September, 2006

Weekly News Clips

Wal-Mart’s foreign labor practices get failing grade
Blogging Stocks – USA
WalMart’s foreign factories are not up to snuff, according to inspectors. WalMart said that it performed 13,600 initial and follow


Wal-Mart’s urban strategy(Chicago, New York next)
Marketplace – Los Angeles,CA,USA
MARK AUSTIN THOMAS: WalMart opened its first store in Chicago yesterday. HELEN PALMER: Getting a foothold in US cities has been tough for WalMart.

Green Wal-Mart Gets Meaner
Yahoo! News – USA

The Nation — Recently, I wrote an article for the magazine — sorry, it’s not available on the web unless you subscribe — on WalMart’s recent decision to ….
According to the report, the company has a contract to source milk from Aurora Organic Dairy, which is one of the worst industrial organic offenders


Reaction to Wal-Mart Drug Plan Varies
NPR – USA
News & Notes, September 27, 2006 · While some are lauding WalMart’s plan to reduce drug prices in its stores, others worry about the effect on small

The Prescription Revolution Has Officially Started
Yahoo! News (press release) – USA
“In light of Walmart’s recent move to sell 291 generic drugs at reduced prices, we’d just like to remind consumers that Walmart may not be the best solution.

Wal-Mart anticipates its "Value Plan"

“We’ve done the math on this, and we have a pretty good understanding of what this is going to mean, Most associates are going to come out better on this.” Wal-Mart spokesman Dan Fogleman

According to internal Wal-Mart documents, just released by WakeUpWalMart.com,
Wal-Mart plans to slash health care costs by eliminating all of its low-deductible health care plans for new hires, increasing medical premiums on its existing plans, and increasing the spousal surcharge to a whopping $1,800 a year in order to push more employees off of the company health care plan.By eliminating most of its health care plans and replacing them with a high-deductible, catastrophic plan, Wal-Mart is effectively out of the health care business and will, instead, shift its health care costs onto its hard-working employees and America’s taxpayers.

Read the Washington Post Article Here

Walmart Threatens Movie Studios

On September 6, James Stoup wrote about what he called the gathering storm between Wal-Mart and Apple. In it he suggested that Wal-Mart would open it’s own online movie store. He asked what other choice the retail giant has.

This week Wal-Mart decided they do have another choice.

According to the New York Post, the Disney studio offers Apple a better deal than it does to Wal-Mart. Other studios have expressed an interest in coming aboard. They have seen the success of iTunes and want a piece of the download pie.

Wal-Mart doesn’t want to risk losing its DVD business to Apple. They have threatened retaliation. According to an unnamed source in the article, Wal-Mart plans to use it’s massive buying power to keep the studios in line. In other words, they have told retailers that if they follow Disney’s lead, they will notice a drop in orders from Wal-Mart.

Somehow I find that ironic. For years Wal-Mart has used its ability to purchase items cheaper than anybody else to undercut the competition. Now that another company is doing it to them, they don’t like it at all.

Do you think Wal-Mart’s threat will have any impact on whether or not Hollywood joins iTunes? I’m not so sure that Wal-Mart will really be hurt by the ability to download movies. A lot of customers would prefer to purchase a hard copy instead of loading it their iPods. There is also a certain amount of impulse buying when people shop at Wal-Mart.

Wal-Marts threat to purchase fewer movies from the studios does, however, have potential to hurt them. The risk is that customers will turn to iTunes to find the movies they can’t get at the retail store. Posts on several internet forums suggest that many users don’t want to download and watch a movie on the small screen. Yet buyers will go where it is easy to get the product. If they can’t get the DVD they want while shopping at Wal-Mart, they may just develop the habit of going to iTunes for it.

If I were a retailer I wouldn’t even consider trying to make a deal with Apple just yet. I’d wait until after the Christmas season, and during this time I’d be watching Disney closely. After Disney’s deal with iTunes, Wal-Mart sent several cases of DVDs back to them. I’d wait to see if any of this seemed to hurt the company.

Wal-Mart’s threats are an interesting strategy. Wal-Mart is afraid that iTunes will cut into their sales, so they packed up Disney’s DVDs and sent them back to the company. This gives them fewer DVDs to sell, thereby cutting into their sales.

How about you? Do you think movie studios will listen to Wal-Mart, or will they get enough business from iTunes to risk losing their largest customer?

I’m guessing that with time things will cool down. Just like with music, you’ll eventually be able to purchase DVDs from both. Maybe Wal-Mart will even be able to negotiate a better deal with the movie studios. This could only benefit consumers.

I don’t have any plans to download movies for the same reason I’ve never bought those tiny televisions that were being sold everywhere at one time. I like a larger screen to watch movies on. If I can’t find what I want at Wal-Mart, I’ll stop looking there and go somewhere else.

