Politics & Prose: 2005 Year In Review
Posted on December 23, 2005 by webteam
On the heels of a massive $207 million jury ruling against them in California, a new cycle of negative press, and the upcoming “Fair Share Health Care” legislative battle in Maryland, we’d say 2005 was a bad year for Wal-Mart and a great start for us. Here’s a rundown of the highs and lows of this year. Happy holidays from all of us at Wal-Mart Watch. Please join us in 2006!
SECRET MEMO BROKE IN THE NEW YORK TIMES
An internal secret memo sent to Wal-Mart’s board proposes numerous ways to hold down spending on health care and other benefits while seeking to minimize damage to the retailer’s reputation. Among the recommendations are hiring more part-time workers and discouraging unhealthy people from working at Wal-Mart. Ms. Chambers acknowledged that 46 percent of the children of Wal-Mart’s 1.33 million United States employees were uninsured or on Medicaid.
LEE SCOTT SAYS TAXPAYER HEALTH PROGRAMS ARE “LUCRATIVE”
Wal-Mart Lashes Out At Competitors And Unions In Conference (St. Louis Post-Dispatch). CEO says low prices help raise customers’ standard of living.
“There are government assistance programs out there that are so lucrative it’s hard to be competitive, and it’s expensive to be competitive” [Wal-Mart CEO Lee] Scott said.
WAL-MART WATCH SPONSORS HIGHER EXPECTATIONS WEEK
A Stepped Up Assault On Wal-Mart (Business Week)
Come November, expect to hear a whole lot about Wal-Mart Stores. During the week of Nov. 13, a coalition of 400-plus national and local groups will mount hundreds of actions around the country to complain about the retail ginat’s labor and environmental practices. They’re being coordinated by Wal-Mart Watch, a new umbrella group that includes everyone from the Service Employees International Union to the Sierra Club, the United Church of Christ, and Sprawl-Busters.
Wal-Mart Watch Keeping Close Eye On Titan (Arkansas Democrat Gazette)
“Perhaps no other group is scrutinizing the company more thoroughly than Wal-Mart Watch. Since it was founded in March, Wal-Mart Watch has unleashed a torrent of news releases, advertisements and statements meant to change the way Wal-Mart does business.”
DISAPPOINTING FIRST QUARTER EARNINGS
Wal-Mart Results, Outlook Disappoint; Target Gains (Reuters)
Shari Eberts, retail analyst with J.P. Morgan, said Wal-Mart’s second quarter forecast “is the largest negative revision in recent memory.”
Wal-Mart Invites Media Home (CNNMoney.com)
Bill Dreher, analyst with Deutsche Bank, said, “All the negative publicity has pressured the stock. Maybe this move will help take away some of that ‘headline’ risk acting on the stock.”
TRUCK DRIVERS CLAIM BIAS
Two Black Truckers Sue, Accusing Wal-Mart Of Hiring Bias (New York Times)
Two black truck drivers have filed federal lawsuits against Wal-Mart Stores in Arkansas, arguing that the company discriminated against them by denying them jobs because of their race. A more recent complaint, filed last month by Tommy Armstrong, states that 2 percent to 3 percent of Wal-Mart’s highway drivers are black, compared with 15 percent of highway truck drivers over all.
DUKES V. WAL-MART
Wal-Mart Didn’t Act On Internal Sex-Bias Alert, Documents Show (Bloomberg)
Wal-Mart Stores Inc. took no action on internal warnings seven years ago that it was falling short in promoting women, documents in a federal sex-discrimination lawsuit show. “Wal-Mart’s chances of losing this at trial are very, very high,’’ says Washington employment attorney Richard Seymour…”An employer that knows or should have known that its officials have abused their authority over personnel matters to discriminate against women has an immediate duty to end the discrimination.”
JULY POLLING SHOWS SPLIT
Polls Split On Wal-Mart’s Image Campaign (Arkansas Democrat Gazette)
A long string of negative publicity has the potential to turn away Wal-Mart customers and strengthen the hand of critics who don’t want the discount chain to open in their town. Between March and July of this year, the percentage of respondents with a negative view of Wal-Mart grew from 31 percent to 36 percent, according to the poll.
Those with a positive view fell from 59 percent to 50 percent. The margin of error was 3.5 percent, according to Westhill Partners. “Wal-Mart has taken a beating in the press for many months now. They have a truly significant PR problem,” said Jim Jordan with Westhill Partners. Jordan is a paid Wal-Mart Watch consultant who helps the group develop campaign strategies.
TENNCARE
Should Wal-Mart Share Blame For TennCare Crisis? (WATE.com)
During WATE’s TennCare town hall meeting Tuesday night, state Sen. Tim Burchett (R-Knoxville) said Wal-Mart shares some of the blame for the TennCare crisis. “A large percentage of their employees are on TennCare and I’d like to see them use some of their profits to support some of their people, and things like that,” Burchett said.
THE FACES OF WAL-MART: BOWEN
Wal-Mart Retreats On Fired VP (Arkansas Democrat Gazette) Retailer discloses that Bowen told firm of fake records in 1998 Wal-Mart told media outlets in July that Bowen’s college transcript was fake. Bowen said at the time that he had already admitted the forgery and was forgiven by his managers. Wal-Mart denied that claim at the time, but now concedes the admission did occur. Bowen says he was fired after reporting allegations of fraud by Coughlin. The company says Coughlin stole roughly $400,000 over more than 10 years from the firm, while Coughlin, through his attorneys, has denied any wrong-doing.
THE FACES OF WAL-MART: COUGHLIN
“Petty Cash: A Wal-Mart Legend’s Trail Of Deceit” (Wall Street Journal).
