Wal-Mart Same-Store Sales Fall First Time in 10 Years

By Heather Cannon

By CHUCK BARTELS
The Associated Press                        [back to top]

LITTLE ROCK, Ark. — A union-backed group is to launch two television ads Thursday that feature Wal-Mart workers calling on their employer to improve working conditions and make company health insurance more affordable.

Funded by the United Food and Commercial Workers International Union, the 30-second ads by WakeUpWalMart.com include three workers who list their complaints, which include low wages, being locked in stores and not being able to leave without penalty to care for a sick child.

"This holiday season, tell Wal-Mart to do the right thing, put America’s families first," the three workers say in one ad, sharing segments of the dialogue.

To coincide with the start of the ads, WakeUpWalMart.com is having supporters hand out leaflets at 300 Wal-Mart stores today, spokesman Chris Kofinis said.

"It’s our first ad campaign of the holiday season and the first where we use actual Wal-Mart workers," Kofinis said.

Wal-Mart Stores Inc. spokesman David Tovar said the claims in the ads break no new ground and that Wal-Mart’s customers understand the company.

"Our customers see these attacks as a part of a tired and failing campaign. Americans know that Wal-Mart creates jobs, reduces the cost of health care through our US$4 generic drug program and protects the environment through our sustainability efforts," Tovar said.

"People see that Wal-Mart gets good things done. Our customers know their holidays will be brighter when they shop at Wal-Mart. We remain focused on serving our customers and providing value to them," he said.

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Wal-Mart Trips as It Changes a Bit Too Fast

By Michael Barbaro
New York Times
November 30, 2006                               [back to top]

The most wonderful time of the year? Tell that to Wal-Mart. The world’s largest retailer has long dominated the holiday shopping season, with eye-popping discounts that drew throngs of customers and made life miserable for competitors.

After fresh price cuts this month, few doubted they would own this season, too. But this heartwarming storyline for Wal-Mart has turned into heartburn for the company.

Today, the retailer is expected to announce, based on its own estimates, that sales for November fell for the first time in a decade.

“In a season of what has been pretty healthy numbers from retailers, Wal-Mart has been lackluster, to say the least,” said Adrianne Shapira, an analyst at Goldman Sachs. “Houston, there is a problem.”

But what exactly is the problem?

At first glance, the stumbles seem to resurrect the perennial question: is Wal-Mart too big for its own good, making it impossible to achieve the gravity-defying growth that Wall Street has counted on for four decades.

Yet, what is happening now appears to be more complicated than Wal-Mart hitting a wall. It may simply be changing too fast, acting more like a start-up than a company with 6,000 stores, 1.3 million employees and sales of $312 billion.

And that may not be such a bad thing in the long run.

In the last year, Wal-Mart has introduced a dizzying number of new strategies: it started a line of urban fashion, began renovating 1,800 stores, overhauled its advertising to focus less on price and more on style, rolled out $4 generic drugs, ended its layaway program and imposed wage caps on its workers, to name just a few.

Given its size, even the slightest misstep is magnified. And this season, Wal-Mart has made several, alienating shoppers with designer-inspired clothing and disruptive store remodeling.

And when these miscues occur at the same time, as they have recently, they spook not just investors in Wal-Mart — its shares are down 5 percent this month — but the broader stock market as well.

Wal-Mart has little choice but to change, analysts said. The company’s formula since 1962 — pile cheap merchandise high and watch it fly — is no longer enough. Competitors like Target and Best Buy have stolen shoppers with smarter fashions and sleeker electronics, leaving Wal-Mart to sell Americans mostly everyday products like laundry detergent and socks.

And the company’s strategy of growing through relentless store openings — about 300 a year for the last decade — has begun to hurt the retailer as much as help it by siphoning away sales from other Wal-Marts nearby.

The problem shows up in a crucial yardstick of its performance: sales at stores open at least a year, like the November figure that rattled investors.

Since the beginning of 2006, Wal-Mart’s monthly sales have risen 2.4 percent, half as fast as Target, which posted a 4.8 increase.

Wall Street has been urging the company to find a solution to the slide.

“They need to take some risks,” said Christine K. Augustine, an analyst at Bear Stearns, who expressed alarm at the company’s November performance. “I do not fault them for trying new things.”

But the turnaround effort — which the company has dubbed “Wal-Mart Out In Front” — is taking longer than investors had hoped. And there is a growing consensus that the rapid pace of change may be one reason why.