Do you think this is a smart move by Wal-Mart? Does iTunes really pose a threat?

Maybe movie studios don’t want to lose this chain as a customer, but obviously Wal-Mart feels they need the DVDs, too. It might be smarter to try to find a way to work together.

The Wal-Mart Health Plan

Upscale items in Dallas, followed by a political victory in Chicago. And now, cheap drugs in Tampa. In its latest move to drive store traffic and make nice with politicians Wal-Mart has adjusted their highly criticized health plan.

“They are doing something that may be good for consumers, but they don’t have altruistic motives,” said Patricia Edwards, a portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle. “They are capitalists. They still need to make a profit.”

Analysts have said the risks to Wal-Mart are slim because profit margins on most of the drugs already are low, and the program could help the Arkansas-based retailer address an image problem stemming from its policies on health insurance coverage for employees.

“We’re able to do this by using one of our greatest strengths as a company _ our business model and our ability to drive costs out of the system, and the model that passes those costs savings to our customers,” he said at a Tampa Wal-Mart. “In this case, we’re applying that business model to health care.”

Beginning Friday, the company will offer 291 generic drugs for $4 per prescription at 65 Wal-Mart, Sam’s Club and Neighborhood Market stores in the Tampa metro area. The company said it hopes to expand the program statewide by January–and, should it prove successful, to other states later in 2007.

Read the Full Report Here

Health Care

Today, Wal-Mart plans on adjusting their Health Care system by adjusting it for the 4th time in one year. Wal-Mart will announce what it has billed as a “major health care initiative,” at a Tampa, Fla. event with senior executives, elected officials and “other special guests.” They’ll have a tremendous opportunity to make dramatic changes to their inadequate employee health care plan, a problem that a recent Wal-Mart job posting described as “the biggest single reputation issue Wal-Mart faces.” Are our efforts finally working??? Or is this just yet another PR response to all the criticism from the national campaign against Wal-Mart

Our friends at Wal-Mart Watch have done great research on this issue here is their release

Additional information on Wal-Mart’s health care plan is available below and at www.walmartwatch.com/healthcare.

WAL-MART’S HEALTH CARE PLAN: RHETORIC VS. REALITY

RHETORIC: Wal-Mart says it does offer affordable health-insurance coverage for its workers.

REALITY:<!– D(["mb","nBut Wal-Mart knows that coverage is too expensive for its workforce. Anmemo written by Susan Chambers, Wal-Mart Executive Vice-President fornBenefits, for the Wal-Mart board of directors, said: "[O]urncritics are correct in some of their observations. Specifically, ourncoverage is expensive for low-income families, and Wal-Mart has ansignificant percentage of associates and their children on publicnassistance." [Susan Chambers Memo to the Wal-Mart Board ofnDirectors, http://walmartwatch.com/memo;nNew York Times, 10/26/05]

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RHETORIC:nWal-Mart says it offers health care plans with low premiums.

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REALITY:nBut according to the Center for a Changing Workforce, in 2003 Wal-Martnemployees paid 41 percent of insurance premium costs. At the time ofnthe report, Costco employees paid about 10 percent of premium costs.nNationally, workers today pay an average of 16 percent of premiums fornsingle coverage and 26 percent for family coverage. [Employer HealthnBenefits 2005 Annual Survey, The Kaiser Family Foundation and HealthnResearch and Educational Trust; Wal-Mart and Healthcare: ConditionnCritical, Center for a Changing Workforce, 10/26/05]

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RHETORIC:nWal-Mart says its employees are only slightly more likely to collectnMedicaid than average.

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REALITY:nHowever, the Susan Chambers memo recognizes that "fivenpercent of our associates are on Medicaid compared to an average fornnational employers of four percent. Twenty-seven percent ofnassociates’ children are on such programs, compared to annational average of twenty-two percent." [Susan Chambers Memonto the Wal-Mart Board of Directors, http://walmartwatch.com/memo;nNew York Times, 10/26/05]”,1] ); //–> But Wal-Mart knows that coverage is too expensive for its workforce. A memo written by Susan Chambers, Wal-Mart Executive Vice-President for Benefits, for the Wal-Mart board of directors, said: “[O]ur critics are correct in some of their observations. Specifically, our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of associates and their children on public assistance.” [Susan Chambers Memo to the Wal-Mart Board of Directors, http://walmartwatch.com/memo; New York Times, 10/26/05]

RHETORIC: Wal-Mart says it offers health care plans with low premiums.

