March, 2007

Is Wal-Mart really forgetting about Manhattan?

After yesterdays breaking NYT article everyones initial response was excitment. Lee Scott cracked, he was pushed so far in the interview he had snapped and made comments such as “I don’t care if we are ever here.” But can we really believe him or is this just a simple public relations move. We’ve been running our campaigns against Wal-Mart throughout the five boroughs for years now and couldn’t have been successful without the support and help from community members. Just 2 months ago Wal-Mart was attempting to enter the Fulton Mall in Brooklyn. We managed to get a signed letter from the developer saying “Wal-Mart will not be a tenant.” New York City is the last major city in America Wal-Mart has not intruded, that is a remarkable feat but we have to realize that New York City is their pearl. It is where they want to be more than any other city in the world. So why is Lee Scott now saying he doesn’t care if they open a store here or not? This has all of us thinking something is up his sleeve. He claims that we are snobbish elites in New York “You have people who are just better than us and don’t want a Wal-Mart in their community.” We ask Mr.Scott how many communites across the country have said the same thing to you? Hawaii, Massachusetts, Texas, Oregon, Illinois, North Carolina, Michigan, and Lancaster Michigan, Wisconsin, Georgia, Milwaukie, St.Louis, Ohio, Riverhead Long Island, Arizona, Vermont, and we can keep going. We don’t anticipate Wal-Mart to stop trying to come to any of the 5 boroughs and I myselft am not taking this quote as a victory because besides Wal-Mart we still have many irresponsible employers throughout this city that aren’t paying a decent wage or providing quality products. We acknowledge that keeping Wal-Mart out is only half the solution to our problem, our next problem is now finding affordable quality goods for lower income communities. Errol Louis identifies these next problems we face in an outstanding editorial in todays Daily News. 1/2 of the battle is done, now we must solve the problem of finding responsible employers who provide good paying jobs along with quality affordable products.

Wal-Mart’s CEO on New York, “I don’t care if we are ever here.”

Today we all claim victory in knowing our efforts continue to discourage Wal-Mart from bringing their low quality jobs to New York City. The New York Times has learned that Wal-Mart is getting so discouraged that they are writing New York City off…

The New York Times

March 28, 2007

Wal-Mart Chief Writes Off New York

Wal-Mart to New York: fuhgeddaboudit.

Frustrated by a bruising, and so far unsuccessful battle to open its first discount store in the nation’s largest city, Wal-Mart’s chief executive said yesterday, “I don’t care if we are ever here.”

H. Lee Scott Jr., the chief executive of the nation’s largest retailer, said that trying to conduct business in New York was so expensive — and exasperating — that “I don’t think it’s worth the effort.”

Mr. Scott’s remarks, delivered at a meeting with editors and reporters of The New York Times, amounted to a surprising admission of defeat, given the company’s vigorous efforts to crack into urban markets and expand beyond its suburban base in much of the country. In recent years, Wal-Mart has encountered stout resistance to its plans to enter America’s bigger cities, which stand as its last domestic frontier.

Much of the opposition to Wal-Mart in cities like New York is led by unions. Organized labor, fearing that the retailer’s low prices and modest wages will undercut unionized stores, have built anti-Wal-Mart alliances with Democratic members of city councils.

Yesterday, labor leaders, upon learning of Wal-Mart’s apparent retreat from New York — or at the very least Manhattan — returned Mr. Scott’s sentiment.

“We don’t care if they’re never here,” said Ed Ott, executive director of the New York City Central Labor Council. “We don’t miss them. We have great supermarkets and great retail outlets in New York. We don’t need Wal-Mart.”

For Wal-Mart, New York City has long loomed as a tantalizing prize — the home of more than eight million consumers and attention-grabbing stores for just about every major retailer in the country.

But Wal-Mart, a cost-minded retailer known for its dowdy merchandise, and New York, a city of excesses known for cutting-edge style, have long had an uneasy relationship.

Wal-Mart executives have argued that low prices would be the universal language that bridged the gap. So far, they have not.

During the questioning, Mr. Scott repeatedly referred to New York, but after the meeting a Wal-Mart spokeswoman, Mona Williams, called to say that Mr. Scott was referring to only Manhattan, not the entire city.

Wal-Mart, which has nearly 4,000 stores in the United States, has sought to open stores in Rego Park, Queens, and in Staten Island, but both plans fell through in the face of intense union, community and political opposition.

Mr. Scott said yesterday that the opposition to Wal-Mart in New York, Chicago, Cleveland, Los Angeles and other cities had a common thread: “The glue is the unions.”

