Wal-Mart to release cut-price HD-DVD

Wal-Mart Expects Tough April

n Wal-Mart Ever Be 'Green'?

By Anthony Bianco,
BusinessWeek
April 30th, 2007                                 [back to top]

Declining growth, increasing competition, and not an easy fix in sight

John E. Fleming, Wal-Mart's newly appointed chief merchandising officer, is staring hard at a display of $14 women's T-shirts in a Supercenter a few miles from the retailer's Bentonville (Ark.) headquarters. The bright-hued stretch T's carry Wal-Mart's own George label and are of a quality and stylishness not commonly associated with America's über-discounter. What vexes Fleming is that numerous sizes are out of stock in about half of the 12 colors, including frozen kiwi and black soot.

Fleming may be America's most powerful merchant, but a timely solution is beyond him even so. Wal-Mart failed to order enough of these China-made T-shirts last year, and so they and other George-brand basics will remain in short supply in most of its 3,443 U.S. stores until 2007's second half, depriving the retailer of tens of millions of dollars a week it sorely needs. "The issue with apparel is long lead times," says the quietly intense Fleming, who spent 20 years at Target Corp. before joining Wal-Mart Stores Inc. "We will get it fixed."

For nearly five decades, Wal-Mart's signature "everyday low prices" and their enabler—low costs—defined not only its business model but also the distinctive personality of this proud, insular company that emerged from the Ozarks backwoods to dominate retailing. Over the past year and a half, though, Wal-Mart's growth formula has stopped working. In 2006 its U.S. division eked out a 1.9% gain in same-store sales—its worst performance ever—and this year has begun no better. By this key measure, such competitors as Target, Costco, Kroger, Safeway, Walgreen's, CVS, and Best Buy now are all growing two to five times faster than Wal-Mart.

Wal-Mart's botched entry into cheap-chic apparel is emblematic of the quandary it faces. Is its alarming loss of momentum the temporary result of disruptions caused by transitory errors like the T-shirt screwup and by overdue improvements such as the store remodeling program launched last year? Or is Wal-Mart doing lasting damage to its low-budget franchise by trying to compete with much hipper, nimbler rivals for the middle-income dollar? Should the retailer redouble its efforts to out-Target Target, or would it be better off going back to basics?

If Wal-Mart seems short of answers at the moment, it might well be because there aren't any good ones. Increasingly, it appears that America's largest corporation has steered itself into a slow-growth cul de sac from which there is no escape. "There are a lot of issues here, but what they add up to is the end of the age of Wal-Mart," contends Richard Hastings, a senior analyst for the retail rating agency Bernard Sands. "The glory days are over."

Simple mathematics suggest that a 45-year-old company in an industry growing no faster than the economy as a whole will struggle to sustain the speedy growth rates of its youth. In Wal-Mart's case, this difficulty is exacerbated by its great size and extreme dominance of large swaths of the U.S. retail market. Wal-Mart already controls 20% of dry grocery, 29% of nonfood grocery, 30% of health and beauty aids, and 45% of general merchandise sales, according to ACNielsen.

However, the expansion impulse is as deeply embedded in Wal-Mart's DNA as its allegiance to cut-rate pricing. Wal-Mart was able to boost total U.S. revenues by 7.2% last year by opening new stores at the prodigious rate of nearly one a day. According to Wal-Mart CEO H. Lee Scott Jr., the company plans to sustain this pace for at least the next five years. In fact, he is on record saying that room remains in the U.S. for Wal-Mart to add 4,000 Supercenters—the largest of its store formats by far—to the 2,000 it now operates.

Does Scott, 58, recognize any limits whatsoever to Wal-Mart's growth potential in the U.S., which accounted for 78% of its $345 billion in sales last year? "Actually, and I know it's going to sound naive to you, I don't," he replies. "The real issue is, are [we] going to be good enough to take advantage of the opportunities that exist?"

TOO CLOSE FOR COMFORT

Wall Street does not share Scott's bullishness, to put it mildly. Wal-Mart shares are trading well below their 2004 high and have dropped 30% in total since Scott was named CEO in 2000, even as the Morgan Stanley retail index has risen 180%. "The stock has been dead money for a long time," says Charles Grom, a JPMorgan Chase & Co. analyst.

Even money managers who own Wal-Mart's shares tend to see the retailer as a beaten-down value play, not a growth company. "I'd be surprised if true growth-oriented investors were involved at this point," says Walter T. McCormick, manager of the $1.2 billion Evergreen Fundamental Large Cap Fund, which began buying the stock a year ago. "The issue the Street has is market saturation: We may be in the seventh inning of a nine-inning game."

One can argue that the deceleration of Wal-Mart's organic growth is a function of the aging of its outlets, given that same-store sales rates slow as stores mature. Outlets five years or older accounted for 17% of all U.S. Supercenters in 2000 and 44% in 2006, and will top 60% in 2010, according to HSBC analyst Mark Husson. "There's an inevitability of bad middle age," he says.

Meanwhile, the underlying economics of expansion have turned against Wal-Mart, even as it relies increasingly on store-building to compensate for sagging same-store sales. On balance, the new Supercenters are just not pulling in enough sales to offset fully the sharply escalating costs of building them. Part of the problem is that many new stores are located so close to existing ones that Wal-Mart ends up competing with itself. All in all, the retailer's pretax return on fixed assets, which includes things such as computers and trucks as well as stores, has plunged 40% since 2000.

Even many analysts with a buy on Wal-Mart want it to follow the lead of McDonald's Corp. (MCD ) and cut way back on new-store building to concentrate instead on extracting more value from existing stores, which vary wildly in their performance. Wal-Mart disclosed a year and a half ago that same-store sales were rising 10 times, or 1,000%, faster at the 800 best-managed outlets than at the 800 worst-run ones. Equally shocking was its admission that 25% of its stores failed to meet minimum expectations of cleanliness, product availability, checkout times, and so on.

Scott is acutely aware of the Street's discontent. "We have to find a way to give our shareholders back the returns that they need through some mechanism," he acknowledges. In March, Wal-Mart boosted its dividend 31%. Apparently, the board also is considering spinning off Sam's Club, the warehouse club division that is a perennial also-ran to Costco.

Wal-Mart announced late last year that it would trim its customary 8% annual addition to U.S. square footage to 7% in 2007. At the moment, though, slamming on the brakes is out of the question. Says Scott: "If you stop the growth at Wal-Mart, you'd be silly to think that [alone] means you're going to have better stores."

Wal-Mart's "home office" has taken a series of steps to improve the performance of its far-flung store network. Last year it implemented a whole new supervisory structure that required many of its 27 regional administrators to move out of Bentonville and live in the districts they manage. In April, Scott removed the executive in charge of U.S. store operations and put her in charge of corporate personnel instead.

The number of stores falling below the threshold of minimum customer expectations has declined but remains "more than would be acceptable," says Scott, who is surprisingly philosophical about the persistence of mediocrity. Asked why it has been so difficult to fix bad stores, HE replies: "That's a very good question. It's a question I ask all the time."

The polite, self-deprecating Scott is no Robert L. Nardelli, whose ouster as Home Depot Inc.'s chief had as much to do with his abrasive personality as the chain's business problems. That said, Wal-Mart's stock has performed worse under Scott than Home Depot's did under Nardelli. "The Street is going to look to the back half of 2007 for evidence of improvement," says an adviser to a large, longtime Wal-Mart shareholder. "If that doesn't happen, you're going to see a tremendous amount of pressure."

Scott & Co. already are struggling to cope with mounting sociopolitical backlash to Wal-Mart's size and aggressive business practices. Over the past decade, dozens of lawsuits were brought by employees claiming to be overworked and underpaid, including the mother of all sex discrimination class actions. Organized labor set up two Washington-based organizations to oppose the antiunion employer at every turn. And hundreds of municipalities across the country erected legal obstacles of one kind or another.

Wal-Mart's initial reaction to the gathering storm of opposition was to ignore it and maintain the defiant insularity that is a legacy of its Ozarks origins. "The best thing we ever did was hide back there in the hills," Sam Walton, the company's legendary founder, declared shortly before his death in 1992.

In the past few years, Scott has reluctantly brought Wal-Mart out from behind its Bentonville barricades. Virtually from scratch, this famously conservative company has built a large public and government relations apparatus headed by Leslie A. Dach, a veteran Washington political operative of pronounced liberal bent. Few CEOs have embraced environmental sustainability as avidly as has Scott, who also broke with the Republican orthodoxy of his predecessors by advocating a hike in the federal minimum wage.

It's not just rhetoric: Wal-Mart has indeed made substantive reforms in some areas. It has struck up effective working relationships with many of the very environmental groups it once disdained. No less dramatically, the company has added three women (one is Hispanic) and two African American directors to its board and also tied all executive bonuses to diversity goals.

It turns out, though, that there is a dark, paranoid underside to Wal-Mart's visible campaign of outreach. What began as an attempt by Wal-Mart's Threat Research and Assessment Group to detect theft and pro-union sympathies among store workers grew into surveillance of certain outside critics, consultants, stockholders, and even Wal-Mart's board. Bruce Gabbard, a security technician fired for allegedly unauthorized wiretapping of a New York Times reporter, has described himself as "the guy listening to the board of directors when Lee Scott is excused from the room."

Wal-Mart's spreading Spygate scandal is perhaps the most damaging in a long sequence of PR disasters, including last year's conviction of former No. 2 executive Thomas M. Coughlin on fraud and tax evasion charges stemming from embezzlement of company funds. Coughlin, a Walton protégé who had been Scott's leading rival for the CEO post, is serving a sentence of 27 months of house arrest.

There is no way of measuring how much business Wal-Mart is losing to competitors with more benign reputations. According to a recent survey conducted by Wal-Mart itself, though, 14% of Americans living within range of one of its stores—which takes in 90% of the population—are so skeptical of the company as to qualify as "conscientious objectors."

But the Arkansas giant's fundamental business problem is that selling for less no longer confers the overwhelming business advantage it once did. Low prices still define the chain's appeal to its best customers, the 45 million mostly low-income Americans who shop its stores frequently and broadly. But the collective purchasing power of these "loyalists," as Wal-Mart calls them, has shriveled in recent years as hourly wages have stagnated and the cost of housing and energy have soared.

More affluent shoppers also walk Wal-Mart's aisles in great numbers, but they tend to buy sparingly, loading up on toothpaste, detergent, and other "consumables" priced barely above cost while shunning higher-margin items such as clothes and furniture. To the selective middle-income shopper, quality, style, service, and even store aesthetics increasingly matter as much as price alone. "Here's the big thought Wal-Mart missed: Price is not enough anymore," says Todd S. Slater, an analyst at Lazard Capital Markets.

BACKWOODS KNOWHOW

At first, Wal-Mart management blamed its loss of momentum mostly on rising gasoline prices—a theory undercut when same-store sales kept falling even as the cost of gas receded during the latter half of 2006. Today, Wal-Mart executives are more willing to acknowledge the X factor of intensified competition. Says Fleming: "We're now up against world-class competitors that are each taking a slice of our business."

Wal-Mart not only was slow to recognize this threat but also responded haphazardly once it did. The nub of the problem was that the discounter had relied for so long on selling for less that it did not know any other way to sell. Wal-Mart did not begin to build a marketing department worthy of the name until Fleming was named to the new position of chief marketing officer in spring, 2005, an appointment Scott hailed as "an extraordinary move for us."

Founded in 1962, Wal-Mart rose to dominance on the strength of its mastery of retailing's "back-end" mechanics. Forced by the isolation of the Ozarks to do for itself what most retailers relied on others to do for them, Wal-Mart built a cutting-edge distribution system capable of moving goods from factory loading dock to store cash register faster and cheaper by far than any competitor. It added to its cost advantage by refusing to acquiesce to routine increases in wholesale prices, continually pressing suppliers to charge less.

Walton, who was both a gifted merchant and a born tightwad, also pinched pennies in every other facet of business, from wages and perks (there were none) to fixtures and furnishings. Aesthetics counted for so little that when the retailer finally put down carpet in its stores it took care to choose a color that matched the sludgy gray-brown produced by mixing dirt, motor oil, and the other contaminants most commonly tracked across its floors. To Wal-Mart, the beauty of its hideous carpet was that it rarely needed cleaning.

Low costs begat low prices. Instead of relying on promotional gimmickry, Wal-Mart sold at a perpetual discount calculated to make up for in volume what it lost in margin. Walton's philosophy was price it low, pile it high, and watch it fly. His belief in everyday low prices made him a populist hero even as he built America's largest fortune. (His descendants still own 40% of Wal-Mart's shares, a stake worth $80 billion.) Regulators forced "Mr. Sam" to modify his slogan of "Always the lowest price" to the hedged "Always low prices!" But hundreds of retailers went broke trying to compete with Wal-Mart on price just the same.

In many ways, Wal-Mart has remained reflexively tight-fisted under Scott, a 28-year company veteran who trained at Walton's knee and rose to the top through trucking and logistics. Last year, Wal-Mart began remodeling the apparel, home, and electronics sections in 1,800 stores, replacing miles of that stain-colored carpeting with vinyl that looks like wood. To Fleming, the new "simulated wood" floor is all about aesthetic improvement. His boss takes the classical Wal-Mart view. "The truth is that vinyl costs less," Scott says. "And the maintenance on the vinyl costs less than the maintenance on the carpet."

Yet Wal-Mart is neither as low-cost nor as low-price a retailer as it was in Walton's day, or even when Scott moved up to CEO. Most dramatically, overhead costs jumped 14.8% in 2006 alone and now amount to 18.6% of sales, compared with 16.4% in Scott's first year—a momentous rise in a business that counts profit in pennies on the dollar.

The imperatives of reputational damage control have prompted Bentonville to add hundreds of staff jobs in public relations, corporate affairs, and other areas that the company happily ignored when it was shielded by the force field of Walton's folksy charisma. And as the nation's largest electricity consumer and owner of its second-largest private truck fleet, Wal-Mart was hit doubly hard by the explosion of energy costs.

Wal-Mart also has purposefully, if not entirely voluntarily, inflated its cost base in expanding far beyond its original rural Southern stronghold. It is far more expensive to buy land and to build, staff, and operate stores in the large cities that are the final frontier of Wal-Mart's expansion than in the farm towns where it began. Then, too, the company is encountering mounting resistance as it pushes deeper into the Northeast, Upper Midwest, and West Coast, requiring it to retain legions of lawyers and lobbyists to fight its way into town.

NARROWING THE GAP

Under Scott, Wal-Mart even blunted its seminal edge in distribution by letting billions of dollars in excess inventories accumulate at mismanaged stores. A dubious milestone was reached in 2005 as inventories rose even faster than sales. "You'd see these big storage containers behind stores, but what was more amazing was that [local] managers were going outside Wal-Mart's distribution network to subcontract their own warehouse space," says Bill Dreher, a U.S. retailing analyst for Deutsche Bank.

Over the past decade, top competitors in most every retailing specialty have succeeded in narrowing their cost gap with Wal-Mart by restructuring their operations. They eliminated jobs, remodeled stores, and replaced warehouses, investing heavily in new technology to tie it all together. Unionized supermarkets even managed to chip away at Wal-Mart's nonunion-labor cost advantage, signaling their resolve by taking a long strike in Southern California in 2003-04. The end result: Rival chains gradually were able to bring their prices down closer to Wal-Mart's and again make good money.

Consider the return to form of Kroger Co., the largest and oldest U.S. supermarket chain. Cincinnati-based Kroger competes against more Wal-Mart Supercenters—1,000 at last count—than any other grocer. Which is why until recently the only real interest Wall Street took in the old-line giant was measuring it for a coffin. Today, though, a rejuvenated Kroger is gaining share faster in the 32 markets where it competes with Wal-Mart than in the 12 where it does not.

A recent Bank of America survey of three such markets—Atlanta, Houston, and Nashville—found that Kroger's prices were 7.5% higher on average than Wal-Mart's, compared with 20% to 25% five years ago. This margin is thin enough to allow Kroger to again bring to bear such "core competencies" as service, quality, and convenience, says BofA's Scott A. Mushkin, who recently switched his Kroger rating to buy from sell. "We're saying the game has changed, and it looks like it has changed substantially in Kroger's favor," he says.

While Wal-Mart vies with a plethora of born-again rivals for the trade of middle-income Americans, it also must contend on the low end of the income spectrum with convenience and dollar-store chains and with such "hard discounters" as Germany's Aldi Group. These no-frills rivals are challenging Wal-Mart's hold over budget-minded shoppers by underpricing it on many staples.

To right Wal-Mart's listing U.S. flagship division, Scott installed Eduardo Castro-Wright as its president and CEO in fall, 2005. The Ecuador-born, U.S.-educated Castro-Wright, now 51, worked for RJR Nabisco and Honeywell International Inc. before joining Wal-Mart in 2001. In Castro-Wright's three years as CEO of Wal-Mart Mexico, revenues soared 50%, powered by sparkling same-store sales growth of 10% a year.

To date, Castro-Wright has fallen so far short of replicating the miracle of Mexico that in January he had to publicly deny rumors that he was about to be transferred back to international. Instead, Scott shifted the vice-chairman over Castro-Wright to new duties. That the U.S. chief now reports directly to Scott both solidifies Castro-Wright's status and ups the pressure on him to show results.

Castro-Wright can point to progress on the cost side of the ledger. By tightening controls over the stores, headquarters has halved the growth rate of inventories to 5.6% from 11.5% two years ago. Wal-Mart also has squeezed more productivity out of its 1.3 million store employees for eight consecutive quarters. This was done by capping wages for most hourly positions, converting full-time jobs to part-time ones, and installing a sophisticated scheduling system to adjust staffing levels to fluctuations in customer traffic.

Wal-Mart has found other new ways to economize, notably by cutting out middlemen to do more contract manufacturing overseas. The company's much publicized green initiatives have tempered criticism from some left-leaning opponents but are perhaps best understood as a politically fashionable manifestation of its traditional cost-control imperative.

By any conventional measure, Wal-Mart remains a solidly profitable company. Rising overhead costs have cut into net income, which in 2006 rose a middling 6.7%, a far cry from the double-digit increases of the 1990s. Return on equity continues to top 20%, however, and U.S. operating margins actually have widened a bit under Castro-Wright, as costs have risen a bit slower than Wal-Mart's average selling price.

Evidently, though, it is going to take a lot more than Castro-Wright's workmanlike adjustments to revive Wal-Mart's moribund stock. In the end, Scott's aversion to a McDonald's-style strategic about-face leaves Wal-Mart no alternative but to try to grow its way back into Wall Street's good graces. But if opening a new Wal-Mart or Sam's Club almost every day can't move the dial, what will?

Foreign markets present an intriguing mix of potential and peril for Wal-Mart, which first ventured abroad in 1992. Although the company now owns stores in 13 countries, the lion's share of those revenues comes from Mexico, Canada, and Britain. In 2006 international revenues rose 30%, to $77 billion. At the same time, though, Wal-Mart's long-standing struggles to adapt its quintessentially American low-cost, low-price business model to foreign cultures was underscored by the $863 million loss it took in exiting Germany.

Wal-Mart is the rare U.S. company that is more politically constrained at home than abroad in angling for outsize growth opportunities. In March it withdrew its application for a Utah bank charter just before a congressional committee was set to convene hearings. The retreat marks an apparent end to its decade-long campaign to diversify into consumer banking.

Although Wal-Mart regularly makes sizable acquisitions abroad, it is in no position to respond in kind to such domestic dagger thrusts as CVS's $26.5 billion acquisition of pharmacy benefits manager Caremark Rx. "That deal is a real threat, but Wal-Mart would have huge antitrust problems if it made an acquisition of any size," says a top mergers-and-acquisitions banker. "They are kind of stuck."

In the end, Wal-Mart seems unlikely to regain its stride unless it can solve what might be the diciest conundrum in retailing today. That is, can it seduce tens of millions of middle-income shoppers into stepping up their purchases in a major way without alienating its low-income legions in the process?

Largely because of the pressing need to differentiate itself from Wal-Mart, Target began grappling with this very puzzle more than a decade ago and gradually solved it with the cheap-chic panache that transformed it into "Tar-zhay." Says the president of a leading apparel maker: "Target has an awareness of what's happening in fashion equal to a luxury player, maybe greater. They have set the bar very high."

Scott acknowledged as much in making former Target exec Fleming chief marketing officer, reporting to Castro-Wright. Fleming, who had been CEO of Wal-Mart.com, went outside to fill every key slot in building a 40-person marketing group from scratch. He supported Wal-Mart's move into higher-priced, more fashionable apparel and home furnishings with the splashiest marketing the retailer had ever done, buying ad spreads in Vogue and sponsoring an open-air fashion show in Times Square.

Wal-Mart's top management all the way up to and including Scott presumed that Wal-Mart could run like Tar-zhay before it had learned to walk. "What Wal-Mart tried to do smacks of a kind of arrogant attitude toward fashion—that you can just order it, put it down, and people will buy it," says Eric Beder, a specialty retailing analyst at Brean Murray, Carret & Co.

CRASH COURSE

Wal-Mart did everything at once and precipitously, introducing ads even as it was flooding stores with new merchandise and before it could complete its store remodeling program. Bentonville was learning marketing on the fly and did not even attempt to adopt the sort of formal, centralized merchandise planning at which Target and many big department-store chains excel. Instead, Wal-Mart relied on dozens of individual buyers to make critical decisions as it pushed hard into unfamiliar product areas.

How else to explain why a retailer whose typical female customer is thought to be a size 14 loaded up on skinny-leg jeans? Or why Wal-Mart's cheap-chic Metro7 line got off to a flying start in 350 stores only to crash and burn as it was rolled out to 1,150 more? Or why Wal-Mart not only severely misread demand for George-brand basics but also is unable to replenish its stocks for months on end while "fast-fashion" chains such as H&M easily turn over entire collections every six weeks?

Scott loved Wal-Mart's bold new direction until he hated it, his enthusiasm diminishing in sync with same-store sales throughout much of 2006. "We are going to sell for less," Scott says now, emphasizing a return to Wal-Mart's first principles. "I believe that long after we are gone, the person who sells for less will do more business than the person who doesn't."

Yet Scott also signaled his continuing commitment to the pursuit of the middle-income shopper by promoting Fleming to yet another new post, chief merchandising officer, as part of a January shakeup of the senior ranks. Although Wal-Mart no doubt has sponsored its last glitzy runway show, Fleming insists that the company is sticking with its underlying strategy of "customer relevance"—that is, of moving beyond a monolithic focus on price to try to boost sales by targeting particular customers in new ways. "We're not going to back off," he vows. "We've learned certain lessons. Some things we'll build on, some things we won't."

While the look of its stores is primarily a function of how much Wal-Mart chooses to spend on them, the retailer is unlikely ever to come up with an ambience conducive to separating the affluent from their money without changing its whole approach to labor. The chain's dismal scores on customer satisfaction surveys imply that it is understaffing stores to the point where many of them struggle merely to meet the demands of its self-service format.

It is entirely possible even so that Wal-Mart in time will figure out how to sell vast quantities of dress-for-success blazers, 400-thread-count sheets, laptop computers, and even prepackaged sushi. But as Wal-Mart closes in on $400 billion in annual revenues, it is going to have to overachieve just to get same-store sales rising again at 3% to 5% a year.

The odds are that Scott, or his successor, will have to choose between continuing to disappoint Wall Street or milking the U.S. operation for profits better reinvested overseas. Only by hitting the business development equivalent of the lottery in countries like China, India, or Brazil can the world's largest retailer hope to restore the robust growth that once seemed like a birthright.

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Human Rights at Wal-Mart

Liza Featherstone
04/30/2007                                      [back to top]

How appropriate, this May Day, that Human Rights Watch has just released "Discounting Human Rights: Wal-Mart's Violation of US Workers' Right to Freedom of Association," a detailed account of how Wal-Mart systematically violates its workers' right to organize. The right to freedom of association is, as the group notes, "well established under international human rights law," and the United States should be enforcing it. Our government has not been fulfilling this basic task, and as a result, our nation's largest private employer has also become a rogue union buster, whose practices are starkly at odds with any notion of workplace democracy.

Between 2004 and early 2007, Human Rights interviewed forty-one current and former Wal-Mart workers and managers (some of whom supported unionization, some were opposed and some ambivalent). The group also interviewed labor lawyers and union organizers, and analyzed the cases against Wal-Mart charging the company with violating US labor laws. Even adjusted for its size, the human rights group found, Wal-Mart stood out for the number of such violations. Between January 2000 and July 2005, fifteen National Labor Relations Board rulings against Wal-Mart are still standing and have not been overruled -- that is three times as many such rulings as Albertson's, Costco, Kmart, Kroger, Home Depot, Sears and Target combined. Put together, those companies have a workforce 26 percent bigger than Wal-Mart's.

The rights group found that the company begins to indoctrinate and intimidate workers with an anti-union message almost from the moment they are hired. In violation of international standards -- but not in violation of US law -- workers are encouraged to attend "captive audience" meetings in which they hear all the bad news about unions -- with little or no opportunity for union supporters and organizers to respond. In violation even of weak US laws, Wal-Mart spies on union supporters extensively, has fired workers for union organizing, and has told workers they would lose benefits if they supported a union.

The Human Rights Watch report correctly points out that the problems at Wal-Mart neither begin nor end with Wal-Mart. The retailer is, the authors explain, "a case study in what is wrong with US labor laws." Our laws don't meet international standards, and Wal-Mart doesn't even follow our pathetically minimal laws. US penalties are so light they provide no deterrent even for chronic violators. Human Rights Watch suggests some solid policy solutions. The report's authors don't suggest that Lee Scott and the rest of Wal-Mart's management spend some time breaking rocks on a Southern chain gang. That's what I'd call a proper deterrent! But they do, quite sensibly, rather than simply decrying the bad practices and calling on Wal-Mart to change its ways, suggest that Congress pass the Employee Free Choice Act, which would increase penalties for breaking labor laws and restore some democracy to the union election process by requiring employers to recognize a union if a majority of workers sign union cards. That bill passed the House in March, and is now under consideration in the Senate.

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Wal-Mart Filing Puzzles Analysts

By Anita French,
The Morning News
April 28th, 2007                        [back to top]

Wal-Mart filed what some analysts called an odd statement with the U.S. Securities and Exchange Commission late Thursday that seems to try and justify the $29 million President and CEO Lee Scott earned last year.

The Bentonville-based retailer filed its annual proxy statement April 19 outlining Scott's and other top executives' compensation. On Thursday, the company followed up with a two-page document that began with an explanatory note saying Wal-Mart had provided statements in response to a media inquiry regarding the company's executive compensation.

The document goes on to outline Wal-Mart's financial performance last year and how sales had grown under Scott's leadership. The company then includes a statement that seems an attempt to justify Scott's compensation.

"More than 85 percent of our CEO's compensation, as set by an independent board committee, is tied to the company's financial performance. Lee Scott's compensation is benchmarked with the CE Os? of other publicly traded U.S. retailers and large companies. When compared to other companies, it is among the lowest as a percentage of annual revenue and net income," the statement says.

Wal-Mart spokesman John Simley said the company filed the unusual document "in anticipation of any questions we might get about executive compensation."

"Under SEC rules, when a director is standing for election or there are shareholders proposals relating to compensation, we have to file any responses to news media with the SEC," he said. "If we were to say something, it may constitute solicitation of shareholders. In order to prepare for any questions from the news media, we have to file our answers."

In its proxy statement, Wal-Mart said Scott, 58, earned $1.3 million in base salary, which was unchanged from fiscal 2006. Scott received an incentive payment of $4.3 million, which was based on the total company attaining 82.42 percent of its maximum pre-tax profit improvement performance goal for fiscal 2007.

He also received $15.3 million in stock awards and $8.1 million in option awards, along with $422,680 in other compensation and $308,390 in changes in pension value and nonqualified deferred compensation earnings.

Scott's total compensation was $29.7 million, but the stock options and restricted stock awards will not vest for several years and are based on the company's performance.

Jeff Macke, founder and president of Macke Asset Management, said in March that Scott's stock award of $22 million seemed extreme in light of Wal-Mart's recent financial performance.

"I've no idea what their logic was. I'm a capitalist, but I'm not sure how you can justify $22 million," he said at the time.

On Friday, Macke seemed equally perplexed at Wal-Mart's follow-up filing with the SEC.

"It's bizarre," he said. "Better to remain silent. Justification seems the obvious reason behind it, but there's nothing about his compensation being tied to shareholders. There should be some relationship between pay and return to shareholders.

"The financial arguments make sense to an extent, but the idea that employees are proud of him is nice but has nothing to do with his compensation at all."

Fund manager Patricia Edwards of Wentworth, Hauser and Violich in Seattle, also said she had never seen an SEC document like the one Wal-Mart filed.

"They seem to want to be able to make sure the public has the information they have as reasons for the compensation. It's fine, but not everyone is going to agree with it," she said.

Wal-Mart's most persistent critic, Wal-Mart Watch of Washington, weighed in with its own statement. Spokesman Nu Wexler called the SEC document "defensive and misleading."

"It's awfully hard to justify a $29 million CEO salary when your stock is dead money, your upscale strategy was a flop, and you've just posted the lowest same-store sales growth in the history of the company. Lee Scott's spending a lot of time putting out public relations brushfires and Wal-Mart's senior management team seems to be losing its focus on the fundamentals," he said in an e-mail.

Wal-Mart's stock price has remained sluggish since Scott took over the company almost seven years ago. The company also has had to defend itself recently against attacks over its wages and health benefits, largely from Wal-Mart Watch and another union-backed organization, Wake-Up Wal-Mart.

Text of Wal-Mart's SEC filing on Thursday:

"Lee Scott leads the largest and most complex company in the world and has delivered strong financial performance. Last year alone, sales were up $37 billion and income from continuing operations increased by $770 million from the prior fiscal year. Since he became CEO in 2000, annual sales have more than doubled to $345 billion and income from continuing operations has grown 126 percent to $12.2 billion. Compound annual growth rates are strong in almost every major category: net sales 12.3 percent, income from continuing operations 11.8 percent, EPS from continuing operations 12.9 percent.

We have maintained double-digit annual growth rates in sales and income from continuing operations, which is almost unprecedented for a company this size. More people than ever are shopping at Wal-Mart and that's why we are once again the number one company in the Fortune 500.

More than 85 percent of our CEO's compensation, as set by an independent board committee, is tied to the company's financial performance. Lee Scott's compensation is benchmarked with the CE Os? of other publicly traded U.S. retailers and large companies. When compared to other companies, it is among the lowest as a percentage of annual revenue and net income.

Our associates respect that Wal-Mart has a well-recognized culture of opportunity. They are proud that their CEO started as a manager in the trucking division and has stayed with the company for 28 years. They're also proud that his leadership - through sustainability initiatives and the $4 prescription drug program -- reflects the company's purpose of saving people money so they can live better."