REALITY: But according to the Center for a Changing Workforce, in 2003 Wal-Mart employees paid 41 percent of insurance premium costs. At the time of the report, Costco employees paid about 10 percent of premium costs. Nationally, workers today pay an average of 16 percent of premiums for single coverage and 26 percent for family coverage. [Employer Health Benefits 2005 Annual Survey, The Kaiser Family Foundation and Health Research and Educational Trust; Wal-Mart and Healthcare: Condition Critical, Center for a Changing Workforce, 10/26/05]

RHETORIC: Wal-Mart says its employees are only slightly more likely to collect Medicaid than average.

REALITY: However, the Susan Chambers memo recognizes that “five percent of our associates are on Medicaid compared to an average for national employers of four percent. Twenty-seven percent of associates’ children are on such programs, compared to a national average of twenty-two percent.” [Susan Chambers Memo to the Wal-Mart Board of Directors, http://walmartwatch.com/memo; New York Times, 10/26/05]<!– D(["mb","

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RHETORIC:nWal-Mart says it is among a small number of retail employers to offernhealth coverage to both part-time and full-time employees.

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REALITY:nBut the percentage of associates covered by Wal-Mart health insurancenin January 2006 was 46 percent, compared to a national average of 67npercent of workers for large firms who receive health benefits fromntheir employers. [http://www.walmartfacts.com;nEmployer Health Benefits 2005 Annual Survey, The Kaiser FamilynFoundation and Health Research and Educational Trust]

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RHETORIC:nWal-Mart will claim it has more full-time workers than other retailers.

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REALITY:nBut the company’snpart-time workforce – currently around 20 percent of thencompany’s employees – is larger than the nationalnretail average. Furthermore, Wal-Mart executives have acknowledged thatnthe retailer will shift to a heavier reliance on part-time workers. Anrecent JP Morgan report said Wal-Mart plans to increase the ratio ofnits 1.2 million-member U.S. hourly workforce on part-time schedules ton40 percent from 20 percent. Citigroup analyst Deborah Weinswignpredicted that Wal-Mart’s proportion of full-time workers isndeclining, and in a 60-page research report, she predicted thatn"Wal-Mart will reduce its ratio of full-time workers to 60npercent over the next year or so, with the remaining 40 percent slatednfor part-time status." [Wall Street Journal, 4/11/06;nAssociated Press, 5/3/06]

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RHETORIC:nWal-Mart claims it shortened the waiting period for part-time workersnto receive health coverage by half.

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REALITY:nBut Wal-Mart has more part-time workers, which lowers the number ofnemployees who are eligible for coverage. Wal-Mart’s part-timenworkforce is larger than the national retail average. Full-timenWal-Mart employees still wait twice as long for health care eligibilityncompared to the average for the retail industry. Wall Street Journal,n4/11/06; Associated Press, 5/3/06; Employer Health Benefits 2005 AnnualnSurvey, The Kaiser Family Foundation and Health Research andnEducational Trust]”,1] ); //–>

RHETORIC: Wal-Mart says it is among a small number of retail employers to offer health coverage to both part-time and full-time employees.

REALITY: But the percentage of associates covered by Wal-Mart health insurance in January 2006 was 46 percent, compared to a national average of 67 percent of workers for large firms who receive health benefits from their employers. [http://www.walmartfacts.com; Employer Health Benefits 2005 Annual Survey, The Kaiser Family Foundation and Health Research and Educational Trust]

RHETORIC: Wal-Mart will claim it has more full-time workers than other retailers.

REALITY: But the company’s part-time workforce – currently around 20 percent of the company’s employees – is larger than the national retail average. Furthermore, Wal-Mart executives have acknowledged that the retailer will shift to a heavier reliance on part-time workers. A recent JP Morgan report said Wal-Mart plans to increase the ratio of its 1.2 million-member U.S. hourly workforce on part-time schedules to 40 percent from 20 percent. Citigroup analyst Deborah Weinswig predicted that Wal-Mart’s proportion of full-time workers is declining, and in a 60-page research report, she predicted that “Wal-Mart will reduce its ratio of full-time workers to 60 percent over the next year or so, with the remaining 40 percent slated for part-time status.” [Wall Street Journal, 4/11/06; Associated Press, 5/3/06]

RHETORIC: Wal-Mart claims it shortened the waiting period for part-time workers to receive health coverage by half.

REALITY: But Wal-Mart has more part-time workers, which lowers the number of employees who are eligible for coverage. Wal-Mart’s part-time workforce is larger than the national retail average. Full-time Wal-Mart employees still wait twice as long for health care eligibility compared to the average for the retail industry. Wall Street Journal, 4/11/06; Associated Press, 5/3/06; Employer Health Benefits 2005 Annual Survey, The Kaiser Family Foundation and Health Research and Educational Trust]<!– D(["mb","

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