Source: The Salt Lake Tribune

Dow Jones Newswires

A group of investors will tomorrow demand the global supermarket come up with a plan to improve relations with its workforce

Robert Lindsay
Times Online
May 31, 2007                             [back to top]

A group of Wal-Mart institutional investors are planning a revolt at the supermarket giant's annual meeting tomorrow to be held in a sports arena close to its home base in Arkansas.

They have filed a proposal calling on the board to detail the impact of a series of scandals and class action law suits by staff and come up with a plan to improve its reputation.

The revolt at the annual meeting in the 19,000-capacity Bud Walton stadium - named after a Wal-Mart co-founder - at the University of Arkansas is being led by the New York City Employees Retirement System which holds 2.95 million Wal-Mart shares. It is also backed by Britain's F&C Asset Management and the state pension funds of Illinois and Connecticut as well as a Swedish state pension fund.

Karina Litvack, Head of Governance at F&C, said the fund had become increasingly concerned over the past few years by signs of failure in the giant grocer's internal controls that have led to a class action lawsuits by employees and government investigations.

Employees have filed suits alleging they are forced to "work off the clock" during breaks and after shifts, systematic discrimination against women and questionable tactics to prevent workers from voting for union representation.

Last year vice chairman Thomas Coughlin, a protege of former chief executive Sam Walton, was fired for fraud and tax evasion stemming from embezzling company funds. More recently, a fired marketing executive Julie Rhoem alleged the chief executive had violated Wal-Mart's policies governing conflicts of interest with suppliers by accepting travel, concert tickets and preferential prices on yachts and jewelry.

She said: "We got off to a promising start in 2005 with expectations of a dialogue with the independent directors on the Audit Committee. But when this simply withered on the vine, we had little choice but to bring our concerns about internal controls, labour violations and the erosion of the company's reputation to our fellow shareholders."

"We found that the company was not interested in engaging in a productive discussion about how it builds and supports a compliance culture and as a result, we have joined an international group to file a shareholder proposal."

"Weaknesses in internal controls have eroded the company's reputation as an attractive employer and are adding fuel to the fires of Wal-Mart's critics," she said. "We fear that its failure to deliver on these policy commitments is inhibiting Wal-Mart's ability to expand into new domestic markets."

The motion calls on the Board to issue a report to shareholders by September on the "negative reputational impact" of reported and known cases of management non-compliance with International Labor Organization (ILO) conventions and also on breaches of the company’s own legal and regulatory controls. It wants the report to include "recommendations and actions taken to improve compliance."

Wal-Mart's board has recommended shareholders vote against the motion. In a letter to shareholders it stressed: "The Company is fully committed to treating its Associates fairly and complying with all applicable labor and employment laws and regulations in all of the states and countries in which Wal-Mart operates."

It said the US had ratified only 14 ILO conventions since 1919, most of which had no pertinence to Wal-Mart's operations.

It said it had "consistently denied the allegations" that it did not comply with its own controls in all the law suits it faced, so making a report based on the assumption it had breached rules "would be contrary to the Company’s and the shareholders’ best interests. "

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© Copyright 2007 Times Newspapers Ltd

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5 ways to fix Wal-Mart

Investors say the world's biggest retailer needs a catalyst, or more than one, to revive sluggish sales, and its stock.

By Parija B. Kavilanz,
CNNMoney.com 
May 31 2007                                [back to top]

NEW YORK (CNNMoney.com) -- As Wal-Mart prepares for its annual meeting, the world's biggest retailer - in typical fashion - has lined up big-name performers to entertain the crowd, including a concert by The Eagles.

More than likely, the pomp and circumstance is also meant to distract shareholders from the thorny issues that have nagged the retail giant in recent years.

As thousands of investors pack the Bud Walton arena for the meeting on Friday in Fayetteville, Ark., here's what they'll be thinking about.

Wal-Mart (Charts, Fortune 500)'s stock is down 5.1 percent since last year's meeting while shares of rival discounters Target (Charts, Fortune 500) and Costco (Charts, Fortune 500) have risen 24 percent and 4 percent, respectively, over the same period.

Sales at stores open at least a year, a key measure of retail performance, have grown just 1 to 3 percent at Wal-Mart the past three years, versus about 5 percent previously. And while total sales including new stores grew 11 percent last year, profits grew an anemic 1 percent.

But not everything's gone wrong for Wal-Mart the past year. Its $4 generic drug program and its "green" initiatives have generally been well received.

Its other problems persist, however. It made a big misstep with higher-priced fashion clothing; it backtracked on its plans to open a bank, and its union-backed critics are still hammering Wal-Mart for what they claim is its unfair pay and health care. Wal-Mart defends its pay and benefit practices.

And it's hard to put a positive spin on Wal-Mart's "spygate" scandal - the salacious saga of how it fired former ad executive Julie Roehm.

Even though Wal-Mart won back the No. 1 spot on Fortune magazine's annual ranking of America's largest companies, that's not doing much to appease shareholders.

"When you have value built into the company but the market doesn't recognize it, that's very frustrating to investors," said Don Gher, chief investment officer for Coldstream Capital Management, which counts Wal-Mart in its $1.5 billion portfolio. "The company has stumbled when it should be doing well."

Peter Fader, professor of marketing atWharton Business School, called Wal-Mart a "marked" company. "In some ways that's enviable because it shows people are talking about you," Fader said. "Look at Microsoft and the old AT&T. They've kept their brand leadership position despite people passionately hating them. Management should never give up but be reasonably responsive to criticism."

Gher and other experts say Wal-Mart needs a catalyst - or a few - to boost sales and profits and get its stock moving again. Here are a few ideas.

Sam's Club: Sell it or spin it off. This tops the list for Gher. "Wal-Mart should use the hot M&A market to realize the value of the division," he said. "Plenty of private equity firms would be interested. It's got more allure to it than Wal-Mart and doesn't have a target on its back."

Same-store sales at Wal-Mart's 582 Sam's Club warehouse stores grew 4.1 percent last quarter versus a 0.1 percent decline at Wal-Mart Stores.

Some Wall Street analysts have said a spinoff could make sense.

"With over $41 billion of sales in 2006 and a solid management team, we believe the division is substantial enough to stand on its own," Citigroup analyst Deborah Weinswig wrote in a note to clients in January, noting that Sam's Club has about 42 percent of the warehouse club industry, second to Costco's 49 percent.

Spinning off Sam's Club, which could be worth $20.6 billion, would allow the company to "focus solely on improving its U.S. and international operations," she wrote.

But some analysts aren't convinced. Joseph Beaulieu at Morningstar said, "It'll be very difficult to disentangle Sam's from Wal-Mart. Sam's leverages Wal-Mart's distribution network, even Wal-Mart parking lots."

Others suggest Wal-Mart should rethink another unit, its 110 smaller urban neighborhood stores that primarily sell groceries. It hasn't set any aggressive expansion targets for this format partly because of the great resistance it faces from communities in cities like New York and Los Angeles.

Wal-Mart could sell the unit or relaunch the stores with a different range of products not sold at its discount stores, said Russell Jones, director with turnaround advisory firm AlixPartners. "This could succeed if Wal-Mart doesn't associate the new format with its Wal-Mart brand," he said.

Stick to basic clothes: Wal-Mart shot itself in the foot last year by straying from low-priced items like socks and underwear in favor of pricier, trendier clothing. And Wal-Mart's never really moved clothes the way Target has with its "cheap-chic" designer wear.

"Higher-income people do not shop at Wal-Mart for clothes because they don't need the savings," Ketty Maisonrouge, marketing professor at Columbia Business School. "It's a mistake for Wal-Mart to try to appeal to people who are trading up in their spending."

Should it pull out of clothes altogether? Gher doesn't think so. "Wal-Mart's struggling with apparel but it still sells a lot of it. It needs to stick to selling the basics," said Gher. What's more, with the recent addition of former J.C. Penney's (Charts, Fortune 500) CEO Alan Questrom to Wal-Mart's board, Gher said Questrom could help reinvigorate the category for Wal-Mart like he did for Penney.

New leadership:"This could be welcomed by investors," said Steven Baumgarten, an analyst with PNC Advisors, a Philadelphia-based investment firm with $54 billion in assets under management, including Wal-Mart stock. "It's a huge company. It take a lot to right the ship and it won't happen overnight."

Baumgarten thinks Eduardo Castro-Wright, CEO of Wal-Mart USA, is a good candidate. "He's done a good job when he headed the Mexico operations and he's worked closely with Scott," he said.

Under Scott, a 25-year veteran at Wal-Mart and only its third CEO after founder Sam Walton and then David Glass, sales have doubled to more than $345 billion. But its stock price has been stagnant during Scott's seven-year reign.

"Scott spend more time apologizing for Wal-Mart's mistakes instead of being a champion for Wal-Mart," said Morningstar's Beaulieu. "He's never been a celebrity CEO.

"Wal-Mart has recently done a considerable amount of executive reshuffling. Give that a chance to work," Gher said, but warned that investors' patience with the stock was wearing thin. "[Scott] should be very aware of that."

International focus: Wal-Mart's overseas business is now a bigger piece of the pie, accounting for 23 percent of total sales last year, up from about 19.6 percent two years ago. The retailer currently operates in 15 countries, including China, Mexico and Japan. It's also set a joint-venture with Bharti Enterprises to enter India.

"International expansion is the best opportunity for growth for this company," said PNC's Baumgarten. "I'd rather see it grow organically instead of through acquisitions because the last thing Wal-Mart needs is to buy someone else's headaches."

Know your customer: If Wal-Mart needs just one catalyst, it's understanding its own customers better, said Wharton's Fader.

A combination of arrogance and naivete has landed Wal-Mart in trouble, he said. "Its problems could be avoided if Wal-Mart exploited the huge amounts of data it collects to really understand its customers and do a better job in serving them. It's irresponsible for it not to. It doesn't even have a good loyalty program for its shoppers."

He cited Netflix as as example. "Netflix does a fantastic job serving its customers. It has an enormous data and it uses it to pull very specific data on individual customers," he said.

If Wal-Mart did that, it wouldn't make all of its merchandising blunders, he added. "This embodies Wal-Mart's problem. When you think inside the box for too long, you'll keep making the stereotypical mistakes." Fader said.

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Anti-Wal-Mart group aims ads at core customers

By Brad Dorfman,
Reuters
May 31st, 2007                        [back to top] 

BENTONVILLE, Arkansas (Reuters) - A group that opposes Wal-Mart Stores Inc.'s business practices plans to target what it calls the retailer's core conservative Republican customers with a new television advertising campaign, saying the company is "not American anymore."

WakeUpWalMart.com is launching the $1 million television campaign in the the South, Southeast and Midwest United States to try to take advantage of what it says its research shows is a "values conflict" among consumers who like low prices but do not like to see more manufacturing jobs moving overseas.

"People like low prices, but they don't like the values" they are seeing at Wal-Mart, said Chris Kofinis, a spokesman for the union-backed group that has been highly critical of the world's largest retailer.

The first television ad, which will begin running in June, paints Wal-Mart as having moved away from founder Sam Walton's vision of buying American, saying the retailer instead "drives American companies to shut down plants and move manufacturing jobs to China."

The U.S. trade deficit with China hit a record $233 billion last year, a source of frustration among many U.S. lawmakers. A three-day Washington visit by a top-level Chinese delegation last week ended with little progress evident on the thorniest points in a troubled trans-Pacific trade relationship.

Wal-Mart directly sources about $9 billion in goods from China, a spokeswoman for the retailer said. In the past, the company has said another $9 billion reach Wal-Mart stores through suppliers who also buy goods manufactured in China, but the spokeswoman declined comment on that second figure on Thursday.

A spokesman said Wal-Mart's commitment to buying from American suppliers -- cited in a 1985 memo from Walton distributed by WakeUpwalMart.com to reporters attending the company's annual meeting and media day -- has not changed.

"However, today we're a global company and it is necessary to source globally to ensure that we meet the needs and wants of our customers," said Wal-Mart spokesman David Tovar.

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Wal-Mart realistic toy guns trigger raid

Sify.com
Thursday, 31 May , 2007                    [back to top]

Shanghai: Chinese quality watchdogs have seized 46 toy guns from a Wal-Mart store in Shanghai because they looked ‘too realistic,’ state media reported on Thursday. Five types of toy guns, including pistols and a machinegun, seized from the US retailing giant's outlet in Pudong district, violated colour standards, The Shanghai Daily said, citing the local bureau of quality and technical supervision.

"All of the guns are black or metallic, which is against a law that states at least half of toy guns should be bright colours such as red or green to differentiate them from real weapons," the paper quoted an unnamed quality official as saying.

"The toy guns sold in Wal-Mart are too real, and such toys can be harmful to children by easily inducing them to violence," the official said.

The bureau would inspect samples of the seized guns again, the paper said, adding that if they were confirmed to have broken regulations, Wal-Mart could face a fine equal to three times their sale value.

"© 2004 sify.com India Limited. All Rights Reserved.

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Wal-Mart Cashier Says Joke Cost Him Job

Associated Press
May 31st, 2007                           [back to top]

ALMONT TOWNSHIP, Mich. (AP) -- A former Wal-Mart cashier says he was fired for joking on his MySpace page that the average IQ would increase if a bomb were dropped on the company's stores. David Noordewier said he was fired Feb. 27 for posting the message, which he said was a joke and not a threat.

"I told them that this was crazy," Noordewier told The Flint Journal. "It's not like I have a fighter jet in my backyard to drop a bomb with. Then they escorted me out to the parking lot."

Noordewier said store officials had him sign an acknowledgment that he was fired for "gross misconduct -- integrity issue."

Wal-Mart spokeswoman Kory Lundberg confirmed that Noordewier no longer worked for the company but would not discuss why.

Unemployment officials said Noordewier did not qualify for benefits because he had made a threat.

Noordewier had a near-perfect work attendance record and once received a personal thank-you letter from the company president over compliments from a customer he once helped.

He said he thinks a co-worker disliked him and pointed the MySpace page out to his boss.

"If you have a MySpace site, you better act like you're a politician," he said. "Be politically correct and don't try to be funny."

MySpace is owned by media conglomerate News Corp.

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Union Attacks Wal-Mart on China Goods

By MARCUS KABEL
Associated Press
05.31.07                                        [back to top]

Union-backed critics of Wal-Mart Stores Inc. are using a made-in-America campaign started by late founder Sam Walton in the 1980s to attack the global retailer for buying heavily from China.

WakeUpWalMart.com unveiled Thursday what it called an effort to turn conservatives against the retailer with ads alleging Wal-Mart (nyse: WMT - news - people ) had turned its back on Walton's values since he passed away in 1992 by increasing its buying overseas.

In materials provided to reporters on the sidelines of a Wal-Mart media conference, the group included a 1985 press release from Sam Walton in which he criticizes the loss of U.S. jobs to imports and pledges to buy American-made products whenever possible to protect domestic manufacturing jobs.

"We can restore our manufacturing capacity, improve our national economy and renew our pride in American craftsmanship," Walton wrote in a March 1985 open letter that urged manufacturers to work with retailers to bring as many competitive American products to the shelves as possible.

Wal-Mart said it is still committed to buying from suppliers that manufacture in the United States whenever possible.

"However, today we're a global company and it is necessary to source globally to ensure that we meet the needs and wants of our customers," Wal-Mart spokesman David Tovar said.

In recent years, Wal-Mart has bought roughly $9 billion in goods from China directly and another $9 billion indirectly, or goods produced in China for another company and then sold to Wal-Mart, Wal-Mart International spokeswoman Beth Keck said.

Keck said exports of U.S. goods were also increasing to fill Wal-Mart shelves in the 13 countries where it has stores. That includes beef from Kansas sold in Japan and American dairy products sold in Mexico, she said.

When Japan eased restrictions on U.S. beef last year, Wal-Mart's subsidiary Seiyu was the first retailer to resume offering American beef. "That's going very well," she said.

Wal-Mart is not alone in using the lower cost of China production to push down shelf prices for consumer goods in the United States, said China trade expert Peter Morici, a business professor at the University of Maryland and the former chief economist for the U.S. International Trade Commission.

But Morici, a critic of the burgeoning U.S. trade deficit with China, said Wal-Mart's size and supply-chain expertise make it a leader among domestic retailers in what he called pressuring suppliers to lower costs by moving production to China.

"Wal-Mart is the poster child of outsourcing," Morici told The Associated Press.

Morici said Wal-Mart is acting against its own interests by sourcing from China. He said the loss of U.S. manufacturing jobs is eroding the buying power of the same working people who make up Wal-Mart's core customers.

Wal-Mart's Tovar said WakeUpWalMart.com's two top officers, who were in Bentonville on the eve of Wal-Mart's annual shareholder meeting, were spending "hard-earned union member dues" on a publicity stunt.

"They know that Wal-Mart creates thousands of jobs, offers competitive wages to our 1.3 million associates, reduces health care costs through $4 generic medicines and in-store health clinics, and provides leadership on environmental sustainability," Tovar said.

WakeUpWalMart.com said it would be airing a 30-second television ad in 30 markets in the South and Midwest this summer, mainly during local news programs, for a total cost of $1 million.

The campaign targets conservatives in the South and among Republicans, who WakeUpWalMart.com believe are receptive to criticism of American companies buying heavily from China rather than from U.S. manufacturers.

Copyright 2007 Associated Press. All rights reserved.

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Wal-Mart CEO's expensive tastes

By Devin Leonard,
FORTUNE Magazine
May 31st, 2007                             [back to top]

Lee Scott's jewelry purchases have become a hot issue in a former marketing executive's lawsuit against the retailer

NEW YORK (Fortune) -- Has former Wal-Mart CEO Lee Scott been bloodied by former marketing executive Julie Roehm's charges that he cut sweetheart deals for himself with one of the retailer's suppliers? It certainly seems that way.

Roehm's charges are the latest twist in corporate America's most salacious legal battle. It all started in December when Wal-Mart fired its former senior vice president for marketing communications for allegedly accepting gifts - including a case of vodka - from Draftfcb, an ad agency that won the retailer's $580 million account last year. Roehm didn't just publicly deny the charges. She sued Wal-Mart for $325,000 in severance pay.

Wal-Mart clearly wanted to make an example out of its unrepentant former executive. It unleashed top-notch lawyers and an in-house investigative team led by Kenneth Sensor, a former CIA official, to unearth incriminating evidence.

In March, the retailer filed a scathing 28-page counterclaim. The document opened with a lofty statement about how Wal-Mart's ethical policies forbid employees from accepting "personal gratuities" from vendors because that might increase its business costs and lead to higher prices for customers: "The policies are intended to avoid even the appearance of improper influence upon the company's decision making in the selection and supervisor of vendors."

Then Wal-Mart proceeded to detail Roehm's alleged misdeeds in prose that was sometimes more akin to a bestselling novel than a court filing. The most sensational allegation was that Roehm had stepped over yet another ethical line by conducting an "inappropriate romantic relationship" with Sean Womack, a former marketing VP at Wal-Mart.

Wal-Mart included this now-famous excerpt from a email that Roehm sent to her purported paramour: "I think about us together all of the time. Little moments like watching your face when you kiss me." (Roehm's lawyers say Roehm and Womack were never romantically involved.)

But Roehm struck back in June with her own lengthy response, in which she argued that ethical violations were rampant at the retailer's executive office.

Among other things, she accused Scott himself of purchasing more than one yacht and a large pink diamond ring for his wife at "preferential" prices from Irwin Jacobs, whose business, Jacobs Trading Company, has the "exclusive rights to purchase unsold Wal-Mart merchandise." Roehm also names two Wal-Mart executives who, she claims, had an affair, but weren't fired by the company.

Wal-Mart dismissed Roehm's charges as an attempt by its former employee to divert attention from her own misdeeds. Jacobs also fumed that Roehm should retract them. But the Wall Street Journal reported on May 30 that Scott bought a diamond ring for his wife from the Aaron Group, another Wal-Mart supplier. The Aaron Group said it wasn't a sweetheart deal, but it didn't reveal the price paid by Wal-Mart's CEO.

It's not clear if Roehm's allegations will stand up in court. But that may not matter. This is a public-relations battle. And right now, it looks like Roehm has the upper hand. Scott has plenty of things to worry about.

Wal-Mart's stock is an underperformer. It's not clear if the retailer has a viable long-term strategy. Meanwhile, Wal-Mart's hardball tactics are drawing fire. It recently had to apologize to the New York Times after it revealed that one of the former members of its Threat Research and Analysis Group had eavesdropped on a reporter's cell phone calls.

The last thing Scott needs is more questions about his jewelry purchases.

If nothing else, Wal-Mart's CEO should have paid more attention to the part in the company's ethics policy about avoiding appearances of impropriety.

Wal-Mart's lawyers may still find a way to avoid paying Roehm her severance.

But she's already had her revenge.

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New anti-Wal-Mart ads target 'Southerners,' 'Republicans'

By CNNMoney.com,
May 31st, 2007                                 [back to top]

WakeUpWalMart.com launches $1M ad campaign pitching the message that Wal-Mart fosters anti-American values by doing business with China.

NEW YORK (CNNMoney.com) -- On the eve of Wal-Mart's annual shareholders meeting, union-backed watchdog group WakeUpWalMart.com announced Thursday a new million-dollar campaign targeting what it claims are the retailer's core customers of "Southerners and conservative Republicans." 5 ways to fix Wal-Mart

The group said the three-month "Summer Southern Blitz" campaign will consist of a series of television ads and grassroots actions intended to highlight the message that Wal-Mart's "values are not [truly] Southern or Republican."

What's more, WakeUpWalMart's latest initiative against the world's largest retailer aims to make the case that Wal-Mart values its business with China more than American jobs and national security, Paul Blank, campaign director for WakeUpWalMart.com, said in a statement.

The first ad, entitled "It's Just Not American," uses an image of Sam Walton and an American flag waving in the background and announces that once "Sam Walton's Wal-Mart was an American company."

"The ad goes on to state that "as [the U.S.] trade deficit grows and middle class American jobs are shipped overseas, Wal-Mart and China get stronger ... America gets weaker." The ad ends with the message,"Wal-Mart, it's just not American anymore."

In March, the same group, which is funded by the United Food and Commercial Workers (UFCW) union, launched a TV ad that featured images of a nuclear explosion and Osama bin Laden to suggest that the retailer is putting America's security at risk by opposing scanning of cargo containers at the nation's ports.

Wal-Mart responded by calling the ad's claims "factually incorrect."

To be sure, Wal-Mart remains a lightning rod for groups like WakeUpWalMart.com and Wal-Mart Watch that have attacked the company over its pay, hiring and health care policies.

For its part, Wal-Mart has initiated some reforms over the past year. The company has cut by half the waiting time for its part-time workers to get health insurance and has taken steps to become more environmentally friendly.

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Circuit City Cuts Retail, Corporate Jobs

By ZINIE CHEN SAMPSON
Associated Press
05.31.07                                            [back to top]

Circuit City Stores Inc. cut retail management positions and eliminated about 200 jobs at its corporate offices Thursday as it began another phase of its restructuring plan.

Circuit City (nyse: CC - news - people ), the nation's No. 2 consumer electronics retailer behind Best Buy Co. Inc. (nyse: BBY - news - people ), said it will eliminate an average of one manager for each of Circuit City's 654 U.S. stores and give more supervisory duties to midlevel sales staff. The changes will be based on store volume, the company said.

There are 3,000 people employed at the chain's corporate offices in Richmond and company officials didn't specify which 200 positions would be cut.

Chief Executive Philip J. Schoonover said that the job cuts are part of the middle phase of Circuit City's plan to reduce costs and improve financial performance in light of heavy competition from Best Buy and retailers like Wal-Mart Stores Inc. (nyse: WMT - news - people ), which have depressed prices for flat-panel televisions and other key products.

"We're in the second act of a three-act play," Schoonover said in a telephone interview with The Associated Press.

The company needs is "making some tough decisions on some things that we won't do anymore," said Schoonover, who became Circuit City's chief executive since March 2006.

Circuit City plans to add jobs when it opens 165 new stores over the next two years and tries to boost online-sales.

The latest changes come two months after the company laid off 3,400 store employees, replacing them with lower-paid workers, and trimmed about 130 corporate information-technology jobs by outsourcing the work to IBM (nyse: IBM - news - people ).

Schoonover, a former Best Buy executive who started at Circuit City in 2004 as chief merchandising officer, addressed concerns that Circuit City's restructuring might be tackling too much too quickly.

"I think this is a hypercompetitive industry," Schoonover said. "We have a history of resilient behavior. Because of the changes to the profit model in our business we have to make these changes."

Circuit City is "acting with a sense of urgency" to benefit its customers, employees and investors, he said.

The company lost $11.8 million, or 7 cents a share, for the fiscal year ended Feb. 28. That's compared to a profit of $139.7 million, or 77 cents a share, in the previous fiscal year. Annual sales rose 8 percent to $12.4 billion, but fourth-quarter sales - which included the important holiday shopping season - only rose 1.2 percent.

Circuit City has said it expects to lose $80 million to $90 million from continuing operations in 2008's first fiscal quarter, based on lower than anticipated sales of flat-panel and projection TVs in April. The company said it plans to report first-quarter results June 20.

Copyright 2007 Associated Press. All rights reserved. 

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Union Ad Campaign Targets

By Kris Hudson,
Wall Street Journal
May 31st, 2007                       [back to top]

BENTONVILLE, Ark. -- The United Food and Commercial Workers union's WakeUpWalMart.com has launched a $1 million advertising campaign aimed at dissuading Wal-Mart Stores Inc.'s core customers: Southerners and conservative Republicans.

The union group, formed two years ago to criticize Wal-Mart's practices after the retailer thwarted unions' attempts to organize its U.S. work force, says it spent more than $1 million on the latest ad campaign. The initial ads will run in 30 markets, including midsize markets in Wal-Mart's core Southern states.

The first ad to air criticizes Wal-Mart's ties to China, a country from which Wal-Mart annually purchases roughly $9 billion in goods and roughly the same amount from suppliers who buy from China. The ad alleges that Wal-Mart has contributed to the loss of American jobs by purchasing Chinese-made goods, proclaiming "It's just not American."

Wal-Mart, Bentonville, Ark., dismissed the campaign as a "publicity stunt." WakeUpWalMart.com unveiled the ads today as Wal-Mart started a media conference that precedes its annual shareholder meeting on Friday.

"We're not surprised that they're here spending hard-earned union member dues on another publicity stunt to further their politically motivated agenda," Wal-Mart spokesman David Tovar said in a statement. "We're focused on celebrating another successful year with our associates and shareholders from around the world."

The ad campaign isn't the first launched by WakeUpWalMart.com. Earlier this year, the group criticized Wal-Mart's alleged opposition to security scanning of port containers -- a topic actually addressed by the Retail Industry Leaders Association more than Wal-Mart, a prominent member of the retail trade group. That ad showed images of Osama bin Laden and a mushroom cloud. The group also aired ads slamming Wal-Mart last holiday season.

This time, however, WakeUpWalMart.com says it is going after Wal-Mart's core customers, rather than dissuading the more-affluent shoppers Wal-Mart attempted to lure last year. According to ACNielsen, 42.2% of Wal-Mart's customers have household incomes of $40,000 a year or less. And the retailer's stores are far more concentrated in the southern U.S. than in the West and Northeast.

Part of WakeUpWalMart.com's ads will allege that Wal-Mart has strayed from the ideals of late founder Sam Walton, who once launched a campaign to encourage shoppers to buy American-made goods.

"We believe that just like all Americans, Wal-Mart's core customers will become enraged when they learn how much Wal-Mart has changed for the worse since the days of Sam Walton," said Chris Kofinis, a spokesman for WakeUpWalMart.com.

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NJ Court Certifies Wal-Mart Class-Action

By JEFFREY GOLD
Associated Press
05.31.07                                    [back to top]

The New Jersey Supreme Court certified a class-action lawsuit against Wal-Mart by employees who claim that the nation's largest retailer denied them meal and rest breaks, and forced them to work off-the-clock.

The Thursday ruling revives the workers' lawsuit, which had been denied class-action status by a trial judge and an appellate panel.

Plaintiff attorney Judith L. Spanier said the class would contain about 80,000 current and former Wal-Mart (nyse: WMT - news - people ) employees.

Wal-Mart spokesman John Simley said the Bentonville, Ark.-based company was disappointed with the ruling and was studying its options.

"It's our policy to pay every associate for every hour that they have worked. Any manager who disregards that is subject to discipline, up to and including termination," Simley said.

Wal-Mart workers in Pennsylvania won a $78.5 million judgment last year for working off the clock and through rest breaks and a $172 million verdict in a California case. The company is appealing both.

Wal-Mart has settled a Colorado suit over unpaid wages for $50 million.

Spanier said she is appealing a decision by an Illinois judge rejecting class-action status for a similar lawsuit.

The New Jersey Supreme Court found that the class should be certified because common questions of law outweigh individual issues, and that the class-action lawsuit is the better method to handle the dispute.

The court rejected an earlier ruling that workers could file a claim with the state Division of Wage Collection at little cost.

The court said that many of the low-wage workers may remain silent because of "legitimate fears concerning employer retaliation, lack of resources, or a sense of powerlessness when confronting their would-be corporate adversary."

"We cannot ignore the reality that if the proposed class is not certified, thousands of aggrieved employees will not seek redress for defendant's alleged wrongdoing," Chief Justice James R. Zazzali wrote for the majority.

Spanier estimated that each worker lost an average of $500 in wages due to Wal-Mart's conduct.