Mr. Coughlin, who retired as an executive in January, abruptly resigned on March 25 from his board seat after Wal-Mart found what it said was a pattern of expense-account abuses and the use of false invoices to obtain reimbursements. Several other Wal-Mart employees also have been fired. The U.S. attorney for the Western District of Arkansas is investigating the matter. The tale involves another mystery: the “union project.” Mr. Coughlin told several Wal-Mart employees that the money was actually being used for anti-union activities, including paying union staffers to tell him of pro-union workers in stores, according to people familiar with the matter. The fake invoices, Mr. Coughlin told these people, were simply a roundabout way of compensating him for out-of-pocket expenses in his anti-union campaign.
WALTON FAMILY PHILANTHROPY
Wal-Mart’s Benevolence Questioned By Critics (Arkansas Democrat Gazette)
“Unfortunately, their philanthropy is more about corporate advertising than it is about helping nonprofits or communities”; said Jeffrey Krehely, deputy director of the National Committee for Responsive Philanthropy, which recently published a report questioning the motives and effectiveness of Wal-Mart’s giving.
CRASH VICTIM SUED
Insurer Wants Woman’s Crash Settlement (St. Louis Post-Dispatch)
Health plan, like many, seeks repayment of medical costs Debbie Shank stocked shelves at a Wal-Mart store in Cape Girardeau, MO, until five years ago, when her minivan was hit by a tractor-trailer. Her Wal-Mart health insurance paid the medical bills. Proceeds from a lawsuit helped finance her care in a nursing home. Brain damage forces her to use a wheelchair and limits her upper body movement to one arm and two fingers. It stole her memory and her ability to talk to her husband and three sons. … Now the Shanks face a new obstacle. Her Wal-Mart health insurance plan wants the lawsuit money to repay its costs. “This is kind of a standard procedure, and it just preserves our options,” [Wal-Mart spokesman] Marty Hires said.
ENVIRONMENTAL REFORM
Wal-Mart To Seek Savings In Energy (New York Times)
Wal-Mart’s chief executive is set to announce on Tuesday a set of sweeping, specific environmental goals to reduce energy use in its stores, double its trucks’ fuel efficiency, minimize its use of packaging and pressure thousands of companies in its worldwide supply chain to follow its lead. Carl Pope, the executive director of the Sierra Club and a board member of Wal-Mart Watch, a group critical of Wal-Mart, said that, from an environmental standpoint, Wal-Mart’s stated goals would bring tangible improvements. “But,” he said, “they had not addressed the land-use impact of locating new stores in rural areas, covering fields or wetlands and prompting customers to consume extra gasoline to reach them. Even so, “these are positive steps,” Mr. Pope said. “If they do these things, it’s not greenscamming. If they did what they say they will, it would be major shift.”
EXPANSION TACTICS WITH THE WTO
Wal-Mart Up Against A Stagnant Stock Price (Los Angeles Times op-ed from Michael Hiltzik)
Like a noxious smell to which nobody wants to draw attention, there was a curiously unremarked subtext to the third-quarter earnings release from Wal-Mart Stores last week. Wal-Mart stock peaked just under $67 (adjusted for a split) in December 1999. Since then it has largely traded between the $40s and $50s. If you’ve been a long-term holder, as all the primers on virtuous investing instruct us to be, Wal-Mart has been dead money for you since before the turn of the century. The politicized opposition confronting Wal-Mart’s expansion plans can be caricatured as liberal bleeding hearts taking aim at a big, fat conservative target, but it derives more from a recognition that the company’s impact on existing merchants, wage rates and public services is much more pronounced in the city than the countryside. This means rising costs for Wal-Mart. Lobbying expenses to counteract attacks on its behavior are rising, land is more dear, and pressure to provide employees with pay and benefits that keep them off the public rolls is more intense. The stock price hasn’t budged because no one is really sure whether Wal-Mart will overcome these challenges as it has others in the past, or whether, like any being or institution approaching its 60s, this one is starting to show its age.
THE WAL-MART EFFECT
Hot Topic: Is Wal-Mart Good For America? (Wall Street Journal)
It is a testament to the public-relations success of the anti-Wal-Mart campaign that the question above is even being asked.
Wal-Mart Debate Spurs Documentary, Research (Newsday)
What began many years ago as a low murmur of discussion has grown into full-throated debate. It’s a question that is engaging activists, economists, legislators and even the company around which the controversy swirls: Is Wal-Mart good for America?
Wal-Mart Epitomizes Crisis Of Work (Albany Times Union op-ed from Annette Bernhardt)
“When do we recognize that an economy with 30 million people stuck in working poverty is morally bankrupt as well as economically unsustainable? That’s the conversation we are starting this week, and now that Wal-Mart has been forced into the arena, let’s make sure we are ready to go the distance.”
WAL-MART FACING THE LIMITS OF GROWTH
Wal-Mart Up Against A Stagnant Stock Price (Los Angeles Times op-ed from Michael Hilzik)
After years of boasting a price-earnings multiple handily exceeding the rest of the retailing industry, the company has been cut down to size, an inevitable phenomenon. (The near-doubling of its earnings over the last five years, to about $11 billion, means a parallel cut by nearly half in its P/E multiple.) More important, Wal-Mart is facing the limits of growth. This derives partially from the law of big numbers: It’s a lot more challenging to grow profits by, say, 5% when the base is $11 billion than when it’s $5.7 billion, which was the company’s net income in 1999. Wal-Mart long ago passed the age of effortless expansion. With 3,100 stores in the U.S., the company is running out of convenient suburban and exurban building sites. As a result, it has started building stores closer together than it used to, which means cannibalizing sales from the old stores.