Individually, the strategies can be viewed as healthy fixes to longstanding problems at Wal-Mart. Trendier (and pricier) clothing, for example, will theoretically persuade consumers to spend more at Wal-Mart, rather than, say, Kohl’s. Ending layaway plans and capping wages will save the company money.

Collectively, however, these measures have created the retail equivalent of cacophony in the stores, temporarily disorienting consumers and employees at a crucial time of year.

For example, at the same time that Wal-Mart introduced fur-trimmed jeans in the clothing department and 42-inch flat-screen televisions in the electronics section this year, it also began renovating hundreds of stores, “making it difficult to find all that enticing new stuff,” Ms. Augustine said.

“They are working at cross purposes over a short period,” she said.

Wal-Mart executives have conceded that the company’s efforts to reinvent itself have hit a few snags.

Several weeks ago, H. Lee Scott Jr., the chief executive of Wal-Mart, told analysts that he was “surprised that the disruption that occurred during the remodels was as extensive as it has been.”

The new clothing at Wal-Mart created problems, too. After early success with a designer women’s clothing line called Metro7 in 600 mostly urban area stores, the company rolled out the fashions across the chain.

It did not work. The average Wal-Mart shopper lives in the suburbs, is roughly 5-foot-2 and wears a size 14 — making them poor candidates for the skinny jeans that were a popular, tight-fitting fashion in urban markets.

Consumers like Shirley Shepherd, who lives outside Salt Lake City, Utah, balked at the unfamiliar clothes.

“I would never buy dress clothes here,” said Ms. Shepherd, who shops at the Wal-Mart in Midvale, Utah, twice a week for staples like toothpaste, batteries, underwear and socks.

It’s not just a simple matter of new fashions not selling well. The new clothes took up space where Wal-Mart stocked reliable sellers like basic blouses and sensible skirts. So the entire apparel department suffered, contributing to the November sales drop.

Mr. Scott said the company moved “too far, too fast” with the Metro7 clothing line and will now sell it only in its urban stores.

By ending layaway plans, which allowed low-income shoppers to make purchases in installments, the chain freed up the store space and employees.

But it also upset shoppers like Michele Kahindi, a 30-year-old mother of three who lives in Portland, Ore.

Eliminating the program “hinders a mom’s ability to hide stuff from the kids,” she said. “I don’t get it. Now Kmart is going to get my layaway business.”

Some of the changes at Wal-Mart have worked.

Higher-priced electronics have been a hit. By offering products like flat-panel televisions, cellphones and MP3 players at several prices — including a $3,000 plasma-screen TV — Wal-Mart has tripled sales in some stores, proving that consumers will buy upscale products at the chain.

The way the company manages its work force has also helped its bottom line. For example, it is relying on more part-time workers and asking them to be available at night and on weekends when checkout lines are longest.

Sprucing up stores, while temporarily frustrating to shoppers, has improved sales, the company said.

But the company’s hope for a turnaround in store sales could take at least a year, if not longer, for several reasons.

It is too late to cancel the latest orders for Metro7, meaning hundreds of stores will be saddled with the slow-selling fashions for months. Renovations, on hold for the rest of the holiday season to make shopping easier, will start up again in January.

And Wal-Mart said it is still grappling with the aftermath of Hurricane Katrina, which the company has said is skewing its sales figures.

Bigger spending by victims of the storm, who received federal funding to rebuild, increased sales at the chain last year, making it harder for the company to improve on last year’s performance. (In November 2005, for example, Wal-Mart’s monthly sales rose 4.3 percent.)

Analysts also noted that a separate Wal-Mart strategy should improve the company’s fortunes. In October, it said it would begin to apply the brakes on new store growth in part to focus more on improving the performance of its existing outlets.

In a small but symbolically important adjustment that will result in enormous cost savings, the company will expand its square footage at a rate of 7.5 percent in 2007, down from 8 percent in the last several years,

For now, Wal-Mart’s message to investors and customers appears to be the same as the one on the signs in its renovated stores: please excuse our appearance — and performance — while we are under construction.

“The size of the undertaking,” said Ms. Shapira of Goldman Sachs, “should not be overlooked.”

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Wal-Mart's Warning Unsettles Retailers

By ANNE D'INNOCENZIO,
AP Business 
Thursday, November 30, 2006                        [back to top]

Wal-Mart Stores Inc. unsettled the retail industry Thursday, reporting a sales decline for the first time in 10 years and warning that its holiday sales would be disappointing. The discounter's news, coupled with a jump in unemployment benefit claims, raised concerns about the strength of the retailing sector at a critical time of the year.