Spanier was part of a legal team that argued for Wal-Mart employees in Pennsylvania, who are now seeking an additional $72 million in damages and interest.

"There is an enormous amount of pressure in Wal-Mart to keep costs down, and the biggest cost in control of a store manager is labor," Spanier said.

Wal-Mart shares rose 54 cents to $47.66 in afternoon trading Thursday. It has traded from $42.31 to $52.15 over the past year.

Copyright 2007 Associated Press. All rights reserved.

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Ad Agency: Wal-Mart Lacking Respect

By Marcus Kabel,
Associated Press
May 30th, 2007                                 [back to top]

An advertising agency fighting to keep Wal-Mart's business last year told the world's largest retailer that while it was a positive force because low prices helped shoppers lead better lives, the company suffered a lack of respect that could drive away shoppers.

The marketing report by GSD&M was obtained by a union-funded group critical of the retailer, Wake Up Wal Mart.com, and provided to The Associated Press. It warned Wal-Mart was being portrayed in the media as a bad corporate citizen who doesn't treat employees well and isn't acting as a good citizen of the planet.

GSD&M had handled Wal-Mart's advertising for 19 years until the retailer hired a new group during the winter. For its 55-page document, Wal-Mart: Positioning Report, GSD&M conducted in-home interviews with 24 groups of consumers and 20 individuals nationwide and took some of them shopping.

Wal-Mart, based at Bentonville, Ark., acknowledged the report was genuine but played down its significance. Spokesman Nick Agarwal said the company receives many marketing studies from consultants.

"I'm afraid this particular piece of work is not very useful, not least because it's now completely out of date and in some areas just plain wrong," Agarwal said.

Agarwal disputed GSD&M's claims that Wal-Mart's reputation has declined in recent years. He said Wal-Mart does not believe it is losing business because of negative headlines.

Austin, Texas-based GSD&M confirmed the report was part of its unsuccessful pitch. Wal-Mart in January dropped Omnicom Group Inc.'s GSD&M and another longtime agency, Bernstein-Rein of Kansas City, Mo. It hired Interpublic Group of Co.'s Martin Agency and Publicis Groupe SA's Media Vest.

Wake Up Wal Mart.com spokesman Chris Kofinis said the study backs his group's arguments that Wal-Mart must change, including paying its workers more and improving health benefits.

"From day one we told Wal-Mart that the American people cared about values, not just value, and because they didn't listen, preferring this dumb 'head-in-the sand-publicity-stunt' strategy, they have damaged their public image, and needlessly hurt their company, their shareholders, and their workers," Kofinis said.

Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which manages $9.6 billion in assets and holds about 42,000 Wal-Mart shares, said the report points to a genuine issue for Wal-Mart.

"Reputation really does matter," said Edwards. "It's more and more important, especially as you get to the younger crowd (of consumers). They are less about the money and more about values."

Wal-Mart's shares have been in the doldrums for years, a fact that some analysts blame in part on the potential risk of negative headlines affecting its business. While total sales rose 94 percent from 2000 through last year, the company's shares are trading about 30 percent below their Jan. 3, 2000 closing price.

GSD&M listed Wal-Mart's corporate reputation as the first of 10 challenges the company faces. Other problems included a hillbilly stereotype of its shoppers and competition from smaller Target Corp.

The agency argued that Wal-Mart is a positive force because its low prices help shoppers lead better lives.

But it said Wal-Mart's brand had slipped over time from standing for values like patriotism, community and opportunity to offering only economic value as low prices. GSD&M said if that gap is not closed, shoppers will have one more reason not to shop at Wal-Mart.

"While corporate respect may not be a highly rated driver of store choice, this intangible quality cannot be underestimated -- especially as Millennials (people born after 1980) take hold of the marketplace," the report said.

It did not recommend specific steps but said Wal-Mart should rebuild its values and make itself a brand that shoppers, employees, suppliers, shareholders and communities are proud of.

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Is Wal-Mart Too Cheap for Its Own Good?

By Michael Barbaro,
New York Times
May 30th, 2007                          [back to top]

Low prices, it turns out, can be bad for business.

A confidential report prepared for senior executives at Wal-Mart Stores concludes, in stark terms, that the chain’s traditional strengths - its reputation for discounts, its all-in-one shopping format and its enormous selection - “work against us” as it tries to move upscale.

As a result, the report says, the chain “is not seen as a smart choice” for clothing, home décor, electronics, prescriptions and groceries, categories the retailer has identified as priorities as it tries to turn around its slipping store sales, a decline likely to be emphasized Friday during Wal-Mart’s shareholder meeting.

“The Wal-Mart brand,” the report says, “was not built to inspire people while they shop, hold their hand while they make a high-risk decision or show them how to pull things together.”

The document, prepared in October 2006 by the company’s former advertising agency and based on interviews with scores of consumers, offers a candid, wide-ranging explanation for why Wal-Mart, the No. 1 seller of everything from laundry detergent to underwear, has stumbled badly when it comes to higher-end merchandise like silk camisoles and shag accent rugs.

The report contends, for example, that “our low prices actually suggest low quality” for products like high-definition televisions. And it says that Target, with its designer-inspired clothing and furniture, feels “like the ‘new and improved,’ while Wal-Mart often feels like the ‘old and outdated.’ ”

A copy of the 55-page report, written by GSD&M Advertising, was provided to The New York Times by WakeUpWalMart.com, a union-financed group highly critical of the retailer. The group said that a person outside of Wal-Mart gave it the report.

GSD&M, which has worked with Wal-Mart since 1974, submitted the report as part of an elaborate campaign to remain Wal-Mart’s ad agency after the retailer said that it might choose a replacement last year. Ultimately, Wal-Mart chose other firms.

Nick Agarwal, a spokesman for Wal-Mart, said that the seven-month-old report was “out of date and, in some areas, it is just plain wrong.” Sales in the chain’s pharmacy, electronics and grocery departments, for instance, are very strong, he said. GSD&M, a division of the Omnicom Group based in Austin, Tex., declined to comment.

Its report is at times prescient. As Wal-Mart’s clothing and home furnishing businesses have struggled, sales at stores open for at least a year fell to the lowest levels in decades over the last 12 months, well below those of Target. The figures are not expected to improve much over the next year, unsettling investors.

The GSD&M document offers a rare glimpse of the concerns that are buffeting Wal-Mart’s retailing empire, from its flagging corporate reputation to the “near catastrophic” economic pressures faced by its working-class consumers.

Wal-Mart attracts 138 million shoppers a week, a staggering figure unmatched in American retailing, but the portion of Americans who say the chain is their No. 1 destination for discount shopping has fallen from about 75 percent two years ago to 67 percent today, according to the report.

No specific explanation for the drop-off is provided, but Wal-Mart’s ad agency suggested a combination of factors, like stiff competition and public relations troubles. Those troubles have included a sex discrimination lawsuit filed on behalf of 1.6 million female current and former employees and firings of top executives, like the former vice chairman Thomas M. Coughlin, for stealing company funds.

Wal-Mart’s rating as a company that consumers trust and respect “steadily declined” over the last two years, the report said, as labor groups and elected leaders criticized its wages, benefits and practices. “While corporate respect may not be a highly rated driver of store choice,” it said, “this intangible quality cannot be underestimated.”

Wal-Mart has said that its own analysis has found that just 0.04 percent of customers have stopped shopping at Wal-Mart because of its reputation.

Chris Kofinis, director of communications at WakeUpWalMart.com, said, “Wal-Mart needs to realize that improving its public image and its business reputation demands they stop ignoring the fact that the American people care about values, not just value.”

The report by GSD&M also says several big-box rivals are meeting shoppers’ needs better than Wal-Mart. Best Buy, for example, provides “information and knowledge” to help buy electronics, the report says. Kohl’s provides “a wide selection of brand-name apparel” displayed “in a stylish environment that inspires browsing,” it says. And Bed, Bath & Beyond has “great displays that provide ideas on how to pull looks together,” it adds.

The economy is not helping matters, the report says. After living through the “decade of affluence” in the 1990s, Americans may now be entering the “decade of retreat” as real wages remain flat, fuel prices spike and consumer debt reaches all-time highs, it says, adding, “We have a crisis in the making for America’s working and middle classes.”

A significant portion of the report portrays Wal-Mart positively. In interviews, shoppers said the chain saves them money, time and stress, which suggests that the retailer’s low-price heritage is “as relevant today as it ever was.” Asked by GSD&M to describe Wal-Mart as if it were a person, some consumers compared it to a handyman, a grandmother and Uncle Sam. The report also asserts that “for most people and for most shopping occasions, Wal-Mart is the smart choice.”

The bulk of the report, however, examines the challenges facing Wal-Mart as it tries to transform itself from a chain focused on basic household items sold at low prices into one known for style.

Wal-Mart’s 200,000-square-foot stores, brightly lighted, minimally decorated and teeming with signs for price rollbacks, have served the chain well for much of the last 40 years.

But now, as Wal-Mart experiments with contemporary clothing, flat-screen televisions and nine-layer lasagna, that format has become a hindrance. To a shopper who wants to purchase a single dress for an evening out or a DVD player to watch a movie, “Wal-Mart’s one-stop shopping format becomes a time-consuming irrelevant obstacle,” the report says.

That environment is conducive to “zero-time” shopping, in which a customer spends just a few seconds thinking about a product, like a new bottle of dishwashing soap. “But people don’t buy electronics, home décor and apparel in zero time,” the report says.

“They shop for them,” it continues. “Those are slow-time shopping trips that require, unique, slow-time environments that provide a level of service, a sense of style and an array of ideas that inspires shopping.”

Wal-Mart’s advertising agency recommended a series of solutions, though the company has so far not adopted most of them. For electronics, it suggested creating a no-hassle, no-questions-asked returns policy that would make people feel more comfortable buying expensive televisions and stereo systems

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Wal-Mart Chief Bought Ring From Firm's Vendor

By James Bandler
and Gary McWilliams,
Wall Street Journal
May 30th, 2007                       [back to top]

Wal-Mart Stores Inc. Chief Executive H. Lee Scott, who recently was accused by a fired marketing executive of accepting sweetheart deals from suppliers, purchased a diamond ring from a Wal-Mart vendor, according to that vendor's officials.

Mr. Scott purchased the ring for his wife in April 2003 from The Aaron Group, a wholesale supplier of jewelry to Wal-Mart, said Robert Kempler, president of the New York-based company. Mr. Kempler declined to discuss the terms of the diamond sale other than to say Mr. Scott hadn't received preferential pricing.

Wal-Mart's famously strict ethics code prohibits employees from receiving anything free from suppliers. Last week, Julie Roehm, a former Wal-Mart marketing executive who was fired in December for allegedly violating the retailer's ethics rules, claimed in a federal court filing that Mr. Scott obtained "a number of yachts" and "a large pink diamond" at preferential prices.

The lawsuit didn't identify the specifics of the diamond sale, other than to say that Mr. Scott had purchased the stone through a relationship with Irwin Jacobs, a financier who has numerous business relationships with Wal-Mart. It isn't clear whether the diamond ring purchased from The Aaron Group is the same one referred to in Ms. Roehm's suit.

Mr. Kempler said he'd never heard of Mr. Jacobs, and he said everything about the transaction was "above board." Mr. Jacobs called the allegations without any substance and has denied knowing anything about any diamond purchase by the Wal-Mart CEO.

A Wal-Mart spokeswoman declined to comment specifically on the diamond purchase or Wal-Mart's policies on employee purchases from suppliers. Mr. Scott "is subject to the same ethics policy as any other associate and has not violated either the spirit or the letter of Wal-Mart's ethical standards," the spokeswoman said. She characterized the allegations in Ms. Roehm's court filing as "old news. No facts have been presented to back them up."

Charles Elson, Director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, said Mr. Scott shouldn't have been doing business with any vendor, even if the deal was in accordance with Wal-Mart's ethics rules. "Someone at that level, at that paygrade, should avoid dealing with the company vendors," Mr. Elson said. "It sends the absolute wrong signal to the rest of the organization, particularly one that prides itself on its relationships with vendors."

Wal-Mart's code of ethics prohibits employees from requesting or encouraging gifts from suppliers, including "free goods...personal services or favors" or "kickbacks in the form of money or merchandise." It doesn't specifically bar employees from purchasing goods from suppliers, but it does advise more broadly: "Do not have social or other relationships with suppliers, if such relationships would create the appearance of impropriety or give the perception that business influence is being exerted."

In court filings, Bentonville, Ark., Wal-Mart previously had accused Ms. Roehm of having an improper personal relationship with a subordinate and improperly accepting gifts from suppliers, including liquor and lavish dinners. She has denied accepting gifts and insisted suppliers were told to bill the company for any meals. In the increasingly bitter fight, Ms. Roehm has accused the company of a double standard, detailing instances in which other top executives supposedly received favors from suppliers.

Supplying a diamond ring for a chief executive's wife would appear an unusual order for The Aaron Group, which on its Web site describes itself as a "maker of popular priced" jewelry. The company says its "target focus is the middle market consumer" with retail jewelry from $29.99 to $999. Among its retailing partners it says, are Wal-Mart and its Sam's Club unit; JC Penney Co.; and Kohl's Corp.

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Former Wal-Mart employee claims company refused to pay health insurance

By Steve Gonzalez,
Madison County Record
May 30th, 2007                                    [back to top]

A former Wal-Mart employee filed suit in Madison County Circuit Court May 29, alleging Wal-Mart wrongfully refused to pay her health insurance benefits.

Donna Clendenny claims she was hired at Wal-Mart in November 2001 and was discharged in January 2004.

She claims that while employed she validly executed a leave of absence for medical reasons unrelated to her employment causing Wal-Mart to terminate her employment.

Clendenny also claims as part of her employment she was entitled to shares of stock which she accumulated over time.

According to Clendenny, she accumulated over 800 shares of stock and Wal-Mart told her that those shares were forfeited.

"(Wal-Mart's) conduct is wrongful and without cause," the complaint states.

Clendenny claims she has suffered both economic and non-economic damages and seeks damages in excess of $200,000, plus costs and attorney fees.

She is represented by Jeffrey Weishaupt of East Alton.

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Is Wal-Mart The Answer To Dell's Problems? Not Likely

Chad Brand
May 29th, 2007                             [back to top]

After handing off the CEO post to Kevin Rollins at Dell (DELL) for a few years, founder Michael Dell has returned to try and help his company find its way back to the top. Dell came out of nowhere in the 1990's to overtake the likes of Hewlett Packard (HPQ) and IBM (IBM) in the PC market and earned the number one spot in worldwide market share. However, customer service issues have hurt the company in recent years and a reinvigorated Hewlett Packard (thanks to the entrance of Mark Hurd) now holds the top spot.

So what is Michael Dell's master plan to get back to the top? Last week, we learned that the company will begin selling several desktop models in 3,000 Wal-Mart (WMT) stores nationwide. Upon hearing the news, I couldn't help but ask myself, "How is that going to help Dell solve its problems?"

After all, the company built its business perfecting the direct distribution model that Dell created in his University of Texas dorm room in the 1980's (he subsequently dropped out). Furthermore, the company focused on the higher end corporate, government, and education markets, leaving the likes of HP, Compaq, Gateway (GTW), IBM, eMachines, and Packard Bell to fight over the low-end consumer segment. That market didn't turn out to be a very lucrative one. Packard Bell no longer exists. IBM sold its PC business to Lenovo. Compaq was forced to merge with HP. A struggling Gateway bought out eMachines, but still is doing poorly.

Now we hear that Dell is entering the retail channel with what I would have to think (given Wal-Mart's customer base) is a low-end desktop computer. This decision really doesn't make a whole lot of sense to me. The company thrived by shying away from the exact area they now are going to go after. Let's not forget that Dell at first refused to offer desktop models at $300 and $400 price points, instead focusing on higher margin products. They eventually gave in and also began using Advanced Micro Devices [AMD] chips (under Rollins), something they did not do for a long time.

It has been well publicized that Dell has lost market share due to sub par customer service. The company opted to outsource their customer support in order to save money, but the result was consumers waiting on the phone for hours and upon finally getting through, not really getting helpful information. Dell should really focus on what it is that lost them market share in the first place. You can't argue that it was ignoring the low-end PC market, because Dell was number one years back when they were avoiding that segment entirely. If Dell doesn't fix its image of having poor customer support, its market share numbers aren't going to improve dramatically. Even if someone buys a Dell at Wal-Mart, a bad experience will ensure they buy HP or another brand the next time around.

All of that said, you can understand why Dell has decided to go the Wal-Mart route. If they think the key is to regain lost market share at HP's expense, then selling computers at the world's largest retailer would be a great way to boost unit volume. The only problem with that strategy is that profits won't greatly improve and as long as customer support remains lousy, new customers won't result in a high percentage of repeat business, which is really something Dell needs to maintain to sustain any sort of reemergence as the worldwide PC leader.

It seems to me Dell is focused on a short-term impact, something that can score a few points of market share. While that may be attainable, they run the risk of not really improving the overall Dell experience, either as a shareholder or as a computer user. And without that, a Dell turnaround might be very, very difficult.

Disclosure: Author has no position in above-mentioned companies at the time of writing.

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Retail Madness: Dump Wal-Mart, Buy Target and Costco

Georges Yared
Seeking Alpha
May 29th, 2007                          [back to top]

An old client of mine has been a Wal-Mart (WMT) shareholder for years and years. He has made a fortune with the stock and, of course, is now falling victim to the usual thing that happens to people when they have made a fortune with a stock: he is emotionally attached to it. That's one of the worst characteristics, though sometimes it's quite unavoidable.

The stock has provided wealth building and after a while the afflicted investor gets used to the beautiful annual reports with the colorful pictures, showing happy customers and of course, the bribed happy employees. He asked for my professional guidance on the stock. He held his breath--but he listened. I told him to sell every share he has, long-term capital gains tax be damned--pay them happily and get on with a couple of winners.

He wants to keep the assets in the retail space as he has felt lucky with that sector. For that I do not blame him. I explained to him that Wal-Mart has a $200 billion market capitalization right now. He bought in when the market cap was only $40 billion, thus the 5 bagger. The next two-larger cap names with 5 bagger potential are Target Corp. (TGT) and Costco (COST). Both are killing Wal-Mart in different ways: Costco is beating Wal-Mart's Sam's Club consistently, month-in and month-out. Target is beating the traditional Wal-Mart stores with a fresh look, higher quality fashion selections and many other visceral things. Both concepts have room to double-to-triple their store base and the existing units beat Wal-Mart in the monthly critical same store sales metrics.

Wal-Mart has issues unique to its size and clumsy execution. Why stick with this stock when Costco and Target offer greater share appreciation over the next 2-5 years. One day, Target and Costco will face the same growth issues as Wal-Mart...but many years from now...

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Murphy closing 6 Wal-Mart gas stations

The Associated Press
May 29, 2007                                   [back to top]

DES MOINES, Iowa  - Six gasoline stations located near Wal-Mart stores in Iowa will be closed.

The Murphy Oil Corp. gas stations operated as Murphy USA in Waverly, Independence, Marshalltown, Anamosa, Grinnell and Le Mars are among 47 stations to be closed.

Murphy Oil has just over 1,000 gas stations in 21 states including 27 stations in Iowa.

Murphy said in a statement that it entered an agreement on April 30 to buy stations it operates at Wal-Mart stores. The gas stations are currently leased from Wal-Mart. Murphy said it plans to spend about $315 million in 2007 and 2008 to buy the properties.

The stations that will not be bought from Wal-Mart will be closed, the company said.

"In conjunction with this agreement, the company plans to close up to 47 existing stations and will incur after-tax impairment and restoration charges of approximately $18 million in the second quarter 2007," the company said in a statement.

A company spokesman said Tuesday that a list of stations to be closed has been developed but not released.

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Wal-Mart Faces Pressure to Settle Suit With Fired Executive

By Margaret Cronin Fisk
and Lauren Coleman-Lochner
Bloomberg                                                   [back to top]

May 29 (Bloomberg) -- Wal-Mart Stores Inc., defending against dozens of wage suits and the biggest discrimination complaint on record, faces pressure to settle with fired marketing chief Julie Roehm after she said executives violated company policy.

Roehm, 36, said last month that she wants company executives deposed, including Chief Executive Officer H. Lee Scott and a technician fired for allegedly conducting unauthorized surveillance for the company, the world's largest retailer. Last week, Roehm accused Scott, 58, and other executives in court papers of accepting discounts and gifts from a vendor.

``Given all the other litigation, Wal-Mart might want to settle,'' said Carl Tobias, a law professor at the University of Richmond in Virginia. Other lawyers said future court filings may contain more allegations. ``Wal-Mart needs to consider the cost, in dollars and to its reputation,'' Tobias said.

Wal-Mart spokesman John Simley declined to comment. Roehm's attorneys Sam Morgan and John Schaefer didn't return calls for comment yesterday.

Wal-Mart fired Roehm without saying why in December and dropped the advertising agency she'd selected. Roehm then sued the Bentonville, Arkansas, retailer for breach of contract and fraud. Wal-Mart countersued in March, accusing Roehm of taking gifts from DraftFCB, the agency she had hired, and of having an affair with a subordinate.

Roehm has asked for an unspecified amount of damages, plus punitive damages. Wal-Mart said in court papers that Roehm wants at least $1.5 million in salary and other payments.

Roehm's suit, filed in a Port Huron, Michigan, federal court, is one of more than 250 complaints by employees in federal courts since January 2005. Other lawsuits include allegations of bias and violations of wage-and-hour regulations.

Millions in Damages

Since December 2005, juries in Pennsylvania and California have awarded Wal-Mart workers a total of $251 million in pay and damages over claims the company broke wage laws.

The company faces a trial in Minnesota in September by hourly workers in a class-action lawsuit. The case is among more than 70 alleging Wal-Mart failed to pay employees for the hours they worked or didn't compensate them properly for overtime.

Wal-Mart is already under pressure from investors led by the New York City comptroller, who is demanding a vote at Wal- Mart's next shareholder meeting that would force a review of its treatment of workers.

Further attention will probably hurt Wal-Mart, said Cyrus Mehri of Mehri & Skalet in Washington, who represents employees in workers' rights litigation.

``The company is in a fishbowl,'' Mehri said.

`At a Disadvantage'

``Wal-Mart is already at a disadvantage in the eye of the all-important consumer and potential shareholder base because their reputation isn't squeaky clean,'' said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich, whose $9.6 billion in assets include Wal-Mart shares. ``The best outcome they could possibly achieve would be for this situation to just go away.''

Roehm's lawyers said in court papers last month they intend to depose ``any and all current or former employees and/or agents of Wal-Mart Stores Inc.,'' including Scott, Raul Vazquez, CEO of walmart.com, and Bruce Gabbard, a Wal-Mart technician fired this year on allegations of unauthorized surveillance of people including employees, critics and shareholders.

In papers last week, Roehm accused executives of accepting free plane travel and concert tickets. Scott, she charged, received discounts on yachts and a pink diamond from companies owned by Irwin Jacobs, which do business with Wal-Mart.

One Jacobs company, Plymouth, Minnesota-based Jacobs Trading Co., buys and sells leftover merchandise from stores including Wal-Mart. It employs Scott's son Eric as a consultant.

Hiring Complications

Jacobs and Simley previously denied Roehm's claims.

Wal-Mart should consider the effect the suit will have on recruiting top managers, Tobias said.

``This kind of litigation would complicate Wal-Mart's ability to hire top-line executives,'' Tobias said. ``Especially if they thought they would be fired after a short period on the job and then be accused of improper behavior.''

David Berg, a Houston attorney, argues the company shouldn't settle the lawsuit immediately -- perhaps not at all - - because settling now makes the company ``look guilty as charged.''

``You don't do it with a gun at your head,'' he said. Roehm's lawyers may find weaknesses in their own case, making them likely to settle for less, Berg said.

`A Pox'

Wal-Mart may win at trial if its claims against Roehm are true, even if her allegations are valid, Berg said. A jury is likely to say, ``a pox on both your houses,'' he said.

Wal-Mart, which has denied any discrimination or violation of overtime laws, is fighting the class-action wage cases. It settled some employee lawsuits. It's appealing the Pennsylvania and California verdicts.

The company is also defending a case brought on behalf of two million female workers who say Wal-Mart denied them equal pay and promotions. Simley has said the company will fight Roehm in court.

``Both sides are playing hardball in this litigation,'' Tobias said. ``Wal-Mart conducts much litigation that way.''

The case is Roehm v. Wal-Mart Stores Inc., 07-CV-10168, U.S. District Court, Eastern District of Michigan (Port Huron).

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Watching Wal-Mart for inkling on U.S. growth plans

By Nicole Maestri
Reuters
Tue May 29, 2007                          [back to top]

NEW YORK, May 29 (Reuters) - Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research may have become the largest retailer in the world by spreading its discount store concept around the globe, but analysts and investors want the retailer to rein in its U.S. expansion as it struggles with sales at home.

Wal-Mart is scheduled to hold an analysts meeting on June 1, after its annual shareholders' meeting, and company followers said they will be listening closely for clues about its plans for future store growth.

"The part we want to hear more about would be additional plans for slowing the square footage growth," said Don Gher, chief investment officer at Coldstream Capital Management, which has about $1.15 billion in assets under management and owns Wal-Mart shares.

A company spokesman said the retailer historically outlines its growth plans at its analyst meeting in October. Last October, it said it expected its retail space to grow by 7.5 percent in the fiscal year that started Feb. 1 -- a modest slowdown from the 8 percent increases in recent years.

The Bentonville, Arkansas-based retailer said at the time that it would delay opening new stores that are close enough to existing locations to draw away customers, and planned to build smaller ones where possible to reduce costs.

But analysts and investors are pressing for more. Its shares are down almost 14 percent in the past five years, while rival discounter Target Corp. (TGT.N: Quote, Profile, Research has risen 50 percent.

Sales at its U.S. store base remain lackluster, and its consumers now face rising gasoline prices and a slowing housing market that could crimp spending.

"A tougher backdrop for the core retail business should further encourage management to slow the square footage growth," wrote Merrill Lynch analyst Virginia Genereux in a research note earlier this month.

SAME-STORE SALES

Wal-Mart has struggled in recent months with sales at its U.S. stores open at least a year, a key retail gauge known as same-store sales, reporting a drop of 3.5 percent in April -- the largest fall since it began reporting the figures in 1979.

It has blamed the poor results on merchandising missteps, like offering trendy clothes that its customers rejected, and store remodeling activity, which it said disrupted shoppers.

Wal-Mart is working to improve its apparel business, marking down prices on poor-selling merchandise to clear out inventory, but it has said it expects weakness to persist through the spring.

"I'd like to find out their game plan for back-to-school and apparel," said Charles Grom, an analyst with J.P. Morgan, on what he wants to hear at the meeting.

Grom said the back-to-school period will be Wal-Mart's first opportunity to show it can improve its apparel business.

The retailer has also nominated Allen Questrom, a retail industry veteran who helped revitalize J.C. Penney Co. Inc. (JCP.N: Quote, Profile, Research, to its board -- seen as another way to help get its apparel business back on track.

Gher said Wal-Mart could have a better chance of improving its same-store sales if it cuts back on its square footage growth so it can concentrate on its existing stores.

At the end of April, Wal-Mart operated 4,058 Wal-Mart and Sam's Club stores in the United States.

When it reported first-quarter results May 15, Chief Financial Officer Tom Schoewe said on a recorded call that the retailer's current real estate review process "ensures that we apply stringent guidelines for returns on future projects."

Mark Miller, an analyst with William Blair & Co., said that may mean the retailer will moderate its capital expenditures.

"We believe the annual shareholders' meeting on June 1 should provide important incremental insight on how management proceeds with capital spending targets," he wrote in a research note May 15.

(C) Reuters 2007. All rights reserved.

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Fired Wal-Mart executive turns spotlight on bosses' conduct

David Teather
Guardian
Monday May 28, 2007                             [back to top]

A senior Wal-Mart executive fired for breaching ethics policies has turned the tables on her former employer and accused the chief executive, Lee Scott, of doing the same thing. In a lawsuit made public over the weekend, the former marketing chief, Julie Roehm, accuses Mr Scott and other executives of accepting gifts and discounts on items such as yachts and diamonds from suppliers and other businesses.

The suit is the latest damaging blow to Wal-Mart's public image. The retail chain has struggled over labour relations and faced opposition from businesses and community groups who claim it crushes smaller firms.

For a company that prides itself on the homespun ethics of its founder, Sam Walton, Wal-Mart also found itself embarrassingly embroiled in another scandal last year when its former vice-chairman, Thomas Coughlin, admitted fiddling his expenses to buy almost $500,000 (£250,000) worth of goods.

Ms Roehm was fired in December amid claims she had accepted gifts from an advertising agency that she later hired. She was also accused of misusing a company travel fund to pay for trips with a colleague, with whom she was alleged to have been romantically involved.

In court papers filed in Detroit, Ms Roehm said Mr Scott had received "preferential prices" on yachts and a "large pink diamond for his wife" through his relationship with businessman Irwin Jacobs. Mr Jacobs' company has a deal to buy unsold Wal-Mart merchandise. Mr Scott's son Eric has worked for Mr Jacobs for a number of years. Ms Roehm also claimed that Mr Scott accepted travel on Mr Jacobs' private aircraft.

In other allegations, she said Wal-Mart's vice president of marketing, John Fleming, and others, had accepted $300 tickets and backstage passes to an Eagles concert during a meeting with suppliers in Spain. "Many Wal-Mart executives do not abide by Wal-Mart's alleged firm policy forbidding conflicts of interest," she said.

