardly. There is a distinct accent, all right. And it may be hard to tell if it's Mexican, Ecuadoran, or even Venezuelan. But it's clearly Latino, adding an international sound to a company that is still associated with rural mid-America.

Wal-Mart has turned to Castro-Wright, born in Ecuador and most recently head of its Mexico stores, to revive its domestic chain of 3,300 stores--the heart of the company, and a heart that's been missing too many beats lately. Maybe because he's a relative newcomer to Wal-Mart, with only five years at the retailing colossus, Castro-Wright is moving with surprising speed. He has made enough changes that his boss, CEO Lee Scott, feigned unease at the announcement of yet more changes this summer. "I thought at this point he'd already changed everything that was possible to change," Scott joked.

Transformation. Stay tuned, suggests Castro-Wright, who took over as president of the U.S. stores in September. Since his arrival at Wal-Mart's Bentonville, Ark., headquarters, the company has remade its retail management and introduced a new focus on customer segments, such as upscale suburban and ethnic urban shoppers. It has also launched a major remodeling of 1,800 stores in 18 months, is shifting staffs to better match customer flows, and is emphasizing "value" instead of simply the lowest price. On that note was the demotion of Mr. Smiley, the cutesy "Have a Happy Day," price-slashing, bouncing yellow ball with eyes that has infected Wal-Mart ads for years.

"Wal-Mart is a company in transformation," Scott told reporters earlier this year. The changes included demotions, promotions, and job shifts at senior levels. The most apparent impact so far is on U.S. stores, which still account for 75 percent of Wal-Mart's operations and where Castro-Wright is a driving force. He seems to be avoiding the limelight, even while being mentioned as a possible successor to Scott. He stepped aside, for example, at a presentation to investors this month following the company's shareholder meeting and let subordinates describe how they're remaking the stores. And he has declined interview requests from the media. But in an appearance before reporters earlier this year, he came across as assertive and confident, saying he is "very proud about what we've been able to achieve."

Wal-Mart needed to do something. While it remains the world's largest retail chain--and private employer--its stock has languished, moving only sideways for five years while other retailers watched their share prices jump an average of 40 percent. The company's same-store sales rose only 3 percent in 2005, its worst performance ever, trailing archrival Target every month for more than two years. Labor unions and environmentalists, meanwhile, blasted Wal-Mart's business practices and encouraged shoppers to turn elsewhere.

Benefits? Scott went after the image problems publicly in 2005, fighting allegations of work-rule violations and working to ensure that stores committed fewer. "It was a huge commitment--he brought on legions of legal help," says Bernard Sosnick, an analyst with Oppenheimer & Co. The once secretive Wal-Mart opened up some, mounting an image counteroffensive, while also embracing environmental and health-plan initiatives. Its critics are hardly satisfied and point to ongoing staffing changes as a new concern, in which U.S. stores will increasingly shift workers to peak shopping times. The result, analysts have said, is that Wal-Mart will employ a higher percentage of part-time workers. Company critics fear that will cut worker access to benefits.

Makeover Artist Page 2 of 3 Related Links Big dog yanks the supply chain More from the Executive Edition More from Best in Business Castro-Wright, though, says the change reflects an increasing focus on customer needs, which he has emphasized since coming to Arkansas, first as chief operating officer of the U.S. stores. "He's been moving at warp speed ever since," says Sosnick. Castro-Wright initially tackled a behind-the-scenes reorganization, as he helped scramble Wal-Mart's traditional field structure to decentralize control over merchandising and to free area managers from issues like human resources. All store employees also now see bonuses tied to their outlet's performance, a first for Wal-Mart.

Nine months after arriving, Castro-Wright was promoted to president and CEO of the U.S. stores, and he announced the organizational changes last fall. Other executives worried that the changes would stall sales, at least during the transition. "I'll be honest, he scared me to death when he shared with you just how aggressive our plan was to change the operating organization," Chief Financial Officer Tom Schoewe told investors. Yet, Wal-Mart managed to report better sales and profits in the quarter that followed.

Castro-Wright, 51, came to Wal-Mart de Mexico from Honeywell, where he worked in corporate management, including overseeing key overseas operations. He previously worked for Nabisco in Latin America, running its business in Venezuela and then Mexico. But he grew up in a retailing family--his grandfather founded what became Ecuador's first grocery chain.

During his time at Wal-Mex, sales rocketed 50 percent, including a 10 percent gain in same-store sales. He expanded the chain's outlets, but perhaps more telling, tailored its stores to surrounding communities. Wal-Mex now operates six different types of stores, in contrast to four in the United States, and more than in any other country except Brazil. They include Superama grocery stores for upscale clients, Suburbia department stores for middle-income shoppers, and Bodega outlets that serve poorer customers. Wal-Mart's market segmentation is so distinct in Mexico, says Andrea Teixeira, a JPMorgan analyst, that "when you walk into one of the Bodegas, you don't even realize you're in a Wal-Mart."

The result: Castro-Wright now talks up plans to create here "the store of the community" that's tailored to a neighborhood, both in architecture and in products. Two examples are pilot projects in an affluent Dallas suburb and an urban neighborhood just outside Chicago: The first is a more upscale supercenter with a sushi bar and broad wine selection, and the second a discount store that carries no fresh food to threaten local grocers but stocks African-American grooming products. The company says it also has identified 1,300 stores that serve large Hispanic populations, and many will get aisles of Latino products and bilingual signs.

Executives also talk about introducing more upscale products but say the stores themselves aren't generally going upscale. Castro-Wright commissioned research that identified customer segments, including loyal shoppers. "The loyalists: They love us and we sure love them," he says. "So price leadership is the core of everything we do." Now the chain is targeting selective shoppers who come for cheap prices on toilet paper and food but don't cross the aisle for clothes and electronics--getting them to shop the "rest of the box." Apparel is getting more designer clothes, including additions from George, a line Wal-Mart acquired with a British chain, more private designer labels like Metro 7 clothes for women, and Exsto, targeting the young urban male.

Makeover Artist Page 3 of 3 Related Links Big dog yanks the supply chain More from the Executive Edition More from Best in Business The company will redo just about every U.S. store except those opened or remodeled in the past few years, or those discount stores already scheduled to become supercenters. Apparel departments will display less packed racks on fake-wood floors, other areas will get lighter-colored tile, electronics will have expanded shelf and wall space, and bathrooms will be redone. "Maybe women will stay longer to shop, rather than holding their nose and dashing out the door," says Mark Husson, an analyst with HSBC.

The flurry of activity has yet to move Wal-Mart's stock. Husson, for one, worries the moves will do little more than slow Wal-Mart's decline from the ranks of growth companies. He says Wal-Mart is like someone trying to fend off a middle-age appearance with jewelry (overseas acquisitions), fast cars (designer clothes), and Botox (remodeling). "The problem is that you have to keep going back every six months to do them again," says Husson.

But the remodeling also dovetails with broader corporate efforts, particularly a move to reduce inventory (box). Besides saving money, cutting inventory also means fewer boxes on risers looming over customers. "Inventory clutters stores," says Castro-Wright.

It's still unclear if Wal-Mart can execute its promised changes. But Citigroup analysts noted this spring that the company is "gaining momentum and a renewed sense of urgency."

Wal-Mart CEO Scott explains that the company's remake accelerated in the wake of last August's Hurricane Katrina. The retailer earned widespread kudos for quickly shipping supplies to storm-devastated areas. That experience was transformational for Wal-Mart, Scott says, showing him that even the world's biggest retailer could move quickly when needed. "For me ... it said it's time to stop doing this stuff incrementally," Scott says. "Let's get the right people in the right jobs, and let's get this stuff done."

The month after Katrina, Scott announced a management shuffle and Castro-Wright's promotion.

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Opinion: The Planet Wal-Mart

by Ryan Lorenzo
Monday, June 19, 2006                  [back to top]

I stood outside my house with a blank look on my face. I was extremely pale, and I shivered nonstop in the scalding hot afternoon. A neighbor came out of her house and approached me. "What's wrong? It looks like you've been abducted by aliens or something," she said. "I'm not sure what happened, but last night I was not in the company of humans," I said. She then asked me to explain myself, so I proceeded to tell her about my experience at a place called Wal-Mart. I was hanging out with three friends, and we all stared at each other in boredom. Awkward silence overshadowed any crickets. A friend spoke and suggested we purchase Scrabble at a store. Unfortunately, I knew of no such store open this late, but he insisted that there is a Wal-Mart Supercenter open at this time. I once heard a rumor from someone that this place existed. That person told me that Wal-Mart underpays their employees so that customers can save 11 cents on a bag of Funions. I wasn't sure of the validity of this rumor, but I was willing to drive to Wal-Mart to obtain a Scrabble board game. When we arrived at Wal-Mart, I was amazed at the size of the store. The parking lot alone was massive with several recreational vehicles camping out for the night. As we walked toward the building, a male in a truck honked at the two attractive females in our group. Just in case he didn't get his point across, he followed that up with an extended reenactment of the honk. He should have finished the job with a whistle and an inappropriate comment about their booties. The moment we walked inside, an older man, who looked petrified that he had to work at his age, greeted us. I looked around at the customers, and they were not humans. They were a different life form. The jeans these "people" wore had elastic waistbands rather than belt loops and a button and zipper. The men's T-shirts didn't cover their stomachs, and the women's T-shirts went past their knees. Mullets and perms covered their heads, and in the not-so-rare occasion, the men sported the perms and the women had the mullets. We found the Scrabble game after trudging our way through the electronics, automotive and mule-feed sections of the store. We decided to get some ice cream as well. One of my friends picked up a box of Dibs, which is a ball of ice cream encapsulated by a hard chocolate shell. A woman walked by and decided to tell us that she thinks Dibs taste weird. Perhaps we should have gone with corn nuts or Skoal, which were found in her shopping cart. We went to the self-checkout line. At this point, we serve as paying customers and unpaid employees. I paid for my items, but as I was putting them in bags, a perm-mulleted lady started scanning her items. I wasn't even finished, and her mindset was like "I'm here, I'm checking out, and I don't care." She wore a hard plastic garden visor. She must have won it at a county fair raffle or perhaps a two-for-one garage sale. Anyway, I decided not to say anything to her. I took our bags, and we went home to play Scrabble. After telling my neighbor the story, I felt much better. I looked over at her, and she was very pale and shivering nonstop. I didn't know what to do, so I went inside and drank some pink lemonade. Two weeks later, she is still out there shivering. You can come over and look at her if you want. I'll even set up some lawn chairs I acquired at K-Mart the other day.

Copyright © 2001-06, ASU Web Devil. All rights reserved.

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Wal-Mart: German closures will strengthen international focus

Datamonitor
19 June 2006          [back to top]

Wal-Mart is considering closing some more of its loss-making stores in Germany. The recent performance of Wal-Mart is not one the company would wish for, with monthly growth at the bottom end of expectations in the US and weak performance at several international operations. Closing some of its weaker German outlets should help the company to strengthen its focus and reshape its international portfolio.

Wal-Mart entered the German market in December 1997 by acquiring 21 Wertkauf hypermarkets in Germany. A year later, in January 1999, the company acquired 74 units of the Interspar hypermarket chain. Wal-Mart has since invested in the remodeling of these stores and today operates 88 Supercenters across the country. It recorded losses for many years at its German operations which were largely due to the retailer's insufficient buying power with domestic suppliers. However, the company reported a positive operating cash flow for the first time in 2004.

The move to Germany in the late 90s was different to later international acquisitions, notably the UK's Asda which was already a big player in the grocery market. The modest scale of the German operations meant Wal-Mart never had a chance of becoming market leader. The German stores were also modeled heavily on Wal-Mart's US format, with little or no local adaptation, unlike Asda in the UK which has had autonomy over its operations to respond to local demand and experiment with formats and sub-brands.

There is also the problem of the tough German retail market; it is a difficult retail market for international and domestic alike retailers to compete in. Despite being wealthy, Germans are very price conscious and shop around to look for a good deal. Therefore many retailers compete heavily on price, making it difficult for other value-focused retailers like Wal-Mart to trade profitably.

The news that Wal-Mart is considering further closures in its German operation comes just a month after the company's withdrawal from South Korea. The retailer has already closed three German shops this year. Such decisions suggest a new willingness by the retailer to take tough decisions to reshape its international portfolio. It will help the retailer to focus more on developing its brand in the Americas as well as free up resources for other international operations. With expansion plans into China scheduled for this year, it could also allow more flexibility for funding further acquisitions.

Source: Verdict Research

Source: Datamonitor

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Carrefour, Wal-mart and ‘localization’

by Chung Sang-ho
2006.06.18                       [back to top]

Wal-Mart Stores on May 22 made a surprising announcement: They will leave Korea, after struggling for eight years in the $25 billion discount-store market. The world’s biggest retailer said it agreed to sell its 16 stores to Shinsegae Company, the operator of E-Mart discount stores, for $880 million. The latest sell-off came only three weeks after the French retailer Carrefour’s decision to exit the Korean market in late April. Carrefour, the world’s second-largest retailer, sold its 32 local stores to the homegrown fashion retailer E-Land for $1.85 billion. The New York Times carried an article on May 23 saying that Korea has been “a graveyard for some of the most competitive global brands.” Indeed, there are a great number of instances of failures or near-failures of major international brands in Korea. In addition to Wal-Mart and Carrefour, Coca-Cola and McDonald’s also are having a tough time competing against formidable local brands. In technology markets as well, Google is suffering from embarrassing obscurity, while Nokia gave up promoting its cell phones in Korea years ago. What is going on here? Is Korea’s consumer market so special that foreign consumer-goods giants cannot possibly penetrate it? It seems many retail analysts here and abroad subscribe to this view. They attribute the recent departures of discount-store operators to their inability to adapt to local particularities, such as Korean housewives’ preference for vaguely upscale ambiance over no-frills warehouse environments selling bulk items. SERI researcher Jin-Hyuk Kim concurs with the above view. He says that the two retailers made fatal strategic mistakes in this fickle market: First, they erroneously thought Korean consumers would flock to their outlets as long as they offered low prices, just as they did in the United States and Europe, where consumers drive long distances to buy foods and dry goods by the box. As it turns out, Korean consumers want more than low prices. They prefer instead to shop in a more pleasant atmosphere, preferably a few blocks away from their homes. The second reason for the “big box” store failures has something to do with the fact that these retailers missed the right timing for expansion here. Launching stores at lucrative locations at an early stage of the market and thereby reaching economies of scale faster than anyone else is the most essential condition for success in the discount-store business. Wal-Mart and Carrefour, according to Mr. Kim, lost their chance to lead the market in Korea by failing to make investment decisions to open new stores quickly enough. From the above diagnosis, one may get the impression that localization is the way to go. There are many global retail brands, however, doing extremely well in Korea without even trying local adaptation. Starbucks is one good example. In addition, U.S.-based restaurant chains, led by Bennigan’s and TGI Friday’s, are attracting young affluent clients by serving all-American dishes. Most likely, their formulas for success are based on positioning themselves in the upscale market. These chains are strategically located in high-traffic areas amid a multitude of pricey fashion clothiers and accessory shops. They also charge higher prices to reflect their upmarket positioning, typically costing their customers more than $50 for a dinner for two. In return, their customers enjoy attentive service rendered by efficient and eager servers, and feel as if they are in an American city for the couple of hours they linger over a meal. That means there are other ways for foreign companies, especially those engaged in consumer markets, to succeed in Korea without pretending to be a local company. Actually, nothing looks more awkward than a foreign brand making clumsy attempts to be taken for a local. Instead, it’s much better to proudly announce early on that you are foreign and make the most of this fact. These companies should be able to offer something that local rivals can’t possibly match. For example, an American retailer can “educate” Korean consumers by holding a Thanksgiving festival in which store visitors can sample American-style holiday meals featuring turkey, cranberry sauce and pumpkin pie. If you are a German restaurant operator, you can regale customers with free beer, rotisserie chicken and giant pretzels to celebrate Oktoberfest, thereby familiarizing them with famous Bavarian cuisine and all, or at least many, things Deutsch. Of course, localization is still important in many areas. But I’m just saying that too much of it may be more dangerous for foreign companies doing business in Korea, or any other Asian market for that matter, than being consistent with globally recognized business practices. It may be that Wal-Mart and Carrefour were unsuccessful in Korea because they stuck to neither localization nor global practices. It would have been different if they defined their strategy more clearly and pursued it more forcefully.

