Wal-Mart

Wal-Mart Stores, Inc.

Type	Public (NYSE: WMT)
Founded	Rogers, Arkansas, 1962
Location	Bentonville, Arkansas, USA
Key people	Sam Walton (1918-1992), Founder H. Lee Scott, CEO S. Robson Walton, Chairman
Industry	Retail (Department & Discount)
Products	Wal-Mart Discount Stores Wal-Mart Supercenter Sam's Club Neighborhood Markets ASDA
Revenue	$288 billion USD ($29B FY 2005)
Operating income	{{{operating_income}}}
Net income	{{{net_income}}}
Employees	1.7 million
Website	www.walmartstores.com
{{{footnotes}}}

Wal-Mart Stores, Inc. (NYSE: WMT) was founded by Sam Walton in 1962. It is now a multinational corporation and is the largest retailer and second largest company in the world based on revenue. For the fiscal year ending January 31, 2005, Wal-Mart reported net income of US $10.3 billion on US $285 billion of sales revenue (3.6% profit margin). If Wal-Mart were its own economy, it would rank 20th in the world, with a GDP between those of Greece and Ukraine. It is the largest private employer in the United States, Mexico and Canada. It holds an 8.9 percent retail store market share, with $8.90 out of every $100 spent in U.S. retail stores being spent at Wal-Mart.

History

A Wal-Mart advertisement from 2004, showing a Wal-Mart greeter.

Another scene from the same 2004 advertisement.

• 1962: First Wal-Mart store opens in Rogers, Arkansas
• 1969: The company incorporates as Wal-Mart Stores, Inc. on October 31, 1969.
• 1972: Wal-Mart listed on the New York Stock Exchange.
• 1983: First Sam's Club opens in Midwest City, Oklahoma.
• 1987: Wal-Mart completes largest private satellite communication system in the U.S.
• 1988: First Supercenter opens in Washington, Missouri.
• 1990: Wal-Mart becomes nation's largest retailer.
• 1991: The first store outside of the U.S. opens, in Mexico City.
• 1994: Wal-Mart acquires 122 Woolco stores in Canada.
• 1996: Wal-Mart enters China through a joint-venture agreement.
• 1997: Wal-Mart replaces Woolworth on the Dow Jones Industrial Average. Woolworth's Square One Shopping Centre location in Canada becomes the largest Wal-Mart store in the world, at 220,000 square feet (20,000 m²).
• 1997: Wal-Mart becomes largest private employer in the United States, with 680,000 employees worldwide.
• 1997: Wal-Mart has its first $100 billion sales year.
• 1998: First Wal-Mart Neighborhood Market opens
• 1999: Wal-Mart has 1,140,000 employees, making it the largest private employer in the world. It acquires the ASDA Group with 229 stores in the United Kingdom.
• 2003: Wal-Mart sets a single-day sales record of $1.52 billion on Black Friday.
• 2004: Wal-Mart buys the Amigo supermarket chain in Puerto Rico for $17 million.
• 2004: Wal-Mart employees in Jonquière, Quebec, Canada vote in favor of becoming the first unionized Wal-Mart in North America. Five months later, Wal-Mart announces that it would close the store, citing poor sales.
• 2005: Anti-Wal-Mart website walmartwatch.com is launched by the Center for Community & Corporate Ethics.
• 2005: Wal-Mart launches walmartfacts.com in a public relations effort to counter critics.
• 2005: Wal-Mart seeks to expand to urban markets, most notably New York City, Chicago, and Los Angeles.

Business

Wal-Mart operates discount retail department stores selling a broad range of non-grocery products, though emphasis is now focused on the "Supercenters" which offer a full line of grocery items. Wal-Mart also operates Sam's Club—a "warehouse club" (similar to Costco and BJ's) that sells discounted bulk merchandise to due-paying members.

As of January 2005, Wal-Mart employed 1.3 million people in the United States. Wal-Mart's corporate headquarters are located in Bentonville, Arkansas. Apart from retail locations, it operates 99 Distribution Centers and Transportation Offices in the United States. Internationally, Wal-Mart employs over 410,000 people (excluding Japan) for a company-wide total of 1.7 million employees. Wal-Mart also operates the largest real estate company in the United States, with an entire division devoted to building new stores, selling old stores, and developing shopping centers around its stores.

Exterior of a typical Wal-Mart discount store.

Exterior of a typical Wal-Mart Supercenter.

Exterior of a Wal-Mart Supercenter in Mexico. Note how "Siempre" replaces "Always" over the entrances.

Like ordinary supermarkets, Supercenters have a produce section with fresh fruits and vegetables.

In addition to its wholly-owned international operations, Wal-Mart owns a 42% stake in The Seiyu Co., Ltd. in Japan, with a proposed US$597 million to increase its stake to 50%. This purchase has been approved by Seiyu Group shareholders and The Seiyu will be consolidated into Wal-Mart International in FYE 2006.