Wal-Mart's confirmation of weak November sales and its announcement that its December same-store sales gain would be no better than 1 percent came as the nation's retailers reported an overall mixed performance for the month. Same-store sales reflect business at stores open at least a year and are the industry standard for measuring a company's strength.

Wal-Mart's disappointment was a sharp contrast with results from discount rival Target Corp., which beat Wall Street forecasts, and Federated Department Stores Inc., which far exceeded expectations. Other retailers had mixed sales; J.C. Penney Co. and Costco Wholesale Corp. both fell short of Wall Street projections.

Industry analysts generally believed the world's largest retailer is struggling with its own internal problems, not an industry-wide malaise. Still, the discounter's woes raised the possibility that it would incite increasingly aggressive price wars this season that would slice into retail profits. And a Labor Department report Thursday that showed a surprising increase in claims for jobless benefits last week added uncertainty to the outlook for holiday sales.

The timing of Wal-Mart's news couldn't have been worse, coming just after most consumers started holiday shopping. While many retailers had a strong Thanksgiving weekend, Wal-Mart warned Saturday that its November sales would be weaker than expected.

Wal-Mart's 0.1 percent dip in same-store sales for the month is in line with the reduced forecast from analysts surveyed by Thomson Financial, which forecast unchanged growth.

Including a drop in gasoline revenues from its Sam's Club division, which Wal-Mart did not include in its calculation, same store-sales fell 0.3 percent.

Wal-Mart has struggled in recent months with a mix of problems, including the fact that its lower-income customers were hurt by soaring gas prices. But the company's lackluster sales have persisted even as the cost of gas eased, an indication that there are other factors that are dragging down Wal-Mart's results.

"This is pretty discouraging," said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. But he added that Wal-Mart's weak sales "will not be a harbinger of a broad-based weakness across the retail sector."

But he added, "I think it will be a promotional Christmas. Stores will slash prices to drive consumers. And Wal-Mart is going to be first and foremost."

Wal-Mart's discount stores suffered a 0.5 percent decline, while Sam's Clubs had a 2.0 percent increase.

One of Wal-Mart's main problems is that its strategy to broaden its appeal to higher-income shoppers with upscale merchandise was poorly executed. It filled its fall clothing racks with too many trendy items like skinny jeans that shoppers just didn't want.

Wal-Mart's weakness dragged down the International Council of Shopping Centers-UBS same-store sales tally for November to 2.1 percent, below the original 3 percent growth forecast. Excluding Wal-Mart, the tally rose 4.0 percent.

Based on overall disappointing November results, ICSC pared down its growth forecast for the November-December period combined, forecasting a range of 2.5 percent to 3 percent, down from 3 percent.

While retailers have hopes for a decent season, there are concerns about how confident consumers are. The latest measure of confidence by the Conference Board fell during November, and reports of job cuts and buyouts could make consumers even more uneasy.

Thursday's Labor Department report also raised questions about consumers' comfort level.The department said 357,000 claims were filed last week, up 34,000 from the previous week. Economists said it was too soon to tell whether the unexpected increase indicated a weakening in the job market.

October figures on consumer income and spending issued Thursday showed that consumers had reason to be upbeat, at least during that month. The Commerce Department said incomes rose a healthy 0.4 percent, while spending rose 0.2 percent after a decline in September. The data was encouraging but does not guarantee that consumers shopping for the holidays will feel like spending freely — something that was clear the day after Thanksgiving, when shoppers focused on getting the best bargain, gravitating toward early bird specials and then leaving stores when the deals disappeared.

"This tells me that the customers is ever savvy about shopping for markdowns," said John Morris, a managing director at Wachovia Securities "The next couple of weeks will be really telling."

Target's 5.9 percent same-store sales increase topped forecasts of a 5.7 percent gain. But Costco reported a 5 percent gain in same-store sales, below the 5.7 percent estimate.

Among department stores, Federated, which acquired May Department Stores Co. last year, reported a robust 8.5 percent same-store sales gain, beating the 4.8 percent estimate. Same-store sales include only Macy's and Bloomingdale's stores that existed before the deal closed. Federated also raised its December forecast.

Saks Inc.'s 7.2 percent gain in same-store sales beat the 7 percent estimate.

But results from Kohl's Corp. and Penney were disappointing. Penney said same-store sales at its department stores rose 1.4 percent, falling short of the 3.7 percent forecast from Wall Street. Kohl's had a 3.7 percent gain in same-store sales, below the 4.8 percent prediction.

Gap Inc., which is still struggling to find the right fashion formula, suffered an 8 percent drop in same-store sales, worse than the 5.4 percent forecast.