* The writer is managing editor of SERIworld, Samsung Economic Research Institute’s English-language Web site. The views expressed in this column are the author’s and do not represent those of Samsung Economic Research Institute.

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Lawsuit claims Sam's Club sells fake Pradas

By Khristopher J. Brooks
Associated Press
June 16, 2006                              [back to top]

It took a shipment halfway across the world for a western Kentucky man to question the authenticity of the Prada handbags he bought at a Sam's Club. When a Prada factory in Italy said one of the high-end fashion bags was fake, Joseph Mayo began wondering about the others, according a federal lawsuit he filed this week.

The Paducah doctor filed suit Wednesday against Wal-Mart Stores Inc., the parent company of Sam's Club, alleging that the store in Paducah, a town of about 26,000 on the western edge of Kentucky, sold him phony Prada handbags.

Mayo's attorney, Mark Bryant, said this week that his client bought three handbags in December 2004 thinking they were real and sent one to his sister-in-law, Pia Sandonato, in Italy.

"The purse started falling apart so she took it to the factory," Bryant said. "Then the company called her back and said 'this is fake.'"

Wal-Mart spokesman John Simley would not comment directly about the lawsuit, but said the nation's largest retailer doesn't sell forgeries.

"We are prepared to show that the products we sell are authentic because it's our company policy to sell only authentic brands," he said.

Prada handbags are made of Italian leather, snake skin or other expensive material. They are known for their durability and can cost anywhere from $800 to $1,800.

Bryant said he doesn't know how much his clients paid for their handbags.

Mayo declined to comment and referred questions to Bryant.

Prada officials in Italy said Wal-Mart - known for its rural roots and downscale image - is not a client. The closest authorized Prada carrier near Paducah is a Saks Fifth Avenue in Hazelwood, Mo., while the closest Prada store is in Miami.

Mayo's wife, Rita, shipped the remaining two bags to Italy last month to see if they were fake too, Bryant said. She hasn't heard back.

It was the second lawsuit within a week alleging that Wal-Mart has sold fake designer handbags.

Italian fashion designer Fendi filed suit against the retailer on June 9 alleging that Sam's Club was selling fake handbags, shoulder bags, purses, wallets and key chains.

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Wal-Mart battlefield: Bronx

By Lore Croghan
New York Daily News
June 16, 2006                        [back to top]

Activists are gearing up to oppose Wal-Mart where they believe the retail giant is now most likely to try for its city debut - the Bronx. A union coalition is mobilizing community groups - and even a performance artist who plays the role of a preacher - though the world's largest retailer was banned last winter from the Bronx Terminal Market redevelopment project.

"We believe Wal-Mart will focus on the Bronx because it's the poorest of the five boroughs - with the excuse that 'People in the Bronx need jobs and low prices,'" said Pat Purcell, a spokesman for Wal-Mart Free NYC, the coalition.

"But Wal-Mart doesn't offer a living wage or decent health care," he asserted.

Wal-Mart spokesman Philip Serghini said the company "continues to look at store sites throughout New York City," but declined to talk specifics.

He called Wal-Mart opponents "a small minority of special interests" and said they "stand in the way of more choice, greater savings and quality job opportunities for the borough's working families."

Wal-Mart already has considered sites in other boroughs that haven't panned out - first in Rego Park, Queens, last year, and later on Staten Island, and in Harlem and Flushing, Queens.

"We have people in all five boroughs watching for signals - and the strongest signals are coming from the Bronx," said Bill Talen, aka. Reverend Billy, the theatrical persona he uses when staging protests against Wal-Mart and other corporate giants.

At a performance Wednesday night at St. Mark's Church in the East Village, the crowd cheered when he shouted, "We want to keep Wal-Mart out of the Bronx," and his choir sang a mock hymn, "Back Away from the Wal-Mart, Back Away."

Wal-Mart's opponents wonder why the retailer was allowed to join the Bronx Chamber of Commerce - whose bylaws limit membership to companies located in the five boroughs.

Chamber chief exec Lenny Caro said he wasn't in charge when Wal-Mart joined - and the Chamber board is scheduled to vote today about terminating the membership.

Also, activists contend the retailer's trying to make friends by spreading money around.

"We fear Wal-Mart is giving - and will keep giving - money to create support for itself," said Matt Lipsky of the Neighborhood Retail Alliance.

But one organization's leader vehemently denied that his group's gotten any dough.

The New York Statewide Coalition of Hispanic Chambers of Commerce hosted a procurement seminar for Wal-Mart last winter - but was not paid by Wal-Mart to do so, said Frank Garcia, the coalition's president. And Wal-Mart did not pay for the group's evening reception at an Albany legislative event in April, he said.

"People are spreading rumors about me," Garcia said.

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A Wal-Mart Pro Shop Could Be Headed Your Way

By Matt Wiebe
JUNE 15, 2006                    [back to top]

BENTONVILLE, AK—If you can get past the sushi bar, $300 bottles of French wine, $1,000 plasma TVs and the Wi-Fi enabled coffee cafÈ at Wal-Mart’s flagship test store in Plano, Texas, you might see a surprisingly uncluttered, well-merchandised bike section featuring $400 bikes and dedicated sales staff.

The Plano store’s bike department features wide aisles, clean fixtures and custom signage. You almost expect to see a Campagnolo wooden tool kit behind the service counter.

As impressive as the layout is, the switch from kid’s bikes to adult Schwinn and GMC road and comfort bikes having pride of place at the front of the department is just as significant. Kid’s bikes are still there, but they are at the back of the department in the expected slot racks.

Wal-Mart’s aspirations for transforming its bicycle departments are not limited to the Plano store. Wal-Mart’s planned expansion of its bicycle boutique concept is so aggressive that Dorel’s chief operating officer, Martin Schwartz, was confident that sales in the company’s Pacific Cycle division would increase as a result.

The mass retailer plans to implement the concept in about 250 locations over the next year. Some of the retailer’s 3,800 stores will be retrofitted and some stores under construction will be built with the bike boutique. And rumors abound that aluminum and carbon fiber bikes could be sold in Wal-Mart by year-end.

“Retailers should be concerned about this push further up the price point, but suppliers should also be concerned about a channel not known for expert assembly and service,” said Matt Dekker, Raleigh America’s national sales manager.

Few in the industry have actually seen the Plano store, which opened at the end of March.

Rick Gurney and Kyle Carlson, president and operations manager, respectively, of Plano Cycling and Fitness in Plano, Texas, visited the Wal-Mart boutique and were impressed. However, they question whether Wal-Mart can follow through with service.

Gurney wondered whether Wal-Mart could pay competitive wages for trained sales staff that will be selling a $400 STI-equipped road bike. “It’s hard enough for us to find part-time help at $10 an hour; I just don’t see how Wal-Mart can get the help they will need at $7 an hour. But I have to believe that if they do stick with it and make it work it is something our industry has to address,” Gurney said.

Wal-Mart is not releasing details about its plan, so questions of how well trained bicycle boutique staff will be, and what level of assembly the bikes will receive are unanswered.

In a press release, John Fleming, Wal-Mart’s executive vice president and chief market officer, said the Plano store will serve as a test lab. “This store will function as an active laboratory for testing a range of new ideas and merchandise in a fully operational setting. If something doesn’t work, we will change it and try something else. And when an innovation resonates with our customers, we will consider introducing it in other stores,” Fleming said.

Wal-Mart offered Schwinn and Mongoose full-suspension bikes a few years ago priced up to $500 in its stores with limited success. So why does the retailer think its luck will be any different this time around?

The company will strategically implement the concept in certain stores in up-market settings like Plano, where higher priced bikes make sense. And as any specialty bike retailer knows, pavement bikes are hot.

Wal-Mart made its name offering the lowest price goods. But its competitor, Target, has shown that its slightly higher priced, higher quality goods attract consumers less affected by ups and downs in the economy. So Wal-Mart is looking to develop an up-market strategy of its own.

Those familiar with mass market retailers point to the success of Dick’s, a sporting goods chain that seven years ago focused exclusively on price. The company changed its philosophy, moving products and service up market to successfully transform its business.

Sales, service and level of assembly are going to be real issues for Wal-Mart as it moves its price points up, but these are not impossible hurdles for it to jump. Just because Wal-Mart does not currently have the level of service of specialty shops, it may be too soon to dismiss the world’s largest retailer.

“The bike displays are organized and clean and everything has a place with divided sections that were identified by signage. I was somewhat impressed by the organization and amount of space that was committed to bikes, though there was no salesperson in sight,” said Plano Cycling and Fitness’ Carlson.

“Besides the clean look and spacious display area, I will say that this new concept Wal-Mart has a lot of work to do for a high-end store. Besides some higher priced electronics and appliances, the bike department did not have it. If potential bicycle buyers need service and a road bike in any other size than a 52, they had better check out their local IBD,” he added.

But are older, first-time bike buyers finding good service and good value in the average bike shop catering to enthusiasts? Wal-Mart sells $500 digital cameras and $1,000 plasma TVs because it provides sufficient service for many consumers.

The ’70s bike boom and the ’90s mountain bike boom created a greater demand than bike shops could fill, giving a lot of business to mass retailers. The current boom in pavement bikes may do the same, allowing mass retailers to find customers for higher price point road and comfort bikes. Related articles Pro Road Teams Join SponsorHouse Sugoi Announces New Canadian Sales Manager

© 2006 VNU eMedia Inc. All rights reserved.

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Wal-Mart could hike pay and benefits

Study shows increase in employee wages and benefits will not affect low prices, still earning profit.

Reuters
June 15, 2006                        [back to top]

CHICAGO (Reuters) - Wal-Mart Stores Inc. could significantly increase employee wages and benefits without raising prices, and still earn a healthy - albeit smaller - profit, research released Thursday concluded.

The Economic Policy Institute study comes as the world's biggest retailer faces a barrage of criticism from labor unions, politicians and community activists, who say it pays poverty-level wages and drives competitors out of business.

Wal-Mart (up $0.86 to $48.57, Charts), which has taken steps to improve its health care and other benefits, argues that its low prices boost consumers' buying power and increase their standard of living. The retailer regularly cites a Global Insight study that found Wal-Mart saves U.S. families more than $2,000 per year.

"The more important question for the future isn't whether Wal-Mart is a force for good or evil in the American economy, but whether the economic benefits provided by Wal-Mart can be preserved even if their labor compensation is dramatically improved," economists Jared Bernstein and Josh Bivens wrote.

They concluded that if Wal-Mart reduced its profit margin to about 2.9 percent, where it stood in 1997, from the 3.6 percent margin it recorded last year, that would free up some $2.3 billion to pay workers without raising prices. That works out to just under $2,100 per non-managerial employee, the researchers calculated.

They noted that rival Costco Wholesale Corp. (up $0.89 to $53.87, Charts) posted a profit margin of about 2 percent in 2005. The study did not mention Target Corp. (up $1.15 to $49.42, Charts), Wal-Mart's biggest competitor in the discount sector, which reported a 4.7 percent profit margin for last year.

In a telephone interview, Bivens said his research was aimed at refuting "outsized" claims that Wal-Mart saved consumers hundreds of billions of dollars and that its margins were so thin that it simply could not afford to pay employees more without forcing low-income consumers to foot the bill.

"I always thought that they had really, really tight profit margins," he said. "They're really a microcosm of the U.S. economy. They are very, very good at generating income, but it needs to be spread out more equitably."

His research refuted many of the findings from the Global Insight study released last year regarding how much money Wal-Mart saved consumers. Global Insight could not immediately be reached for comment.

Wal-Mart said that its stores were good for U.S. working families, and noted that they created tens of thousands of jobs last year, many of them in underserved neighborhoods.

The retailer also criticized the Economic Policy Institute as "funded by big labor."

"We will treat the findings of this study with the same amount of skepticism as other statements made by labor leaders who oppose us," Wal-Mart spokesman Kevin Thornton said. "We are proud of the economic impact we have on communities - from the job opportunities we provide, to the money we save working families, to the tax revenue we generate, to the contribution we make to local charitable organizations," he added.

Thornton said Wal-Mart's average full-time wage is $10.11 per hour, and the retailer does market analysis to ensure its wages are competitive. He noted that Wal-Mart offers 18 different health care plans that cost as little as $11 per month in some areas.

Bivens and Bernstein concluded: "Wal-Mart does a lot right. It has expanded productivity by being more efficient and leaner than many other companies. Many of the benefits shoppers accrue from Wal-Mart's expansion could be preserved even if the retailer had to meet the expectations of its critics regarding fair worker compensation."

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The Wal-Mart debate

A false choice between prices and wages

By Jared Bernstein
and L. Josh Bivens                     [back to top]

The benefits and costs of Wal-Mart's expansion across the United States have been hotly debated. Critics of the retailer have documented the extent to which Wal-Mart uses its market power to undermine its workers' compensation, squeezing suppliers and hurting local economies along the way. Supporters of Wal-Mart counter that the lower prices offered by the company more than compensate U.S. consumers for any depressing effect the company's expansion has on wages.

In a more technical Working Paper, we assess many of the competing claims about Wal-Mart's impact on prices and wages.1 We note, however, that this is a very narrow question and argue that the debate over Wal-Mart's economic impact is plagued by false dichotomies. The more important question for the future isn't whether Wal-Mart is a force for good or evil in the American economy, but whether the economic benefits provided by Wal-Mart (and other big-box retailers) can be preserved even if their labor compensation is dramatically improved. To this end, our research finds that:

A study by the consulting firm Global Insight, which concludes that Wal-Mart's expansion has saved U.S. consumers $263 billion, is deeply flawed. The statistical analysis generating this widely quoted figure fails the most rudimentary sensitivity checks used in good economic analysis, rendering its conclusions unreliable.

A robust set of research findings shows that Wal-Mart's entry into local labor markets reduces the pay of workers in competing stores. This effect is largest in the South, where Wal-Mart expansion has been greatest.

Wal-Mart could raise wages and benefits significantly without raising prices, yet still earn a healthy profit. For example, while still maintaining a profit margin almost 50% greater than Costco, a key competitor, Wal-Mart could have raised the wages and benefits of each of its non-supervisory employees in 2005 by more than $2,000 without raising prices a penny. "Everyday low prices?" Not that low Wal-Mart recently convened a seminar to discuss academic studies that examined its impact on local (and the national) economies. Wal-Mart also commissioned a study from the consulting firm Global Insight (GI). Of all the studies done on this topic, the GI report found by far the largest positive impacts of Wal-Mart on the economy, and defenders of the company cite GI's results most often. We find, however, that GI's estimate of Wal-Mart's dampening effect on inflation is indefensibly large and is contradicted by more careful research reviewed in the EPI Working Paper, Wrestling With Wal-Mart: Tradeoffs Between Profits, Prices, and Wages. While the statistical fragility of the GI results requires long explication, there is a more fundamental problem with GI's results—they are internally inconsistent.

GI reports that Wal-Mart lowered overall prices (as measured by the overall consumer price index (CPI)) by a total of 3.1% from 1985 to 2004. They also report that Wal-Mart has lowered commodity (goods) prices by 4.2% over this period. However, in an unrelated portion of the text, GI correctly notes that "consumer prices for services are dominated by rents, imputed rents, utilities, medical services, and transportation—all areas outside of Wal-Mart's product offerings."

The GI report bases its findings on the overall CPI. Yet fully 60% of the items in the CPI are services, not commodities.2 Thus, if the impact of Wal-Mart on service inflation is zero, then the GI numbers on Wal-Mart's impact on prices are inconsistent. GI's finding that Wal-Mart's expansion led to a 4.2% decline in goods prices translates to only a 1.7% decline (not the reported 3.1%) in overall prices (4.2 * 0.4 = 1.7). In short, the two top-line findings of the GI report (Wal-Mart's effect on overall prices and goods prices) are internally inconsistent with each other.

Overall, we find that the Global Insight research methodology is fraught with problems. Some of the results it yields—such as that Wal-Mart lowers housing rents and that its greatest effect on food prices occurred before its expansion—make no sense. Our analysis argues against using any estimate of consumer savings from Wal-Mart's expansion that is derived from the Global Insight study.

Can low prices make up for low wages? A key concern in the debate over the economic consequences of Wal-Mart's expansion is the effect this has on workers' wages. Most would grant that prices are lower at Wal-Mart than in many competing stores (although the magnitude of this price difference is often less than implied by company defenders). A critical question, however, is whether the benefits of lower prices are implicitly clawed back when Wal-Mart drives down wages not just of its own workers, but throughout the retail sector as a whole.