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Dig at Wal-Mart Site Yields Prehistoric Camel

AP
2007-04-28                                  [back to top]

PHOENIX (April 28) - Workers digging at the future site of a Wal-Mart store in suburban Mesa have unearthed the bones of a prehistoric camel that's estimated to be about 10,000 years old.

Arizona State University geology museum curator Brad Archer hurried out to the site Friday when he got the news that the owner of a nursery was carefully excavating bones found at the bottom of a hole being dug for a new ornamental citrus tree.

"There's no question that this is a camel; these creatures walked the land here until about 8,000 years ago, when the same event that wiped out a great deal of mammal life took place," Archer told The Arizona Republic.

Wal-Mart officials and Greenfield Citrus Nursery owner John Babiarz have already agreed that the bones will go directly on display at ASU.

Archer said some of them may be placed on display very soon, but most will take several months "to get sorted out and stabilized."

"In my 15 years at ASU doing this work I can think of six or seven times when finds this important have been made," Archer said. "This is the first camel. Others have been horses, once a mammoth on Happy Valley Road. This sort of thing is extremely rare."

Copyright 2007 The Associated Press.

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Low Costs Versus High Wages?

James O'Toole and
Edward E. Lawler III
Forbes
04.25.07                                 [back to top]

In a radical cost-cutting move, Circuit City announced recently that it was dismissing 3,400 of its most experienced employees. While Circuit City's offer to hire many of those salespeople back at lower wages puts a surreal twist to the tale, in fact, the company is just one of many trying to gain competitive advantage by lowering labor costs.

In the last few years, Detroit automakers have laid off more than 70,000 workers, and most of the nation's grocery, discount, fast food and mall chain stores have undertaken "innovative" approaches to reducing employee wages and benefits to lower their costs. Wal-Mart Stores' CEO argues that he has "no choice" but to pay low wages to meet his customers' demand for low prices.

Although offering minimal wages and benefits is the most common way companies try to lower their costs, our recent study of American management practices reveals that such bottom feeding may not be the most effective strategy. In fact, low wages paradoxically generate a variety of negative employee behaviors that add to the overall cost of doing business.

Although managers rarely calculate these costs, they often turn out to be substantial. For example, employees at low-wage companies have significantly higher turnover rates than those at well-paying companies: Wal-Mart has nearly a 50% turnover rate, and at many fast food, retail and service companies, the rates are even higher. Researchers have computed the total costs of such turnover as the equivalent of one month's salary for unskilled workers and more than a year's salary for skilled ones.

In almost all industries, research shows that the most profitable companies are those with the lowest overall operating costs, and not those that pay the least. For example, pilots at "low-cost" Southwest Airlines actually are paid more on average than their counterparts at "high-cost" United Airlines.

The difference between these two unionized airlines--the first highly profitable, the second not--is found in their pay rates and the way they manage their people. Southwest managers do a better job recruiting the right employees, and Southwest employees at all levels are able to make managerial decisions and to work with a minimal amount of supervision.

In almost all industries, productive, higher-paid workers can more than cover the costs of their salaries and benefits, if they are managed appropriately. For example, Costco Wholesale pays its workers $17 an hour on average, while its competitor, Wal-Mart's Sam's Club, pays only $10 an hour on average; 85% of Costco employees enjoy company-provided health insurance, compared with less than half of the workers at Sam's Club. Significantly, these high wages and benefits do not come out of the pockets of Costco's shareholders. In fact, Costco has outperformed Wal-Mart on the stock market over the last five years. The real reason for the difference in compensation and benefits is that Costco employees have much lower turnover, better interaction with customers and are more productive than Wal-Mart's workers.

Because Sam's Club employees require layers of close supervision, they are much less productive than Costco's largely self-managing workers. The results speak for themselves: Costco generates slightly more sales than Sam's with 38% fewer employees. Moreover, Costco's engaged and motivated workers are organized in ways that encourage, and reward, them for adding value to their enterprise by way of their ideas and extra effort. Also, at Costco, there is a deep managerial understanding that the correct metric to be used with regard to labor productivity is "total overall labor costs" and not "unit labor costs."

Costco exemplifies a small but growing number of businesses whose labor practices are predicated on the understanding that competitive advantage increasingly is realized through the effective mobilization of an engaged and committed workforce.

These "high-involvement companies" offer workers challenging and enriching jobs and a say in the management of their own tasks. They also make commitments to low turnover and few layoffs. Found in manufacturing as well as services, these companies are relatively egalitarian, with few class distinctions between managers and workers and relatively small ratios between the salaries of the CEO and the average worker.

Typically, their workers are organized into self-managing teams; all employees are made to feel they are members of a supportive community; and all receive extensive, on-going training and education. Importantly, workers in these companies tend to be paid salaries, as opposed to hourly wages, and all participate in company stock ownership and share in company profits.

--------------------------------------------------------------------------------

In our recent review of the performance of high-involvement companies, we found that the productivity of their workers more than justifies the high pay and good benefits they receive. In fact, when managed correctly, highly paid American workers are far more productive than even low-wage overseas workers. That's because managers at high-involvement companies organize work processes and systems in ways that allow employees to contribute significant amounts of "added value" to the products and services they make and provide.

When U.S. managers give their employees the organizational structure, resources and authority needed for them to contribute their ideas and efforts, they routinely outproduce their counterparts in less-developed countries, as witnessed by the ingenuity, initiative and efforts of the Americans who productively and efficiently make steel at Nucor, motorcycles at Harley-Davidson, consumer goods at Proctor & Gamble and high-tech products at W.L. Gore and Associates.

Waterloo, Wisc.-based Trek Bicycle is able to export bikes to the world because its American workers are empowered, and rewarded, to make continual improvements to their products and work processes. Trek's workplace system creates a constant stream of new products that forces the poorly paid, under-educated, and micromanaged workers making copy-cat bikes in South Asian factories to continually play catch up. Our research shows that the comparative advantage of having trained, motivated and committed workers enjoyed by Trek can be realized by a wide variety of businesses, both low-tech and high-tech.

Evidence of the positive potential of employee involvement doesn't rest on a few company examples. Analysis of the results of the 2002 U.S. Census of a cross-section of American workers shows that in all industries and among all demographic groups, the greater the extent to which employees participate in profit sharing, stock ownership and other forms of financial gains that derive from their efforts, and the greater the extent to which they also participate in organizational decision making, the more they are committed to, engaged in and satisfied with their jobs.

The existence of such data gives rise to an important question: Given the manifest benefits to shareholders, employees and society alike, why aren't there more High-Involvement Companies?

The High-Involvement model has not spread further largely because managers believe their companies have to be highly successful before they can offer good working conditions to their employees. As one CEO recently explained, "I would treat my employees as well as Starbucks treats theirs--if I could charge the equivalent for my product of $3 for a cup of latte!" But managers who assume that higher profits drive better working conditions have their logic backward.

Contrary to conventional wisdom, we have identified companies in virtually every industry that are profitable because they provide good jobs. As Starbucks CEO Howard Shultz explains, the high-quality customer service that makes it possible for his company to charge a premium for its coffee results from the investments it makes in employee welfare and training. This is true as well for the productive contributions of employees at such diverse high-involvement companies as package courier United Parcel Service, grocery chain Whole Foods Market and Circuit City's competitor in discount electronics, Costco.

In light of this evidence, we are left to wonder what might have happened at Circuit City had its executives appropriately rewarded individual, team and organization performance at all levels; invested heavily in the development of their human capital; and created conditions in which their workers could add large amounts of value?

Despite the evidence to the contrary, most American managers continue to believe they face a painful choice between offering high employee wages on the one hand or low customer prices on the other. In fact, their real alternative is between staying with conventional management or adopting high-involvement management practices.

James O'Toole and Edward E. Lawler III are professors at the University of Southern California's Marshall School of Business and authors of The New American Workplace (Palgrave-MacMillan, 2006).

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Wal-Mart trimming number of bosses at Sam’s Club stores

By Steve Painter,
NW Arkansas Democrat-Gazette
April 27th, 2007                                              [back to top]

Wal-Mart Stores Inc. is shrinking the store-level management staff at its Sam’s Club wholesale stores, giving managers the option of applying for other jobs at the company — in some cases with a pay cut — or taking severance pay.

The change will eliminate department-head positions at stores across the country. Those positions, five at each store, will be replaced by three new assistant store manager positions at higher pay levels, the company said.

Nearly 1, 200 management positions at the 580 Sam’s Club stores will be eliminated.

“This is not a cost-cutting effort. We expect a slight increase in payroll upon completion of this change,” Sharon Orlopp, senior vice president for Sam’s People Division, said in a statement.

Managers choosing to accept the buyout must sign a fourpage “restructure” agreement in which they agree not to sue for age discrimination, disclose any confidential information or make “disparaging comments regarding Wal-Mart, its business strategies and operations, and any of Wal-Mart’s officers, directors, associates, shareholders and affiliates.”

“At what point does the First Amendment come into play ?” asked Nu Wexler, spokesman for Wal-Mart Watch, a unionfunded group critical of the company’s pay and benefits.

The Arkansas Democrat-Gazette obtained a copy of the agreement from Wexler, who said it came from an employee affected by the change.

Chris Kofinis, spokesman for WakeUpWalMart. com, another union-funded group, characterized the changes as evidence of employee mistreatment.

“They do damage to their business when they treat their employees like this,” Kofinis said.

Retail observers said the restructuring move is not unusual.

“That’s actually a more standard format that they’re switching back to,” said Claudia Mobley, head of the Center for Retailing Excellence at the Sam M. Walton College of Business at the University of Arkansas at Fayetteville.

Sam’s Club employs more than 100, 000 workers. The company’s sales performance in recent years has consistently trailed rival Costco, which has a higher pay scale but also operates in more urban markets, where the cost of living is higher than where Sam’s Club operates.

Retail analyst Edward Weller of ThinkEquity Partners LLC in San Francisco said employee pay levels alone don’t explain Costco’s better store performance.

“You can’t hire people in Los Angeles for what Wal-Mart pays people in Arkansas,” he said.

Orlopp said in her statement that the company’s goal was to find positions for all current managers affected by the change.

“Some were promoted to the new higher-paying positions, and some impacted by this change have voluntarily accepted severance,” she said. “Based on our current trend, we anticipate approximately 250 of our more than 100, 000 associates will not continue with the company.”

Managers who accept an hourly position must stay in that job for at least six months before seeking another management position, spokesman Susan Koehler said. They are eligible to apply for management openings in the company’s much larger Wal-Mart Stores division in addition to the Sam’s Club stores, she said.

Another document circulated to managers affected by the change and obtained by Wake-UpWalMart. com showed severance payments would range from two weeks to 40 weeks of normal pay, depending on length of employment with Wal-Mart.

Kofinis said Wal-Mart’s move “smacks a little of what happened at Circuit City.”

Last month the electronics retailer laid off 3, 400 of its most experienced employees to replace them with lower-paid workers. Circuit City said the discharged employees could apply for their old jobs at lower pay after 10 weeks.

Patricia Edwards, a fund manager at Wentworth, Hauser and Violich, Investment Counselors in Seattle, said the Sam’s Club move should improve operations.

“Having people who are focused more broadly on the overall store operation rather than the department will improve the experience for customers,” she said. “This is such a competitive landscape that they are all constantly looking at how to better align their labor. It’s just bigger news when Wal-Mart does it.”

Wal-Mart’s stock closed Thursday at $ 48. 70 a share, down 11 cents, or 0. 23 percent, in trading on the New York Stock Exchange.

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Wal-Mart Diversity Figures Show Small Change in Management Makeup

Naharnet                               [back to top]

Management ranks at Wal-Mart Stores Inc. saw modest increases last year in women and minorities, even though they are more abundant in the retailer's work force than in the population at large, according to figures the company released Friday. This is just the second year that Wal-Mart, which faces the largest discrimination class-action lawsuit in U.S. history, has publicized its report to the Equal Employment Opportunity Commission and therefore the first time any changes can be seen.

Compared to the report on 2005, the 2006 numbers showed small increases in the overall presence of minorities and women among Wal-Mart's 1.35 million U.S. employees.

Women made up 60.9 percent of Wal-Mart's employees last year, compared to 60.5 percent the year before. Minorities were 33.1 percent versus 31.8 percent, including blacks at 17.5 percent, up from 16.8 percent.

Hispanics accounted for 11.4 percent, compared to 11.2 percent in 2005. The rate for Asians was 3.1 percent versus 2.7 percent in 2005. Native Americans were barely changed at 1.2 percent after 1.1 percent the year before.

Wal-Mart noted there were increases for minorities in all job categories, from clerks and technicians to managers and professionals.

"Wal-Mart continues to be an employer of choice and a leading employer of minorities in the U.S.," spokeswoman Sarah Clark said. "We are proud of our accomplishments and believe this is a result of our long-standing diversity initiatives and our commitment to diversity. We will continue to work toward becoming an even better corporation in all aspects of our business."

But Wal-Mart's union-backed critics called the report "a joke." They cited the report's revelation that women made up 39.7 percent of Wal-Mart's managers and officials last year, compared to 38.8 percent in 2005. Minorities held 23.2 percent of those positions, compared to 21.3 percent the year before.

"Wal-Mart's own statistics prove what an embarrassing failure its diversity initiatives have been and paint a disturbing picture of how incredibly difficult it still is for women and minority Wal-Mart workers to get ahead," WakeUpWalMart spokesman Chris Kofinis said.

A religious investor group whose lobbying helped prompt Wal-Mart to start publishing the data said the report showed the company still has room for improvement.

"A corporation of this size should reflect the nation as it exists. It should show the same face," said Sister Barbara Aires of the Interfaith Center on Corporate Responsibility, a coalition of religious investors that advocates for social and environmental causes.

Wal-Mart faces a class-action lawsuit in federal court in San Francisco on behalf of an estimated 1.5 million current and former female employees, alleging women were passed over in favor of men for pay raises and promotions.(AP)

Copyright © 2000, Naharnet . All rights reserved.

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Wal-Mart cutting manager jobs at Sam's Club

Reuters                       [back to top]

NEW YORK  Wal-Mart Stores Inc., the world's largest retailer, is cutting about 1,000 management positions at its Sam's Club stores, a spokeswoman for the company's warehouse chain said on Thursday.

Wal-Mart is consolidating about 2,800 salaried-manager positions at some 580 U.S. Sam's Club stores, spokeswoman Susan Koehler said.

The restructuring, which began in early March and is expected to be completed within the next couple of weeks, was done to improve customer service and gain more flexibility in managing the stores rather than to cut costs, Koehler said.

The company has created three higher-paying positions to replace about 1,800 of those jobs and is also offering affected employees other positions in the company, Koehler said.

"Our goal was all of those impacted associates would find other employment within either Wal Mart or Sam's Clubs," Koehler said. "Most of those associates have found other positions."

About 3 percent of the affected managers have decided to take a severance package, she said.

Copyright 2007 Reuters News Service. All rights reserved.

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Wal-Mart Moves to Trim

By Gary McWilliams,
Wall Street Journal
April 26th, 2007                                [back to top]

Wal-Mart Stores Inc., under pressure to boost productivity at its Sam's Club wholesale unit, is cutting a small number of store-management jobs at the operation as part of a rare nationwide job cut.

The world's largest retailer by revenue plans to consolidate about 3,000 salaried-manager positions at some 580 U.S. Sam's Club stores, according to people briefed on the situation. It isn't clear how many people will lose their jobs. The unit has more than 100,000 employees world-wide.

A Sam's Club spokeswoman confirmed the restructuring, calling it a move to improve customer service in the stores. "This is not about cost reduction; it's about providing better service to our members," she said. The spokeswoman said there are no other restructuring actions under way.

About 3% of affected managers so far have opted to accept the severance package, she said. The employees were notified in mid-March and have until May 2 to accept a management job elsewhere in the company, stay on as an hourly employee or accept the severance.

Alan Peto, a former Sam's Club employee familiar with the changes, said the company is returning to a store-management structure it used in the early 1990s. "They pumped up management all over" during a fast-growth phase, he said. The change will eliminate the now-separate managers overseeing the stores' receiving, bakery, meat, photo and front-end departments, he and others said, consolidating five positions down to three at stores.

While profitable, Sam's Club has lagged behind its main rival, Costco Wholesale Corp., based in Issaquah, Wash. Sam's reported an operating profit of $1.5 billion on $41.6 billion in revenue in its latest fiscal year. But sales at stores open at least a year rose just 2.5%, compared with a 7% increase at Costco.

As part of a study into ways of boosting its stock price, the Bentonville, Ark., retailer last year considered a plan to spin off and establish Sam's as an independent company with headquarters in Dallas. However, the spinoff was rejected, said people familiar with the matter.

Managers who accept the severance plan must relinquish any claims against the company, according to the Sam's Club Assistant Manager Restructure Agreement provided to employees. Wal-Mart faces some 67 lawsuits alleging wage violations in 36 states, according to its latest annual report. The largest is a sex-discrimination suit that covers more than 1.5 million past and present female workers.

Wal-Mart has some 1.4 million U.S. workers. Last year, it reorganized its U.S. Wal-Mart Stores field operations, leading to a small number of management departures. In 2005, it cut some 1,000 jobs at its Asda unit in the United Kingdom.

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Mexican Wal-Mart launches cheap generic drugs

Reuters
April 26, 2007                            [back to top]

MEXICO CITY (Reuters) - Mexico's leading retailer Wal-Mart de Mexico, or Walmex, has launched a line of 150 cheap generic drugs, selling for no more than $3.50, in a new bid to boost its appeal as a one-stop shop for clients looking for low prices.

Walmex's Medi-Mark generics line started selling last week at the retailer's supermarket chains.

The low-priced drugs include everyday staples like pain and fever reliever paracetamol, as well as more complex medicines such as cafergot, used for migraine treatment.

Some of the medicines, which are being manufactured by different laboratories, will cost 90 percent less than the leading over-the-counter brand, according to an industry source.

The Medi-Mark brand will be permanent and is not a trial program, the source told Reuters.

Some of the laboratories selling medicines to Walmex belong to Canifarma, which groups more than 150 drug manufacturers.

Walmex and Canifarma were not available for comment.

Walmex's parent, Wal-Mart Stores Inc. , launched a similar plan in the United States last year, selling generic drugs for $4 per prescription.

This week, U.S. Wal-Mart said its $4 prescriptions now account for more than 35 percent of all prescriptions filled at the company's stores.

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Walton Family to Loosen Grip on Wal-Mart

By Kris Hudson and
Rachel Emma Silverman,
Wall Street Journal
April 25th, 2007                                  [back to top]

The Walton family, which has held sway over Wal-Mart Stores Inc. for the retailer's entire 45-year history, will loosen its grip eventually following the death of matriarch Helen Robson Walton last week.

The family announced that much of the Wal-Mart stock held by Ms. Walton through a family partnership will be donated to charity over several years. The partnership holds 41% of Wal-Mart's stock outstanding. Ms. Walton's one-fifth stake in that partnership amounts to roughly 8.1% of the stock of the world's largest retailer, in terms of sales.

"As a result of Helen Walton's death, a significant portion of her Wal-Mart interest will pass, over a period of years, to charity," reads a statement issued by the family through Wal-Mart. "While Helen Walton's disposition of her Wal-Mart interest will not require sales of a substantial number of Wal-Mart shares for the next several years, it is expected that Wal-Mart shares will be disposed of over time to fund charitable programs."

The family and Wal-Mart, Bentonville, Ark., declined to comment further. Ms. Walton died Thursday of natural causes. She was 87 years old. Sam Walton, her husband and Wal-Mart's founder, died in 1992.

If Ms. Walton's will specifically bequeaths her stock to the family's charitable foundation and certain others, it could lead to the charities divesting themselves of the stock over several years to comply with federal tax rules. At the extreme, that would translate to up to roughly 336 million Wal-Mart shares hitting the market in the coming years and the family partnership's stake slipping to 33% from 41%. For investors, that could be a good thing, some analysts say.

"Because there's so much family ownership, it's almost like a family-run company to a certain degree despite it being so large," Deutsche Bank Securities analyst Bill Dreher said. "If those shares were to go outside the family, it would be another step in bringing Wal-Mart deeper into the public market, where it is more readily influenced by external investors."

The expected divestment of much of Ms. Walton's stock marks the first time in Wal-Mart's history that the Waltons have allowed a reduction of their partnership's Wal-Mart stake, which currently is valued at roughly $81 billion. The Waltons formed the partnership that holds the family's assets in 1953, nine years before Mr. Walton founded Wal-Mart. An equal stake of one-fifth was held by Ms. Walton, her three surviving children and the estate of son John Walton, who died in a 2005 plane crash.

With the family holding four of every 10 shares, few, if any, matters voted on by shareholders in Wal-Mart's history as a public company have won approval without the support of the Walton family.

If Ms. Walton's will grants her Wal-Mart stake to the Walton Family Foundation, much of that stock likely would be divested over time. That's due to a federal law outlining that most types of private foundations can hold only up to 2% of a company's stock if the foundation's major contributors and officials already own 20% or more of the company. Because the Walton children already own such a large stake, the foundation would effectively have to divest within a five-year period any additional shares it receives as a bequest, says Kansas City, Mo., lawyer Bruce R. Hopkins, who focuses on nonprofit law. Under rare circumstances, the IRS can grant a foundation a divestment deadline longer than five years.

Such a donation would make the Walton Family Foundation one of the largest charitable foundations in the U.S., trailing only the Bill & Melinda Gates Foundation.

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healthcare disclosure

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Dear johnny,

Who is the primary source of health care for Wal-Mart employees?

You.

Less than half of Wal-Mart employees opt-in to the company's health insurance plan because it's too expensive. Instead, they rely on taxpayer-funded programs like Medicaid.

Wal-Mart's penny-pinching practices hit people on both sides of the cash register -- consumers and employees. By skimping on health care benefits, they place an unnecessary burden on state governments to pick up the cost. New research revealed last week that Wal-Mart has been rigging the system to skip out on $2.3 billion in state taxes -- so that money comes from your precious tax dollars, not Wal-Mart's.

This week is "Cover the Uninsured Week," and there's never been a more important time to address Wal-Mart's unethical health care practices. Contact your legislator about the Wal-Mart tax you're paying to subsidize their employees' health benefits:

http://action.walmartwatch.com/healthcaredisclosure

Thanks to a high-dollar ad campaign, Wal-Mart has done a great job hiding information about its health care tricks from the public -- but not for much longer.

Almost half of all states have disclosed which companies take the most advantage of publicly funded health care. In every state, the number of Wal-Mart employees enrolled in Medicaid top the list every single time.

Not every state has specific laws requiring full disclosure of this information and you can be sure that Wal-Mart wants to hide it. So, ask your state legislators to request the information for you. After all, it's your money!

There is absolutely no excuse for Wal-Mart to cheat its employees out of basic healthcare -- especially for a company that reported profits above $11 billion last year and paid its CEO $29.7 million, or roughly 2,000 times the salary of an average Wal-Mart employee.

It's time to force Wal-Mart to disclose the truth about its reliance on Medicaid. Take action now.

http://action.walmartwatch.com/healthcaredisclosure

Wal-Mart's abuse of our country's public health care system is a burden that taxpayers shouldn't have to bear. You have the right to know where your tax dollars are going -- and speak out when it's helping to line the pockets of Wal-Mart executives.

By contacting your state legislator about Medicaid disclosure, you can take the first step in holding Wal-Mart accountable.

Sincerely,

David Nassar

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Survey says: Bring on Wal-Mart

durhamregion.com
Apr 24, 2007                                      [back to top]

PORT PERRY -- The Scugog Chamber of Commerce has thrown its support behind the proposed commercial expansion for Port Perry's western edge, based on a survey of its members. The merchant group originally sent out an e-mail to its membership on April 19, which detailed the position the chamber planned to take at Monday evening's public meeting regarding the development. In the correspondence, the chamber notes that its position last September "was that we supported development under the original guidelines" of the Township's official plan for a cap of about 170,000 square feet and not the proposed 355,000 square feet requested by the developer, Smart!Centres.

"It is the position of the Scugog Chamber of Commerce that it is our mandate to support the business growth of this community. It is our responsibility to support all business(es) and their growth in this community of Scugog Township. We would continue to support the development of the west-end property," said the e-mail.

Also included in the message were three suggestions that the chamber wished to make at Monday's meeting before council. These included increasing the proposed minimum retail store size from 2,000 square feet to 2,500 square feet "to provide more of a buffer to protect downtown landlords and business that would be more suited to the downtown core"; to see plans detailing road improvements that deal with increased traffic flow; and "a financial investment by the developer to the Township, BIA and Scugog chamber to be used to support infrastructure changes and funding for business development programs to benefit the existing business of this community."

At the top of the original message were clearly marked instructions that read, "This notice requires your e-mail response from all who are opposed to this position. If you are not opposed your lack of response will be considered a support vote."

It is that line, however, that raised a few eyebrows at Monday's meeting. Some in the crowd disagreed with the system, the detractors comparing it to negative billing, and suggested the chamber should have requested a straight yes or no answer from its members.

The merchant group, though, stresses that it did its best to solicit feedback from its membership despite the short time frame. Tony Janssen, the chamber's president, explained that the Township's report on the zoning bylaw amendments was released to the public on Monday and that the chamber reviewed the document. It wasn't until Tuesday evening, he noted, that the merchant group discovered the Port Perry Downtown BIA would be meeting with municipal officials on Wednesday morning regarding the matter.

"We were a little upset," said Mr. Janssen of the chamber being left out of the meeting.

A chamber meeting was hastily called for the Wednesday lunch hour and, after the matter was discussed with a handful of directors, it was decided the merchant group would detail its opinion on the matter and then send it out for comment.

The correspondence was then e-mailed out to about 160 members and mailed to another 20.

"We left just enough time for people to respond, to send back their comments. If we didn't hear back from them, we figure you're not opposed," said Mr. Janssen. "It was the quickest way to get some response on how we stand."

He explained that given such a short time frame, the merchant group wouldn't be able to sort through individual responses from everyone.

"We figured let's just hear from the people that are opposed and why they're opposed," he said. "If we had two or three weeks to do this, we would have asked yes or no. But business people are so busy and they have no time for this; they just hit delete and move on. The ones who were upset (about the chamber's response) responded.

"But we only got six back."

If the merchant group heard from 60 or 70 people in opposition, Mr. Janssen said, it would have taken another look at the matter.

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National group formed to oppose Wal-Mart entry

Business Line                            [back to top]

New Delhi April 24 A group has been set up to oppose the entry of big retail giants in the country, particularly Wal-Mart.

Called the National Joint Action Committee for Retail Democracy and comprising mass organisations of traders, hawkers, farmers and trade unions, it has announced a national campaign on August 9 against the rise of corporate retail chains, both domestic and foreign.

Speaking to newspersons, Mr Wade Rathke, head of ACORN, a US-based community organisation, shared his experiences on the impact Wal-Mart has had on small traders in the US.

Mr Rathke has been involved with movements against Wal-Mart's expansion in the US and in similar movements in Mexico and South Korea.

He cited examples of the company's anti-union policies and the numerous pending lawsuits for discrimination against workers and various labour violations.

"Many communities in the US have successfully blocked Wal-Mart's entry into rural and suburban areas and that is why, even after 40 years, the company does not have a presence in over half the cities there," he said.

Meanwhile, in reply to an e-mail query from Business Line, Wal-Mart reiterated that through the joint cash-and-carry venture, the company aims to establish an efficient wholesale supply chain linking farmers and small manufacturers - who lack adequate brand power or distribution strength - directly to retailers and thereby minimise wastage.

The company has also said that it aims to establish a relationship with the small business community and help them lower costs and increase their profits. Besides, it said that currently the company sources goods worth over $600 million directly from suppliers in India.

Many of these suppliers have grown and developed their businesses and have now tied up with other major global retailers.

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Wal-Mart expanding health facilities

By Ruth Mantell
& Kristen Gerencher,
MarketWatch
April 24th, 2007                        [back to top]

In-store clinics to help bring 'much-needed price transparency'

SAN FRANCISCO (MarketWatch) -- Wal-Mart Stores Inc. plans to open up to 400 in-store health clinics over the next two to three years, building on a pilot program begun in 2005, in an aim to implement customer solutions to America's health-care crisis, the company's chief executive said Tuesday.

The clinics, which will lease space in Wal-Mart stores, will be managed by local or regional hospitals or other third-party organizations. They will also post prices for services and procedures, helping to bring "much-needed price transparency" to the American health care system, according to the company.

"We know that customers like and want these clinics. At existing clinics in our stores, about 90% of patients report being satisfied or very satisfied. They appreciate the fast, easy and convenient experience," said Lee Scott, president and chief executive, in a speech Tuesday at the World Health Care Congress in Washington.

Currently, there are 76 clinics operating inside Wal-Marts in 12 states. The company, which has faced criticism on its own employee health coverage, said up to 2,000 clinics could be in stores over the next five to seven years if current market forces continue.

"We think the clinics will be a great opportunity for our business. But most importantly, they are going to provide something our customers and communities desperately need -- affordable access at the local level to quality health care," Scott said. "We believe we can deliver effective and efficient health care at the local level."

Also at the congress, Scott said people don't have the tools and the information they need to make the best possible health-care decisions, preventing them from being good health-care consumers. He added that the answer to improving health care is to lower costs for the whole system, and that information technology "is perhaps the single largest opportunity" to drive out costs.

"The private sector can make a difference," he said. "I believe American businesses can lead and we should."

Wal-Mart's move with the clinics comes at a time when consumers are being asked to take more responsibility for their care and its costs, and is part of a broader trend Forrester Research calls the "retail-ization" of health care. Another harbinger came last summer when CVS acquired MinuteClinic and went on to purchase pharmacy-benefits manager Caremark. MinuteClinic began in the early 2000s in the Minneapolis-St. Paul metro area.

Another in-store health clinic called RediClinic, of which Steve Case's Revolution Health Group is the principal investor, is rapidly expanding in partner stores such as Wal-Mart and Walgreens. RediClinic is in about 50 locations today. Revolution Health hopes to double that quantity by the end of 2007 and grow to 500 by the end of 2009, spokesman Brad Burns said.

The clinics are a bet that time-pressed, price-sensitive consumers will seek care for simpler conditions such as ear infections, pink eye, strep throat and seasonal allergies just steps away from where they buy milk and household items. Some retailers also see an advantage in managing health-care expenses for their own employees with this model, according to a 2006 report on retail clinics from the California Healthcare Foundation.

Firing up critics

Wal-Mart's expansion of in-store clinics enrages critics of the world's largest retailer, who say the company has done little to alleviate the plight of its own uninsured and underinsured workers.

"This is another attempt by Wal-Mart to avoid the responsibility of providing health care to its workers and lessening the burden on taxpayers," said Chris Kofinis, spokesman for WakeUpWalMart.com, a grass-roots advocacy group in Washington. "This is part of a pattern. They talk about addressing health care, but they don't address their own health-care crisis."