In the past, Wal-Mart operated dot Discount Drugs, Bud's Discount City, Hypermart*USA, OneSource Nutrition Centers, and Save-Co Home Improvement stores. In 1990 Wal-Mart acquired The McLane Company, a foodservice distributor. In 2003 McLane Company was sold to Berkshire Hathaway.

Wal-Mart stock is publicly traded on the New York Stock Exchange under the symbol WMT.

Competition

Wal-Mart's chief competitors in the discount retail space nationally include the Sears Holdings Corporation (Kmart) and the Target Corporation, along with many smaller regional chains such as Meijer in the midwest. Wal-Mart's move into grocery has also positioned it against major grocery chains such as Kroger, Publix, Giant Eagle, and local grocery chains. In the Sam's Club warehouse business, Wal-Mart's chief competitor is Costco, which is slightly larger than Sam's in terms of sales, as well as the smaller BJ's Wholesale Club chain operating mainly on the East Coast.

Wal-Mart TV Network

The Wal-Mart TV Network is an in-store network showing commercials for products sold in the stores, concert clips and music videos for recording artists products sold in the stores, trailers for upcoming movie releases, and news. According to a New York Times story, it is seen by 130 million people a month, making it the fifth largest network in America, behind NBC, CBS, ABC and Fox

Contributions

In 2004, cash donations to non-profit organizations by Wal-Mart, its employees, and its customers made through Wal-Mart, the Wal-Mart Foundation and the Sam's Club Foundation totaled more than US$170 million. The typical Supercenter channels $30,000 to $50,000 a year to local causes and events. More than 90 percent of cash donations from Wal-Mart Stores and the Wal-Mart & SAM'S CLUB Foundation target local communities.

After the 2005 Hurricane Katrina disaster on the United States Gulf Coast, Wal-Mart donated $2 million to the Salvation Army and the American Red Cross and $15 million to the Bush-Clinton Hurricane Katrina Fund for a total of $17 million. These donations made it the largest single corporate contributor. In addition, an estimated $3 million in merchandise was donated to victims in several states, and in some cases the corporation was able to provide supplies before the federal government. An emergency contact website was set up by Wal-Mart to help locate displaced persons, accessible by Internet and at every store in the country. About $1.5 million in emergency aid was given to displaced employees, and employees displaced by the storm were offered work at Wal-Mart locations elsewhere in the country.

According to the November 21, 2005 issue of The Nation, recently both the Arkansas-based company and the Walton family have elevated their charitable giving. The Walton Family Foundation (WFF) gave away $106.9 million in 2003, twice as much as in 2000. Walmart's company political action committee, the second largest corporate donor to the GOP, gave away $2.1 million in 2004, compared to $100,000 in 1994. Also in 2004, Alice Walton donated $2.6 million to the Progress for America PAC, which supported the Swift Boat Veterans for Truth. From 1998 through 2003, the WFF contributed $25,000 to the Heritage Foundation, $15,000 to the Cato Institute, $125,000 to the Hudson Institute, $155,000 to the Goldwater Institute, $70,000 to the National Right to Work Legal Defense Foundation, $300,000 to the Mackinac Center for Public Policy, $185,000 to the Pacific Research Institute for Public Policy, and $350,000 to the Evergreen Freedom Foundation. The WFF has also donated to advocacy groups promoting school privatization, such as a $3 million donation in 2003 to the Knowledge Is Power Program.

Renewable energy experiments

Recently, Wal-Mart has designed two experimental stores [1], one in McKinney, Texas, the other in Aurora, Colorado, which feature wind turbines, photovoltaic solar panels, and biofuel-capable boilers. The buildings also include many other energy and cost-saving technologies. Critics, such as the Institute for Local Self-Reliance, while acknowledging that the features in the new stores are an improvement, still contend that Wal-Mart practices increase driving, and that it has a poor record of locating stores on environmentally sensitive sites, especially wetlands.

An environmentally-friendly design for a Wal-Mart in Vancouver, BC, Canada was proposed. This design, too, included wind turbines, geothermal heating and collecting rainwater. However, this proposal was rejected by the city councillors [2] on June 28, 2005 for several reasons including worry over the possible negative impact to small businesses and a potential increase in traffic as customers drive longer distances to go shopping.

Employees

Wal-Mart refers to its employees as "associates," and encourages managers to think of themselves as "servant leaders." Each shift at every store, club, and distribution center (theoretically) starts with a store-wide meeting where managers discuss with hourly employees daily sales figures, company news, and goals for the day.

All Wal-Mart stores in the United States have employees referred to as "People Greeters." They welcome people to the store and help prevent shoplifting. At some Sam's Club these employees inspect the contents of the shopping carts of exiting customers.