Dube (2005) and Neumark (2005), in papers reviewed in Wrestling With Wal-Mart, present strong evidence that Wal-Mart's expansion has driven down earnings for workers not just in competing retailers, but across stores throughout the region of Wal-Mart expansion.

There is another point to be raised here about the implicit horse-race between prices and wages that underlines the Wal-Mart debate. Essentially, the defenders of Wal-Mart argue that the price-depressing effects of Wal-Mart outrun the wage-depressing effect, leading to rising purchasing power for American workers. However, the prices that are reduced through Wal-Mart's expansion constitute an ever-shrinking share of American families' expenditures.

Wal-Mart essentially gives people the ability to buy food, apparel, household goods, and furniture at reduced prices. As seen in Figure A, the share of expenditure in each of these categories has shrunk over time. By contrast, the expenditure shares on health care, housing, and transportation for families have gone up over time. These cannot be bought at Wal-Mart, yet they constitute an ever-growing share of American household expenditures. In short, the benefits from the same price effect in Wal-Mart's product areas are shrinking over time. The real pressures on family income are coming from items that can't be bought at Wal-Mart. These products and services can, however, be bought with higher wages.

The idea that encouraging Wal-Mart's expansion constitutes a progressive endeavor that will provide big benefits to poor Americans in the future is misguided; truly progressive policy should focus on the big-ticket items in most families' budget—health care, housing, and education.

Do higher wages have to mean higher prices? Other issues make the narrow "wages vs. prices" debate described before particularly uninformative. One side of the debate assumes that the cost of higher compensation to employees at Wal-Mart is higher prices to consumers. This isn't necessarily the case—some (or all) of the costs of increased compensation could come from reduced profit margins, raising the living standards of Wal-Mart employees while preserving the benefits from low prices.

To get a feel for how much of a wage increase could be financed out of reduced profit shares, one can imagine Wal-Mart's profit margins falling back down to their 1997 levels, which would also cut half of the difference between their margins and a key Wal-Mart competitor, Costco (which posted a profit margin of 2.0% in 2005). Reducing the profit margin by this much would give Wal-Mart $2.3 billion to plough into improved worker compensation without the need to raise prices. In Wrestling With Wal-Mart, we calculate that this would translate into just under $2,100 per non-managerial employee. Simply returning to its 1997 net profit margins, Wal-Mart could give its non-supervisory workers 13% pay increases without raising prices, while maintaining higher profit margins than a main competitor.

Wal-Mart could definitely raise compensation for its workers and still have lower prices than its competitors. Note that labor costs for its non-supervisory staff account for less than 7% of its total sales. If Wal-Mart's price advantage relative to its competitors is even in the neighborhood of what its defenders claim, consumers would still find Wal-Mart's prices lower. To believe otherwise is to believe that Wal-Mart's price advantage comes completely from substandard worker pay and not through any cost efficiencies.

Is this any way to run an economy? A particularly contentious issue regarding Wal-Mart's effect on the American economy involves its employees' use of publicly financed programs like Medicaid and food stamps. A recent internal Wal-Mart memo revealed, for example, that 46% of Wal-Mart workers' children are uninsured or on Medicaid. This compares to 29% for large retailers and 32% for all retailers. Critics of the company argue that this (disproportional) use of Medicaid is an implicit subsidy from taxpayers to a rich corporation. Supporters of the company counter that the lion's share of these subsidies benefit the low-wage workers at Wal-Mart, and this is exactly the point of them.

On this point, both sides are right: subsidies to low-wage workers accrue to both the company they work for and the workers themselves, with the lion's share of the subsidies going to the workers.

This, however, does not imply that it is inappropriate or economically harmful to either Wal-Mart consumers or employees to pressure the firm into increasing its compensation package, particularly with regards to health care. Part of this debate comes down to whether policy makers should be more concerned about primary or secondary income distributions. In other words, is it better to intervene directly and require employers to pay a living wage or to allow whatever compensation employers choose to pay but supplement it with government supports? The primary income distribution is that which holds before the effects of taxes and government transfer payments (i.e., Social Security payments, unemployment compensation, disability income, etc.) are factored in. The secondary distribution includes the effect of all taxes and transfers.

When it comes to offsetting the damage to the wage structure we document above, many policy analysts seem to believe that the sole intervention point is the secondary distribution. That is, they are quick to accept the primary distribution as an outcome that cannot and/or should not be altered. In their view, if the market is generating "too much" inequality, the government can offset this through redistributive fiscal policy. Many defenders of Wal-Mart's current business model advocate expanding the Earned Income Tax Credit (EITC) as the "correct" way to help Wal-Mart's workers.

While there is some merit in this view, this strategy makes U.S. workers and their households too reliant on the single instrument of fiscal redistribution—the expansion of transfer programs. EITC expansion, for example, is clearly a viable policy remedy for lost earnings, but there are reasons not to rely solely on this strategy.

First, it relies on tax increases. We cannot ask American workers to depend exclusively on taxpayers and politicians continually ratcheting up their willingness to offset the degradation of the wage structure induced by Wal-Mart, not to mention globalization, the loss of manufacturing employment, union power, and so on.

Second, the federal budget is already constrained by the current and, more importantly, the projected gap between future federal outlays and revenues under current policies. According to the Congressional Budget Office, under plausible assumptions, that gap is expected to grow much wider in coming decades, largely due to the pressure of health care price increases and current tax policies.3 This does not mean that potentially useful policies like expanding the EITC should be off the table, but it does mean that any spending program outside of defense and homeland security faces a very steep challenge for at least the medium term. Wal-Mart defenders who argue that workers harmed by its practices should rely on government transfers to make ends meet are essentially telling those workers to get taxes raised if they want any help, and to struggle in the meantime.

Recent budget developments indicate that no help is on its way. While Wal-Mart supporters argue that it's fine for Medicaid to pick up the health coverage of uninsured workers, the president has proposed $5 billion in cuts to Medicaid over the next five years and has proposed an additional $5 billion in cuts to other programs for low-income people in his most recent budget. Further, in February of this year, Congress passed a budget reconciliation that included a $27 billion cut in Medicaid over 10 years. In other words, the tide is pushing hard against expanding these redistributive measures, and may be for some time to come.

Conclusion Wal-Mart does a lot right. It has expanded productivity by being more efficient and leaner than many other companies. Many of the benefits shoppers accrue from Wal-Mart's expansion could be preserved even if the retailer had to meet the expectations of its critics regarding fair worker compensation. Defenders of the company too often set up false dichotomies such as low prices vs. high wages when in reality, better compensation for workers won't negate Wal-Mart's competitive edge

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Wal-Mart approved for mayor's land

Tim Kane
Chicago Tribune
Published June 15, 2006                [back to top]

HARVARD -- Mayor Jay Nolan left the City Council chambers briefly as aldermen unanimously and without discussion this week approved a petition by Wal-Mart to build a supercenter on land that he holds the deed to on the south side.

But two people complained Tuesday that officials were rushing the petition process.

"This is troubling," resident Scott Summers said. "I want to see a draft ordinance. This is insufficient time. I request that the city defer approval until the public has an opportunity to comment."

Summers said at a planning and zoning meeting last week that comments from the audience came before Wal-Mart presented its plan, which he said was unfair.

Nolan was not compelled legally to leave and could have voted on the proposal, said City Atty. Robert Fetzner. Nolan said he left because of concerns brought up by news media.

He holds the deed on 16 of the 20 acres on the south side of McGuire Road near U.S. Highway 14 on which Wal-Mart plans to build. More than two years ago developer Elvis Henson bought the property, but the land is under a contract-purchase agreement.

Nolan said he is not getting a financial benefit from Wal-Mart's purchase of the land from Henson.

"I thought Elvis was going to build on it," Nolan said. "Instead he consolidated it with another parcel and sold it to Wal-Mart."

Nolan said he would have made more money had he sold the land to Wal-Mart himself.

Copyright © 2006, Chicago Tribune

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Wizardry At Wal-Mart

Tom Van Riper
06.15.06                   [back to top]

Forget Ben Bernanke. Does anything move markets these days more than a monthly same-store sales report from Wal-Mart?

Time and again, traders work themselves into a frenzy, buying or selling based on whether the world's largest retailer hit its latest comparable-store sales forecast. The presumption is that the result provides a window into not only the health of the retail sector but also consumers' overall spending patterns, which drive two-thirds of the economy.

There's only one problem--evidence shows that the presumption is wrong.

An analysis comparing Wal-Mart Stores' same-store sales growth to consumer spending data dating back to January 2004, compiled by the Bureau of Economic Analysis, actually shows a negative correlation between the two. During the first four months of 2006, for example, each month brought a minimum 6% hike in consumer spending from the corresponding month in 2005, while Wal-Mart's year-over-year comp sales were bouncing from as low as 0.9% to as high as 4.3%.

And a similar comparison of Wal-Mart's comp sales to the Conference Board's consumer confidence reading showed almost no correlation between those two measurements either.

Still, Wal-Mart's size, together with the longtime acceptance of same-store sales as a yardstick of a retailer's health, makes for potential fireworks every time the company's executives put out the latest monthly number.

Some retail experts say that a mature company such as Wal-Mart, with over 3,200 stores, is bound to see its comp store sales slow down as it builds multiple locations in many markets. The practice may cannibalize sales in some of its older stores, they say, but it succeeds in building a bigger overall share of markets the company already occupies.

"It's a false premise," says retail expert Britt Beemer of America's Research Group on the notion of Wal-Mart's same-store sales as a valid economic measurement. Target, with a smaller, more spread-out store base, has an easier time growing same-store sales, he notes. And, he says, it makes sense for Wal-Mart to add service to an area that's outgrowing one store, even if it drags same-store sales a bit.

"The two biggest complaints Wal-Mart gets are that their checkout lines are too long and that their aisles are too crowded," Beemer says. Indeed, what shopper stuck in a long line doesn't love the sound of a cashier's voice saying, "I can help you over here," as she opens a new checkout stand? Wal-Mart's expansion of its store networks means simply that it has perfected a way to open more checkout lines a few miles away.

But industry analysts' obsession with comp-store sales continues to keep Wal-Mart's stock down while playing havoc with the industry.

Over Memorial Day weekend, Wal-Mart disappointed investors by announcing 2.6% same-store sales growth. That result was "toward the low end of its previous forecast," a phrase that's been used so often with Wal-Mart it's begun to take on cult status in the American economy.

Sure enough, when stock markets reopened on Tuesday, May 30, Wal-Mart led a major selloff by tanking almost 3%. The Dow dropped 184 points; all 30 components fell for the first time since September 2004. Reports blamed the effect of gas prices and interest rates on consumer spending. Analysts were using Wal-Mart's sales report as the barometer. Other major retailers naturally got caught up in the frenzy, with shares of Home Depot, J.C. Penney, Best Buy, Costco and Gap all down 2% or more.

But the pundits had to eat crow a day later, since only Gap lived down to expectations inaugurated by Wal-Mart when other major retailers reported their own May sales. Same-store sales at J.C. Penney and Anne Taylor Stores were up 11% and 12%, respectively, while Limited Brands rose 7%. Wal-Mart's discount competitors, Target (up 6%) and Costco (up 10%), also showed few signs of following their bigger rival in lackluster same-store sales.

Overall retail store sales rose 4.1% from May 2005, according to the International Council of Shopping Centers, well above Wal-Mart's clip. So much for Wal-Mart's announcement being a bellwether for the industry.

By missing its comp sales targets--Wal-Mart's growth has been below 3% for eight of the past 12 months--the retailer has disappointed investors despite its continued surge in overall sales and profit. Wal-Mart grew earnings per share by 29% over 2004 and 2005, not far below the 36% pace of all S&P 500 firms. But while the S&P 500 index rose 12% over that span, Wal-Mart shares dropped 11% (they've been flat so far in 2006).

But experts say the focus on same-store sales has given too little credit to a company that has been successfully growing profit--not just revenue--through store expansion.

"Wal-Mart comps say nothing about earnings. I have no concerns about them at all in this [high interest rate] environment," says retail analyst Richard Hastings of Bernard Sands. He points out that the supermarket business, which now accounts for about a third of the company's $300 billion in annual sales, according to industry tracker Retail Forward, provides the advantage of high market penetration. Supermarkets may carry low margins that reduce the same-store sales numbers, but they don't reduce profit.

Neither do Wal-Mart's same-store sales say too much about the economy and consumer spending. If anything, when interest rates are rising and inflation in showing its face, discount shoppers are more likely to remain discount shoppers.

"A low-income family may delay buying their child a bike, but they will still get their milk and other things they need at Wal-Mart," Hastings says.

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Wal-Mart Getting Demographic Oriented

Shaveta Bansal -
All Headline News
June 14, 2006                  [back to top]

New York, NY (AHN) - Wal-Mart is customizing itself to cater to key demographics that it identified in its customer base, reports Dow Jones.

In a conference hosted by Credit Suisse on Tuesday that was broadcasted on the Internet, Vice Chairman John B. Menzer told investors that Wal-Mart is seeing strong results at a handful of stores that now cater to key demographics it has identified in its customer base, which include Latinos, African Americans, baby boomers, high-income and rural customers.

As per Dow Jones, Menzer mentioned that at Evergreen Park, Ill. store, whose client base is 90 percent African American, Wal-Mart has boosted sales by offering a selection of ethnic hair-care products, urban apparel styles, and a music selection that's focused almost exclusively on gospel, rap and "other urban selections."

Dow Joners further quoted Menzer as saying that the company's core customer is still its "rural" base, which predominates in about 2,000 stores nationwide.

For lower- and middle-class customers in small towns, "opening price points are still king," Menzer said.

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Wal-Mart Re-Vamps Store Concepts

Kate DuBose Tomassi
Forbes
06.14.06                         [back to top]

Wal-Mart is currently undertaking a series of initiatives to better serve customers, with particular focus on becoming the "store of the community," according to a recent report from Credit Suisse.

In a presentation at Credit Suisse's Retail and Consumer Conference on Tuesday, Wal-Mart vice chairman John Menzer identified five store formats meant to better serve customers based on demographics and locations: suburban affluent, urban multicultural, Hispanic, baby boomers and rural markets.

After a decline in consumer traffic in early April, the company aggressively promoted a price “Rollback” starting over the Memorial Day weekend and added an extra circular.

"Menzer emphasized the importance of Wal-Mart continuing to be identified with the value message at a time when it is focused on selective customers," wrote Credit Suisse analyst Michael Exstein.

In addition, Wal-Mart is in the middle of a large inventory reduction that began at the freight docks and is now focused on the sales floor, said Exstein.

"We believe the in-store inventory reduction could be more challenging after most of the low-hanging fruit has already been picked on the inbound freight and stocking areas," he said.

Finally, the company is renovating many stores, with 800 remodels completed or begun, and 500 more planned to be implemented by the end of the year. The analyst said that while he believes the remodeling will ultimately benefit the company, it has the potential to disrupt near-term sales.

Credit Suisse rates Wal-Mart "outperform" with a 12-month price target of $55.

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Wal-Mart adds to Big Apple area offer

Lori Gustavus
Cosmeticnews.com.
06/14/2006                         [back to top]

US mass-retail giant Wal-Mart held a ribbon-cutting ceremony today to inaugurate its location in Kearny, New Jersey, just seven miles from New York City. The new 13,245m² store, situated in a high-traffic area between NYC and Newark, was built with Wal-Mart’s new design format that includes wider aisles and wood and earth-toned floors that indicate store departments. This store’s beauty department will feature an assortment chosen to correspond with the area’s community, which is 30% Hispanic, a Wal-Mart spokesperson tells Cosmeticnews.com.

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HOW WAL-MART AND OTHER LARGE CORPORATIONS PICK AND CHOOSE WHEN TO BEHAVE PROPERLY

By Philip Mattera
Corporate Research E-Letter No. 59
May-June 2006                                                 [back to top]

For the past 52 years, Fortune magazine has been publishing a list of the largest U.S. corporations, an annual chance for chief executives to brag that “my revenue is bigger than yours.” For the past seven years, Business Ethics magazine has issued another kind of ranking—a list of what it calls the “100 Best Corporate Citizens”—that promotes virtue over size in the perennial game of corporate comparisons.