Teen retailers generally did well. Wet Seal Inc.'s 5.5 percent same-store gain beat the 4 percent estimate.

©2006 Associated Press

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Wal-Mart's November Not So Jolly

World's Largest Retailer's Disappointing Sales Results; Other Chains Fare Better

By DAN ARNALL
Nov. 30, 2006                                        [back to top]

If you're the world's largest retailer, the holiday buying season should be one of the most wonderful times of the year as shoppers open their wallets in search of a little cheer.

But sometimes a grinch and a little trouble in the clothing aisle can increase the number of empty shopping carts at your stores.

Wal-Mart, the world's largest retailer, posted a 0.1 percent decline in same-store sales during November.

This is the first time the company has posted a down month in more than a decade and it comes at a crucial time that has some investors worried that Wal-Mart has lost its touch with customers.

"I do think they've lost their way on some parts of the store," said Christine Augustine, a retail analyst with Bear Stearns. "And I think they'll get it back, but it's going to take time."

In it's monthly sales report to investors, the company pointed out some of its problem areas: apparel and home furnishings. Wal-Mart decided it could grab some of the more fashion-conscious customers from competitor Target by offering more than basics in both of these areas. But sales in both have yet to gain traction.

One Wal-Mart shopper talked with ABC's Betsy Stark today. "What do you think about the fashion at Wal-Mart?" asked Stark. The customer responded: "The fashion? I don't go there."

Add to that a difficult comparison from a year ago, when residents along the Gulf Coast were spending billions to replace home goods and basics lost to the hurricanes, and it makes for a tough month to post growth.

According to data from the International Council of Shopping Centers, Wal-Mart's down month zapped almost half the November growth in the retail sector. According to the group's figures, sales were up 2.1 percent during November at chain stores open at least one year. Last year, the ICSC's retail growth index came in at 3.8 percent during November.

Wal-Mart says it will increase advertising during December and cut prices on holiday and gift items to drive traffic up. They are predicting that the final month of the year will be flat or slightly up when compared to last year.

But customers are saying they are less likely to drop by a discount store this holiday season, turning instead to traditional department stores or online merchants.

Research firm RetailForward's most recent "ShopperScape" survey shows about 55 percent of people plan to go to discount stores for holiday shopping this year, six percent below the level from a year ago.

Analysts say the retailer needs to take risks to gain traction. "This is a battleship that is in the process of turning and it's going to take some time for those changes to be made," said Bill Dreher, retail analyst at Deutsche Bank.

But Wal-Mart's fate was not shared by all retail chains; some big-name vendors posted impressive sales gains during November.

Department stores saw sales grow by 4.6 during the month, helped by an 8.5 percent surge at Federated, operator of the newly national Macy's chain. A massive $100 million national ad campaign and holiday-related sales helped draw people into their stores last month.

Analysts also point to the luxury store sector, which saw a 9.6 percent increase in sales. Clients of these stores tend to be wealthier, thus more likely to be enjoying the benefits of the recent run-up in the stock market.

Limited Brands, owner of Victoria's Secret and Bath & Body Works stores, saw sales jump by 12 percent, but reminded investors that a good November does not necessarily insure a glittering holiday season. On their investor call, they noted that November sales represent just a fifth of the total holiday sales for their stores, even with the Black Friday boom.

Copyright © 2006 ABC News Internet Ventures

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Wal-Mart to Offer AT&T High-Speed Services

By BetaNews 
November 29, 2006                              [back to top]

AT&T said Wednesday that it had reached a deal with Wal-Mart to offer its high speed Internet service in 570 stores across 13 states. Consumers would be able to learn about and purchase services from Wal-Mart's "Connection Center" kiosks. AT&T pointed to the potential reach of up to 150 million customers who shop in the nation's largest retailer each week as a reason for working with Wal-Mart.

AT&T will also offer Wal-Mart gift cards of $25 for ordering the company's Express service, and $75 cards for ordering Pro and Elite Service. Service fees would begin at $14.99 per month, with no term commitment. "We offer the fastest Internet speeds in the market for the price, which fits perfectly with the Wal-Mart everyday-low-price model," AT&T Consumer chief marketing officer Rick Welday said.

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San Diego to Ban Wal-Mart Supercenters

By ELLIOT SPAGAT
Associated Press
11.29.06                                      [back to top]

The City Council here voted late Tuesday to ban certain giant retail stores, dealing a blow to Wal-Mart Stores Inc.'s potential to expand in the nation's eighth-largest city.

