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Wal-Mart Woes Grow

The seemingly indomitable Wal-Mart Stores Inc. all of a sudden is showing signs of weakness as pressure from the outside has increased and news of company improprieties mounts.

In an attempt to stop the bleeding, Wal-Mart hosted its first-ever “media day” in April, getting journalists to come down to Arkansas for a meet-and-greet. However, the retailer managed to sour the mood at its own event when CEO Lee Scott proceeded to scold the assembled journalists. In response to the oft-leveled accusation that Wal-Mart provides poverty-level wages and few benefits, Scott snapped back, “It doesn't make sense that people would line up for jobs that are worse than they could get elsewhere, with fewer benefits and less opportunity.” After pointing to headlines that say “Wal-Mart's low prices come at too high a cost,” Scott said “I'd suggest a better headline, ‘Wal-Mart is great for America.’”

Scott's logic didn't address the possibility that part of the reason those jobs are in such demand is because there are not tons of jobs out there for able workers, critics say. Wal-Mart could be accused of exploiting the unemployment problem rather than helping to solve it.

After the media day backfired, Wal-Mart put out a blitz of releases trumpeting its good deeds. It started a program to preserve wilderness (see left) and played up its charitable giving.

The media campaign came less than four months after Wal-Mart launched Critics quickly responded with the Service Employees International Union-sponsored Wal-Mart Fact Checker at The United Food and Commercial Workers created

Its union troubles only increased when it was revealed that Wal-Mart's former vice chairman, who resigned months ahead of his scheduled departure, had created a secret anti-union slush fund of between $100,000 and $500,000 through expense account abuses. The plan was to pay union staff members to find the names of pro-union employees at Wal-Mart stores. The scandal has led to Grand Jury hearings, which were under way at press time.

Wal-Mart's sales have been sluggish in 2005. Wal-Mart says that its first-quarter same-store sales would be at the low end of its forecast — about a 3 percent gain over 2004 — and says its April figures would come in just 2 percent above last year. Same-store growth peaked for the company at 9 percent in 1998 and has declined since. Meanwhile, its stock, in the $47 range in late April, down about 20 percent off its 52-week high. Some of this seems to be due to customer's views of the retailer. (See chart below.)

At industry shows, Wal-Mart is also trying to mend its image. At ICSC's Mid-Atlantic Idea Exchange, Mia Masten, a Wal-Mart director of corporate affairs defended the chain.

“Wal-Mart is used as a focal point in a lot of local elections. Unions see us as a membership base,” said Masten, “But we're not the only non-unionized retailer. We are trying to battle the misinformation.”

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