The Business Ethics list, the 2006 version of which appeared recently, has become a leading scorecard in the field of corporate social responsibility, or CSR (increasingly used as an abbreviation for corporate sustainability and responsibility). CSR has evolved from a rallying cry of business critics to a fashionable concern among corporate executives eager to demonstrate that high-mindedness can co-exist with the pursuit of profit. Many of the companies cited by Business Ethics consider it a badge of honor, putting out press releases touting this accomplishment.

Yet when one looks at the companies on the Business Ethics list, it is easy to be baffled at the real meaning of CSR. Some of the firms may have done laudable things, but the list is riddled with companies that have significant blemishes on their record when it comes to environmental matters, labor practices or treatment of customers. The likes of Wal-Mart and Big Oil have not yet made the cut, but that may be only a matter of time.

NOT SO CLEAN

Business Ethics compiles its list using data on corporate social performance in eight categories—community, diversity, employee relations, environment, etc.—from the Socrates database produced by KLD Research & Analytics. That information is then processed quantitatively using methodology developed by Sandra Waddock and Samuel Graves of the Carroll School of Management at Boston College. Unfortunately, the magazine says nothing about that methodology, so the reader is confronted with a statistical black box. An article accompanying the list provides scanty details. Thus, one must essentially take the rankings at face value.

The first thing that stands out is that the list is top heavy with high-tech firms, including Hewlett-Packard (No. 2), Advanced Micro Devices (No. 3), Motorola (No. 4), Cisco Systems (No. 8), Dell Inc. (No. 9), Texas Instruments (No. 10), and Intel (No. 11). The magazine says this is, in part, because “most top tech companies do well on environmental issues.” That claim would come as a surprise to groups such as the Silicon Valley Toxics Coalition (SVTC), which has for years been pointing out that high-tech industry is far dirtier than its clean image. The electronics industry is a heavy user of toxic chemicals, which have a way of seeping out into the environment, resulting in a proliferation of Superfund toxic waste sites in places such as Silicon Valley.

In recent years, SVTC has also been looking at another environmental problem caused by high tech: the growing volume of e-waste generated when obsolete computers and other devices—with toxic material inside—are thrown away. SVTC’s Computer Take Back Campaign has been pressuring the major tech companies to take responsibility for recycling. While Dell and Hewlett-Packard have responded positively to the pressure, the campaign faults companies such as Apple (No. 25 on the Business Ethics list) for resisting.

Also difficult to accept is the other reason given by Business Ethics for the prevalence of tech firms at the top of the list: high scores on employee relations, including workplace health and safety. The same toxic chemicals that pollute communities around electronics plants have taken a toll on the health of workers inside the plants. For instance, in 2004, IBM (No. 41 on the Business Ethics list) paid an undisclosed amount to settle lawsuits brought by about 50 current and former workers who were suffering from cancer that they attributed to workplace exposure.

As for the aspect of employee relations relating to unions, Business Ethics fails to mention that the high-tech firms on its list are all largely unacquainted with collective bargaining. The electronics industry has resisted unionization of its domestic workforce for decades. A Wall Street Journal reporter once took a job incognito at a Texas Instruments plant and found workers there so intimidated that they panicked at the mere mention of unions. At the same time, these same companies have not hesitated to move much of their production to foreign sweatshops.

In recent years, the industry has also been moving high-level technical, research and design functions abroad to low-wage havens such as India—much to the detriment of U.S. workers. IBM, now focused on computer services rather than hardware, has increased the size of its Indian workforce to 43,000. Any owner of a Dell computer knows that a call to tech support is likely to be answered by someone sitting in Bangalore.

TAKING TAX BREAKS

U.S. high-tech companies are not offshoring everything, but when they build new domestic operations they often engage in another practice that should raise questions in the minds of the ethics monitors: extorting tax breaks and other subsidies from state and local governments. Recently, the Albany Times-Union reported that New York State officials may be preparing a subsidy package worth $1 billion to persuade Advanced Micro Devices to build a new chip fabrication plant in Saratoga County.

This would be the latest in a long series of generous “incentives” that semiconductor and computer producers have taken from governments across the country. In 2004 Dell got a package worth up to $267 million when it agreed to locate a new assembly plant in Winston-Salem, North Carolina. The deal, which is being challenged in a lawsuit brought by the North Carolina Institute for Constitutional Law, mirrored a package Dell received in 1999 in connection with the construction of a plant in Nashville. When the city of Austin, Texas turned down Dell’s demand for long-term property tax breaks, the company moved its headquarters to the suburb of Round Rock, which agreed to 20 years of abatements.

Intel has avoided hundreds of millions of dollars in local taxes on its facilities in New Mexico, Arizona and Oregon by using complex financing schemes involving industrial revenue bonds as well as straightforward abatements and exemptions. All these subsidies weaken the fiscal condition of local governments, making it harder for them to pay for services such as education and public safety.

SHARKS AND PREDATORS

High-tech is not the only industry that accounts for some questionable entries on the Business Ethics list. Take financial services. Wells Fargo & Co. (No. 16) scores high on workplace diversity, but it has been accused of mistreating its poorer customers—many of whom are people of color. For the past several years, Wells has been the target of a campaign by the community-organizing network ACORN over its predatory lending practices. ACORN charges Wells with a slew of abusive practices, such as charging higher interest rates than a borrower’s credit warrants and imposing excessive mortgage origination fees. This spring, for the third year in a row, ACORN activists—including some carrying inflatable sharks—demonstrated outside the Wells Fargo annual meeting. Also protesting were supporters of Rainforest Action Network (RAN), which has charged the bank with financing environmentally destructive infrastructure projects in developing countries.

RAN’s Global Finance Campaign has succeeded in getting Citigroup Inc., No. 62 on the Business Ethics list, to adopt guidelines that promote more environmentally responsible projects, but the financial giant is still widely criticized for the predatory lending practices of its subsidiary Associates First Capital. More surprising is the appearance of Freddie Mac, No.38 on the list. The mortgage finance entity has been embroiled in a major accounting scandal. In April it agreed to pay $3.8 million to settle charges relating to illegal campaign contributions.

Many other examples of companies with ethical lapses can be found on this list of supposedly exemplary corporate citizens. Johnson & Johnson (No. 12) refuses to join the 300 other companies that have signed the Campaign for Safe Cosmetics pledge not to use toxic ingredients. NIKE Inc. (No. 13) has adopted some reforms in response to years of criticism over labor practices at its overseas suppliers, but activist groups continue to cite abuses. General Mills (No. 14) sells food products with unlabeled genetically modified ingredients.

A question can even be raised about the company at the very top of the Business Ethics list: Green Mountain Coffee Roasters. The company seems to have a strong commitment to CSR, but one of its main customers is Exxon Mobil, which sells Green Mountain coffee at many of its service stations.

NO COMPANY IS PERFECT, ESPECIALLY WAL-MART

The fact that the corporation dubbed most ethical does a great deal of business with a company that is widely seen as one of the least ethical—along with the many mixed track records described above—puts into question the legitimacy of the concept of CSR.

Wait, you may say—no company is perfect. Maybe so, but should we be honoring some of those rather imperfect entities as “the best corporate citizens?” We certainly don’t use such limited standards when it comes to real citizens. Do we honor embezzlers because they recycle their newspapers? Do we overlook child abuse because the parent contributes to the United Way? People are expected to follow all laws and ethical norms—not only those that are convenient to obey. Why not apply the same standard to corporations?

Which brings us to Wal-Mart. Having been subjected to probably more criticism than any other single company (including two national pressure campaigns devoted exclusively to it), Wal-Mart is now changing its stripes—or at least some of them. Last fall, the company announced a sweeping set of voluntary environmental measures that are supposed to sharply decrease its energy consumption, reduce its waste production and expand its recycling efforts. The giant retailer also said it would pressure its suppliers to adopt greener practices. More recently, there have been reports that Wal-Mart is making a big push into organic food products, sustainably fished salmon and fair trade coffee.

What the company has not announced are any significant changes in its labor practices. Wal-Mart remains adamantly anti-union and continues to offer low pay and limited benefits. It strongly opposes living wage initiatives. The fact that nearly half the children of its U.S. employees are uninsured or have to get coverage from taxpayer-funded programs is not likely to change any time soon. There is no evidence as yet that the company has eradicated the tendency of store managers to force employees to perform extra work off the clock. Slick TV ads notwithstanding, it remains to be seen whether Wal-Mart has significantly addressed charges of sex and race discrimination in its domestic workplaces. Given the company’s obsession with cutting costs, there is every reason to believe that sweatshop conditions will persist in the factories of its foreign suppliers.

RESISTING CORPORATE GREEN HYPE

The divergence between Wal-Mart’s environmental reforms (assuming they turn out to be more than greenwash) and its retrograde labor policies symbolizes the selective business ethics that prevail today.

Like Wal-Mart, much of Corporate America claims to be going green. Sometimes this is the result of pressure, such as RAN’s successful campaigns against firms such as Home Depot, Citigroup and Goldman Sachs. Sometimes it is for public relations purposes, such as General Electric’s “eco-imagination” ad blitz that came after years of resisting responsibility for cleaning up PCBs in the Hudson River. And sometimes it is because companies have decided they can make money selling alternative products or technologies, such as Toyota’s promotion of hybrids. While some executives may claim to be following their conscience, the fact is that corporate environmentalism today is deemed good for business.

The same cannot be said about enlightened employment practices. Most big companies still hold down wages, restrict medical coverage, downgrade retirement benefits, pay inadequate attention to workplace health and safety, engage in downsizing and offshoring, and, of course—fight unionization or demand concessions from unions already in place. Chief executives at firms such as Wal-Mart claim they cannot afford to make major improvements in working conditions—even if they will result in higher productivity—yet they are now willing to spend heavily on environmental change.

It may take a major resurgence in the labor movement to get big business to give the same priority to workplace reforms that it now accords to environmental matters. In the meantime, we shouldn’t get too carried away with the corporate green hype. And we certainly shouldn’t be giving good citizenship awards to companies that view ethics as a menu from which to choose only that which is most palatable.

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Wal-Mart's Luxury Problem

By Pallavi Gogoi
JUNE 13, 2006            [back to top]

French design house LVMH's Fendi files suit, claiming that counterfeit Fendi leather goods are being sold at Wal-Mart's Sam's Club unit

Wal-Mart Stores (WMT ), the world's biggest retailer, has often been compared to a flea market because of the bargains that one finds there. The biggest difference for shoppers is that they know they're getting authentic goods at Wal-Mart or at its Sam's Club warehouse unit. Or at least that's what buyers believe.

Now, Fendi, a purse and handbag brand of French luxury goods company LVMH Moët Hennessy Louis Vuitton (LVMHF ), is suing Wal-Mart Stores in federal court in New York, alleging that counterfeit versions of its Fendi brand bags and wallets are being sold in Sam's Club stores.

According to the complaint filed on June 9, Wal-Mart has never purchased Fendi products from Fendi or any entity or person affiliated or approved by Fendi. "Handbags, shoulder bags, purses and wallets, and keychains that imitate the designs of Fendi products and carry the Fendi trademark are sold at Sam' Club stores," it says. Some counterfeit Fendi handbags sell for as much as 68% less than the actual Fendi products, according to the lawsuit. One example cited in the suit is a handbag that goes for $295.03, vs. $925 for the original.

John Simley, spokesman from Wal-Mart counters: "Our policy is not to sell counterfeit goods." He says that Wal-Mart will be able to demonstrate that the Fendi items in the store are not counterfeit.

SIMILAR LAWSUITS. This isn't the first time Wal-Mart has been sued for selling counterfeit goods. And Wal-Mart has offered a similar defense in the past. In 1998, after many rounds in court over several years with Tommy Hilfiger it paid out $6.4 million to settle a lawsuit that it was selling fake Hilfiger brand T-shirts. And in 1999 it paid more than $1 million to Nike (NKE ) after being sued on similar charges.

Wal-Mart has also settled lawsuits on similar claims with Nautica, Polo (RL ), and the Fubu group at Inter Parfums (IPAR ). "You'd think that these cases would stop with Wal-Mart being one of the largest and most sophisticated companies in the world," says Steven Gursky, partner at law firm Dreier LLP in New York, who represented Tommy Hilfiger, Polo, Nautica, and Fubu in their cases against Wal-Mart. "I suspect that there was a breakdown in communicating the simplest of instructions down the hierarchy to the actual people who purchase and sell goods," says Drier.

Still, such breakdowns could hurt Wal-Mart as it tries to attract more upscale consumers. After seeing that its stores were beginning to draw wealthier customers, Chief Executive Lee Scott laid out a strategy to get them to spend more time at the store. "We've got to make sure that those customers aren't bypassing [our] other departments," he said at the company's annual meeting last year. He plans to double the store's presence in organic foods, and introduce trendier brands like Metro 7 for young women and Exsto for young men (see BusinessWeek.com, 03/29/06, "Wal-mart's Organic Offensive").

IMAGE BRUISER. But the same upscale customer could bolt if they believe that the goods at Wal-Mart or Sam's Club are of an inferior quality or even fake. "Yes, luxury consumers from all rungs of the income spectrum want a bargain," says Pamela Danziger, president of luxury research and consulting firm Unity Marketing, and author of Why People Buy Things They Don't Need. "But when they walk into a Sam's Club, they expect the real deal, not what they'd get at street corners." (see BusinessWeek.com, 4/19/06, "Wal-mart Puts on a Happy Face")

Big-name luxury brands are determined to protect their reputations. Most counterfeiters make shoddy products and cannot emulate the quality of a legitimate brand owner. Not only does the brand stand to harm its reputation if a counterfeit product malfunctions or falls apart, but it also stands to lose substantial revenue. "After all, counterfeit products are just riding the tails of big advertising and promotional expenses spent over many years by big brands," says Nils Montan, president at International Anticounterfeiting Coalition, a group that combats trademark and product counterfeiting.

Fendi in its lawsuit claims that it distributes exclusively to retail outlets owned by the Fendi group and to a limited number of exclusive boutiques and department stores, such as Neiman-Marcus, Saks Fifth Avenue (SKS ), and the Bloomingdale's division of Federated Department Stores (FD ). As a result, there is prestige and quality associated with the Fendi trademark. Donald deKieffer, a principal with Washington (D.C.)-based DeKeiffer & Horgan, who is not involved in the current suit, says that companies like Fendi not only will not sell directly to Wal-Mart, but they don't even want to be associated with a discounter such as Wal-Mart.

DeKieffer says that it's possible that Wal-Mart was able to secure original Fendi goods by figuring out a leak in Fendi's supply chain. But he would be surprised if that was the case, given the high costs of such lawsuits. "Most companies are usually real sure before they pull the trigger (of filing a lawsuit)," sys deKeiffer.

MORE THAN AN ACCIDENT. If indeed Fendi can prove that the products were fake, Wal-Mart will have some explaining to do. After all, Wal-Mart is only too aware of such fake items in the market, as the lawsuits of the past decade have shown. In fact, in a statement after losing the case against Tommy Hilfiger, Wal-Mart said that it tracks invoices from the manufacturers to the sales floor.

In 1999, New York Judge John E. Sprizzo asked Wal-Mart to explain why it had violated a 1996 court injunction to stop selling Hilfiger knock-offs. A Wal-Mart executive tried to pass it off as an accident, but admitted that it hadn't told its clothing buyers about the injunction. At that moment, an exasperated Judge Sprizzo said: "That's chutzpah if I ever saw it."

Indeed, many experts believe that a similar corporate attitude could be behind the Fendi lawsuit. After all, Wal-Mart is so big, with annual revenues that top $320 billion, that paying $6 million to settle a lawsuit barely makes a dent in its financials. "You may be just seeing the symptoms of corporate hubris," says Robert Passikoff, president of Brand Keys, a brand consulting firm in New York.

Passikoff, who measures brand loyalty, says that the perception of Wal-Mart as a brand might erode over time if people read more about such cases where it improperly stocked products in its stores, but that ultimately Wal-Mart knows that many people walk into its stores because it offers the lowest price on many products. "Has it helped Wal-Mart's corporate reputation? No. Will you see a massive drop in sales? Absolutely not," says Passikoff.

Copyright 2000- 2006 by The McGraw-Hill Companies Inc. All rights reserved.

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Asda under threat of prosecution for union busting

GMB prepares to take industrial and legal action
Supermarket chain denies plans to employ 'scabs'

David Hencke,
Westminster Guardian
Tuesday June 13, 2006                    [back to top]

Asda could become the first company in Britain to be prosecuted for union busting under laws passed last year. Shop stewards from the GMB union are discussing whether they could initiate legal proceedings in an increasingly bitter dispute over union recognition in the supermarket company's distribution depots. Asda is owned by the US retail group Wal-Mart, which has a policy of non-union recognition in its stores.