Wal-Mart benefits

According to Wal-Mart proponents, these benefits are offered to some employees:

• Health for 3 in 10 employees (80/20 co-pay cost varies by plan and health; Wal-Mart pays average of two-thirds of insurance cost.^[3])
• Dental (80/20 co-pay; $1000 per year cap)
• Stock Options (payroll deduction option, 15% match)
• 401k (50% of profit sharing contribution by company, up to 4% of employees' pay)
• Life Insurance (up to $200,000)
• Company Paid Life Insurance (1 year's pay,up to $50,000)
• Accidental Death and Dismemberment (100% employee-paid)
• Short Term Disability (100% employee-paid)
• Long Term Disability
• Prescription Drug Benefit (Begins after one year of enrollment in company health insurance plan)
• 10% Discount (General merchandise only, does not apply to grocery items)
• Stake Holders Bonus
• Sick Pay (Beginning the third day of absence; accrues at approximately one hour per 80 worked)
• Vacation pay (An average of hours worked, begins on second year of employment)
• Personal time pay
• Bereavement Pay (immediate family members)

Employees are eligible for full benefits after six months of full-time employment, two years of peak-time (part-time or seasonal) employment, or 1000 hours worked. Most benefits, including limited health insurance, start at the first day of employment.

About 30% of its 1.6 million employees have some coverage under the insurance plan.^[4])

Financial results

Wal-Mart is now the largest grocery chain in the U.S., with 14 percent of all grocery sales -- nearly twice the sales of Kroger ($95 billion vs. $51 billion). Wal-Mart also does 20 percent of the retail toy business. Sam Walton's family's holdings in Wal-Mart if combined would comprise the nation's largest fortune; at $100 billion combined they are significantly ahead of Bill Gates.

Wal-Mart went public in 1975. Since then its stock has climbed from 5 cents (split adjusted) to a high of $63 in March 2002. Its stock has dropped more than 20% since then, closing under $50 in August 2005.

Different explanations have been offered for this success:

• The company has always paid a great deal of attention to site selection; in the company's early years, Sam Walton would fly over small towns in a private plane to identify prospective locations. The company claims it analyzes potential locations to find those that would support "one and a half" stores.
• Wal-Mart benefits from economies of scale in manufacturing and logistics; the purchase of massive quantities of items from its suppliers combined with a very efficient stock control system help make Wal-Mart's operating costs lower than those of its competitors. They are leaders in the field of vendor managed inventory—asking large suppliers to oversee stock control for a category and make recommendations to Wal-Mart buyers. This reduces the overhead of having a large inventory control and buying department. Wal-Mart's vast purchasing power also gives it the leverage to force manufacturers to change their production (usually by creating cheaper products) to suit its wishes: a single Wal-Mart order can easily comprise a double-digit percentage of a supplier's annual output.
• One particular aspect of the economy of scale is the aggregation effect, used in other business such as The Home Depot and Wells Fargo, whereby Wal-Mart sells as many different items as possible. This allows the company to grow revenue over its fixed cost base (more sales out of the same store). This is why Wal-Mart began to sell low margin groceries.
• Information Systems: Wal-Mart helped push the retail industry to adopt UPC codes and bar-code scanning equipment. Also, Wal-Mart's focus on cost reduction has led to its involvement in a standards effort [5] to use RFID-based Electronic Product Codes to lower the costs of supply chain management. As of June 2004, it has announced plans [6] to require the use of the technology among its top 300 suppliers by January 2006.
• Suppliers: A spokesperson for the company told the Wall Street Journal on Nov. 18, 2004 that it imported $15 billion worth of goods from China in the year that ended Jan. 31, 2004. About $7.5 billion were directly imported by Wal-Mart; the other $7.5 came indirectly through suppliers. In the same period net sales reached $256 billion, with $209 billion coming from U.S. operations. U.S. current account imports from China was reported as $152.4 billion during 2003 ([7]). Mainland Chinese media place Wal-Mart as their 8th largest trading partner in front of Russia and the UK on the top-10 list.
• Cost Control: Wal-Mart watches controllable expenses very closely. Hourly employees can be reprimanded or terminated for having unauthorized overtime. Wal-Mart also squeezes out any inefficiencies in the business, such as reducing paper consumption by using a computerized process.

Public relations

In 2005, Wal-Mart officials embarked on a public relations campaign to counter some of the criticism it receives, through its public relations website as well as through television commercials which show employees who have had a medical emergency and have been sent by Wal-Mart to the Mayo Clinic.

It was reported in the New York Times on November 1, 2005 that in response to increased criticism the public relations firm Edelman had been retained. Edelman has set up an internal "war room", a rapid-response public relations team, staffed with high-profile political operatives to respond to negative media attention. Operatives hired include Michael K. Deaver who formerly worked on behalf of Ronald Reagan, Leslie Dach who worked on behalf of Bill Clinton, and Robert McAdam who worked on behalf of the Tobacco Institute [8].

Unlike its main competitor Target, Wal-Mart allows the Salvation Army to solicit using its popular kettles during the Christmas season, as well as other groups during the year.

Criticism

(disputed — see talk page)

Bumper sticker from Wal-Mart critic ReclaimDemocracy.org

Critics argue that a large portion of Wal-Mart's financial success is due to business practices harmful to employees, the community, the economy, and the environment. Specific areas of controversy include the company's product selection; treatment of suppliers, competitors, and employees; impact on local communities, and effects on world trade and globalization.