A Wal-Mart spokesman denied the allegations. "This lawsuit is about Julie Roehm and her misconduct," he said. "We will address these issues in court."

In her lawsuit, Ms Roehm denied the allegations against her. She said that a dinner Wal-Mart had accused her of accepting improperly consisted of "small, White Castle-sized burgers", referring to the fast food chain selling mini burgers.

Ms Roehm has also alleged that another senior executive, who has since left Wal-Mart, had an affair with a subordinate when both were married.

She claims that she was fired for trying to modernise the Wal-Mart marketing department. She had wanted to push the retailer towards edgier television advertising, including a husband and wife discussing underwear.

Guardian Unlimited © Guardian News and Media Limited 2007

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Wal-Mart shareholders mix show, business

By MARCUS KABEL
The Associated Press
May 28, 2007                                        [back to top]

Thousands of Wal-Mart investors and employees will pack a northwest Arkansas sports arena Friday for the giant retailer's annual shareholder meeting, a mix of music celebrity flash and serious business with a pinch of criticism from dissident shareholders.

Investors will be closely watching the presentations by Chief Executive Lee Scott and top executives for word on growth strategies after the company warned second quarter profits may miss Wall Street expectations.

The global retailer typically packs the 18,000-seat Bud Walton arena at the University of Arkansas in Fayetteville, about 30 miles south of Wal-Mart headquarters in Bentonville.

Activist shareholders ranging from religious orders and unions to a free-market think tank are offering 11 proposals. Such measures typically fail to win majority support.

This year's proposals include calls for Wal-Mart to report on the gap in pay and benefits between its top executives and lowest paid workers, on the percentage of stock awards to employees based on gender and race, on the need for universal health care plans and on the grounds for its charitable giving.

It is always a well-choreographed event with a sprinkle of big-name performers to serenade the audience. Recent years included stage appearances by Garth Brooks, Jon Bon Jovi and Jessica Simpson.

At the shareholder meeting and at an analyst conference immediately afterward, analysts will be listening for any news on Wal-Mart's growth strategies for its core U.S. namesake stores, whose sales dwarf its faster-growing international business and its Sam's Club membership warehouse chain.

"What everyone is wanting to hear is that they are going to get it right on fashion and they're going to get it right on home (decor)," said Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which holds about 42,000 Wal-Mart shares.

Apparel and home furnishings are two areas that Wal-Mart has identified as its weakest, weighing down sales gains in electronics, food and pharmacy.

Wal-Mart is trying to find the right balance between low prices and adding more brand names to departments like home electronics after a brief foray last year into higher-end fashion brought disappointing results.

Wal-Mart's sales at established U.S. stores, a key retail benchmark, have been trailing those at smaller rivals like Target Corp. and fell in April by 3.5 percent, the worst showing in at least 27 years.

Wal-Mart warned this month that earnings in the second quarter might fall below analysts consensus of 79 cents per share as it offers more discounts and as high gas prices take cash out of the pockets of its core lower income shoppers.

A.G. Edward & Sons retail analyst Robert Buchanan said he would like to see the company trim its longer term earnings guidance to reflect what Buchanan calls a more realistic level for a retailer that has grown into the world's largest company by revenues.

Buchanan said many analyst estimates reflect expectations that Wal-Mart will continue growing profits at past levels of 11 to 13 percent per year, but that he believes 8 percent is more realistic for a mature company.

"This company is huge...It's very, very hard to grow at anything approaching the historical high rates," Buchanan said.

Wal-Mart expects earnings this year of $3.15 to $3.23 per share, up between 8 and 11 percent from $2.92 in its last fiscal year, which ended in January. On average, analysts surveyed by Thompson Financial expect an 8 percent increase to $3.16 per share this year and another 11 percent to $3.51 next year, while Buchanan sees just a 7 percent rise next year.

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Wal–Mart to hold shareholders meeting

SPRINGFIELD, Missouri (AP) – Thousands of Wal–Mart investors and employees will pack a northwest Arkansas sports arena Friday for the giant retailer’s annual shareholder meeting, a mix of music celebrity flash and serious business with a pinch of criticism from dissident shareholders.

Investors will be closely watching the presentations by Chief Executive Lee Scott and top executives for word on growth strategies after the company warned second quarter profits may miss Wall Street expectations.

The global retailer typically packs the 18,000–seat Bud Walton arena at the University of Arkansas in Fayetteville, about 30 miles south of Wal–Mart headquarters in Bentonville.

Activist shareholders ranging from religious orders and unions to a free–market think tank are offering 11 proposals. Such measures typically fail to win majority support.

This year’s proposals include calls for Wal–Mart to report on the gap in pay and benefits between its top executives and lowest paid workers, on the percentage of stock awards to employees based on gender and race, on the need for universal health care plans and on the grounds for its charitable giving.

It is always a well–choreographed event with a sprinkle of big–name performers to serenade the audience. Recent years included stage appearances by Garth Brooks, Jon Bon Jovi and Jessica Simpson.

At the shareholder meeting and at an analyst conference immediately afterward, analysts will be listening for any news on Wal–Mart’s growth strategies for its core U.S. namesake stores, whose sales dwarf its faster–growing international business and its Sam’s Club membership warehouse chain.

"What everyone is wanting to hear is that they are going to get it right on fashion and they’re going to get it right on home (decor)," said Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which holds about 42,000 Wal–Mart shares.

Apparel and home furnishings are two areas that Wal–Mart has identified as its weakest, weighing down sales gains in electronics, food and pharmacy.

Wal–Mart is trying to find the right balance between low prices and adding more brand names to departments like home electronics after a brief foray last year into higher–end fashion brought disappointing results.

Wal–Mart’s sales at established U.S. stores, a key retail benchmark, have been trailing those at smaller rivals like Target Corp. and fell in April by 3.5 percent, the worst showing in at least 27 years.

Wal–Mart warned this month that earnings in the second quarter might fall below analysts consensus of 79 cents per share as it offers more discounts and as high gas prices take cash out of the pockets of its core lower income shoppers.

A.G. Edward & Sons retail analyst Robert Buchanan said he would like to see the company trim its longer term earnings guidance to reflect what Buchanan calls a more realistic level for a retailer that has grown into the world’s largest company by revenues.

Buchanan said many analyst estimates reflect expectations that Wal–Mart will continue growing profits at past levels of 11 to 13 percent per year, but that he believes 8 percent is more realistic for a mature company.

"This company is huge...It’s very, very hard to grow at anything approaching the historical high rates," Buchanan said.

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Mittal wants Wal-Mart in thru’ the front door

Sindhu Bhattacharya
Monday, May 28, 2007                          [back to top]

NEW DELHI: The Bharti Group, which is tying up the details of its cash-and-carry joint venture with Wal-Mart, is keen on getting the Giant of Bentonville to the front end of the retail business. Even though the government continues its ban on foreign direct investment (FDI) in retail, Bharti already has the option of using the Wal-Mart brand name on its front-end stores.

Speaking to DNA Money, Bharti group chairman Sunil Bharti Mittal said, “Whenever government opens up FDI in retail, Wal-Mart is absolutely welcome to come into the front-end.” Shrugging off suggestions that Wal-Mart may want to get into the front end on its own, he asserted.

“Wal-Mart will be brought to the front end in partnership with us… Why have they partnered us for the back-end business otherwise?”

So far, Bharti has been fighting shy of declaring its intentions on bringing Wal-Mart to the front-end and this is perhaps the first time Mittal has given any indication about his plans for the front-end. His assertion comes even as many government functionaries feel that Wal-Mart’s entry is a backdoor one.

On his part, Mittal has all along maintained that the pact with Wal-Mart is being inked only for carrying out the wholesale cash-and-carry business, in which government regulations allow 100% cent FDI. Mittal dismissed reports that the two partners have differences of opinion over the use of the Wal-Mart brand name, clarifying that the two sides are yet to come to a decision over whether the Wal-Mart name should be used in the front end stores. “

“This issue (use of the Wal-Mart brand name) is not sensitive at all. It is up to us to use it or not, it’s a prerogative we have … we have a franchise from Wal-Mart for the front-end and (we will) do what we have to. If we use the brand name, there will be a royalty, otherwise not.”

“We are in the process of taking a decision on this, but work on the retail venture is ongoing. Land is being acquired at various places and we have already hired a competent team of people,” he said.

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Microsoft, Wal-Mart named in kid's death

INDIA TIMES NEWS
SUNDAY, MAY 27, 2007                      [back to top]

The family of an Illinois infant that died in a house fire has filed a lawsuit claiming that an Xbox video game system manufactured by Microsoft and sold by Wal-Mart Stores overheated and sparked the killer blaze, say media reports.

According to the suit, the wiring that connected the Xbox 360 to an electrical outlet became so hot that it started a "catastrophic" fire at a house in Warsaw, Illionis. The victim, an infant named Wade Kline, died in the inferno.

"The fire was a direct and proximate result of the overheating of the game's power supply and wiring," claims the lawsuit, which was filed in State Circuit Court in Illinois. Microsoft, Wal-Mart, and an unnamed power-supply maker have been named in the suit.

Wal-Mart has filed a procedural motion to move the case from state court to US District Court in Illinois. The lawsuit claims that the fatal fire occurred in December 2004, even though the Xbox 360 didn't officially launch until May 2005 -- an indication that the unit involved may actually have been a first-generation Xbox console.

The suit was filed by Wade Kline's estate and seeks unspecified damages in excess of $50,000.

This not the first time that the Xbox has been thought to have caused a dangerous fire, according to media reports. In 2005, a UK woman was pulled unconscious from a blaze reportedly sparked by an overheated Xbox system, according to the British online tech news site The Register.

In February 2005, Microsoft had announced a recall of more than 14 million Xbox power cords, citing fire concerns.

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Accusations fly in Wal-Mart case

BBC NEWS
2007/05/27                        [back to top]

A former Wal-Mart employee fired over an alleged conflict of interest has accused the boss of the world's largest retailer of also accepting favours. Julie Roehm lost her job as a marketing specialist amid claims that she took gifts from an ad agency that later won a contract, and misused company funds.

Ms Roehm claims that Wal-Mart boss Lee Scott has himself accepted gifts, and taken discounts on boats and diamonds.

Wal-Mart said it disputed the claims and called Ms Roehm's case "weak".

'Preferential prices'

Ms Roehm was fired from Wal-Mart in December, and has sued the company claiming breach of contract.

Wal-Mart then counter-sued, alleging that she accepted gifts from DraftFCB, an advertising agency she later hired.

Ms Roehm was also accused of misusing a company travel fund to finance trips with a subordinate with whom she had become romantically involved.

In court papers, Ms Roehm has alleged that Wal-Mart boss Mr Scott was given "preferential prices" on yachts and "a large pink diamond for his wife" thanks to his relationship with businessman Irwin Jacobs.

She also accused a group of other Wal-Mart executives of accepting tickets and backstage passes to a rock concert during a meeting with vendors in Barcelona, Spain.

Wal-Mart said that the allegations were untrue.

"This lawsuit is about Julie Roehm and her misconduct," said company spokesman John Simley. "Her document shows how weak her case is."

"We will address these issues in court."

Story from BBC NEWS

© BBC MMVII

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CEO of Wal-Mart Accused of Ethics Breach

Maeil Business Newspaper
05-27, 2007                                               [back to top]

A fired Wal-Mart Stores Inc. executive has accused the retailer's CEO of violating its ethics policy-accepting discounts on yachts, diamonds and personal gifts from vendors and others wanting to work with the company.

Wal-Mart and a former marketing communications chief, Julie Roehm, have both filed lawsuits: Wal-Mart of her accepting gifts from an advertising agency that was later chosen to handle the retailer's ad account and misusing company travel funds on business trips with a subordinate with whom, it said, she was romantically involved; Roehm of the company's breach of contract-her December dismissal after less than a year.

In addition, Roehm also accused a group of executives.

"This lawsuit is about Julie Roehm and her misconduct. Her document shows how weak her case is," John Simley, a Wal-Mart spokesman, responded on Friday in a statement. Later in the day, Wal-Mart said the allegations of impropriety involving its CEO were untrue.

Roehm, also, denied all her allegations, including her alleged relationship with Sean Womack, the employee with whom she is accused of having a romantic relationship.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]

Copyright ⓒ 2006 MaeKyung Internet Co.

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Official Fired by Wal-Mart Fights Back

By Michael Barbaro,
New York Times
May 26th, 2007                                   [back to top]

After Wal-Mart Stores fired a top advertising executive, Julie Roehm, six months ago, the company accused her of violating a wide range of its strict ethics policies.

Now Ms. Roehm is claiming her bosses did the same thing.

In a 40-page legal filing disclosed yesterday, Ms. Roehm asserted that several top Wal-Mart officers, including its chief executive, accepted gifts like concert tickets and bought expensive products, like a boat, at discounted rates from an entrepreneur who does business with the chain.

The filing contends — without offering specific evidence — that H. Lee Scott Jr., Wal-Mart’s chief executive, bought yachts and a large diamond ring at “preferential prices” from companies owned by Irwin Jacobs, a Minnesota entrepreneur who employed Mr. Scott’s son Eric, and owns a company that buys unsold merchandise from Wal-Mart.

Invoking one of the same company policies cited in her own termination, the filing by Ms. Roehm said Mr. Scott’s actions “created the appearance of conflict” of interest, which “may be just as damaging to Wal-Mart’s reputation as an actual conflict.”

The legal filing, a response to Wal-Mart’s accusations that Ms. Roehm improperly took gifts from and tried to negotiate a job with an advertising firm, is the latest embarrassing document in a case that has riveted Madison Avenue and Wall Street.

Since Wal-Mart fired Ms. Roehm in 2006, the legal back and forth has produced claims of a torrid love affair between colleagues, extravagant free meals, secret job negotiations and rides in expensive sports cars.

Responding to the filing, a Wal-Mart spokesman, John Simley, said, “The allegations of impropriety involving our C.E.O. Lee Scott are untrue.”

He added: “This lawsuit is about Julie Roehm and her misconduct. Her document shows how weak her case is. We will address these issues in court.”

Mr. Jacobs, in an interview, denied that his companies sold Mr. Scott anything at a discount. He said Mr. Scott had insisted on paying full price for a boat bought from one of his companies — and Mr. Jacobs said he was considering suing Ms. Roehm for making false accusations against him.

Mr. Scott “went overboard to make sure there was nothing not right about it, beyond what I imagine anyone doing to make sure it was in the Wal-Mart way,” Mr. Jacobs said.

The legal maneuvers began shortly after Ms. Roehm’s dismissal in December when she filed a wrongful-termination suit claiming that she was punished for trying to modernize Wal-Mart’s marketing department, which gave the world the yellow smiley face in the chain’s advertisements; she called herself an “envelope pusher.”

Wal-Mart, angered over those claims, which it denied, replied with a lawsuit in March asserting that it had fired Ms. Roehm for, among other things, conducting an affair with a subordinate and accepting an expensive watch and bottles of vodka from an ad agency that Wal-Mart had considered hiring. Both actions would violate the company’s ethics code.

In this latest document, lawyers for Ms. Roehm implied that in June 2006, colleagues, including John Fleming, then executive vice president for marketing and now head of merchandise, improperly accepted $300 tickets for an Eagles concert; the filing does not identify who supplied the tickets.

They claimed that E. Stanley Kroenke, a former Wal-Mart director and a relative through marriage of the chain’s founder, has an agreement to lease the Wal-Mart Stores he owns back to the chain at “preferential rates.”

And they asserted that an executive who served as general counsel and corporate secretary, who has since left Wal-Mart, conducted an affair with a subordinate, even though both were married at the time.

Asked about the claims, Wal-Mart referred to its statement, saying it would address the matter in court.

Ms. Roehm also used the filing to defend herself vigorously against Wal-Mart’s claims that she accepted gifts from potential clients; had an affair with a colleague, Sean Womack; and discussed taking a job with DraftFCB, an ad agency Wal-Mart chose after a long selection process that Ms. Roehm led.

She denied, for example, that she allowed DraftFCB executives to pay for an expensive dinner — described as “small White Castle-sized burgers” and several bottles of wine — because she expected the ad agency to bill her for the charges. (It is unclear, however, if DraftFCB did.)

As for the e-mail messages that she wrote to her colleague Mr. Womack — including a description of “watching your face when you kiss me” — Ms. Roehm said Wal-Mart had taken them out of context.

Ms. Roehm contends that she was fired, in part, for prodding Wal-Mart to experiment with racier ad campaigns focused on fashion, like a television commercial that involved a husband and wife discussing underwear in front of their relatives.

As evidence, the filing explained that after Ms. Roehm left the company, the retailer returned to advertising that focused on low prices.

“It is obvious that Wal-Mart was trying to eliminate the ideas that Roehm was advocating,” the filing contended.

Wal-Mart has previously said that it returned to marketing that focused on low prices because higher gas prices had begun to hurt its working-class shoppers, not because it wanted to undo Ms. Roehm’s strategy.

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Group Plans Shareholders Protest

By Anita French,
The Morning News 
May 26th, 2007                      [back to top]

What would a Wal-Mart shareholders meeting be without a protest?

Around 40 to 50 people are expected to meet at the Fayetteville High School parking lot Friday and then march to the Wal-Mart shareholders meeting at Bud Walton Arena on the University of Arkansas campus. They are part of Against the Wal, a local group that has held similar protests at the world's largest retailer's annual meeting for the last four years, said spokeswoman Rozlyn Grace.

"The core group is built of local people because we feel that Wal-Mart controls the local community here in Northwest Arkansas," Grace said in an e-mail to The Morning News. "We are completely independent and not supported or connected to any other project, such as Wal-Mart Watch or Wake-Up Wal-Mart," union-backed groups based in Washington that are highly critical of the company.

Against the Wal will first meet at 6 p.m. on Wednesday and Thursday at Bike City in Fayetteville for some "radical clowning" on Dickson Street in order to "bring our message of change to the shareholders with laughter and mockery," Grace said.

The group has put forward a list of demands from Wal-Mart, which run the gamut from providing higher wages and affordable health care to respecting the environment. Its final demand asks that the retailer "stop spying on us."

"In case you haven't heard, Wal-Mart is very scared of our annual protest -- so scared that an employee wearing a wireless microphone was sent to infiltrate our meetings," the group said in a news release.

Wal-Mart spokesman Dave Tovar said that, while Wal-Mart has admitted in a previous statement that it has researched some shareholder groups that might be disruptive, he said the company has not spied on Against the Wal.

"While we're excited to celebrate another successful year with our shareholders from around the world, our critics are planning another misguided publicity stunt," Tovar said.

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Wal-Mart: Back To Basics

By Anita French,
The Morning News
May 26th, 2007                               [back to top]

Company Still Looking For Identity As Shareholders Meeting Nears

Wal-Mart put on a shareholders meeting last year that some compared to an off-Broadway extravaganza, with singer Beyonce shimmying in a yellow dress and "American Idol" Taylor Hicks doing his somewhat goofy song-and-dance routine.

The company executive credited with that musical extravaganza -- or fiasco, depending on who you talk to -- is gone this year, her departure wrapped in controversy.

Wal-Mart tried last year to reach a more upscale consumer with a new line of apparel, upgraded home furnishings and by opening a store near Dallas that courted big spenders.

The company this year is celebrating a return to its roots as a low-price discounter, once again actively courting its every-day, price-conscious customer.

What a difference a year, controversy and several disappointing sales reports can make.

Wal-Mart will hold its 2007 shareholders meeting Friday at the Bud Walton Arena in Fayetteville, at which it will elect 15 directors, vote on 11 shareholders proposals and transact other business. *

Most eyes and ears will likely be fixed on President and CEO Lee Scott when he hops to the stage to give his annual state of Wal-Mart address and talk about what's next.

Out Front

Scott announced a new campaign at last year's meeting called Wal-Mart Out Front, made up of five "pillars:" broaden appeal to customers, make Wal-Mart a better place to work, improve business operations and efficiency, drive growth in the international division and make unique contributions to the community.

While some analysts and retail veterans give Wal-Mart good grades in pursuing those goals, they also hand out a few low marks.

"Wal-Mart appears to have changed their campaign partway through the year," said Patricia Edwards, fund manager with Wentworth, Hauser and Violich in Seattle. "Last June, the messaging seemed to be about all the surprisingly wonderful things a shopper could find in Wal-Mart while shopping for the basics, but by the holiday season it seemed to be all about price again.

"Wal-Mart's 'Store of the Community,' where they are tailoring stores to better reflect the local community, should continue to help broaden the consumer appeal, but that will be a process rather than an event. I'd give them a B-minus in that area, mostly because of the perceived change of focus throughout the year."

Convoluted Message

Wal-Mart did change horses in midstream, at least when it came to broadening its appeal to consumers. The company made no secret of the fact it was reaching out to a more upscale customer by introducing apparel line Metro 7 and fancier home furnishings. But after several months of disappointing sales, Wal-Mart seemed to reverse itself by saying it was focusing once again on low prices.

"We are committed more than ever to price leadership," Scott said in a recorded call when Wal-Mart released this year's first-quarter earnings.

Those earnings were respectable, with net sales up 8.3 percent and net income up 6.2 percent, but Scott said the company should have done better and that it expected second-quarter earnings below Wall Street forecasts.

Several retail observers have said Wal-Mart seems to have lost its direction. One analyst even complained that the company was "throwing everything at the wall and hoping something sticks."

"To me, it's a bit of a disconnect to highlight high-margin, high-end goods one day, and then emphasize its low-cost value proposition the next. Sure, there may be room for both, but the messages are getting convoluted," wrote senior columnist Mark Lichtenfeld at TheStreet.com earlier this month.

He said Wal-Mart needs to rediscover how to connect with its customers.

George Whalin, who heads a retail consulting agency in California and has followed Wal-Mart for years, said broadening appeal to customers can't be accomplished in a year.

"It's going to take three to four years to make it work," he said. "The store in Plano (Texas) was a move in that direction, and their stores of the community with merchandise more geared to that community. I think they're improving their operations, but it's an ongoing process."

Making Progress

Wal-Mart's new Plano Supercenter is a pilot store in an affluent Dallas suburb that features a new design and offers expensive wines, gourmet foods and electronics. In March, Wal-Mart opened what it called a prototype Neighborhood Market in Plano that also features a new layout and color scheme, along with increased organic and produce offerings.

"I think the company is making progress on a lot of things they want to do," said analyst John Lawrence of Morgan Keegan in St. Louis. "They have worked hard. What you saw in electronics (sales) in the fourth quarter was good ... and the international (division) is clearly working. I think there are just a lot of initiatives going on at one time, and the sales line is somewhat slow in showing some of that," he said.

Rising gas prices, opening new stores and the renovation of existing stores were other factors that played a role in Wal-Mart's up-and-down financials, Lawrence added.

"When they come out of all of this, I think we'll see a better half of 2007," he said.

In November, Wal-Mart reported third-quarter earnings rose 12 percent, a number Scott praised while expressing disappointment in "soft" sales at U.S. stores. But the company bounced back by reporting record sales and earnings -- up 10.9 percent -- for the fourth quarter ending Jan. 31, although they were below analysts' forecasts.

Wal-Mart also received some encouragement from TNS Retail Forward, which in a February report this year, called "Making Wal-Mart Work," said the company would regain Wall Street's favor if it could reverse the downward trend in same-store sales.

"It could be a long haul, but Wal-Mart is intent on proving naysayers wrong," the report said.

Edwards said she believed the best move Wal-Mart made last year was its $4 generic prescription program, which has "endeared them to their core customer" and has driven traffic to their stores. She didn't rule out Wal-Mart making another similar bold move.

"I don't think there's anything I could completely rule out as a possibility because they love to do things that analysts like me never expected," she said. "If I was a betting woman, I would put the greatest odds for bold move of the year on Wal-Mart launching a new concept/banner in the United States. While the market for large-sized discounters is getting fairly saturated, I expect that they very well could be mulling over a small-sized concept to rival Tesco's 10,000- to 12,000-square-foot stores that are expected to open in the U.S. Southwest."

Labor Pains

Wal-Mart may have striven to make its stores a better place to work, but the company still took hits from critics and some retail experts when it instituted wage caps and a new absentee policy. Even former avid Wal-Mart supporter Ron Galloway of Atlanta, who produced the 2005 documentary "Why Wal-Mart Works and Why That Drives Some People Crazy," broke ranks and roundly criticized the company over its new employee policies.

Critics stepped up their attacks when Wal-Mart started a scheduling policy late last year in which it said it was using computer software to match customer traffic with staffing. The company said the new system was aimed at improving the shopping experience and the work environment, but union-backed critics alleged that Wal-Mart was trying to save money by using the system to beef up its part-time staff.

Perhaps in response to mounting criticism, Wal-Mart made the unprecedented move this year of revealing the amount of bonuses it had given hourly employees in the United States and then following up with how much it had contributed in employee benefits.

Wal-Mart said in March that its employee bonuses totaled $529.8 million last year and then revealed in May it had contributed $1.1 billion in profit sharing, 401(k) accounts, stock purchase plan and merchandise discounts for the fiscal year ending Jan. 31.

It was the first time Wal-Mart had released such figures, and company spokesman Dan Fogleman said at the time both actions were a move on Wal-Mart's part to become a "more transparent company."

Whalin said he hasn't seen any meaningful action on Wal-Mart's part that improved working conditions for employees, and that the company focused too much on polishing its image by ramping up its public relations campaign.

"I think they've gone the wrong way. It's not about PR; it's about your actions, what you really do. It's been said they spend around $10 million on PR and they should spend that being good citizens and taking care of their employees. They're trying to spin instead of being a good retailer," Whalin said.

But it was the bonus the company awarded Scott this year that garnered almost as much attention from the media. In a March filing with the U.S. Securities and Exchange Commission, the company said Scott would receive a stock bonus worth $22 million for "reaching revenue targets" last year.

Scott's salary and bonus for 2006 was $5.23 million. His total compensation for that year, excluding restricted stock awards, was $15.7 million. The $22 million bonus was for Wal-Mart's 2007 fiscal year, which ended Jan. 31.

Wal-Mart took another unusual step when it filed a follow-up document in April with the SEC that seemed aimed at justifying Scott's bonus. In the filing, Wal-Mart said more than 85 percent of Scott's compensation was tied to the company's financial performance and that, when compared to other companies, his compensation was "among the lowest" as a percentage of annual revenue and net income.

That didn't stop the sniping from some critics, however. Forbes magazine listed Scott among its "overpaid bosses" in a May 3 article on CEO compensation.

Public Relations

The gears in Wal-Mart's public relations machine went into overdrive at last year's firing of former marketing executive Julie Roehm. Roehm, 35, joined Wal-Mart in January 2006 after a successful stint as director of marketing communications at Chrysler Group, where she was known for her edgy and risk-taking style.

Roehm became a senior vice president in Wal-Mart's marketing communications and reported directly to marketing head John Fleming. It was Roehm who was credited with turning Wal-Mart's 2006 shareholders meeting into a show-stopper.

"After arriving at Wal-Mart, she referred to herself as a 'change agent,' and set about turning the company's annual shareholder meeting -- a traditionally PowerPoint and numbers-heavy affair -- into a three-hour musical," wrote The New York Times.

A media frenzy ensued after Roehm, along with fellow executive Sean Womack, was abruptly fired in December for what Wal-Mart would only say at the time was a violation of company policy. When Roehm later filed a suit against the company, alleging she was unfairly dismissed, Wal-Mart fired back by taking the unusual step of publicizing some alleged e-mails between her and Womack -- reportedly provided by Womack's estranged wife -- that hinted at an improper relationship between him and Roehm.

"I think Wal-Mart handled the Julie Roehm affair poorly," Whalin said. "That shouldn't have been on the front page of every newspaper in the country. It made both of them look bad."

Wal-Mart spokesman John Simley said it would be inappropriate for the company to comment on the Roehm matter since litigation is involved.

As for Roehm's musical legacy, this year's shareholders meeting is going to be a "very traditional" one as in years past, said Wal-Mart spokesman Sharon Weber.

Wal-Mart came in for even more media scrutiny when the company said earlier this year it had discovered that an employee who worked in its security department had monitored phone calls between Wal-Mart and a New York Times reporter over a four-month period. The employee, Bruce Gabbard, was fired, but he later alleged in an interview with the Times that Wal-Mart had used its security system to spy on critics, its board of directors and shareholders -- which Scott himself denied publicly and in letters to shareholders.

Gabbard later recanted his claims.

"Probably the worst misstep for the company was the whole fiasco with Michael Barbaro, the New York Times reporter," Edwards said. "Wal-Mart came across as heavy-handed and paranoid. And the New York Times reader is, in many respects, the upscale, urban consumer that (Wal-Mart) eventually hopes to attract to their stores."

Still, Edwards added, Wal-Mart is "up against so much negative publicity from the unions that the best they can do is maintain status quo, and I think they've probably done a decent job on that. They've also talked a lot about becoming a greener company -- helping the environment. That's not just good for their reputation, but it's generally good business from a financial perspective. Once again, though, I don't think it will drive the socially responsible investors into their stock because there are so many other issues that are still swirling about in the marketplace."

Wal-Mart's stock not only didn't improve last year, it hasn't budged much since Scott took over the helm in 2000 -- something his critics are quick to point out. But several analysts think Wal-Mart's stock may have seen its darkest days.

A recent Business Week article pointed out that, for savvy investors like Warren Buffett -- who already owns numerous shares -- the company's stock may prove to be a good buy.