The measure, approved on a 5-3 vote, prohibits stores of more than 90,000 square feet that use 10 percent of space to sell groceries and other merchandise that is not subject to sales tax. It takes aim at Wal-Mart (nyse: WMT - news - people ) Supercenter stores, which average 185,000 square feet and sell groceries.

Mayor Jerry Sanders will veto the ban if the Council reaffirms it on a second vote, which will likely happen in January, said mayoral spokesman Fred Sainz. The Council can override his veto with five votes.

"What the Council did tonight was social engineering, not good public policy," Sainz said.

Supporters of the ban argued that Wal-Mart puts smaller competitors out of business, pays workers poorly, and contributes to traffic congestion and pollution. Opponents said the mega-retailer provides jobs and low prices and that a ban would limit consumer choice.

"Quite simply, I do not think it is the role of the San Diego City Council to dictate where families should buy their groceries," said Councilman Kevin Faulconer, who opposed the ban.

Councilman Tony Young, who joined the 5-3 majority, countered, "I have a vision for San Diego and that vision is about walkable, livable communities, not big, mega-structures that inhibit people's lives."

Wal-Mart spokesman Kevin McCall said the Bentonville, Ark.-based company may consider a legal challenge or voter referendum if the measure becomes law.

"Certainly we're disappointed but there's still a number of steps left in this process," he said. "We need to look at what our options are."

The ban is modeled on a law in Turlock, a city of 70,000 people 85 miles southeast of San Francisco. Turlock prohibited big-box stores over 100,000 square feet that devote at least 5 percent of their space to groceries.

Wal-Mart recently dropped its challenge to the Turlock ordinance, which prevented it from building a planned 225,000-square-foot Supercenter store. In July, a federal judge in Fresno said Turlock's zoning law did not infringe on the company's constitutional rights. The state Supreme Court refused to hear the case.

Wal-Mart has about 2,000 Supercenter stores, including 21 in California, but none in the San Diego area. The retailer has 18 regular Wal-Mart stores in the San Diego area, including four within limits of the city of 1.3 million people.

Wal-Mart has not disclosed plans for a Supercenter store in San Diego area. Sainz, the mayoral spokesman, said the retailer probably wants to expand.

"It's complete and total guesswork but I'm inclined they would," Sainz said. "Everything I've seen and heard from them makes me think they would."

San Diego's move comes two months after the Chicago City Council failed to override Mayor Richard Daley's veto of a so-called "living-wage" ordinance that would have required giant retailers to pay their workers higher wages.

Copyright 2006 Associated Press. All rights reserved.

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What's With Wal-Mart's Sales Woes?

Is it the discount feel? The try for trendy? The bad union rep? On Nov. 30 the No. 1 retailer may explain its first key sales dip in a decade

by Pallavi Gogoi
Business Week
November 29, 2006                            [back to top]

All eyes are on Wal-Mart Stores (WMT) and what explanation the world's largest retailer will provide for its slipups on Thursday, Nov. 30, when it reports its final monthly sales numbers.

And with good reason. The whole stock market took a hit on Nov. 27 after the Bentonville (Ark.) company warned that its November same-store sales will drop 0.1%, the first such decline in 10 years. A key retail metric, same-store—or comparable—sales, are those of units open at least one year. As the largest retailer, Wal-Mart is viewed as a bellwether for consumer spending, which makes up two-thirds of all economic activity. But Wal-Mart's problems may well be the product of its own business strategies. One of these was launching a line of trendy apparel in its Metro 7 line, which backfired and scared away core customers (see BusinessWeek.com, 11/14/06, "Wal-Mart Back to the Basics").

Goldman Sachs (GS) analyst Adrienne Shapira notes that Wal-Mart had been remodeling its stores through mid-November, which might have had a negative impact. Still, Wal-Mart rolled out some of its deepest discounts in recent years on toys, electronics, and home appliances in the hopes of appealing to its core customers, who look for value. Yet shoppers spurned the discounter. As Shapira notes in her report: "A negative handle is never a good way to kick off the season."

Fending Off Critics One question on the minds of some retail experts: Is Wal-Mart's reputation hurting sales? After all, last year consulting firm McKinsey & Co. found that 2% to 8% of the company's customers have stopped shopping there "because of negative press they have heard." And that was before the negative publicity campaigns by two of its most vociferous opponents—union-funded groups Wal-Mart Watch and WakeUpWalmart.com. This year both groups have ramped up their attacks on Wal-Mart, calling on the company to provide a "living wage and affordable health care" for employees (see BusinessWeek.com, 10/31/06, "Wal-Mart: A Reputation Crisis").