Dumping

Five Rivers Electronic Innovations is located in Greeneville, Tenn. It employs more than 700 workers, and is the last American-owned color TV maker in the U.S.

In May 2003, Five Rivers filed an anti-dumping petition in Washington, charging that color television makers in China were illegally dumping their larger-sized color sets in the U.S., thereby threatening to put Five Rivers out of business. The company tracked TV imports from China and found that sales of the Chinese televisions skyrocketed from just over 50,000 sets in 2001 to 1.5 million sets during the first nine months of 2003, and that Wal-Mart was the primary reason for this increase.

In May 2004, the International Trade Committee unanimously agreed that the surge of these imports from China had injured Five Rivers, and then imposed duties averaging about 23 percent on these sets.

Wal-Mart, standing to lose money if Five Rivers was successful, filed a brief in support of the Chinese suppliers during the hearing, since then it has come to the aide of several other Chinese companies found guilty of dumping. [9]

The argument presented by Wal-Mart and the government of China claimed that the makers of these sets were pricing them fairly, and that if American companies cannot compete, that is their own fault.

Use of overseas labor

Like most major retailers, Wal-Mart purchases the bulk of its goods from countries where the cost of labor is significantly less than in the United States and other wealthy industralized nations. Wal-Mart has been criticized for failure to maintain adequate supervision over its foreign suppliers. This lack of supervision has led to incidents where Wal-Mart products have been made using sweatshops or alleged slave labor. Wal-Mart critic Greg Palast reported that Chinese dissident Harry Wu (Wu Hongda) discovered in 1995 that Wal-Mart was contracting for work done by prisoners in Guangdong Province. Wu and Palast argue that numerous items at Wal-Mart are made by the Chinese People's Liberation Army, potentially including some items described as "Made in America".

In Bangladesh, Palast reported that in 1992 teenagers were working in "sweatshops" approximately 80 hours per week, at $0.14 per hour (9.2 Bangladeshi Taki), for Wal-Mart contractor Beximco. In 1994, Guatemalan Wendy Diaz reported that, at the age of 13, she had been working for Wal-Mart at $0.30 per hour (2.283 Guatemalan Quetzales).^[10]

According to Wal-Mart, as well as many advocates of free trade, comparisons of wage levels between vastly different countries is not a useful way to assess the fairness of a trade policy. The company also asserts that wages paid to overseas workers are comparable to or exceed local prevailing wages. In that case, the company states that the overseas manufacturing jobs it creates are often an improvement in the quality of life for its employees. The company has also asserted that factory jobs with its suppliers are often safer and healthier than local alternatives, which may include prostitution, the drug trade or scavenging.

Some United States observers have criticised the company for buying too much from the People's Republic of China, contributing to the enormous U.S. trade deficit with China. Wal-Mart accounted for $12 billion dollars of the $103 billion dollar US trade deficit in 2002. [11] Critics say this trade helps support China's government, which they describe as oppressive, and helps them fund their military to further threaten Taiwan, and leads to joblessness and poverty in the United States.

Opposition to unions

Wal-Mart is well-known for its resistance to labor union efforts to organize workers in the corporation's stores. The company argues that unionization is unnecessary because the management and workers maintain a positive working relationship without need for outside representation or involvement.

In 1970, Sam Walton fended off an organizing push by the Retail Clerks Union in two small Missouri towns by hiring a professional union buster, John Tate, to lecture workers on the negative aspects of unions. On Tate's advice, he also took steps to convince his workers that the company had their best interests in mind, encouraging them to air concerns with managers and implementing a profit-sharing program. Shortly after this, Wal-Mart hired a consulting firm, Alpha Associates, to develop a union avoidance program. Martin Levitt, a consultant who worked on the program, claims that Wal-Mart does "whatever it takes to wear people down and destroy their spirit." Each manager, he claims, is taught to take union organizing personally: "Anyone supporting a union is slapping [their] supervisor in the face." Wal-Mart has maintained books to be passed out to its management, describing how to bust a union organizing attempt; one that leaked is titled "Labor Relations and You, at the Wal-Mart distribution center", and was prepared by a professional union buster named Orson Mason. Managers have a policy of calling the police and having union organizers arrested for trespassing in order to have them removed from the premises. [12] The United Food and Commercial Workers (UFCW) asserts that Wal-Mart maintains a phone hotline for managers to call if they suspect union activity.^[13]

Wal-Mart has aggressively resisted unionization efforts brought forth by their employees, in several cases the company was found guilty of violating the National Labor Relations Act, which expressely forbids firing workers sympathetic to a labor union. The company also shows anti-union videos to all new employees.