"Wal-Mart (stock) now sells for 16.6 times earnings, the cheapest it has been in more than a decade," Business Week said.

Whitney Tilson, a co-portfolio manager with the Tilson Focus Fund, told Business Week that he counts Wal-Mart among his top 10 stock holdings and expects earnings to hit $4 to $5 per share over the next two to five years.

"The pieces are in place for Wal-Mart to really appreciate," David Chalupnik, head of equities at First American Funds in Minneapolis, said in the article.

BY THE NUMBERS

* $344.9 billion -- Net sales for year ending Jan. 31

* $312.4 billion -- Net sales for year ending Jan. 31, 2006

* $47.83 -- Wal-Mart's closing stock price on June 2, 2006, date of last year's shareholders meeting.

* $46.91 -- Closing price on Friday

NOTABLE

"Business operations do seem to be running smoother and with greater efficiency, but they were already pretty efficient. Their focus on ROIC (return on invested capital) is to be commended, and by bringing down inventories they got a big leg up on that last year. The hurdle gets higher as they go forward on this one because the low-hanging fruit has already been picked."

-- Fund manager Patricia Edwards of Wentworth, Hauser and Violich

"They've done a pretty good job of trying to go back and showing the strength of Wal-Mart. They had to step up and start defending themselves."

-- Analyst John Lawrence of Morgan Keegan.

"It's awfully difficult to find much good news since the last Wal-Mart shareholder's meeting. Its stock price is still stuck in the 40s, and the company is now dealing with a whole host of public relations problems that complicate its marketing strategy. The higher income consumers Wal-Mart covets are also the most likely to have concerns about its business practices, which means some real problems for the company."

-- Wal-Mart Watch spokesman Nu Wexler

AT A GLANCE

Shareholder Proposals

There are 11 shareholders proposals at Wal-Mart's annual meeting this year. As has been the case in the past, Wal-Mart recommends a no vote on all.

The proposals are:

* That Wal-Mart provide a semiannual report disclosing the company's policies and procedures, monetary and nonmonetary contributions and rationale.

* That the company report on the implications of rising health care expenses and how it will address this issue.

* Establish a pay-for-superior performance standard in the company's executive compensation plan for senior executives.

* Have the board prepare a report documenting the distribution of last year's equity compensation by race and gender of the recipients.

* Requests that the board's compensation committee review the senior executive compensation policies.

* Requests that the board prepare a business social responsibility report.

* Asks the board to adopt a policy requiring shareholders to vote at each annual meeting to ratify the compensation of executive officers.

* Asks company to prepare a report disclosing political contributions.

* Requests board to issue a report on the negative social and reputational impacts of reported and known cases of management noncompliance with International Labor Organization standards on workers rights.

* Asks the board to adopt cumulative voting, i.e., each shareholder may cast as many votes as equal to the number of shares held, multiplied by the number of directors to be elected.

* Director nominees come from sources over which Wal-Mart's chief executives have no control.

Source: Wal-Mart

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Ex-Wal-Mart Employee Claims Executives Took Gifts

By Lauren Coleman-Lochner
and Margaret Cronin Fisk,
Bloomberg
May 25th, 2007                                          [back to top]

Julie Roehm, the marketing chief fired by Wal-Mart Stores Inc. for alleged conflicts of interest, accused executives of accepting free plane travel, concert tickets, and, in the case of Chief Executive Officer H. Lee Scott, discounts on yacht purchases.

Roehm said in court papers filed in Detroit yesterday that she never put her own interests first, ``although other executive employees of Wal-Mart did on a frequent basis.''

The filing follows Roehm's lawsuit for breach of contract and fraud in December and a counterclaim by Wal-Mart in March that accused her of taking gifts from DraftFCB, an advertising agency she had hired, and having an affair with a subordinate. Wal-Mart fired Roehm after less than a year on the job and subsequently dropped the agency.

``This lawsuit is about Julie Roehm and her misconduct,'' said Wal-Mart spokesman John Simley. ``Her document shows how weak her case is.'' He declined to comment on the specific allegations.

Scott bought yachts at a ``preferential price'' from a company run by Irwin Jacobs, the complaint said. Roehm also accused Scott of traveling to Las Vegas and Florida on jets owned by Jacobs.

One of Jacobs' companies, Plymouth, Minnesota-based Jacobs Trading Co., buys and sells returned and leftover merchandise from stores including Wal-Mart, and employs Scott's son as a consultant.

Jacobs denied giving preferential prices on at least two fishing boats to Scott and says Scott has never been in any of his planes.

`Outright Lying'

``Wherever she's getting her information from is either wrong or from someone who is outright lying,'' Jacobs, 65, said in an interview by mobile phone from Turkey today. ``If they don't retract it, I'm going to sue them personally.''

``What bothers me about this whole thing is how hard he tries to make sure the things he does are done just the right way,'' Jacobs said of Scott. ``He made it very clear he did not want preferential treatment. He said that to me in person.''

Roehm attorney Sam Morgan said today that he would depose Jacobs, ``and we'll see what he has to say under oath.''

Separately, the treasurer of Rhode Island has asked the U.S. Securities and Exchange Commission to look into whether Wal-Mart adequately disclosed a possible conflict of interest concerning Scott's son Eric's employment by Jacobs Trading.

Rhode Island has a $21 million stake in Wal-Mart in its pension funds. The state sent a letter to the SEC on May 21.

Vodka Case

Wal-Mart didn't initially disclose the reasons why the retailer fired Roehm.

After Roehm filed the lawsuit for breach of contract and fraud, Wal-Mart accused her of taking gifts, including meals and a case of vodka, from DraftFCB, which was competing for the company's $580 million annual advertising budget.

Roehm denied those accusations in the filing yesterday. She also said other Wal-Mart executives, including her supervisor John Fleming, the company's executive vice president of marketing, accepted from vendors free tickets, backstage passes and souvenirs from an Eagles concert in Spain.

Roehm's lawsuit was initially filed in state court in Michigan in December and transferred to federal court in January. A trial is scheduled for May 2008, Morgan said.

The lawsuit is Roehm v. Wal-Mart Stores Inc., No. 07-CV- 10168, U.S. District Court, Eastern District of Michigan (Port Huron).

Shares of Wal-Mart rose 25 cents to $46.90 at 1:36 p.m. in composite trading on the New York Stock Exchange.

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Wal-Mart prescribes an 'own brand' cure for drugs price concerns

By Jonathan Birchall
and Christopher Bowe
The Financial Times
May 25 2007                               [back to top]

Wal-Mart, the largest US retailer, has in the past two decades reshaped both the country's retail industry and its economy. But can it also reduce the more than $200bn (£100bn, €150bn) that Americans spend on prescription drugs every year?

Since September the company has been pursuing a high-profile attempt to cut costs. In-store pharmacies, it announced, would sell a month's supply of 300 commonly prescribed generic drugs for $4. That meant a price cut of 60 per centfor the most expensive drugs on the list.

Wal-Mart says low-cost generics - copies of brand-name drugs whose patents have expired - now account for 35 per cent of the prescriptions issued in its own pharmacies.

Lee Scott, the chief executive, de-clared in April that the cuts had so far saved customers $290m and that30 per cent of the drugswere being issued without health insurance.

Target, Wal-Mart's main discount rival, has followed with its own $4 programme. Kmart has extended an offer of three months' supply of generics for $15.

Questions remain on whether the initiative can achieve the more substantive structural changes to the US drug pricing model (and by extension the US healthcare market) that Bill Simon, the head of Wal-Mart's pharmacy operations, says he wants to achieve.

"Before, we took what was given us. What we're doing now is trying to lead," he says. Mr Simon argues that the $4 programme could bring down the price of generics across the market - just as Wal-Mart contributed to last year's fall in the price of flat-screen televisions. That would lead to a $10bn reduction in overall US healthcare costs, he claims.

But the three largest drugstore chains - CVS, Walgreens and Rite Aid - refuse to follow suit. They argue that customers with insurance pay only about $5 for generics. It is an indication of the opaque world of drug pricing. Wal-Mart and its allies say that although the customer may pay only $5 in the drugstore, the remaining costs, including transaction processing, are borne by the healthcare system.

"Standard industry practices had led to a place where price was relatively irrelevant," Mr Simon says.

According to Brian Sweet, chief clinical pharmacy officer at Wellpoint, one of the largest health insurers, Wal-Mart's programme is not extensive enough to affect overall pricing. "If it was broader, then you may have a big enough initiative . . . that it would change pricing," he says.

Wal-Mart, meanwhile, is keen to expand its project. It says it is considering a $9 price tier to cover, eventually, 40 to 50 per cent of all drugs prescribed in the US. It is talking to insurers about designing healthcare plans that would take account of the availability of low-cost generics.

"They understand that there is a role these products could play in a new lookat the future," Mr Simon says. "They could redesign a programme that would offer to their clients extra value on the expensive drugs because they don't need to provide support on the inexpensive ones."

Mr Sweet says Wellpoint is watching the unfolding dynamics of the programme. "It certainly is a bellwether to watch. . . If these programmes are utilised heavily or expanded then we may have some change in the way we do business here."

Wal-Mart's interest in healthcare stems in part from its own healthcare issues. The retailer is the largest private employer in the US, with about 1.3m workers. It has faced rising healthcare costs and a storm of political criticism over the level of healthcare support offered to its largely low-wage workforce.

Its strategies should also win the company new customers, one way or another. Pharmacies and clinics encourage customers to stay in stores longer, so they are also good for sales.

Mass sales approach to new drugs

Wal-Mart is looking to a volume-driven approach to the newly-developed drugs that are so important to the pharmaceutical industry.

The high prices charged by big pharmaceutical companies for new drugs represent the expected short shelf-life before the expiration of patents allows generic competitors into the market.

But Bill Simon, Wal-Mart's pharmacy head, thinks this model can be turned upside down. "We're trying to encourage them to think about a 40-year brand at a $30 price point as being far more valuable than a six- or seven-year brand at a $100 price point," he says. "And we believe that a $29 brand could compete against a $9 generic. We do that every day with Tylenol and generic acetaminophen [paracetamol] in our stores."

He argues that Wal-Mart could offer incentives for such a drastic change by allowing drugs to be sold in their manufacturers' packaging, rather than in the faceless plastic bottles provided by US retailers.

"Delivering the manufacturers' brand message into customers' hands would help build that brand. So when a generic became available . . . people might choose to stay with the brand they know."

Pharmaceutical groups may take some convincing. But the CEO of one of the biggest companies says the idea of extending branded drugs' shelf life "has a lot of merit to it."

Copyright The Financial Times Limited 2007

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Ex-exec hits back at Wal-Mart

In filing, fired marketing executive slams alleged ethical lapses, preferential transactions with vendors.

By Chris Zappone,
CNNMoney.com
May 25 2007                                  [back to top]

NEW YORK (CNNMoney.com) -- Julie Roehm, the former Wal-Mart marketing executive fired for traveling with a co-worker at the company's expense, hit back Friday at her ex-employer - and especially its CEO - with a slew of accusations contained in a federal court document.

Roehm accused executives at the No. 1 retailer of ignoring company ethics policy, accepting trips and gifts from clients, and of benefiting from preferential prices on jewelry and yachts.

The filing was made at the U.S. District Court in Detroit.

Many of the allegations center on CEO Lee Scott's relationship with Irwin Jacob of Jacobs Trading Co. Roehm said that Scott initiated a relationship that allows Jacobs Trading Company the exclusive right to buy unused merchandise from Wal-Mart (up $0.26 to $46.91, Charts, Fortune 500).

Roehm claims Scott initiated an association with Jacobs, who also owns boat-building companies, and then bought a number of yachts from Jacobs at "preferential prices." Scott was vice president of merchandising at the time, the filing claims.

Scott's relationship with Jacobs allowed Scott to buy a "large pink diamond for his wife at a preferential price," according to the filing.

Roehm also contends Scott and his wife flew to their homes in Longboat Key, Fla., and Las Vegas on private jets owned by the entrepreneur Jacobs.

Wal-Mart responded to Roehm's allegations swiftly.

"This lawsuit is about Julie Roehm and her misconduct," said spokesman John Simley. "Her document shows how weak her case is."

"We will address these issues in court. The allegations of impropriety involving our CEO Lee Scott are untrue," Simley said.

In addition to Scott, Roehm fingers John Fleming, executive vice president of marketing, Steve Bratspies, vice president of marketing and three other executives for a June 2006 trip to Barcelona to meet with vendors, including Tyson Foods and Hanes.

Wal-Mart seen pulling fashion line The vendors gave the executives $300 tickets to an Eagles concert, complete with backstage passes and souvenirs, Roehm said in the filing. "None of the officers ever returned any gift or gratuity received...with an explanation [of the company's policy on gifts]," she said.

In a pointed allegation Roehm - whose relationship with former executive Sean Womack was thrust under scrutiny when the two were fired by Wal-Mart - states that Robert Rhoads, who served as general counsel for Wal-Mart, had an affair with a subordinate employee in the company's legal department, even going so far as to pay for the employee's apartment and college tuition.

Rhoads, Roehm said, divorced his wife and subsequently married the employee.

"Mr. Rhoads was not subject to 'immediate termination,' even though it was known that he and [the employee] had married and that he had been her supervisor at Wal-Mart," the filing stated.

Roehm was fired by the retail giant last Dec. 4 after less than a year as head of marketing communications at the world's largest retailer. She sued the company, claiming breach of contract and fraud.

Penney: No excuses, just great results Wal-Mart countersued Roehm, claiming she and a marketing colleague had a romantic relationship, traveling on the company's time, and used a review of advertising agencies to seek jobs at one of those agencies.

The retailer also charged the executives with misuse of the agency review process, accepting gifts from advertising agency DraftFCB, which was later chosen to handle Wal-Mart's ad account, and of discussing job opportunities with that agency.

Wal-Mart said in the suit that Roehm violated company policy that prohibits inappropriate relationships between supervisors and associates - and forbids accepting gifts from suppliers.

Dell to sell computers in 3000 Wal-Marts

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Wal-Mart wants to be your stock broker

CNNMoney
May 25, 2007                            [back to top]

A small item in The Wall Street Journal caught my eye recently about a new tie-up between mega-retailer Wal-Mart (WMT) and a discount brokerage company in Washington state called ShareBuilder Corp. The Journal reports that Wal-Mart recently has begun including ShareBuilder’s services on its Web site and plans to begin testing discount brokerage in its stores. This after the Beast of Bentonville recently backed away from its bid for a charter to run an industrial bank.

No one has paid much attention to this fascinating little report, but they should. Wal-Mart opponents will cite this as an example that Wal-Mart wants to sell everything. Already Wal-Mart offers other financial services, including money orders, bill payment and check-cashing services, according to the Journal. The better question is whether or not Wal-Mart has any business in the financial services business and whether its customers want to attend to their portfolio while they’re shopping for groceries. In fact, it’s precisely the strategy Sears (SHLD) followed once upon a time. Its strategy was called “socks to stocks,” for everything you could buy under one roof. In the early 80s, Sears had cobbled together Dean Witter brokerage, Coldwell Banker real estate agents and Allstate insurance. All are gone from Sears today (and Dean Witter is gone altogether), but this chestnut of an article from Time Magazine capturs the Big Store’s ambitions at the time — and why the strategy ultimately wouldn’t work. A snippet:

Though some bankers are doubtful that many people will want to buy their stocks and socks under the same roof, Sears officials believe that the company’s trusted name and the allure of one-stop shopping will attract masses of new customers. Another Sears attraction may be that its financial centers will not be keeping bankers’ hours. Most will be open until 9 on weeknights, all day Saturday and on Sunday afternoon. Says Sears Vice President Charles Moran: “You have to visit other financial service offices when they want to be open. Ours are open when you want to visit.”

Ah, those were the days. Is Wal-Mart trying to bring them back?

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India's Bharti says no hitch in Wal-Mart JV

Reuters
May 25, 2007                         [back to top]

NEW DELHI (Reuters) - Wal-Mart Stores Inc. and India's Bharti group are still discussing business plans for their cash-and-carry joint venture and a deal is just a matter of time, a top official at the Indian group said on Friday.

"It's not just signing the agreement, there are a whole lot of other things -- discussions, business plans, other things simultaneously going on. So I don't have an exact date," Bharti group Managing Director Akhil Gupta told Reuters in an interview.

He rejected media reports about possible differences for the delay in striking a deal, which has been on the cards for many months.

"All I can say is it's on track and there is absolutely no hitch. It is just a matter of time," Gupta said.

India's highly fragmented $300 billion retail industry, which is dominated by small family-run stores, is forecast to more than double in size by 2015.

Copyright 2007 Reuters

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Dell's Wal-Mart move shows direct limits

By: Martin Veitch
Friday 25 May 2007                        [back to top]

DELL SELLING THROUGH Wal-Mart is one of those individually small yet symbolically significant steps. A bit like chiselling out the first brick from the Berlin Wall, putting a foot on the moon or, more realistically, Dell using AMD chips, it’s emblematic of a new dawn or a change in the weather, to blend several metaphors. The selection of Wal-Mart as retailer of choice is interesting. Michael Dell’s business hero is the US grocer’s founder Sam Walton. Walton had the right channel to market when he started Wal-Mart back in 1962, Dell had the growth channel for PCs when he started selling PCs in 1984. Both are famous for pricing low and squeezing every drop of juice from supply chains. Wal-Mart has come under heavy fire for its labour conditions but Dell has been more gently treated excepting sporadic criticisms of its support service and a perceived lack of R&D investment.

This isn’t the first time Dell has tried retail, of course. It flirted with the model in the early 1990s before retrenching and winning the argument against those that said direct sales would only work for a niche audience. Ever since, it has insisted that retail customers were far less profitable because of the cost of shipping PCs to stores, having them sit losing value in inventory, and the service price inherent in supporting newbie buyers.

So what has changed? Perhaps Dell feels that it can find a cheaper way to get products to retail customers or maybe it can persuade them to touch and feel in stores before buying online. Either way, it is taking baby steps. Only a couple of configurations will be available and only in the US, Canada and Puerto Rico.

Michael Dell called his book Direct From Dell and it might go against the grain to admit it but the move to retail is surely also an admission that in mature markets the direct-sales model may have reached its peak.

From the Alienware buy, selling services, the customer blogs, and now Linux and tablet PCs, Dell has been tweaking its strategy for a few years now but its main tenet, even stronger than the “direct” mantra has been to follow what the customer wants. Dell has a fresh look about it and one of the smartest CEOs in the business. Don’t bet on it rising again.

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Ahead of the Bell: Dell, Wal-Mart

The Associated Press
May 25, 2007                               [back to top]

Analysts on Friday said they aren't sure that Dell Inc.'s expansion into retail partnerships, beginning with Wal-Mart Stores Inc., will lead to profitability for the computer maker.

Austin, Texas-based Dell said Thursday it would beginning selling some of its computers through Wal-Mart, starting June 10, a sharp departure from Dell's direct-to-consumer business model. The company said it plans to announce other global retail plans in coming quarters.

Lehman Brothers analyst Harry E. Blount in a client note was ambivalent.

"While helping revenue it is unclear to us that it will help margins. Further, this may adversely hurt the cash conversion cycle and perhaps (free cash flow) yield," wrote Blount, who kept an "Equal-Weight" rating and $26 target price on shares.

Morgan Stanley analyst Kathryn Huberty in a client note said she's not sure Dell can turn the increased volume that will likely arise from Wal-Mart sales into profitable customer relationships.

In the longer-term, the analyst suggested a strategic partnership with Best Buy Co. would be a better bet, partly because the electronics retailer could offer an in-store warranty and customer service through its Geek Squad.

"This would differentiate Dell against its major competitors and improve brand image," wrote Huberty, who rates Dell "Overweight."

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Mumbai company may help Wal-Mart get moving

KALA VIJAYRAGHAVAN
& LIJEE PHILIP
TIMES NEWS NETWORK
THURSDAY, MAY 24, 2007                               [back to top]

MUMBAI: US retail giant Wal-Mart is negotiating with Mumbai-based hospitality and logistics major Radhakrishna Group for a tie up or strategic stake in its logistics offshoot Radhakrishna Foodland.

Top Wal-Mart officials visited a few of the company’s back-end facilities across the country recently and discussed a partnership with senior officials.

“Wal-Mart is interested in closely working with us but it is too early to comment on where the discussions will take us. I have nurtured and run this business and intend to be a part of it as long as I can,” the firm’s founder Raju Shete told ET.

The Bentonville, Arkansas-based company is aiming to build a vast supply chain network comprising warehouses, storage and transport facilities and a vendor base that will feed its upcoming cash-and-carry joint venture with the Bharti group.

Radhakrishna Foodland, which began as a captive distribution model for the group, has now farmed out into a massive services model providing logistics, distribution and back-end solutions to top retailers and corporates such as Pantaloon, Metro Cash & Carry, McDonald’s, Subway, Pizza Hut, HLL, Cadbury, Amul, ITC, Venky’s and Chambal Fertilisers, among others. In 2003, Warburg Pincus bought a 25% stake in Radhakrishna Foodland.

Wal-Mart is hoping to gain access to this network for its cash-and-carry business, which refers to bulk sales of products to other retailers and institutional buyers. Wal-Mart, which operates on a low-cost business model across markets to offer the most competitive prices at the front-end, is believed to have been impressed with the efficiencies offered by Radhakrishna in India, people close to the talks said.

Its interest stems from the operational similarities between the Radhakrishna group’s service-oriented approach, pan-India presence, low-cost business model.

The US company’s talks with Radhakrishna are likely to intensify competition among Indian and global retail majors looking for the perfect back-end supply chain for their shops. The salt-to-software Tata Group had approached Radhakrishna sometime ago for a buyout.

Indian retail is estimated at around $300 billion. Of this, modern retail comprises $20 billion and is growing at a robust 35%-plus growth rate. There are not too many modern cash-and-carry formats, though Indian traditional wholesale business forms a big chunk.

Currently, Metro Cash & Carry is the only global such format in the country while Pantaloon Retail’s Kishore Biyani has also set up similar formats—KB’s Wholesale—recently in smaller markets. Wal-Mart officials did not respond to an email on this issue.

The Radhakrishna group was set up by Raju Shete, a first-generation entrepreneur in 1979. Sources said Mr Shete, a hands-on entrepreneur, may eventually sell out in the long run in the absence of a family back-support to run the business.

The Rs 650-crore Radhakrishna group, which boasts of a manpower of 16,000, is also into front-end retail with its Foodland Fresh. This venture today has the most number of outlets in the food and grocery format in Maharashtra. Incidentally, US retail major Shoprite is also understood to have expressed interest in teaming up with Foodland Fresh for its retail foray, sources said.

Like Wal-Mart, Foodland Fresh has adopted a ‘in the community’ approach by playing an active role in issues related to the environment, consumer health, hygiene, sanitation and local employment. For instance, Foodland Fresh employs people from local neighbourhoods in which they trade their store operations.

Another group company Radhakrishna Hospitality Services (RKHS) provides high-end catering services and is equipped to service even remote locations such as oil rigs.

RKHS has a tie up with Eurest International, part of global food-services giant Compass Group. RKHS also has partnered Ticket Restaurant, the food coupon promoter, which is part of the French Accor group.

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Wal-Mart touts high deductibles

By Jason Roberson,
Dallas Morning News
May 24th, 2007                                 [back to top] 

Health plans lower company costs, take less from paychecks

Wal-Mart Stores Inc. – the world's largest retailer and a company often criticized for poor employee pay and benefits – sent the executive responsible for designing its employee benefits to Dallas on Wednesday to lecture area business leaders on company health coverage.

Wal-Mart vice president Tom Emerick had three words for the 300 local benefit coordinators and health care professionals gathered at a luncheon of the Dallas-Fort Worth Business Group on Health: high-deductible plans. Such plans are working for Wal-Mart and could work for other employers, he told his audience at the DoubleTree Hotel near the Galleria.

INSURING WAL-MART'S WORKERS

Number of U.S. employees: 1.3 million.

Coverage: 636,000 employees, 47 percent of workforce. (1,024,894, or 76 percent, are eligible.)

To qualify: Six months full-time employment; one year part time.

Total company insurance cost, fiscal 2006: $4.8 billion

NEW WAL-MART HEALTH CARE PLAN

Fully covered, no deductible: First three doctor visits per family member; first three generic prescriptions per family member.

Deductibles: $1,000 medical, $300 prescription.

Monthly cost to employee: $11 to $23 for employee only; $33 to $65 for family coverage.

SOURCE: Wal-Mart Stores Inc.

Raising the deductibles that employees must pay out of pocket makes them more aware of their health care spending, he said. In return, the company can provide health plans with smaller deductions from their paychecks, Mr. Emerick said.

The retailer that employs 1.3 million in the U.S. offers workers plans with deductibles ranging from $350 to $1,000, as well as ultra-high deductible plans of up to $6,000.

"The greatest incentive for health and wellness is high deductibles," Mr. Emerick said in an interview. "We'll tell anybody in America how we did it and how it works."

Wal-Mart's sheer size, along with its number of low-income retail workers, has catapulted the Bentonville, Ark., company into the national spotlight in efforts to broaden health coverage.

The huge company helps set the benchmark against which other businesses make health care decisions. Mr. Emerick said he receives phone calls regularly from companies large and small seeking benefit advice or asking for details of Wal-Mart's plans.

Bob Queyrouze, benefits coordinator for the Federal Reserve Bank of Dallas, said he has been thinking more about high-deductible health plans but doubts that the bank will make a change in the next two years. Mr. Queyrouze – who coordinates benefits for 1,400 workers in Dallas, Houston, El Paso and San Antonio – agreed with Mr. Emerick that higher employee contributions encourage workers to take personal responsibility for their health.

Mr. Emerick said he went to the sales floor and asked Wal-Mart employees what they wanted when he was researching health benefits.

Based on their responses, his staff developed the company's Value Plan, which was rolled out January 2006. The health plan comes with a $1,000 deductible, but a Dallas-area Wal-Mart worker would pay only $11 in monthly paycheck deductions for individual coverage and $33 a month for a family. So far, 95,000 people have enrolled, according to Wal-Mart's records.

The warm reception Mr. Emerick received in Dallas contrasts with the barbs Wal-Mart has received from labor unions and some local and state governments.

Maryland even sued the company in what is, so far, a losing fight to require the retailer to pay more for employee health care. The state's 2006 law was tossed out by federal judges who said it violated federal benefit standards.

Meanwhile, the Service Employees International Union funds a Wal-Mart Watch campaign that criticizes Wal-Mart's health plans. However, the union also has partnered with Wal-Mart to create a coalition called Better Health Care Together, which teams corporations and advocacy groups to push politicians for more affordable health care.

Part of Mr. Emerick's job is to serve as an advocate for a national health care system. This is a special concern for Wal-Mart because 30 percent of its new hires come to the retailer without health insurance.

In fiscal year 2006, Wal-Mart spent about $4.8 billion on employee benefits – a cost made higher because many hires arrive with unattended health needs, according to Mr. Emerick. The expense was far too much, given Wal-Mart's $11.2 billion in profit that same year, he said.

Many employers, especially in retail, have increased part-time employment and made it harder for their workers to qualify for benefits as a way to manage costs, Mr. Emerick said. Employees eligible for coverage stood at 59 percent in 2006, down from 62 percent in 2004, according to a Kaiser Employer Health Benefits Survey.

In comparison, Wal-Mart's eligibility is 76 percent, up from 72 percent in 2004, Mr. Emerick said.

"In many respects, we believe that eligibility is much more important than the scope of coverage," he said.

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Protesting Wal-Mart's move to India

By Carrie Mason-Draffen,
Newsday
May 24th, 2007                                  [back to top]

It looks as if the show will go on inside - and outside - Nassau Coliseum in Uniondale Saturday, when India's film industry celebrates itself in an awards extravaganza.

Protesters from ACORN, an association of community groups, plan to demonstrate against Wal-Mart's plans to move into the Indian market.

Wal-Mart is a sponsor of the awards ceremony, which organizers say they hope will pull in more fans for Bollywood, as the massive Indian film industry is informally known.

ACORN, or the Association of Community Organizations for Reform Now, and other groups have long accused the nation's largest retailer of failing to provide its workers with health insurance.

"If Wal-Mart won't even give workers health insurance here in New York State, just imagine what they're going to get away with in India," said ACORN spokeswoman Dolores Davis.

Wal-Mart spokesman Kevin Gardner took aim at the characterization.

"It's a shame that ACORN would choose to [intrude on a] really fun and significant event like the Bollywood awards with irresponsible and nonfactual accusations about Wal-Mart's business here and abroad," he said.

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Obama's wife cuts ties to Wal-Mart supplier

By Christi Parsons,
Chicago Tribune
May 23rd, 2007                           [back to top]

Resigns position on board of TreeHouse Foods

WASHINGTON -- Michelle Obama resigned her position as a director of TreeHouse Foods on Tuesday, ending the relationship with the Wal-Mart supplier that had threatened to become a problem for the presidential campaign of her husband, Sen. Barack Obama.

TreeHouse supplies pickles and other foods to Wal-Mart, a frequent target of union leaders who say the company treats its workers unfairly.

Michelle Obama cited increased demands on her time for resigning the position, according to a TreeHouse official. She has recently stepped up her time commitment to the campaign, appearing as a surrogate for her husband in campaign appearances and appealing to would-be donors for support.

"As my campaign commitments continue to ramp up, it is becoming more difficult for me to provide the type of focus I would like on my professional responsibilities," she said in a written statement. Her top priorities are taking care of their daughters and supporting her husband during the campaign, she said.