Kofinis said the company "seems much more concerned with cynically addressing its faltering public image" than providing affordable health care to its uninsured workers, and called for Wal-Mart to provide universal coverage. He added that 775,000 Wal-Mart employees and their families had no company health care last year, a number Wal-Mart spokesman Dan Fogleman disputes.

Fogleman says 90% of the company's 1.3 million U.S. workers have some kind of health coverage. More than 47% have medical insurance through Wal-Mart, with others receiving benefits through spouses, school plans or other sources. Medicaid and other state programs account for 3% of workers' coverage, while 9.6% of employees are uninsured.

"By creating jobs and opportunities for people, we're providing a gateway for them to employer-sponsored health care -- in many cases for the first time," Fogleman said.

In a move widely believed to be aimed at Wal-Mart, Maryland lawmakers tried to require companies with more than 10,000 workers to spend at least 8% of their payroll on medical benefits or pay that money into the state's health program for low-income people. A federal judge overturned the law last summer.

Clinics target uninsured

Surveys indicate that more than half of those who visited a clinic in a Wal-Mart said they were uninsured, and almost 15% of customers said they would have gone to a hospital emergency room for their care if they could not have gone to one of the clinics, according to the prepared remarks.

Providers running the clinics, which will be staffed by certified nurse practitioners or physicians, will determine what services to offer, and will include preventive and routine care for conditions such as allergies and sinus infections, as well as services such as cholesterol screenings, according to the company.

Scott also said that Wal-Mart customers have saved about $290 million on selected generic prescription drugs since September 2006, when the company began selling prescriptions for $4 each in Tampa, Fla. The $4 prescriptions have been available nationwide since November, and now account for more than 35% of all prescriptions filled at Wal-Mart, and almost 30% of the $4 prescriptions are filled without insurance, according to the company.

"Within days of announcing our $4 program, countless other discounters, drug stores and supermarkets dropped their prices on generic prescriptions," Scott said. "That has surely saved our health-care system millions of more dollars. So let there be no doubt that the private sector can lead."

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Wal-Mart to Expand Walk-In Clinics

AP                               [back to top]

BENTONVILLE, Ark. (AP) - Wal-Mart Stores Inc. plans to open as many as 400 in-store health clinics over two to three years and could raise the total to 2,000 within seven years, the world's largest retailer said Tuesday.

Chief Executive Lee Scott was due to make the announcement at a health care conference in Washington, D.C., later in the day, Wal-Mart said in a statement.

The retailer has more than 3,000 Wal-Mart discount stores and Supercenters in the United States, where it has been experimenting with walk-in health clinics as part of a trend among several national retail, grocery and drug store chains.

"We think the clinics will be a great opportunity for our business. But most importantly, they are going to provide something our customers and communities desperately need - affordable access at the local level to quality health care," Scott said according to a text of his speech.

Wal-Mart called the clinic program part of a series of moves it is making to implement "customer solutions to America's health care crisis." Other steps included a $4 generic drug prescription program it started last year and its support this year for a business and labor coalition seeking comprehensive health care reform by 2012.

Wal-Mart said it would contract with local hospitals and other organizations to operate the walk-in clinics, which lease space from Wal-Mart and are run as separate businesses.

It currently has 76 such clinics, which typically provide a limited number of basic health services at a lower cost than hospital emergency rooms or doctor's offices and do not require an appointment.

Scott said surveys in existing clinics revealed more than half of those who visited a clinic said they were uninsured. Nearly 15 percent of customers said they would have gone to a hospital emergency room for their care if they could not have gone to the clinic inside a Wal-Mart.

Copyright 2007 The Associated Press.

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Arnold group claims Wal-Mart shortchanges taxpayers, workers

By Trish Wallace,
St. Louis Suburban Journal 
April 24th, 2007                                            [back to top]

Wal-Mart protestors in Arnold took advantage of the tax filing deadline April 17.

Standing at street corners near the Arnold Post Office, volunteers from WakeUpWalMart.com handed out information about Wal-Mart's tax practices to passing motorists.

"We're trying to educate the public on what Wal-Mart is all about," Steve Straher, local spokesperson for WakeUpWalMart.com and local union member, said. Members of WakeUpWalMart.com unite under a pledge not to shop at Wal-Mart until the company improves employee benefits and community relations.

According to the Web site, Wal-Mart pays rent to fake companies, deducting the cost of rent so it doesn't have to pay corporate income taxes. Citing the Wall Street Journal, the group says Wal-Mart avoided $3.39 billion in state taxes from 1999-2005.

The Web site also says employees who don't receive company health care from Wal-Mart are forced to use Medicaid and other government funded programs, and estimates that taxpayers will have to pay $9.1 billion in the next five years to cover the costs.

"It's the world's richest corporation, why do we as taxpayers have to shoulder the responsibility?" Straher said.

WakeUpWalMart.com is a national movement gaining strength every day. At nearly 400,000 members strong since 2005, Straher believes they can make a difference and raise standards.

"The movement is sweeping the country to stand up for basic human rights," he said.

Wal-Mart also uses tax increment financing and other taxpayer money to move into new neighborhoods, costing $15-20 million to set up shop, Straher said. He added that the company gives far less back to the community than it takes.

"This is not Sam's store," Straher said. "This is not 'buy America.'"

According to WakeUpWalMart.com, Wal-Mart forces good jobs overseas and into unacceptable working conditions.

"You might buy something extra cheap, but it comes at a cost, and we think that cost is too severe," Straher said.

Some of the volunteers at the Arnold Post Office wore T-shirts demanding "Stop the Wal-Mart tax" and with the Wal-Mart smiley face frowning.

Those handing out information faced very little opposition and found most of the people they encountered were receptive. A few members of the union that represents Shop-N-Save workers, said they gave extra brochures to a man who teaches a government class at ITT Technical Institute because he wanted to share them with his class.

Arnold was just one of the 70 cities in 31 states--including four St. Louis area locations--where WakeUpWalMart.com members took a stand with people filing their last minute taxes.

"I think it will really strike a cord when people realize how Wal-Mart shirks its responsibility," Straher said.

Attempts to reach Wal-Mart's corporate office for response were unsuccessful.

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Wal-Mart recruits intelligence officers

By MARCUS KABEL
The Associated Press
April 24, 2007                                       [back to top]

BENTONVILLE, Ark. Wal-Mart Stores Inc. has been recruiting former military and government intelligence officers for a branch of its global security office aimed at identifying threats to the world's largest retailer, including from "suspect individuals and groups".

Wal-Mart's interest in intelligence operatives comes at a time when the retailer is defending itself against allegations by a fired security employee that it ran surveillance operations against targets including critics, dissident shareholders, employees and suppliers. Wal-Mart has denied any wrongdoing.

Wal-Mart posted ads in March on its own web site and sites for security professionals, including the bulletin of the Association of Former Intelligence Officers, for "global threat analysts" with a background in government or military intelligence work.

The jobs were listed with the Analytical Research Center, part of Wal-Mart's Global Security division, which is headed by former senior CIA and FBI senior officer Kenneth Senser. The analytical unit was created over the past year and half, according to published comments by its head, Army Special Operations veteran David Harrison.

The job description includes collecting information from "professional contacts" and public data to anticipate and assess threats stemming from "world events, regional/national security climates, and suspect individuals and groups."

"Familiarity with a broad spectrum of information resources and data-mining techniques" is listed among the skills sought, along with a foreign language, preferably Chinese or Spanish.

A Wal-Mart spokesman declined to comment on the Analytical Research Center for this story or to make any security executives available for interviews.

Many corporations hire law enforcement officers for their security departments.

But Steven Aftergood, who runs the government secrecy project for the Washington-based Federation of American Scientists, said Wal-Mart's efforts appear to go beyond what most companies are doing, raising questions about corporate intelligence work outside of the oversight process in place for government spying.

"It's a troubling new departure in corporate security. We're not just talking about security, we're talking about intelligence operations," Aftergood said.

Harrison told a meeting of security professionals last year that Wal-Mart was learning to defend itself by using the vast information it routinely collects about its employees, shoppers and suppliers.

The only public comment to date on the work of the Analystical Research Center, the speech was reported on by the trade magazine Government Security News. Wal-Mart did not dispute the report when contacted by The Associated Press this week.

Harrison told the meeting that Wal-Mart tracks customers including those who use its pharmacies, buy propane tanks and anyone making "bulk purchases" of prepaid cell phones, which some law enforcement officials have tied in the past to terrorist or criminal activities.

Harrison did not elaborate on how that information could be better used, except to say the data could be shared with law enforcement.

Wal-Mart's union-backed critics said culling customer data for intelligence was disturbing.

"The idea that Wal-Mart is creating its own personal CIA should make every American -- Wal-Mart customer or not -- nervous about whether Wal-Mart is invading their privacy or could do so in the future," said Chris Kofinis, spokesman for WakeUpWalMart.com.

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The Wal-Mart Squeeze

Tom Van Riper
04.24.07                              [back to top]

A bottom feeding investor might be intrigued by a consumer electronics company called Handheld Entertainment, a San Francisco-based firm that's trading at about a third of its 52-week high of $7.78 a share. While the company lost $12 million last year, it competes in a business where one big hit can turn things around.

But there's another complication. Handheld Entertainment got 94% of its $3.8 million in sales through Wal-Mart, a dependency that it puts it at the mercy of the retail behemoth's decisions on shelf space and promotional efforts. And investors tend to frown on companies with too many eggs in one shopping basket--less diversification means more risk.

Maybe that's why Handheld went on a spree to diversify its revenue base by acquiring a half dozen small Web sites since last November, aimed at capturing online ad dollars through services like video and picture uploads, among other content. Selling a big chunk of your wares through Wal-Mart's enormous distribution system can be a boon if the company likes what you have, but it also has the market power to inflict a lot of damage by shifting your shelf space or dropping you altogether.

"Wal-Mart can be your best customer and your most difficult one at once," says Walter Todd, a money manager at Greenwood Capital Management. "There's kind of a constant push and pull."

In Pictures: The Wal-Mart Squeeze Video: Finding Inside Information Video: Betting On Wal-Mart's Business Business leaders, politicians and academics have debated the "Wal-Mart effect" on the U.S. economy for several years now. Mostly, they've been locked into the usual topics of low prices versus low wages, environmental concerns and discrimination toward workers. It's been enough to spur the Wal-Mart PR machine to work overtime trying to soften the company's image.

But other big pistons in the economic machine--institutional stock traders--are now basing more decisions on a different type of Wal-Mart effect. That is, measuring risk in consumer staple companies like Procter & Gamble and PepsiCo, in part, on how dependent they are on Wal-Mart to generate sales. Just as minimal diversification makes any investment portfolio more risky, a maker of laundry detergent, cosmetics or soft drinks could be flirting with danger when a high percentage of sales are pushed through a single retailer.

"Investors like to have better visibility into a company's sales and into supply chains," says Kevin O'Brien, chief executive of Revere Data, a financial information provider that tracks the percentage of sales that hundreds of companies generate through Wal-Mart. Revere specializes in analyzing corporate influence through a company's business relationships.

Just ask Newell Rubbermaid, the maker of cleaning products and other consumer staples that hit a slump in the late 1990s, about Wal-Mart's market power. With the company's goods not moving at a pace that satisfied Wal-Mart, it lost prime eye-level shelf space. Newell Rubbermaid shares dropped from $50 to $20 between 1999 and 2001 before steadying. They're now back to $30, but haven't been close to their highs of eight years ago.

To measure the "Wal-Mart effect" on profits across different industries, Forbes analyzed information compiled by Revere to compare the percentage of sales that various firms generated through Wal-Mart in fiscal 2006 to the gross margins those firms produced during the same period, as compiled by FactSet . The survey covered 333 companies in six industry sectors--apparel & accessories, consumer games & electronics, household accessories, food & beverage, personal care and leisure goods--that Revere indentified as heavy Wal-Mart sellers and their competitors.

On balance, firms that derive less than 10% of its sales through Wal-Mart averaged 39.1% in gross margin, or the percentage of profit realized before items like fixed costs and interest expense are considered. For those falling between 10% and 20%, gross margin falls to 36.2%. Above 20%, and margin dips a little bit more, to 35.4%. The trend is most pronounced in the apparel & accessories category, where average gross margin drops from 48.7% for companies generating less than 10% of its sales through Wal-Mart, to 28.7% for those selling 20% or more. Food & beverage also shows a big disparity, where the same breakdown shows average gross margins dropping from 39% to 22%.

In all, only 25 of 333 companies managed to beat its sector gross margin average while generating at least 10% of their revenue through Wal-Mart. Only seven that sold over 20% there did it. And the numbers show that company size has little to do with Wal-Mart dependency, at least once you get past the top handful. The 10 companies that sell through Wal-Mart in the highest percentages, a list that includes apparel maker Jaclyn and personal care company CCA Industries, average a relatively paltry $107 million in market cap (CCA is the only top-10 member whose gross margin beats its sector average). But past the top 10, companies that generate at least 10% of their sales through Wal-Mart carry an average market cap of $5.9 billion, more than the $4.9 billion average of those firms that sell less than 10% there.

While Wal-Mart squeezes margins of suppliers of all sizes, it's still true that smaller companies tend to feel a tighter pinch. For example, beverage company Cott, even with a market cap in excess of $1.2 billion, doesn't have the brand strength of Coca-Cola or PepsiCo, whose products are in more demand at supermarkets, convenience stores and other outlets. So Cott turns to Wal-Mart for 38% of its sales, compared to less than 10% for the two beverage titans. The result? Cott's gross margin of 12.4% last year was about a third the industry average, while Coke and Pepsi both registered over 50%.

But even blue chips aren't exempt from investors' scrutiny. A double-digit percentage of sales through Wal-Mart or any other single retailer always raises a red flag.

"I wouldn't not own a company just for that reason, but if I could choose between two companies that were basically equivalent, I'd choose the one that sells less through Wal-Mart," Todd says.

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Wal-Mart Diversity Figures Show Small Change In Management Makeup

By MARCUS KABEL
AP Business                                      [back to top]

Management ranks at Wal-Mart Stores Inc. saw modest increases last year in women and minorities, even though they are more abundant in the retailer's work force than in the population at large, according to figures the company released Friday.

This is just the second year that Wal-Mart, which faces the largest discrimination class-action lawsuit in U.S. history, has publicized its report to the Equal Employment Opportunity Commission and therefore the first time any changes can be seen.

Compared to the report on 2005, the 2006 numbers showed small increases in the overall presence of minorities and women among Wal-Mart's 1.35 million U.S. employees.

Women made up 60.9 percent of Wal-Mart's employees last year, compared to 60.5 percent the year before. Minorities were 33.1 percent versus 31.8 percent, including blacks at 17.5 percent, up from 16.8 percent.

Hispanics accounted for 11.4 percent, compared to 11.2 percent in 2005. The rate for Asians was 3.1 percent versus 2.7 percent in 2005. Native Americans were barely changed at 1.2 percent after 1.1 percent the year before.

Wal-Mart noted there were increases for minorities in all job categories, from clerks and technicians to managers and professionals.

``Wal-Mart continues to be an employer of choice and a leading employer of minorities in the U.S.,'' spokeswoman Sarah Clark said. ``We are proud of our accomplishments and believe this is a result of our long-standing diversity initiatives and our commitment to diversity. We will continue to work toward becoming an even better corporation in all aspects of our business.''

But Wal-Mart's union-backed critics called the report ``a joke.'' They cited the report's revelation that women made up 39.7 percent of Wal-Mart's managers and officials last year, compared to 38.8 percent in 2005. Minorities held 23.2 percent of those positions, compared to 21.3 percent the year before.

``Wal-Mart's own statistics prove what an embarrassing failure its diversity initiatives have been and paint a disturbing picture of how incredibly difficult it still is for women and minority Wal-Mart workers to get ahead,'' WakeUpWalMart spokesman Chris Kofinis said.

A religious investor group whose lobbying helped prompt Wal-Mart to start publishing the data said the report showed the company still has room for improvement.

``A corporation of this size should reflect the nation as it exists. It should show the same face,'' said Sister Barbara Aires of the Interfaith Center on Corporate Responsibility, a coalition of religious investors that advocates for social and environmental causes.

Wal-Mart faces a class-action lawsuit in federal court in San Francisco on behalf of an estimated 1.5 million current and former female employees, alleging women were passed over in favor of men for pay raises and promotions.

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Wal-Mart Wars

By Elmer Ploetz,
The Buffalo News
April 23rd, 2007                                    [back to top]

"We were fortunate; we were one of the first ones to win the battle." ANNE LEARY, WHO HELPED KEEP WAL- MART FROM BUILDING IN THE VILLAGE OF EAST AURORA

Opposition efforts in three Western New York communities

In the old days, David used a sling and a stone to keep Goliath out of town.

It’s not that simple these days, when Goliath is the Wal-Mart retail chain and David is the citizens group that seems to pop up wherever the Walton clan’s business wants to set down its footprint.

But the Davids have been having their day in some places.

• In Lockport, a proposed Transit Road Wal- Mart Supercenter is apparently off the table while the company looks for a new site.

• In Amherst, a proposed Millersport Highway store was killed — although the town is now being sued by the property owners.

• In Lima, a rural community near Geneseo, residents fought off the potential rezoning to keep Wal-Mart out.

In other places, from Lake Placid in the Adirondacks to Burlington in Vermont to New York City, Wal-Mart has been forced to deal with the pain of rejection.

One of the constants is the strategy Anne Leary and her allies developed when they kept Wal- Mart out of East Aurora in 1995. East Aurora was one of the first communities to keep Wal-Mart out and was featured in a “60 Minutes” report on the issue at the time. “We were fortunate; we were one of the first ones to win the battle,” Leary said.

“What we’ve done in various towns and villages is we’ve forced the issue, to say, ‘At this present date, where do you stand on the Wal-Mart issue?’ ” she said. “It’s put candidates into a corner, because they don’t want to answer it. But they’ve been forced to.”

Leary was referring to some of the towns she received calls from after her group’s success in her hometown. She estimates she consulted in close to 40 communities fighting Wal- Mart.

Leary and most of Wal- Mart’s critics cite the company’s devastating effects on village main streets, low wages for workers and traffic and crime problems around stores as reasons they don’t want the chain in their community.

Although the chain is hugely successful, Wal-Mart has been accused of driving American jobs overseas and encouraging employees to seek health benefits from Medicaid instead of obtaining them through the company.

Of course, not everyone sees it that way, if judged by nothing more than full parking lots and a healthy corporate bottom line. And not all politicians jump on the anti-Wal-Mart bandwagon. North Tonawanda Mayor Lawrence V. Soos welcomes the store to the former Melody Fair area.

And while concerns about the fate of the Grandview Drive- In are driving opposition in the Town of Evans, Angola Village Trustee William Houston makes the argument: “Where else are you going to get a pair of socks between Hamburg and Fredonia?”

In fact, Town of Lockport Supervisor Marc R. Smith said he is supportive of Wal-Mart building a new supercenter — a combination of old-style Wal- Mart and supermarket — on the site of the old Lockport Mall.

“They’re already in our community,” he said. “And we’ve been working on a marketing plan for the North Transit corridor. We’re interested in growing our commercial area, and that would be one positive step.”

What apparently happened to derail plans for a new Lockport store was that while Wal- Mart was pursuing the required zoning variances, its option on the property ran out. The owner, General Growth Properties, then raised the price, reportedly by as much as $1 million.

That scenario isn’t necessarily encouraging for opponents of the Lockport Mall Wal-Mart, but the zoning process did delay the project long enough to stall it, at least temporarily.

So the combination of zoning and political pressure adds up as factors in resisting Wal- Mart, Leary said.

In East Aurora, the zoning process took long enough that she was able to help elect enough Village Board members opposed to the Wal-Mart proposal that it was stopped.

Wal-Mart plans typically struggle when the property needs to be rezoned, said Wal- Mart’s Phillip Serghini, the company’s senior manager for public affairs in New York State. Then it becomes a question of the preference of the ruling boards — as it was in East Aurora.

But if the zoning is already in place, it’s a matter of meeting the site’s requirements.

“It’s a formal process under state law, and you may like it or may not like it,” he said. “But at least it’s a process.”

Serghini said his company tries to address the concerns of the neighbors of proposed projects, whether it’s lighting, traffic or the style of building.

He contends, however, that some groups in Erie County are union-based.

“Some of the so-called community groups really are paper groups,” he said. “They’re made up and funded by people that have their own self-serving purposes.”

That wasn’t the case in East Aurora, where Leary said her group was able to pull about 800 volunteers together.

It isn’t likely to be the case in neighboring Orchard Park, either, where residents have started to attend Town Board meetings to voice their concerns about the proposed Wal- Mart at the Quaker Crossing development area.

Orchard Park resident Jim Craw said he got involved last year when a volleyball park was proposed for his neighborhood. Now he sends out e-mail alerts to a group of like-minded residents when he sees something that concerns him — and Wal- Mart does concern him.

“It’s made me realize, if we could organize our efforts, all the little groups in town, together we’re stronger,” he said.

Craw said he is in contact with about 30 people. Their concerns include traffic and the rezoning of the proposed site from industrial to commercial last year.

The Orchard Park Town Board seems divided on the project, with some arguing that in the wake of the rezoning, some kind of big commercial development will be going there — whether it’s Wal-Mart or not.

Councilman Mark Dietrick said he has received letters from residents supporting the project. Councilwoman Deborah Yeomans said she hasn’t been convinced yet.

“I’m listening to what people are saying, which is not very positive,” she said. “My concern is ‘Is it a suitable place for it to go?’ ”

Leary, meanwhile, has moved on from the Wal-Mart battles to working as a fundraising consultant.

She said she still sees the battle as a David-and-Goliath issue, but one that community groups can win.

“People don’t have to resign themselves to [Wal-Marts],” she said. “But they have to remind the elected officials that they have a real responsibility to the residents, not the developers.”

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Wal-Mart Says Finds No Evidence of Surveillance

By Nicole Maestri,
Reuters
April 23rd, 2007                          [back to top]

NEW YORK (Reuters) - Wal-Mart Stores Inc. said on Friday that it has found no evidence that a fired systems technician secretly listened to its board or that the retailer conducted surveillance on shareholders who submitted proposals for its upcoming shareholders meeting.

The world's largest retailer said the findings came out of a review conducted by its legal department. It also said it was mailing an affidavit and certification of the review's findings to its shareholder proponents.

A copy of the affidavit was provided to Reuters by Wal-Mart.

Wal-Mart has faced mounting calls to disclose its surveillance records after it said in March that it fired security worker Bruce Gabbard for what the company said were unauthorized recordings of calls to and from a New York Times reporter and for intercepting text messages.

A lawyer for Gabbard could not immediately be reached for comment.

In a Wall Street Journal report earlier this month, Gabbard claimed the he was part of a surveillance operation that included snooping on Wal-Mart's board and stockholders.

Following the article's publication, Tom Hyde, Wal-Mart's top legal officer, sent a letter to shareholder proponents saying that while the article implied that the company had initiated an intrusive "threat assessment" of shareholders who submitted proposals for inclusion in Wal-Mart's annual proxy statement, that was not true.

But that did not satisfy shareholders or Wal-Mart critics. New York City's comptroller sent letters to the U.S. Attorney General's office and the U.S. Securities and Exchange Commission asking for an investigation, and SEC Chairman Christopher Cox said any company that investigated or intimidated shareholders after they submitted proxy petitions should be "condemned."

In the affidavit, Wal-Mart said the only information sought or obtained about the proponents of shareholder proposals was acquired through Internet searches and "other readily available public sources and only when the shareholder had a known or suspected history of disrupting meetings or staging disruptive protests."

It said it "would have been remiss from a corporate security standpoint if it had not taken reasonable steps to make such inquiries about shareholders proponents with a history of disruptive behavior."

Wal-Mart is holding its annual shareholders meeting on June 1. The meeting is typically attended by thousands of Wal-Mart employees, shareholders and the media.

In the letter being mailed to shareholder proponents on Friday, Wal-Mart Chief Executive Lee Scott said he hoped the results of the legal department's review would allay the concerns of shareholders.

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Centre should prevent entry of Wal-Mart

P. Sunderarajan
23/04/2007                             [back to top]

The meet specially sought a legislation to close legal loopholes relating to wholesale cash and carry business

NEW DELHI: A national convention of trade unions, farmers' organisations, consumer groups, trade associations and NGOs held here on Sunday called on the Government to come out with a legislation to ensure that there was no "backdoor" entry by U.S. retail giant, Wal-Mart into India.

In a joint declaration, the meet specially sought a legislation to close loopholes in the law relating to wholesale cash and carry business, which they alleged had already facilitated the entry of Germany-based Metro and South-Africa's Shoprite into the retail market and which could be utilised by Wal-Mart to come in through the "backdoor''.

The meet also called upon the Government to set up a special task consisting of representatives of hawkers, traders, farmers and other stakeholders to examine what would be the impact of corporate retail, apart from the task force that was set up in March by the Prime Minister's Office.

Calling for a strong movement against the entry of big retailers, U.S. labour leader and well-known anti-Wal-Mart campaigner, Wade Rathke argued that retail giants like Wal-Mart would not mind sustaining losses for many years just to ensure that small businesses shut their shops. They could also very well indulge in predatory pricing for their gains and squeeze suppliers to offer cheaper prices.

© Copyright 2000 - 2006 The Hindu

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Wal-Mart Finds No Evidence Of Secret Surveillance

Namnews
Monday 23rd April 2007                             [back to top]

Wal-Mart has said that it has found no evidence that a former systems technician had secretly listened to its board, or that Wal-Mart had conducted surveillance on shareholders who submitted proposals for its upcoming shareholders meeting. The retailer said the findings came out of a review conducted by its legal department.

Wal-Mart has now said the only information sought or obtained about the proponents of shareholder proposals was acquired through Internet searches and "other readily available public sources and only when the shareholder had a known or suspected history of disrupting meetings or staging disruptive protests". It said it "would have been remiss from a corporate security standpoint if it had not taken reasonable steps to make such inquiries about shareholders proponents with a history of disruptive behavior."

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How Wal-Mart's TV Prices Crushed Rivals

The retailer's holiday decision to slash prices on flat-panel sets—selling one for less than $1,000—proved disastrous for electronics stores

by Pallavi Gogoi
April 23, 2007                             [back to top]

Last "Black Friday," for its annual post-Thanksgiving sales blitz, Wal-Mart Stores (WMT) decided to slash the price of one of the hottest electronics items for the holidays—the 42-inch flat-panel TV—to $988. The world's largest retailer had staked similarly audacious positions before, in numerous product categories, as part of its quest to remain U.S. retailing's "low-price leader." In turn, Wal-Mart's move caused a freefall in prices of flat-panel televisions at hundreds of retailers—to the glee of many people who were then able to afford their first big-screen plasma or liquid-crystal-display model.

Now, it is becoming apparent that Wal-Mart's calculated decision to break the $1,000 barrier for flat-panel TVs triggered a disastrous financial meltdown among some consumer-electronics retailers over the past four months.

The fallout is evident: After closing 70 stores in February, Circuit City Stores (CC) on Mar. 28 laid off 3,400 employees and put its 800 Canadian stores on the block. Tweeter Home Entertainment Group (TWTR), the high-end home entertainment store, is shuttering 49 of its 153 stores and dismissed 650 workers. Dallas-based CompUSA is closing 126 of its 229 stores, and regional retailer Rex Stores (RSC) is boarding up dozens of outlets, as well as selling 94 of its 211 stores. "The tube business and big-screen business just dropped off a cliff," says Stuart Rose, chief executive officer of Dayton-based Rex Stores. "We expected a dropoff, but nowhere near the decline that we had." Clearly, these retailers are taking such drastic measures because they don't see any respite in sight.

The 'Wal-Mart Effect' Since early February, when the companies first started closing stores and announcing layoffs, most of their stock prices also have been battered. Circuit City shares have fallen 24%, to $18.76, since the end of November, when the price war started. In the same period, Tweeter's shares declined 32%, to $1.72, near a 52-week low, and Best Buy's (BBY) stock is down 9%, to $48.73. Shares of Rex Stores have been flat, down 0.7%, to $16.98 (see BusinessWeek.com, 4/9/07, "Stop the Bullying, Wal-Mart").

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 over the past two decades as Wal-Mart's business stature grew dramatically. The Bentonville (Ark.) juggernaut's entry into the grocery business in the late 1980s and its ability to offer deep discounts led to the bankrupting of dozens of regional supermarkets over the next 15 years, including Florida-based Winn-Dixie Stores, Eagle Foods from Illinois, and Penn Traffic in Pennsylvania.

And Wal-Mart's discounting of popular toys sent FAO Schwartz and KB Toys into bankruptcy. Now, Wal-Mart has clearly turned its gaze to electronics. "We recommitted to our customers that we would be their low-price leader, especially on those products that were rising in popularity, such as flat-screen and high-definition TVs," says Kevin O'Connor, Wal-Mart vice-president and general merchandise manager (see BusinessWeek.com, 11/14/06, "Holiday Hysteria").

Manufacturers Still Smarting None in the industry doubted that flat-panel television prices would fall or that Wal-Mart would offer heavy promotions. But most expected the promotions to be limited to lesser-known brands like the Viore TV that Wal-Mart was selling at $988. What caught competitors off guard was that Wal-Mart also cut the price of a top brand name—the 42-in. Panasonic high-definition TV—by $500, to $1,294. That sent dozens of retailers across the country scrambling, and many rushed to match prices: Circuit City offered the same Panasonic TV at $1,299, while Best Buy sold a Westinghouse 42-in. LCD for $999. Others tried to lure customers to larger TVs—CompUSA gave a $500 rebate on its 50-in. Panasonic plasma for $2,499.

Panasonic executives are still smarting from Wal-Mart's decision to drop the price on its 42-in. model. Panasonic officials won't discuss the issue. "I'm not going to comment on what Wal-Mart did," says Andrew Nelkin, president of Panasonic Professional Display Co. in Secaucus, N.J.

Along with Wal-Mart's determination to lower prices, two other factors played key roles in last winter's 40%-to-50% flat-panel price drop and the ensuing turmoil. For one, many more retailers such as Sears (SHLD) and CompUSA were starting to stock a wider selection of flat-panel TVs after seeing demand soar over the previous two years. Also, manufacturers like Samsung, Sony (SNE), Panasonic, and Westinghouse had ramped up production last year with new factories in Asia and the U.S. They began flooding the market with new TVs in the latter half of 2006. All these forces combined to make a commodity of what just six months earlier had been a solidly high-end, high-margin entertainment product. "It's Econ 101: Best Buy and Circuit City had seen fat margins from flat-panel TVs for a while, and as it happens with any product, eventually the margins come down and the music stops," says David Abella, a portfolio manager at New York-based Rochdale Investment Management, with assets of $2 billion.