In 2000, meat cutters in Jacksonville, Texas voted in a union, and Wal-Mart eliminated in-house meat-cutting jobs in favor of prepackaged meats. The UFCW believes that the switch was retaliation for the union vote, but Wal-Mart claims that the change had been planned for years. In June 2003, a National Labor Relations Board judge ordered Wal-Mart to restore the meat department to its prior structure, complete with meat-cutting, and to recognize and bargain with the union over the effects of any change to case-ready meat sales.^[14]

Of the few stores that have successfully organized, at least one (Jonquière in the province of Québec) was closed down within that year, before management had negotiated with the union regarding a contract. Although Wal-Mart denies that the vote in favor of unionization was the motive for this closure, the Quebec Labor Board has ruled that this action was taken to punish workers for excercising their right to organize, and has ordered that Wal-Mart pay the workers appropriate damages. The board will determine the appropriate remedies for the former employees at a later point in time. In a separate ruling, the labor board rejected Wal-Mart's request to turn over the names of all employees who signed up to unionize in some of their other stores.^[15]

Wal-Mart had an illegal section of its anti-handbilling/anti-solicitation policy that said that workers were not allowed to meet with union representatives or receive union literature while they were off-the-clock and in a non-sales area; Wal-Mart amended this policy in an informal settlement with the National Labor Relations Board [16]

Wal-Mart has an anonymous survey given to each one of its employees, called "Grassroots". The UFCW claims that the purpose of this survey is to let Wal-Mart calculate a Union Probability Index number for each facility, that tells them how likely a union is to form there. UFCW representatives also claim that Wal-Mart listens in on store telephone calls and e-mails, looking for signs of unionization, and sends in union busters in order to dissuade employees from unionizing.[17]

In March of 2005, Tom Coughlin was forced to resign from Wal-Mart's board of directors. The company claims that they found evidence of embezzlement by Coughlin, Coughlin claims that the money was used for an anti-union project involving cash bribes paid to employees of the United Food and Commercial Workers union in exchange for a list of names of Wal-Mart employees that had signed union cards; Coughlin also claims the money was unofficially paid to him, by Wal-Mart, as compensation for his anti-union efforts.^[18]

Wages

In some positions, Wal-Mart employees earn less than those performing similar jobs at other stores. As of 2001, according to US federal statistics, the average supermarket employee earned $10.35 per hour, industry-wide; in comparison, stock clerks at Wal-Mart made $8.23 per hour on average. A 2003 wage analysis reported that cashiers, the second most common job at Wal-Mart, earn approximately $7.92 per hour and work an average of 29 hours a week. This brings in annual wages of $11,948, about $1000 less than the United States federal poverty line for a parent and one child.

Wal-Mart founder Sam Walton once argued that his company should be exempt from the minimum wage, and took advantage of an exception in the minimum wage law that, at the time, excluded small businesses from having to pay the minimum wage. While the federal minimum wage in 1962 was $1.50 an hour, Walton regularly paid his employees only 50 to 70 cents per hour.^[19] Former managers have reported that they were judged by upper management based on their ability to keep payroll costs low, and that they sometimes pressured more senior, higher-paid employees, in the hopes that they would quit. [[20]]

Critics of Wal-Mart have argued that Wal-Mart indirectly incurs costs for federal social service programs, due to the low wages it pays its employees. A report by U.S. Democratic Party congressman George Miller argued that a 200-employee Wal-Mart store may indirectly cost federal taxpayers $420,750 to finance free-lunch and health-care programs for children of low-income Wal-Mart employees, tax credits for low-income families, and similar programs.^[21]

In 2000, Wal-Mart paid $50 million to settle a class-action suit that asserted that 69,000 current and former Wal-Mart employees in Colorado had worked off-the-clock. These employees, as well as several former managers, have testified that Wal-Mart had an unofficial policy requiring off-the-clock work, to keep the cost of payroll down; as of the time of printing of Wal-Mart's 2005 Annual Report, the company faced 44 wage and hour lawsuits in states including California, Indiana, Minnesota, New Jersey, Oregon, and Washington.

Labor laws and working conditions

In January 2004, the New York Times reported on an internal Wal-Mart audit which found “extensive violations of child-labor laws and state regulations requiring time for breaks and meals.” One week of time records from 25,000 employees in July 2000 found 1,371 instances of minors working too late, during school hours, or for too many hours in a day. There were 60,767 missed breaks and 15,705 lost meal times.

The report by congressman Miller alleged that in ten percent of Wal-Mart's stores, nighttime employees are sometimes locked inside, making them unable to leave. In some cases employees who had sustained injuries requiring medical attention were forced to wait inside the store for hours for a manager to arrive and unlock the door.^[22]

Under an arrangement, disclosed by the New York Times, Wal-Mart will be allowed 15 days to investigate and rectify employee complaints before the Department of Labor conducts any investigation. Upon receiving a complaint about a potential violation of wage and hour laws, DOL’s field offices around the country are now instructed to notify the DOL office in Little Rock, Arkansas, which will then notify Wal-Mart’s headquarters in Bentonville, Arkansas of the complaint. The Department will not launch its own investigation during that time and it remains unclear under what circumstance it would launch an investigation after the 15 day period ends, Representative George Miller (D-California) requested an investigation by the DOL’s Inspector General to determine whether the arrangement represents a sweetheart deal between the Bush Administration and Wal-Mart. [23]

Today Wal-mart gets a fifteen day's notice before child labor inspections.