Despite setbacks in each of these cities, Wal-Mart has had success in urban areas. In Chicago, for example, Wal-Mart opened a store last year that attracted thousands of job applicants and has, Mr. Scott said, performed better than expected.

He said that Wal-Mart executives have lobbied for a store in New York, but he said he remains unconvinced. “It’s too hard to make money here,” he said.

Late yesterday, Ms. Williams sought to amend Mr. Scott’s remarks.

“Entering New York has been difficult, but not something we rule out,” she said in an interview. “Lee said he personally didn’t care if we built stores there or not. It might be more trouble than it’s worth, but that he would leave that up to the real estate group that makes these decisions.”

As he does in many public appearances, Mr. Scott was quick yesterday to talk up the chief potential benefit of a Wal-Mart in New York City, particularly for its many struggling residents with modest incomes: lower prices because of the chain’s vast purchasing power and highly efficient distribution system.

Surveys have repeatedly shown that Wal-Mart’s grocery prices are typically 10 to 30 percent lower than those of its competitors.

But labor leaders assert that while Wal-Mart’s prices are low, its wages and health benefits are often so skimpy that they leave many workers below the poverty line and pressure competitors to reduce pay and benefits.

“We don’t like how they do business,” Mr. Ott, the New York union official, said.

But as Mr. Scott sees it, there is another reason Wal-Mart has such a hard time making inroads into some of the nation’s biggest enclaves. Speaking about what he sees as snobbish elites in New York and across the country, Mr. Scott added, “You have people who are just better than us and don’t want a Wal-Mart in their community.”

Our work paying off…

Analyst: Union campaigns hurt Wal-Mart

A Banc of America Securities analyst on Friday said union campaigns against Wal-Mart are beginning to hurt the world’s largest retailer’s operations.

In a note to investors, Bank of America analyst David Strasser said Banc of America spoke to representatives from the Service Employees International Union and the United Food and Commercial Workers International Union to discuss why Wal-Mart is a focus for unions.

The three groups sponsoring a campaign to force Wal-Mart to make changes including improving pay and benefits, include Change To Win, a group of seven unions including SEIU and UFCW,, a project of the UFCW and Wal-Mart Watch, an independent non-profit.

The groups have said that Wal-Mart is “the proverbial 800-pound gorilla, and therefore they get the highest return on investment by focusing on Wal-Mart,” Strasser wrote.

“This union fixation has cost Wal-Mart real estate sites in key locations, adversely impacted comp store sales to some degree, and has distracted management from focusing on its retail strategy,” Strasser wrote. “Additionally, (Chief Executive) Lee Scott now spends a large amount of time improving Wal-Mart’s image domestically and abroad, and Wal-Mart has been forced to focus advertising dollars on defending their brand.

“This is surprising considering the positive impact (Wal-Mart) has on its low income consumers and the broader U.S. economy.”

Strasser, who rates Wal-Mart “Buy,” added that the degree of impact was difficult to quantify. However, because having to fight the campaign has forced a change in advertising strategy to improve its corporate image, the campaign might be ultimately good for the company.

“We believe that Wal-Mart has an advertising budget that approximates $580 million, which is increasingly being allocated to brand image marketing to fight these attacks,” Strasser wrote.

Wal-Mart Stores Inc. shares fell 49 cents to $47.40 during afternoon trading on the New York Stock Exchange.

Wal-Mart tapping phone calls…

The New York Times

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March 6, 2007

Wal-Mart Says Worker Taped Reporter’s Calls

Federal investigators are looking into the actions of a computer systems technician at Wal-Mart Stores who, over a period of several months, intercepted pager and text messages and also secretly taped telephone conversations between Wal-Mart employees and a reporter for The New York Times, the company said yesterday.

The United States attorney’s office for the Western District of Arkansas and the Federal Bureau of Investigation are assessing the actions of the employee and others inside Wal-Mart to determine whether federal and state laws were broken and whether they have jurisdiction in the matter, according to spokesmen for the investigators’ offices.

Wal-Mart said the technician was not authorized to monitor and tape the conversations between members of its media relations staff and Michael Barbaro, a retail reporter for The Times.

The company did not say what led the technician to make the recordings or why Mr. Barbaro’s conversations were the target.

Over the last year, Mr. Barbaro has written dozens of articles about Wal-Mart, including some that were based on internal company documents that were given to him by union-financed groups that were critical of Wal-Mart’s business practices.

Mona Williams, a spokeswoman for Wal-Mart, which is based in Bentonville, Ark., said the company fired the technician and a supervisor yesterday. A third manager in Wal-Mart’s information technology group was disciplined. Ms. Williams declined to identify the technician or his supervisors.