Wal-Mart didn't comment for this article. In the past, company officials have responded to critics by saying that its workers are paid more than the minimum wage and that it offers inexpensive health plans, in some cases for as little as $11 a month. The retailer also says it acts as an ally of the middle class and poor by providing a broad array of goods at affordable prices. "We continue to create jobs, advance careers, and enhance communities across this country," said Chief Executive Lee Scott in the third-quarter earnings call on Nov. 14.

Still, Wal-Mart has struggled to keep negative headlines out of the news. Last month, Senator Barack Obama (D-Ill.) and former Democratic Vice-Presidential candidate Senator John Edwards teamed up with WakeUpWalmart.com to call on the retailer to become a better employer. Those calls officially launched a six-week campaign titled "Hope for the Holidays," in which the watchdog group plans to build public pressure on Wal-Mart to change what the group calls the discounter's "anti-family business practices with its strict attendance policies and its salary caps" (see BusinessWeek.com, 11/16/06, "See Can Barack Wake Up Wal-Mart?").

It's the Ambience, Stupid Today, some say that the negative sales for November might be the first sign of public backlash. "Wal-Mart's brand has become very fragile," says James Gregory, chief executive of CoreBrand, a global brand-management consultancy in Stamford, Conn. Gregory says that Wal-Mart hasn't managed its brand as well as other discounters and cites Target (TGT), which gives the impression of being chic. "The Target store experience is that you don't feel like it's a discount store, but Wal-Mart stores actually feel that way," says Gregory.

Indeed, this year customers seem to be going more for pleasant ambience than discounts. Tricia Ehrlich, a Setauket (N.Y.) mother of three who owns an online boutique, says that she doesn't go to Wal-Mart because it doesn't have an acceptable shopping environment. "Wal-Mart is schlocky. It's like you're in a big flea market," says Ehrlich, whose home is on Long Island. Clearly, the toy discounts at Wal-Mart didn't reel her in. Target, on the other hand, seems to be doing quite well. Like Wal-Mart and other retailers, Target will release its monthly sales figures on Nov. 30, but Goldman's Shapira expects a 7% increase in Target's same-store sales, according to a preliminary traffic report the analyst compiled.

Gogoi is a reporter for BusinessWeek Online in New York.

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

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Attack of the Wal-Martyrs

They spin, leak and cajole. The politicos behind Wake Up Wal-Mart aim to make the holidays hell for the folks in Bentonville.

By Barney Gimbel
Fortune Magazine
November 28, 2006                                  

(Fortune Magazine) -- It's the week before Thanksgiving, and Chris Kofinis, the never-at-a-loss-for-words communications director for Wake Up Wal-Mart, is going through his organization's secret holiday campaign plan. We're in his drab, windowless office in downtown Washington, D.C., surrounded by handmade posters, press clippings and assorted flip charts full of ideas and scheduling details. "You know, I probably shouldn't be doing this," he says as his cell phone rings. "If this got out, it would screw everything up. Wal-Mart would know too much."

The PowerPoint presentation entitled "Hope for the Holidays" details how the 1 1/2-year-old union-backed group plans to rattle Wal-Mart's carefully crafted image precisely when Americans are frequenting the mega-retailer most. It includes a ten-part timeline for attacking the company from mid-October through the end of the year.

The week before Christmas, for example, the group plans a mini-campaign titled "America, Pray for Wal-Mart to Change." It calls for reaching out to religious leaders and groups, targeted media buys and candlelight vigils in front of the stores, with families and children asking for health care. It's topped off by a national day of prayer.

"When you frame it as a family values and faith issue, almost all of Wal-Mart's core customers pay attention," Kofinis says. Another week the group plans to frame its campaign as a women's issue. "That's the whole idea behind what we do: We try to come up with innovative and creative ways to reach out to as many different demographic groups as possible."

Generate headlines, spin the news, trash your opponent. If this sounds like a presidential campaign, you're not too far off. Oh, and just as in The Boys on the Bus, these political junkies take few vacations, get little weekend rest and dating - well, that's for civilians.

In many ways, not much has changed since they were with the Howard Dean, Wesley Clark and John Kerry presidential campaigns. Only this time they think they're backing a winner. Even better, their candidate doesn't have to win - Wal-Mart (Charts) just has to lose. "If we want to talk about what kind of America we want for our children," says Kofinis, "we've got to talk about what is the responsibility of companies like Wal-Mart."

David vs. Goliath

Plenty of companies complain they get bad press. But Kofinis and Paul Blank, the group's campaign director, are part of what is quite possibly the most relentless public relations assault ever launched against a company.