The GMB is conducting a strike ballot - to be announced on June 21 - that could lead to stores being denuded of goods as drivers and depot staff refuse to handle them.

The row erupted after a tribunal case where the company was ordered to pay £850,000 compensation to depot workers. Asda had tried to persuade them to accept a pay deal that involved them giving up their rights to union bargaining.

The tribunal ruled the company's action illegal and blamed Asda's agents, Portland public relations, run by Tim Allen, the former Downing Street deputy press secretary to Alastair Campbell, for producing material that was "very hostile to trade unions and highly disparaging of the process of collective bargaining". The company has since dismissed Portland and is appealing against the tribunal decision.

However yesterday shop stewards accused Asda of fresh bullying tactics, including putting CDs in drivers cabs urging them to vote against the strike, making lorry drivers go for interviews with senior management to persuade them not to strike and writing to their families warning them against strike action. One shop steward has been suspended by the company for flying an England flag with a GMB vote "yes" sign on it.

The idea of taking legal action came after the then trade secretary Alan Johnson wrote to Nick Brown, Labour MP for Newcastle upon Tyne East, in April pointing out that the Asda dispute could fall foul of new labour laws. "The 2004 act included provisions to penalise employers, trade unions or their agents (including so called 'union busters') who use intimidatory tactics during the key balloting phases of the statutory procedure," he wrote.

Mr Brown has since held talks in the House of Commons between the GMB and Andy Bond, chief executive of Asda, to try to reach an agreement over union recognition. These broke down and led to a ballot for strike action.

Yesterday Paul Kenny, general secretary of the GMB, raised the temperature by accusing the company of planning to use "scabs" to work in depots and deliver goods. He told his union's annual conference in Blackpool: "It seems that Asda is intent on driving a coach and horses through the legislation about hiring labour in industrial disputes so we are going to send a coach and horses down to visit these companies. I will be calling for the mass ranks of the GMB to picket those depots wherever those scabs come in and try and do our jobs."

Asda yesterday denied it had plans to bring in agency labour to replace striking staff. The company also said that the GMB did not represent more than a third of the staff. "In one depot they only have two members and in other depots they have do not represent more than a third of the staff. We have only had 1,737 notifications by staff about a potential dispute."

The GMB disputes this. It says it has just under 50% of Asda's workers and 70% support in some depots.

Guardian Unlimited © Guardian Newspapers Limited 2006

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Wal-Mart: City could get 20 stores -- but . . .

BY FRAN SPIELMAN
June 13, 2006                               [back to top]

City Hall Reporter [Image removed] [Image removed] Chicago could be home to as many as 20 new Wal-Mart stores over the next five years, but only if the City Council does not establish wage and benefit standards for "big box" retailers, a company official said Monday. Even before the planned September opening of its Austin store, Wal-Mart is meeting with aldermen and scouting locations for additional Chicago stores while pursuing the urban strategy outlined by its CEO in April, according to John Bisio, Wal-Mart's Midwest director of public affairs. One possibility is an old K-Mart site at 77th and Stony Island in the South Side ward of Ald. Leslie Hairston (5th), who said she's not interested until Wal-Mart cleans up "some serious public perception problems" related to how the company treats its employees. Ordinance's defeat required But Wal-Mart will "put the brakes" on those ambitious expansion plans unless the City Council defeats a so-called "big-box" ordinance co-signed by 33 of Chicago's 50 aldermen. Introduced by Ald. Joe Moore (49th) and championed by Finance Committee Chairman Ed Burke (14th), the ordinance would apply to both newly built and existing stores with at least 75,000 square feet of space owned by companies with $1 billion in annual gross revenues. Those 35 Chicago stores would be required to pay any employee who works more than five hours a week a "living wage" of at least $10 an hour, along with $3 an hour in benefits. "Why would you continue to invest millions and millions of dollars . . . in a marketplace [that has] rules subject to some and not all? If you want to do it to all retailers, you might have something. But, not like this," Bisio said. Asked how many new Chicago Wal-Marts hang in the balance, Bisio said, "It's not unreasonable to say 10 or 20 stores over five years." 'Scare tactic' Chicago Federation of Labor President Dennis Gannon accused Wal-Mart of "holding a gun" to the Council's head. Gannon said he would "not be intimidated" by a behemoth that clearly needs Chicago more than Chicago needs Wal-Mart. "Who are they kidding? They need this market. They're saturated [everywhere else]," Gannon said. Moore denounced the Wal-Mart threat as a "scare tactic." "If they're going to come in and do some sort of predatory pricing -- the same sort of subsistence wages they pay their workers -- and, at the same time, put other [retailers] out of business, perhaps it's not such a bad thing" for Wal-Mart to avoid the Chicago market, Moore said. Two years ago, a bitterly divided City Council handed Wal-Mart a split decision: zoning approval to build its first Chicago store in the West Side's Austin community and a one-vote defeat in Chatham.

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The one-stop shop behind Tesco and Wal-Mart's fall

Investment Week
12 June 2006                           [back to top]

Retailers, especially those at the value end of the market, are in choppy waters according to some fund managers. However, durables and out of city retailers are taking advantage of niche markets and are showing promising mid- to long-term improvements.

Rahul Shama, director and sector manager at Martin Currie, believes there are three identifiable problems affecting retailers.

He points to the growth of convenience shopping stores. "The idea of the one-stop shop is causing problems for every-one else as companies such as Tesco and Wal-Mart offer the easiest solution to the customer's needs," he explains.

"These companies are often located away from city centres and have lower costs than retailers such as Matalan and Woolworths, which are unable to compete on the same terms."

Secondly, Shama believes that the past 18 months have seen an acceleration of non-controllable family spending, such as bills and household costs, leaving less money to be spent elsewhere.

"For many people there is simply very little leftover to be spent," he notes.

Finally, the increase in rates and rental costs is tightening the margins for many retailers. "The combined effect of these issues can, theoretically, be seen to knock 25% off the profit margins of many retailers," he says.

Managers agree one area suffering from such pressures is clothing.

"The value end of the market has been proved to offer quality and is now popular among consumers," Denis Wyles, UK fund manager at Resolution Asset Management, says.

"These companies, such as Primark, are squeezing the mid-range market. This, combined with the bad weather and lack of trends, is giving the clothing sector a hard time," he says.

Wyles also highlights problems affecting the DIY sector due to saturation after television shows like Changing Rooms.

"Retail spending is tight and wallets are being turned away from home improvement to other areas," he says.

Jeremy Richardson, equity analyst at Credit Suisse, believes such problems have resulted in rising volatility, although he is keen to point out this also features in the rest of the market.

However, despite specific difficulties, managers highlight the strength of those companies with defensible niche markets.

Richardson points to the durables sector as particularly strong as it enters a period of trading driven by new technology.

"Digital media and flat screen televisions are very popular, especially as the FIFA World Cup gives an incentive to buy larger screen televisions," he explains. "Electrical goods retailers are currently doing well," he adds.

Shama says high-end retailers are also able to avoid competing with the value end of the market.

"These companies have a good niche from which to work away from the competition," he says.

According to Wyles, this cycle is set to continue in the long term. "The penetration of digital technology is still low compared to the US and the substitution of flat screen televisions is in the early stages," he says.

© Incisive Media Investments Ltd 2005

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Wal-Mart considers fair trade Retailer looks to overhaul image, attract new customers

By Ylan Q. Mui
The Washington Post
June 11, 2006                            [back to top]

POCO FUNDO, Brazil - Rosevaldo Jose Pereira has never been to Wal-Mart. The name doesn't mean anything to the lifelong coffee farmer in this remote village in southeastern Brazil.

But Wal-Mart Stores Inc. knows who he is. And the world's largest retailer is changing his life.

Wal-Mart is in the midst of overhauling its tightfisted image to win over shoppers searching for more than low prices. That effort has taken the company that built an empire on the principle of high volume and low costs into previously uncharted territory, into the realm of trendy apparel and organic food.

Now, with the help of Pereira, it is embarking on one of its most radical undertakings to date: fair trade.

Pereira, 40, is part of a small cooperative of growers living here in the heart of coffee country, where the rolling mountains are lush with trees. The late afternoon sun is strong. Pereira wipes the sweat from his brow with his forearm as he works his six acres. Dirt is jammed deep underneath his fingernails. He has been picking coffee cherries since 5 a.m., stripping them off the branches with his bare hands. They will be dried, and eventually only the pit will be left -- the coffee bean.

Pereira gets a premium for his harvest. His co-op is one of only seven in the country that is fair-trade certified, charging above-market price for beans because it meets certain social and environmental standards.

Wal-Mart is considering bringing Pereira's beans into its namesake stores. It would be a novel arrangement for a company infamous for squeezing pennies out of its suppliers -- and a test of how deep its makeover will really go.

For Pereira, the deal could mean more money, new computers for the co-op or a bigger school for the village. Already some children talk about college and life away from the farm. But it would also inextricably bind the co-op's fortunes to the company from Bentonville, Ark. -- all its beans, so to speak, in one basket.

Wal-Mart executives are planning to visit Poco Fundo at the end of the month before making a decision. It's part of the new corporate philosophy outlined by chief executive H. Lee Scott Jr.: "Doing well by doing good."

It is a work in progress.

Wal-Mart meets the co-op Wal-Mart discovered Pereira and his co-op five years ago when Mark Hoffman, a buyer for its Sam's Club membership warehouse stores, visited Brazil on a scouting trip. There was nothing particularly philanthropic about his visit.

Hoffman worked for the company's global sourcing team, a now-defunct group that traveled the world finding ways to buy products for less money. The Brazil list included beef jerky, cashews and, of course, coffee.

Brazil produces roughly 30 percent of the world's coffee, exporting 26.4 million bags weighing 132 pounds each in 2004. About half of that is grown in the southeastern state of Minas Gerais, known for its iron mines and orange-red earth.

Pereira's village is there, the farms connected by dusty dirt roads. Donkeys plod along the cobblestone streets of the town center next to cars. About an hour and a half away is the air-conditioned headquarters of a company called Cafe Bom Dia.

Bom Dia is Pereira's link to the global economy, buying beans from the co-op and selling them to Wal-Mart. It counts itself among the five biggest coffee roasters and exporters in Brazil. Much of its production includes organic and fair-trade coffee from small growers.

Bom Dia buys beans directly from farmers and roasts them, eliminating a middleman. The company, run by the wealthy Marques de Paiva family, also grows, roasts and exports beans from its own farm.

To Hoffman, that all meant one thing: cheaper prices.

"I really didn't think five years ago when I was down there that I'd be talking about a national organic or fair-trade program," he said in an interview from Bentonville. "That had not crossed my mind."

Sam's Club already was selling fair-trade coffee from Millstone Coffee but wanted to work directly with Bom Dia to create a new line that could undercut the prices of the big names, controlling a supply chain from the ground up.

"Here was a company that first of all made a fantastic product," Matt Kistler, vice president of product and packaging innovation at Sam's Club, said in an interview from company headquarters. "But also it was a really direct-to-the-farmer opportunity for us. It eliminated or bypassed some of the traditional layers."

Lightning rod for criticism Supporting fair trade presents a paradox for Wal-Mart. It is a tacit admission that there is a point at which no more efficiencies can be squeezed out of the system without harming the people who make it work. Fair-trade beans are sold at a minimum of $1.26 per pound, compared with the world average last month of 90 cents. But Wal-Mart is still determined not to pay more than it must.

The company has forged partnerships with hundreds of social and environmental groups to develop sustainability initiatives. TransFair USA, which certifies farms as fair trade, is working with it on Pereira's coffee. The Rocky Mountain Institute is helping reduce the fuel consumption of its trucking fleet.

But Wal-Mart remains a lightning rod for criticism, and some groups are stepping carefully. The National Resources Defense Council has quietly worked with the retailer on everything from consumer electronics to alternative fuels over the past eight months. But a few weeks ago, organization President Frances Beinecke reminded staff in a memo that the group's name could not be used publicly in association with Wal-Mart without express approval.

"Trust is built over time," said Andrew Ruben, Wal-Mart's vice president for corporate strategy and sustainability, in an interview from Bentonville.

Or, as Kirsten Moller, executive director of the nonprofit group Global Exchange, which supports fair trade, puts it: "Wal-Mart is probably the last place in the world that we would recommend anyone shop. That makes it complicated."

When Hoffman tried to bring Bom Dia coffee to Sam's Club, the first question he got was, "Well, what are you getting rid of?"

The answer: Millstone Coffee, owned by Procter & Gamble.

The brand's Mountain Moonlight Fair Trade Certified blend sold on its Web site recently at $8.99 for a 10- to 12-ounce package of whole beans, or about 75 cents to 90 cents per ounce. Bom Dia's fair trade coffee sells at Sam's Club for $11.77 for 40 ounces -- about 29 cents per ounce.

"Just look at the cost," Hoffman said. "They couldn't come close to what we were trying to accomplish."

Hoffman's efforts to switch coffees were two years ago. Sam's Club is now Bom Dia's largest customer and one of the top three U.S. retailers of fair-trade coffee, TransFair USA said. The companies have an arrangement that displays both brands -- Bom Dia's Marques de Paiva and Sam's Club's Member's Mark -- on the packaging.

Pereira says his profit has doubled since the co-op became fair-trade certified, and he expects to sell his entire harvest of 40 sacks of beans.

Pereira sat in front of the TV in his new house with tile floors and spacious kitchen after a long day harvesting coffee cherries recently. He converted the old one into a fertilizer warehouse. His daughter Mariana Karina, 15, has braces on her teeth. Pereira has a cellphone.

The poorest coffee farmers in northern Minas Gerais have no electricity or running water, much less the satellite dishes sitting near several of the homes in Poco Fundo.

"We dreamt to have a good house," Pereira said.

At the end of the month, Wal-Mart dry groceries buyer DeDe Priest and 11 colleagues are to visit this small town at the bottom of the global supply chain. Fair-trade coffee is carried in about 1,000 Wal-Mart-brand stores. Millstone is its leading brand. But that can always change.

The fair-trade label The first thing Joe Alcantara, president of Cafe Bom Dia's North American operations, does every morning is check his coffee sales at Sam's Club. Before the deal, Bom Dia worked with several retailers, including Walgreens, selling conventional coffee. Now its strategy is "to optimize our relationship with Wal-Mart globally," Alcantara said.

That is why the Bom Dia packaging room is filled with pallets of Marques de Paiva coffee ready to ship to Sam's Club. Wal-Mart's code of conduct for suppliers is posted at the entrance. The nutty aroma of roasting coffee lingers.

If Bom Dia expands from hundreds of Sam's Clubs to thousands of Wal-Mart stores, Alcantara estimated, sales could easily double.

At Wal-Mart, executives say a rebirth is occurring inside their no-frills headquarters. "Sustainability" and "trend-right" have entered the corporate lexicon alongside "everyday low prices." Chief executive Lee Scott drives a Lexus Hybrid.

Greg Spragg, executive vice president for operations and the No. 2 guy at Sam's Club, has christened Bom Dia's coffee his "volume producing item," which means everyone down the ladder is focused on boosting sales. "I really felt like it was important to be able to put the words that we had been using around sustainability [and] kind of bring them to life in an item," Spragg said from Wal-Mart headquarters. "What we had in these products were really great quality items at an extraordinary value."

It remains to be seen whether shoppers will buy the story.

The Organic Consumers Association posted a notice on the Web about the fair trade and organic coffee at Sam's Club that urged shoppers to patronize independent cafes and roasters instead. Ronnie Cummins, the group's national director, said the most common complaints about Wal-Mart -- that it runs out small businesses and lowers prices and wages to unsustainable levels -- do not disappear just because the merchandise changes.

Marketing consultant Simon Sinek, who teaches at Columbia University, said labels such as "organic" and "fair trade" may work against Wal-Mart because they are losing resonance with shoppers. "Wal-Mart is the absolute pinnacle of mass market appeal," Sinek said. "If Wal-Mart is selling it, then it's not a big deal."

There is a saying that Cafe Bom Dia's Alcantara likes to repeat: "When you're working with the world's largest retailer, you can never win. You can only be winning."