H. Lee Scott Jr., Wal-Mart’s chief executive, called the chief executive of The New York Times, Janet L. Robinson, early yesterday to explain the situation and apologize, Ms. Williams said.

Ms. Williams added that she contacted Mr. Barbaro and personally apologized to him, as well.

Wal-Mart said it began an internal investigation into the matter on Jan. 11 after executives were notified by an employee about the recordings. It then notified the United States attorney’s office two days later.

Over the course of a two-month internal investigation, Wal-Mart discovered that the technician had used a program that identified calls coming in from, or made to, Mr. Barbaro at The Times’s New York headquarters from last September to mid-January, Ms. Williams said. The inquiry involved an outside technology firm that scoured more than 100 computer drives and other devices, she said.

Members of the media relations group, including Ms. Williams, were unaware they were being taped, Ms. Williams said.

“No one knew he was recording these conversations,” Ms. Williams said in a conference call with reporters yesterday afternoon. “As a matter of fact, I’m not even sure he knew whose conversations he was recording. He simply programmed in the reporter’s phone number and captured those calls.”

It is unclear whether the technician was able to sort Mr. Barbaro’s calls from those other Times reporters might have made to Wal-Mart since all calls from the newspaper’s New York office register on caller ID screens as a series of numeral 1s.

The technician told investigators of some motives for his actions, Ms. Williams said, but she declined to say what they were because of the continuing investigations.

In a statement, a spokeswoman for The Times, Diane C. McNulty, said: “We are troubled by what appears to be inappropriate taping of our reporter’s conversations. At this point, we don’t know many of the key facts, such as what the purpose of this taping was and the extent, if any, to which the action was authorized.”

Mr. Barbaro declined to comment.

At first blush, it does not appear that the taping of the conversations was illegal.

Under federal and Arkansas state law, a telephone conversation can be recorded if one party has given consent. Wal-Mart said that under its policy, all employees give their consent to the monitoring and recording of their calls made through Wal-Mart systems and equipment.

Wal-Mart said, however, that calls were monitored only in cases of suspected criminal activity or fraud and only with written consent from the company’s legal department. No approval for the recordings was sought or given, the company said.

Ms. Williams added that in the course of the investigation only one person — a “senior-level lawyer” at Wal-Mart — listened to parts of the tapes between Mr. Barbaro and the media group.

The focus of any criminal investigation might be on the text messages and the pages transmitted near company headquarters by people who were not Wal-Mart employees; the technician made those interceptions using his own personal radio-frequency equipment.

“He captured all of the text messages that were within a range of his equipment,” Ms. Williams said. “Some of those messages had key words in them that he was watching for. Those were captured and put into a separate file or bucket from the others.” She declined to provide details of the messages or motives for those actions by the technician.

Federal and most state laws forbid the unauthorized interception of messages, said Rodney Smolla, dean of the University of Richmond Law School.

Wal-Mart to pay $1b for China retailer

Wal-Mart to pay $1b for China retailer

Updated: 2007-02-27 15:38

HONG KONG/NEW YORK – Wal-Mart Stores Inc., the world’s biggest retailer, will pay about US$1 billion to take over a Chinese chain, challenging Carrefour as the largest operator of super-centers in booming China.

Shoppers emerge from a Wal-Mart Supercenter branch in Beijing October 17, 2006.
Shoppers emerge from a Wal-Mart Supercenter branch in Beijing October 17, 2006. [Reuters]

The acquisition of Bounteous Co. Ltd. by Bentonville, Arkansas-based Wal-Mart, will be done in phases by 2010 and could trigger much-needed consolidation in China’s ferociously competitive US$1 trillion retail market.

Under terms of the deal, Wal-Mart is buying 35 percent of Taiwan-based Bounteous, which operates 101 hypermarkets in 34 Chinese cities under the Trust-Mart brand, and will acquire ownership control of the chain by 2010 if conditions are met.

Terms were not disclosed, but a source familiar with the situation said Wal-Mart will pay a total of US$1 billion for all of Bounteous.

“It’s all about tiering and market share — Wal-Mart has a history of buying local operators, and this could make them No. 1 in China,” said an analyst at a European investment bank in Hong Kong.

Wal-Mart already operates 73 stores in China and employs more than 37,000 people there.

France-based Carrefour, the world’s No.2 retailer and the largest foreign operator in China, added 20 China stores last year to bring its total in the country to 90 by the year-end.

Other players include Germany’s Metro AG, Britain’s Tesco Plc. and local operators such as Wumart

Wal-Mart’s China expansion follows exits last year from its operations in Germany and South Korea.

The company is also close to striking a joint venture with Bharti Enterprises to enter India, a fragmented retail market where foreign operators are restricted.