Simply put, Wal-Mart cannot do anything right in the eyes of these groups. When Wal-Mart lowers prescription drug costs, it "needlessly exaggerated" the scope of the plan. New environmental policies? "A publicity stunt." Even CEO Lee Scott's vacation raised "serious questions."

Wake Up Wal-Mart and another union-backed group, Wal-Mart Watch, spend just a few million dollars a year in contrast to Wal-Mart's $1.6 billion advertising budget. But thanks to the explosion of news outlets and modern Internet campaigning, the opportunities to point out the retailer's misdeeds - often through internally leaked documents - are limitless. (Imagine if Standard Oil muckraker Ida Tarbell had had a blog.)

Kofinis and Blank are liberals - but say they aren't radicals out to destroy Wal-Mart. Kofinis, 37, who grew up outside Toronto and recently became an American citizen, was a political science professor at Cal State Northridge before he was drafted to help run General Clark's campaign.

And Blank, a New Jersey native who began his political career at 12 as a volunteer for Senator Bill Bradley, graduated from Exeter and Duke, then went to work in politics, most recently as the political director for Howard Dean's campaign.

It's difficult to gauge what effect their efforts have had on Wal-Mart's bottom line. "Our customers see these attacks as part of a tired and failing campaign," says Wal-Mart spokeswoman Sarah Clark. "We have 127 million customers who visit our stores each week. We think that in itself tells the whole story."

That's true - and those customers have saved billions. Still, Wal-Mart's stock is down 30 percent since 2000. Same-store sales growth has slowed to 1.5 percent in the third quarter, compared with 4.6 percent at Target (Charts). And opposition to stores in urban areas is as high as ever. With all that going on, the PR offensive, which was spurred by a 2004 grocery workers strike in California that the unions blamed on Wal-Mart, certainly can't be helping.

The demands

But what does Wake Up Wal-Mart want, exactly? It depends on whom you ask. Kofinis and Blank say their aim is to drum up enough public awareness about the company's practices, so it's forced to treat workers better, which will in turn make smaller companies follow suit. (Target is much smaller than Wal-Mart and doesn't sell nearly as many groceries, which explains why they aren't, well & a target.)

Wal-Mart "made $11.2 billion in profits last year," says Kofinis. "If they took even a few billion of that and used it to pay better wages and provide more affordable health care, they could change their public image overnight. They would be a model employer."

But ask the union leaders - the people who pay the bills - the same question, and additional motives emerge. "Success would be if Wal-Mart would bring their working standards up to what we consider decent," says Joseph Hansen, president of the United Food and Commercial Workers International Union, who founded Wake Up Wal-Mart. "We just don't think they are going to do that without a union."

"The average Wal-Mart worker will have to work 1,000 years to make what Lee Scott made last year," Kofinis bellows in front of 27 people holding small mechanical dials. It's a rainy Sunday evening in Bedford, N.H., and Kofinis is "live-dialing" a focus group to pinpoint the messages that resonate most with voters. He's got a winner - the focus group attendees are twisting their knobs furiously, registering an 80 percent approval rating for his message, something most politicians would kill for.

Then Republican strategist Frank Luntz (famous for helping Newt Gingrich forge his Contract With America) takes a turn. He's been brought in to analyze the focus group, and when he tests classic Wal-Mart rebuttals, including how much the company saves consumers, he bombs, scoring a Dukakis-like 30 percent.

Labor issues

The guys are elated: they'll use this research to help convince politicians on both sides of the aisle to make Wal-Mart an issue on the campaign trail. Luntz's takeaway: "Everyone in that room thinks Wal-Mart is a legitimate issue in '08."

That's the whole idea, says the UFCW's Hansen, a former meat cutter who took over the union in 2004. That year the UFCW barely survived the crippling grocery strike in California, which came about after Wal-Mart announced it was moving its grocery-carrying "Supercenters" into the state. Traditional chains used that threat to play hardball with their unions, slashing benefits and precipitating the strike.

The UFCW had already spent more than a decade trying to unionize Wal-Mart with no success. (When they signed up meat cutters in Texas, for example, the company centralized all meatpacking for that region; when they organized one Canadian store, Wal-Mart simply shut it down.) Now it was war.

In January 2005, Hansen approached Howard Dean's former political director, the then 29-year-old Blank. The question was simple: Could he replicate the populist groundswell that the Dean campaign embodied against a single corporation? "I thought about it for a little while," Blank says. "Then it hit me: This was a once-in-a-lifetime opportunity to change America through one company."