Little to Lose Wal-Mart is the second-largest electronics retailer today, behind Best Buy, which has fared relatively well compared to many of its rivals. But it has done so by imitating some of Wal-Mart's best practices, most notably an efficient supply chain, by the admission of CEO Brad Anderson himself. It also has more diversified merchandise than other specialty-electronics retailers.

Despite its bold move last year, Wal-Mart currently is not the largest seller of flat-panel TVs. In fact, even though Wal-Mart set in motion the price drops, it has actually been a bit player in the high-definition TV segment. 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.

However, for Circuit City, which was in the midst of a turnaround and sells thousands more flat-panel televisions than Wal-Mart, the new price landscape represented a massive hit to its margins. The Richmond (Va.) company lost $12.2 million in its fiscal fourth quarter ended Feb. 28, compared to a net income of $141.4 million in the same period last year. At Tweeter, where flat-panel TVs make up more than 51% of sales, the price declines hurt badly. Sales in its fiscal second quarter ended Mar. 31 declined 12%, to $139 million. The Canton (Mass.) company plans to release earnings on May 10. "We desperately hope that sanity reigns and that the lessons of the past holiday season are not lost on anybody in the industry," says Joe McGuire, CEO of Tweeter Home Entertainment Group.

Luring the Technophiles Despite shoppers paying lower prices, Circuit City CEO Phil Schoonover is hoping customers will continue to want their TVs installed and will use the company's Firedog service, a competitor to Best Buy's Geek Squad that launched last October. Sales at Firedog grew 80%, to $200 million last year, and Schoonover says he expects them to double this year. He admits, however, that the environment couldn't be more uncertain. "I'm not here to say that we're sure what the second half looks like because we have 96 suppliers of flat-panel TVs who market their products in the U.S.," he says. "With production facilities all over the world and brands from China, we don't know what their real marketing strategies are. We think it's going to be a competitive marketplace for the flat-panel TV business."

As new technology emerges and as LCD TVs with crisper images hit the market this May, some retailers are hoping to lure the technophiles. However, if consumer-electronics purveyors are hoping to maintain sky-high prices on new products, they'd better not count on it. After all, they have no idea what Wal-Mart has in store.

Copyright 2000-2007 by The McGraw-Hill Companies Inc. All rights reserved.

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The Wal-Mart Squeeze

Tom Van Riper,
04.23.07                                     [back to top]

A bottom feeding investor might be intrigued by an electronic games maker called Handheld Entertainment, a San Francisco-based company that's trading at about a third of its 52-week high of $7.78 a share. While the company lost $12 million last year, it competes in a business where one big hit can turn things around.

But there's another complication. Handheld Entertainment got 94% of its $3.8 million in sales through Wal-Mart, a dependency that it puts it at the mercy of the retail behemoth's decisions on shelf space and promotional efforts. And investors tend to frown on companies with too many eggs in one shopping basket--less diversification means more risk. Selling a big chunk of your wares through Wal-Mart's enormous distribution system can be a boon if the company likes what you have, but it also has the market power to inflict a lot of damage by shifting your shelf space or dropping you altogether.

"Wal-Mart can be your best customer and your most difficult one at once," says Walter Todd, a money manager at Greenwood Capital Management. "There's kind of a constant push and pull."

IBusiness leaders, politicians and academics have debated the "Wal-Mart effect" on the U.S. economy for several years now. Mostly, they've been locked into the usual topics of low prices versus low wages, environmental concerns and discrimination toward workers. It's been enough to spur the Wal-Mart PR machine to work overtime trying to soften the company's image.

But other big pistons in the economic machine--institutional stock traders--are now basing more decisions on a different type of Wal-Mart effect. That is, measuring risk in consumer staple companies like Procter & Gamble and PepsiCo, in part, on how dependent they are on Wal-Mart to generate sales. Just as minimal diversification makes any investment portfolio more risky, a maker of laundry detergent, cosmetics or soft drinks could be flirting with danger when a high percentage of sales are pushed through a single retailer.

"Investors like to have better visibility into a company's sales and into supply chains," says Kevin O'Brien, chief executive of Revere Data, a financial information provider that tracks the percentage of sales that hundreds of companies generate through Wal-Mart. Revere specializes in analyzing corporate influence through a company's business relationships.

Just ask Newell Rubbermaid, the maker of cleaning products and other consumer staples that hit a slump in the late 1990s, about Wal-Mart's market power. With the company's goods not moving at a pace that satisfied Wal-Mart, it lost prime eye-level shelf space. Newell Rubbermaid shares dropped from $50 to $20 between 1999 and 2001 before steadying. They're now back to $30, but haven't been close to their highs of eight years ago.

To measure the "Wal-Mart effect" on profits across different industries, Forbes analyzed information compiled by Revere to compare the percentage of sales that various firms generated through Wal-Mart in fiscal 2006 to the gross margins those firms produced during the same period. The survey covered 333 companies in six industry sectors that sell heavily to discounters and other retailers--apparel & accessories, consumer games & electronics, household accessories, food & beverage, personal care and leisure goods.

On balance, firms that derive less than 10% of its sales through Wal-Mart averaged 39.1% in gross margin, or the percentage of profit realized before items like fixed costs and interest expense are considered. For those falling between 10% and 20%, gross margin falls to 36.2%. Above 20%, and margin dips a little bit more, to 35.4%. The trend is most pronounced in the apparel & accessories category, where average gross margin drops from 48.7% for companies generating less than 10% of its sales through Wal-Mart, to 28.7% for those selling 20% or more. Food & beverage also shows a big disparity, where the same breakdown shows average gross margins dropping from 39% to 22%.

In all, only 25 of 333 companies managed to beat its sector gross margin average while generating at least 10% of their revenue through Wal-Mart. Only seven that sold over 20% there did it. And the numbers show that company size has little to do with Wal-Mart dependency, at least once you get past the top handful. The 10 companies that sell through Wal-Mart in the highest percentages, a list that includes apparel maker Jaclyn and personal care company CCA Industries, average a relatively paltry $107 million in market cap (CCA is the only top-10 member whose gross margin beats its sector average). But past the top 10, companies that generate at least 10% of their sales through Wal-Mart carry an average market cap of $5.9 billion, more than the $4.9 billion average of those firms that sell less than 10% there.

While Wal-Mart squeezes margins of suppliers of all sizes, it's still true that smaller companies tend to feel a tighter pinch. For example, beverage company Cott Corporation, even with a market cap in excess of $1.2 billion, doesn't have the brand strength of Coca-Cola or PepsiCo, whose products are in more demand at supermarkets, convenience stores and other outlets. So Cott turns to Wal-Mart for 38% of its sales, compared to less than 10% for the two beverage titans. The result? Cott's gross margin of 12.4% last year was about a third the industry average, while Coke and Pepsi both registered over 50%.

But even blue chips aren't exempt from investors' scrutiny. A double-digit percentage of sales through Wal-Mart or any other single retailer always raises a red flag.

"I wouldn't not own a company just for that reason, but if I could choose between two companies that were basically equivalent, I'd choose the one that sells less through Wal-Mart," Todd says.

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Wal-Mart to release cut-price HD-DVD

Blow to Blu-ray

By Nick Farrell
Monday 23 April 2007                              [back to top]

SUPERMARKET giant Wal-Mart has delivered a blow to the Blu-Ray standard by buying more than two million HD-DVD units from Taiwan. The gear, bought from the electronics outfit Fuh Yuan, will be released in the stores for around $300. This will undercut Blu-ray players significantly.

The machines are not expected to make an appearance until 2008, but when they do Blu-ray manufacturers will either have to slash their prices or lose the format war.

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Wal-Mart in Benicia?

Anonymous mailer has residents wondering

By MATTHIAS GAFNI
Vallejo Times Herald 
04/22/2007                                    [back to top]

BENICIA - An anonymous mailer sent to Benicia residents last week promoting large retail in a proposed development has some whispering the "W-word" - Wal-Mart. Weeks before a critical city council meeting, the glossy one-page color flyer reached the mail boxes of Benicians proclaiming: "BENICIA IS MOVING UP: Major retailers are eyeing Benicia, and you can make it happen!"

Even more alarming to some, was a paragraph reading: "Dozens of new large and small retail options - including even a Wal-Mart Supercenter - for our families making shopping more convenient and accessible."

Kevin Loscotoff, a Wal-Mart official, said Friday the company has no plans or applications for a Benicia store, and denied any knowledge of the flyer.

The flyer refers to the Seeno project, along Interstate 680 and Lake Herman Road, which has been in the works since the 1990s. Seeno, a Concord-based home builder, has owned the property since 1970 and plans to build a 520-acre business park, with large and small retail outlets.

The council is expected to vote May 1 on the project's draft environmental report. Also during that meeting, the council is set to debate proposed restrictions on big-box stores. The council has already approved tight restrictions on formula-based businesses, like Starbucks, in the downtown area.

So, who sent out the mystery mailer? The unknown group "Benicians for Growth" is listed at the bottom, but with no contact information.

"Anybody who knows Benicia wouldn't send out a flyer with Benicians for Growth," said councilwoman Elizabeth Patterson, who received the mailer.

Councilman Mark Hughes said he's heard of the mailer, but hasn't seen it.

"It's very frustrating to see those pieces go out and I'm not sure we'll ever know who sent them out," Hughes said.

Seeno representatives did not return numerous calls for comment.

Benicia officials say the developer has not shared any names of prospective tenants and they don't know where the mailer originated.

However, many are willing to speculate on the source.

"Somebody paid for this and mailed it out," said Joseph Feller, a Vallejo spokesman for Vallejoans for Responsible Growth, a citizen's group fighting the proposed White Slough Wal-Mart Supercenter. "We suspect Wal-Mart paid for it."

Others say Seeno sent out the mailer, which asks recipients: "What can you do? Urge the City Council to vote NO on the formula-based business ban and protect growth and free market principles in Benicia."

If Wal-Mart made a move for Benicia, the company would surpass one million square-feet of proposed Supercenters in Solano County alone, and that's not including the nearly complete American Canyon store in Napa County. The retail giant operates a Supercenter in Dixon, and has proposals for Vallejo, Fairfield and Suisun City in the works.

Even without a Benicia store, opponents claim there are too many Wal-Mart proposals in the county.

"It's saturation marketing designed to eliminate competition, until they are finally only competing store against store," Feller said.

Former Benicia Mayor Jerry Hayes said Wal-Mart has other strategies.

"Wal-Mart wants to play cities off each other," Hayes said. "They can play Vallejo against Benicia. They'll have Vallejo think if you guys let us down, we'll just move over there. They'll play their tax dollar card."

Wal-Mart's Loscotoff says only a vocal minority protest such stores.

"We recognize there are special interests out there only looking out for their own interests. We're looking out for the interests of our customers and our associates," he said. "We know there are thousands of Vallejoans that recognize the savings Wal-Mart provides We're proud to be partners in Solano County."

Three council members would not want to see a Wal-Mart in Benicia.

"We're too small. We need to protect the downtown," Patterson said, adding any big-box store would not fit.

"I'm not a big supporter of big-box stores up there," Hughes said. "I don't want to see a store open up there on Monday and two or three stores close in downtown on Tuesday."

Vice Mayor Alan Schwartzman said he doesn't think the Seeno project, which has identified only 100,000-square-feet of retail, could even fit a big-box store.

"I'm not in favor of big-box stores on a personal level," Schwartzman said.

Other council members were not available for comment Friday.

Seeno's development plan calls for 29 acres of commercial space, 286 acres of limited industrial use and 178 acres of open space.

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Wal-Mart, labor willing to talk on wage law

By Greg Hinz,
Crain's Chicago Business
April 22nd, 2007                                      [back to top]

Despite post-election chest thumping, the first signs of a potential compromise are emerging in the political war between Wal-Mart Stores Inc. and union-led advocates of a big-box minimum wage bill.

Sources on both sides say they're willing to sit down and talk at length, and they raise the possibility of a deal in which Wal-Mart would get zoning approval needed for more Chicago stores in exchange for agreeing to support a wider minimum wage bill that applies to more than the super-sized retail outlets known as big boxes.

Wal-Mart recently backed a similar law in Maryland, and while such a proposal would stir intense opposition from some partisans on either side of the fray, it might also provide a starting point for substantive discussions, sources say.

Wal-Mart has more than adequate reason to compromise. Expansion in urban areas is critical to the Arkansas-based retailer, which wants to add at least five Chicago stores to its single West Side outlet, says Roderick Scott, the retailer's senior manager for public affairs in Illinois.

But it took a veto by Mayor Richard M. Daley last year to block a bill that would have required Wal-Mart and a handful of other giant retailers to pay at least $10 an hour plus $3 an hour in fringe benefits — well above the $7.50 required by state law. The retailer's bargaining position didn't improve after last Tuesday's elections, in which union-backed candidates beat those backed by Mayor Daley in six wards.

Customers wait in line to enter Wal-Mart's 142,000-square-foot West Side store during its grand opening in September.

However, some mayoral allies like Alderman Howard Brookins Jr. (21st) won races. (Mr. Brookins would like a Wal-Mart in his South Side ward.) And many aldermen are uncomfortable having to choose between a mayor and new jobs or labor groups who want those jobs to pay well.

Asked if Wal-Mart would back a wider minimum wage bill that would not put it at a competitive disadvantage against smaller retailers, Mr. Scott says the company is "more than wiling to have a dialogue with any willing party, so long as it does not inhibit what we want to do, which is serve our customers.

"I wouldn't want to speculate" on a Maryland-type law, he adds. "There shouldn't be a situation where a proposal solely targets us. . . . In other places, a law has been applied across the board, not only to us."

DOUBTING DEAL

One top labor leader, Ron Powell, president of Local 881 of the United Food and Commercial Workers International Union, says he would "have to think about" such a proposal and carefully examine its details. Mr. Powell says he doubts Wal-Mart is interested in any compromise.

Another union leader, Chicago Federation of Labor President Dennis Gannon, says he needs to talk to his partners in the coalition that pushed the big-box bill. The main thing needed is a willingness to talk, Mr. Gannon adds. "Wal-Mart has made a decision not to have a dialogue," he says. Mr. Scott denies that.

Any compromise could get torpedoed by activists from either side.

David Vite, CEO of the Illinois Retail Merchants Assn., says his group "will be on the opposite side" if Wal-Mart moves to widen a minimum wage bill to cover retailers like Deerfield-based Walgreen Co., whose stores are smaller than the minimum 90,000 square feet in the bill that Mayor Daley vetoed.

Similarly, Madeline Talbott, head organizer for the Illinois unit of Acorn, an advocacy group that pushed for living- wage laws nationally, says it might be bad politics to let Wal-Mart off the hook.

"I don't know if you want every Walgreens and CVS on your case," Ms. Talbott says. "Wal-Mart is a great political enemy to have."

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Little diversity change at the top at Wal-Mart

Percentages of women, minorities in management up slightly

The Associated Press
April 20, 2007                                     [back to top]

Management ranks at Wal-Mart Stores Inc. saw modest increases last year in women and minorities, even though they are more abundant in the retailer’s work force than in the population at large, according to figures the company released Friday.

This is just the second year that Wal-Mart, which faces the largest discrimination class-action lawsuit in U.S. history, has publicized its report to the Equal Employment Opportunity Commission and therefore the first time any changes can be seen.

Compared to the report on 2005, the 2006 numbers showed small increases in the overall presence of minorities and women among Wal-Mart’s 1.35 million U.S. employees.

Women made up 60.9 percent of Wal-Mart’s employees last year, compared to 60.5 percent the year before. Minorities were 33.1 percent versus 31.8 percent, including blacks at 17.5 percent, up from 16.8 percent.

Hispanics accounted for 11.4 percent, compared to 11.2 percent in 2005. The rate for Asians was 3.1 percent versus 2.7 percent in 2005. Native Americans were barely changed at 1.2 percent after 1.1 percent the year before.

Wal-Mart noted there were increases for minorities in all job categories, from clerks and technicians to managers and professionals.

“Wal-Mart continues to be an employer of choice and a leading employer of minorities in the U.S.,” spokeswoman Sarah Clark said. “We are proud of our accomplishments and believe this is a result of our long-standing diversity initiatives and our commitment to diversity. We will continue to work toward becoming an even better corporation in all aspects of our business.”

But Wal-Mart’s union-backed critics called the report “a joke.” They cited the report’s revelation that women made up 39.7 percent of Wal-Mart’s managers and officials last year, compared to 38.8 percent in 2005. Minorities held 23.2 percent of those positions, compared to 21.3 percent the year before.

“Wal-Mart’s own statistics prove what an embarrassing failure its diversity initiatives have been and paint a disturbing picture of how incredibly difficult it still is for women and minority Wal-Mart workers to get ahead,” WakeUpWalMart spokesman Chris Kofinis said.

A religious investor group whose lobbying helped prompt Wal-Mart to start publishing the data said the report showed the company still has room for improvement.

“A corporation of this size should reflect the nation as it exists. It should show the same face,” said Sister Barbara Aires of the Interfaith Center on Corporate Responsibility, a coalition of religious investors that advocates for social and environmental causes.

Wal-Mart faces a class-action lawsuit in federal court in San Francisco on behalf of an estimated 1.5 million current and former female employees, alleging women were passed over in favor of men for pay raises and promotions.

© 2007 The Associated Press. All rights reserved.

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Wal-Mart selling a feel-good image

DEEPSHIKHA MONGA
TIMES NEWS NETWORK
FRIDAY, APRIL 20, 2007                          [back to top]

NEW DELHI: The Beast of Bentonville has finally broken its silence. CEO designate for India Raj Jain on Thursday attempted to set the record straight on a host of controversies surrounding the Wal-Mart-Bharti alliance announced late last year.

In an e-mail to ET, Mr Jain asserted that his company aims at establishing a relationship with the Indian small business community by partnering them and helping them lower costs and increase profits.

He also traced Wal-Mart’s “strong history’’ with India, stating that the company sources goods worth over $600 million directly from suppliers in India. In a bid to appease critics, he also held out the carrot of increasing direct sourcing from the region.

After months of silence, his e-mail comes at a time when the Bharti-Wal-Mart joint venture is expected to be announced finally. But more importantly, it comes on the eve of anti-Wal-Mart activist Wade Rathke’s India visit, which ET reported on April 14. Mr Rathke, chief organiser of the Association of Community Organisations for Reform Now, is famous in the US for spoiling Wal-Mart’s party. He is known to have mobilised public opinion against the retail behemoth in South Korea and Germany, the two markets from where Wal-Mart subsequently withdrew, said a source.

Mr Jain said there have been a number of media reports about Wal-Mart that do not reflect the facts, and “for this very reason I thought I should proactively send you certain information about Wal-Mart”. First on Mr Jain’s list is clearing the anti-mom-and-pop-store image the retail giant has acquired, especially in view of the protests in India following the announcement of the Bharti-Wal-Mart JV.

He has clarified that the JV for wholesale cash-and-carry business will sell quality goods to retailers, including small store owners. Not only that, the venture’s wholesale supply chain would link farmers and small manufacturers, thus minimising wastage of fresh foods and vegetables and helping control inflation, Mr Jain says in his e-mail. He also clarified that the front-end retail venture would be a separate wholly-owned and managed Bharti venture.

Infamous for its labour policies? No way. The missive would have everyone know that Wal-Mart is the largest employer in the US and its jobs are “sought-after because of the investment we make in our associates and opportunities we provide them”. In fact, Wal-Mart’s average hourly wages in the US are more than double the federal minimum wage.

Not only that, Mr Jain reminds us that Wal-Mart is one of the largest private sector providers of health insurance in the US, one of the top employers of women in the country and runs an Ethical Standards program to improve conditions for workers in factories of suppliers.

He goes on to cite research that have shown that Wal-Mart is good for local economies, creating large number of jobs and leading to springing of new businesses around its stores, which benefit from their proximity to the Bentonville-based retailer.

Citing Wal-Mart’s “strong history with India”, the e-mail says Wal-Mart has been sourcing from the country since 2001 and currently sources goods worth over $600 million directly. “Direct sourcing from the region will continue to grow as suppliers are innovative and respond quickly to new trends for apparel and goods found in Wal-Mart stores around the world. In addition, our wholesale cash-and-carry operations will help accelerate export growth out of India as we develop new suppliers, first for the domestic market and then for the global market,” Mr Jain writes.

Without directly referring to Sonia Gandhi’s letter expressing concerns about the impact of “transnational supermarkets’’ on small businesses, Mr Jain has attempted to address her concerns. “Our goal is to establish a relationship with the small business community by partnering with them and helping them to lower costs and increase profits,’’ he said.

©Bennett, Coleman and Co., Ltd. All rights reserved. 

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Wal-Mart reveals worker diversity data

By MARCUS KABEL
The Associated Press
April 20, 2007                            [back to top]

Management ranks at Wal-Mart Stores Inc. saw modest increases last year in women and minorities, even though they are more abundant in the retailer's work force than in the population at large, according to figures the company released Friday.

This is just the second year that Wal-Mart, which faces the largest discrimination class-action lawsuit in U.S. history, has publicized its report to the Equal Employment Opportunity Commission and therefore the first time any changes can be seen.

Compared to the report on 2005, the 2006 numbers showed small increases in the overall presence of minorities and women among Wal-Mart's 1.35 million U.S. employees.

Women made up 60.9 percent of Wal-Mart's employees last year, compared to 60.5 percent the year before. Minorities were 33.1 percent versus 31.8 percent, including blacks at 17.5 percent, up from 16.8 percent.

Hispanics accounted for 11.4 percent, compared to 11.2 percent in 2005. The rate for Asians was 3.1 percent versus 2.7 percent in 2005. Native Americans were barely changed at 1.2 percent after 1.1 percent the year before.

Wal-Mart noted there were increases for minorities in all job categories, from clerks and technicians to managers and professionals.

"Wal-Mart continues to be an employer of choice and a leading employer of minorities in the U.S.," spokeswoman Sarah Clark said. "We are proud of our accomplishments and believe this is a result of our long-standing diversity initiatives and our commitment to diversity. We will continue to work toward becoming an even better corporation in all aspects of our business."

But Wal-Mart's union-backed critics called the report "a joke." They cited the report's revelation that women made up 39.7 percent of Wal-Mart's managers and officials last year, compared to 38.8 percent in 2005. Minorities held 23.2 percent of those positions, compared to 21.3 percent the year before.

"Wal-Mart's own statistics prove what an embarrassing failure its diversity initiatives have been and paint a disturbing picture of how incredibly difficult it still is for women and minority Wal-Mart workers to get ahead," WakeUpWalMart spokesman Chris Kofinis said.

A religious investor group whose lobbying helped prompt Wal-Mart to start publishing the data said the report showed the company still has room for improvement.

"A corporation of this size should reflect the nation as it exists. It should show the same face," said Sister Barbara Aires of the Interfaith Center on Corporate Responsibility, a coalition of religious investors that advocates for social and environmental causes.

Wal-Mart faces a class-action lawsuit in federal court in San Francisco on behalf of an estimated 1.5 million current and former female employees, alleging women were passed over in favor of men for pay raises and promotions.

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Supreme Court won't hear Wal-Mart appeal

Neil Scott
CanWest News Service
Regina Leader-Post
Friday, April 20, 2007                         [back to top]

REGINA - Canada's highest court has declined to hear a case that relates to accusations of bias, levelled against the Saskatchewan Labour Relations Board by Wal-Mart Canada.

In a decision released Thursday, the Supreme Court of Canada dismissed an application by Wal-Mart for leave to appeal decisions by two Saskatchewan courts that went against the retailer.

As is routine, the court offered no reasons for its decision.

Claiming bias, Wal-Mart had applied for a court ruling that the Saskatchewan Labour Relations Board should be barred from hearing cases or making judgments on any cases involving Wal-Mart.

That application was denied by both the Saskatchewan Court of Appeal and a Saskatchewan Court of Queen's Bench justice, prior to the final bid by Wal-Mart.

Wal-Mart has been involved in a number of cases that have gone to the labour relations board in recent years, including an application by the United Food and Commercial Workers (UFCW) union to represent Wal-Mart employees at a Weyburn, Sask., store.

While the labour board hearings on that Weyburn case are now over, the board has yet to issue a ruling about whether it will certify a union at the Weyburn store.

The case which the Supreme Court declined to hear related to issues that went beyond the Weyburn matter.

Those included accusations that Walter Matkowski, who was the vice-chairman of the labour relations board until his term expired in March 2006, was not reappointed to that position because of the influence that some unions had with the provincial Labour Department.

There were also accusations that members of the labour relations board were required to read certain newsletters that were anti-Wal-Mart.

© CanWest News Service 2007

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A New Twist on Snooping at Wal-Mart

By Michael Barbaro,
New York Times
April 21st, 2007                         [back to top]

A former Wal-Mart computer technician, who asserted that company employees eavesdropped on board meetings and conducted clandestine surveillance on shareholders, has reversed himself and denied both claims in sworn testimony, the giant retailer said yesterday.

Bruce D. Gabbard, who was fired in March for taping telephone calls between Wal-Mart employees and a reporter for The New York Times, had told The Wall Street Journal that he was part of an elaborate operation that snooped on employees, stockholders and company critics.

After receiving angry letters from shareholders, who demanded an investigation of the accusation, Wal-Mart’s chief executive, H. Lee Scott Jr., took the unusual step of publicly denying several of Mr. Gabbard’s most damaging charges in a statement and released portions of his sworn testimony conducted after the Journal articles were published.

“Some of the most disturbing assertions,” made by Mr. Gabbard, the chief executive wrote, “simply are not true.”

In a transcript of Mr. Gabbard’s testimony, conducted by a lawyer for Wal-Mart on April 18, the former technician said several statements were taken out of context or inaccurately attributed to him in the articles, Wal-Mart said.

For example, Mr. Gabbard denied that he secretly listened in on or taped board meetings, seemingly contradicting his assertion in an article on April 9 when he said, “I’m the guy listening to the board of directors when Lee Scott is excused from the room.”

Wal-Mart said it sought Mr. Gabbard’s sworn testimony after publication of the Journal articles and that he had voluntarily agreed, adding that it had not made any financial settlement with Mr. Gabbard to secure his testimony.

Mr. Gabbard did not respond to a message and his lawyer, W. H. Taylor, declined to comment on Wal-Mart’s claims.

Wal-Mart did not deny several other assertions in the Journal articles — that, for example, company employees conducted surveillance on groups critical of the company, like Acorn, and firms hired by the company, like McKinsey & Company, the consultant.

Mr. Gabbard worked in Wal-Mart’s Threat Research and Analysis Group, a special team inside Wal-Mart’s information technology department. The team is responsible for, among other things, securing the flow of information among senior executives and directors, the company said.

A spokesman for The Wall Street Journal, Robert Christie, said the newspaper was “confident that the information provided to The Journal by Mr. Gabbard, who is being investigated by the criminal arm of the United States attorney’s office for conduct relating to Wal-Mart, was accurately reported.” Mr. Christie noted that Mr. Gabbard made similar statements to The Associated Press.

Wal-Mart said that its own investigation into Mr. Gabbard’s assertions showed that no employee had either secretly listened in on board meetings or conducted surveillance on shareholders.

Wal-Mart did concede, however, that employees have in the past researched the background of shareholders expected to attend its annual meeting in Arkansas. It justified this to prepare for investors with “a history of being disruptive” who “might use this high-profile forum to stage an inappropriate or disruptive protest.”

In one case, for example, publicly available Web sites, found through Google, were searched regarding PETA, or People for the Ethical Treatment of Animals, before a member of the group was scheduled to present a shareholder proposal at the 2006 annual meeting, the company disclosed.

But Wal-Mart said the research did not prevent PETA members from speaking at the meeting.

Chris Kofinis, the head of communications for WakeUpWalmart.com, a union-financed group critical of the company, called for an independent investigation of Mr. Gabbard’s claims “to determine, once and for all, who is telling the truth.”

Wal-Mart fired Mr. Gabbard after discovering that he had taped telephone conversations between this reporter and members of Wal-Mart’s public relations staff and intercepted electronic text messages sent by employees. Wal-Mart said it had not authorized those activities.

For Wal-Mart, Mr. Gabbard’s most inflammatory accusations surrounded the surveillance of shareholders. An internal memorandum dated January 2007, provided to The Journal, suggested that Wal-Mart might conduct “background work on the potential threat assessment” of certain shareholders submitting proposals for its annual meeting in June.

In a statement yesterday, Wal-Mart’s general counsel, Thomas A. Mars, said that the company had never carried out any such research on those shareholders in preparation for this year’s annual meeting — “not even through Google,” he wrote.

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Group suggests Wal-Mart policy helps terrorists

By Justin Juozapavicius,
Associated Press
April 19th, 2007                                     [back to top]

CATOOSA, Okla. - Retail giant Wal-Mart, America's largest importer, could be indirectly aiding terrorism by lobbying against fully scanning containers of goods that enter the country's ports, critics suggested Thursday.

Gathering at the Tulsa Port of Catoosa, where companies send and receive more than 2.2 million tons of cargo a year, labor union members said the Bentonville, Ark.-based company was putting profits before U.S. security because it opposes strengthening port safety.

The news conference is part of a national campaign by WakeUpWalMart.com, a union-funded group critical of the retailer, urging it to drop opposition to a bill that would tighten port security. The campaign has picked up support in recent weeks from at least nine senators, including Democratic presidential hopefuls Hillary Clinton and Barack Obama. Ads critical of Wal-Mart began airing late last month on television and the Internet.

"It's not just about making a dollar, it's about protecting the lives of Americans," said Billy Brown, with the United Food and Commercial Workers International Union.

A Wal-Mart spokesman called the accusations irresponsible and politically motivated.

At issue is a provision in a homeland security bill requiring foreign ports to scan all U.S.-bound cargo containers for nuclear or radiological contraband within five years.

Since the Sept. 11 terror attacks, lawmakers and several constituency groups have lobbied the federal government to step up inspection of port containers.

WakeUpWalMart said that, since the U.S. only inspects about 5 percent of port containers coming into the country, it would be possible for terrorists to slip a nuclear weapon inside one in transit and detonate it in an American city.

"It does seem to me they're more concerned about profits than they are American lives," Brown said.

Port security broke up the news conference about 10 minutes in because a guard said the group did not have the proper permit. The port is one of the largest and farthest inland in the country.

Wal-Mart and The Retail Industry Leaders Association have said the homeland security proposal is not technologically feasible and would snarl the flow of imports for U.S. consumers.

In a statement, Wal-Mart spokesman Robert L. Traynham said the "union-funded ad is in poor taste and an irresponsible attempt to avoid the facts, play upon people's fears and disparage our company and its 1.8 million associates worldwide."

"Wal-Mart is proud of our efforts to ensure a more secure supply chain and we will continue to play a central role in defining real solutions to enhance cargo security," Traynham said.

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Wal-Mart Loses Bid to Halt Union Effort in Canada

By Kevin Bell,
Bloomberg
April 19th, 2007                     [back to top]

April 19 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, lost a bid to halt a union at a Canadian store after the country's highest court declined to hear an appeal that would have delayed the process.