In a statement, Wal-Mart Vice Chairman Michael Duke called the China investment “an important step in bringing our additional scale to our China retail business.”

Trust-Mart posted 2005 sales of about 13.2 billion yuan (US$1.7 billion) at its Chinese hypermarkets, according to the China Chain Store and Franchise Association, well above Wal-Mart’s 9.9 billion yuan in its Chinese stores.

By comparison, Carrefour had 2005 sales of 17.4 billion yuan at its Chinese hypermarkets, while Metro recorded sales of 7.5 billion yuan, the data showed.

International expansion has grown more important for Wal-Mart as US sales growth slows. In its fiscal quarter ending January 31, total sales rose 10.9 percent to US$98.09 billion, but international sales rose 29.6 percent to US$22.73 billion. US sales at stores open at least one year rose 1.6 percent.

Trust-Mart stores employ more than 31,000 people, and will continue to operate under the Trust-Mart name, Wal-Mart said, with both companies continuing to open new stores.

Credit Suisse advised Wal-Mart on the transaction, and UBS advised Bounteous.

Wal-Mart dodging state taxes?

Wal-Mart Stores Inc., with 28 discount stores, four “supercenters,” and three Sam’s Club warehouses in Connecticut, for years has lowered its state taxes by essentially paying rent to itself and deducting that cost as a business expense, a company official confirmed Wednesday.

The controversial and complex strategy has saved the world’s biggest retailer several hundred million dollars in taxes in 25 states, according to the Wall Street Journal, which last month reported that on average Wal-Mart paid only about half of the statutory state tax rates for the past decade.

The company spokesman, John Simley, said he didn’t immediately know how much money the arrangement may have saved Wal-Mart in Connecticut, but said it had been used for just over 10 years and is currently employed in connection with all but two of the company’s 35 properties here.

Wal-Mart paid $16.7 million in state and local taxes in Connecticut in fiscal 2006, he added.

Simley defended the company’s use of a “captive” real estate investment trust, or REIT – a corporate entity controlled by individuals associated with the company that pays it rent – saying it is permitted under Connecticut law and that state Department of Revenue Services officials are aware of Wal-Mart’s practice.

“It is allowed in Connecticut and I’m sure other companies use it,” he said. “It’s a lawful structure, and … known to the Department of Revenue in Connecticut and has existed for probably a dozen years.”

Department of Revenue Services spokeswoman Sarah E. Kaufman said Tuesday that she was prohibited from providing details about any Connecticut taxpayer and specifically declined to discuss Wal-Mart.

But Kaufman also insisted that the department was “ahead of the curve on the whole captive REITs issue,” pointing to the 1997 passage of an amendment to a state law that she said closed the loophole still available in other states.

“This is something we noticed more with the banking industry,” she said. “It is not allowed and it’s a rare occurrence when someone does try to claim it on their return.”

Businesses that had exploited the loophole would now find their deductions disallowed, according to Kaufman, who said the department has the discretion to determine the practice improper.

Kaufman added that the department is not now involved in any litigation or administrative proceeding challenging a corporate taxpayer that may have tried to deduct rent it paid to a captive REIT.

But Attorney General Richard Blumenthal said Tuesday that he was launching an investigation of “whether Wal-Mart and other companies are exploiting a loophole in our law that may need to be closed legislatively, or whether the current law can be enforced against them to collect money that clearly should go to Connecticut taxpayers.”

Blumenthal said his probe also would focus on whether existing law “should be enforced more aggressively and vigorously.

“We’ve done some research and there may be some questions about the current law that need to be clarified,” he said.
Simley, the Wal-Mart spokesman, said the company doesn’t use its REIT structure only to lower its state tax burden.

“We have so many landholdings that if we create a separate structure to administer them, we can do it far more efficiently,” he said, adding that it frees the managers of individual stores to deal with other issues.

“One compelling issue is that the REIT is a discrete – and by that I mean separate – organization that can handle capital requirement issues without being tied to the stores,” he continued. “If they need to raise capital or dispose of property it can be done much more effectively through that structure.

“That’s not to ignore that fact that in many states there is a significant tax advantage,” he added.

The Wall Street Journal did not cite Connecticut as one of the states in which Wal-Mart exploits the tax-law loophole which it said was plugged by the federal government years ago but which many states have been slower to close.

Under the arrangement described by the newspaper, a Wal-Mart subsidiary pays rent to a REIT that is entitled to a tax break if it pays out profits in dividends. The REIT is 99 percent owned by another Wal-Mart subsidiary, which gets the REIT’s dividends tax-free. Wal-Mart then gets to deduct the rent from state taxes as a business expense, “even though the money has stayed within the company.”