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Wal-Mart: Cave to Critics?


When you make a profit of $11.2 billion on $316 billion in sales, you're going to make a few enemies.


It was my pleasure to appear on Fox News Channel's "Bulls & Bears" with fellow ChangeWave editor Tobin Smith recently. As always, it is both a high compliment and a lot of fun to be asked to do that show, and this one was no exception.

I was asked by host Brenda Buttner whether Wal-Mart (WMT) caved to its critics, and would that be bad for WMT and the economy, and I said it absolutely would be bad for both. I could paraphrase what I said, but since a site called NewsHounds (whose tagline is "We watch Fox so you don't have to") was nice enough to refer to me as "right-winger Jon Najarian," I'll let them detail what I said:

"'I think we should all be worried about it, because when Wal-Mart does cave in, they risk going the route that Ford (F) and General Motors (GM) went down when they caved in to critics," warned Najarian.

"'Certainly Henry Ford didn't set up Ford to be the way that it ended up, and United Airlines (LCC), Delta Airlines -- the reasons that we've seen so many of these tremendous American success stories fail so miserably is when they cave in to critics. And Wal-Mart needs to keep its focus, needs to keep bringing the prices that are low, which benefits all Americans. 127 million Americans shop there every week. If all of a sudden Wal-Mart starts bowing to pressure and is unable to provide those low prices, which benefit all of us -- not just the shoppers of Wal-Mart -- that's a bad thing for America and it could just be a disaster for the stock market as well.'"

Thanks, NewsHounds -- that is what I said and I stand by it.

Jack Welch, former chairman of General Electric, and Nobel laureate Robert Solow agree with me -- that Wal-Mart has grown the economic pie and that most of the value created by the company is actually pocketed by its customers in the form of lower prices.

Even if you don't shop at WMT, they have an impact on what you pay for groceries, sundries, DVDs, cat food, etc. So when you hear the figures that the average American family saves $2,300 per year, or $18 billion collectively, that doesn't count what you save because Kohl's (KSS), Target (TGT), and Sears (SHLD) are forced to lower their prices to compete.

One thing NewsHounds states is that neither Brenda nor I came out and said who Wal-Mart's critics were, or to cite directly, "'cave in to critics,' but no word on who the critics are." So here, for the benefit of NewsHounds and all of you, is a short list of who the critics are:

  • Wal-Mart Watch
  • The Center for Community and Corporate Ethics
  • Five Stones
  • American Independent Business Association
  • National Council of Women's Organizations
  • Sierra Club
  • Interfaith Worker Justice
  • Teamsters
  • United Food and Commercial Workers
  • Sprawl-Busters
  • Neighborhood Retail Alliance

And that's just to name a few!

Now if you'll peruse this list, you may note the abundance of 501(c)3s and unions, such as the Service Employees International Union (SEIU), which was the initial money behind Wal-Mart Watch.

None of this is against the law, but it's hardly the grassroots folks who are disgusted by Wal-Mart. Opponents are more like what is known as Astroturf, or formal P.R. campaigns that seek to create the impression of being grassroots, but are instead well-organized and funded by someone, more specifically some organization pushing a specific agenda.

This is part of why I think "caving" to these special-interest groups could be so negative for the world's largest retailer. If Wal-Mart implodes, it will take down more than just WMT shares -- it could impact all of us!

Wal-Mart not only saves all of us money, but it is the largest private employer in the world, with 1.8 million employees on its payroll. That's more than work in the automotive business (1.1 million) and airlines (437,000) combined -- and they want us to lose those jobs?!

As Toby Smith correctly pointed out on the show, Wal-Mart doesn't want to get into the healthcare mess that took down GM and Ford. And they shouldn't have to because the mom-and-pop grocery stores they compete with or replace don't provide healthcare, either -- and those same mom-and-pop stores don't pay the $10.55 per hour that Wal-Mart does!

If Wal-Mart takes a hit like Ford or GM are currently doing, we're not talking 40,000 jobs; we're talking multiples of that. And when you see our massively subsidized airline industry dumping 100,000 workers, keep in mind that it, too, would be just a drop in the bucket against WMT's numbers.

When you make a profit of $11.2 billion on $316 billion in sales, you're going to make a few enemies. Does anyone really think that if WMT lets its enemies set its agenda the company will thrive, as it has for past 44 years? I didn't think so!

No positions in stocks mentioned.
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