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, WakeUpWalMart.com, 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.