Wal-Mart could use some cheering up

Amy Scott May 31, 2007

Wal-Mart could use some cheering up

Amy Scott May 31, 2007

KAI RYSSDAL: Here’s a tip-off as to Wal-Mart’s economic pull — if you needed, y’know, another one. Shareholders were treated to concerts by Beyonce and American Idol Taylor Hicks during the company’s annual meeting last year.

Tomorrow, investors and employees will gather at headquarters in Bentonville, Ark. for this year’s meeting, and they could probably use a little entertainment this time around, too. Wal-Mart stock has been flat. Sales growth is sluggish. And it’s had more than just a couple of public relations black eyes. Just today, the New Jersey Supreme Court approved a class-action lawsuit against it. Marketplace’s Amy Scott has more now on Wal-Mart’s malaise.

AMY SCOTT: Wal-Mart’s annual shareholder meetings are always mad affairs. Beyonce and Taylor Hicks weren’t the only acts last year.

PATRICIA EDWARDS: They actually had a musical: “Wal-Mart the Musical.” And it was corny.

That’s Patricia Edwards, portfolio manager at Wentworth, Hauser and Violich. Wal-Mart is keeping its plans for this year’s meeting close to the vest.

Edwards plans to tune in via webcast. She says shareholders will be looking for signs the company’s getting back on track. Edwards says her fund owns about 40,000 shares of Wal-Mart right now.

EDWARDS: Which is down from 1.2 million shares three years ago. We got out at roughly $60.

Selling was a good move. The stock has hovered in the $40 to $50 range over the last year.

Peter Sorrentino has held onto his shares as portfolio manager for Huntington Asset Advisers. But he says Wal-Mart is up against some tough obstacles. The company’s low to middle-income customers have been hit hard by higher gas prices. They’re less likely to drive to the stores. When they do, they don’t spend as much.

And there’s a union-backed campaign hammering Wal-Mart’s labor and environmental practices. Sorrentino says the bad press is hurting worker morale.

PAUL SORRENTINO: Wal-Mart’s being portrayed in the press almost, you know, consistently as sort of the big evil out there in the world. And I think that has an effect on the employees of the store.

Spirits are apparently so low, that Wal-Mart’s started airing half-hour infomercials on cable-TV aimed at its own workers.

[COMMERCIAL: And how we’re making Wal-Mart an even better place to work.]

Shareholder Patricia Edwards says Wal-Mart is also trying to recover from recent allegations that it spied on some activists and investors.

EDWARDS: Not exactly what makes Wall Street want to do a lot of business with them. It can be very difficult for you to want to invest other people’s money in a stock if you think that perhaps they’re not running the business the way you would like them to run the business.

Wal-Mart is working to clean up its image with investors and the public. It’s about half-way through a three-year plan to revamp its stores, improve its merchandise and get grocery shoppers to buy bigger ticket items, like electronics. It’s also launched a “green campaign” to curb energy use by its stores and suppliers.

Analyst Mark Husson follows the stock for HSBC.

MARK HUSSON: I think that, you know, they should be applauded for some of the initiatives they’ve taken in terms of recycling and in terms of using, you know, fluorescent light bulbs, simple things like that. And it’s not just a question of empty rhetoric. I think they actually believe it.

Now it may be question of getting investors to believe in Wal-Mart again. One item of business at tomorrow’s shareholder meeting is the election of a new board member.

Allen Questrom is former CEO of J.C. Penney. He’s known as a retail turnaround expert. He said one of his top priorities will be improving Wal-Mart’s PR.

In New York, I’m Amy Scott for Marketplace.

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