The Supreme Court of Canada today refused to hear the Bentonville, Arkansas-based company's appeal of a lower court ruling in Saskatchewan last year that allowed the unionization process to go ahead.

The dismissal paves the way for a ruling by the Saskatchewan Labour Relations Board on whether workers at a Wal-Mart store in Weyburn, Saskatchewan, should be certified so they can bargain for a labor contract. If certified, it would be the third Wal-Mart store in Canada with active union status.

``After losing in the high court, you'd think they have run out of stalling tactics,'' said Michael Forman, spokesman for the United Food and Commercial Workers union, which represents the workers.

Wal-Mart had argued that the labor board should be disqualified from making a decision on whether workers can be represented by a union because it was biased against the company.

Andrew Pelletier, Wal-Mart's Canadian spokesman, didn't return a call.

Second Time

It's the second time that Wal-Mart has lost at the Supreme Court in its effort to stall the Weyburn unionization drive.

The court declined to hear an appeal in April 2005 to overturn the labor board's demand that the company turn over documents to the union. The workers applied for union status in April 2004.

Workers at Wal-Mart stores in Saint-Hyacinthe and Gatineau, both in Quebec, have gained union certification. The company is challenging the Gatineau unionization in court, the union said. The first Canadian store that was unionized, in Jonquiere, Quebec, was closed by the company in April 2005.

Shares of Wal-Mart rose 37 cents to $48.34 at 4 p.m. in composite trading on the New York Stock Exchange.

The case is Wal-Mart Canada Corp. v. Saskatchewan Labour Relations Board, et al. (Sask.), 31813, Supreme Court of Canada.

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Wal-Mart pays CEO $29.7 million in 2006

By Lauren Coleman-Lochner,
Bloomberg News
April 19th, 2007                                     [back to top]

Wal-Mart Stores Inc., the world's largest retailer, paid Chief Executive Officer H. Lee Scott $29.7 million last year after sales grew at the slowest pace in more than two decades.

Scott, 58, received a salary of $1.3 million and stock valued at $15.3 million, Wal-Mart said in a regulatory filing today. The Bentonville, Arkansas-based company also awarded him bonuses of $4.29 million and $8.08 million in stock options.

Scott's pay trailed the $36.4 million earned by Target Corp. Chief Executive Officer Robert Ulrich, who oversaw a 16 percent increase in net income last year. Wal-Mart's profit was almost unchanged, and sales at stores open at least a year rose 2.1 percent, the smallest gain in at least 27 years.

Scott has "got to prove that he has control of this company, and last year it didn't look like he did," said Don Gher, who manages $1 billion at Coldstream Capital Management in Bellevue, Washington, including Wal-Mart shares.

Unions and politicians including presidential candidates Barack Obama and John Edwards have assailed Wal-Mart, saying it needs to boost wages and benefits for its employees. Wal-Mart, with 1.36 million U.S. workers, is the nation's largest private employer.

Last year, Wal-Mart lost a $78.5 million court case in Pennsylvania, fired its new advertising chief and her hand- picked agency and was criticized for its plan to open its own bank. It withdrew the bank application last month.

The company also said it misstepped by adding fashionable and upscale clothing like its Metro 7 women's line to too many stores and said it would remove the collection from almost half the locations.

--With reporting by Chris Burritt in Greensboro, North Carolina.

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Group presses Wal-Mart on port security

By John Dobberstein,
Tulsa World
April 19th, 2007                                  [back to top]

WakeUpWalMart takes its national campaign against the retailer to the Tulsa Port of Catoosa.

A national group critical of Wal-Mart's business practices plans a press conference Thursday at the Tulsa Port of Catoosa.

WakeUpWalMart.com claims Wal-Mart Stores Inc. is lobbying against a bill in Congress that would require 100 percent scanning of port containers at U.S. ports.

The Washington D.C.-based group says only 5 percent of containers are inspected at U.S. ports, leaving the country vulnerable to a terrorist attack.

Many of the containers that aren't being inspected are carrying Wal-Mart goods, but the corporation is trying to sack the legislation through its lobbyists, WakeUpWalMart says.

"If Wal-Mart was a country, they would rank just behind Saudi Arabia in gross national prod uct," said Billy Brown, Oklahoma coordinator for WakeUpWalMart.

"With the amount of (imported goods) they're bringing over from China, there could be a nuclear weapon in those crates. If they're not being searched, they're never going to be found until one of our major cities is taken out."

Robert Portiss, the port's director, said the group didn't notify him of the press conference.

The ironic thing, Portiss said, is that the Port of Catoosa doesn't handle containers on barges, or sealed boxes or any Wal-Mart merchandise. The port does handle some cargo that originates in the United States, or comes through a coastal port where inspection is done during transfer, he said.

"The cargo comes (to Catoosa) in barges, and you take the covers off and there it is," Portiss said. "There's nothing to scan. It's steel, or it's grain or it's dried fertilizer or liquids."

Portiss said the port does take security seriously, but he can't recall anything dangerous or suspicious being found.

"I understand what they're saying, but I think they need to go where there is cargo like that. It's not here," he said.

A Wal-Mart spokesman said Wednesday his company takes port security seriously.

"Wal-Mart conceptually supports 100 percent screening of cargo entering this country," spokesman Robert Traynham said in an interview. "Our customers know that this protest is a desperate attempt to distort the truth."

Traynham said the retailer supported the Safe Port Act, which was signed into law by President Bush last year. The act includes a number of programs to improve security of U.S. ports.

Brown said the press conference, which is expected to include state Rep. Eric Proctor, D-Tulsa, and state Sen. Sean Burrage, D-Claremore, isn't about the Port of Catoosa, but national security questions. The group's "Wal-Mart, Put America's Security First" campaign has visited 15 other cities.

"The reason we're having it at the port," he said, "is to draw public awareness to what's transpiring at the ports."

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Wal-Mart loses bid to exclude Sask. labour board

Canadian Press
19/04/07                               [back to top]

OTTAWA — Retail giant Wal-Mart Stores Inc. has lost a bid to have the Saskatchewan Labour Relations Board banned from hearing any cases involving it. The Supreme Court of Canada has ruled it won't let Wal-Mart argue that it can't get a fair hearing in front of the board. The company first went to Saskatchewan Court of Queen's Bench with its complaint after attempts by employees in several stores in the province to unionize.

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Watch dogs on the prowl

By Elizabeth Skrapits,
The Citizens' Voice 
April 18th, 2007                         [back to top]

WILKES-BARRE — Members of a Wal-Mart watchdog group selected tax time as the ideal time for an informational campaign.

Throughout the country, WakeUpWalMart supporters handed out “Stop the Wal-Mart Tax” fliers at post offices on Tuesday.

Linda Bello and Kenneth Karasek, representatives of UFCW Local 1776 and members of WakeUpWalMart, stationed themselves in front of the Wilkes-Barre post office to target area residents mailing state and federal tax returns.

“The message we’re trying to send has to do with Wal-Mart not paying taxes,” Karasek said. “We want Wal-Mart to pay its fair share. We pay our taxes, the working middle class — why can’t Wal-Mart pay theirs?”

Wal-Mart often exploits a tax loophole by moving ownership of its properties to a shell company set up by the corporation in another state. Wal-Mart then pays rent to itself — and can deduct that rent from its income taxes.

WakeUpWalMart’s goal is to make the world’s largest retailer a better employer by paying its share of taxes and giving its associates reasonable wages and affordable health care, Karasek said.

It is not just a union thing — Wal-Mart is frequently a target of labor activists for the corporation’s refusal to allow workers to unionize — but a fairness issue, Karasek said.

“A lot of people think Wal-Mart, low prices — but a lot of their low prices are on the back of their employees and the American public,” he said.

Wal-Mart spokesman Dave Tovar responded to questions about the company’s tax practices and lack of health care coverage for its employees by saying Wal-Mart saves working families who shop there more than $2,300 a year.

The corporation provides health care to its associates, with plans as low as $11 a month in some cases, and helps reduce medication costs with its $4 prescription drug program, Tovar said.

Wal-Mart collects more than $12.8 billion in state and local taxes each year through sales tax, which is passed on to state and local governments, he said. Employees pay state income tax and the corporation pays property taxes based on store locations, Tovar said.

“We think that tax day is the perfect time to reflect on the numerous contributions Wal-Mart makes to working families and the communities which it serves,” Tovar said. “While the critics continue to focus on negative attacks, we focus on saving money so people can live better.”

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Group protests Wal-Mart's taxes, health coverage

By Michelle Kearns,
The Buffalo News
April 18th, 2007                                      [back to top]

Apr. 18--Four people came to the William Street post office on Tuesday, tax deadline day, to pass out fliers and talk about their opposition to what they described as Wal-Mart's low tax payment rates, low wages and low rates of covering its employees with health insurance.

"People are paying their fair share of taxes, why isn't Wal-Mart?" said Mark Manna, an Amherst town council candidate and organizer with the United Food & Commercial Workers' Union, which represents Tops supermarket employees.

He and three others gathered at the post office parking lot with brochures from WakeUpWal- Mart.com.

Two years ago the United Food union used its money to launch the protest organization, which reported coordinating 70 similar gatherings nationwide Tuesday.

A Wal-Mart spokesman said that while protesters say taxpayers pay extra to fund the Medicaid insurance that covers a portion of Wal-Mart employees, the company saves its shoppers some $2,300 a year per family.

"We think that tax day is the perfect day to reflect on all the contributions that Wal-Mart makes," said David Tovar, director of media relations at the chain's headquarters in Bentonville, Ark.

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Campaign targets "Wal-Mart tax"

By BizTimes Daily,
Small Business Times
April 18th, 2007                                   [back to top]

WakeUpWalMart.com, a grassroots campaign to change Wal-Mart Stores Inc., staged a "Stop the Wal-Mart Tax" protest Monday to draw attention to the company's impact on the economy.

According to the organization, Wal-Mart costs taxpayers more than $2.5 billion every year because of its "corporate irresponsibility and the fact that uninsured Wal-Mart workers and their families are being forced onto taxpayer-funded public health care."

The protests were staged in 64 cities across the nation, including Milwaukee and Green Bay. The organization said poorly-paid Wal-Mart workers are forced onto public health care programs and public assistance programs, such as Food Stamps, costing taxpayers more than $2.5 billion a year.

The cost of providing health care to the growing number of uninsured Wal-Mart workers and their families will cost taxpayers an estimated $9.1 billion over the next five years.

Research by the Citizens for Tax Justice (CTJ) found that Wal-Mart also avoided $2.3 billion in state income taxes from 1999 to 2005, by using an array of tactics, including real estate investment trusts.

Wal-Mart is Wisconsin's largest employer, according to the Wisconsin Department of Workforce Development. In Wisconsin, on estimated income of $852 million from 2000 to 2003, Wal-Mart paid only $3 million in state income tax - a tax rate of 0.35, compared with the 7.9 percent statutory tax rate corporations are supposed to pay in Wisconsin, according to the CTJ.

"It is outrageous that Wal-Mart, the No. 1 company on the Fortune 500, a company with $11.3 billion in profits, is shifting billions of dollars of its costs onto taxpayers. The truth is that our tax dollars should help fund better schools, more police on the streets and better health care, not subsidize Wal-Mart's irresponsible behavior," said Paul Blank, campaign director for WakeUpWalMart.com.

WakeUpWalMart.com supporters have distributed - both online and on the ground – more than a quarter million "Wal-Mart Tax" cards to taxpayers.

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For an Agency, Life After Wal-Mart Is Called Kmart

By STUART ELLIOTT
April 18, 2007                         [back to top]

HOWARD DRAFT and his agency, Draft FCB, are back in the retail advertising business — and this time, they hope, it will be for longer than a couple of months.

The comeback is the result of an unexpected decision by Kmart, announced yesterday, to change creative agencies after four years. By hiring Draft FCB in Chicago, effective in 90 days, Kmart is teaming up with the agency that won — then lost — the creative account of its major competitor, Wal-Mart Stores.

Kmart spends about $200 million a year on advertising in major media, compared with about $580 million a year spent by Wal-Mart.

The roller-coaster ride that Draft FCB took with Wal-Mart was one of the most closely watched in Madison Avenue history.

Wal-Mart hired Draft FCB last October, then dismissed it two months later, citing what Wal-Mart described as improper conduct by two of its own executives who had been involved in a long search for a new creative agency that concluded with the selection of Draft FCB.

Wal-Mart fired the executives, Julie Roehm and Sean Womack, charging them with favoring Draft FCB and Mr. Draft, its chairman and chief executive. During the review process, Wal-Mart said, the two executives accepted meals and gifts, among them, a watch and a case of vodka, in violation of Wal-Mart policies.

Ms. Roehm and Mr. Womack have denied any wrongdoing. An internal investigation by the parent of Draft FCB, the Interpublic Group of Companies, found what an Interpublic executive, Philippe Krakowsky, described as “no instances of behavior that violates any of Interpublic’s policies or our code of conduct.”

Even so, when Wal-Mart conducted version 2.0 of the creative review, Draft FCB was pointedly excluded from the process. Wal-Mart later chose another Interpublic unit, the Martin Agency in Richmond, Va.

Wal-Mart was Draft FCB’s first big client since Mr. Draft oversaw its creation for Interpublic, through the merger last summer of his namesake agency with Foote Cone & Belding, a venerable agency based in New York. So the loss of the assignment was keenly felt.

Trade publications had recently speculated that Mr. Draft was embarking on one of his famous charm offensives with executives at Kmart and its parent, Sears Holdings, to try to compensate for the stinging loss of the Wal-Mart creative assignment.

“Of course we knew that,” Maureen McGuire, chief marketing officer at Sears Holdings in Hoffman Estates, Ill., said of what had taken place between Wal-Mart and Draft FCB, but “we decided that was not important.”

“We made this decision totally on the capabilities Draft FCB can bring to Kmart as we build a better brand,” Ms. McGuire said.

A spokesman for Draft FCB, Wally Petersen, said that Mr. Draft would not be available for comment and referred a reporter to a statement Mr. Draft had made in a news release.

“Everyone we have met at Kmart is focused on building their business by establishing even stronger connections with their loyal shoppers and bringing more people into their stores,” Mr. Draft said in the statement, adding, “Our two organizations have a shared commitment to accountability and creativity.”

How is Wal-Mart taking the news that the agency it hired and then fired is being hired by a rival?

“We don’t have any comment or worries about this one,” a Wal-Mart spokeswoman, Mona Williams, said yesterday in an e-mail message.

Draft FCB will create Kmart campaigns for television, radio and magazines and also handle tasks like producing ads aimed at regular Kmart shoppers, known as customer relationship marketing.

“At Kmart, we’re all about building long-term relationships with our customers,” said Bill Stewart, chief marketing officer at Kmart.

In hiring Draft FCB, Kmart is dismissing Grey Worldwide in New York, part of the Grey Global Group unit of the WPP Group. Kmart hired Grey as its creative agency in August 2003.

“Kmart came to us at a very difficult time in its history,” James Heekin, chairman and chief executive at Grey Global, wrote yesterday in a memorandum to employees. “We reinvented the brand, gave it new relevance and created a humanity that connected with consumers.”

The timing of Grey’s dismissal is unusual, because Grey is finishing its work on a major brand-image campaign for Kmart that is scheduled to begin appearing next month.

“We think the campaign works well,” Ms. McGuire said. The change, however, is “about all the capabilities Draft FCB brings,” she added.

No review preceded the decision to shift the creative assignment to Draft FCB from Grey. In contrast, earlier this month Sears Holdings announced a review to find an agency to handle the media planning and buying duties for both Kmart and its sister chain, Sears, Roebuck.

The media assignment is now divided between two WPP agencies: MindShare, for traditional media, and MEC Interaction, for interactive ads. Both are taking part in the media review.

Mr. Draft and Draft FCB may not have put the Wal-Mart experience entirely behind them. Ms. Roehm is suing Wal-Mart for severance pay and has listed Mr. Draft as a potential witness on her behalf. Wal-Mart is countersuing.

Still, Mr. Draft can smile when he thinks about the timing of the Kmart announcement. He is scheduled to speak tomorrow afternoon, in an appearance planned months ago, at a conference of the American Association of Advertising Agencies. The audience will be composed largely of his peers at the top of agency organization charts.

Before yesterday, Mr. Draft would have been speaking as the chief executive who won and then lost the Wal-Mart creative account. Tomorrow, he will appear as the chief executive who went out and replaced that assignment four months later with work for a Wal-Mart competitor.

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Loophole Let Wal-Mart Evade $2.3B in Taxes*

by Michelle Chen
The NewStandard                     [back to top]

Apr 18 - Accusing a retail giant of wriggling out of over $2 billion in taxes, a watchdog group is pointing to a loophole in certain states that lets huge companies pay rent to themselves.

According to a new analysis of corporate and state financial data, from fiscal years 1999 to 2005, Wal-Mart paid some $2.4 billion in state income taxes, out of $77.4 billion in overall profits. But watchdog groups estimate the company would have owed about $2.3 billion more under state tax rates – calculated at about 6 percent of profits nationwide – suggesting Wal-Mart somehow shrugged off about half of its tax burden.

The report, released by the taxpayer-advocacy group Citizens for Tax Justice (CTJ) and the labor coalition Change to Win, attributes part of the tax gap to real-estate investment trusts (REIT). These trusts enable Wal-Mart and other multi-state companies to funnel money into a fund designated for property investments.

The REIT system has enabled Wal-Mart to effectively double as both landlord and tenant, recycling real-estate funds to itself and then deducting that cost from its tax bill. Court documents recently published by the Wall Street Journal show that Wal-Mart has used the REIT structure to set up the Delaware-based Wal-Mart Real Estate Business Trust, which is run by Wal-Mart employees.

According to CTJ’s sister organization Institute on Taxation and Economic Policy, 20 states, including California and Illinois, have moved to close the REIT loophole by adopting so-called "combined reporting" laws. These policies require the incomes of a parent company and subsidiaries to be reported together, blocking companies from concealing profits held out of state.

Though unable to yield detailed figures for Wal-Mart’s taxes in each state, CTJ did obtain payment data for Wisconsin, which allows tax-sheltering through REITs. Payments from fiscal years 2000 to 2003 amounted to $3 million, or about a third of one percent of Wal-Mart’s revenues in the state, while the standard state-tax rate was nearly 8 percent. CTJ argues that Wal-Mart’s ability to escape 96 percent of the taxes it would ordinarily have had to pay is tied to Wisconsin’s looser reporting requirements.

But to Wal-Mart, the CTJ report describes a legal, widespread use of state tax codes and merely reflects anti-Wal-Mart sentiment among some unions. Company spokesperson John Simley told The NewStandard that to suggest that the company is abusing REITs is "analogous to saying that a person filing their own tax return should not take the deductions that are allowed to them."

"The fact is that those deductions were created for a purpose," he continued, claiming that "the effect for Wal-Mart has been that we have been able to build more stores and, in fact, create more jobs."

A 2003 study by the intergovernmental state-tax agency Multistate Tax Commission found that in fiscal year 2001, state tax-shelter policies absorbed about $3 billion to $7 billion in corporate money that would otherwise have gone toward public resources.

CTJ Director Bob McIntyre said REITs are one of several tax-code "quirks" that help corporations cut taxes. Another notorious "separate-entity taxation" scheme is artificial trademark "holding companies," which have in the past allowed corporations like Toys "R" Us to pay themselves "royalties" when subsidiaries use their business logos.

In a statement announcing the Wal-Mart data, CTJ urged state authorities to "update their laws and require corporations to report the combined nationwide profits of all their subsidiaries, so that schemes and loopholes don’t disguise big corporations’ real profits."

© 2007 The NewStandard.

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Wal-Mart hits road block as council orders more studies

By Leslie Albrecht
MercedSunStar.com

Plans to build a Wal-Mart distribution center in southeast Merced hit a slight delay Monday night when the City Council approved more studies on how the 1.2-million-square-foot warehouse complex would affect air quality and traffic.

The extra scrutiny will add $18,288 to the cost of the environmental report on the distribution center; it will also mean the report likely won't be released until the fall, said city Planning Manager Kim Espinosa.

Wal-Mart is paying for the entire $401,638 environmental report, which must be completed before the project can move forward. Sacramento-based EDAW, Inc. is writing the report.

The new studies the council unanimously approved Monday will include a more detailed version of a "health risk assessment," which analyzes how the distribution center could contribute to health problems for people who live nearby.

EDAW consultants will also take a second look at traffic. A previous traffic study had only analyzed how residential projects in the area will impact roads. Now consultants will take into account the traffic that could be generated by three proposed shopping centers next to the new Mission Avenue interchange.

The interchange is about three-quarters of a mile from the Wal-Mart site between Childs and Gerard avenues, Espinosa said.

"Because of the amount of traffic projected to be generated by Wal-Mart we need to look at what the effects are going to be on the interchange and the whole area," Espinosa said. "It's so we can have a more complete picture so the City Council can make their decision based on the best information available."

If approved, the Wal-Mart distribution center would operate 24 hours a day, with approximately 450 trucks driving in and out each day. It would employ about 600 full-time workers to start and 900 by the end of the third year of operation.

This is the second time the council has added more studies to the environmental report on the Wal-Mart project. In November, the council approved extra analysis at the request of the San Joaquin Valley Air Pollution Control District and the California Department of Transportation.

Residents opposed to the Wal-Mart distribution center have stepped up their efforts lately. At the April 2 City Council meeting, representatives from the anti-Wal-Mart Merced Alliance for Responsible Growth announced a new campaign to educate council members and the public on their cause. On Sunday, the group is hosting an Earth Day picnic featuring pinatas shaped like Wal-Mart trucks.

At Monday's meeting, Lisa Kayser Grant of the Moms Clean Air Network said the distribution center's location near schools would create health problems for children.

"We are not more desperate for jobs than we are for clean healthy air," Kayser Grant told the council. "You cannot as stewards in good conscience allow the Wal-Mart distribution center to locate in that place."

Iowa Elected Leaders Hold Tax Day Press Conference on Wal-Mart & Health Care Programs

27 Iowa Elected Officials Send Letter to Wal-Mart Calling on the Company to 'Provide Better Health Care to Its Employees and Their Families'

PRNewswire-USNewswire
April 17                                                      [back to top]

DES MOINES, Iowa ---Today, State Senator Jack Hatch and State Senator Joe Bolkcom joined with leaders of the WakeUpWalMart.com campaign to hold a press conference at the Iowa Statehouse calling on Wal-Mart, one of the state's largest employers, to stop shifting its health care costs on to Iowa's public health care programs and taxpayers.

At the State Capitol press conference, the speakers released a joint letter, signed by 27 Iowa elected leaders, including 17 Iowa State Senators and 10 Iowa State Representatives, which called on Wal-Mart to end its "inexcusable" behavior that leaves over half of its employees and their families without company health care. Among the Iowa elected leaders that signed onto the letter were Senator Staci Appel, Senator Daryl Beall, Senator Dennis Black, Senator Mike Connolly, Representative Marcella Frevert, Representative Mary Gaskill, Representative Elesha Gayman, and Representative Bruce Hunter.

The letter, addressed to Wal-Mart CEO Lee Scott, emphasized that "because of rising health care costs and the fact that companies like Wal-Mart are failing to live up to their health care responsibilities, the Hawk-I program is facing a federal budget shortfall of $13 million and Iowa is facing the grim reality that 15,000 Iowa children may have to be dropped from the program by the end of June 2007." The letter ends with the shared hope of these Iowa elected leaders by calling on "Wal-Mart to do the right thing and provide better health care to its employees and their families."

During the press conference, the elected and community leaders highlighted the fact that, despite $11 billion in profit, Wal-Mart fails to provide company health care to more than half of its employees and their families which needlessly forces those employees and their dependents onto taxpayer- funded public health care programs, like Hawk-I. In Iowa, for example, it is estimated that providing health care coverage for Wal-Mart workers and their families costs taxpayers as much as $10 million a year.

Today's press conference in Des Moines was part of WakeUpWalMart.com's national "Stop the Wal-Mart Tax" campaign that included events at U.S. Post Offices in 64 cities and 28 states all across America. The latest initiative was designed to inform taxpayers of the added tax burden they face because of Wal-Mart's irresponsible corporate behavior. In Iowa, "Stop the Wal-Mart Tax" day protests were also held in Council Bluffs, Iowa City, Cedar Rapids and Davenport.

The letter from Iowa's State leaders with a list of signatories is attached below.

The Senate State of Iowa Eighty-second General Assembly
STATEHOUSE
Des Moines, Iowa 50319

April 17, 2007

H. Lee Scott, Jr.
President and CEO
Wal-Mart Stores Inc.
702 SW Eighth Street
Bentonville, AR 72716

Dear Mr. Scott:

With over 8.5 million uninsured children in America, there is no issue more critical to hard working families than making sure every child in our country has access to affordable, quality health care. That is why, in Iowa, we have been strong supporters of the State Child Health Insurance Program (SCHIP), which provides funding to our state program Hawk-I, which has successfully provided health insurance coverage to more than 32,000 Iowa children.

Unfortunately, because of rising health care costs and the fact that companies like Wal-Mart are failing to live up to their health care responsibilities, the Hawk-I program is facing a federal budget shortfall of $13 million and Iowa is facing the grim reality that 15,000 Iowa children may have to be dropped from the program by the end of June 2007.

We received your letter to Governor Chet Culver sent on February 12, 2007 claiming you are reforming your health care policy. It lacks specifics and continues to call for a shift away from employer-based health insurance. We will need more details to believe your corporation is acting in good faith.

In your letters to Senator Hatch and other legislators delivered April 11, 2007, you claimed that 90% of your employees "now have health coverage either from Wal-Mart, Medicare or another insurance provider." If this is correct, please explain the apparent discrepancy between your statements and a 2005 study conducted by the Iowa Department of Human Services that reported on employers whose employees receive Medicaid. In that report, Wal-Mart had 845 Iowa employees receiving Medicaid benefits, the most of any employer in the state. Incredibly, the 'Wal-Mart health care crisis' costs taxpayers in Iowa millions of dollars every year. With over $11 billion in annual profits, it is simply inexcusable that Wal-Mart fails to provide company health care to over half of its employees and their families.

By shifting Wal-Mart's health care costs onto Iowa's taxpayers, Wal-Mart is needlessly putting Iowa's Hawk-I program at risk and is perverting the original intention behind the SCHIP program. These programs were intended to provide health care to children who couldn't otherwise afford it, not to use taxpayer money to subsidize the health care costs of corporations like Wal- Mart who earned $11.3 billion in profits last year.

With over 40,000 Iowa children already uninsured, we simply cannot allow corporations like Wal-Mart to put the health insurance of one additional child at risk. Therefore, as one of the largest and most profitable private employers in Iowa, we call Wal-Mart to stop contributing to Iowa's health care crisis, but instead, join us in our fight to improve the health care coverage of all Iowans.

We hope Wal-Mart will do the right thing and provide better health care to its employees and their families. We would also invite you to join us in lobbying against any cutbacks to the SCHIP program which would result in children in need losing their health care.

We look forward to your immediate attention to this matter.

Sincerely,

Senator Staci Appel

Senator Daryl Beall

Senator Dennis Black

Senator Joe Bolkcom

Senator Mike Connolly

Senator Tom Courtney

Senator Dick Dearden

Senator Bill Dotzler

Senator Bob Dvorsky

Senator Gene Fraise

Senator Jack Hatch

Senator Matt McCoy

Senator Rich Olive

Senator Amanda Ragan

Senator Tom Rielly

Senator Becky Schmitz

Senator Joe Seng

Representative McKinley Bailey

Representative Marcella Frevert

Representative Mary Gaskill

Representative Elesha Gayman

Representative Bruce Hunter

Representative Helen Miller

Representative Mark Smith

Representative Art Staed

Representative Bob Kressig

Representative Andrew Wenthe

WakeUpWalMart.com

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How Wal-Mart got the love e-mail

When Wal-Mart famously fired ad exec Julie Roehm, some juicy emails were brought to light - but the love notes came from an unexpected source, says Fortune's Devin Leonard.

By Devin Leonard,
Fortune
April 17 2007                                         [back to top]

(Fortune Magazine) -- A saucy detail in the scandal surrounding Wal-Mart's firing of Julie Roehm is an e-mail that she sent to her subordinate, Sean Womack. In it the former senior vice president of marketing communications wrote: "I think about us together all of the time. Little moments like watching your face when you kiss me."

The e-mail made Roehm look like an adulteress. But lost in the coverage was an explanation of how Wal-Mart (Charts) got this damning piece of evidence. Wal-Mart won't say where it came from. Roehm's lawyer, Andrew Rifkin, told Fortune that Wal-Mart talked Womack's estranged wife, Shelley, into turning over her husband's private e-mails by promising her that they would never be made public.

For those high-minded souls who haven't been following corporate America's favorite soap opera, a brief recap: In December, Roehm was fired from her position after ten months on the job. At the time the retail giant questioned her about accepting gifts from Draftfcb, the ad agency that won Wal-Mart's $580 million account. (Wal-Mart prohibits employees from accepting gifts.)

The firing turned out to be just the beginning of Roehm's headaches. Within days she sued her former employer for breach of contract. In March, Wal-Mart responded with a counterclaim as page-turning as Danielle Steel. It included a lengthy account of an "inappropriate romantic relationship" between Roehm and Sean Womack, a former marketing VP at Wal-Mart, complete with the e-mail excerpts. The filing even quoted a "friend" of Womack's who said he caught the two in the act in a Fayetteville, Ark., bar: "Womack had Roehm 'pinned' against the wall in an intimate pose."

It's not unheard-of for allegations of sexual misbehavior to surface when a top executive is ousted. What's surprising about the Roehm case is that the e-mails became public. "Usually these matters are quietly resolved," says attorney Ronald Green, who defended Fox News when Bill O'Reilly was loudly accused of cajoling a former producer to have phone sex. (The case was settled out of court.)

Quiet resolution was not what Shelley Womack got when she agreed to help Wal-Mart. According to Roehm's lawyer, Wal-Mart had one of Sean Womack's old Saatchi & Saatchi X colleagues - someone who still does advertising work for the retailer - call Shelley in January and urge her to contact Thomas Mars, the retailer's general counsel.

Fortune 500: See the full list Roehm's lawyer further claims that Mars told Shelley Womack to cooperate with Wal-Mart's investigation if she and her husband ever wanted to get his signing bonus. (Womack didn't return calls seeking comment, but according to Wal-Mart, she and her husband, Sean, are separated.)

So why did Wal-Mart put the amorous e-mail in the counterclaim? Wal-Mart refused to discuss it. But the company was clearly angered by Roehm's combativeness after she was fired. She accused Wal-Mart of making "false and malicious statements" to the press about her, and even after Wal-Mart had the compromising e-mails, Roehm publicly made fun of the retailer and talked of writing a book about her experience. Even now she denies she had an affair or did anything wrong while overseeing Draftfcb's selection. And Roehm and her husband, Michael, are still together, while Roehm and Sean Womack are considering starting a marketing company.