But the decision comes as Democratic presidential candidates are under pressure to distance themselves from Wal-Mart, a key target of one of the party's most important constituencies. As a member of the Senate, Barack Obama has been one of Wal-Mart's most outspoken critics.

Other leaders in the race for the Democratic nomination for president also have ties to Wal-Mart in their background, including Sen. Hillary Rodham Clinton (D-N.Y.), who formerly served on the company's board of directors. When Democrat John Edwards was a member of the Senate, he disclosed that he owned Wal-Mart stock, which an aide said he has since sold.

The reason that Democratic activists care is that union leaders are so intensely focused on the business practices of Wal-Mart, which they say pays its workers too little, charges too much for health benefits and discriminates against women. Reached by the Tribune on Tuesday afternoon, a spokeswoman for Wal-Mart declined to comment.

In recent weeks, Obama supporters have maintained that the tie between Michelle Obama and Wal-Mart was a loose one. TreeHouse, based in west suburban Westchester, is one of many suppliers to the retailing giant and provides a small portion of its merchandise, they said.

But critics have noted that TreeHouse depends heavily on Wal-Mart for its business, according to the company's annual report.

The value of Michelle Obama's compensation package for serving on the company's board last year was slightly more than $100,000, according to a filing with the Securities and Exchange Commission.

A Harvard-trained lawyer, Michelle Obama began her career as an attorney at the Chicago law firm of Sidley Austin, and later went to work at Chicago City Hall and at the non-profit group Public Allies, a leadership program for young adults.

She has worked full-time throughout her career, but now, for the first time, is focusing more on her husband's career than on her own. She recently reduced her schedule to part-time at the University of Chicago Medical Center, where she is a vice president.

She is traveling frequently on behalf of the campaign. Over the weekend, she was the keynote speaker at Brookland Baptist Church in West Columbia, S.C., and also made several campaign stops in Iowa on Monday.

But she has said that her first priority is to keep life at home as normal as possible for her two young daughters, for herself and for her husband.

"My priorities, particularly at this important time, are ensuring that our young daughters feel a sense of comfort and normalcy in this process, and that I can support my husband in his presidential campaign to bring much-needed change to this country," she said in her statement Tuesday.

Some Wal-Mart critics say they didn't see Michelle Obama's role at TreeHouse as a problem.

"Many companies do business with Wal-Mart," said Chris Kofinis, communications director for WakeUpWalMart.com, a project of the United Food and Commercial Workers union. "The difference is whether one stays silent on Wal-Mart's negative business practices or not. Sen. Obama has not stayed silent, and he should be applauded for that."

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China debates workers' rights

By Editorial Board,
Chicago Tribune
May 23rd, 2007                              [back to top]

If Wal-Mart were a country, it would be China's eighth-largest trading partner, according to an article in Asia Times Online. So it comes as no surprise that Wal-Mart, along with a host of foreign companies that do business in China, has expressed strong consternation about a new labor law likely to be passed by the National People's Congress in June.

First proposed in December 2005, the law would provide Chinese workers with basic rights and protections covering issues such as the length of probationary contracts for new workers, firing protocols, severance pay and non-compete clauses. According to some Western companies, the law will make it too expensive for them to do business in China.

Chinese labor leaders say the law is necessary to curb widespread abuses such as failing to pay workers in a timely fashion. Especially hard-hit are migrant workers who come to industrial zones from remote provinces, they say.

This is a law for China, but it has become something of a tussle between U.S. businesses and U.S. labor unions. No surprise there. U.S. labor would like to reduce the advantages that employers have in setting up shop in China and moving U.S. jobs there. Business doesn't want to lose the cost advantages it has found in using Chinese workers.

The most welcome development is that Chinese workers have had any say at all in the discussion on the proposed law. In March 2006, the People's Congress issued a draft of it for public comment -- the only time in recent memory that has happened. Lawmakers received 191,849 comments. According to China Daily, only the 1954 draft constitution received more feedback.

To state the obvious, this is a good thing.

Americans -- both in the government and the business community -- have long argued that increased liberalization of China's economic policies would have the beneficial corollary of leading to a more democratic state. "American business plays an important role as a catalyst for positive social change by promoting human welfare and the principles of free enterprise," the American Chamber of Commerce in Hong Kong says.

Chinese Premier Wen Jiabao said in a December 2003 speech at Harvard, "If no effective measures are taken to protect the fundamental rights of our massive labor force, and in particular the farmer workers coming to the cities, they may end up a miserable plight. ..."

This is probably a law that firms operating in China can live with. Pushback from American and European companies during the draft comment period has led the People's Congress to scale back some worker protections and severely circumscribe unions.

Business leaders continue to agitate for more concessions. But in the long run, they're likely to bet that, even without more changes in the law, a predictable labor market and a more democratic China will continue to pay high dividends.

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Wal-Mart health clinics divide US medics

By Christopher Bowe,
Financial Times
May 23rd, 2007                                    [back to top]

Can a retail store deliver healthcare? Wal-Mart, the largest US retailer, thinks so, together with CVS, Walgreens and Rite Aid, the leading US drug store chains. But as all four move ahead with plans to expand “walk-in clinics” in their stores, the doctors of Illinois are fighting back.

The state could be the first to impose stricter regulation on the new generation of walk-in clinics, where nurse-practitioners can examine patients, conduct basic procedures such as inoculation, and prescribe for minor illnesses, while charging less than a doctor’s practice.

Massachusetts is also considering whether and how to license the state’s first retail clinics, proposed by drugstore group CVS and its Minute Clinics unit. And the industry expects more challenges ahead.

Walk-in clinics represent one of the most advanced and aggressive attempts by US business and entrepreneurs to drive reform of the healthcare system.

This year hundreds will be opened in some of the US’s largest drugstore and retail groups, and thousands of clinics could be running in the next decade.

Advocates say the clinics will improve access to healthcare and reduce costs; that they will reduce more expensive visits to hospital emergency rooms; and that they will catch some illnesses before they become serious and costly. As a result, physicians will have more time for complex cases.

But the clinics also have a direct impact on doctors, who see themselves as the gatekeepers of common, everyday healthcare.

Dr Rodney Osborn, president of the Illinois State Medical Society, said: “This is a brand new animal. That’s why we believe legislation is important to guarantee patient safety ... They’re not putting these things in to provide healthcare; these people are businessmen.”

Dr Arnold Milstein, chief physician at Mercer health consultancy, says doctors are playing on patient fears to thwart change.

“[Doctors] wrap themselves in the holy garb of quality ... completely ignoring the facts that all the research shows current care stinks,” Dr Milstein says. “The weaknesses that are endemic in the current healthcare system are being trotted out to block innovation and change.”

The clinics see themselves as advancing medical care, not diminishing its quality, with a retailer’s focus on service: the slogan of CVS’s Minute Clinic, for instance, is “You’re sick, we’re quick”.

Hal Rosenbluth, chairman of clinic company Take Care and head of the industry group Convenient Care Association, says any pushback against the clinics actually validates their existence, and adds that the concept is here to stay.

“That’s what people are clamouring for - they want healthcare on their terms not the system’s,” says Rosenbluth. Doctors’ quality concerns, he says, are merely anti-change “turf protection.”

On a national level, the American Medical Association, the doctors’ lobby group, has taken a cautious tone, issuing guidelines last year for clinics. They call for a well-defined scope of services; standardised medical protocols; and clear definitions of medical qualifications. They also call for closer doctor oversight, and emphasise the importance of referrals to doctors, which the leading clinics promise.

In any case, retail clinic companies are expanding nationally. In May, Walgreens bought Take Care, following CVS’s Minute Clinic acquisition last year. Both Wal-Mart and Target, the leading discounters, are opening clinics.

Their national footprint could eventually support the development of a much-discussed but elusive electronic records system for the US, as the clinics build patient databases, see more patients, and give patients printouts of their diagnoses and treatments.

Nevertheless, there are still some tough questions, raised by doctors and others, on the clinics and whether they can deliver what they promise.

First, despite US business’s push to inject and increase consumer principles into healthcare, it is still unproven whether people understand how to shop for medical care like other products, or even whether they want to do so. Clinics also could be a controversial way for employers to push more health costs on to employees.

Second, retail clinics claim they will increase doctors’ business by referring new patients or allowing them to spend more time on higher-value tasks.

But experts agree that they could be sapping high-margin, easy tasks like vaccinations from doctors’ businesses, and that clinics do not yet generate significant referral business to doctors.

Third, the clinics are for-profit businesses. Dr Osborn, of Illinois, says: “They’re not at this to increase doctors’ business; they’re in it to make money. That’s a smokescreen.”

More than anything, however, the retail clinics show that business is pushing for change on its own without waiting for government. And walk-in clinics could do for US healthcare what low-cost Southwest Airlines did for the airline industry, by making healthcare better, faster, and cheaper.

“This is a conceivably disruptive innovation of our happy little empire,” Dr Milstein says

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Wal-Mart dives into sustainable shrimp market

By Carol Ness,
San Francisco Chronicle
May 23rd, 2007                                        [back to top]

More evidence that Big Food is listening to the growing clamor for sustainable products surfaced last week at the Cooking for Solutions confab in Monterey, Calif.

Chefs showing off their local, seasonal cooking provided the glamour quotient of the sixth annual event. But one seminar offered a one-day crash course in what is and isn't being done to ensure a healthy future for the U.S. food system.

It was no surprise to hear from executives from Whole Foods Markets and Bon Appetit food service company, both of which have made their niche appealing to sustainably minded customers.

But appearing with them - and dwarfing them onstage, at least in terms of the amount of the world's food production it affects - was Wal-Mart, in the person of Peter Redmond, the chain's vice president in charge of seafood.

Wal-Mart is the world's biggest retailer, and its move into organic foods last year was a powerful signal that sustainability means profits for Big Food.

Redmond outlined other steps Wal-Mart is taking to green up.

The company is requiring shrimp farms that have been ravaging the coast of Thailand to change their aquaculture practices or lose the retailer's business. Under the company's new rules, the shrimp farms must be certified by Global Aquaculture Alliance or Aquaculture Certification Council as being farmed in environmentally sound ways, he said.

It's no hollow gesture _ Wal-Mart sells more than 50 million pounds of shrimp a year (most of it from Thailand), which is about 40 percent of all the seafood it handles, Redmond said.

Wal-Mart is also turning more toward wild, domestic shrimp, even though it's more expensive, he said. The company has stopped selling some overfished species entirely, although he didn't name them.

And while it's reintroducing the hugely overfished Chilean sea bass, it buys only from a certified sustainable fishery in the south Atlantic, as Whole Foods does.

"I can tell you it's good for business," Redmond remarked. "Part of the sustainability issue is it's also a business plan for us."

It's also good news for worldwide efforts to save the oceans from complete depletion of major edible species by mid-century, as predicted by an international study published last November in Science magazine. Stanford University marine biology professor Stephen Palumbi was one of the researchers on that study; he appeared on a separate panel. Whole Foods veep Joe Rogoff and Bon Appetit Management Co. CEO Fedele Bauccio, who appeared with Redmond, are far ahead of Wal-Mart. They challenged Redmond to follow their lead in refusing to sell certain foods they consider unsustainable.

Bon Appetit, which runs cafes and cafeterias in corporations like Cisco and public institutions like San Francisco's AT&T Park, recently pledged to stop selling produce and meats raised outside North America, to reduce the energy spent shipping it. Whole Foods won't sell foods that contain trans fats, and it has set humane-handling standards for animals raised for their meat.

"We have to take a stand, and if that means you don't carry certain foods, you do it," Bauccio said.

Rogoff said businesses need both to lead their customers as well as follow their demands.

"You'd think Whole Foods customers would be very well informed on these issues," he said. But when the company holds public panel discussions, "we find out they're not. So consumer education is very important to us."

But Redmond wasn't going there. "Our role isn't to tell people what they can and can't buy," he said.

All three companies are doing more to reduce the distances they're transporting food.

Said Redmond: "I think food miles is going to be the next big issue of sustainability."

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Wal-Mart fined for "product fraud"

By Winny Wang
2007-05-23                            [back to top]

A court in Shanghai's Pudong has ordered retail giant Wal-Mart to refund a customer 920.6 yuan (US$120) and pay him 187 yuan compensation for forging identifying details on two products he had bought, the Wenhui Daily reported on Tuesday.

The customer, surnamed Lu, spent 1,187 yuan on 10 boxes of tooth whitening powder and 10 boxes of cookies in Wal-Mart's Pudong outlet on December 22.

He found the Chinese-language labels on the two products were different from the original labels.

On the whitening powder package, the Chinese label claimed it was produced in Japan, while the original Japanese label said the producing area was Thailand, the report said.

The Chinese label on the cookie boxes read "date of production" but the original English label had "expiry date."

The cookies had expired when sold in the supermarket, the report said.

Lu then sued Wal-Mart alleging that the retailer had violated China's Product Quality Law and Consumer Law, and he sought to obtain a refund and equivalent compensation from the retailer.

Wal-Mart has filed an appeal against the decision in the case.

China has ordered retailers to paste Chinese-language labels on imported food products to explain what elements are in the products.

Source:Shanghai Daily

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Wal-Mart to Hand Over Sales Data to Nielsen

mr.web.com
May 23 2007                              [back to top]

Wal-Mart has partially lifted its six-year ban on providing sales data to MR firms, to support Nielsen’s effort to create an industry standard for in-store marketing measurement.

Wal-Mart’s Chief Marketing Officer Stephen Quinn said that the firm will provide sales data from 1,000 of its 3,000 US stores to the Nielsen In-Store syndicate, an initiative also backed by Procter & Gamble, and the media agency that serves them both, Starcom MediaVest Group. He reassured customers that data would only be used by members of the syndicate and commented: ‘This is an initiative we think will forever change retail marketing.’ He added that the system should benefit all retailers and manufacturers.

The Nielsen In-Store service, known as PRISM, was launched earlier this month (www.mrweb.com/drno/news6756.htm ) on a limited basis, with plans to roll out nationally in early 2008. Through the use of infrared sensors, the system will measure traffic and consumer exposure to product displays and other marketing materials like banners and in-store TV networks.

Dina Howell, Procter & Gamble’s General Manager-Marketing Global Operations said that an initial test of the programme conducted in 10 Wal-Mart stores last year had shown a better-than-expected 76% accuracy rate. She commented: ‘We will now have the right tools to make the right choices on how, when and where to spend our dollar to generate the greatest consumer impact.’ Quinn added that since that initial test, refinements to the system have increased confidence to 85%.

Among the more than 20 syndicate participants funding PRISM are Unilever, Kraft Foods, General Mills, Miller Brewing and Hewlett Packard. Nielsen, Wal-Mart and Procter & Gamble are on the net at www.nielsen.com, www.walmartstores.com and www.pg.com .

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Wal-Mart to appeal court ruling

By Cao Li
China Daily
2007-05-23                               [back to top]

SHANGHAI: Retail giant Wal-Mart is to appeal a decision made last month that found it guilty of fraud for mislabeling its products.

Wal-Mart East China Stores Co Ltd, which manages the corporation's operations in eastern China, was ordered by the Shanghai Pudong New Area District People's Court to pay compensation of 2,107.60 yuan ($275) to a customer surnamed Lu who filed the initial suit.

Lu said that on December 22, 2006, he purchased 10 packets of tooth powder and 10 tins of biscuits from Wal-Mart's Pudong store at a total cost of 1,187 yuan.

"Both products are imported, so they don't have Chinese wording on the original packaging," he said. "They just have simple Chinese stickers attached."

Lu said that the Chinese label on the tooth powder said it was made in Japan, but he later noticed that the information on the original package showed it was actually made in Thailand.

Also, the Chinese label on the biscuits advised customers to check the product's expiry date on the original packaging. When he did so, Lu said he found that the expiry date was October 15, 2006, which had passed.

"But by then, I had already eaten three tins of biscuits, not knowing they were out of date," he said.

Lu sued the company, demanding refunds on the 10 packets of tooth powder and the remaining cookies, as well as compensation to cover the money he initially paid, 1,187 yuan.

Under China's consumer laws, people are entitled to claim refunds as well as compensation equivalent to the amount they paid, if fraud is found to have occurred.

Wal-Mart, however, denied there were any differences between the products' Japanese and Chinese information and said Lu was not a genuine consumer. It accused him of staging the whole thing in order to claim compensation.

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Asda fined for selling rotten food

ITN
23 May 2007                                   [back to top]

Asda has been fined £80,000 after selling out of date food including a pack of lamb chops more than a month past its use-by-date.

As well as the lamb chops, trading standards officers who visited Asda stores in Newport and Cwmbran found 38 items that were one day past their use-by date, 17 items were two to five days over, and three items were seven days over.

Asda pleaded guilty to all 59 charges and was fined £78,750 and ordered to pay the case leaders, Torfaen Council, £10,000 legal costs.

Torfaen councillor Glyn Caron, executive member for public protection, said: "This case shows that with solid evidence our Torfaen trading standards team will prosecute businesses who are breaking the law on food safety.

"Trading standards officers went into Cwmbran Asda to follow up a complaint from a member of the public.

"We then worked with our colleagues in Newport who investigated their Asda store."

He added: "It does not matter how big or small the business, if the evidence is there we will prosecute to make sure the public are protected when purchasing food."

© Independent Television News Limited 2007. All rights reserved.

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Wal-Mart's New York Strategy

by Azi Paybarah
May 23, 2007                                    [back to top]

Hillary Clinton may have returned a contribution from Wal-Mart, and Barack Obama’s wife may also be distancing herself from the company, but the country’s largest retailer is trying to win other friends in high places with its own quiet campaign in New York.

Without much fanfare, Wal-Mart has joined a number of local business groups, like the Association for a Better New York, the Partnership for New York City, and the chambers of commerce in four of the city's boroughs.

All this, without having a single store here. So, why have they joined all these New York business groups when, technically, they don’t have a business in New York?

“Wal-Mart is a significant part of the New York City economy, spending nearly $4 billion in the five boroughs,” company spokesman Steve Restivo said in a statement.

It may also help them build the kind of grass-roots support they need to eventually open a store here, something that’s eluded them previously.

As the Partnership’s Kathy Wylde told me, “Obviously, they wouldn’t be joining if they weren’t thinking about it.”

Copyright © 2007 The New York Observer. All rights reserved.

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Walmart's advice to Indian retailers

By IBNlive.com
Wednesday May 23                        [back to top]

New Delhi: World’s biggest retail giant Walmart has probably sensed the insecurity of the small-time Indian retailers who are threatened by the entry of international brands in the market.

Reacting to the protest against global retailers eating into the market share of small grocery shops in India, an official from Walmart advised these shop owners to "learn to change" in order to survive.

Speaking to a TV channel in Arkansas, the Walmart official said that these mom-n-pop stores choose to compete with big players like Walmart instead of carving out a niche for themselves, hence making their own survival difficult.

"What we have found is that these mom-n-pop stores choose to compete with large companies head-to-head instead of finding a niche or specialisation.

"They will struggle, they might succeed, but it's likely they'll struggle. So they have to learn to change in order to survive," the official was quoted by PTI.

Indian government's decision to partially open retail sector to foreign players has been criticised by small traders. Walmart has tied up with India's Bharti Enterprises to set up a retail base in the country. As part of the agreement, the US-based retailer would handle back-end operations of the joint venture company.

Other global players including Carrefour and Tesco are also planning to enter India. Indian conglomerates including Reliance and Aditya Birla group have also embarked upon major expansion plans of their retail operations.

With inputs from PTI

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Wal-Mart, others can't be banks

Source: The Salt Lake Tribune
22/05/2007                                       [back to top]

Legislation barring commercial companies such as Wal-Mart and Home Depot from owning a special sort of bank overwhelmingly cleared the House on Monday.

The bill, which passed 371-16, would prohibit nonfinancial companies from setting up or owning so-called industrial loan companies, federally insured institutions that can issue credit cards, make loans and take deposits. ILCs have been proliferating in recent years. There are 58 with a total of about $200 billion in assets. Thirty-one are based in Utah, one of only seven states that grant charters for such banks.

Critics say the growth of the industrial banks dangerously blurs the line between banking and commerce, concentrating assets in the hands of a few big companies, stifling competition and hurting consumers.

The application to federal regulators of Wal-Mart Stores Inc., the world's largest retailer, to establish an ILC in Utah stirred a storm of protest from banks, unions, lawmakers, and consumer and community organizations. In January, the Federal Deposit Insurance Corp. extended for one year a moratorium on considering nonfinancial companies' applications to establish or acquire industrial banks, and Wal-Mart withdrew its bid in mid-March.

Proponents of the legislation say it is needed to close a loophole in banking regulation. Current laws prohibit the mixing of banking and commerce, but an exception is made for the ILCs, allowing commercial companies to own a federally insured bank.

Bill sponsor Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, cited a wave of applications for ILCs in recent years by large commercial companies. The bill would restrict the banking charters to companies with at least 85 percent of their business in financial services. Frank has said he would consider allowing some exceptions when the legislation is negotiated with the Senate, a move that could benefit automakers.

Similar legislation also passed the House overwhelmingly last year, but it has stalled in the Senate. It faces opposition from Utah Sen. Bob Bennett, a Republican member of the Senate Banking Committee.

Bennett believes that the banks ''fill a niche in the marketplace and have done so in a safe and sound way,'' his spokeswoman said. Sen. Chris Dodd, D-Conn., the banking panel's chairman, has said he will continue to work with committee members and other Senate colleagues ''in a thoughtful, deliberative manner to address this issue.''

Rep. Paul Gillmor, R-Ohio, who sponsored the House bill with Frank, noted the recent long run of years without a failure of a federally insured bank or thrift. ''I would hate to see the type of hit to the deposit insurance fund . . . should Enron have had an industrial bank prior to [its] collapse,'' he said during Monday's debate.

The Home Depot Inc., whose application for an ILC was put on hold by the FDIC's moratorium, said in a statement Monday that it ''opposes any legislation that would ban commercial firms from owning industrial loan charters.'' If such a bill became law, it said, companies with pending applications should be allowed to have them approved.

In addition to Utah, the states that grant charters for ILCs are California, Colorado, Hawaii, Indiana, Minnesota and Nevada.

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Obama's wife resigns from board of company that supplied Wal-Mart

By Deanna Bellandi,
Associated Press
May 22nd, 2007                                           [back to top]

CHICAGO - The wife of Democratic presidential candidate Barack Obama resigned Tuesday from the board of a food supplier for retail giant Wal-Mart Stores Inc., a target of criticism by the Illinois senator.

Michelle Obama cited the increased demands of his campaign for leaving the board of Westchester, Ill.-based TreeHouse Foods Inc. Her position had raised questions because Obama has praised a union-led effort to change working conditions at Wal-Mart.

The company said in a Securities and Exchange Commission filing Tuesday that her resignation from the position she has held since 2005 "is not due to any disagreement with the Company on any matter." Last year she earned $51,200 in director fees from the company, according to the couple's 2006 tax returns.

"As my campaign commitments continue to ramp up, it is becoming more difficult for me to provide the type of focus I would like on my professional responsibilities," Michelle Obama said in a written statement.

An administrator at the University of Chicago Hospitals, she also has significantly curtailed her work hours to campaign for her husband, who would be the first black president if elected.

"We would like to thank Michelle for her dedicated service on behalf of the Company's shareholders. While we regret her resignation, we understand and respect her decision," TreeHouse board chairman Sam K. Reed said in a written statement.

The company, which supplies retail grocery chains with pickles, nondairy powdered creamer and other products, said Wal-Mart was its largest customer last year, according to an SEC filing.

Obama and other Democratic presidential contenders have been critical of Wal-Mart, which has taken heat over employees' wages and benefits. Some cities have passed, or tried to pass, laws upping the amount big retailers would have to pay. The Arkansas-based company has defended its wages.

One of Barack Obama's chief Democratic rivals, fellow Sen. Hillary Rodham Clinton, once served on Wal-Mart's board but since has become a critic of its business practices. Democratic presidential contender John Edwards also has criticized the retail chain.

Last year, before Barack Obama declared his candidacy for president, the Illinois senator courted the union-backed group WakeUpWalMart.com.

"This is a much broader issue than Wal-Mart but I think the battle to engage Wal-Mart and force them to examine their own corporate values and what their policies and approaches are to their workers and how they are going to be good corporate citizens, I think, is absolutely vital," Obama said at the time.

WakeUpWalMart.com spokesman Chris Kofinis said Tuesday night that "many companies do business with Wal-Mart, but what truly matters is whether our leaders stay silent on Wal-Mart's negative effect on America's working families."

"Sen. Obama has not stayed silent and should be applauded for that," Kofinis said.

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Wal-Mart could see increased pressure to spin off Sam’s Club amidst earnings woes - analysis

By Gayatri Iyer
and Richard Collings,
Financial Times
May 22nd, 2007                              [back to top]

Amidst lackluster earnings, calls for retail giant Wal-Mart to spin off of its thriving warehouse discount chain, Sam’s Club, could become louder.

Analyst reports in recent months have suggested that a spin-off of Sam’s Club could make sense. One January Citigroup analyst report even suggested a spin-off could occur in 2007, although admittedly that was a ”stretch.”

Wal-Mart last Tuesday announced quarterly net income of USD 2.83bn on net revenues of USD 86.4bn. US store sales for the parent company were down 0.1%, not including Sam’s Club, which had a 4.7% rise in sales. Despite representing an overall increase in income and revenues from the same quarter a year ago, the company’s stock declined in reaction to the announcement.

With Wal-Mart’s management focused on improving its core business, shareholder value could be unlocked by spinning off Sam’s Club, analysts agreed. As one explained, although Sam’s Club, with USD 41bn in revenues, is not large enough to impact Wal-Mart’s USD 348bn in total revenues, a spin-off might unlock unrealized value in the division’s business. If Wal-Mart were to seriously consider spinning off Sam’s Club the retailer’s stock would also go up, he added.

And although it was unlikely that Sam’s Club was distracting Wal-Mart management from focusing on improving the parent retailer, Sam’s Club could be distracted by its parent’s woes, one suggested.

Two analysts said they thought it was unlikely that Wal-Mart would spin-off Sam’s Club in the near term, however, as management’s first priority was to get higher returns on the US business.

The Wal-Mart spokesperson said the company was pleased with Sam’s Club’s progress. “We remain dedicated to Sam’s Club.” During the company’s prerecorded Q1 2008 earnings call, CEO Lee Scott said Sam’s Club’s profits grew faster than its revenues. This was the seventh consecutive quarter this had occurred, he added. Sam’s Club accounted for over 12% of Wal-Mart’s total sales in Q1, a Wal-Mart spokesperson said.

For the company to spin-off one of its divisions, it would need the approval of the Walton family, which has a controlling stake in the business. The Walton Family has a little more than a 40% stake in Wal-Mart. Every Walton owning a stake might not be against the idea, the third analyst speculated.

For now, Wal-Mart is concentrating on its three year project during which time it plans to remodel 1800 stores, the spokesperson said. Wal-Mart has a market capitalization of USD 194bn.

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Michelle quits Wal-Mart-linked board

The Politico
May 22, 2007                          [back to top]

Michelle Obama just resigned her lucrative board seat at TreeHouse Inc., an Illinois food company whose main customer is Wal-Mart.

According to the press release from the company, she departed "citing increased demands on her time."

But the timing — after a weekend of coverage of Hillary Clinton's service on Wal-Mart's board — is hard to ignore.

Sam K. Reed, chairman of the board, says in the release, "We would like to thank Michelle for her dedicated service on behalf of the Company's shareholders. While we regret her resignation, we understand and respect her decision."

Full release after the jump.

WESTCHESTER, Ill., May 22 /PRNewswire-FirstCall/ -- TreeHouse Foods, Inc.

(NYSE: THS) announced today that Michelle R. Obama has resigned as a director

of the Company effective May 22, 2007, citing increased demands on her time.

Ms. Obama has been a director of the Company since it became a public company

as a spin-off from Dean Foods Company on June 27, 2005. She also served as

the Lead Independent Director of the Board.

Sam K. Reed, Chairman of the Board, said "We would like to thank Michelle

for her dedicated service on behalf of the Company's shareholders. While we

regret her resignation, we understand and respect her decision

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Wal-Mart Applies for New York Citizenship

by Azi Paybarah
May 22, 2007                              [back to top]

When Wal-Mart does something, it’s hard not to notice. Especially in New York, where the mere rumor of the world’s largest retailer opening its first store has been enough to send protesters into the streets and set politicians screaming in front of television cameras.

The name of the famously anti-union company has become so politically toxic that an erstwhile member of their board of directors, one Hillary Rodham Clinton, returned a $5,000 contribution from Wal-Mart, as a New York Times story about her ties to the company duly noted this week. And shortly afterwards, on May 22, Michelle Obama—the wife of Senator Barack Obama—resigned her seat at an Illinois-based company whose main customer is Wal-Mart.

But neither that, nor the failure of Wal-Mart’s plans in February 2005 to open a store in Rego Park, and in 2006 to open one on Staten Island’s South Shore, has stopped its management from quietly pushing ahead with plans to ingratiate themselves into New York’s business scene.

Earlier this year, with no fanfare, the company became a member of the Association for a Better New York. That’s in addition to their nearly two-year involvement with another of the city’s leading labor-and-business civic associations, the Partnership for New York City.

Meanwhile, over the past year and a half, Wal-Mart has also joined the Chambers of Commerce of Manhattan, Brooklyn, Queens and the Bronx.