Search for a willing buyer Pereira's co-op depends on Bom Dia and Wal-Mart for fair-trade prices. For most fair-trade farmers, finding a willing buyer is the most difficult part of the process. About 35 to 45 percent of fair-trade-certified coffee is actually sold at fair-trade prices, according to TransFair USA. The rest goes for market value, undistinguishable from regular coffee.

If Wal-Mart has a change of heart -- if Bom Dia goes the way of Millstone -- the effect could be devastating. Wal-Mart acknowledges that.

"I think whether you say it or not, you're putting all of your eggs in one basket," Mark Hoffman said.

Alcantara has a packed itinerary for the Wal-Mart executives. A tour of Cafe Bom Dia's headquarters. A horse ride through a hillside farm. Passion fruit caprinhas and music.

But perhaps the most effective pitch will be trips to coffee farms. Pereira's home is on the agenda. Wal-Mart will come right to his door.

Pereira is not sure what he will say to the company that could determine his future.

© 2006 The Washington Post Company

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Wal-Mart generates more loads of ink

By STEVE POWERS
The Chronicle
June 10, 2006                                    [back to top]

WAL-MART'S rise to its status as America's largest retailer has spawned a growing library of books — with 10 published in 2005 and 2006, and a couple more on the way in August.

The mix tilts heavily toward the negative, though the company's virtues have been the subject of a few books generally written by insiders.

The high visibility hasn't been matched by high sales, based on the ratings on Amazon.com.

Nearly all of the books had rankings of 100,000 or lower on Amazon, with only one book cracking the top 1,000.

But the Wal-Mart books just keep coming.

The list includes two very different books released this year: The Bully of Bentonville, with a decidedly negative tone, and Wal-Mart: The Face of Twenty-First Century Capitalism, a collection of essays ranging from neutral to negative.

The Bully of Bentonville is written by Business Week senior reporter Anthony Bianco. In his critique of the retail giant based in Bentonville, Ark., Bianco takes a calm, reasoned approach as he dissects Wal-Mart.

After an opening exploring Wal-Mart's colorful beginnings, Bianco gets down to exploring one of the biggest criticisms of the company: how Wal-Mart has driven traditional "mom-and-pop"shops out of town with its extremely low prices.

While consumers benefit, many mom-and-pop stores competing with Wal-Mart are forced to shut their doors.

Even large companies feel the pressure to cut costs, which has forced them to outsource their manufacturing and production facilities, thus taking away American jobs.

Bianco also takes a close look at the substandard working conditions for many Wal-Mart employees, many of whom lack health insurance.

As negative as the tone often is, Bianco makes his case with careful reporting.

Everything is based on information gleaned from interviews with Wal-Mart employees, managers, executives, competitors, customers and community leaders.

As a final coda, Bianco suggests that Wal-Mart has the power to impact the global economy in a positive way, and that if the company were to move away from its destructive price-slashing ways, conditions might improve.

Collection of essays Wal-Mart: The Face of Twenty-First Century Capitalism, edited by Nelson Lichtenstein, is not as hard-hitting, but it is no less informative.

The book is composed of essays collected from an April 2004 conference on Wal-Mart at the University of California, Santa Barbara. Lichtenstein, a professor of history at that university, put together the seminar to examine the impact of the corporate giant.

There are 12 essays in the book covering everything from the history of retailing to working at Wal-Mart.

Susan Strasser's essay on retailing, which takes a look at the history of stores from Woolworth to Wal-Mart, turns up little that's new.

But Misha Petrovic and Gary Hamilton's essay on Wal-Mart's impact on global markets makes an interesting, though sometimes hard-to-follow analysis of the chain's ability to "shape the institutional structure of the economy."

For those who are not inclined to study charts and tables, the last section of the book, "Working at Wal-Mart," may prove to be the most interesting, especially Brad Seligman's essay on an employee discrimination lawsuit filed in San Francisco in 2001 by six women.

This book is not as easy of a read as Bianco's book, but nevertheless, it provides valuable information about the state of Wal-Mart in the early years of the 21st century.

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Fendi sues Wal-Mart; claims bags are counterfeit

The Associated Press
Posted 6/9/2006                  [back to top]

NEW YORK (AP) — LVMH Moet Hennessy Louis Vuitton, owner of the Fendi brand, sued Wal-Mart Stores Inc. in federal court in Manhattan on Friday, alleging counterfeit Fendi bags and wallets are being sold in Sam's Club stores for hundreds of dollars less than the actual items. The lawsuit by the world's largest luxury-goods group alleges Sam's Club stores, including stores in the New York area, are selling handbags, shoulder bags, purses, wallets and key chains that "imitate the designs of the Fendi products and that bear reproductions, counterfeits, copies or colorable imitations of the Fendi trademarks."

The alleged counterfeit items are selling for as much as 68% less than the actual Fendi products, the lawsuit says.

For example, a Sam's Club in Las Vegas was selling a handbag for $295.03, compared with $925 for the actual Fendi product, according to the complaint.

A spokesman for the Bentonville, Ark.-based retailer wasn't immediately available to comment late Friday.

Copyright 2006 The Associated Press. All rights reserved.

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AIG, Hartford revived

By Jonathan Stempel
Reuters                                      [back to top]

NEW YORK, June 9 (Reuters) - Wal-Mart Stores Inc. <WMT.N>, may pursue its fraud claim against AIG Life Insurance Co. and Hartford Life Insurance Co. that it suffered more than $100 million of losses from sham insurance policies, the Delaware Supreme Court ruled.

The decision, dated Tuesday and posted on the court's Web site, reversed a Delaware Chancery Court ruling dismissing the world's largest retailer's complaint.

The case involves allegations that the insurers sold Wal-Mart policies it knew were flawed, without disclosing that the flaws jeopardized tax deductions that the retailer hoped to take.

Wal-Mart had from 1993 to 1995 bought corporate-owned life insurance, or COLI, policies for about 350,000 employees.

Tuesday's decision rejected several Wal-Mart claims, but allowed the Bentonville, Arkansas-based retailer to pursue a fraud claim in the Chancery Court. It did not rule on that claim's merits.

"The complaint adequately pleads that (the defendants sold) a product that was an economic sham designed to create enormous tax deductions," Justice Carolyn Berger wrote.

"They did so knowing that their product was flawed, and without disclosing that those flaws jeopardized the favorable tax treatment that formed the basis of the deal," she added.

AIG Life is a unit of New York-based American International Group Inc. <AIG.N>. Hartford Life is a unit of Hartford Financial Services Group Inc. <HIG.N>, which is based in Hartford, Connecticut.

AIG spokesman Joe Norton and Hartford Life spokesman Tim Benedict declined to discuss the surviving claim, citing their companies' policies against discussing pending litigation.

A message left for Wal-Mart was not immediately returned.

According to the Supreme Court's decision, a 1996 federal law eliminated most future tax benefits from COLI plans.

Soon thereafter, the Internal Revenue Service moved to disallow tax deductions for older plans, including Wal-Mart's.

This resulted in a substantial tax liability when Wal-Mart settled with the IRS in 2002, the Supreme Court said. Wal-Mart sued the same year.

© Reuters 2006. All rights reserved.

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The Web Isn’t Wal-Mart

Good experiences beat low prices as Netflix tops e-customer satisfaction survey.

LGannes
RedHerring.com
June 8, 2006                             [back to top] 

Low prices aren’t key drivers of revenue or customer satisfaction for online shopping sites, according to a rating of top sites released Thursday.

Instead, selection, brand, and site design and experience are bigger factors, said ForeSee Results, a firm that analyzes online customer satisfaction and consults to online retailers.

“With online retail, price was going to turn everything into a commodity,” noted Larry Freed, CEO of ForeSee. “It was surprising at first, but we see pretty consistently that price is an important thing but it’s not an impactful thing.”

The findings about the relative unimportance of price were consistent with ForeSee’s previous research, said Mr. Freed, as well as studies of off-line retailers.

ForeSee’s customer satisfaction survey was topped by Netflix, which also won the highest score six months ago and one year ago, the other two times ForeSee conducted the survey.

Second was Amazon, followed by Newegg, QVC, and LLBean, respectively.

ForeSee surveyed more than 8,500 visitors to the top 40 Internet retailers by sales volume, as reported by Internet Retailer this month. That list—led by Amazon.com, OfficeDepot.com, Staples.com, Dell.com, and HPShopping.com, in that order—reflects a somewhat partial version of online retailing, leaving out the high-grossing travel site segment, for example.

After ForeSee’s analysis, Amazon was the only site in the top five both for sales and customer satisfaction. Mr. Freed claimed, however, that satisfaction scores can be directly correlated with growth rates.

For instance, ForeSee determined that visitors to online retailers in the top 10 percent of satisfaction scores were 33 percent more likely to make an online purchase than visitors to the bottom 10 percent of retailers. \

Online Preference

Mr. Freed admitted that the success of Netflix on his firm’s survey may reflect the different nature of its visitors, who are often subscribers to its service. That bypasses the challenge converting them to paying customers.

Web-only merchants like Netflix were also very successful in customer satisfaction surveys, accounting for only six of the 40 retailers surveyed but three of the top five by satisfaction score.

“It’s curious,” noted Mr. Freed, of customer’s preference for the online-only stores. “The percentage of customers that want a multichannel shopping experience is pretty significant, and obviously pure-play retailers can’t offer that.”

Mr. Freed said offline retailers, especially, face significant challenges in addressing the customers who land on their site, displaying their wares within a browser window, and replicating the “look and feel and touch” of offline shopping.

© 1993-2006 Red Herring, Inc. All rights reserved.

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Swift earns top carrier award from Wal-Mart

The Business Journal of Phoenix
June 8, 2006                                                [back to top]

Wal-Mart Stores Inc. has awarded Swift Transportation with its annual "Carrier of the Year" award.

"Swift Transportation provided outstanding truckload service for Wal-Mart in 2005," said Tracy Rosser, vice president of Wal-Mart Corporate Traffic. "Their great support throughout 2005 has ultimately allowed us to better serve our customers."

Selection criteria for the award included revenue/growth, ease of doing business, communication, flexibility, customer service and follow-up/correction of errors.

Swift Transportation Co. Inc. (NASDAQ: SWFT) is a Phoenix-based truckload carrier.

Bentonville, Ark.-based Wal-Mart (NYSE: WMT) operates discount stores worldwide.

All contents of this site © American City Business Journals Inc. All rights reserved.

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Coke caves under Wal-Mart pressure

Report says beverage giant feared the retail giant would launch its own sports drink if Coke didn't agree to new delivery terms.

CNNMoney.com
June 8, 2006                              [back to top]

NEW YORK (CNNMoney.com) - Coca-Cola, fearing Wal-Mart would launch its own sports drink to rival the beverage giant's Powerade if it didn't agree to the retailer's new distribution terms, caved under the pressure and altered its own century-old supply system, a published report said Thursday.

Wal-Mart, the world's largest retailer, asked Coke last year to switch to the straight-to-warehouse delivery method, and Coke's largest bottler, Coca-Cola Enterprises (Research) (CCE), began doing so across much of the U.S. in April, the Wall Street Journal said.

But according to June 1 court filing by Coke, the company stated that it faced a "serious risk" of a Wal-Mart-branded rival to Powerade unless it abided by Wal-Mart's demands of direct distribution instead of having Coke (Research) bottlers deliver drinks to individual stores within their exclusive territories and stack those drinks on store shelves.

The disclosure was made in a lawsuit filed in U.S. District Court in Atlanta against Coke and its largest bottler by 55 smaller bottlers, the paper said.

The smaller bottlers who brought the suit claim the distribution change violates their distribution contracts with Coke, but the beverage giant and CCE have argued that the plaintiffs aren't entitled to "claim nationwide veto rights" over how another bottler serves its territories, the paper said.

Internal CCE documents filed as part of the suit show that Wal-Mart officials criticized the traditional Coke distribution system for failing to keep Powerade in stock on store shelves and for taking too long to introduce products throughout the Wal-Mart chain, the paper said.

"If Powerade continues at the current trajectory - it will be irrelevant in Wal-Mart," Steve Broughton, a Wal-Mart vice president, told CCE officials at a November meeting, the report said.

The Journal said Coke has struggled to build Powerade into a viable competitor to Pepsi (Research)'s Gatorade, which had an 82 percent market share based on U.S. volume in the first quarter, compared with 16 percent for Powerade, according to trade publication Beverage Digest.

Both Coke and Wal-Mart declined to comment on the court filing, the paper said.

[back to top]

Coke: Wal-Mart shakes up delivery system

The Associated Press/ATLANTA
JUN. 8                                                            [back to top]

Wal-Mart Stores Inc. is shaking up Coca-Cola Co.'s bottling system. Wal-Mart told Coke it would double its purchases of Powerade if the sports drink is delivered to its stores through its own warehouses rather than through the bottler system, but said it could jump to a private label if it can't do what it wants, Coke said in a court filing.

Coke warns that a private-label competitor to Gatorade could prevent Powerade from any future growth opportunities in Wal-Mart stores.

The comments came in a June 1 response by Coke to a federal lawsuit filed by a group of bottlers who are challenging Coke's distribution of Powerade to Wal-Mart stores through Wal-Mart's warehouses.

Coca-Cola says an injunction sought by the bottlers would do more harm than good. The suit was originally filed in Springfield, Mo., but has been transferred to Atlanta. The bottlers say an agreement negotiated in 1994 between the bottlers and the company prohibits warehouse delivery of Powerade to major retailers such as Bentonville, Ark.-based Wal-Mart.

But Coca-Cola says the Powerade contract allows a bottler to choose warehouse delivery within its own territory.

A call to Wal-Mart was not immediately returned.

Copyright 2006, by The Associated Press. All rights reserved.

[back to top]

List reveals new trends in business

By Corinthia McCoy
and Terry Anderson
Green Bay Post Gazette
June 7, 2006                                 [back to top]

The local business community is changing, even if a list of the companies that employ the most people locally hasn't. A list of the 30 area companies that employ the largest number of people released by the Green Bay Area Chamber of Commerce shows little change in rankings from 2005 to 2006. The same companies made the list, with 14 holding the same position as last year.

But new trends are emerging.

Paul Jadin, chamber president, listed subtle changes in the area's business community from 2005 to 2006.

Green Bay is becoming more of a medical center.

Some manufacturers are trimming employment levels.

The Oneida Tribe of Indians continues to grow.

Local governments are keeping tight grips on employment levels.

The employee count is based on full-time equivalency, meaning every 40 hours equals one employee, said Cindy Gokey, chamber economic development coordinator. The rankings were based on March 31 full-time employment levels.

The largest employers are in the transportation, paper, health, education and entertainment sectors.

The economy's diversity is good, giving the area an edge in competition, Jadin said.

"We are better able to compete in this economy than most other regions are."

Between 2005 and 2006, Aurora Health Center increased its full-time employees by 341 from 1,272 to 1,613, placing it No. 1 in terms of net full-time job growth among companies on the list.

The first eight businesses remain in the same positions as last year, with Schneider National Inc. leading the pack, according to the list, published in the June/July issue of the Bay Business Journal, a chamber publication.

Wal-Mart dropped from 18 to 24 on the list with a job loss of 155.

"That's a surprise because they are obviously opening more stores," Jadin said. "That one is a little more confusing."

That's not the only thing that makes Wal-Mart's drop a surprise: The company added Sam's Club employees to their list, considering them a part of the Wal-Mart employee family.

The loss may be because of reporting errors and inconsistencies, Jadin said.

Not surprisingly, the largest decrease came within the paper industry, where Georgia-Pacific, Procter & Gamble and Paper Converting Machine Co. each reported employment drops.

Georgia-Pacific Corp. had the greatest loss of all the companies. Although it maintained its spot at No. 2, the paper company had a loss of 409 full-time jobs with Paper Converting Machine Co. not far behind with a 226 employment loss.

That's because most manufacturers are getting leaner, Jadin said. Georgia-Pacific has outsourced jobs to Canada and is relying more on technology, rather than human labor. The idea is to "produce more paper with fewer employees."

But there is no need to assume the company is suffering. It's doing well, but doing it with fewer employees, Jadin said. The labor may be suffering, he said, but that doesn't mean the company is.

ShopKo stayed at No. 8 despite being sold. The once-publicly owned company is now an affiliate of Sun Capital Partners Inc. The ownership change was effective as of December 2005.

John Vigeland, ShopKo director of corporate communications, said it's business as usual, just with new owners.

"We never anticipate downsize in employee numbers," he said, adding there may be more stability now that the company is privately owned.