Roehm's attorney suggests that the real reason his client ran afoul of Wal-Mart was her outspokenness. She pointed out in one meeting that the company was wildly overpaying for its commercial production, according to Rifkin.

Regardless of the suits' outcome, she's tainted. "It will certainly have an impact on her ability to find another job," says Kathleen Bogas, president of the National Employment Lawyers Association. "Now she's Julie Roehm, that sex goddess."

Wal-Mart may regret it too. It wasn't easy for the company to lure edgy ad execs to its Bentonville, Ark., headquarters. The Julie Roehm scandal isn't likely to change that.

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Wendy's adds ex-Wal-Mart treasurer as CFO

The hamburger chain hires Jay Fitzsimmons, who left the world's largest retailer as treasurer the end of January.

Reuters
April 17 2007                              [back to top]

CHICAGO (Reuters) -- Wendy's International Inc. said Tuesday it hired former Wal-Mart Stores Inc. Treasurer Jay Fitzsimmons as chief financial officer.

Fitzsimmons left Wal-Mart (Charts), the world's largest retailer at the end of January. On Jan. 5, Wal-Mart said Fitzsimmons was retiring from the company.

Shares of Wendy's (Charts) closed higher Monday afternoon but edged lower in after-hours trade on the New York Stock Exchange.

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Wal-Mart dethrones Exxon on Fortune 500

India Daily
Apr. 16, 2007                                 [back to top]

Wal-Mart, the world's largest retailer, has reclaimed its position as the largest corporation in the U.S. among the Fortune 500, pushing Exxon Mobil down to number two. With more than $351 billion dollars in revenue, the magazine ranks Wal-Mart slightly ahead of the energy giant. Wal-Mart is on top for the fifth time in six years. Oil companies have three of the top five spots. Fortune says Google is among the biggest movers. The online search leader has moved up more than 100 spots to 241.

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Wal-Mart's Conduct in Phillipines Gets Worse

Liza Featherstone
04/14/2007                          [back to top]

Some people are outraged that Wal-Mart spied on a New York Times reporter. But the company's behavior to workers overseas is much worse.

Wal-Mart is pulling out of the Chong Won factory, the plant in the Phillipines I wrote about last month. "Cutting and running" may be an easy way for a company to look as if it's taking a stand against supplier misconduct, but it doesn't help the workers.

Chong Won workers don't want to lose their jobs; they are fighting to be able to organize a union, without fear of violence and intimidation. Wal-Mart is doing the wrong thing, and shouldn't get away with it.

Tell Rajan Kamalanathan(rkamala@wal-mart.com) Wal-Mart's director of compliance, that the company needs to keep doing business with Chong Won, and use its muscle to force the factory to respect workers' rights.

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Paranoia and Bugging at Wal-Mart

By Floyd Norris,
New York Times
April 13th, 2007                    [back to top]

Paranoia strikes deep.

Into your life it will creep.

It starts when you’re always afraid.

— Stephen Stills

Life used to be nice at Wal-Mart. Competitors could not match its prices. Suppliers begged for the privilege of selling to it. Local governments used tax-exempt financing to lure stores. A soaring share price made low-level employees rich, and the Walton family became one of the wealthiest in the world.

In the 1990s, under David Glass, the successor to the founder Sam Walton, Wal-Mart stock rose more than 1,100 percent, a compound growth rate of almost 30 percent a year. When Mr. Glass stepped down in January 2000, he was hailed as one of the greatest corporate bosses ever.

Since then, plenty has gone right under his successor, H. Lee Scott Jr. Last year, Wal-Mart earned more than $11 billion, twice what it made in Mr. Glass’s last year at the helm. It is the largest retailer in the world.

But its stock has lagged.

And now we are learning that paranoia has set in at Wal-Mart. The otherwise cost-conscious company spent millions to spy on employees and critics.

First we learned that a Wal-Mart employee taped phone calls between Michael Barbaro, a New York Times reporter, and Wal-Mart officials. This came after The Times reported on a Wal-Mart memo that suggested such clever tactics as forcing all shop clerks to spend some time hauling shopping carts in from the parking lot — the better to weed out unhealthy workers who might submit health insurance claims.

Wal-Mart fired the employee it said was responsible for taping the calls, a man named Bruce Gabbard, and said his actions were unauthorized. Then Mr. Gabbard started talking to The Wall Street Journal, saying the department he worked for had spied on critics. Wal-Mart quickly issued apologies to the critics and got a judge to order Mr. Gabbard to stop talking.

Mr. Gabbard said he told a Wal-Mart lawyer that “I’m the guy listening to the board of directors when Lee Scott is excused from the room.”

Does that mean that Mr. Scott authorized spying on his own board when it was discussing his performance? If so, it would be a shocking breach of corporate etiquette and governance.

For a few days after that quote appeared, Wal-Mart declined to comment. But eventually a company spokeswoman, Mona Williams, did issue a denial: “We never would have authorized” bugging board meetings, she said, and Mr. Scott never listened to any such tapes.

“As far as we know,” she said, Mr. Gabbard “never shared the information with anyone else.”

On the day Mr. Scott was named president and chief executive, the company’s share price was over $65. Now it is under $48. Mr. Scott has reported profits of $13.9 million from cashing in options, but those were issued before he became the boss.

Of the 3.6 million options granted to Mr. Scott since he received the top job, just 415,627 options would be worth anything if exercised now, and they are not in the money by very much. The rest are under water.

During his tenure, the Morgan Stanley retail index, which covers most large American store chains, is up about 180 percent. Wal-Mart is down more than 25 percent.

Even more painful, Wal-Mart is getting blasted from all sides. Unions, angry at the company’s successful efforts to keep them out, have been forced to make concessions to keep Wal-Mart competitors in business. They complain about Wal-Mart workers on Medicaid, the government health program for low-income people, and encourage cities to keep Wal-Mart out. A class-action suit by women claiming employment discrimination is pending.

Trying to mend fences on the left, Wal-Mart has angered some on the right. One group that got a Wal-Mart apology this month is upset over Mr. Scott’s comments favorable to government-financed health care and the company’s efforts to force suppliers to reduce carbon emissions. It says Wal-Mart has quotas to assure the hiring of women and minorities and gives money to gay rights groups.

Wal-Mart is successful, but Mr. Scott’s inability to convert that success to a rising share price may have colored his judgment. It appears that the company grew paranoid about its critics, and created a security operation that went too far. At best, management controls were sorely inadequate.

It is time for the Wal-Mart board to bring in an outside investigator, one without previous ties to the company. That investigator should learn, and tell the public, what went on in the spying operation, and just who knew the details.

A generation ago, when President Richard M. Nixon lost his job because of a spying operation that went too far, it was Senator Howard H. Baker Jr. who repeatedly asked a question that must be asked at Wal-Mart: “What did the president know, and when did he know it?”

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Court: Wal-Mart Can Copy Gabbard Data

Associated Press
April 13, 2007                       [back to top]

BENTONVILLE, Ark. (AP) - Wal-Mart won a court order Friday to take custody and make electronic copies of data on the computers, hard drives and other storage devices of a security operative it fired last month and blames for leaking its secrets to the press.

But federal authorities must supervise the copying, the order signed by Benton County Circuit Judge John R. Scott said.

The order filed in the Benton County courthouse less than a mile from Wal-Mart Stores Inc. headquarters said the property, now in the hands of Benton County prosecutors, can be turned over to Wal-Mart's head of corporate investigations, a former FBI veteran named Joe Lewis.

Wal-Mart asked for the personal computers, storage devices and papers of ex-employee Bruce Gabbard when it filed a late-night emergency order a week ago to bar him from talking to any more reporters. Scott granted that restraining order, including an order for Gabbard to turn over the devices and files to prosecutors.

Gabbard was publicly fired by Wal-Mart last month for allegedly recording a reporter's phone calls and intercepting pager messages of other people in violation of company policy. The company also turned the case over to the U.S. Attorney for the Western District of Arkansas, whose office has said it is investigating whether any federal laws were broken.

After he was fired, Gabbard alleged to The Wall Street Journal and The Associated Press that Wal-Mart had widespread surveillance operations against targets including shareholders, critics, suppliers, the board of directors and employees. Wal-Mart has denied any wrongdoing.

Gabbard also told The Wall Street Journal before the restraining order was issued that Wal-Mart had a secret "Project Red" to find ways to boost its stagnant share price. The company declined to comment except to say it is constantly exploring strategic ideas.

The court order on Gabbard's property instructed prosecutors to hand the materials to Lewis by Tuesday. It said Wal-Mart "shall be entitled to take replica images of all electronic storage devices within the Property."

"Wal-Mart's imaging of the electronic storage devices shall be supervised by the United States Government," Scott ordered.

The one-page order did not specify if "government" meant the U.S. Attorney's office and did not elaborate on why federal authorities would be involved in a civil case filed in county circuit court. Wal-Mart's restraining order was filed as part of a lawsuit against Gabbard seeking unspecified damages for allegedly spilling the company's secrets.

The U.S. Attorney's office was closed for the day and could not be reached for comment. Wal-Mart had no immediate comment and Gabbard's attorney, W.H. Taylor of Fayetteville, declined to talk.

© 2007 The Associated Press. All rights reserved.

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Prison Is Sought for Former Wal-Mart Officer

By REUTERS
April 13, 2007                        [back to top]

ST. LOUIS, April 12 (Reuters) — The case of the former vice chairman of Wal-Mart Stores, Thomas M. Coughlin, was back in court on Thursday as an appellate court took up a prosecutor’s plea that Mr. Coughlin’s sentence was too light.

The United States attorney for Western Arkansas, Robert Balfe, told the United States Court of Appeals for the Eighth Circuit that it appeared Mr. Coughlin, who admitted to stealing thousands of dollars from the company, was spared prison because he was a well-known businessman.

Arguments that Mr. Coughlin’s health problems would worsen behind bars were unproven, Mr. Balfe said. “There is no evidence established about what would occur or that the prison environment would have worsened his condition.”

Mr. Coughlin, 57, who joined Wal-Mart in 1978 and worked closely with the founder Sam Walton, had faced up to 28 years in prison and $1.35 million in fines after he pleaded guilty in January in federal court in Arkansas to wire fraud and tax evasion.

But he was sentenced to 27 months of house confinement after testimony that he had medical problems like diabetes, cardiac disease, sleep apnea, arterial blockage and other ailments. The sentence also called for five years of probation and restitution of about $411,000.

A lawyer for Mr. Coughlin, Blair Brown, told the three-judge panel that Mr. Coughlin’s condition could be life-threatening were he sent to prison.

“Going to prison could kill him,” the lawyer told the court.

The judges reacted with some skepticism and speculated on Thursday about the validity of allowing someone to escape punishment in prison because of poor health.

A ruling is expected in the next few weeks.

In a separate ruling, the Arkansas Supreme Court said Wal-Mart might sue Mr. Coughlin for fraud and allow a jury to decide whether it could recover money from him.

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SEC's Cox: Wal-Mart Surveillance Matter Sent To NY SEC Office

By Judith Burns,
Dow Jones Newswires
April 13, 2007                                        [back to top]

WASHINGTON -(Dow Jones)- Concerns sparked by a Wal-Mart Stores Inc. (WMT) memo that proposed investigating activist shareholders have been referred to the New York office of the Securities and Exchange Commission, SEC Chairman Christopher Cox said.

In a letter to New York City Comptroller William Thompson Jr., released by the SEC late Friday, Cox said he was forwarding the matter on to the regional SEC office without "prejudging what occurred" at Wal-Mart.

Thompson wrote Cox on Monday to express concern about a Wall Street Journal report of an internal Wal-Mart memo, which suggested Wal-Mart's security units could surveil shareholders who submitted proposals for consideration at the retailer's annual shareholder meeting. In later press reports, Wal-Mart acknowledged the existence of the memo but denied any surveillance of investors occurred, Cox noted.

Cox said shareholders' right to propose appropriate matters for consideration at corporate annual meetings is clearly spelled out in the U.S. securities laws administered by the SEC.

"Attempts by company fiduciaries to intimidate shareholders exercising these rights are antithetical to the core principles of corporate governance and the full and appropriate expression of shareholder rights and should be roundly condemned," Cox wrote. He added that under the SEC's longstanding policy it can't confirm or deny whether it is investigating a company or an individual.

A Wal-Mart spokesman wasn't immediately available to comment.

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Crews move in to build Wal-Mart

By Chris Strunk
Ark Valley News                         [back to top]

From all appearances, no one is invited to enter the future site of the area’s newest Wal-Mart Supercenter. A sign promising $1,000 fines for trespassers backs that up.

But that won’t be for long.

Pretty soon, the Wal-Mart Supercenter at 53rd Street North and Meridian will be clamoring for customers.

As tractors and construction crews set up shop in the fenced area, The News has learned more about what the new Wal-Mart will look like and when it will open.

The company is planning a grand opening late this year or early 2008.

The 176,000-square-foot store will have a garden center, a tire, lube and express shop as well as a drive-through pharmacy, company officials said. A Subway and a Smart Style Hair Care shop will be inside the store.

“Additional tenants are still to be determined,” company spokesperson Angie Stoner said.

The store will employ between 300 and 350 people.

The store’s location came under fire last year when neighbors as well as government officials said they were concerned about the impact a large retail presence could have on the primarily residential area.

A residential subdivision — the 271-lot, 140-acre Northgate Addition — is planned for the area north of Wal-Mart.

To get the Wichita City Council’s approval, developers agreed to some additional concessions to enhance the landscaping and streets around the development.

“We worked very closely with the city to provide additional landscaping at this site,” Stoner said.

Developers of the Northgate Commercial Park, which has been compared to New Market Square at 21st and Maize Road, agreed to install signals at 54th and Meridian as well as future signals on 53rd, a southbound right-turn lane and a fifth lane on Meridian from 54th to 53rd, dual left-turn lanes on the west and south legs of the 53rd and Meridian intersection as well as separate right-turn lanes on all approaches.

In addition, developers will landscape raised street medians in the area.

Wal-Mart is slated to be the cornerstone of a large retail development on that corner. Future plans call for a strip mall with smaller retail shops as well as a home improvement center.

Kevin Mullen, president of Ritchie Development, one of the project’s developers, said he wanted to make it an area the city and neighbors would be proud of.

“We want the neighborhoods to be better places, too,” he told The News last year. “We have a lot of common interests with people. We want it nice, too. We want people to be able to hold their heads up high and be proud of what the end product is.”

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Calls mount for Wal-Mart to disclose surveillance records

By MARCUS KABEL,
AP Business
Friday, April 13, 2007                                 [back to top]

More demands for details of Wal-Mart security activities — including records of alleged corporate surveillance — were voiced Thusday.

Another shareholder group and the lawyers in a massive class-action sex-discrimination lawsuit in federal court in California called for the Bentonville, Ark.-based retailer to shed light on its intelligence gathering.

Brad Seligman, lead attorney in the Dukes v. Wal-Mart gender discrimination case pending in San Francisco, wrote Wal-Mart's lawyers that he was concerned about recent news stories claiming Wal-Mart's security apparatus conducted widespread surveillance operations.

"We aren't in the habit of responding to letters from opposing counsel in the press," Wal-Mart spokeswoman Sarah Clark said. "However, Mr. Seligman provided his letter to the press, so we will respond by saying that his purported concerns are unfounded."

Separately, a group of Benedictine Sisters became the fourth shareholder group in a week to demand Wal-Mart turn over any records compiled on them and formally apologize for a memo that suggested some investors be investigated as potential threats to the June 1 shareholder meeting.

Wal-Mart has written to the shareholder groups to say it did not act on the January memo, which asked for a "potential threat assessment" of investors proposing policies opposed by management.

"We are deeply disappointed, appalled and shocked that Wal-Mart would engage in this type of activity with any shareholders who are owners of the company," the Benedictine Sisters of Boerne, Texas, wrote to Wal-Mart Chief Executive Lee Scott.

The memo and allegations of corporate espionage followed Wal-Mart's public firing of a security operative last month for allegedly taping a reporter's phone calls and intercepting pager messages. The ex-employee, Bruce Gabbard, went on to claim that the retailer snooped on its critics, consultants, board members, suppliers, shareholders and employees.

Wal-Mart has denied any wrongdoing and last Friday won a late-night emergency order from a judge in its hometown that barred Gabbard from talking to reporters.

Seligman said he does not know if Wal-Mart spied on his team but that the news reports by The Wall Street Journal and The Associated Press raised concerns.

"We do know from speaking with (company employees or former workers) that Wal-Mart's security is sophisticated and tenacious. They have their own internal CIA," Seligman said.

Wal-Mart's office of global security is headed by a veteran senior CIA and FBI official, Kenneth Senser, with a staff that includes former FBI agents, State Department security experts and other government intelligence professionals.

Seligman wrote to Wal-Mart that any surveillance could threaten the legal privileges of his team and the plaintiffs, representing as many as 1.5 million current and former female employees of Wal-Mart. It is the nation's largest employment discrimination class-action case.

"Accordingly, we request that Wal-Mart investigate whether class counsel, plaintiffs and/or disclosed class members have been the subject of any surveillance activities by Wal-Mart, its employees or agents, whether authorized or not," the letter said.

If there was any surveillance, Wal-Mart must disclose it to the Dukes legal team and the court and produce any related documents, recordings or electronic data, Seligman wrote.

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Ex-Wal-Mart Exec Benefits to Jury

By JILL ZEMAN
Associated Press 
April 12, 2007                         [back to top]

LITTLE ROCK -- The Arkansas Supreme Court ruled Thursday that a state judge was wrong to dismiss Wal-Mart's lawsuit to break a retirement deal with a convicted former executive, saying the world's largest retailer is entitled to have a jury hear its claims.

Wal-Mart Stores Inc., based in Bentonville, wants to void a multi-million-dollar retirement settlement it gave to Tom Coughlin, who later pleaded guilty to defrauding the company through the misuse of gift cards and expense reimbursements.

Wal-Mart and Coughlin had signed a pact in which the two sides agreed not to sue the other for grievances that might come to light after Coughlin's departure. However, the company said it discovered Coughlin's fraud after that pact was signed and believes Sam Walton's former right-hand man was obligated to reveal his deceit before retiring.

"Wal-Mart has sufficiently stated a claim that it would not have entered the retirement agreement and release had it known of Coughlin's misconduct," the justices ruled unanimously.

Separately, federal prosecutors will argue in a federal appeals court later Thursday that Coughlin should serve a term in jail. In October, Coughlin began a 26-month term of home detention.

Lawyers estimate Coughlin's retirement package is worth $12 million to $15 million.

Coughlin's lawyers say Coughlin didn't defraud the company while negotiating his January 2005 retirement after 28 years with the company.

He remained on Wal-Mart's board after his retirement, but by April of that 2005, Wal-Mart said it was suspending Coughlin's benefits amid allegations that the former executive used Wal-Mart money and gift cards to pay for personal items. Coughlin later pleaded guilty after prosecutors claimed that Wal-Mart had paid for his for hunting trips, hunting dog training, clothes, alcohol and parts and service for his vehicles.

Coughlin pleaded guilty to fraud and tax charges in federal court and Wal-Mart sued to have his benefits canceled. Circuit Judge Jay Finch dismissed the suit, citing the pact the two sides had signed.

Wal-Mart lawyer Theodore Boutrous argued before the state Supreme Court that Coughlin had a duty to disclose the fraud. However, "He knew that if he told the truth, he wouldn't get a retirement package. If he told the truth, he would be terminated. And so he lied," Boutrous said.

Copyright 2007 Newsday Inc.

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Wal-Mart feeling the heat over spy scandal

More demands retailer disclose records of surveillance of shareholders

The Associated Press
April 12, 2007                                         [back to top]

Calls mounted Thursday for Wal-Mart Stores Inc. to disclose records of alleged corporate surveillance as another shareholder group and the lawyers in a massive class-action discrimination lawsuit demanded the retailer shed light on its intelligence gathering.

Brad Seligman, lead attorney in the Dukes v. Wal-Mart gender discrimination case pending in San Francisco federal court, wrote Wal-Mart’s lawyers that he was concerned about recent news stories claiming Wal-Mart’s security apparatus conducted widespread surveillance operations.

“We aren’t in the habit of responding to letters from opposing counsel in the press,” Wal-Mart spokeswoman Sarah Clark said. “However, Mr. Seligman provided his letter to the press, so we will respond by saying that his purported concerns are unfounded.”

Separately, a group of Benedictine Sisters became the fourth shareholder group in a week to demand Wal-Mart turn over any records compiled on them and formally apologize for a memo that suggested some investors be investigated as potential threats to the June 1 shareholder meeting.

Wal-Mart has written to the shareholder groups to say it did not act on the January memo, which asked for a “potential threat assessment” of investors proposing policies opposed by management.

“We are deeply disappointed, appalled and shocked that Wal-Mart would engage in this type of activity with any shareholders who are owners of the company,” the Benedictine Sisters of Boerne, Texas, wrote to Wal-Mart Chief Executive Lee Scott.

The memo and allegations of corporate espionage followed Wal-Mart’s public firing of a security operative last month for allegedly taping a reporter’s phone calls and intercepting pager messages. The ex-employee, Bruce Gabbard, went on to claim the retailer snooped on its critics, consultants, board members, suppliers, shareholders and employees.

Wal-Mart has denied any wrongdoing and last Friday won a late-night emergency order from a judge in its hometown of Bentonville, Ark., barring Gabbard from talking to reporters.

Seligman said he does not know if Wal-Mart spied on his team but that the news reports by The Wall Street Journal and The Associated Press raised concerns.

“We do know from speaking with members of the (class-action lawsuit) that Wal-Mart’s security is sophisticated and tenacious. They have their own internal CIA,” Seligman said.

Wal-Mart’s office of global security is headed by a veteran senior CIA and FBI official, Kenneth Senser, with a staff that includes former FBI agents, State Department security experts and other government intelligence professionals.

Seligman wrote to Wal-Mart that any surveillance could threaten the legal privileges of his team and the plaintiffs, representing as many as 1.5 million current and former female employees of Wal-Mart. It is the nation’s largest employment discrimination class-action case.

“Accordingly, we request that Wal-Mart investigate whether class counsel, plaintiffs and/or disclosed class members have been the subject of any surveillance activities by Wal-Mart, its employees or agents, whether authorized or not,” the letter said.

If there was any surveillance, Wal-Mart must disclose it to the Dukes legal team and the court and produce any related documents, recordings or electronic data, Seligman wrote.

A federal appeals court ruled in February that Wal-Mart must face a class-action lawsuit alleging as many as 1.5 million former and current female employees were discriminated against in pay and promotions. Wal-Mart is seeking another appeal of the decision.

© 2007 The Associated Press. All rights reserved.

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Wal-Mart workers' lawyer seeks info on surveillance

Reuters
April 12, 2007                                    [back to top]

NEW YORK (Reuters) - A lawyer representing employees of Wal-Mart Stores Inc. who are suing the world's largest retailer for sexual discrimination is seeking information on whether his clients were among the targets of the company's controversial surveillance activities, according to a letter seen by Reuters.

Brad Seligman, a lawyer at the Impact Fund, a nonprofit group in Berkeley, Calif. representing female plaintiffs in the Dukes sexual discrimination case requested the company investigate the surveillance matter and turn over any related documents or recordings.

Wal-Mart had asked an internal security group to keep tabs on shareholders submitting proposals for a June shareholder meeting and its employees, according to a Wall Street Journal report last week.

New York City Comptroller William Thompson, Jr. sent letters to the U.S. Attorney General's office and the U.S. Securities and Exchange Commission asking for an investigation into what he called "ill-considered and possibly illegal surveillance operations."

Betty Dukes sued Wal-Mart for bias in pay and promotions. A nearly 13-year veteran of the company, where she works as a greeter in a store east of San Francisco. She alleged that she and other female employees were neglected when openings for higher-paid positions were advertised within her store.

"The prospect of any such activity in connection with the Dukes litigation implicates serious concerns of attorney-client and work product privileges," Seligman wrote in the letter sent to Wal-Mart's attorneys on Thursday.

A Wal-Mart representative could not be immediately reached. A spokeswoman for Seligman verified the letter.

In February, a top U.S. court ruled that more than a million women could join what is seen as the biggest sexual discrimination case in U.S. history.

Copyright 2007 Reuters

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A Poor Harvest for Wal-Mart

By Pallavi Gogoi,
BusinessWeek.com
April 12th, 2007                         [back to top]

After the retailing giant laid out ambitious plans to offer organic food last year, farmers say it's backing off

Last fall, Peter Ricker got an order from Wal-Mart Stores for organic apples that was the biggest he'd ever seen. "I'm talking trailer truckloads," says the 34-year-old, eighth-generation apple farmer in Maine. Ricker had heard of the giant retailer's push into organics, and he thought the order could be the beginning of a surge in demand. But that wasn't the case. While most retailers place orders with Ricker Hill Orchards once a week, Wal-Mart never came back.

He's hardly alone. A number of organic farmers across the country say that Wal-Mart has backed off of aggressive plans to offer more organic foods. After placing large orders for organic apples and juices last year, the retailer is cutting back or stopping orders altogether. Wade Groetsch, president at the Florida juice producer Blue Lake Citrus Products, says he stopped shipping his organic orange-tangerine blend to Wal-Mart after a few months. "The sales there just weren't enough to justify our costs of packing and shipping," he says.

Scaled-Back Ambitions

A year ago last March Wal-Mart grabbed headlines by announcing its organic push. Stephen Quinn, a top marketing executive, told investors at a Bear Stearns (BSC) conference that the company would double the number of organic food items in its stores to 400 and offer them "at the Wal-Mart price" (see BusinessWeek.com, 3/29/06, "Wal-Mart's Organic Offensive"). But now Karen Burk, a spokeswoman for the company, says that the majority of Wal-Mart stores are offering between 100 and 200 organic food items. She says the company does not have a target, at least not a public one, of stocking 400 organic items in the average store.

Burk denies that this means the company has fallen short of its goals. She said Quinn had been misinterpreted and hadn't meant to suggest that Wal-Mart stores would actually carry 400 organic items. He meant that the company would make as many as 400 organic items available to store managers; if they choose to stock only 25% to 50% of those items, it is simply a reflection of local demand. "It has always been our goal for our locations to be 'stores of the community,'" she wrote in an e-mail.

Burk said that in some cases, stores have doubled the number of organic products that they offer. She said that there are Wal-Mart stores that do stock roughly 400 organic items, including locations in Rogers, Ark., Rockwall, Tex., and Plano, Tex. "We are continuing to see a demand by many of our customers for organic alternatives and will tailor each store's assortment to meet the demand," she wrote.

High-End Strategy Flops

Wal-Mart has been struggling to move upscale in a number of product categories. Last year, Wal-Mart found through internal research that it had high-income customers, with incomes of more than $75,000, in its stores shopping for staples like milk and detergent, and it set out to sell them more high-end merchandise. Besides its organic push, the company introduced a new apparel line called Metro 7 and started stocking higher-end bedding. But Chief Executive Lee Scott concedes that the company has struggled to persuade customers that Wal-Mart can mean high-quality, rather than simply low price. "I think we went too far too fast," he said.

In the case of organic foods, there also may be a disconnect between Wal-Mart's brand and the products it hopes to sell. The retailer's existing customers tend to be very price-conscious and may not be willing to pay a premium for organic foods. On the other hand, consumers who go to stores like Whole Foods Market or Wild Oats Markets are less price-sensitive and may not be lured to Wal-Mart with low prices. "The Whole Foods customer is walking in there to buy organic and is more concerned about how the fruit was farmed," says apple farmer Ricker, "but the Wal-Mart customer is used to shopping with a calculator."

Others in the organic movement are skeptical that Wal-Mart will be able to gain much traction in the business. "When Wal-Mart found that people are buying organics, they decided to get into that too and sell it for just 10% over the regular foods," says Marty Mesh, executive director of the Florida Certified Organic Growers & Consumers, a nonprofit organization in Gainesville, Fla., which provides an Organic Certification program. "Problem is, the same people didn't all of a sudden say, 'I can get it cheaper at Wal-Mart,' and drive across town to get it." Incompatible Business Models

There may be problems with supply as well as demand. Wal-Mart is known for its hardball tactics with suppliers, driving costs as low as possible and regularly switching suppliers to get the best price. That kind of attitude can alienate farmers, especially organic ones, who tend to plan their crops years ahead of time. They need to keep land pesticide-free for four years to win organic certification. "Is organic really compatible with the Wal-Mart approach? We're finding out that it's not," says Jim Riddle, organic outreach coordinator and guest lecturer at the University of Minnesota.

Consider the case of Organic Valley Family of Farms in La Farge, Wis., one of the country's largest cooperatives of organic farmers. When demand for organic milk soared two years ago, rival Horizon Organic Dairy offered to sell to Wal-Mart for 15% below Organic Valley's price. Wal-Mart expected a similar reduction from Organic Valley, but instead the cooperative pulled out. "Looking for ever-lower costs comes at a real cost to sustainability," says George Siemon, Organic Valley's chief executive. "To have consistent supply, you have to change the paradigm of thinking and think about long-term partnerships."

Farmers like Ricker are now dealing with the fallout from Wal-Mart's faltering demand. He has decided to pare back his organic apple farm, from 150 acres to 120 acres. He says organics are just tough to grow. Without pesticides, insects and disease attack his McIntosh, Gala, and Honeycrisp apples. Production per acre dropped about 30% when he switched from regular farming methods 10 years ago. Now he plans to switch back. "The grocery stores want the perfect, blemish-free apple," he says, "and that's difficult to produce."

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Wal-Mart Warns on Earnings

By Kris Hudson,
Wall Street Journal
April 12th, 2007                             [back to top]

DALLAS -- Wal-Mart Stores Inc. surpassed its expectations by posting a 4% sales gain at established stores in March, aided by an early Easter pushing pre-holiday sales into March.

However, the Bentonville, Ark.-based retailer, like many of its peers, expects a letdown this month, predicting a rare sales decline for April. A Wal-Mart representative even warned during a recorded phone message this morning that the retailer's first-quarter outlook on earnings per share of 68 to 71 cents "is still attainable, but given the tough sales environment for the April period, it will be a challenge."

Wal-Mart had forecast a gain of 1% to 2% for the five-week period that ended April 6. March typically represents 8.8% of Wal-Mart's annual sales, making it the retailer's fifth most lucrative month of the year, according to JP Morgan Securities.

Same-store sales measure sales gains or losses at stores open for at least a year. They are a key indicator of the returns a retailer reaps on the capital it spends, and thus an influence on its profitability. Most publicly traded U.S. retailers are expected to report their March results today. Retail Metrics LLC, a retail analysis firm in Swampscott, Mass., predicts the 51 retailers it tracks will post an average gain of 4.2% today.