Taxes

Until the mid-1990s, Wal-Mart took out corporate-owned life insurance policies on low level employees, such as janitors, cashiers, cart pushers, and stockers. This type of insurance is usually purchased to cover a company against financial loss when an executive or other high ranking employee dies. In this case it is usually known as "Key Man Insurance", but the policies that Wal-Mart took out on its rank-and-file workers were derided as "Dead Peasants Insurance" or "Janitor Insurance". Critics (such as the U.S. Internal Revenue Service) charge that the company was trying to profit from the deaths of its employees, and take advantage of a loophole in a tax law which allowed them to deduct the premiums. The practice was stopped in the mid-1990s when the federal government, which had previously called the financing scheme "tax arbitrage," closed the tax loophole and began to pursue Wal-Mart for back taxes. [24]

Allegations of gender discrimination

Wal-Mart is currently facing an $11 billion gender discrimination lawsuit that has been granted class action status by the district court hearing the case.

Health insurance memo

On October 26, 2005, The New York Times reported that a Wal-Mart internal memo sent to the firm's board of directors advised trimming over $1 billion in health care expenses by 2011 through measures such as attracting a younger, implicitly healthier work force by offering education benefits. The memo also suggested giving sedentary Wal-Mart staffers, such as cashiers, more physically demanding tasks, such as "cart-gathering", and eliminating full-time positions in favor of hiring part-time employees who would be ineligible for the more expensive health insurance [25] — policy proposals which may violate the Americans with Disabilities Act of 1990.

According to the article, the memo accused Wal-Mart's lower paid employees of abusing emergency room visits, "possibly due to their prior experience with programs such as Medicaid", whereas such visits may actually be due to the reduced ability of uninsured or underinsured people to make timely appointments to see a regular physician. [26]

The memo reportedly also expressed concern that an employee with seniority earns more money, but is not more productive than a new employee.

Critics point to the story as evidence that Wal-Mart purports to be generous with its employee benefits, while in reality the company is working to cut such benefits by reducing the number of full-time and long-term employees and discouraging supposedly unhealthy people from working at Wal-Mart. [27]

Illegal use of undocumented workers

On October 23, 2003, federal agents raided 61 Wal-Mart stores in 21 states, in a crackdown known as "Operation Rollback". [28] When they left, the agents had arrested 250 nightshift janitors who were undocumented workers. Following the arrests, a grand jury convened to consider charging Wal-Mart executives with labor racketeering crimes for knowingly allowing undocumented workers to work at their stores. The workers themselves were employed by agencies Wal-Mart contracted with for cheap cleaning services. While Wal-Mart executives have tried to lay the blame squarely with the contractors, federal investigators point to wiretapped conversations showing that executives knew the workers were undocumented. Additionally, some of the janitors have filed a class-action lawsuit against Wal-Mart alleging both racketeering and wage-and-hour violations. According to the janitors, Wal-Mart and its contractors failed to pay them overtime totaling, along with other damages, $200,000. One of the plaintiffs told the New York Times that he worked seven days per week for eight months, earning $325 for 60-hour weeks ($5.41 per hour), and that he never received overtime pay. A legal question now being raised is whether these undocumented workers even have the right to sue their employers. This recent raid was not the first time Wal-Mart was caught using undocumented workers. In 1998 and 2001, federal agents arrested 102 undocumented workers at Wal-Mart stores around the country.

Wal-Mart eventually settled the lawsuit the government brought against them, for $11 million.

In November 2005, 125 alleged illegal immigrants were arrested while working on construction of a new Wal-Mart distribution center in eastern Pennsylvania. According to Wal-Mart, the workers were employees of Wal-Mart's construction subcontractor. [29]

Workforce diversity

Wal-Mart has received low scores on the Corporate Equality Index, published by the Human Rights Campaign, a measure of how companies treat gay and lesbian employees and consumers. The company received a 57% rating in the 2005 edition, a 43% rating in the 2003 and 2004 editions, and a 14% rating in the 2002 edition. [30] [31]

According to data from the Equal Employment Opportunity Commission, Wal-Mart ranks well below its current retailing peers, which have an average of 56% female managers, female employees at Wal-Mart make up 73% of its workforce, but only one-third of its management, a percentage that was typical in 1975.

The EEOC has had to file more lawsuits against Wal-Mart for cases of disability discrimination than any other corporation. A top EEOC lawyer told the magazine Business Week, "I have never seen this kind of blatant disregard for the law." [32]

Product controversy

Wal-Mart's product selection is a controversial subject. As a privately-controlled corporation, Wal-Mart may retain the right to control what products are sold in its stores, but many criticize the company for allowing right-wing, conservative and religious viewpoints to influence its product selection and thereby effectively impose their own view of morality onto their customers instead of allowing the customers to make their own decisions.