Wal-Mart explains its institutional gregariousness, despite the fact that it has no stores in New York City, by pointing to the fact that it does do business here.

“Wal-Mart is a significant part of the New York City economy, spending nearly $4 billion in the five boroughs,” company spokesman Steve Restivo said in a statement. “This represents goods and services purchased from hundreds of New York City businesses, ranging from small manufacturers to larger companies.”

According to Mr. Restivo, Wal-Mart spends about $12 billion with suppliers in New York State, “supporting more than 179,000 jobs, including tens of thousands in New York City,” and has “donated millions of dollars to New York City and statewide causes and organizations.”

Still, having friends among the city’s business and labor elite—Wal-Mart C.E.O. Lee Scott staged a Nixon-to-China moment in New York earlier this month by meeting with health-care workers’ union president Andy Stern—won’t hurt if and when the company tries (again) to open its first outlet in the five boroughs.

Which, it seems, is only a matter of time.

“Wal-Mart continues to vet potential sites in and around the New York City market,” Mr. Restivo said.

Kathryn Wylde, president and C.E.O. of the Partnership for New York City, offered this explanation of Wal-Mart’s recent moves:

“Obviously, they wouldn’t be joining if they weren’t thinking about it. I think they see it as a market that they missed. We certainly have made very clear to their representatives that corporate citizenship is taken very seriously in New York, and not to join us simply as a public-relations effort.”

It seems, for now, that Wal-Mart is listening.

Copyright © 2007 The New York Observer. All rights reserved.

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Black Truckers May Pursue Class Action For Wal-Mart's Failure to Hire, Court Rules

By BNA,
May 22nd, 2007                                 [back to top]

Black truck drivers who either were rejected for jobs with a Wal-Mart subsidiary or were deterred from applying because of the company's alleged "word of mouth" recruitment policy may pursue a race bias class action under Title VII of the 1964 Civil Rights Act, the U.S. District Court for the Eastern District of Arkansas ruled May 16 (Nelson v. Wal-Mart Stores Inc., E.D. Ark., Nos. 2:04-CV-00171 and 2:05-CV-00134, 5/16/07).

Partially granting two named plaintiffs' petition under Rule 23 of the Federal Rules of Civil Procedure, the court certified a nationwide class of all African Americans who have applied for jobs as over-the-road truck drivers at Wal-Mart since Sept. 22, 2001, as well as black drivers who were "deterred or thwarted from applying."

The court, however, limited the class action to the plaintiffs' claims for declaratory and injunctive relief, including back pay. The plaintiffs' punitive damages claim is not subject to class treatment because it involves a fact-specific inquiry requiring "individualized and independent proof of injury to, and the means by which discrimination was inflicted upon, each class member," the court decided.

"The individual issues involved in these 'mini-trials' for each potential class member would swamp the litigation and, as result, detract from a class action's superiority over other methods of adjudication," Judge William B. Wilson Jr. wrote.

The plaintiffs' other allegations satisfy Rule 23(b)(2)'s requirement that Wal-Mart "acted or refused to act on grounds generally applicable to the class, thereby making appropriate injunctive relief or corresponding declaratory relief with respect to the class as a whole."

Reliance on 'Word of Mouth'

Named plaintiffs Tommy Armstrong and Daryal T. Nelson are two black applicants who were rejected for driver jobs with Wal-Mart Transportation, a wholly owned subsidiary of Wal-Mart Stores Inc. Filing claims under Title VII and the Civil Rights Act of 1866 (42 U.S. Code Section 1981), they alleged that Wal-Mart's method for hiring truck drivers discriminated against black applicants and deterred other black drivers from applying at all.

Wal-Mart employs approximately 8,000 drivers in 47 field transportation offices, who deliver goods and products to Wal-Mart stores and Sam's Clubs. Each transportation office has a general manager and a personnel manager who jointly hire over-the-road truck drivers.

Under a policy set at Wal-Mart headquarters in Bentonville, Ark., new truck drivers are recruited almost exclusively through "word of mouth" by current Wal-Mart drivers, who distribute "1-800 cards" to potential applicants. The cards list Wal-Mart's minimum qualifications for drivers and the toll-free number to call for an application. Wal-Mart does little, if any, advertising for new drivers except for the cards, the court noted. Applications are sent to Wal-Mart headquarters and, if the applicant meets the minimum qualifications, relayed to the appropriate local transportation office.

Current drivers screen applicants and conduct the initial interviews, the court said. Those approved by the driver committees in turn are interviewed by managers before the general manager and personnel manager make the final selections. The managers' discretion is largely "unfettered by any objective criteria," the court noted. Wal-Mart does not track, evaluate, or analyze what subjective criteria its current employees use in recruiting and hiring, the court added.

From January 2000 through September 2005, Wal-Mart hired 4,135 truck drivers. During that time, its driver workforce ranged from approximately 4 percent to 6 percent African American and approximately 7.4 percent of new hires were black. An American Trucking Association study showed that African Americans comprised about 15 percent of the total U.S. truck-driver workforce. The plaintiffs also proffered an expert's analysis that the proportion of black drivers hired in 34 of 39 Wal-Mart local transportation offices was less than the expected proportion based on black drivers' presence in the workforce.

Wal-Mart's "word of mouth" recruitment and subjective hiring combined to produce a disproportionate adverse impact on black drivers, the plaintiffs argued. They sought to represent a class of all black applicants for Wal-Mart driver jobs nationwide since Sept. 22, 2001, as well as black drivers deterred from applying during the same period.

Rule 23(a) Satisfied

For the most part, the plaintiffs meet the numerosity, commonality, typicality, and adequacy of representation requirements in Rule 23(a) of the Federal Rules of Civil Procedure, the court decided.

Wal-Mart argued that including individuals who did not actually apply for jobs renders the class "too imprecise and speculative" to be certified. Judge Wilson, however, noted that when the challenged employment practice involves "word of mouth" recruitment, courts "have often included deterred and thwarted applicants" in the class. The plaintiffs presented sufficient evidence to support their characterization of Wal-Mart's practice as "word of mouth," the court said.

Although some courts have rejected classes including deterred applicants as too large and unwieldy, the court said the proposed class here is limited to African American drivers possessing sufficient skill and experience to meet Wal-Mart's minimum qualifications who can show they were deterred or thwarted from applying.

"While that may be a few hundred, or even a few thousand, class members, it is [a] far cry from the sheer magnitude of potential class members that has given other courts pause in determining whether to allow deterred applicants to participate in the class," Wilson wrote.

Plaintiffs also have alleged common questions of law or fact among class members based on the "uniform hiring policies" affecting all black drivers who met Wal-Mart's minimum qualifications, the court said. Although Wal-Mart lacks a centralized decisionmaking body making hiring decisions for truck drivers, the court said, "Wal-Mart does have uniform policies, procedures, and practices that control the hiring process" in the field transportation offices.

The plaintiffs also produced evidence that although consultants on two occasions made Wal-Mart aware of the potential for adverse impact in its hiring system as well as suggestions for correcting the racial disparity, the company declined to change its system, the court said.

Wal-Mart argued that plaintiffs cannot show "commonality" because hiring decisions are made independently by local general managers. The court, however, said the centralized policy alleged in this case is sufficient to establish "commonality," even if it was implemented by independent managers. "It is difficult to see why a large corporation should not be held to account for instituting a centralized policy that harms a class of individuals just because that policy allows managers to utilize subjective decisionmaking," Wilson wrote.

Wal-Mart argued the plaintiffs could not meet the "typicality" requirement because of the named plaintiffs' differing qualifications and factual circumstances from those of proposed class members.

"[T]ypicality is not defeated just because the named plaintiffs and individual class members have differing qualifications," Wilson wrote. "As explained above, plaintiffs' claims are based on the same hiring policies and legal theories relevant to the class as a whole. While Wal-Mart's unique defenses may ultimately preclude some potential class members from recovering, they do not prevent use of a class action to determine the central issue in this case: whether Wal-Mart's hiring policies for over-the-road truckers resulted in unlawful discrimination."

Wal-Mart contended the named plaintiffs, who both applied for jobs as Wal-Mart drivers, cannot be considered adequate representatives of proposed class members who never applied. Judge Wilson noted that other courts in word of mouth cases "have not hesitated to certify classes represented by applicants that included deterred applicants."

"While the named plaintiffs made it farther in Wal-Mart's hiring process than the class members who were deterred from applying at the outset, Wal-Mart has not made any showing of how that factual difference might lead to conflicting interests between the named plaintiffs and the class members who were deterred applicants such that recognizing independently represented subclasses would be appropriate," Wilson wrote. "At this point, I do not see potential for conflict between the interests of the named plaintiffs and the class members who were deterred applicants."

Punitive Damages Not Included

Regarding the named plaintiffs' claim for punitive damages, however, the court decided they are not adequate class representatives unless the punitive damages issue is severed from the class action.

The court therefore exercised its power under FRCP Rule 23(c)(4)(A) to separate the issue of punitive damages and certify the class action only as to liability and declaratory and injunctive relief. Individuals with potential punitive damages claims will not be bound by the class action result and can litigate their damages claims separately should Wal-Mart be found liable under Title VII, the court decided.

Wal-Mart argued that the plaintiffs' proposed class could not be certified under Rule 23(b)(2) because claims for monetary damages predominate over the plaintiffs' claims for declaratory and injunctive relief. Although the court's concerns over punitive damages led it to deny class treatment of that issue, it said the plaintiffs satisfied Rule 23(b)(2) even though they seek back pay.

"[C]ourts have uniformly held that back pay does not predominate over the declaratory and injunctive relief sought by Title VII plaintiffs," Wilson wrote. " ... As the Eighth Circuit has stated, 'Though Rule 23(b)(2) relates to class claims on which declaratory and injunctive relief is sought, this court has observed in conformity with the majority of federal courts, that the fact pecuniary relief in the form of back pay is sought incidental to injunctive relief will not prevent certification.' "

David O. Bowden in Little Rock, Ark., John W. Walker in Little Rock, and Lloyd W. Kitchens III and Morgan E. Welch of Welch & Kitchens in Little Rock represented the plaintiffs. Alison B. Marshall of Jones Day in Washington, D.C., Lawrence Di Nardo? and Michael J. Gray of Jones Day in Chicago, and Joann C. Maxey and Philip E. Kaplan of Kaplan, Brewer, Maxey & Haralson in Little Rock represented Wal-Mart.

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Wal-Mart pulls designer line from many stores

by Paritosh Bansal
Mon May 21, 2007                    [back to top]

NEW YORK, May 20 (Reuters) - Wal-Mart Stores Inc.'s (WMT.N: Quote, Profile, Research designer line by Mark Eisen has been pulled from several hundred of the more than 3,000 U.S. stores that carried it, the Wall Street Journal said on its Web site.

Wal-Mart brought in Eisen, a former AnnTaylor Stores Corp. (ANN.N: Quote, Profile, Research design executive, a year ago for its George line of women's clothing, the paper reported.

The move comes as Wal-Mart looks to clear out stocks of unsold clothing, the Journal said.

A Wal-Mart spokesperson could not immediately be reached for comment.

(C) Reuters 2007. All rights reserved.

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House OK's bill barring Wal-Mart from banking

By Marcy Gordon,
Associated Press
May 21st, 2007                              [back to top]

WASHINGTON — Legislation barring commercial companies like Wal-Mart and Home Depot from owning a special sort of bank overwhelmingly cleared the House on Monday.

The bill, which passed 371-16, would prohibit nonfinancial companies from setting up or owning so-called industrial loan companies, federally insured institutions that can issue credit cards, make loans and take deposits.

The industrial loan companies, or ILCs, have been proliferating in recent years: there are now 58 with a total of about $200 billion in assets. Thirty-one are based in Utah, one of only seven states that grant charters for such banks.

Critics say the growth of the industrial banks dangerously blurs the line between banking and commerce, concentrating assets in the hands of a few big companies, stifling competition and hurting consumers.

Those who think retailers and other commercial enterprises should be allowed to own ILCs say they could help reduce fees and costs for consumers and provide much-needed competition.

The application to federal regulators of Wal-Mart Stores Inc., the world’s largest retailer, to establish an ILC stirred a storm of protest from banks, unions, lawmakers, and consumer and community organizations. In January, the Federal Deposit Insurance Corp. extended for one year a moratorium on considering nonfinancial companies’ applications to establish or acquire industrial banks, and Wal-Mart withdrew its bid in mid-March.

FDIC Chairman Sheila Bair called House passage of the bill “another critical step in moving the process forward.”

“It is my hope that the Senate can find a consensus approach as well, to remove the cloud of uncertainty over the ILC charter and allow the ILC industry to continue as a strong, safe and sound component of the banking sector,” Bair said in a statement.

Proponents of the legislation say it is needed to close a loophole in banking regulation. Current laws prohibit the mixing of banking and commerce, but an exception is made for the ILCs, allowing commercial companies to own a federally insured bank.

Bill sponsor Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, cited a wave of applications for ILCs in recent years by large commercial companies.

“We believe that that does not really reflect what Congress intended,” he said in floor debate before the vote.

The bill would restrict the banking charters to companies with at least 85 percent of their business in financial services. Frank has said he would consider allowing some exceptions when the legislation is negotiated with the Senate, a move that could benefit automakers.

Similar legislation also passed the House overwhelmingly last year, but it has stalled in the Senate. It faces opposition from Sen. Robert Bennett, a Utah Republican and member of the Senate Banking Committee.

Bennett believes that the banks “fill a niche in the marketplace and have done so in a safe and sound way,” his spokeswoman said recently.

Sen. Chris Dodd, D-Conn., the banking panel’s chairman, said Monday he will continue to work with committee members “in a thoughtful, deliberative manner to resolve outstanding issues regarding the ownership and regulation of industrial loan companies.”

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CHINA: Wal-Mart Unit To Build Warehouses

Namnews                               [back to top]

Gazeley Properties Ltd, a wholly owned unit of Wal-Mart, said it plans to invest $1.0bn over three years to build warehouses in China. The investment comes as Wal-Mart is expanding aggressively in the country.

Gazeley is a preferred developer for Wal-Mart in many markets, and has started construction of two projects in China since it entered the market last year. It will deliver its first project - a 42,000 sq.m distribution centre in the city of Tianjin - to its clients in September. The construction of a 40,000 sq.m. distribution facility in Jiaxing is scheduled to be finished in January 2008.

The company said deals to build new projects in Shanghai, Beijing, Guangzhou, Chengdu and Chongqing are close to be finalized and will be built by 2009. Jack Yang, Gazeley's China director said revenue from Wal-Mart is expected to make up 5-10% of the company's total China sales.

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Fashion Faux Pas Hurts Wal-Mart

By Gary McWilliams
and Rachel Dodes,
Wall Street Journal
May 21st, 2007                             [back to top]

Slow Sales of Designer Line Show Higher-End Clothes Remain a Weak Spot

Wal-Mart's struggles in fashion apparel appear to be worsening. Stacks of unsold clothing are clogging store aisles and pressuring profits. Now, Wal-Mart Stores Inc.'s first designer line, by designer Mark Eisen, has been pulled from several hundred of the more than 3,000 U.S. stores that carried it, according to a person close to the situation. A Wal-Mart spokeswoman confirmed the line had been pulled from some stores but didn't know how many.

Wal-Mart's chief financial officer says clearing out stocks of unsold clothing is going to be a chore and could pressure margins all summer. "We're a little heavy in apparel," Thomas M. Schoewe said in an interview last week. "It's all about getting the stores cleaned up right now."

The flush inventories mark a significant miscue from a year ago, when Karen Stuckey, a Wal-Mart apparel-merchandising executive, said of the addition of Mr. Eisen and the retailer's new-found fashion focus, "We're going to rock in apparel."

The setback suggests Wal-Mart's apparel problems go deeper than a misfire with ultratrendy attire that led to a sales stumble late last year. At that time, an in-house-designed line of skinny-legged pants and nightclub wear, called Metro7, turned off customers, who went shopping elsewhere.

Wal-Mart's inventories jumped 10.3% in the fiscal first quarter, ended April 30, to $35.2 billion from a year earlier, driven by unsold apparel, home decor and outdoor products. About $2 billion of the increase represents unsold spring clothing and home goods that are expected to depress profit through the summer, analysts estimate. The Wal-Mart spokeswoman declined to comment on the estimate.

The latest woes involve Wal-Mart's efforts to bring brand-name designers into its orbit. Wal-Mart is seeking to better compete with Target Corp., J.C. Penney Co. and Kohl's Corp., which have a reputation for higher-end clothing than what Wal-Mart carries.

A year ago, Wal-Mart signed Mr. Eisen, a former Ann Taylor? Stores Corp. design executive, to put some sparkle into its George line of everyday women's apparel, which although successful outside the U.S. has been weaker here. Mr. Eisen, known for his line's fit and styling, launched knitwear label Karoo in 2005. The Karoo line sells at high-end retailers such as Bergdorf Goodman, Neiman Marcus and Nordstrom.

ON THE RACKS • Line Trouble: Wal-Mart withdraws its first designer apparel line from several hundred stores. • Crowded Shelves: The move comes as Wal-Mart looks to clear out stocks of unsold clothing. • Burnishing Image: Wal-Mart is seeking to compete with retailers that have added more upscale offerings in recent years.

Mr. Eisen developed a collection of women's sportswear within the broader George line called George M.E., for the designer's initials. It featured $22 cardigans and $70 suede jackets, among other items. Wal-Mart showed the collection at New York's fashion week last year, gathering positive reviews. But problems surfaced almost immediately. The fall line was supposed to appear in mid-August, but Wal-Mart put the apparel in stores a month early -- too soon for many shoppers -- to fill gaps in other lines.

Patricia Edwards, a portfolio manager at financial-services firm Wentworth, Hauser & Violich, says little marketing of Mr. Eisen or his line followed the fashion-week launch. Wal-Mart customers who didn't shop at Neiman Marcus were unlikely to have heard of him, she said. "Wal-Mart is so good at providing things based on price that I'm not certain they've yet grasped how to promote items that aren't solely based on price."

The Wal-Mart spokeswoman declined to make executives available to comment. Mr. Eisen didn't return calls seeking comment. A person close to the designer said sales had recently improved, now that the line appears in fewer stores.

The inventory overhang has several analysts paring this year's profit estimates by as much as five cents a share, citing the effect of working through the excess inventories and weaker sales. Bank of America now expects Wal-Mart to post annual profit of $3.13 a share. About 10% of its revenue comes from apparel.

"When 10% of your business is not doing what you want it to, that's a lot of drag," Ms. Edwards says. "It's going to be a drag until they get it right. The question is, when will they get it right?"

Wal-Mart has a couple of bright spots in its fashion stable. A line of young men's fashions, called Exsto and introduced in 2006, was expanded to 500 stores from the original 300. The company is planning to make Exsto fashions available in boys' sizes as part of its back-to-school line, the spokeswoman said. Wal-Mart says George M.E. remains a part of its apparel strategy and that it will announce a freshened line later this year.

It also recently nominated retail-turnaround guru Allen Questrom to its board. Mr. Questrom helped revitalize Penney and Barneys New York Inc. and engineered Federated Department Stores Inc.'s acquisition of Macy's.

Despite its fashion efforts, Wal-Mart's customers in polls don't list the retailer as their first choice for clothing purchases, says Wendy Liebmann, president of consulting firm WSL Strategic Retail. "People who shop Wal-Mart regularly think of Wal-Mart as the No. 2 or No. 3 place they shop most often" for apparel, she says. Customers don't yet perceive the company as a credible arbiter of fashion, she says.

Wal-Mart's fashion woes surfaced last year with the in-house line of nightclub wear called Metro7. Its gold lamé vests and skinny-legged pants fell flat with customers, leading to anemic same-store sales last fall just as Wal-Mart was preparing for the holiday sales rush. Wal-Mart initially planned to introduce Metro7 in just 500 stores but increased the number to 1,500 last year in an effort to become known as a fashion source. It pulled the line out of 500 stores earlier this year. Overall, the retailer has roughly 4,000 U.S. Wal-Mart stores.

Complicating a turnaround are continued economic pressures. The rising price of gasoline is damping purchases of home decor and clothing.

Wal-Mart isn't alone in feeling the pinch of higher energy prices. Retailers including Sears Holdings Corp. and Target had declines in same-store sales, those at stores open at least year, in the first quarter. Department stores emphasizing designer brands have fared better. Penney raised its profit outlook for the year after first-quarter results were buoyed by new launches, and it signed Polo Ralph Lauren Corp. to develop a new brand.

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UK: Asda To Open 300 Living Outlets

Namnews                                    [back to top]

Asda has been given approval by parent Wal-Mart to open up to 300 new Asda Living homeware stores, as it looks to beat Sainsbury's in the battle for sales, according to The Observer. The paper cited CEO Andy Bond as saying, “We will open significantly more than 30 supermarkets over the next three years…..There are probably 300 locations where you could have an Asda Living store”.

Bond added that his plans would 'absolutely' beat Sainsbury’s CEO Justin King's growth plans. The aggressive expansion came ahead of the release of a white paper, where the government will signal its intention to lift a key restriction limiting the building of out-of-town retail developments.

Asda currently operated seven Asda Living stores, and Bond believes he can make his plans work despite fears that consumer spending will be hit by higher interest rates. He said households will be attracted by Asda's low prices, adding “I would be quite hawkish about consumer spending this year, making the dynamic of low prices more important”.

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As a Director, Clinton Moved Wal-Mart Board, but Only to a Point

By Michael Barbaro,
New York Times
May 20th, 2007                        [back to top]

In 1986, Sam Walton, the founder of Wal-Mart, had a problem. He was under growing pressure from shareholders — and his wife, Helen — to appoint a woman to the company’s 15-member board of directors.

So Mr. Walton turned to a young lawyer who just happened to be married to the governor of Arkansas, where Wal-Mart is based: Hillary Rodham Clinton.

Mrs. Clinton’s six-year tenure as a director of Wal-Mart, the nation’s largest company, remains a little known chapter in her closely scrutinized career. And it is little known for a reason. Mrs. Clinton rarely, if ever, discusses it, leaving her board membership out of her speeches and off her campaign Web site.

Fellow board members and company executives, who have not spoken publicly about her role at Wal-Mart, say Mrs. Clinton used her position to champion personal causes, like the need for more women in management and a comprehensive environmental program, despite being Wal-Mart’s only female director, the youngest and arguably the least experienced in business. On other topics, like Wal-Mart’s vehement anti-unionism, for example, she was largely silent, they said.

Her years on the Wal-Mart board, from 1986 to 1992, gave her an unusual tutorial in the ways of American business — a credential that could serve as an antidote to Republican efforts to portray her as an enemy of free markets and an advocate for big government.

But that education came via a company that the Democratic Party — and its major ally, organized labor — has held up as a model of what is wrong with American business, with both groups accusing it of offering unaffordable health insurance and mistreating its workers.

So rather than promote her board membership, Mrs. Clinton is now running from it, even returning a $5,000 campaign donation from the giant discount chain in 2005, citing “serious differences” with its practices. But disentangling herself from the company is harder than it may seem.

Despite her criticism, Mrs. Clinton maintains close ties to Wal-Mart executives through the Democratic Party and the tightly knit Arkansas business community. Her husband, former President Bill Clinton, speaks frequently to Wal-Mart’s current chief executive, H. Lee Scott Jr., about issues like health care and even played host to Mr. Scott at the Clintons’ home in New York last July for a private dinner.

And several months ago, Mrs. Clinton helped broker a secret meeting between a top Wal-Mart executive and former Democratic operative, Leslie Dach, and leaders of the retailer’s longtime adversary at the United Food and Commercial Workers union, according to several people briefed on the matter, who spoke on condition of anonymity because they were not authorized to do so publicly.

The goal of the meeting was to tamp down the rancor between the company and the union, which has set up a group, WakeUpWalMart.com, that has harshly criticized the chain and leaked embarrassing internal documents to the news media, though an accord has not yet been reached.

Mrs. Clinton declined to be interviewed for this article. In a statement, her spokesman said, “Wal-Mart is now one of the country’s largest employers, and Mrs. Clinton still believes it is important to try to influence the decisions they make because they can affect so many people.”

In Mrs. Clinton’s complex relationship with Wal-Mart, there are echoes of the familiar themes that have defined much of her career: the trailblazing woman unafraid of challenging the men around her; the idealist pushing for complicated, at times expensive, reforms; and the political pragmatist, willing to accept policies she did not agree with to achieve her ends.

“Did Hillary like all of Wal-Mart practices? No,” said Garry Mauro, a longtime friend and supporter of the Clintons who sat on the Wal-Mart Environmental Advisory Board with Mrs. Clinton in the late 1980s and worked with her on George McGovern’s 1972 presidential campaign.

“But,” Mr. Mauro added, “was Wal-Mart a better company, with better practices, because Hillary was on the board? Yes.”

Mrs. Clinton was not Mr. Walton’s first choice for a woman on the board. That honor belonged to an executive at Nordstrom, the upscale department store. But Nordstrom opposed its employees sitting on a competitor’s board, so Wal-Mart turned instead to the 39-year-old Mrs. Clinton. They offered her about $15,000 a year for her time, generally four meetings a year.

She was a logical candidate: the wife of the governor, a Wal-Mart shareholder — with stock eventually worth nearly $100,000 — and a highly regarded lawyer at the Rose Law Firm, which had represented Wal-Mart in several cases.

But if her circumstances made her a natural choice for the board, her often liberal beliefs did not and she struggled to change the rigid, conservative culture at Wal-Mart, achieving modest results.

Early in her tenure, she pressed for information about the number of women in Wal-Mart’s management, worrying aloud that the company’s hiring practices might be discriminatory.

The data she received would have been troubling: by 1985, there was not a single woman among the company’s top 42 officers, according to “In Sam We Trust,” the 1998 book about Wal-Mart by Bob Ortega.

John E. Tate, who served as a director with Mrs. Clinton from 1988 to 1992, recalled that by her third board meeting Mrs. Clinton had announced “that you can expect me to push on issues for women. You know that. I have a reputation of trying to improve the status of women generally, and I will do it here.”

Mr. Walton appeared relieved to have a woman on the board to deflect criticism, telling shareholders during the annual meeting in 1987 that the company had a “strong-willed young lady on the board now who has already told the board it should do more to ensure the advancement of women.”

Still, the board’s discussions did not translate into significant progress. By the late 1990s, after Mrs. Clinton had left the board, Wal-Mart had added a second female director, but the number of women in senior management remained paltry, according to company records. (Today, 23 percent of Wal-Mart’s top 300 corporate officers are women, but the company is fighting a class-action lawsuit claiming sex discrimination filed on behalf of 1.6 million current and former female employees.)

Mrs. Clinton had greater success on environmental issues. At her request, Mr. Walton set up the environmental advisory group, which sent a series of recommendations to the company’s board.

When it came time to pick members, Mrs. Clinton, who led the advisory group, reached out to at least two colleagues from the McGovern presidential campaign — Mr. Mauro and Roy Spence, who headed an advertising firm in Texas that did extensive work for Wal-Mart.

Under her watch, the advisory group drew up elaborate plans. Consumers would bring in used motor oil and batteries for recycling. Suppliers would reduce the size of their packaging. And Wal-Mart would build stores with energy-saving features.

Wal-Mart executives put much of the program into place. In 1993, for example, they opened an experimental “eco-store” in Kansas, with skylights and wooden beams from forests that had not been clear cut.

One executive derided it as “Hillary’s store” because it was more expensive to build than the average Wal-Mart, but several of its features, like the skylights that cut energy bills by reducing the need for artificial lighting, were widely copied across the industry.

“We were on the leading edge of something that is being mandated now,” said Bill Fields, the head of merchandise at Wal-Mart in the early 1990s who worked closely with Mrs. Clinton on the environmental project.

For Wal-Mart, the largest employer in Arkansas, Mrs. Clinton’s presence had obvious advantages: on matters big and small, the company had the ear of the governor’s wife.

For Mrs. Clinton, being a director at Wal-Mart gave her access to several of the state’s most powerful business executives. In the early 1980s, for example, Mr. Walton was instrumental in building support for a corporate tax program, pushed by Mrs. Clinton, that financed a major education overhaul in Arkansas, a signal achievement of her husband’s governorship.

Though she was passionate about issues like gender and sustainability, Mrs. Clinton largely sat on the sidelines when it came to Wal-Mart and unions, board members said. Since its founding in 1962, Wal-Mart has fought unionization efforts at its stores and warehouses, employing hard-nosed tactics — like allegedly firing union supporters and spying on employees — that have become the subject of legal complaints against the company.

A special team at Wal-Mart handled those activities, but Mr. Walton was vocal in his opposition to unions. Indeed, he appointed the lawyer who oversaw the company’s union monitoring, Mr. Tate, to the board, where he served with Mrs. Clinton.

During their meetings and private conversations, Mrs. Clinton never voiced objections to Wal-Mart’s stance on unions, said Mr. Tate and John A. Cooper, another board member.

“She was not an outspoken person on labor, because I think she was smart enough to know that if she favored labor, she was the only one,” Mr. Tate said. “It would only lessen her own position on the board if she took that position.”

Mr. Tate, a prominent management lawyer who has helped stop union drives at many major companies, said he worked closely with Mr. Walton to convince workers that a union would be bad for the company, personally telling employees when he visited stores that “the only people who need unions are those who do not work hard.”

A spokesman for Mrs. Clinton said, “Wal-Mart workers should be able to unionize and bargain collectively.”

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At Wal-Mart, Clinton didn't upset any carts

By Stephen Braun,
Los Angeles Times
May 19th, 2007                            [back to top]

As a board member, she touted women and the environment but didn't fight anti-union efforts.