Around the same time, Andy Stern, the chief of the Service Employees International Union, hatched a similar plan. He called it Wal-Mart Watch and designed it more as a watchdog research organization than a take-it-to-the-streets campaign. Run by Democratic operative Andrew Grossman, its $4.6 million budget comes primarily from Stern's union, with help from groups like the Sierra Club.

Grassroots campaigning

Blank's group, which receives all its money from the UFCW, modeled itself after the Dean and Clark campaigns. One of the first things it did was to set up a snappy Web site where supporters could enter their zip code to find nearby Wal-Marts and then get involved in pickets, informational house parties or letter-writing blitzes.

With campaigns like "Love Mom, Not Wal-Mart," and "All I Want for Christmas Is Health Care for Mommy," the group says it has signed up more than 287,000 supporters.

Last summer they took their message on the road. With an old bus painted red, white and blue, they held rallies, press conferences and town hall meetings in 35 cities in 35 days. The eight staffers slept on the bus; there were few showers and far too many meals at Denny's. "By the middle of the tour, the bus wasn't smelling so good," says Kofinis.

Not that their office is deluxe either. The quarters are cramped, the carpet is green, and workdays can go as late as midnight working the phones, lobbying Capitol Hill and talking with Wal-Mart employees.

Staffers have become experts at leaking Wal-Mart documents to the press. Recently they exposed an unpublicized salary cap that was part of a much-publicized Wal-Mart pay raise.

Rival Wal-Mart Watch found the single most embarrassing document: a leaked memo from Wal-Mart's VP of benefits that recommended, among other things, discouraging unhealthy people from working at Wal-Mart.

Political pressures

Lately several A-list politicians have spoken out for the cause. Wake-Up Wal-Mart's holiday-campaign kickoff conference call featured Senators John Edwards and Barack Obama. "Wal-Mart is making enormous profits, and yet it has chosen to go with low wages and diminished benefits," Obama told listeners.

Wal-Mart isn't the first American company to face such withering attacks. Standard Oil's dominance provoked widespread public outcry around the turn of the 20th century. Henry Ford's labor practices came under intense criticism in the late 1930s. In recent years Nike (Charts) and Gap (Charts) faced scrutiny for what critics said were sweatshop conditions at its overseas factories.

Each company eventually yielded, says Nelson Lichtenstein, a labor historian at University of California at Santa Barbara and editor of "Wal-Mart: The Face of 21st-Century Capitalism." Standard Oil fell to new antitrust laws. Ford (Charts) unionized, and Nike and Gap opened their factories to inspection. "If history is any guide, Wal-Mart will eventually have to do the same," he says. "No company can withstand this kind of criticism forever."

Clark, Wal-Mart's spokeswoman, says that although the company recently changed its environmental policies with the help of various activist groups, it doesn't plan to meet with any union-backed groups.

"Wal-Mart creates tens of thousands of jobs every year, we offer associates health plans for as little as $23 a month, and we're good stewards of the environment," says Clark. "Americans view Wal-Mart as a good neighbor, a good place to work, and a good place to shop."

Still, a confidential 2004 report prepared by McKinsey & Co. for Wal-Mart, and made public by Wal-Mart Watch, found that 2 to 8 percent of Wal-Mart consumers surveyed have ceased shopping at the chain because of "negative press they have heard."

And Wal-Mart hasn't taken the attacks lying down. Last year the company, which has historically had a tiny PR department, hired Edelman, one of the world's largest public relations firms. After setting up a "war room" in Bentonville, one of Edelman's first projects was to help organize a pro-Wal-Mart grass-roots organization called Working Families for Wal-Mart. But its leader, Andrew Young, the first African-American U.S. ambassador to the UN, was quickly forced to resign after making anti-Semitic and anti-Korean comments.

Then, in October, Wal-Mart Watch exposed another independent-looking site, Wal-Marting Across America, a travelogue by "Jim and Laura," as being company-funded. (Edelman referred all questions to Wal-Mart.)

With both sides locked in a standoff, will the activists ever get the retailer to make concessions? Live to see Wal-Mart workers unionized? Nobody knows. But the longer Wal-Mart stonewalls, the more time the unions have to influence public opinion. "I can't let it end until somehow Lee Scott and Joe Hansen figure out a way to end it," says the UFCW's Hansen. "I don't see that happening anytime soon."

Kofinis agrees. "Wal-Mart could easily change. They just don't want to," he says. "That's what gives this campaign power." It's also what keeps Kofinis's phone ringing off the hook. Back in his office, feet up on his desk, he's taking call after call, his voice becoming louder with each successive point.

It's CNN: "Don't think I can do it today un