Two factors are heavily influencing retailers' results for March and April. First, Easter fell one week earlier this year on April 8, resulting in some early Easter shopping to bolstering March results. As well, due to a shift in their reporting schedules, retailers included the first week of April in their five-week March period, claiming even more pre-Easter sales for the March tally.

The shift will take its toll this month, though. Wal-Mart this morning predicted it will post same-store sales ranging from "flat" to a 2% loss. Considering March and April together, Wal-Mart projected its two-month performance will amount to a gain of 1% to 2%.

Another example of the disparity created by the shift: Target Corp., Minneapolis, posted a 12% gain for March but anticipates a loss of 2% to 4% for April. For the two-month span, Target predicts it will post a 4% to 6% gain.

Overall, Wal-Mart posted sales of $34.3 billion for the five-week March period, up 12% from March 2006. Its overall 4% same-store sales gain included a 3.4% gain from its primary U.S. stores division and a 7.4% gain from its Sam's Club membership-warehouse division. Wal-Mart reported strong March sales in categories including Easter merchandise, food, household paper goods, girl's apparel and pharmacy. It continued to post weak sales in home décor and apparel in general.

As Wal-Mart has grown to unprecedented size -- tallying $345 billion in sales last year -- and has embarked on rocky efforts to spur additional growth, its same-store sales have suffered. They deteriorated from a 9% gain in 1998 to a 27-year low of a 2% gain last year. The retailer's recent results included a 0.9% gain in February, a 2.2% gain in January and a 0.1% loss in November.

Wal-Mart has blamed much of its slowing momentum in the past year on a host of troubles, including disruption caused by a sweeping program to partially remodel 1,800 stores and a backfired bet on fashionable women's apparel.

Yet another culprit in Wal-Mart's malaise: The retailer didn't fare well with last year's campaign to broaden its customer base to include more affluent shoppers by bolstering its fashion apparel and producing commercials focused on lifestyle themes rather than low prices. Wal-Mart plans this year to focus most of its marketing efforts on encouraging more purchases by its core, low-income customer in an effort to boost its sales.

"To the extent that we blew it last year, it really wasn't with our core customer," Stephen Quinn, Wal-Mart's chief marketing officer, said in an April 4 speech to an audience of 250 at a Bentonville/Bella Vista Chamber of Commerce event in Rogers, Ark.

That means Wal-Mart will rely more on shoppers like Melody Salser, a single mother in southwest Missouri. She shopped at Wal-Mart 10 times in March to buy groceries, children's clothes, garden supplies and Easter gifts, among other things. "Being a single mom, Wal-Mart is my friend," she says. "Good quality items at a great price."

Wal-Mart has yet to impress John Cupples, a 57-year-old sales manager in Arlington, Texas. He visited a Wal-Mart once last month and left without making a purchase after he could not find the DVD he sought. He predicts he'll shop at Wal-Mart three or four times this year but will more frequently go to Target, Home Depot Inc., Costco Wholesale Corp. and Best Buy Co. In explaining why he chooses those stores over Wal-Mart, he said, "Better selections, cleaner stores, generally better customer service."

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Wal-Mart Expects Tough April

Associated Press
April 12th, 2007                           [back to top]

Wal-Mart Stores Inc., the world's largest retailer, on Thursday said it expects a tough sales environment in April.

The company said it might have trouble making its guidance for earnings from continuing operations between 68 cents and 71 cents in the fiscal first quarter.

"While the earnings guidance is still attainable, given the tough sales environment for the April period, it will be a challenge," said Tom Schoewe, executive vice president and chief financial officer.

Analysts polled by Thomson Financial expect first-quarter profit of 69 cents per share.

Wal-Mart (nyse: WMT - news - people ) said it expects April same-store sales to be flat to down 2 percent in April. The company said the Easter calendar shift into March would hurt April results.

Same-store sales, or sales in stores open at least one year, are a key measure of retail industry performance because they measure growth from established stores rather than growth from newly opened ones.

Same-store sales for the March and April nine-week period are expected to grow between 1 percent and 2 percent, compared to a rise of 3.4 percent in the period a year ago.

Shares rose 40 cents in premarket electronic trading to $47.67.

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DealTalk: Prospect of Wal-Mart's Sam's spinoff sparks debate

By Nicole Maestri
and Jessica Hall
Thu Apr 12, 2007                                   [back to top]

NEW YORK/PHILADELPHIA, April 12 (Reuters) - A report that Wal-Mart Stores Inc. <WMT.N> has considered spinning off its Sam's Club warehouse chain may be a sign that the world's largest retailer has found a way to revive its stock price -- or that it has run out of ideas.

Earlier this week, Wal-Mart said regular strategic reviews of its businesses were simply good governance after The Wall Street Journal said the company had developed a secret plan that mulled a possible spinoff of Sam's Club.

"We look at a full range of alternatives, many of which are considered and rejected, and we will not comment specifically on any of them," Wal-Mart said.

The notion of carving out Sam's Club drew mixed reviews, with some analysts and investors seeing it as a way for Wal-Mart to focus on improving its core U.S. stores and fast-growing international operations.

"It could breathe some life back into the stock," said Citigroup analyst Charmaine Tang.

"The stock has kind of hovered around $45 to $50 for basically five years," Tang said. "So I think there may be some shareholder pressure, or it might be a nice way to enhance value."

Wal-Mart's stock has dropped roughly 22 percent over the past five years. In that time, warehouse chain Costco Wholesale Corp.'s <COST.O> shares have jumped 35 percent, and rival discounter Target Corp. <TGT.N> has seen a roughly 39 percent increase.

'A GIMMICK'

Other analysts and investors viewed a Sam's Club spinoff as financial engineering that might get Wal-Mart's stock price moving in the short-term, but would not fix the underlying problem of sluggish sales growth at its U.S. stores.

"I actually think that spinning off Sam's Club at this point is more of a gimmick," said David Abella, a portfolio manager at New York-based Rochdale Investment Management.

"That's not to say that sometimes gimmicks do work and there might be a certain valuation that they got out of Sam's Club that made the sum of the parts -- Wal-Mart core and Sam's Club -- greater than your current price," said Abella, whose firm owns Wal-Mart shares and has $2.4 billion under management.

But he said Wal-Mart benefited from operating Sam's Club, which gives the company greater size and market heft to negotiate better prices with suppliers.

That Wal-Mart has been considering a spinoff at all struck some retail experts as a sign that the company had become a mature, stodgy business.

"When you start hearing words like 'spinoff' or 'tracking stock' or 'dividends,' that's when you know a company's growth is behind it and it is looking for other ways to improve shareholder value," said a retail investment banker who requested anonymity.

Abella said that at some point, Wal-Mart might need to concede it has reached saturation in the United States and appease shareholders by raising its dividend.

Still, Sam's Club is big enough to survive as a stand-alone company, Citigroup's Tang said.

The chain had $41.6 billion in sales last year, representing about 12 percent of Wal-Mart's total. Sam's Club holds 42 percent of the warehouse club market, behind market leader Costco, whose share is 49 percent, analysts said.

Separating Sam's Club would only slightly lessen Wal-Mart's heft, they said, but it would give management more time to focus on reviving the main U.S. business and its international aspirations.

In the fiscal year that ended on Jan. 31, Sam's Club saw a 4.5 percent increase in net sales, compared with growth of 7.8 percent growth for Wal-Mart's U.S. stores and 30.2 percent for its international operations.

WORLD DOMINATION

Wal-Mart has struggled to boost sales in the United States, where some analysts suggest it has hit a saturation point. They expect much of the company's future growth to come from international markets.

"We view the Wal-Mart U.S. stores as the 'room for improvement' -- turnaround potential," Tang said.

But Wal-Mart's international experience has been mixed. The company exited South Korea and Germany after failing to successfully navigate tough competition and unfamiliar consumer habits, and it has faced stiff competition in the United Kingdom.

Yet its international growth benefited from acquisitions in Brazil and Central America, and Wal-Mart de Mexico is the top retailer in that country. Wal-Mart also recently forged a deal to take over a big retailer operating in China by 2010, and cemented a joint venture with Bharti in India.

Asda, the British unit of Wal-Mart, had considered making a bid for rival supermarket chain J. Sainsbury Plc <SBRY.L>, sources familiar with the situation previously told Reuters.

Sainsbury's founding family on Tuesday rejected a 10.1 billion pound ($19.9 billion) offer from private equity firm CVC Capital Partners <CVC.UL>.

Analysts expect Wal-Mart to make more international acquisitions in markets such as Asia, South America and Russia rather than building from scratch in each region.

"For a company as large as Wal-Mart, starting with one store in a new market is not going to move the needle," said another retail investment banker. "You need to buy revenues and buy a presence -- and a partner. Buying an established chain gives you validity and gives you people who already know the local do's and don'ts."

But any changes at Wal-Mart will take time.

"Wal-Mart is a tug boat," Abella said. "It takes a little while to turn these things around."

© Reuters 2007. All rights reserved.

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SEC urged to look at Wal-Mart spying scandal

N.Y.C. official wants to know if research on shareholders was legal

Associated Press
April 11th, 2007                              [back to top]

NEW YORK - New York City’s comptroller has asked the Securities and Exchange Commission and the Justice Department to investigate whether Wal-Mart illegally spied on some of its shareholders.

The request by New York City Comptroller William C. Thompson follows a string of allegations by a fired Wal-Mart security operative that the giant retailer had wide-ranging surveillance operations against employees, critics, suppliers, consultants and shareholders expected to challenge some of the company’s policies at an annual meeting.

Wal-Mart’s spokesman John Simley declined to comment Wednesday on Thompson’s action.

In a letter faxed to shareholders last week, Wal-Mart denied allegations by the fired operative in the Wall Street Journal that the retailer was targeting shareholders for surveillance.

At least three investor groups including the Interfaith Center on Corporate Responsibility, a leader in shareholder activism, have said that the assurance was not enough and have demanded a formal apology and copies of any material collected on them.

“We certainly welcome this initiative (by the comptroller) and we’d like to get to the bottom of this situation,” said Peter Flaherty, president of the National Legal and Policy Center, a free market think-tank that has a resolution pending for the June 1 shareholder meeting to require more details from Wal-Mart on its charitable giving.

Wal-Mart’s union-backed critics also called for an investigation.

“Since Wal-Mart is unwilling to say, it’s time for a serious government investigation into who Wal-Mart spied on, when, where, and why,” said Chris Kofinis, spokesman for WakeUpWalMart.com.

In letters to government officials, Thompson said his office, which controls $400 million worth of Wal-Mart stock through government pension funds, was among those targeted by the surveillance effort.

Thompson called Wal-Mart’s surveillance activities “ill-considered and possibly illegal” in the April 9 letters to SEC Chairman Christopher Cox and Deputy Attorney General Paul McNulty.

“This conduct reflects breathtakingly flawed judgment and raises significant questions regarding Wal-Mart’s commitment to its shareholders and the public markets,” he wrote in his letter to Cox.

An SEC spokesman said he could not comment on whether the agency is investigating the matter.

The comptroller’s office reportedly drew Wal-Mart’s attention after submitting a proposal asking it to abide by a code of conduct that would govern its operations in Northern Ireland.

Thompson also wrote Wal-Mart CEO Lee Scott, calling the company’s defense of its activities, “mystifying and outrageous.”

Wal-Mart confirmed last Thursday that there was a January memo by an unnamed Wal-Mart official asking an internal security team to research certain shareholders in advance of the company’s annual meeting on June 1.

A spokeswoman told The Associated Press last week it was routine for the company to review “potential areas of concern” before shareholders’ meeting but added that any review was “mainly using the Internet and other public sources to obtain background information.”

However, Wal-Mart’s letter to shareholders on the same issue stated flatly that there had been no effort to collect information on them.

“In spite of a January 2007 memo referenced in the (Wall Street Journal) article, there were no inquiries made with respect to the proponents of shareholder proposals. Given the nature of the matters proposed and our familiarity with the individual proponents, the request contained in the memo was not acted upon,” Wal-Mart wrote.

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Wal-Mart Gets Late Night Court Order

By MARCUS KABEL
Associated Press
04.11.07                                            [back to top]

Arkansas legal rules intended to protect trade secrets from imminent disclosure were the basis for a rare late-night court order obtained by Wal-Mart Stores Inc. to stop a former employee from talking about the company's affairs, an expert in civil law said Tuesday.

Wal-Mart (nyse: WMT - news - people ) lawyers went to Benton County Circuit Court Judge John R. Scott's home around 8 p.m. Friday seeking a temporary emergency order against former security employee Bruce Gabbard without Gabbard or his lawyer present.

The judge granted the temporary restraining order and filed the ruling and complaint in court Monday in Wal-Mart's home county. Rules in Arkansas and most states allow judges to accept emergency filings at all hours, according to civil procedure expert Scott Dodson of the University of Arkansas Law School.

Dodson said that for the judge to make a ruling without the presence of both parties, Wal-Mart would have had to show that the immediate order was necessary to protect trade secrets.

"I'm confident the judge would not have signed such an order without some showing by Wal-Mart that it was necessary to preserve the confidentiality of Wal-Mart's trade secrets over the weekend," said Dodson, an assistant law professor at the university in Fayetteville.

"Confidential information and the possibility of immediate disclosure of certain trade secrets or things that could be harmful of a business nature do generally provide adequate justification for such extreme measures," Dodson said.

The judge said Monday that it was rare to get a trade secrets case after hours and that the company argued that it was an emergency. He said he could not by law comment on the specifics and referred instead to the court filings.

In its motions, Wal-Mart argued that the company needed an immediate restraining order to prevent "irreparable harm" that would occur if the judge did not immediately order Gabbard to stop revealing confidential information.

Wal-Mart also asked the judge to seal the company's supporting arguments because they specified the confidential information the company was trying to protect. The retailer included statements from company officials, including a former manager of Gabbard's and an ex-FBI agent who heads its internal corporate investigations, to back up its claims that it faced imminent harm without a restraining order.

Those six statements were sealed by the judge at Wal-Mart's request to protect confidential company information.

Dodson said sealing the underlying information is permissible "to prevent the Catch-22 of having a litigant prove that something is so confidential that they need an emergency order and yet at the same time divulging the confidential information to the public."

Wal-Mart said in its filings that it had been contacted by a reporter April 5, "seeking to write a story regarding Wal-Mart's confidential and/or trade secret information." Wal-Mart alleged that the information came from Gabbard.

Gabbard had already been quoted as a source for two stories in the Wall Street Journal, including allegations that the retailer ran surveillance operations against employees, critics, consultants and shareholders.

On Monday after the restraining order, the Wall Street Journal ran another story citing Gabbard that alleged Wal-Mart has a secret "Project Red" looking at ways to bolster its dormant stock price.

Dodson said the law required Wal-Mart to notify Gabbard or his attorney immediately of the restraining order. Gabbard could then seek a hearing to challenge the restraining order, and the law instructs the courts to set that hearing "as expeditiously as possible," Dodson said.

As of Tuesday afternoon, Gabbard had not filed any motions with Benton County Circuit Judge Xollie Duncan, who was assigned to the case.

Gabbard could not be reached for comment.

Wal-Mart declined to comment beyond what was in its legal filings, a company spokesman said.

Copyright 2007 Associated Press. All rights reserved. 

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Official Asks for Probe Of Wal-Mart 'Surveillance'

By Ann Zimmerman
and Gary McWilliams,
Wall Street Journal
April 11th, 2007                                         [back to top]

The New York City Comptroller asked the U.S. Attorney General's office and the Securities and Exchange Commission to investigate Wal-Mart Stores Inc. for what it called "ill-considered and possibly illegal surveillance operations" directed at shareholders who submitted proxy petitions.

In letters to both agencies, Comptroller William C. Thompson Jr., citing a recent article in The Wall Street Journal, said he was "particularly troubled by reports that Wal-Mart engaged in chilling and truly outrageous surveillance activities."

The April 4 article detailed the company's extensive surveillance of employees, critics and shareholders. As one example, the article detailed how internal security groups were asked to investigate shareholders who had submitted proposals that could potentially disrupt the company's annual meeting and that the company was trying to block.

The comptroller's office submitted a proposal that requested the Wal-Mart board to abide by a corporate code of conduct for companies doing business in Northern Ireland. New York City's Pension Funds hold approximately eight million Wal-Mart shares, currently valued at nearly $400 million.

The April 4 article noted that in a January internal memo viewed by the Journal, a Wal-Mart official asked its internal security groups to "do some preliminary background work on the potential threat assessment for the Annual Shareholders Meeting," listing the 14 submitted proposals. The official cautioned that the company's efforts to thwart some of the petitions "can create a potential for a negative reaction from the shareholder group that submitted the proposal."

Shortly after the article ran, Wal-Mart contacted some of the shareholders to apologize, particularly for referring to them as potential threats. Mr. Thompson said the phone call didn't appease his office.

"The response they gave my office was that it was justifiable and that they had no problem with it," Mr. Thompson said. "We want to know to what level this background investigation went. If they just Googled us, fine. But we can't get answers."

Wal-Mart wouldn't comment, but it provided a letter written by its top legal officer that was faxed this past Thursday to all shareholder proponents, in which the company said the request to do a threat assessment was never carried out.

The letter went on to explain that "in the ordinary course of business and for legitimate business reasons, Wal-Mart will conduct background research on persons or organizations, including proponents of shareholder proposals ... Any information gathered about proponents of shareholder proposals would come from internet searches and from other publicly available sources of background information."

The Comptroller's office says it received the fax but still wasn't satisfied.

Other shareholders got on the Wal-Mart threat list with a variety of petitions. Action Fund Management LLC, which operates the Free Enterprise Action Fund, submitted a proposal that would require the company to report on what it has done to promote "the social benefits of business and the virtues of capitalism." Last week, after the Journal article ran, the group sent a letter to Wal-Mart seeking "any and all information" that Wal-Mart may have collected on the fund and its managers.

Steven J. Milloy, the Potomac, Md., fund's managing partner, asked that the retailer's chief executive and general counsel "personally certify" that the company had done no "inappropriate surveillance of shareholders" who submitted petitions for the upcoming annual meeting.

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NY seeks probe of Wal-Mart for surveillance

Wed Apr 11, 2007                                   [back to top]

NEW YORK (Reuters) - New York City is seeking a probe of Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) over the retailer's surveillance of shareholders who submitted proxy petitions, the Wall Street Journal reported on Wednesday.

The New York City Comptroller asked the U.S. Attorney General's office and the Securities and Exchange Commission to investigate Wal-Mart for what it called "ill-considered and possibly illegal surveillance operations" directed at shareholders who submitted proposals that could potentially disrupt the company's annual meeting, the paper said.

Comptroller William Thompson Jr.'s office and Wal-Mart officials could not immediately be reached for comment.

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Wal-Mart's major woe with Sam's? It's Costco

It has 71 stores in Canada and had the field to itself for 18 years until Sam's arrived

MARINA STRAUSS
Globe and Mail                        [back to top]

Pretty well everything that behemoth Wal-Mart Stores Inc. has touched in Canada has turned golden, with one exception: its Sam's Club warehouse stores.

While Wal-Mart has built more than 280 discount outlets since arriving in this country in 1994, it has only six Sam's Clubs, and no current plans for more.

Last month, for the first time publicly, Mario Pilozzi, chief executive officer of Wal-Mart Canada, acknowledged what industry insiders had been whispering: "At this point, frankly, the Sam's business is not what we would like it to be," he told analysts at a meeting in the Canadian head office in Mississauga. "However, there have been some very, very encouraging signs."

Lurking behind those words is the formidable competitor Costco Wholesale Canada Ltd. Owned by Costco Wholesale Corp., it's not only the leader in the warehouse-club retail sector, having opened its 71st store in Canada on March 30. It had the field to itself for 18 years until Sam's Club arrived in 2003.

"Costco owns that space and no one is moving them aside," said Jim Danahy, managing principal at CustomerLab, which consults for retailers and suppliers. "There's no compelling reason to switch to Sam's Club."

Costco keeps gaining ground with a recipe of bare-bones, warehouse-style stores, an unpredictable stock of often unique, high-quality items, enticing prices and membership fees ($55 for individual members, compared with $45 at Sam's) for the privilege of shopping at the outlets.

Costco also sets itself apart from Wal-Mart by paying its employees generously in an industry where wages are notoriously poor, Mr. Danahy said. As a result, Costco's work force has proven to be a committed and motivated one. "Their people are well-coached and well-paid. The company shows them love."

Louise Wendling, who heads Costco in Canada, said while it offers little product choice and minimum customer service, she recently put a push on store upkeep. She instructed employees to ensure the outlets are "A-1" clean, that shopping carts are in order, parking lots cleared of snow and washrooms "in top shape."

She reminded employees to be polite to shoppers, greet them directly and engage them in conversation when possible. "It's a club, and we should treat our members -- even more so than any other retailer -- the absolute best we can.

"Already you don't have that style or appearance you would find in a Bay flagship or Holt Renfrew," she said. "Without doing the carpet and all the marble on the floor and all the beautiful presentation, which we don't do, it's very important that at least it's neat and tidy, that it's clean and it's agreeable -- that it's show-time ready."

Even so, a daunting rival isn't the only thing restraining Sam's Club's growth, observers said. Over the past few years, Wal-Mart has been more focused on launching massive Super centres in Canada, with a full array of fresh food, they said. The first of them opened late last year, and the company plans to have almost 30 in operation by the end of 2007. Many more are on the drawing boards.

As Mr. Pilozzi asserted, "today our smart investments are in discount stores and in Super centres."

Despite the challenges, Wal-Mart executives insist they haven't given up on Sam's Club. They say its slow expansion is conspicuous only because it contrasts with the rapid rollout of the discount stores, which appeal to a wider customer base.

And Sam's Club employees' compensation is "at the high end of the market pay scale and more than competitive," a spokesman said.

"When you start from scratch . . . there's a learning curve that goes with it," said Shawn Baldwin, who heads Sam's Club Canada. He was recruited from the discounter's Bentonville, Ark., head office about 18 months ago to try to turn around the warehouse chain. "We're the new kid on the block. You have to prove yourself harder."

Already the results are encouraging, he said. Sam's Club exceeded its financial targets in February and has a strong small-business membership, which is crucial to its strategy, Mr. Pilozzi said. "The format is proven in other parts of the world," he said. "At this point, we continue to evaluate. We continue to improve."

In the United States, Sam's Club has enjoyed better results recently, although it still trails Costco in many financial measurements, analysts said. They include total sales, sales per store, sales per square foot of retail space and sales per employee. But Sam's Clubs' operating profit margin of 3.5 per cent beats Costco's 2.8 per cent.

In Canada, some of Sam's Club's latest improvements borrow a page from Costco's book. Sam's Club is introducing new merchandise more often, and more than tripling the number of "road shows" it stages, to every second week, Mr. Baldwin said.

Road shows are part of the "treasure hunt" mentality of the club warehouse retailer: the chains ship high-end items to the stores for brief periods, luring customers with attractively priced products that are often sold out within days.

Sam's Club recently introduced a conventional credit card, MasterCard (Costco uses American Express), and more marketing events to draw the all-important small-business shopper, Mr. Baldwin said. It started to stock more products that cater to the local community: for example, kosher food at its store in Richmond Hill, Ont., which has a large Jewish population.

As well, the chain rolled out some of its own initiatives. It now runs fully serviced jewellery counters, ditching the warehouse-club style of locking jewellery behind glass cases and forcing customers to write their choices on a paper and take it to the front counter. Store wars

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India's Bharti says to sign Wal-Mart deal in April

Reuters
Wed Apr 11, 2007                              [back to top]

MUMBAI (Reuters) - India's Bharti Enterprises said on Wednesday it will sign a deal in April with Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) for a joint venture in cash-and-carry and back-end supply for its retail operations, nearly a month later than previously expected.

"The deal will be signed this month," a spokesman for the Indian firm said. He did not say why the deal was delayed.

Top executives from the U.S. giant had met Indian government officials early in March and Bharti Chairman Sunil Mittal had said at the time that the two firms were very close to a deal.

Bharti Retail Ltd., wholly-owned by Bharti Enterprises, has said it will spend $2.5 billion by 2015 on setting up hypermarkets, supermarkets and other stores across India.

The proposed entry of Wal-Mart in India's fragmented $300 billion retail industry, which is dominated by small stores, has triggered political concerns and protests from trade unions and small shop owners who fear job losses.

© Reuters 2006. All rights reserved. 

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Retailer expected to slow growth

By Steve Painter,
Northwest Arkansas Democrat-Gazette
April 10th, 2007                                                     [back to top]

Wall Street stock analysts have been looking for signs that Wal-Mart Stores Inc. would scale back its U. S. store growth. They found a small step in that direction in the company’s latest expansion plans, outlined in a report filed last month with federal regulators.

Wal-Mart intends to spend about $ 17 billion on capital projects in the United States this year, the report shows, most of it on new supercenters or expansions, conversions or relocation of older discount stores into supercenters.

Patricia Edwards, a fund manager at Wentworth, Hauser and Violich, in Seattle, estimated the projects will add 7. 5 percent more store space this year.

“It is a bit of a haircut off of what they had before,” she said. “It may not be as far as we would like to see them go.”

Last year, the company added 8. 4 percent more square footage and, the year before, 8. 6 percent. Analysts have suggested that part of Wal-Mart’s problem with marginal sales gains in existing stores is new stores that siphon off customers.

In the past, Wal-Mart has been too quick to open a third store in a two-store market, said Stephanie Hoff, a retail analyst with Edward Jones in St. Louis.

Though the latest move is only incremental, she said, “Just a nod in that direction is helpful.” Wal-Mart’s filing shows plans for 265 to 270 supercenter projects, which the company says average 187, 000 square feet.

Relocations, conversions or expansions account for about 145 of the planned projects. The company completed 276 supercenter projects in the fiscal year that ended Jan. 31 and 267 the year before.

Mark Rein, an independent retail analyst in Chicago, said the company should stay the course with its conversion of older-format discount stores to supercenters, which include a complete supermarket along with general merchandise. “They’ve got to find a way to increase sales at their existing stores, and I think the supercenter route is the way to go,” he said.

Wal-Mart plans to add only five to 10 of its discount stores this year, down from 15 last year and 24 the year before. The discount stores average 107, 000 square feet.

The company also will open 15 to 20 of its supermarket-only format Neighborhood Market stores, which average 42, 000 square feet. Hoff said she expects to see the company scale back U. S. expansion even more next year. Given the size of its projects and the rate of past expansion, she said, it will take more than one year to change course.

Based on moves Wal-Mart already has made in China and India, the world’s most populous nations, analysts expect most of the company’s future growth to be overseas. “International growth, there’s a lot of green fields for them,” Edwards said.

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Wal-Mart Gags Whistleblower; Investor Group Demands Apology; Activists Spied On

By Matthew Rothschild
April 10, 2007                                                  [back to top]

Wal-Mart has won a temporary restraining order against a fired employee who spilled the beans about the company’s spying operations to the Wall Street Journal on April 4.

Bruce Gabbard told the Journal that he was part of a sophisticated company surveillance operation that spied not only on employees but on shareholders and critics. The outfit was called the Threat Research and Analysis Group. He confirmed his story to the Associated Press.

“Wal-Mart’s actions are paranoid, childish, and desperate,” says a spokesperson for Wal-Mart Watch, who himself was tracked by company sleuths.But he won’t be confirming any more stories for a while, since a judge in Benton, Arkansas, home of Wal-Mart, granted the gag order late Friday, April 6. Wal-Mart successfully argued that Gabbard had gabbed about confidential corporate information. The local judge also ordered Gabbard to cough up “the names of all persons to whom he has transmitted, since January 15, 2007, any Wal-Mart information,” AP reported.

According to Gabbard, Wal-Mart’s spies kept tabs on several groups, including the Interfaith Center on Corporate Responsibility (ICCR). After the story broke, Wal-Mart said it regretted that shareholder groups had been monitored. But that’s not enough for the Interfaith Center. On April 9, it demanded a formal apology.

“We were surprised and disappointed to read the results of the Wall Street Journal investigative report,” four leaders of the group said in a statement. “We view such actions as a serious breach of the trust relationship between shareholders and their company. . . . We ask that Wal-Mart formally apologize to investors and to others whose expectations of privacy has been breached.”

Signing the letter was Sister Judy Byron of the Sisters of the Holy Names of Jesus and Mary, U.S.-Ontario Province; Sister Susan Mika, who represents the Benedictine Sisters of Boerne, Texas; Father Michael Hoolahan, the interim executive director of the ICCR; and Mark Regier, chair of the ICCR’s governing board.

The Wall Street Journal article said that Wal-Mart had done “some preliminary background work on the potential threat assessment” of the Benedictine Sisters of Boerne, Texas.

Another group the company went to great lengths to keep tabs on was Wal-Mart Watch. Gabbard told The Wall Street Journal that he found photos of Nu Wexler, a spokesperson for the group, on a South Carolina Democratic Party website, and shared the photos with company personnel.

“Wal-Mart’s actions are paranoid, childish and desperate,” Wexler said in a statement on his group’s website. The company’s “thug-like tactics only confirm their critics’ charges. Wal-Mart should stop playing with spy toys and take the criticism of their business model seriously.”

In addition to Wal-Mart Watch, the company also reportedly was concerned about ACORN and Up Against the Wal.

Wal-Mart sent “a long-haired employee wearing a wireless microphone to Up Against the Wal’s Fayetteville, Ark., gathering, and eavesdropped from nearby,” the Journal reported, relaying Gabbard’s story. “We followed around the perimeter with a surveillance van,” he said.

In response to the article, Wal-Mart issued a statement that said, in its entirety: “Our senior management, our board and their advisors regularly conduct thorough, strategic reviews of all aspects of our business. That’s just good governance. We look at a full range of alternatives, many of which are considered and rejected, and we will not comment specifically on any of them.”

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NLPC: Wal-Mart to submit its proposal to holders

by Nicole Maestri
Tue Apr 10, 2007                                [back to top]

NEW YORK, April 10 (Reuters) - The National Legal and Policy Center said on Tuesday it was notified by the U.S. Securities and Exchange Commission that Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) will be required to submit an NLPC-sponsored proposal to shareholders.

The conservative watchdog group said the resolution asks Wal-Mart, the world's largest retailer, to disclose its charitable giving. It said Wal-Mart had appealed to the SEC to exclude the resolution.

Wal-Mart spokesman John Simley said the retailer filed the petition to not submit the proposal for a shareholder vote because Wal-Mart already discloses details on its charitable giving, making the information available on its Web site.

"We feel on that basis that we've already substantially disclosed our policies and procedures," he said.

The NLPC also said it sent a letter to Wal-Mart Chief Executive Officer Lee Scott requesting the retailer turn over any information it may have collected about the group.

Last week, a report in the Wall Street Journal said an internal Wal-Mart security group was asked to investigate the potential threat of those submitting proposals to its June shareholder meeting.