[back to top]

Showdown in U.S. Senate Oppose Walton Family

[back to top]

Dear John,

The Walton family has no shame.

At the same time America faces a costly war, record debt and soaring gas prices, the Walton family, worth over $80 billion, has the nerve to lobby our government to repeal the estate tax.

Repealing the estate tax will not benefit 99% of Americans, and will give the wealthiest 1% of Americans a nearly $1 trillion tax giveaway over the next 10 years. In fact, the Walton family alone will get a $32 billion tax break.

Are we going to let President Bush and the right-wing Republicans in the U.S. Senate give the Walton family a $32 billion tax cut while real Americans struggle just to make ends meet?

Your action is critical. The showdown over the estate tax is tomorrow and the vote is very close.

Please write your U.S. Senator today and tell him/her to stand up for the American people and oppose repealing the estate tax for billionaires like the Waltons.

http://www.wakeupwalmart.com/letters/tax.html

According to a new report by Public Citizen and United for a Fair Economy, over the last decade, the Walton family, along with 17 other wealthy families, has spent nearly $200 million to lobby Congress to repeal the estate tax.

This is not democracy. America was founded on the belief that our government should be of, by and for the people. Unfortunately, under President Bush and the Republican Party, Wal-Mart and the Walton family has been able to use our government to line its own pockets at the expense of the American people.

Rather than stand up for America, Wal-Mart uses its influence to ship our jobs overseas and not provide company health care to more than half of its employees. We cannot allow Wal-Mart, and now the Walton family, to take America in the wrong direction.

It’s time to take our country back from billionaires and billion dollar corporations and fight for the American people.

Please write your U.S. Senator today and tell him/her you oppose repealing the estate tax for billionaires like the Walton family while average Americans are struggling to get by:

http://www.wakeupwalmart.com/letters/tax.html

Only you have the power to change Wal-Mart, fight for everyday people and change America for the better.

Thank you for all that you,

Buffy Wicks
WakeUpWalMart.com

P.S. Please forward this message on to at least 5 of your friends. The faster we grow the faster we can have real change in America.

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Norway ejects Wal-Mart from $240 bln fund

By John Acher
Reuters                        [back to top]

OSLO, June 6 (Reuters) - Norway said on Tuesday its more than $240-billion oil fund would no longer invest in Wal-Mart <WMT.N>, the world's biggest retailer, due to what it called "serious and systematic" abuses of human and labour rights.

Norway's government also excluded shares in mining group Freeport-McMoRan Copper & Gold <FCX.N> from the fund -- one of the world's biggest pension funds -- for environmental reasons.

The fund sold its holdings in both firms, which had been worth about $430 million at end-2005 -- most of it in Wal-Mart stock -- by the end of last month, the finance ministry said.

"These companies are excluded because, in view of their practices, investing in them entails an unacceptable risk that the fund may be complicit in serious, systematic or gross violations of norms," Finance Minister Kristin Halvorsen said in a statement.

The move raised the number of companies excluded from the fund for what Oslo calls ethical reasons to 19. Norway has previously ejected companies involved in producing anti-personnel land mines, cluster bombs or nuclear weapons.

The Finance Ministry based the exclusions on the recommendations of the fund's ethical council.

"The recommendation to exclude Wal-Mart cites serious/systematic violations of human rights and labour rights," the finance ministry said. "The recommendation to exclude Freeport is based on serious environmental damage."

A Wal-Mart spokeswoman declined to comment. Freeport-McMoRan's spokesman said the company rejected the allegations and they were based on a misunderstanding.

Wal-Mart shares traded down 0.3 percent at $47.06 by 1701 GMT on Wall Street, but up from a session low of $46.55. Freeport's stock was up 0.8 percent at $52.34, recovering from an earlier dip.

SLAMS WAL-MART

The ministry said the council had found "an extensive body of material" that indicated Wal-Mart had broken norms, including employing minors against international rules, allowing hazardous working conditions at many of its suppliers and blocking workers' efforts to form unions.

It also listed other alleged Wal-Mart abuses including pressuring workers to work overtime without compensation, discriminating against women in pay and blocking "all attempts to unionise".

It said that Wal-Mart employees were "in a number of cases unreasonably punished and locked in".

The council's report encompassed Wal-Mart's operations in the United States and Canada and at its suppliers in Nicaragua, El Salvador, Honduras, Lesotho, Kenya, Uganda, Namibia, Malawi, Madagascar, Swaziland, Bangladesh, China and Indonesia.

The finance ministry said Norway's central bank, which manages the fund, had invited Wal-Mart to comment on the allegations in September, but the U.S. company did not respond.

Halvorsen said Norway might provide an example to other investors in the way it exercises ownership rights.

"It is of great value that others see what we do," Halvorsen, who also leads the Socialist Left party, told a news conference.

The ministry blamed Freeport-McMoRan for using a natural river system for disposal of tailings from a huge copper mine on the island of New Guinea in Indonesia. "The Council on Ethics finds that the environmental damage caused by the mining operations is extensive, long-term and irreversible," it said.

Freeport-McMoRan's spokesman Bill Collier said that the tailings were not toxic. "They did contact us," he said of the fund's managers, Norway's central bank. "We furnished them with our information, but we feel this reflects a misunderstanding."

Collier said Freeport conducts comprehensive monitoring of the water in the river and the area where the tailings are deposited, including sediment, plant species and aquatic organisms. "And it has never detected a problem," he said.

The fund had held about 2.5 billion Norwegian crowns ($416 million) worth of Wal-Mart securities at the end of the 2005, and its holdings in Freeport-McMorRan were worth about 116 million crowns, the ministry said. All were sold by end-May.

The Government Pension Fund -- Global, which invests surplus oil wealth in foreign stocks and bonds, was worth 1.48 trillion Norwegian crowns ($246.2 billion) at the end of March.

(Additional reporting by Carole Vaporean in New York, Jessica Wohl in Chicago and Joergen Frich in Oslo)

© Reuters 2006. All rights reserved.

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Wal-Mart tailors stores to locals

MARINA STRAUSS
The Globe and Mail 
Tuesday, June 06, 2006                [back to top]

TORONTO -- One size doesn't fit all any more.

Giant discounter Wal-Mart Canada Corp. is putting on a big push to tailor each of its outlets to the tastes of the local neighbourhood.

It is responding to the demands of an increasingly diversified, and aging, population. Depending on the neighbourhood, it is stocking more ethnic greeting cards, tofu products -- even turkey hunting gear -- at some of its stores, chief executive officer Mario Pilozzi said.

The chain has designated its outlet in the Toronto suburb of Agincourt as something of a laboratory for what it calls its "store of the community" concept. The outlet is in a heavily Asian neighbourhood, and carries an array of specialty foods, among other things, to appeal to that group.

Meanwhile, 10 stores in Ontario and British Columbia are carrying South Asian music as a test to serve that large ethnic community.

"We believe we are just scratching the surface in this area," Mr. Pilozzi told the Retail Council of Canada's annual conference.

Retailers need to get to know their biggest customers and then cater specifically to their preferences -- store by store, said Patrick Gardiner, president of market researcher ACNielsen.

"In today's world, success is still about understanding and reaching your target consumer," he said at the conference.

Other chains are attempting to tap into the same burgeoning opportunities. Jerry Zucker, the new U.S. owner of Hudson's Bay Co., has told his staff that he wants to appeal more to local community tastes. He's following the lead of U.S. merchants, ranging from the upscale Nordstrom department store chain to the clothier Chico's FAS.

Now Wal-Mart has turned its attention to giving customers a "personal touch," Mr. Pilozzi said.

It may cost more but, as a return on investment, it's well worth it, he told reporters. Wal-Mart can build economies of scale by purchasing goods for clusters of stores with the same target audience. Meanwhile, Wal-Mart Canada's U.S. parent company has branched out into more upscale products in a bid to reach out to a wider customer base.

In Canada, Wal-Mart is also trying to boost its business by broadening its reach. It has found, for example, that the demand for "dog chow" is 84 per cent higher in Marystown, Nfld., than in other communities, prompting it to look at carrying more dog-related items at its store in that locale. The residents either have more dogs or bigger, hungrier dogs, he suggested.

The demand for tofu in Markham, Ont., is 61 per cent higher than in other markets, he said, pointing to a large Asian local population or vegetarian trends.

Wal-Mart has added ethnic beauty care products to 150 of its stores, ethnic greeting cards to 175 stores and ethnic foods to 140 stores, he said. It carries Italian, reggae and polka music in 30 outlets.

It's not only chasing consumers based on their ethnicity, but also looking to an aging population and varying lifestyles as potential sources of more business.

More than 170 of its stores stock ice fishing items, including 15 different types of gear depending on the local species of fish, he said. And 21 stores in Ontario and British Columbia carry turkey hunting gear.

"What could be right for one market could be totally, totally irrelevant for another," he said.

Wal-Mart is even designing its new stores to fit in with the local community, whether it be a more environmentally sensitive building or one with underground parking, he said.

It drew up plans for a store in Vancouver with three windmills to power the mechanical system, deep wells for geothermal heating and cooling and retention of rainwater for use in toilets. The city council has turned down the proposal, but Mr. Pilozzi said yesterday he won't give up on a store in that city.

© The Globe and Mail

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Wal-Mart to open three supercentres in Ontario

MARINA STRAUSS

Wal-Mart Canada Corp. will open its first three supercentres in Ontario by late fall, chief executive officer Mario Pilozzi said yesterday. The massive stores will be about one-third larger than regular Wal-Mart outlets and carry a full array of its conventional general merchandise as well as a full selection of supermarket products. The discounter plans at least two more supercentres in 2007, he said

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The lads' mag that Wal-Mart refuses to put on sale

By Dominic Walsh
The Times
June 06, 2006                  [back to top]

SINCE the first issue of Maxim appeared on newstands in Britain in 1995 with Lisa Snowdon, the lingerie model, on the cover, it has become a publishing phenomemon.

Its paid-for circulation of more than 2.5 million dwarfs sales of traditional men’s magazines such as GQ and Esquire and the publication has itself become the progenitor of a clutch of rival lads’ mags.

The first American issue appeared in 1997 with Christa Miller, the actress, adorning the cover, and it publishes country-specific editions in 24 other countries. It recently became the first magazine of its type to be sold in India. Wal-Mart, America’s biggest retailer, refuses to stock the magazine, apparently because it goes against the family values that Wal-Mart claims to espouse.

Although pictorials of women in alluring poses are its stock-in-trade, it also carries articles on sport, television, films, fashion, cars, crime and alcohol — subjects targeted at its main 18-35 male readership.

Just as Hugh Hefner is inextricably linked with Playboy magazine and Richard Desmond with OK! Magazine, so Maxim has become the main claim to fame of Felix Dennis, whose publishing empire has made him one of Britain’s wealthiest businessmen.

His publishing career almost came to an end before it started. With two co-editors at Oz, the 1960s satirical magazine, he was prosecuted for obscenity in 1971. All three were given jail terms, although Mr Dennis was given a shorter sentence because the judge felt that he was “very much less intelligent”. He was acquitted on appeal.

Copyright 2006 Times Newspapers Ltd.

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Wal-Mart Getting Tougher On Vendors

Forbes
06.05.06           [back to top]

Wal-Mart appears ready to get more aggressive with its vendors, which could be good news for food companies but bad news for other sectors, according to a new report from Banc of America Securities.

At a recent shareholder meeting, Wal-Mart indicated it will become increasingly offensive in merchandising, procurement and inventory management. This means longer-term risk of inventory rationalization and more private-label purchasing.

Wal-Mart is also pushing environmental sustainability to vendors, which could be an additional cost and risk to the group, according to Banc of America.

Brand packaging must be improved in two years and preference will be given to aligned suppliers. Investment by vendors will therefore be imperative to maintaining shelf space at Wal-Mart stores.

For food companies, the upshot could be positive.

"[Wal-Mart] reiterated its commitment to national brands within the organic realm and has only limited interest in private label organic foods," wrote Banc of America analyst David Strasser. "Furthermore Wal-Mart is clearly mobilized around opportunities within food, as health interests cut across key demographic groups and are driving sales."

In the beverage sector, Wal-Mart is interested in selling more wine and is adding square footage.

There is an opportunity for full service wine companies such as Constellation Brands to step up and win influence here, according to Banc of America.

Meanwhile, supermarket operators have been focusing on Wal-Mart's and have consequently been reducing their own inventory levels since the second quarter of last year.

Banc of America said Safeway has been aided by its move to more perishables and prepared foods, which have faster turnover rates. Kroger has likewise been reducing its inventory.

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Has Wal-Mart Jumped the Shark?

Liza Featherstone
The Nation BLOG 
06/05/2006                     [back to top]

Always a rollicking affair, with the feel of a pep rally or revival meeting, by all accounts, the Wal-Mart shareholder's meeting on Friday was over the top. According to Michael Barbaro, Wal-Mart correspondent for the New York Times, a cast of Broadway actors sang numbers like "Walk Across the Aisle," "The Day That I Met Sam," and "It's About the Customer." Has Wal-Mart jumped the shark?

For those of you that don't watch -- or talk about -- television, "jumping the shark" is a term TV fans have long used to refer to the point at which a show goes downhill. It originates, of course, in that moment on "Happy Days" when Fonzie, water-skiing, jumps over a shark. Usually referring to a preposterous new plot twist, shark-jumping suggests some desperation on the part of the creators. Wal-Mart: The Musical certainly has that feel. Wal-Mart's sales growth has been slow recently, lagging below Wall Street's expectations.

One thing that hasn't jumped the shark is anti-Wal-Mart resistance. In a national "Quarantine Wal-Mart" day of action Friday, thousands around the country, organized by Jobs With Justice and the Ruckus Society, donned hazmat suits and, armed with yellow caution tape, surgical gloves and face shields, had some fun at their local Wal-Marts. Why a quarantine? Because by not providing adequate health care coverage to its workers, the mega-retailer is hazardous to the health of our nation. Actions took place in Wheat Ridge, Colorado, Urbana, Illinois and even outside the Wal-Mart meeting itself, in Fayetteville, Arkansas.

Also notable at the meeting, Martha Burk, the feminist activist who made the Augusta National Golf Club synonymous with discrimination a couple years ago, presented a shareholder proposal on pay equity, particularly relevant in light of the ongoing class action suit Betty Dukes vs. Wal-Mart Stores. Wal-Mart refused to talk about these issues with groups like the National Organization for Women for years, but times are changing: Burk had a meeting with CEO Lee Scott Thursday, the day before the shareholder's meeting.

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Wal-Mart settles pair of lawsuits

By Melissa Followell
Bradenton Herald
June 3, 2006                         [back to top]

MANATEE - Wal-Mart has agreed to pay $315,000 in damages in response to two separate lawsuits that originated in a Manatee County store. The Equal Employment Opportunity Commission filed the lawsuits on behalf of three women who worked at the Wal-Mart SuperCenter located at 2911, 53rd Ave. E.

The first lawsuit was filed in August 2004 on behalf of employees Virginia Rylance and Linda Gliotti. According to the consent decree, the EEOC claimed that Wal-Mart was at fault because it subjected the women to "sexual harassment by a Wal-Mart manager which was sufficiently severe and pervasive to constitute a hostile, intimidating work environment."

The male department manager exposed himself, grabbed and fondled the women, requested sex and other inappropriate actions. Rylance quit her job in 2003 because of the actions and the manager, who was not named in the lawsuit, resigned, the EEOC said in a press release this week.

The second lawsuit was filed in February 2005 based on a charge filed by Laura Fulton-Eddy. She alleged an assistant manager at the same store sexually harassed her. The male assistant manager allegedly sexually propositioned Fulton-Eddy, subjected her to vulgar language and touched private parts of her body. The harassment didn't stop until the manager was transferred out of the store for "unrelated reasons."

Rylance will receive $40,000 for lost wages and an additional $160,000 for compensatory and punitive damages.

A Chapter 7 trustee for Gliotti will receive $90,000 for compensatory and punitive damages. The remaining $25,000 will be paid to Fulton-Eddy.

In addition to the monetary settlement, all employees and managers at the store, which sits near the intersection of State Road 70 and U.S. 301, will have to undergo sexual harassment training and be provided copies of the company's sexual harassment policy.

"Racial and sexual discrimination are intolerable in any workplace," said EEOC's Miami District Director Federico Costales. "The settlement of these cases advances the EEOC's efforts to eradicate employment discrimination, and should remind Florida employers to heighten their awareness of job bias by taking proactive measures to prevent it."

