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Wal-Mart is Under Attack on All Fronts

The king of retailers has lost ground to competitors since its current CEO took over. Wall Street is starting to lose patience, says Fortune's Jon Birger.

From: Fortune Magazine

"EXTEND AN OLIVE BRANCH TO THE HATERS. HSBC retail analyst Mark Husson's suggestion was the boldest we heard: Take a one-year "holiday" from earnings growth to increase pay and particularly benefits for employees. "I could write the press release now," says Husson, whose stock-picking prowess ranked among the top 5% of all analysts last year, according to StarMine. "'Having done the right thing by consumers for so many years, it's now time to do right by our employees. It will be good for America and good for our employee turnover as well.'" Husson says high turnover is hurting sales, especially of upscale items.

A splashy act of goodwill, says Husson, should also make it easier for Wal-Mart to expand in blue states, where efforts to open new stores have met the most resistance. Kentucky has three times as many Wal-Mart supercenters (61) as California (21). On a per capita basis, Wal-Mart is four times more concentrated in red states than in blue, whereas Target's stores are evenly divided." = = Fortune January 22, 2007 U.S. Edition



The king of retailers has given up ground to its competitors, been battered by a negative PR campaign, and lost $90 billion of its market cap since its current CEO took over. Finally, Wall Street is starting to lose patience.

The world's biggest retailer had a lousy 2006. There were personnel problems, like the resignation of Sam's Club marketing head Mark Goodman and the embarrassing ouster of Julie Roehm, the young advertising whiz Wal-Mart had hired away from DaimlerChrysler. There were legal troubles: In October a Philadelphia jury ordered Wal-Mart to pay $78 million to a class of 185,000 workers who claim they were denied breaks and forced to work off the clock. There were also business woes: The company took a $900 million charge after its forays into Germany and South Korea turned sour. Same-store sales growth turned negative in November before rebounding to 1.6% in December ahead of analysts' predictions of 1%, but still skimpy. (Same-store sales at Costco and Target were up 9% and 4.1%, respectively.) And Wal-Mart's stock, currently about $48 a share, was flat in an otherwise strong year for stocks...

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