Examples of items that Wal-Mart does not sell are music with explicit lyrics (censored or "clean" versions are offered instead), certain lad mags such as Maxim, and emergency contraception pills. Some magazines were moved to covered shelves in order to prevent alleged insult to customers. Critics point out apparent hypocrisy in that that Wal-Mart sells other controversial items such as rifles and shotguns, R-rated movies, and violent video games — although Wal-Mart did remove the video game Grand Theft Auto: San Andreas from its shelves due to an allegedly sexually explicit scene accessible by modifying the game's code via a software patch.

Wal-Mart does not carry music albums marked with RIAA's Parental Advisory Label. The store does carry edited versions of those albums. Record labels release edited versions with obscenities completely removed or overdubbed with less-offensive lyrics. Such versions, sometimes referred to as radio edits, are produced by music publishers to increase retail sales. Notably, albums critical of Wal-Mart itself have been removed from the shelves.

Wal-Mart was criticized for selling The Protocols of the Elders of Zion, a fraudulent and anti-Semitic document purporting to describe a plan to achieve Jewish global domination. Wal-Mart sold the book on its website, including a description that suggested it might be genuine; It was withdrawn from sale in September 2004, as a business decision. The document is still available for purchase from many other booksellers, who sell it in the interests of freedom of speech. ^[33]

Supplier relations and predatory pricing

Wal-Mart has been prosecuted for predatory pricing behavior, temporarily lowering prices in order to drive competitors out of business and develop local monopolies. The chain has been found guilty of predatory pricing in lower courts, but those convictions have been overturned on appeal. There are also several ongoing cases alleging predatory pricing. There have been no successful federal or state actions to sanction Wal-Mart for practicing predatory pricing.

Most grocers charge several fees in order to carry a supplier's product. A slotting fee is charged for placing a product on the shelf. In addition to slotting fees, retailers may also charge promotional, advertising and stocking fees. According to an FTC study, the practice is "widespread" in the supermarket industry. According to retailers, fees serve to efficiently allocate scarce retail shelf space, help balance the risk of new product failure between manufacturers and retailers, help manufacturers signal private information about potential success of new products, and serve to widen retail distribution for manufacturers by mitigating retail competition. Vendors charge that slotting fees are a move by the grocery industry to profit at their suppliers' expense. [34] Wal-Mart pays the supplier only for the actual cost of the goods themselves, and the supplier pays no fees to Wal-Mart. ^[35]

With Wal-Mart's supreme buying position, it business relations with suppliers are at times best described as a vigorously monopsonistic. In its negotiations with suppliers, Wal-Mart requires that prices go down from year to year. If a vendor does not comply with Wal-Mart's request for reduced prices, they risk having their entire brand removed from Wal-Mart's shelves in favor of a lower-priced competitor or a less expensive store brand. This can put pressure on suppliers to shift jobs to factories in third world countries or reduce the quality of the product. A CEO of one of Wal-Mart's suppliers said that the price Wal-Mart requested from his company for a particular product was so low that he couldn't afford to keep production in America, even if he didn't have to pay his workers anything. [36]

Local community impacts

Community activists often organize campaigns against proposed new store locations, but the effects of Wal-Mart stores on the communities in which they operate is a topic of some controversy.

Critics of Wal-Mart and some academic studies, particularly out of the University of Iowa, claim that Wal-Mart displaces locally-owned stores resulting in the reduction of locally-owned corporate assets and real estate, and the destruction or displacement of higher paying jobs. Other studies, including several recently from the University of Missouri, have claimed that Wal-Mart stores either do not have negative impacts or have been found to positively impact a community by effecting lower prices, increased employment, and increased establishment counts.

Wal-Mart claims that their entry into local grocery markets lowers prices, and that this is equivalent to an increase in consumers' real incomes in the local economy. Economists at Global Insight in November 2005 estimated that it lowered the Consumer Price Index 3.1 percent, including a reduction nationwide of food prices by 9.1%. These results were published as part of a symposium sponsored by Wal-Mart, in which Global Insight, a respected economics consulting firm, was hired to gather academically reviewed papers concerning the effects of Wal-Mart. The company increased the US economy's overall productivity by three-quarters of a percent by highly efficient distribution systems and pressure on suppliers to be more efficient. Wal-Mart increased net consumer purchasing power by $118 billion in 2004. The efficiencies created 210,000 jobs that would not otherwise exist, but at the same time reduced take-home pay for all retail workers (including the company’s competitors) by $4.7 billion.

Political Cartoon regarding Wal-Mart's store in Teotihuacan, Mexico. "If the Spanish conquistadores built their churches over the pyramids, why not allow the people from Wal-Mart do the same with one of their stores?"