The lawsuits were settled earlier this week in the U.S. District Court, Middle District of Florida.

Wal-Mart reported net sales of $312.4 billion in the 2006 fiscal year, which ended Jan. 31, according to the company's annual shareholders report.

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Wal-Mart touts expansion at annual meeting

By CHUCK BARTELS,
AP Business 
Fri Jun 2                               [back to top]

Wal-Mart Stores Inc. used its annual meeting Friday to tout changes to its stores, trumpet its expansion in the U.S. and abroad and emphasize that the world's largest retailer is undergoing changes to sustain its rapid growth rate.

The company's critics urged Wal-Mart to offer higher pay, better health insurance and make other changes for its 1.3 million U.S. workers.

Wal-Mart chief executive officer Lee Scott didn't directly address the union-financed groups. Instead, Scott and other executives discussed Wal-Mart in terms of building on successes, rather than righting wrongs.

The executives drew an enthusiastic response from the 15,000 shareholders and workers packed into Bud Walton Arena on the University of Arkansas campus. The meeting sprinkled panel discussions and speeches between a couple of celebrity appearances.

Scott said Hurricane Katrina inspired a new vision at Wal-Mart. He noted the company's rapid effort to provide relief supplies — a move that drew praise from Wal-Mart's critics. Scott said he asked, "How can we use our unique strength to be that company all the time?"

Wal-Mart has several experimental stores, where it is testing new designs and aisles that have merchandise targeted to the local demographics, including an "urban and multicultural" store in the Chicago area.

The company is streamlining its inventory to speed items to shelves and trim the time between manufacture and arrival of items in the stores. And many of those items will increasingly be geared to upscale shoppers, executives said.

Chief financial officer Tom Schoewe said the company can still build sales growth in existing stores while gaining market share in the U.S. and internationally. In the last year, Wal-Mart acquired stores in Brazil, entered into a partnership with a retail chain in Central America and finished its push to gain a majority share of Seiyu Ltd. in Japan.

Schoewe also praised workers for helping earnings grow faster than sales in the last fiscal year, when income was up 9.4 percent and earnings were up 11.2 percent.

"The trends here are awesome," Schoewe said. "This is a growth company."

The company is adding about 600 stores this year, about a third of which will be international, including Canada's first three Supercenters. Wal-Mart has more than 6,500 stores in 15 countries and serves 176 million customers per week.

Schoewe said the company intends to keep expanding its retail footprint by 8 percent annually.

"We haven't wavered at all," Schoewe said, noting the company is adding between 270 and 280 Supercenters in the U.S. this year. Wal-Mart had net sales last fiscal year of $312.4 billion.

In past annual meetings, the company has addressed critics, and Scott one year warned managers they'd be fired if they exhibited bias in the stores. But this year, Wal-Mart returned to celebrating the company.

Board chairman Rob Walton, a son of Wal-Mart founder Sam Walton, said his late father would be surprised at the scope Wal-Mart has taken on, but would be right at home with the changes the company is undergoing.

"Nobody loved change more than Sam Walton," Rob Walton said. "As long as we continue to change, there are no limits to what we can achieve."

Walton said the board is committed to Wal-Mart's expansion overseas.

"It is clear today we are succeeding as an international company," he said.

All the shareholder proposals put forth at the meeting were rejected. One proposal, which asked that Wal-Mart issue an equal opportunity report, was removed from the agenda after the company agreed to quantify its women and minority workers and to define their duties are. Failed proposals included requests for humane slaughter of chickens, reports on Wal-Mart's political contributions and requiring majority votes instead of a plurality for new directors.

Scott said the company shows every day that it is a good place to work. He cited thousands of people applying for a few hundred jobs at new Wal-Marts, a health plan that is open to full and part-time workers who, after a year in the plan, will have no cap on how much the plan will pay in lifetime benefits.

"We have made great progress in health care," Scott said.

Critics of Wal-Mart, including the union-backed groups Wal-Mart Watch and WakeUpWalMart.com have taken credit for recent improvements in the health plan and say that, as the world's largest private employer, Wal-Mart can set a new standard for other large employers.

Singer Beyonce performed at the end of the meeting. American Idol finalist Taylor Hicks sang a pair of songs.

Shares of Wal-Mart fell 56 cents, or 1.2 percent, to close at $47.83 on the New York Stock Exchange.

Copyright © 2006 The Associated Press. All rights reserved.

Many Concerns As Wal-Mart Heads Into Shareholders Meeting

DOW JONES NEWSWIRES
06-01-06                                      [back to top]

LITTLE ROCK, Ark. (AP)--Wal-Mart Stores Inc.'s (WMT) annual shareholders meeting will be closely watched by Wall Street and union-backed critics hounding the world's largest retailer as it struggles to please both low-income and upscale shoppers.

About 15,000 Wal-Mart workers and shareholders are to gather Friday at Bud Walton Arena on the University of Arkansas campus in Fayetteville. The company usually puts on a well-choreographed show for its shareholders that highlights Wal-Mart's successes, punctuated by celebrity appearances.

Burt Flickinger, managing director of consulting firm Strategic Marketing, said Wall Street is concerned that Wal-Mart's base is slipping. The company on Thursday forecast growth in June sales in stores open at least a year will be only 1% to 3%.

In the past, Wal-Mart has thrived in hard economic times because low-income consumers would do their shopping there, Flickinger said.

"Now, times are tougher, and Costco, Target and Kohl's are doing well with fixed- and low-income consumers ... and Wal-Mart is not," he said.

Flickinger said Wal-Mart has been hurt by its employment practices, creating high turnover and harming restocking and customer service, thus hurting same- store sales, which are considered the best measure of a company's health. Same- store sales have been hurt because Wal-Mart has opened so many stores that it is slowing growth at older stores but capturing more market share.

"The bean counters are focusing too much on cutting costs and not investing enough to drive sales," Flickinger said, noting that the company has made positive changes in its marketing.

Wal-Mart has been under siege in court, in city council meetings when it wants to build new stores and in the media, where its organized critics regularly attack the company for its practices.

A class-action lawsuit pending in California represents 1.6 million current and former female workers accusing Wal-Mart of gender-based bias.

Patricia Edwards, who helps manage retail funds for Wentworth, Hauser and Violich investment counselors, said investors are shying from Wal-Mart stock.

Wal-Mart shares, which have traded in a 52-week range of $42.31 to $50.87, fell 6 cents to $48.39 Thursday on the New York Stock Exchange.

"In our experience, one of the things that comes up most frequently, with private wealth or institutions, seems to be a discussion about Wal-Mart and whether they want it in their portfolios," Edwards said. "Five years ago it was Philip Morris. Now it's Wal-Mart."

Chris Kofinis, spokesman for WakeUpWalMart.com, a union-funded critic of Wal- Mart, said his group wants Wal-Mart to improve the way it treats its employees because doing so would "change America."

Kofinis, whose group is funded by the United Food and Commercial Workers union, said the company has not sustained founder Sam Walton's devotion to taking care of his employees. Workers who are paid well and have affordable health care are loyal and do better work, he said.

"We believe these are the best changes this company can make," Kofinis said.

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Churches Plan Showdown over Wal-Mart Pay Gap

by Greg Allen
NPR Day to Day
June 1, 2006     

Wal-Mart shareholders are scheduled to meet Friday, and will likely encounter pressure from some religious groups, which hold shares in the nation's biggest retail chain, to adopt policies that address the pay gap between Wal-Mart executives and lower-level workers.

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EEOC Says Wal-Mart Settles Sexual Harassment Suits

John Seward
DOW JONES NEWSWIRES
06-01-06                                       [back to top]

Wal-Mart Stores Inc. (WMT) agreed to pay $315,000 to settle two sexual harassment lawsuits brought by the Equal Employment Opportunity Commission in Florida, the agency said.

A Wal-Mart representative wasn't immediately available for comment.

The first suit, filed in August 2004, charged the company with allowing the harassment of two of its female employees in central Florida by a male department manager to go unchecked until one of the employees was forced to quit. The manager ultimately resigned.

The second suit was filed in February 2005 and charged Wal-Mart with permitting another of its female employees to be harassed by a different manager at the same store location that concerned the 2004 suit. The manager was transferred for unrelated reasons, the EEOC said.

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Chain Stores Buck Wal-Mart

By Nat Worden
TheStreet.com
6/1/2006                     [back to top]

Concerns proved overblown Thursday that a lackluster May for Wal-Mart (WMT:NYSE) would define the month for U.S. chain stores, although the world's biggest retailer built on its own bad news.

Having already disappointed Wall Street by reporting a 2.3% increase in same-store sales for May, which fell at the low end of its forecast, Wal-Mart said Thursday that it expects its June comps to rise anywhere from 1% to 3%. The company cautioned that high fuel prices are crimping its customers' spending habits.

With prices for crude oil futures trending over $70 a barrel on the Nymex, pushing up gasoline costs for drivers, the May retailing results came at a particularly sensitive time for investors. Fears of higher interest rates, inflation, consumer fatigue and a housing slowdown prompted a round of sharp selloffs in the stock market during the month. Wal-Mart's conservative outlook does nothing to allay those concerns, but a number of other retailers provided ground for optimism.

The International Council of Shopping Centers reported that overall same-store sales, a key metric measuring sales at stores open at least a year, rose 4.1%% in May from a year earlier, based on a survey of more than 60 chains. The ICSC had been expecting a reading closer to 3%.

"The impact of high gasoline prices seems to have been somewhat limited to Wal-Mart's lower-income customer-base," says Michael Niemera, ICSC's chief economist and director of research. "The broader story is that consumer spending continues to hold up quite well here."

Excluding Wal-Mart's results, RetailMetrics LLC president Ken Perkins said his overall same-store sales index rose an impressive 6.1%.

"Robust Mother's Day results and summer fashions at a number of apparel retailers resonated with consumers and translated into solid May same stores sales," wrote Perkins in a note to clients. "Our Retail Metrics Same Store Sales Index exceeded forecasts for a second straight month beating expectations by 60 basis points with 63% of retailers beating forecasts, well ahead of the long term average of 55%."

Wal-Mart's chief competitor, Target (TGT:NYSE) , sounded a brighter note than its larger rival, with a 5.8% jump in same-store sales for May. That beat Wall Street's consensus estimate calling for a 4.9% increase.

Also in discount retailing, B.J.'s Wholesale Club (BJ:NYSE) reported a 4.2% increase in same-store sales, helped by strong demand for gasoline and food during the month. Analysts were expecting the retailer to log a 2.4% comp.

In the department store business, Federated (FD:NYSE) reported a 9.2% rise in May comps that beat expectations handily. The parent of Macy's and Bloomingdale's said it expects things to slow down in June with its same-store sales increasing 2% to 3%.

Upscale department store chain, Nordstrom (JWN:NYSE) provided some upside with a 7.8% gain in same-store sales for May that surpassed Wall Street's expectations.

J.C. Penney (JCP:NYSE) blew away estimates with an 11.1% jump in same-store sales. The company said its performance benefited from strong demand related to shopping for Mother's Day.

Guess (GES:NYSE) also delivered as its comps surged 20%, beating Wall Street's estimate for an 11% gain.

Chico's (CHS:NYSE) , the women's clothing chain, said sales at stores open more than a year rose 7.2% in May, topping estimates for a 6.6% gain. Total sales rose 20.4% from a year ago to $141.1 million.

Victoria's Secret operator Limited (LTD:NYSE) said May comps jumped 7% from last year, topping estimates for a roughly 5% gain. Overall net sales rose 7% to $719.4 million.

Ann Taylor (ANN:NYSE) reported that its May comps rose 12%, beating Wall Street's expectations for a 5.9% increase.

Costume jewelry and accessories retailer Claire's Stores (CLE:NYSE) logged a 4% jump in same-store sales, in line with analysts' expectations.

The specialty apparel giant, Gap (GPS:NYSE) , continued to struggle. Its May comps dropped 6%, further than expected. The company expressed disappointment with the performance and it warned investors that its profit margins would remain under pressure until it transitions to its fall product line in late July.

Pier 1's (PIR:NYSE) May same-store sales fell 6.6% from a year ago, slightly worse than expected, as a good response to new merchandise was offset by a lackluster performance over the Memorial Day weekend. Pier 1 reiterated expectations for a loss of 24 cents to 28 cents a share in the first quarter; analysts expect a loss of 25 cents a share.

Surf outfitter Pacific Sunwear (PSUN:Nasdaq) said same-store sales fell 2.6%, while overall sales rose 5.6% to $85.1 million. Analysts were forecasting a 3.5% rise in May comps.

Late Wednesday, American Eagle Outfitters (AEOS:Nasdaq) said its same-store sales rose 11%, beating analysts' average expectation for a 9.3% gain, according to Thomson First Call.

The teen-clothing retailer reiterated its second-quarter earnings forecast of 39 cents to 41 cents a share.

Aeropostale (ARO:NYSE) logged an unexpected decline in its May same-store sales, or comps. The mall-based teen-apparel chain said same-store sales slipped 1.1% after analysts had predicted a small increase. The company noted, though, that it was able to maintain its gross margin projections because of increases in its merchandise margins.

Tough times continued at Hot Topic , which posted a 6% decline in comps for the month. That was a bit worse than what Wall Street was expecting, and it came on top of a 2% decline in the same month last year.

For its part, Zumiez (ZUMZ:Nasdaq) held sway with young, extreme-sports enthusiasts. The seller of action-sports products reported that its same-store sales jumped 18.2%, easily surpassing Wall Street's forecast for a 6.8% gain

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Jury finds Wal-Mart was not negligent in hiring sex offender who molested girl

By Bo Rosser
Court TV                 [back to top] 

COLUMBIA, S.C. — A jury found in favor of the retail giant Wal-Mart Tuesday in a negligence suit filed by the mother of a 10-year-old girl who was molested by an employee in one of the company's Super Center stores.

"What [Bobby] Randall did was indecent and we wish that it had never happened," Wal-Mart's attorney Steve Morrison said. "In the end, Wal-Mart did not do anything negligent." (VIDEO)

The plaintiff in the case, Maria Hollins, chose not to comment after the verdict, but her attorney David Massey said he was shocked by the outcome.

"I was convinced that we had proven negligence and recklessness in the hiring and retention of Randall," Massey said. "I do not see any set of facts that the jury could have found for Wal-Mart. The jury, in essence, let the little girl down."

The plaintiff claims the store was grossly negligent in its hiring practices involving convicted sex offender Bobby Randall, who was caught on store surveillance tape touching her daughter in the electronics aisle on Sept. 25, 2000. Attorneys for Hollins faulted Wal-Mart for not performing a criminal background check on Randall. If they had, according to Massey, the store managers would have learned he was a convicted sex offender.

In the 90-second encounter, Randall touched the girl twice then followed her to the adjacent aisle where the victim's sister found her and led her out of the camera's view. Randall, although not a convicted felon at the time of his hiring in 1997, had been convicted for misdemeanor indecent exposure three times, according to court documents. He was later convicted of performing a lewd act on a minor for the Wal-Mart incident and was sentenced to 10 years in prison, where he died in 2002 at the age of 46.

During the five-day trial, the victim testified via videotaped deposition to having nightmares and thoughts of suicide related to the incident. Massey suggested an award of $1.7 to $5 million be given to the victim's mother and put in a trust fund for the child.

After approximately nine hours of deliberations over two days, the jury sided with Wal-Mart's defense team, who argued the company was under no legal obligation to investigate Randall's criminal past and insisted that, while the hiring process the retailer followed when employing Randall was not perfect, it was "reasonable." Two of Randall's former managers testified for the defense that the convicted sex offender was a strong worker and that they were surprised upon hearing of his legal troubles.

Despite winning the case today, the Bentonville, Ark.-based retailer adopted the practice of performing criminal background checks on potential employees in 2004, following a judge's order that Wal-Mart provide a list of employees so that it could be cross-referenced against South Carolina's sex offender database. A company spokesman said earlier in the trial that there were a number of factors that prompted the change in policy.

The win for the $300 billion company may have done more than just save it a $5 million payout. The retailer is facing similar suits in six states, according to Massey, who is suing the retailer for an incident in Orangeburg, S.C. The verdict may discourage some plaintiffs' plans for multimillion dollar awards or settlements.

Wal-Mart employs 1.34 million people nationwide in 3,864 stores and expects to open a new store in Columbia once rezoning approval is granted.

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