BENTONVILLE, ARK. — At a Democratic presidential debate last month, Sen. Hillary Rodham Clinton described Wal-Mart, the world's largest retail company, as a "mixed blessing." She spoke from experience.

From 1986 to 1992, Clinton was a member of its board of directors, carefully navigating through a spate of internal policy concerns that now weigh on Wal-Mart's corporate image. FOR THE RECORD: In an earlier version of the caption accompanying the photo of the Wal-Mart board of directors, Robert Rhoads was identified as on the left and S. Robson Walton on the right of Sam Walton. — Former Wal-Mart Stores Inc. board members and executives recall Clinton as a politically nimble insider who cautiously tried to nudge the company toward hiring more female executives and environmentally friendly practices, to limited effect, while remaining silent as Wal-Mart pursued anti-union strategies.

Four times a year, Clinton would leave Little Rock, driven by Arkansas state troopers and sometimes accompanied by her husband, then-Gov. Bill Clinton, for a three-hour ride to Bentonville, the northwest Arkansas company town that sprouted up around Wal-Mart's headquarters.

While her husband tended to state duties, she joined all-day Wal-Mart board meetings chaired by the firm's billionaire patriarch, Sam Walton, and attended by Walton's family members, directors and top executives.

Crowded with the others around metal folding tables in the kitchen of a converted warehouse — a no-frills board room selected by "Mr. Sam" himself — Clinton assumed the role of loyalist reformer, making the case for measured change without rocking the boat.

She voted on company policies and joined several advisory committees during a period that was a turning point for the firm as it transformed rapidly from a regional chain of cut-rate stores to a worldwide retail powerhouse. Her Wal-Mart tenure exposed Clinton to the inner workings of a mega-corporation, and foreshadowed an impulse in her political career to both prod and accommodate big business.

"She brought a pragmatic understanding of how life works," said Robert K. Rhoads, a Fayetteville, Ark., attorney who was Wal-Mart's general counsel and the board's corporate secretary. "She was a real savvy board member and one smart lawyer."

Wal-Mart critics say her presence brought little lasting change to the firm. And former executives say she was not a voice for bold reform.

"She was not a dissenter," said Donald G. Soderquist, Wal-Mart's former chief operating officer and the board's vice chairman during Clinton's tenure. "She was a part of those decisions."

Corporate directors are obligated to "protect shareholder value, pure and simple," said Charles Elson, director of the University of Delaware's John L. Weinberg Center for Corporate Governance. If Clinton was brought on to the Wal-Mart board as a "change agent," Elson said, "she shouldn't have been put on there in the first place."

The New York senator's former relationship with the company poses a mixed blessing for her presidential run. The phenomenal growth of Wal-Mart's empire across the country has been a boon to consumers, but it has also drawn fierce fire from labor organizers who accuse the retail behemoth of union-busting tactics, poor wages and healthcare benefits, and mistreatment of female workers.

A request to interview Sen. Clinton was turned down by her campaign, but spokesman Howard Wolfson said: "Wal-Mart is now one of the country's largest employers, and Mrs. Clinton still believes it is important to try to influence the decisions they make because they can affect so many people. Sen. Clinton has made clear that Wal-Mart has an obligation to provide good health benefits and good wages to its workers. Wal-Mart workers should be able to unionize and bargain collectively."

Wal-Mart looms as one of labor's litmus tests for Democratic presidential candidates. One top labor political director expressed doubt that Clinton's 20-year-old Wal-Mart board tenure would be a "make or break" factor, but candidates have repeatedly been asked about their stands on Wal-Mart during recent AFL-CIO union forums.

Labor leaders said Clinton was questioned about Wal-Mart in January when she met with top officials of the United Food and Commercial Workers, the union at the forefront of national efforts to organize Wal-Mart workers. A UFCW official said "she made a presentation and was asked about Wal-Mart," but would not give details on the session.

Clinton often touted Wal-Mart without reservation. But as the labor-backed campaign against Wal-Mart intensified in recent years, she has tempered her public enthusiasm, even giving back a $5,000 political donation from Wal-Mart's political action committee in 2005.

Clinton amassed nearly $100,000 worth of Wal-Mart stock as a director, much of which she and her husband placed in 1993 into a blind trust that they still maintain.

She is not the only Democratic candidate with Wal-Mart ties. During his Senate term, John Edwards disclosed owning between $1,000 and $100,000 in company stock. Illinois Sen. Barack Obama's wife, Michelle, serves on the board of a Wal-Mart supplier. And Sen. Christopher J. Dodd of Connecticut accepted $5,000 from Wal-Mart's PAC in 2004.

Details of Clinton's activities as a Wal-mart director have been scant. She covered her Wal-Mart tenure in a single paragraph in her autobiography, "Living History," saying Walton taught her about "corporate integrity and success."

Pressed during the April 26 debate whether Wal-Mart was a "good thing or a bad thing for the United States," Clinton did not mention her board role. She praised the firm's rural roots and its mission to "stretch the dollar," but said the company's growth had "raised serious questions about the responsibility of corporations."

Responding to her remark, Wal-Mart President H. Lee Scott Jr. told the Associated Press: "We're making progress on all the things that the senator talked about and have a great deal of pride in our historic relationship with her."

But the company declined to comment "about board discussions or what our directors said during board meetings or the relationship between Sen. Clinton and other directors or with the company."

Clinton, then a lawyer with the Rose Law Firm in Little Rock, joined the board in November 1986. She was the first woman on the board, brought on by Walton to diversify an all-male inner circle, mostly Southerners and political conservatives. During a 2004 speech, Clinton recalled that Walton had phoned her and said: "They tell me I have to have a woman on the board. Do you want to be her?"

"They," according to several board members, were Walton's late wife, Helen, and his daughter, Alice Walton, now the world's wealthiest woman. Sam Walton died in 1992.

One former Wal-Mart board member, who spoke on condition of anonymity, said Sam Walton did not want directors with a political or ideological agenda. But "Alice and Helen had spent time with Bill and Hillary and they were impressed," the former director said.

Clinton's board appointment provided a welcome income boost. Clinton's compensation as a Rose partner had diminished after her husband became governor and she was forced to curtail her lucrative legal work before state agencies. Wal-Mart paid her $18,000 a year, $1,500 for each meeting she attended and steady increments of stock that eventually totaled 1,600 shares.

Assigned to work on the diversity issue that preoccupied Walton's wife and daughter, Clinton joined an advisory committee that Walton had assigned to draft recommendations on pay parity and hiring women and minorities as executives.

Rhoads said he and Clinton flew to New York to consult with a firm that helped corporations recruit more female directors. But Tom Seay, a former Wal-Mart vice president who was on the advisory committee, said that her "involvement was limited" and that Wal-Mart staffers did "most of the heavy lifting."

The advisory group ended up suggesting mentoring programs and internal women's groups, ideas that did little to improve conditions for Wal-Mart's female workforce, critics say. The committee's existence — and Clinton's role on it — was not previously acknowledged by company officials, said Joseph T. Sellers, one of the lawyers behind a class action lawsuit against Wal-Mart on behalf of women claiming discrimination.

"There was no change for the better during that period for women at Wal-Mart," Sellers said. "If there was change, it was minimal. Nobody knew about it or else it was just too subtle to recognize."

The class action suit is pending, and could affect up to 1.6 million current and former workers.

On the board, Clinton impressed other outside directors brought in by Walton. "She stayed pretty much in the background. But she was an advocate for women, quietly and effectively," said Toys "R" Us founder Charles Lazarus, who became a director in 1984.

Clinton was able to coexist with the board's male, largely Southern culture. One director, Texas businessman Robert Dedman, often made politically incorrect jokes, prompting Clinton to "roll her eyes," recalled Rhoads.

Union activism was a problem for Wal-Mart as it expanded into labor strongholds such as Missouri and Illinois. Since 1970, Sam Walton had worked closely with Omaha lawyer John E. Tate to ward off unionization using an aggressive campaign of rewards and tough talk.

Bob Ortega, author of "In Sam We Trust," a history of Wal-Mart, said workers were provided with incentives such as stock purchase programs and bonuses for efficiency while the firm sent in teams of lawyers and executives to stiffen resistance to union organizing efforts.

Although the details of Wal-Mart's anti-union efforts were rarely broached during board meetings, Tate said recently, Clinton "clearly knew the company's reputation." Tate said that when he "made presentations on what we were doing" during board meetings, Clinton did not raise objections.

Soderquist agreed, saying there was "no sign that she had any criticism."

Nor did she object, Tate said, when he was brought in by Walton in 1988 as an executive vice president and a director, a step that required board approval.

Tate and Soderquist, like other Wal-Mart executives from that era, are loyal Republicans who donated more than $20,000 apiece to the party and its candidates in the 1990s and 2000s. But both praise Clinton's performance as a board member. Soderquist recalls her as a "very positive member of Wal-Mart's board," while Tate said she was a "well-respected" attorney who showed a "broad understanding" of the law.

Several labor officials said recently that the fact Clinton was on the board when Wal-Mart was mounting union-busting tactics could pose a predicament as they mull presidential endorsements.

Nu Wexler, a spokesman for Wal-Mart Watch, one of several union-backed groups pressing for change at the company, said that any Democratic candidate's ties to Wal-Mart would probably be examined, but he added: "I suspect that unions are far more interested in her plan for universal healthcare than her board service 15 years ago."

Jonathan Tasini, executive director of the Labor Research Assn. and a Senate primary rival of Clinton in 2006, countered that activists would continue to raise questions even if union leaders sidestepped the issue. "She has never answered fully what she did or did not do on the board of Wal-Mart," Tasini said.

Clinton's clearest impact, former company colleagues said, was on environmental issues. Clinton asked Walton to put her on an environmental advisory committee, and Walton agreed, recalled Paul Higham, a former Wal-Mart executive who also was on the panel.

The committee soon included two old friends from the Clintons' 1972 stint with the George McGovern presidential campaign in Texas — former Texas Land Commissioner Garry Mauro and Roy Spence, an Austin advertising man who handled Wal-Mart's account and now is working on Clinton's campaign ads. Higham said Clinton played a critical role in getting Wal-Mart to press its suppliers to use packaging that was easily recycled. The group also spurred more recycling programs and architectural alterations that saved energy in many stores, Higham said.

But the committee tailed off soon after Clinton's departure from Wal-Mart in 1992.

During a car ride through Bentonville after one committee meeting in early 1992, Clinton confided in Mauro and Spence that her husband would run for president. That meant, she told them, that she would have to step down from the Wal-Mart board to devote full time to the campaign. She left that spring.

Mauro stayed on, expecting the firm would continue sorting through ideas. But the board member who replaced her was "a pretty far-right guy who didn't have the personal commitment she had," Mauro recalled. "We had two or three meetings and then the committee just kind of went away."

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Anti Wal-Mart brigade plans agitation in India, abroad

By Dheeraj Tiwari,
Economic Times
May 19th, 2007                            [back to top]

NEW DELHI: The anti-Wal-Mart brigade seems to be making inroads into India too. In fact, India Retail Watch, an organisation that represents the interest of small shopkeepers, is all set to organise protests on the streets of New York against Wal-Mart and its India plans.

According to Census 2001, there are 269 lakh `main' and 24 lakh marginal workers in wholesale and retail trade in India. That is, nearly three crore people depend on wholesale and retail trade - 1.1 crore in the urban and 1.9 crore in the rural areas. Any protests by this sector will cause companies such as Reliance, Pantaloon, Spencer, Bharti and now the Birlas’ to stand up and listen.

The sporadic violence on Reliance Fresh in Ranchi and subsequent demonstration in Indore provides only a glimpse of the tough times these retail players will have to face. And, those organising the Bollywood Awards have just realised that.

“United we stand, divided we fall,” says Praveen Khandelwal, General Secretary, Confederation of All India Traders. According to him the traders have realised that the only way to fight against those with deep pockets is to stay united.

“We have decided to form a Rainbow Coaliation, which will encompass traders, hawkers and everyone affected. We are going to start a ‘National Movement for Retail Democracy,” he says.

The same resistance is now almost visible in all parts of the country. “Small retailers and vendors are impacted when large corporations enter into the retail sector. Multinationals such as Wal-Mart have found a way out through modes like ‘cash and carry.' It’s high time that small players should raise their voices,” reasons Mohan Gurnani, president, Federation of Associations of Maharshtra.

A similar concern can be seen in Kolkata, where Shaktiman Ghosh, Gen Secy, National Hawkers Federation cannot be contacted as he was at a dharna protesting against police violence on traders.

But the big players feel that this fear is unfounded and even if the kirana store owners feel threatened by the modern retail chains and attacked the Reliance Fresh store in Ranchi, the act was not justified.

"The violent attack on the part of kirana store owners is not pardonable", J H Mehta, President and CEO, Spencer's Retail.

He further adds that all mom and pop stores and other kirana stores have the advantage of low overheads and personalised services that makes them equally competitive to what modern retail formats are offering. Wal-Mart Watch, a non-profit organization studying the impact of large corporations on society and its advocacy arm feels that world over big retail players con the public sentiment on same lines. “97% of the Indian retail market consists of small kiranas. If things go according to the plan, within the next five years, there will be 75 Wal-Mart stores around the country. How many of the kiranas can survive

that kind of expansion? Particularly when Wal-Mart and other large retailers offer amenities that the small cornershops do not, such as air-conditioning and constant product availability. Wal-Mart willcorrode the livelihoods of millions of families who rely on retail for survival,” says Nu Wexler, spokesman for Wal-Mart Watch.

Yet players in India such as Pantaloon, Reliance, Spencer's believe that the market is big enough to accommodate every single seller and retailer. "Organised retail is still 4% of the total retail business. Modern retail is full of opportunity and factors such as different pricing, promotion and convenience would help all kirana stores flourish side by side," says Arvind Chaudhary, CEO-Foods, Pantaloon Retail.

Both sides are now up in arms. While the Indian retail players believe that co-existence is the future, small traders remind themselves of Darwin’s law — Survival of the fittest. And as for now, they want their stars to realise it, after all movies take a cue from real life.

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Wal-Mart faces Fresno critic

City Council Member Calhoun says proposed supercenter is too much for his district.

By Sanford Nax
The Fresno Bee
05/18/07                                                 [back to top]

A Fresno City Council member opposes Wal-Mart's newest proposed supercenter because he already has three of the company's stores in his fast-growing district.

The world's largest retailer wants to build a 210,000-square-foot store, which also would feature a complete grocery section, on 24.5 acres at the northeast corner of Herndon and Bryan avenues, according to an application at Fresno City Hall.

Council Member Brian Calhoun said that is too much for his district, which has traditional Wal-Mart stores at Shaw and Brawley avenues and at Ingram and Herndon avenues. His district also includes a Sam's Club, Wal-Mart's membership warehouse across from River Park.

"He won't support a [general plan] amendment to allow that," said Ann Kloose, an aide to Calhoun. "He does not envision a superstore big box at that location."

The proposed site is in the rapidly growing northwest portion of Fresno, near Highway 99. Hundreds of houses have been built or are proposed in that area, and the retailer thinks the region can support a supercenter, despite its proximity to its other Wal-Marts.

"Based on the growth Fresno is experiencing, there will be more than enough consumer base out there to support another store," said Aaron Rios, a company spokesman.

Todd Stone, retail specialist at Grubb&Ellis/Pearson Commercial, said Wal-Mart does extensive market studies before submitting plans. "They obviously have done a considerable amount of research on that corridor."

About 62,000 vehicles travel each day on Highway 99 between Herndon and Shaw avenues, according to traffic studies.

"They're looking to get their stake in the ground, if you will, and capture some of that growth," Stone said.

Kloose said Calhoun would support a recreational use that would complement the nearby golf course.

"And no, the sports department in a big box store doesn't do it," she said.

A tennis club with retail and banquet facilities was last proposed for that site, she said, but fell through.

The application filed on behalf of Wal-Mart calls for a 34,464-square-foot grocery section inside the store. The grocery section would be larger than some Save Marts, including one at Minnewawa and Bullard avenues in Clovis that is 27,820 square feet.

The proposed Wal-Mart also would contain an ATM, fast-food restaurant, eye-care section, hair salon, pharmacy, portrait studio and outdoor garden center.

Four separate pads with other businesses would be on the same property.

The application is in the early stages, and the approval process, which requires a general plan amendment, is likely to be lengthy. Wal-Mart has faced stiff competition in its efforts to open superstores in California.

The approval of a superstore in Clovis in 2003 drew a lawsuit by a community group affiliated with Save Mart. That store still is not built, although supercenters do exist in Dinuba and Hanford and one will open next month in Sanger.

California is home to 24 supercenters, including one that opened this week in San Jacinto in Riverside County, Rios said.

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Wal-Mart Opens Up Data Bank

By Constantine von Hoffman
May 18, 2007                               [back to top]

WEST HOLLYWOOD, FLA.—Wal-Mart, which stopped providing sales data to third-party firms in 2001, said this week it would offer such data for a new initiative with Procter & Gamble to measure the effectiveness of in-store marketing.

“This is an initiative we think will forever change retail marketing,” said Stephen Quinn Wal-Mart CMO, during a session at the Consumer 360 conference, held May 15-17 in West Hollywood, Fla. The effort, called Prism, uses infrared sensors placed throughout stores to measure traffic and consumer exposure to product displays and other marketing materials like banners and in-store TV networks. The effort is being organized by Nielsen In-Store, a division of The Nielsen Co., New York (which also is the parent company of Brandweek). Nielsen Co. also presented the Consumer 360 event.

Dina Howell, general manager-global marketing operations at P&G, said U.S. stores could start to be equipped with the sensors within two weeks. In addition to Wal-Mart, the devices will be put into 150 different retail outlets, including convenience and grocery stores, by the time of the project's full launch in early 2008. Although the effort is currently only being rolled out in the U.S., Quinn and Howell said it would be in place internationally within a couple of years. The consortium funding Prism also includes Albertsons, Kroger, Walgreens, 3M, Walt Disney, Coca-Cola, Kellogg and Miller Brewing.

Howell said a pilot effort that ran for two weeks last year achieved an initial 76% accuracy rate in its predictions of consumer behavior, and that further refinement has increased that to 85%. Wal-Mart contributed sales information from 1,000 of its stores to the study—a tenfold increase over the amount of data the company had ever previously released, according to Quinn.

© 2007 VNU eMedia Inc. All rights reserved.

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Did Wal-Mart Kill the TV Business?

By Mark Fleischmann
Home Theater News
May 18, 2007                                    [back to top]

At the root of recent woes in the TV-retailing business is the legendary "Wal-Mart effect," according to a news analysis by Business Week.

More specifically, Wal-Mart's decision to drop the price of a 42-inch Panasonic plasma below the psychologically crucial $1000 barrier has caused a chain reaction of retail misery that has caused job losses and store closings at Circuit City, Tweeter, CompUSA, and Rex Stores.

The trouble started on Black Friday, the first shopping day after Thanksgiving for the 2006 holiday shopping season. Once Wal-Mart made its move, other chains were forced to match the price or at least offer something comparable on similar products.

"The carnage has one phrase written all over it: the 'Wal-Mart effect.' For many electronics competitors, the experience with flat panels has been a replay of what happened in other businesses," writes Pallavi Gogoi, citing similar collapses following Wal-Mart's entry into the grocery and toy businesses.

"By most accounts, Wal-Mart had little to lose by dropping the price on the Panasonic TVs because it sold out its inventory nearly instantly," adds the BW correspondent. Translation by Wes: "By limiting its per store on-hand inventory, Wal-Mart took a small hit while causing the entire industry to melt down."

Also contributing to the downward price trend were competition from new brandnames and ramped-up production, according to BW. The pain continues at Circuit City. New display technologies may eventually offer retailers and manufacturers temporary respite from sliding prices. However, in television, the move toward commodity pricing is a well-established longterm trend.

Copyright © Primedia Magazines, Inc. All rights reserved.

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Birla to Open Stores in India, Challenging Wal-Mart

By Saikat Chatterjee
and Archana Chaudhary
Bloomberg                                               [back to top]

May 18 -- Indian billionaire Kumar Mangalam Birla plans to invest as much as 90 billion rupees ($2.2 billion) in three years to start a retail chain and compete with Reliance Industries Ltd. and Wal-Mart Stores Inc.

The Aditya Birla group will open the first of 1,000 supermarkets this month, Birla said at a briefing in Mumbai. The group won't form a venture with an overseas partner, he said.

Birla joins fellow billionaires Mukesh Ambani and Sunil Mittal in starting retail groups in India, where Asia's fastest wage growth is creating a middle-class equivalent to the entire population of the U.S. Store chains may account for as much as 35 percent of retail sales by 2015, up from about 4 percent, according to Wal-Mart, the world's biggest retailer.

``The retail market is huge, but with so many chains competition will become even more fierce,'' said R.K. Gupta, who manages the equivalent of $70 million of stocks at Credit Asset Management in New Delhi. ``With the increase in retail outlets, a lot of small vegetable vendors will be displaced and that will create a problem of law and order.''

Aditya Birla's retail unit plans to employ 10,000 people in a year's time, Birla said. The group has already invested 2 billion rupees in the retail venture, he said.

``We intend to be among the leading players in India,'' Birla said. ``We'll give the Indian consumer a fundamentally better shopping experience.''

Reliance, Bharti

Mittal's Bharti Group plans to invest $2.5 billion in a retail network that includes a wholesaling venture with Wal-Mart. Reliance Chairman Ambani is investing more than $5.5 billion to set up stores. The retail unit of Mumbai-based Reliance is targeting sales of 1 trillion rupees by 2011 of goods ranging from groceries to electronics.

Plans to open retail stores in India by Bentonville, Arkansas-based Wal-Mart and other foreign retailers including Carrefour SA and Tesco Plc may be delayed as the Indian government has commissioned a study on the impact of large retailers on small stores.

India's Congress Party, which leads the ruling coalition government, sought safeguards from the government before it allows overseas investment in the nation's retail industry.

The Congress Party is trying to allay concerns of small traders who own more than 12 million shopping establishments across the nation. Support from the trader community is crucial for the Congress Party's fortunes in forthcoming elections.

Overseas investment in India's retail industry is limited to single-brand merchants, preventing international chains from buying stakes in local companies or setting up their own stores. Foreign companies are allowed to set up wholesaling ventures.

Aggressive Pricing

The delay in allowing foreign retailers into the Indian market may favor local retail chains including Aditya Birla's. Still, aggressive pricing of its vegetables and groceries by Reliance have put it in direct confrontation with small traders.

Reliance's retail outlets faced violent protests from traders in the eastern Indian city of Ranchi earlier this month.

Vegetable vendors in Ranchi protested against Reliance retail outlets accusing the company of undercutting prices, the Hindustan Times reported.

The Aditya Birla Group includes Hindalco Industries Ltd., the country's biggest aluminum producer, and the nation's second-and third-largest cement makers UltraTech Cement Ltd. and Grasim Industries Ltd. None of these companies will invest in the retail chain, Birla said.

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Wal-Mart transforms Northwest Freeway store into Supercenter

$23,000 in donations to area groups to accompany ribbon cutting

Houston Chronicle
May 17, 2007                               [back to top]

"After months of renovations, we are thrilled to be able to offer our customers discount groceries and a larger selection of products and services at Wal-Mart's value prices," said store manager Dominic Ortiz. "We can't wait to celebrate our store make-over with our customers."

Originally opened in 1995, the store has gained more than 83,900 additional square feet due to the expansion. The new 211,972-square-foot Wal-Mart Supercenter will feature a full line of groceries, a drive-through service for the store's pharmacy, wider aisles, bilingual signage and additional parking spaces and cart corrals.

The store has also expanded its lawn-and-garden center and its home-entertainment and electronics departments.

The Supercenter will also feature a Tire & Lube Express, a vision center, a portrait studio, a one-hour photo lab and a wireless phone sales center.

Leased areas and services include a Healthy Access clinic, a SmartStyle Family Hair Salon, a McDonald's and aWoodforest National Bank branch.

The store will be open 24 hours and include 29 full-service check-out lanes.

Ortiz said the store has received more than 2,000 applications for the 150 new positions planned for the store's expansion, bringing the total number of associates to nearly 450.

Upon its opening, the store will announce a total of $23,000 in donations, including $2,500 grants to four organizations with health-related missions. More than 10 other organizations will also receive grants from the store as part of the grand opening celebration.

The store will also have a budget to give donations away locally throughout the year. Area organizations can contact the store to inquire about grants, matching grants and opportunities to raise dollars outside store locations throughout the year.

The Rev. Ryszard Kulma, parochial vicar at Christ the Redeemer Catholic Church, will conduct the invocation at the grand opening ceremony, and Boy Scouts from Troop 1138 will present the colors. Several associates who have worked at the store since it originally opened in 1995 will help Ortiz cut the ribbon to the new store.

The celebration will continue throughout the day with performances by Ballet Folklorico Imperio Maya dancers and a mariachi band.

Other will activities include product samples and giveaways.

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Trucker applicants’ Wal-Mart suit gains class-action status

By Linda Satter,
Arkansas Democrat-Gazette
May 17th, 2007                                              [back to top]

A federal judge in Little Rock on Wednesday granted class-action status to a lawsuit accusing Wal-Mart of using racially discriminatory practices in hiring over-the-road truck drivers. The class will include all black applicants living in the continental United States who were denied driving jobs since Sept. 22, 2001, and all blacks who contend they were deterred or thwarted from applying for driving jobs as a result of Wal-Mart’s policies and practices.

U. S. District Judge Bill Wilson Jr. said in a 43-page order that the group of plaintiffs — expected to number below 10, 000 — can seek back pay and a declaration that Wal-Mart’s policies and practices were racially discriminatory and thereby unconstitutional.

Wilson said that if any plaintiffs want to seek punitive damages, they will have to do so in separately filed lawsuits after a trial on the class-action case.

Hank Bates of Little Rock, an attorney who twice argued for class-action status on behalf of the truckers, said Wednesday, shortly after the ruling was issued electronically, “I haven’t had the chance to read it yet, but I think we’re very pleased.”

Bates said he and other plaintiffs’ attorneys at the John W. Walker and Welch & Kitchens firms have not yet determined how many people the class might include but said it will be “in the thousands, somewhere in the single-digit thousands.”

He did not want to say how much money the lawsuit could end up costing Wal-Mart if the plaintiffs win their case and said a jury would have to determine the extent of any discrimination.

A Wal-Mart spokesman, John Simley, said, “We disagree with the district court’s decision and are considering an appeal. We believe that the case will be resolved in Wal-Mart’s favor once the merits of the case are addressed. It’s important to remember, the only question the district court decided concerned class-action status. This has nothing to do with the merits of the case or whether the allegations are true.”

The lawsuit was filed Sept. 22, 2004. The defendants are Wal-Mart Stores Inc. of Bentonville and Wal-Mart Transportation, LLC, a subsidiary. The lead plaintiffs are Daryal T. Nelson of Coldwater, Miss., and Tommy Armstrong of Woodruff County.

According to Wilson’s order, Wal-Mart’s transportation division includes about 8, 000 drivers in 47 field offices nationwide who deliver goods to Wal-Mart stores and Sam’s Clubs across the country. Nelson and Armstrong are both black men who applied at field offices but were not hired.

Wilson’s order says that under the “uniform corporate culture” that Wal-Mart fosters, the hiring process is identical at each of its offices. He said the process ensures that potential drivers are recruited almost exclusively by “word of mouth” from current drivers and are then screened further by a committee of drivers at each transportation office who are not guided by objective selection criteria.

“While Wal-Mart policy requires each driver screening committee to be 50 percent diverse, a review of all of Wal-Mart’s regional personnel manager audits reveals that no screening committee has a majority of African Americans and that a substantial percentage of the screening committees do not have any African American representation whatsoever,” Wilson said. He added that the plaintiffs have presented evidence of “subjective factors” used by committees and “anecdotal evidence of overt racism” among committee members.

From Jan. 1, 2000, through Sept. 29, 2005, while the American Trucking Association determined that about 15 percent of the nationwide truck-driver work force was black, Wal-Mart’s force was just 4 percent to 6 percent black, Wilson noted.

He also noted that in 1999 and in 2004, Wal-Mart’s driver-recruitment coordinators suggested publicizing job openings to the general trucking community, but the company made no changes.

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Wal-Mart: Time For Lee Scott To Go

Todd Sullivan
May 17th, 2007                                  [back to top]

World's biggest retailer Wal-Mart (WMT) said Tuesday quarterly profits rose 8% to $2.83 billion ($0.68/share) and revenue rose 8.5% to $86.41 billion -- hitting analyst estimates exactly.

Wal-Mart said Sam's Club and international operations were its strongest areas, while food and generic drug sales were large growth sections. It expects domestic comparable-store sales to rise 1-2% in the coming quarter after a 0.6% first-quarter rise. It forecasts Q2 earnings from continuing operations of $0.75-0.95; analysts had been calling for $0.79. In the company's earnings press release, CEO Lee Scott shrewdly observed: "While these are record sales and earnings, we feel there was an opportunity to have done better."

Thanks for the heads up, Lee. Kind of like General Custard saying "we should have brought more guys."

It is time for Lee to go. It is not for the standard reason people give, the stagnant share price. Let's be honest here. If you were dumb enough at the turn of the century to pay 60 times earnings for a massive retailer growing at less than 1/2 that, you deserve the predicament you are now in. Given Wal-Mart's scale, it would have been impossible for ANY CEO to get performance out of the company to justify that high of a PE ratio and avoid the eventual share decline. The price of the stock had to fall.

