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Bloomberg.com, January 13, 2005
Wal-Mart Stores Inc., the world's largest retailer, took out full-page
advertisements in more than 100 U.S. newspapers including the New
York Times and USA Today to counter criticism it pays workers less
than competitors.
``It's time for us to be more aggressive in telling the good story
we have to tell,'' Chief Executive Officer H. Lee Scott said in an
interview today.
The advertising campaign represents a more aggressive approach to
address negative publicity that has limited share gains, Deutsche
Bank analyst Bill Dreher said. Unions including the United Food &
Commercial Workers have said the Bentonville, Arkansas-based discounter
pays less than competing supermarket chains and offers fewer health-care
benefits.
``We think it's long overdue that management speak up about the unfair
criticism that they have received,'' said Dreher, who rates the shares
``buy'' and doesn't own any.
The ads are similar to ones Wal-Mart ran in California last year as
opposition increased to its proposals to open supercenters, which
sell groceries as well as toys, clothes and other general merchandise.
Response to those ads was ``very positive,'' particularly from employees,
Scott said.
Wal-Mart in June boosted salaries for some workers and said officers'
bonuses may be cut if some diversity goals aren't reached.
Slow Sales
The retailer's sales growth last year was the slowest in more than
a decade as low-income customers pared budgets amid higher energy
prices.
Shares of Wal-Mart fell 4 cents to $54.04 at 10:25 a.m. in New York
Stock Exchange composite trading. The shares declined less than
1 percent last year, the third annual loss in five years. From 1981
to 1999, the stock dropped in only three years.
The Standard & Poor's Supercomposite Retailing Index, which
doesn't include Wal-Mart, gained 21 percent last year.
The cost of the ads is part of Wal-Mart's existing marketing budget
and ``is not a meaningful expenditure,'' Scott said.
Opposition to some proposed Wal-Mart stores also has increased,
as local activists allege that Wal-Mart's low wages don't help the
communities. New York City union leaders and local retailers last
week asked City Council members to block the company's plans to
open its first store in the city.
Wal-Mart has more than 3,660 U.S. stores, including Sam's Clubs
and Neighborhood Market grocery stores. It is the largest private
employer in the U.S. with more than 1.2 million workers. The company
has 1.5 million employees worldwide.
The advertising campaign was reported earlier today by USA Today.
Wages
Families of Wal-Mart workers in California use 40 percent more in
taxpayer-funded health care and 38 percent more in other public
assistance programs than the average for families of all large retail
employees, according to a 2004 study by the University of California-Berkeley
Center for Labor Research and Education.
The report also said Wal-Mart employees in California earn about
31 percent less than those who work at large retailers. Wal- Mart
workers in the state receive about $9.70 an hour compared with $14.01
at retail firms with 1,000 or more employees, the report said.
Wal-Mart today said it pays its California employees an average
hourly wage of $10.15. About 90 percent of Wal-Mart's employees
have some form of health insurance, and half of those use Wal-Mart's
health plan, the company said. The company also said in August the
center never verified its information with Wal- Mart.
Union Response
``I'm rather skeptical of the facts they're putting out,'' said
Elizabeth Drea, a spokeswoman for UFCW Local 881 in Chicago. The
company gave a wide range of average salaries for the Chicago area
over the past year that differ from the $10.69 hourly wage listed
in today's announcement, she said. ``They're trying to do a glossy
PR campaign to gloss over the reality.''
Some shoppers were discouraged during the holiday season when Wal-Mart
initially offered fewer discounts the day after Thanksgiving, said
investors including Patricia Edwards, who help manage about $5.3
billion at Wentworth, Hauser & Violich in Seattle. Sales at
U.S. stores open at least a year rose 3 percent in December and
0.7 percent in November.
Consumers also may have turned to other retailers after reading
criticism of Wal-Mart's labor issues, said David Keuler, who helps
manage about $60 billion at Mason Street Advisors including Wal-Mart
shares.
Wal-Mart's Image
``People aren't overlooking the image that Wal-Mart has just to
get a bargain,'' with the economy getting stronger, said Keuler,
who is based in Milwaukee.
Wal-Mart's average hourly wage for full-time employees at its discount
stores is $9.68, in addition to contributions to 401(k) and profit-sharing
plans, spokeswoman Sharon Weber said.
The advertisements may be more meaningful to investors than consumers
because shoppers haven't paid much attention to the criticism, said
Britt Beemer, chairman of market research firm America's Research
Group in Charleston, South Carolina.
``All these discussions about Wal-Mart and imports and salaries
just roll off their backs,'' Beemer said. ``The average consumer
doesn't pay attention to it.''
Class-Action Suit
In June 2001, six women who had worked for Wal-Mart filed a nationwide
class action in federal court in California claiming discrimination
in promotions, raises and training opportunities. The women, suing
on behalf of all female employees of Wal-Mart, alleged that company
policies and culture had kept women out of management positions
and created a gender gap in pay levels.
In June 2004, U.S. District Judge Martin Jenkins certified the lawsuit
as a class action, allowing about 1.6 million current and former
female Wal-Mart employees to sue the company as a group. The decision
created the largest civil rights class action ever certified against
a private employer, according to lawyers for the women.
Wal-Mart appealed the class certification, contending that the class
size is ``unprecedented, unmanageable and unconstitutional.'' In
August, the 9th U.S. Circuit Court of Appeals in San Francisco agreed
to review the ruling.
The employees appealed a part of Judge Jenkins' class certification
decision, which limited the class covering discrimination in promotions.
The 9th Circuit will also review this decision, said attorney Joseph
Sellers, who represents the women.
No date has been set yet for oral argument before the court, Sellers
said.
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