The NLPC said that, on April 4, following the article's publication, Wal-Mart Vice President and General Counsel Jeffrey Gearhart called the group to apologize.

The NLPC said it rejected the apology and has instead requested copies of any and all materials that may have been collected.

Wal-Mart shares declined 32 cents to $48.15 in afternoon New York Stock Exchange trading.

Reporting by Nicole Maestri, editing by Andre Grenon;

(C) Reuters 2007. All rights reserved.

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Wal-Mart loses bid to block shareholder proposal

National Legal and Policy Center said SEC has notified Wal-Mart to submit proposal to disclose its charitable donations at its annual meeting.

Reuters
April 10 2007                                      [back to top]

NEW YORK (Reuters) -- The National Legal and Policy Center (NLPC) said on Tuesday that it was notified by the U.S. Securities and Exchange Commission that Wal-Mart will be required to submit an NLPC-sponsored proposal which discloses its charitable donations to shareholders at its annual meeting in June.

The NLPC said the resolution asks Wal-Mart (Charts) to disclose its charitable giving. It said Wal-Mart had appealed to the SEC to exclude the resolution.

"Sometimes David beats Goliath. Wal-Mart should not have opposed our resolution to begin with. If the company were truly proud of its charitable giving, it would have welcomed it," Peter Flaherty, NLPC president, said in a statement.

Wal-Mart (Charts), the world's largest retailer, recently apologized to some shareholder groups for doing "threat" research after they submitted proxy petitions.

The NLPC said in a statement that it was among the groups that had received a call from Wal-Mart executives to apologize for its action.

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Wal-Mart U.S. Gets New Leadership

KATHERINE BOWERS
DNR                                            [back to top]

BOSTON (April 10, 2007) - Wal-Mart U.S. president and CEO Eduardo Castro-Wright shuffled the top leadership of Wal-Mart’s largest operating division, naming Bill Simon, the executive who created the retailer’s $4 generic prescription drug program, as chief operating officer and Pat Curran, formerly senior vice-president of store operations for the mid-Atlantic and southeast regions, as executive vice-president of people for the $226 billion division. Both are new positions and both report to Castro-Wright. It’s another step in Wal-Mart’s continued overhaul of its underperforming U.S. business, which has seen comparable-store sales lag its rival Target Stores. Earlier this mongh, the $345 billion Bentonville, Ark. retailer announced that Castro-Wright would report directly to Wal-Mart president and CEO H. Lee Scott, rather than to vice-chairman John Menzer. Menzer was given the title of chief administrative officer and responsibilities supervising strategic planning, sustainability, informational technology and other support functions. Castro-Wright, who ran Wal-Mart’s Mexican subsidiary, has not been shy about making change. He embarked on a massive store remodeling campaign in mid-2006 and overhauled the way store employees are scheduled and compensated. In January, he named John Fleming, a former Target veteran, as the company’s first chief merchant. Simon, who has a range of consumer packaged goods industry experience, will oversee operations for 3,400 U.S. stores. Curran began as an hourly associate at Wal-Mart, and now will oversee benefits for 1.3 million U.S. employees. “Operational excellence depends on having well-qualified, engaged associates,” said Castro-Wright in a statement. “We greatly expanded our human resources support in the field last year and now want to bring that support even closer to the business.”

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Wal-Mart gets gag order against ex-employee

By Steve Painter,
Northwest Arkansas Democrat-Gazette
April 10th, 2007                                                          [back to top]

Wal-Mart Stores Inc. has obtained a gag order against an employee it fired last month, saying he has trade secrets that could damage the company if revealed to competitors.

The order was officially entered in Benton County Circuit Court on Monday. Circuit Judge John R. Scott signed the order after court hours Friday.

Wal-Mart claims that Bruce Gabbard, who formerly worked in its Threat Research and Assessment Group, twice gave confidential company information to The Wall Street Journal for articles after his dismissal.

At Wal-Mart’s request, Scott sealed a portion of its complaint that included statements from seven people. A spokesman said the company would not confirm that the seven are Wal-Mart employees.

One is Sarah Clark, which matches the name of a Wal-Mart public relations executive.

Gabbard could not be reached for comment Monday.

Each of the documents included in the case had handwritten notes on the bottom of the first page, signed by Scott at 8: 10 p. m., 8: 13 p. m., 8: 20 p. m., 8: 27 p. m. and 8: 35 p. m. Friday.

Scott Dodson, an assistant law professor at the University of Arkansas at Fayetteville, said it is not unusual for judges to rush a temporary order when trade secrets are involved. By rule, however, a judge must hold a hearing “as expeditiously as possible” to determine whether the order will remain in place, he said.

The restraining order directs Gabbard to give Wal-Mart any material related to trade secrets, including “all home and work computers, personal digital assistants, hard drives, thumb drives and all other electronic digital media and hardcopy information.”

It orders him to identify anyone to whom he has sent Wal-Mart information since Jan. 15.

Last month, without identifying Gabbard by name, Wal-Mart fired him and a supervisor. Company officials said Gabbard recorded telephone conversations between a New York Times reporter and company officials over a four-month period.

The company also said Gabbard intercepted text messages within a limited range of the company’s Bentonville headquarters. Wal-Mart referred the issue to the U. S. attorney’s office for western Arkansas. Gabbard later talked with a Wall Street Journal reporter. He was quoted in an article as saying he felt pressure to identify the source of leaks about company information. In the Journal’s latest story, published Monday, Gabbard said that in conducting countersurveillance for Wal-Mart, he eavesdropped on the company’s board of directors, including discussion of a “multibillion-dollar settlement offer” in a lawsuit that claims Wal-Mart discriminated against women in pay and promotion decisions. Lawyers for the plaintiffs in the lawsuit declined Monday to discuss any offer to settle the case.

“All I can tell you is, there is no settlement,” lawyer Brad Seligman of San Francisco said. Last week, Wal-Mart says in its complaint, a reporter inquired about information it considered confidential. The company alleges that “Gabbard provided the reporter with highly sensitive business planning trade secrets which Gabbard misappropriated from Wal-Mart.”

The Wall Street Journal’s Monday article referred to Wal-Mart’s plan to boost sales as “Project Red,” which included spinning off the Sam’s Club wholesale division, a possibility that has been raised in the past.

Wal-Mart released a statement Monday saying: “Our senior management, our board and their advisers regularly conduct thorough, strategic reviews of all aspects of our business. That’s just good governance. We look at a full range of alternatives, many of which are considered and rejected, and we will not comment specifically on any of them.”

Wal-Mart’s union-funded critics said they suspect their activities were among Wal-Mart’s surveillance targets.

“This spy scandal seems to never have an ending,” said Chris Kofinis, spokesman for Wake Up Wal Mart. com, a group largely funded by the United Food and Commercial Workers.

“We have serious concerns that we were subject to surveillance, but we don’t know for a fact,” he said. Nu Wexler, spokesman for Wal-Mart Watch, said the group — funded mostly by the Service Employees International Union — is awaiting the outcome of the U. S. attorney’s investigation. “Wal-Mart is making the Keystone Kops look like Navy Seals. It’s a bad idea to publicly scapegoat a guy who knows where all the bodies are buried,” he said. Wal-Mart’s stock closed Monday at $ 48. 47 a share, up 20 cents, or 0. 41 percent.

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Wal-Mart's Firing Of a Security Aide Bites the Firm Back

By Ann Zimmerman
and Gary McWilliams,
Wall Street Journal
April 9th, 2007                                           [back to top]

Wal-Mart Stores Inc. is embroiled in a messy fight with a security engineer whom it fired last month -- but who it now fears left with information about a secret plan to boost the giant retailer's lagging stock price.

The program, called "Project Red," included a consideration of, among other ideas, a possible spinoff of Wal-Mart's Sam's Club warehouse-store unit.

So secret was Project Red that its reports were encrypted, and consultants who worked on it last fall toiled in a locked office that was swept for electronic bugs. But this weekend, it turned out that computer hard drives Wal-Mart believes contain Project Red information were in the car of the wife of Bruce Gabbard, a security engineer Wal-Mart had once entrusted with guarding its secrets. The company fired him early last month for taping calls between a Wal-Mart executive and a New York Times reporter.

On Saturday, Mr. Gabbard's attorneys were eventually able to reach the security engineer's wife and the hard drives were delivered to the Benton County, Ark., prosecutor's office. As of yesterday, Bentonville-based Wal-Mart had not yet retrieved them.

On Friday, Wal-Mart sued Mr. Gabbard, accusing him of leaking trade secrets in articles published in The Wall Street Journal. The suit in Benton County circuit court said Mr. Gabbard possessed "highly confidential information about Wal-Mart's strategic planning," an apparent reference to Project Red. A judge granted a temporary restraining order barring Mr. Gabbard from disclosing confidential information.

Wal-Mart wouldn't comment on any specifics of Project Red. In a statement, it said: "Our senior management, our board and their advisors regularly conduct thorough, strategic reviews of all aspects of our business. That's just good governance. We look at a full range of alternatives, many of which are considered and rejected, and we will not comment specifically on any of them."

Wal-Mart, long widely admired as a smooth-running retail machine, lately has been on the defensive over its labor policies, health benefits and stock price. Its shares are off 20% over the past five years, versus a 75% gain for rival Target Corp. Though Wal-Mart remains robustly profitable -- earning $11.28 billion last year -- some investors are clamoring for it to take radical steps to become even more so.

Some episodes at the company have had the flavor of a corporate soap opera. A former vice chairman pleaded guilty last year to fraud and tax evasion related to using company funds for custom-made alligator boots and a dog kennel, among other things. He had said he was reimbursing himself for payments he made to help keep unions out of Wal-Mart. In December, Wal-Mart fired a senior marketing executive, saying she had had a personal relationship with a subordinate and accepted gifts such as pricy vodka from a vendor. When she sued, Wal-Mart filed in court what it said were suggestive emails.

Mr. Gabbard, a 44-year-old Marine Corps veteran and former reserve deputy sheriff, spent 19 years at Wal-Mart, the last few in the Threat Research and Assessment Group. The team hunted computer hackers outside the company and regularly searched emails and monitored phones looking for misbehavior or leaks. It worked in a highly secure area nicknamed the Bat Cave.

Mr. Gabbard says he was tasked with the electronic monitoring of directors' meetings, in a hunt for anyone who might be spying on them. This gave him unusual access to information. He says that two years ago, while manning a countersurveillance desk during a board meeting in Puerto Rico, he listened as directors debated a multibillion-dollar settlement offer in a big lawsuit alleging sex bias in pay and promotions. The board voted to reject it for several reasons, including the bad publicity it would generate, Mr. Gabbard said in an interview in late March. Wal-Mart declined to comment.

Mr. Gabbard was part of the security team for Project Red. Wal-Mart hired two teams of McKinsey & Co. consultants, so neither could have a full grasp of the project. Cameras inside a room recorded their activities, according to Mr. Gabbard. The security team was responsible for encrypting data and reports and for creating passwords to keep the work under electronic lock and key. The project, involving heads of domestic and overseas units, finance, legal, procurement and a firm that manages money for the founding Walton family, finished late last year, an internal document shows. McKinsey declined to comment, citing client confidentiality.

In January, an outside attorney for Wal-Mart questioned Mr. Gabbard and some colleagues about unauthorized taping of phone calls between a Times reporter and Mona Williams, Wal-Mart vice president of corporate communications. Mr. Gabbard says he was asked what gave him the right to eavesdrop on a vice president's conversation. He says he replied: "I'm the guy listening to the board of directors when Lee Scott is excused from the room," referring to the Wal-Mart chief executive. He says the lawyer dropped the topic.

But Wal-Mart put Mr. Gabbard on paid leave as an outside forensics team investigated his group's activities. The team came across a project -- which Mr. Gabbard maintains was authorized -- in which he intercepted workers' pager messages containing sensitive information. Because the pager frequency isn't secure, he also intercepted outsiders' calls.

Mr. Gabbard returned to work in mid-February and got a written rebuke for using bad judgment in taping a reporter's calls without authorization. No contention was made that the taping was illegal. About two weeks later, Wal-Mart fired him and said the U.S. attorney for the Western District of Arkansas was investigating possible violations of law. U.S. Attorney Bob Balfe yesterday said he was reviewing the latest allegations and declined further comment.

Mr. Gabbard admits he wasn't authorized to record calls with a reporter. He says he felt pressured to find the source of leaks that painted Wal-Mart in an unflattering light, and felt betrayed by his public dismissal. "When Wal-Mart fired me and went public with it, I felt it was character assassination. They were trying to make me look like I was a whack job and they were taking the moral high ground," Mr. Gabbard says.

In a Journal story on Wednesday, Mr. Gabbard outlined the breadth of his group's activities. The article said his group's activities included sending an undercover operative wearing a microphone to spy on a protest group that planned to attend the 2006 annual meeting.

In a recent email, Mr. Gabbard said he was "going underground" as a result of the furor created by that article. An attorney for him, W.H. Taylor, yesterday said a three-hour meeting he had with Wal-Mart on Saturday was "very congenial." Declining to give specifics, the lawyer added, "I'm hopeful I can negotiate an end to it."

It isn't clear why Mr. Gabbard was willing to talk to reporters about Project Red. But he recently said that rather than splitting itself up to increase the stock price, in his view Wal-Mart should return to founder Sam Walton's values of "customer service and respect for the individual."

Wal-Mart initially suspected Mr. Gabbard knew more about Project Red than he should when he turned his laptop in after he was fired. It contained references to the project. Mr. Gabbard's job was to make sure the information was secure, but not to look at it.

But Wal-Mart took no action until this weekend, after the Journal started asking questions about Project Red. Wal-Mart outside counsel Marshall Ney met Saturday with Mr. Gabbard's attorney and learned that the former employee had two disk-drives containing Wal-Mart material -- which had been double and triple encrypted to prevent access.

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Arkansas Court Grants Wal-Mart Gag Order Over Security Leaks

By Dow Jones Newswire,
April 9th, 2007                                        [back to top]

BENTONVILLE, Ark. (AP)--Wal-Mart has won a gag order to stop a fired security operative from talking to reporters after a string of revelations about the retailer's large surveillance operations and its business plans, according to court papers made public on Monday.

Wal-Mart Stores Inc. filed a lawsuit and request for a temporary restraining order directly with Arkansas Circuit Court Judge John R. Scott after court hours Friday in the retailer's home county of Benton. After-hours filing directly with a judge was rare in civil cases, Scott said.

The suit and the judge's order granting the restraining order against Bruce Gabbard became part of the public file Monday.

In the lawsuit, Wal-Mart alleges that Gabbard has violated trade secrets law by revealing to reporters "confidential information about Wal-Mart security systems and operations" and "highly confidential information about Wal-Mart's strategic planning." It seeks unspecified damages.

The judge's temporary order bars Gabbard from disclosing any further Wal-Mart trade secrets or confidential information.

The suit and restraining order were filed two days after Wal-Mart apologized to activist shareholders for Gabbard's revelation that they were considered potential threats and ahead of a story in Monday's editions of the Wall Street Journal on Gabbard's claim that Wal-Mart had a super-secret "Project Red" aimed at bolstering its stagnant share price.

Wal-Mart declined to comment on the "Project Red" report except to say in a statement, "Our senior management, our board and their advisors regularly conduct thorough, strategic reviews of all aspects of our business. That's just good governance. We look at a full range of alternatives, many of which are considered and rejected, and we will not comment specifically on any of them."

The Interfaith Center on Corporate Responsibility, a coalition of faith-based investors that has worked with Wal-Mart since 1990 on a variety of social issues, demanded Monday that Chief Executive Lee Scott apologize formally for a memo that lists the group as a potential threat.

ICCR members have a total of more than 2 million shares in the retailer.

"More importantly, we ask CEO Lee Scott to shift shareowner resources away from these public relations activities and instead focus on the core issues ICCR and other concerned investors have been bringing to Wal-Mart for almost two decades: the human dignity inherent in each supply chain worker, in-store employee, and customer of Wal-Mart and Wal-Mart's continuing obligation to them and to its shareowners," the group said in a statement.

Wal-Mart's union-backed critics said the latest revelations about Wal-Mart's security operations and the share price project deserved congressional scrutiny.

"Given the scope of the Wal-Mart spy scandal, the time has come for congressional hearings to find out how deep this rabbit hole goes," said Chris Kofinis, spokesman for Wake Up Wal Mart.com.

The restraining order suggests that Gabbard, 44, might still have Wal-Mart equipment or documents. It orders him to surrender any documents or data and a long list of "all home and work computers, personal digital assistants, hard drives, thumb drives, and all other electronic or digital media and hardcopy information."

It also orders Gabbard to provide Wal-Mart lawyers with "the names of all persons to whom he has transmitted, since January 15, 2007, any Wal-Mart information".

Gabbard, a 19-year Wal-Mart veteran, was fired along with his supervisor last month for allegedly recording phones calls between a reporter and company spokespeople and for intercepting pager messages between other persons. Wal-Mart said Gabbard violated its policies.

Gabbard was part of a 20-strong security team called the Threat Research and Analysis Group.

Wal-Mart made the case public last month and denied Gabbard's claims that his actions were the result of pressure from Kenneth Senser, a former senior CIA and FBI official who has headed Wal-Mart's office of global security since 2003. Another FBI veteran, Joseph Lewis, is head of corporate investigations under Senser.

Gabbard didn't work for Senser's department, although the company and others familiar with the case said Senser has the authority to work with staff from other divisions in carrying out investigations. Gabbard has said he felt pressured by Senser to find information leaks, while Wal-Mart has denied that those conversations alleged by Gabbard took place.

Gabbard and his former supervisor, Jason Hamilton, who was also fired, have declined repeated requests for interviews from The Associated Press.

But in a text message to The Associated Press last week, Gabbard confirmed the allegations that he was part of a broader surveillance operation against company workers, critics, vendors and consultants that he alleged were approved by the company.

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Gag order for former Wal-Mart employee

By MARCUS KABEL
The Associated Press
April 9, 2007                                   [back to top]

BENTONVILLE, Ark. Wal-Mart won a gag order to stop a fired security operative from talking to reporters and a judge ordered him to provide Wal-Mart attorneys with "the names of all persons to whom he has transmitted, since January 15, 2007, any Wal-Mart information."

The court papers made public Monday follow a string of revelations about the retailer's large surveillance operations and its business plans.

Wal-Mart Stores Inc. filed a lawsuit and request for a temporary restraining order directly with a Circuit Court judge after court hours Friday.

In the lawsuit, Wal-Mart alleges that former security operative Bruce Gabbard violated trade secrets law by revealing to reporters "confidential information about Wal-Mart security systems and operations" and "highly confidential information about Wal-Mart's strategic planning". It seeks unspecified damages.

The judge's temporary order bars Gabbard from disclosing any further Wal-Mart trade secrets or confidential information.

The suit and restraining order were filed two days after Wal-Mart apologized to activist shareholders for Gabbard's revelation that they were considered potential threats and ahead of a story in Monday's editions of the Wall Street Journal on Gabbard's claim that Wal-Mart had a super-secret "Project Red" aimed at bolstering its stagnant share price.

Wal-Mart declined to comment on the "Project Red" report except to say in a statement, "Our senior management, our board and their advisors regularly conduct thorough, strategic reviews of all aspects of our business. That's just good governance. We look at a full range of alternatives, many of which are considered and rejected, and we will not comment specifically on any of them."

The Interfaith Center on Corporate Responsibility, a coalition of faith-based investors that has worked with Wal-Mart since 1990 on a variety of social issues, demanded Monday that Chief Executive Lee Scott apologize formally for a memo that lists the group as a potential threat.

ICCR members hold more than 2 million shares in the retailer.

"More importantly, we ask CEO Lee Scott to shift shareowner resources away from these public relations activities and instead focus on the core issues ICCR and other concerned investors have been bringing to Wal-Mart for almost two decades: the human dignity inherent in each supply chain worker, in-store employee, and customer of Wal-Mart," the group said in a statement.

Wal-Mart's union-backed critics said the latest revelations about Wal-Mart's security operations and the share price project deserved congressional scrutiny.

"Given the scope of the Wal-Mart spy scandal, the time has come for congressional hearings to find out how deep this rabbit hole goes," said Chris Kofinis, spokesman for WakeUpWalMart.com.

The restraining order suggests that Gabbard, 44, might still have Wal-Mart equipment or documents. It orders him to surrender any documents or data and a long list of "all home and work computers, personal digital assistants, hard drives, thumb drives, and all other electronic or digital media and hardcopy information."

It also orders Gabbard, at Wal-Mart's request, to provide lawyers with the names of contacts to whom he has provided information about the company.

Gabbard, a 19-year Wal-Mart veteran, was fired along with his supervisor last month for allegedly recording phones calls between a reporter and company officials and for intercepting pager messages between other persons. Wal-Mart said Gabbard violated its policies.

Gabbard was part of a 20-strong security team called the Threat Research and Analysis Group.

Wal-Mart made the case public last month and denied Gabbard's claims that his actions were the result of pressure from Kenneth Senser, a former senior CIA and FBI official who has headed Wal-Mart's office of global security since 2003.

Gabbard did not work for Senser's department, although the company and others familiar with the case said Senser has the authority to work with staff from other divisions in carrying out investigations. Gabbard has said he felt pressured by Senser to find information leaks, while Wal-Mart has denied that those conversations alleged by Gabbard took place.

Gabbard and his former supervisor, Jason Hamilton, who was also fired, have declined repeated requests for interviews with The Associated Press.

But in a text message to The Associated Press last week, Gabbard confirmed the allegations that he was part of a broader surveillance operation against company workers, critics, vendors and consultants that he alleged were approved by the company

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Wal-Mart calls business reviews good governance

Reuters
Mon Apr 9, 2007                                    [back to top]

NEW YORK (Reuters) - Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) said on Monday that regular strategic reviews of its businesses are simply "good governance" after a report in the Wall Street Journal said the retailer had developed a secret plan that mulled a possible spin-off of its Sam's Club operations.

The Wall Street Journal said Wal-Mart's "Project Red" was a highly secret plan aimed at boosting the retailer's lagging stock price, and the plan included a consideration of, among other ideas, a possible spinoff of Sam's Club, Wal-Mart's warehouse club operator.

"Our senior management, our board and their advisors regularly conduct thorough, strategic reviews of all aspects of our business. That's just good governance. We look at a full range of alternatives, many of which are considered and rejected, and we will not comment specifically on any of them," Wal-Mart said in a statement.

The Journal also said Wal-Mart had sued Bruce Gabbard, the security engineer it fired last month, saying Gabbard possessed "highly confidential information about Wal-Mart's strategic planning."

The article said the confidential information was an "apparent reference" to Project Red, and Gabbard was part of the security team for Project Red.

The report said computer hard drives that Wal-Mart believed contained information about Project Red were in the car of Gabbard's wife, and on Saturday, the hard drives were delivered to the Benton County, Arkansas prosecutor's office.

A call to Gabbard's lawyer was not immediately returned.

Wal-Mart fired Gabbard in March for what it said were the unauthorized recording of calls to and from a New York Times reporter and for intercepting text messages.

In media reports, Gabbard, who worked at Wal-Mart for 19 years, said he recorded the calls on his own because he felt pressured to stop embarrassing leaks. But he said that most of his spying activities were sanctioned by superiors.

Wal-Mart shares rose 8 cents to $48.35 in morning trading.

© Reuters 2006. All rights reserved. 

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Wal-Mart names 2 new chiefs in America

www.chinaview.cn
2007-04-09                                  [back to top]

BEIJING, April 9 -- Wal-Mart Stores Inc, the world's largest retailer, has named new chiefs of operations and human resources for its United States division, where sales grew last year at their slowest pace in at least 27 years.

Bill Simon will become U.S. chief operating officer, and Pat Curran will be executive vice president for human resources, the Bentonville, Arkansas-based company said on Friday in a statement.

The newly created positions are part of an increased focus on the U.S., where Wal-Mart gets about four-fifths of its sales, spokesman Kevin Thornton said. Sales at U.S. stores open at least a year rose 2.1 percent last year, trailing gains outside the U.S., Bloomberg News said.

Simon previously led Wal-Mart's pharmacy division and spearheaded the company's introduction of 4 U.S. dollars prescriptions for some generic drugs. He'll continue to oversee pharmacy and other services such as optical and also be responsible for security in stores.

Curran, who joined Wal-Mart in 1983 as an hourly worker in the pets department, was most recently senior vice president of operations on the U.S. East Coast.

As head of personnel at U.S. stores, she will face pressure from unions and politicians including presidential candidates Barack Obama and John Edwards. They have chastised Wal-Mart for its treatment of its 1.4 million U.S. employees, saying the company needs to boost pay and benefits.

Wal-Mart has also faced legislative attempts to mandate what it pays, including a law passed in Maryland last year that was later overturned by a federal judge and a measure in Chicago vetoed by the mayor.

(Source: Shanghai Daily)

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Self-help offer for Wal-Mart workers

By Michael Barbaro,
New York Times 
April 8, 2007                                              [back to top]

Employees at a Wal-Mart in Saratoga, Fla., have started an aerobics class held twice a week in their break room. Wal-Mart workers in Denver are reimbursed for taking public transportation to and from work. And the staff at a Sam's Club in Indianapolis now takes a daily walk around the perimeter of the store.

The chain that promises "always low prices" seems to be adding the mantra of nonstop self-improvement.

In the past year, Wal-Mart has quietly introduced an ambitious program in the United States -- in equal parts self-help class, corporate retreat, and tent revival -- that attempts to turn its 1.3 million workers into a model for its 200 million customers on issues ranging from personal health to the environment.

The program tests the assumption, if not conventional wisdom, that environmentalism and fitness are luxuries of the well-off, inaccessible to a vast number of the nation's working class because of hectic schedules, stretched budgets, and bad habits.

At the same time, it thrusts Wal-Mart, the nation's largest private employer, far deeper into workers' personal lives than the company -- and perhaps any retailer -- has ever reached before.

In extensive workshops held nationwide, the company is teaching its employees the benefits of carpooling to work with three colleagues (for a savings of $400 a year on gas), quitting cigarette smoking ($1,500 a year), and turning off a television ($40 a year in electricity, plus more time to spend with family).

The program, called the personal sustainability project, is voluntary, but it is proving popular, with roughly 50 percent of employees in a dozen states signing up so far. The company may eventually extend the program to its workers around the world.

For Wal-Mart, the payoff could be significant: If it succeeds, the initiative could improve employee morale, and therefore productivity; reduce healthcare spending on a work force with higher rates of heart disease and diabetes than the general public; and improve Wal-Mart's reputation with the image-conscious consumers it is courting with costlier merchandise.

Over the next two years, Wal-Mart will ask all its employees to adopt a pledge to improve their bodies, their families, or their planet. And behind that touchy-feely, seemingly New Age aspiration is an estimated $30 million commitment, making the program one of the most expensive of its kind.

White-collar companies, like IBM and Microsoft, have long sponsored fitness and lifestyle-improvement programs. But companies whose workers are more likely to live paycheck to paycheck have generally scoffed at the cost, which makes Wal-Mart's investment so striking.

Wal-Mart, which is known for its rigid rules, is also giving the program an unusually democratic structure. The company is training -- and paying -- hundreds of employees to recruit colleagues, holding off-site retreats for participants (a rarity for hourly workers), and tracking workers' progress in written reports that measure participation rates.

During a workshop in Houston several weeks ago, Wal-Mart managers and hourly workers spent five hours at the zoo learning about environmental sustainability, a lesson that included tips on reducing carbon emissions and consuming healthier, more environmentally friendly food. By the end of the day, each employee had written down a pledge -- or, in the program's parlance, a personal sustainability practice.

"I want to start recycling around my home," said Curtis Tipton, a manager.

"Improve my physical health with food and exercise," said Ferne Oyster, who works in a grocery department.

"Spend more quality time with my family," said Miriam Crosby, who runs a Wal-Mart in the area.

This is a far cry from the mandatory, at times robotic Wal-Mart cheer ("Give me a 'W,' give me an 'A,' " and so on) uttered every morning at the chain's 4,000 US stores -- and that, organizers say, is the point.

To succeed, the program must be personal, with each of Wal-Mart's employees tailoring it to his or her own life. Wal-Mart has left the initiative purposely vague, the better to encourage workers to decide how to improve themselves.

The challenges for Wal-Mart are significant. Its workers earn, on average, less than $20,000 a year, which means that fitness and ecology are, by necessity, relatively low priorities. Wal-Mart attracts a transient work force. And a disproportionate number of its staff suffer from chronic diseases, stemming in part from poor eating habits.

"We need a Subway in there instead of a McDonald's," said Cheryl Victorian, a 39-year-old package receiver at a Wal-Mart near Houston who frequently eats at the McDonald's in her store. Now 248 pounds, she said her goal is to get down to 195.

In an interview, Wal-Mart's chief executive, H. Lee Scott Jr., said he was in talks with McDonald's about granting employees discounts on healthy menu items, like salads.

Still, about half of the Wal-Mart employees introduced to the personal sustainability project have agreed to participate, much higher than the company had expected. Among the pledges the workers have made are to stop eating fast food, to switch to non toxic cleaning supplies, to prepare two organic meals a week, and to stretch five mornings a week.

© Copyright 2007 The New York Times Company

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WAL-MART SENT SPY TO INFILTRATE ARKANSAS COMMUNITY GROUP

While posing as a friendly hometown retailer, the international corporate giant conducted elaborate espionage on citizens.

againstthewal.net                                        [back to top]

FAYETTEVILLE, AR. A recent article in the Wall Street Journal revealed that Wal-Mart's campaign of spying included the grass-roots community group Against the Wal. The Fayetteville Arkansas group organizes annual protests at Wal-Mart's shareholder meetings in order to bring attention to Wal-Mart's chronic mistreatment of workers and communities. Fayetteville is a neighboring town of Bentonville Arkansas where the Wal-Mart home office resides and is home of the University of Arkansas where the Wal-Mart shareholders meeting is held annually.

Bruce Gabbard, a former Wal-Mart security worker revealed to the Wall Street Journal that the retail giant is running a sophisticated surveillance operation targeting employees, journalists, stockholders and citizen groups. Gabbard says that Wal-Mart sent a long-haired employee wearing a microphone to infiltrate Against the Wal's protest at last year's Wal-Mart shareholders meeting. Wal-Mart also sent a surveillance van to monitor the group.

Gary McWilliams, the Wall Street Journal reporter who broke the story told Democracy Now's Amy Goodman that "[Wal-Mart] ...used the information to alert the local police department about the protestors' plans."(Democracy Now, 2007)

Last year's Against the Wal protest was attended by members of ACORN, SEIU and local community members and called for Wal-Mart to improve its health care benefits along with other demands.

"Wal-Mart acts like we're possibly violent or criminal, but we're only normal citizens working for a better world. We're exercising our democratic rights out in the open, they are the shadowy characters here." said an Against the Wal member.

"We were