Why should Scott go? I have been in four Wal-Marts over the past two weeks and one thing sticks out. They have not changed at all the past seven years. Everything feels the same, the look , the merchandise, the people, everything. The worst part is, there seems to be no plans to change anything. If you are struggling with earnings and growth because you have become stale, do something different. You just can't sit there, no matter who you are.

How about this? Let's update the clothing. We have heard for years that Target has had great success with low cost brand name designer clothing. Wal-Mart's is just low cost and in an increasingly brand conscious world, it just is not cutting it. Let spruce it up a bit. Maybe we could take some of the $7 plus billion you are sitting on and buyback a meaningful amount of shares? Wal-Mart is increasing cash at an over a billion dollar a year pace and last year spent just over that on share buybacks. Let's take $3 billion and make a dent in the shares outstanding ( 1.5%) and give more back to shareholders if we are not going to put it work anywhere else.

Here is another issue. When I go into as Target, I can easily find my way around because the layouts of the stores are very similar. It makes may shopping experience less frustrating. Are there any two Wal-Marts that are laid out the same? It makes it very difficult to "just run in" to a Wal-Mart to pick something up. Given the choice, I will choose a Target for the convenience.

Wal-Mart's image has taken a hit. When people want something "cheap" they think Wal-Mart; when the want a value, they think "Target." Because Scott seems to have no desire to change that, it is time to go....

Disclosure: Author holds no position in any company listed above.

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Wal-Mart updates residents on store plans

Grogan's Mill neighborhood has chance to pose questions about concerns

By LAURA ISENSEE
Houston Chronicle
May 17, 2007                                      [back to top]

Grogan's Mill residents got better acquainted this week with their new neighbor, the nearly 200,000-square-foot Wal-Mart Supercenter under construction on Sawdust Road.

Wal-Mart officials updated a handful of residents who live near the world's biggest retailer's new store on its progress and plans at the construction site's headquarters. The new supercenter is replacing the former home of Spring Woodlands Church of Christ, which relocated.

With them, the residents brought a host of questions and concerns, including greenbelt buffers, drainage in the rear of the property and increased traffic.

Wal-Mart officials reviewed plans for the store, which is on track to open in about 10 months.

Changes to the plans include extended greenbelt in some areas, a newly installed drainage system and the removal of plans for a tire lube express, which will reduce square footage by 8,000 square feet, said Joe Grasso, vice president and managing engineer with Wal-Mart.

"We took the opportunity to create more green area and do a little park," Grasso said. "Instead of pavement or building, we converted that to more green area."

The greenbelt in the rear of the property will extend about 100 feet in most areas and reach about 130 feet in some areas, Grasso said.

The retailer has found a potential buyer for the property of the other Wal-Mart site on Sawdust Road, which the new site will replace, said Mark Stephens, regional real estate manager for the company. The buyer would use the site for non-retail use, Stephens said. Final plans for the former site are expected to be released when the new site has its grand opening, Stephens said.

The meeting didn't allay all of the residents' worries, however.

Traffic worries Brian Hillyard, whose house backs onto the rear of the Wal-Mart site, said he remained concerned only two entrances are set for the new store while most Wal-Mart supercenters he's seen have more.

"I can only see a major traffic jam occurring, especially around Christmas or major holidays," Hillyard said. "Traveling around Sawdust is going to become inoperable because of the traffic. I know that."

The new Wal-Mart Supercenter will draw between 15,000 and 16,000 vehicles a day, according to the latest traffic study taken last November.

Wal-Mart officials said there are no further traffic studies slated and plan to install a new signal at the store's main entrance with an extended left-turn lane to help traffic flow. The signal, which the county will install and the retailer will fund, will go up just east of South Park, a road heavily used by many commuters to access The Woodlands Park & Ride.

Grasso said the new signal will coordinate with other traffic signals to give more traffic control. Executives said there were no plans for a second signal at South Park.

Once open, the new supercenter will receive four to six large supply trucks per day, Grasso said.

Patricia Hillyard, whose home lies directly behind the Wal-Mart site, said she proposed more trees planted in the greenbelt buffer if no sound wall is installed to buffer noise.

"My only concern is being woke up in the late, late hours of the evening by big trucks," Hillyard said. "The only concern I had about the (Spring Woodlands Church of Christ) church was their parties Friday nights till midnight."

Grasso said the loading docks have high walls to screen noise.

Other issues Another concern raised by Hillyard and other residents was standing water in the rear of property, which is prime breeding ground for mosquitoes.

"I'm concerned about the drainage," said Sharyn Myers, a Grogan's Mill resident at the meeting. Issues with drainage on the property preceded Wal-Mart's arrival, residents said.

Grasso said the newly installed drainage system should improve the problem and a retention pond is designed for a 100-year event.

"Now that you have a drainage system in place, you shouldn't have a lot of standing water," Grasso said.

The retailer has not yet finalized which businesses will open in the pad sites slated for the front of the property, store officials said. So far, they have received about 25 to 30 inquiries for the spaces.

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Missouri Man Sues Pet Food Makers, Wal-Mart Over Dog's Death

Dow Jones Newswires
May 17, 2007                                     [back to top]

CASSVILLE, Mo. (AP)--A southwest Missouri man who blames contaminated pet food for his dog's deathly illness has sued two food companies and Wal-Mart.

Richard Schwinger, of Barry County, is seeking class-action status for the lawsuit filed Tuesday in U.S. District Court in Springfield. Attorney David Payne of Cassville represents Schwinger, whose dog was euthanized in March.

Named as defendants are Canada-based pet food maker Menu Foods Inc. (MEW.UN.T), which already faces at least 50 lawsuits nationwide; Del Monte Foods Co. (DLM); and Wal-Mart Stores Inc. (WMT), which the complaint states is the single largest distributor of Menu Foods' products.

Schwinger alleges that his dog Sandy, an otherwise healthy 2-year-old, had to be euthanized as a result of eating Menu Foods' Ol' Roy Pet Food and Del Monte's Canine Carry-out Bacon Bite, which were purchased at a Wal-Mart store in Cassville.

Schwinger said Sandy's health began declining in late February and early March but that he continued offering the dog the same food, unaware that it was contaminated.

In mid-March, a veterinarian told Schwinger that Sandy was suffering kidney failure due either to tainted pet food or a family history of kidney failure, the lawsuit said.

Sandy's breeder said there was no such history, according to the lawsuit.

Schwinger said the veterinarian eventually told him his dog was suffering so much that it should be euthanized, which was done, the lawsuit said.

The lawsuit alleges that the defendants failed to prevent the distribution of tainted pet foods after the discovery of contaminated wheat gluten in their ingredients.

John Simley, a Wal-Mart spokesman at the company's offices in Bentonville, Ark., said Wednesday by phone that Wal-Mart could not comment because it had not yet been served with the lawsuit.

Representatives of Menu Foods and Del Monte Foods could not be located for comment Wednesday night.

Copyright (c) 2007 Dow Jones & Company, Inc.

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Dim Outlook at Wal-Mart and Home Depot

By THE ASSOCIATED PRESS
May 16, 2007                                                  [back to top]

Wal-Mart Stores and Home Depot posted quarterly results yesterday that presented a troubled outlook for retailers.

Home Depot said its quarterly earnings fell 29.5 percent, and Wal-Mart warned that profit in its current quarter might fall short of expectations.

Wal-Mart, the largest retailer in the nation, said it earned $2.83 billion, or 68 cents a share, up 8 percent from the $2.62 billion, or 64 cents a share, it earned a year earlier. Revenue in the period, which ended April 30 and was the first quarter of Wal-Mart’s fiscal year, rose to $86.41 billion from $79.67 billion a year earlier.

The results met the 68 cents a share profit and $86.9 billion in sales expected by Wall Street analysts surveyed by Thomson Financial.

But the company said it expected a second-quarter profit of 75 cents to 79 cents a share, while analysts were expecting a profit of 79 cents a share.

Shares of Wal-Mart, which is based in Bentonville, Ark., fell 22 cents, to $47.62 a share.

Home Depot, meanwhile, said erratic weather and continued weakness in the housing market hurt its results in the first quarter and gave a bleak assessment of its financial picture for the rest of the year.

The company, which is based in Atlanta, said it earned $1.05 billion, or 53 cents a share, compared with a profit of $1.48 billion, or 70 cents a share, a year earlier.

Revenue in the period, which ended April 29, rose 0.6 percent, to $21.59 billion from $21.46 billion.

Profit fell short of the 59 cents expected by analysts, and shares in Home Depot fell 71 cents, to $38.30.

“While we expected a tough quarter, this was worse than we expected,” the chief executive, Frank Blake, said during a conference call with analysts.

He said the housing market remained a challenge and that erratic weather across the United States had hurt the company’s spring selling season.

Sales at stores open at least a year were disappointing for both companies.

At Home Depot, same-store sales fell 7.6 percent, and Mr. Blake said the company was not expecting any near-term market improvement.

The company said it now expected profit in the current year to decline by as much as 9 percent, the high end of the range it forecast at the start of the year.

Goldman Sachs said in a research note that the lower forecast from Home Depot’s and Wal-Mart’s focus on lower prices “could weigh on retail stocks at large as investors become increasingly skeptical about the macro and competitive environment.”

Wal-Mart’s chief executive, H. Lee Scott Jr., focused on low prices during a conference call with analysts. “You will see us be more committed than ever to price leadership,” Mr. Scott said.

Same-store sales at Wal-Mart stores in the United States rose 0.6 percent in the first quarter, with its Sam’s Club stores accounting for all of the gain. Wal-Mart’s namesake stores slipped 0.1 percent in the quarter, while Sam’s Club warehouse stores rose 4.7 percent.

For the current quarter, Wal-Mart projected same-store sales to rise by 1 percent to 2 percent.

Wal-Mart is losing market share after an effort last year to offer fashionable, costlier apparel, which failed to win broad customer appeal. Wal-Mart began to shift to lower-priced goods last holiday season.

Robert F. Buchanan, a retail analyst with A.G. Edwards, said apparel remained a problem for Wal-Mart. “Wal-Mart is continuing to fail to properly interpret the fashion trends of their core low-income customers,” Mr. Buchanan said.

Sam’s Club, however, now has had seven consecutive quarters in which profits grew faster than sales, Mr. Scott said. Wal-Mart’s international division, the fastest growing part of the company, accounted for 23 percent of sales for the quarter.

Icahn Sells Federated Shares

The billionaire investor Carl C. Icahn sold his 1.3 percent stake in Federated Department Stores.

Icahn Management sold its 6.8 million shares as of March 31, Mr. Icahn said in a regulatory filing yesterday. Federated’s shares fell 96 cents, to $39.94. Funds managed by Mr. Icahn also cut their Time Warner holdings to 12.9 million shares from 25 million at the end of December, according to the filings. Mr. Icahn bought a $122 million stake in the CSX Corporation.

Mr. Icahn did not return a phone call seeking comment.

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Wal-Mart Restarts: Fool by Numbers

Motley Fool Contributors
May 16, 2007                                     [back to top]

On May 15, Wal-Mart Stores (NYSE: WMT) released first-quarter earnings for the period ended April 30.

Revenue increased by 8.5% to $86.4 billion, thanks to a steady rise in international sales by 18.5%. Comparable-store sales in the U.S. increased by 3.8% and 4.3% for Wal-Mart stores and Sam's Club, respectively. For Q2 2008, the company estimates comparable-store sales will increase between 1%-2% in the U.S., while EPS from continuing operations will be around $0.75-$0.79. The company plans to launch a joint venture of wholesale stores with Bharti Group in India by the middle of 2008, and expand its presence to 75 cities in five to seven years. (Figures in millions, except per-share data.)

Income Statement Highlights

Q1 2008 Q1 2007 Change

Sales $86,410 $79,676 8.5%

Net Profit* $2,826 $2,660 6.2%

EPS* $0.68 $0.64 6.3%

Diluted Shares 4,128 4,170 (1.0%)

*Includes income from continuing operations

Get back to basics with the income statement.

Margin Checkup

Q1 2008 Q1 2007 Change*

Gross Margin 24.4% 24.4% 0.0

Operating Margin 5.6% 5.6% 0.0

Net Margin 3.3% 3.3% 0.0

*Expressed in percentage points

Margins are the earnings engine.

Balance Sheet Highlights

Assets Q1 2008 Q1 2007 Change

Cash + ST Invest. $6,563 $5,690 15.3%

Accounts Rec. $3,300 $2,430 35.8%

Inventory $35,200 $31,900 10.3%

Liabilities Q1 2008 Q1 2007 Change

Accounts Payable $27,562 $25,115 9.7%

Long-Term Debt $29,567 $25,036 18.1%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q1 2008 Q1 2007 Change

Cash From Ops.* $1,847 $3,788 (51.2%)

Capital Expenditures $3,157 $3,210 (1.7%)

Free Cash Flow ($1,310) $578 N/A

*Net cash provided by operating activities of continuing operations

Free cash flow is a Fool's best friend.

Related Foolishness:

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean. This data has been provided by Netscribes. To provide feedback on this article, please click on the "feedback" button below.

Costco is a Stock Advisor pick. The Fool's disclosure policy is always a good bargain.

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

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Wal-Mart, P&G See Sales Through a Prism

By Constantine von Hoffman
May 16, 2007                                                [back to top]

MIAMI -- Wal-Mart and Procter & Gamble today announced the rollout of a major effort to measure the effectiveness of in-store marketing.

“This is an initiative we think will forever change retail marketing,” said Wal-Mart CMO Stephan Quinn during a session at the Consumer 360 conference in West Hollywood, Fla. The effort, called Prism, uses infrared sensors around the store to measure traffic and consumer exposure to product displays and other marketing materials like banners and store TV networks. It is organized by Nielsen In-Store, a division of Brandweek’s parent company.

Dina Howell, who heads worldwide in-store efforts for P&G, said U.S. stores would start to be equipped with the sensors within two weeks. In addition to Wal-Mart, the devices will be put into 150 different retail outlets—including convenience and grocery stores—by the time of the project’s full launch in early 2008. Although the study is currently only being rolled out in the U.S., Quinn and Howell said it will be in place internationally within a couple of years. The consortium funding Prism also includes Albertsons, Kroger, Walgreens, 3M, Walt Disney, Coca-Cola, Kellogg and Miller Brewing.

“This will have a profound impact on the whole industry,” she said after the session. “It’s starting in marketing but it will impact operations, sales, everything.”

“This makes the store a part of measured media,” said Howell. She said that a pilot effort that ran for two weeks last year achieved an initial 76% accuracy rate in its predictions of consumer behavior and that further refinement since then has increased that to 85%. Prism is designed to predict consumer reach by category, area of the store, retail format, and day of the week. “This is not a nice-to-have, it’s a must-have,” she said afterward.

One measure of how important Wal-Mart sees this effort is the fact that it has contributed sales information from 1,000 of its stores to the study—a tenfold increase over the amount of data the company had ever previously released according to Quinn. Another key part of the study is measuring the difference between what companies plan to have displayed in stores and what actually winds up being displayed. “We need to know the truth about this,” Quinn said afterward. “We need to know how much of this is fact and how much is myth.”

Although Howell declined to speculate on what sort of impact this will have on the marketing mix in the future, earlier this month CEO A.G. Lafley made it clear that in-store is growing in importance to P&G. “If you step back and look at our mix across most of the major brands it is clearly shifting and it is shifting from measured media to in-store to the Internet and to trial activity,” Lafley said during a call with investment analysts.

Paul Fox, ER leader for P&G’s global operations, said Procter is stepping up efforts to measure marketing channels “that have been around forever.” He said P&G would be rolling out a word-of-mouth measurement method within the next 18 months.

© 2007 VNU eMedia Inc. All rights reserved.

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Wal-Mart Loses Its Way

By Marc Lichtenfeld
Senior Columnist
5/15/2007                                            [back to top]

There's wasn't much love going around for Wal-Mart (WMT) Tuesday after the retail giant reported a lackluster first quarter and said the second quarter doesn't look much better.

Wal-Mart's earnings for the period were in line with forecasts, although revenue was below estimates. Additionally, the company projected second-quarter earnings of 75 cents to 79 cents a share, allowing for downside to Wall Street's estimate of 79 cents.

While CEO Lee Scott pointed out that revenue and earnings were at record levels, he admitted that "there was an opportunity to have done better."

Indeed. The company's sales remained sluggish, and the retailing giant appears to be trying to figure out what it wants to be, even though it's all grown up.

Shares of Wal-Mart recently were down a modest 18 cents to $47.66. The stock is trading at a historically low multiple of 16.5 times earnings, but now isn't the time to pile into the shares. There are certainly too many problems -- and too much confusion. Identity Crisis

To its credit, Wal-Mart effectively kept a lid on costs in the first quarter. Gross margin declined just 6 basis points, despite an unfavorable sales mix toward lower-margin products.

Operating margin improved 9 basis points, though it was flat when one-time items were removed. The company also saw gains in labor productivity and only a slight increase in markdowns.

It's good Wal-Mart is able to keep its cost structure in check. Now, the company needs to figure out its focus.

Monday, the company said it would enhance its electronics offerings and brighten up stores in an effort to attract traffic. Wal-Mart already has launched remodeling initiatives and efforts to sell higher-margin products.

If successful, a pickup in electronics sales should boost margins, because that category tends to be more profitable than segments such as groceries and generic drugs.

And the latter group is exactly where Wal-Mart performed well this quarter. There's nothing wrong with selling lots of food and drugs. Many companies, such as Safeway (SWY) and Kroger (KR) , are doing very well in that business. But for Wal-Mart to boost profits, it needs higher-margin merchandise to go out the door (and not through shrinkage, or stolen goods, which increased in the first quarter).

Despite the effort to promote higher-end goods, Scott said on a recorded earnings call, "We will be committed more than ever to price leadership."

To me, it's a bit of a disconnect to highlight high-margin, high-end goods one day, and then emphasize its low-cost value proposition the next. Sure, there may be room for both, but the messages are getting convoluted.

Wal-Mart is throwing everything at the wall and hoping something sticks. Four-dollar generic-drug-pricing stuck, because that is in line with Wal-Mart's typical modus operandi. Higher-end flat-panel TVs seem like a reach. Shifting Sales Focus

As I mentioned yesterday, I was closely watching Wal-Mart's international division. Sales in that segment grew 18.5% and represented 23% of total sales. That's up from 21% of total sales in 2006.

Sales at U.S. stores, meanwhile, climbed just 5.6%. Same-store sales for the quarter dropped 0.1% at Wal-Mart stores, compared with a 3.8% rise in the year-earlier period. In the second quarter, Wal-Mart expects comps in the U.S. to rise 1% to 2%.

Until the domestic issues are solved, the international segment cannot afford to slip up.

A mammoth company such as Wal-Mart will always have issues. Indeed, the company is facing its fair share of turmoil -- ranging from townsfolk trying to keep stores out of their area to managers in alleged trysts and spying. But very few of those issues actually affect sales.

What Wal-Mart needs to do is rediscover how to connect with its customers. Shoppers can enjoy a more pleasant experience at Target (TGT) and elsewhere. Thus, Wal-Mart customers have to be confident they will get extraordinary value for their basic needs, such as with the company's $4 drug program.

While everyone would like to save money on a 42-inch flat panel, I'm not sure that will serve the core customer, nor lead to much incremental business beyond the sale of that TV. Until Wal-Mart finds its way, don't expect a huge improvement in sales.

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Wal-Mart to Focus on Price After Outlook

By MARCUS KABEL
AP Business
May 15, 2007                                      [back to top]

Wal-Mart Chief Executive Lee Scott warned earnings in the current quarter could fall short of Wall Street expectations and said Tuesday that the company will focus on prices this summer in a bid to rekindle sales in U.S. stores.

The tepid outlook from Wal-Mart -- considered a barometer for the retail industry -- could serve as a warning bell that rising gasoline prices and a weakening housing market will continue to erode consumer spending in the coming months. Home Depot Inc. reported a 29.5 percent drop in first-quarter profits on a slight increase in sales the same day.

Wal-Mart Stores Inc. reported an 8 percent gain in its fiscal first-quarter earnings, meeting profit expectations with the help of cost controls and strength in its Sam's Club warehouse stores and international businesses.

The world's largest retailer said it expects second-quarter profits of 75 cents to 79 cents per share. Analysts surveyed by Thomson Financial are looking for a profit of 79 cents per share for the period, which ends July 31.

"Quite honestly, we're not satisfied with our overall performance," Scott said during a pre-recorded conference call. Sales and profits for the quarter were "not where we would have expected to be nor where we believe we should be."

"You will see us be more committed than ever to price leadership," Scott said.

Wal-Mart is losing market share after a shaky attempt last year to offer trendier, pricier fashions like skinny jeans, which failed to garner broad customer appeal. Wal-Mart began to shift its focus back to lower priced merchandise last holiday season.

Robert F. Buchanan, retail analyst with A.G. Edwards & Sons, said apparel continues to be a problem for Wal-Mart.

Company officials told investors Tuesday that they won't see an improvement until the back-to-school season. Meanwhile, department stores like J.C. Penney Co. and discounters like Target Corp. have improved their fashion mix, striking up exclusive deals with designers.

"Wal-Mart is continuing to fail to properly interpret the fashion trends of their core low-income customers," said Buchanan, who rates the share a "hold".

Buchanan also said he finds Wal-Mart workers, called associates in company parlance, less motivated to help customers now than in the past 24 years that he has covered Wal-Mart.

Goldman Sachs, in a research note, said the focus on low prices could erode gross profit margins at Wal-Mart and at other retailers that may feel pressure to follow suit.

Goldman's note added that "lowered guidance from Home Depot this morning and an increased aggressiveness on price at Wal-Mart could weigh on retail stocks at large as investors become increasingly skeptical about the macro and competitive environment."

Don Gher, chief investment officer for Coldstream Capital Management, said it is time for Wal-Mart to show that its plans for reviving U.S. sales can work. Wal-Mart has said it will finish remodeling some 1,800 stores this year and has promised to tailor products in individual stores more closely to local communities.

"The U.S business continues to be hurt by apparel mistakes, but sales are buttressed by strong supermarket, pharmacy and international sales," Gher said. Coldstream manages assets of about $1.1 billion, including Wal-Mart shares.

On the conference call, Scott that for Wal-Mart shoppers, rising gas prices, personal finances and inflation remain a concern.

In the first quarter, Wal-Mart U.S. stores did well in sales of food, $4 generic drug prescriptions and home electronics. But those results were weighed down by weakness in the higher margin areas of apparel and home furnishings, said Eduardo Castro-Wright, President and Chief Executive Officer of Wal-Mart U.S. stores.

Same-store sales, an industry benchmark for stores opened at least a year, rose 0.6 percent in the first quarter at Wal-Mart's U.S. stores, the weakest level since Wal-Mart started reporting the quarterly figure in 2003.

For the current quarter, Wal-Mart projected same-store sales to be up a modest 1 percent to 2 percent.

Scott said Wal-Mart's fastest growing business remains its international segment, with sales up 18.5 percent in the first quarter, to account for 23 percent of total sales. Wal-Mart has stores in 13 countries from Mexico and Central America to Asia to Britain.

In the first quarter, Wal-Mart said it earned $2.83 billion, or 68 cents per share, compared with $2.62 billion, or 64 cents per share, in the previous-year quarter.

Wal-Mart had revenue of $86.41 billion in the three months ending April 30, up from $79.67 billion in the year prior.

Analysts surveyed by Thomson Financial expected first-quarter earnings per share of 68 cents and revenues of $86.9 billion. Copyright 2007 Newsday Inc.

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Wal-Mart Earnings Eyed After April Sales

By Marcus Kabel,
Associated Press
May 14th, 2007                                       [back to top]

Investors will be closely watching whether Wal-Mart Stores Inc. meets its earnings forecast Tuesday after the world's largest retailer reported its worst decline in one-month sales at established stores in April.

April was a bad sales month for most retailers because of a mix of factors including cold weather. But Wal-Mart's report last week of a 3.5 percent decline at stores open at least a year, an industry benchmark called same-store sales, was the worst since the Bentonville, Ark.-based retailer started reporting the numbers in 1980.

Some analysts, including at Banc of America Securities and Wachovia Securities, responded by trimming their estimates of the profit Wal-Mart will report Tuesday for the first quarter of its fiscal year, which began in February. Others said it may be a close call.

"Given the revenue shortfall (in April), if they make the earnings number on Tuesday, it'll be by the hair of their chiney-chin-chin," said Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which manages $9.6 billion in assets and holds about 42,000 Wal-Mart shares.

On average, analysts expect Wal-Mart to report earnings of 68 cents per share on sales of $87.08 billion, according to a survey by Thomson Financial.

April brought lower sales for many retailers including Wal-Mart's smaller rival Target Corp., where same-store sales fell 6.1 percent. But the decline at Wal-Mart, the world's largest retailer, was the company's second monthly negative since November and worse than Wal-Mart had forecast.

In the first quarter, Wal-Mart same-store sales rose just 0.7 percent while Target was up 4.3 percent from a year earlier.

Wal-Mart was hit in April from two sides: the economy and its own in-house troubles finding the right merchandise mix, said Richard Hastings, vice president and senior retail sector analyst at Bernard Sands.

With its broad range of products and its 4,000 stores and Sam's Clubs membership warehouses located in nearly every part of the country, Wal-Mart is more closely integrated with the overall economy than any other retailer, Hastings said.

Wal-Mart was hit by the overall economic trends of higher gas prices and falling home values that crimped consumer spending, especially among its lower income shoppers. It also suffered from a surprise event, the massive pet food recalls of recent weeks, which hurt what Hastings called Wal-Mart's significant dog and cat food sales.

"April was unusually unusual," Hastings said.

On top of the economic trends, a big challenge for Wal-Mart is turning around its fashion and home furnishings business amid increasing competition from department stores such as J.C. Penney to discounters such as Target.

Kohl's Corp. has recently struck exclusive agreements to carry Simply Vera _ a line of accessories, jewelry, footwear, clothing and other items _ by designer Vera Wang, clothing by fashion magazine ELLE and home goods by the Food Network. And in a recent shareholders' meeting, Chief Executive Larry Montgomery promised that the retailer would continue pairing with celebrities and high-end fashion designers in an attempt to boost sales by the billions as it adds hundreds of stores.

Union-backed critics, meanwhile, continue a two-year campaign of public pressure on Wal-Mart over what they claim are skimpy wages, poor health care benefits and other issues.

For Mother's Day, campaign group WakeUpWalMart.com released a letter from 14 national women's groups with over 10 million members urging Wal-Mart Chief Executive Lee Scott to provide better working conditions and more management opportunities to female employees.

Wal-Mart has denied a pattern of gender discrimination alleged in a class-action lawsuit pending in federal court in San Francisco.

Whether those publicity campaigns are driving shoppers away from Wal-Mart is a matter of debate. The union groups claim they are persuading people not to shop at Wal-Mart, while Wal-Mart says a poll it commissioned found virtually no impact.

A March report by Banc of America Securities said union campaigns are beginning to hurt Wal-Mart's operations, but said the degree of impact was difficult to quantify.

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Wal-Mart Helps Skype Reach The Masses

Larry Dignan
ZDNet
May 14th, 2007                             [back to top]

Wal-Mart (WMT) will offer Skype hardware and service throughout its 1,800 stores beginning Monday. The move, which could be a boon for growing Skype's subscriber count, means that Wal-Mart will carry headsets, webcams and handsets designed to work with Skype.

Wal-Mart will also carry the first pre-paid Skype cards in the U.S. The cards are available for $20 and can be redeemed for calls. Another card includes a three-month membership to the Skype Unlimited Calling Plan for $8.85.

In theory, the Wal-Mart pact should bolster Skype's subscriber tally. While Skype is growing rapidly it still hasn't hit critical mass to the point of being a cash cow for eBay (EBAY). As Om Malik notes, Skype has been trying with mixed success to boost its U.S. revenue.

In a statement, Skype noted that when users have a Skype certified accessory they use the service more.

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Wal-Mart Reports Worst Sales Figures in Nearly 30 Years

By Mil Arcega 
14 May 2007                          [back to top]

April sales figures show a disappointing month for Wal-Mart. The world's largest retailer reported a big drop in sales last month -- its worst decline in nearly 30 years. As VOA's Mil Arcega reports, Wal-Mart is not alone.

A three and a half percent drop in sales does not seem like much. But for a company that sells more than $300 billion worth of goods every year, analysts say it is significant.

Alan Murray, the managing editor of the Wall Street Journal, says the drop represents Wal-Mart's biggest decline since 1979. "There are a number of things going on. Part of it is early Easter, so some of those sales got moved into March. Part of it is bad weather."

But it may also signal a trend. Across the board, retailers from Target to JC Penny and the Gap, reported weaker sales in April. Analysts say the decline suggests high gasoline prices and the slowing U.S. housing market are finally catching up with consumers. Murray says there may be other factors at play.

Alan Murray "Wal-Mart is not doing what it used to do very well. It made an attempt last year to sell clothes to high scale retailers. That didn't work. It had to back off. It's remodeling its stores. That's not working very well," says Murray.

To bring customers back, some say Wal-Mart needs to go back to its marketing basics. Retail analyst Dana Telsey says that means low priced goods in a friendly retail environment. "I think Wal-Mart is working to enhance its image. It could always be better. Going back to its roots is a way, that hopefully, customers will become familiar with it again."

Wal-Mart is one of the biggest ec