The chain's expansion outside of the United States has been opposed by groups concerned that it would negatively impact local culture. For example, when Wal-Mart opened a Superstore in Teotihuacan, community members protested the opening as being, "like planting the staff of globalization" [37], because of its proximity to cultural landmarks such as the Pyramid of the Moon. Archaeological experts were on hand during construction, and assisted in recovering a Pre-Columbian altar.

Philanthropy efforts

An article in The Nation criticized Wal-Mart's philanthropic efforts, noting that their donations coincide with their negative image. Indeed, while the Walton's contributed over $1.1 billion between 2001 and 2005, Business Week noted that they donated a total of $250 million between 1962 and 2000.

Wal-Mart in popular culture

Wal-Mart is satirized in The Simpsons as Sprawl-Mart. In a 2005 episode ("On A Clear Day I Can't See My Sister"), the Springfield Sprawl-Mart carries the sign "Not a parody of Wal-Mart".

The South Park episode "Something Wall-Mart This Way Comes" features Wall-Mart (note the double L). In the episode, a Wall-Mart is built in town and runs all of the local stores out of business. Wall-Mart is seen as a self-aware and independent entity, building itself across the nation to take over everything, and forcing employees and managers to work there against their will. The town, unable to resist shopping there, tries to burn the Wall-Mart down, but the next day a crew comes and rebuilds it. Stan and Kyle eventually destroy the Wall-Mart by killing its heart, a mirror which represents greedy consumerism, which is located in the electronics department.

The 2000 Natalie Portman film Where the Heart Is centered around the events following Portman's character giving birth in a Lubbock, Texas Wal-Mart.

Chevy Chase's out-of-control sled crashes into the toy donation bin outside of a Wal-Mart in National Lampoon's Christmas Vacation.

In King of the Hill, A Wal-Mart like store named Mega-Lo Mart (sounding like the word "megalomania," this may be an implied criticism of Wal-Mart) starts selling propane, Strickland Propane can't compete with their prices, and Hank loses his job. Hank winds up working in the propane department at Mega Lo Mart. It is eventually burnt down when his inept supervisor causes a gas leak.[38]

In The Simple Life reality series, starring Paris Hilton and Nicole Richie, Hilton has no idea what Wal-Mart is and goes as far as asking, "Do they sell things for walls?" Richie is comparatively much more knowledgable and believes that "people hang out at Wal-Mart." In a later episode, the girls actually visit a Wal-Mart and are shown frolicking, reading magazines on the floor, and "hanging out."

A Wal-Mart in the middle of the New Mexico desert serves as a parody of product placement in the 2003 animated comedy Looney Tunes: Back in Action.

In The Fairly OddParents, a huge store named "Wall 2 Wall Mart" is based on Wal-Mart.

Miami-based humor columnist Dave Barry penned a column in The Miami Herald detailing the early 2000s fascination with spending the night in a Wal-Mart parking lot in an RV.

The Veggie Tales video "Madame Blueberry," which addresses consumerism, features a store called Stuff-Mart.

A JibJab comic called "Big Box Mart" parodies Wal-Mart, and premiered on the October 13, 2005, Tonight Show with Jay Leno.

Statistics

Retail operations

Main article: List of assets owned by Wal-Mart Stores, Inc.

Wal-Mart operates 5 major retail formats under 3 retail divisions:

• Wal-Mart Stores USA
  • Wal-Mart Discount Stores — Average 100,000 square feet (9,290 m²) and include a selection of general merchandise, including apparel, electronics, health and beauty aids, toys, sporting goods, and household products. There were 1,233 Wal-Mart Discount Stores in the U.S. as of October 31, 2005.
  • Wal-Mart Supercenter — Average 187,000 square feet (17,400 m²) and combine a standard Wal-Mart Discount Store with a full-line supermarket. (commonly known as big box stores) There were 1,914 Wal-Mart Supercenters in the U.S. as of October 31, 2005.
  • Wal-Mart Neighborhood Market — Average 43,000 square feet (4,000 m²) and include grocery, pharmacy, and limited general merchandise products. There were 96 Neighborhood Markets in the U.S. as of October 31, 2005. The concept will be introduced into Canada in 2006 with 3 stores (one in London, Ontario and 2 in the Greater Toronto Area.
  • Walmart.com — Online shopping site that offers merchandise different from that in stores. The walmart.com site also offers digital music downloads with digital rights management (DRM) and online photo processing.
• SAM'S CLUB — a membership-only wholesale warehouse club focused mainly on serving small business owners. Clubs average 128,000 square feet (11,891 m²). There were 556 Sam's Clubs in the U.S. as of October 31, 2005. Sam's Club also operates in Canada.
• Wal-Mart International — operates various formats internationally, including (but not limited to) SAM'S CLUB, Discount Stores, Supercenters, Supermarkets, and restaurants.

Store counts & revenue

Current store counts and revenue for Fiscal Year Ending January 31, 2005 (revenue amounts in U.S. Dollars):

• Company Total: 5,246 stores (excludes Seiyu operations) (US$285.2 billion)
  • Wal-Mart Stores USA (3,337 stores, excluding Puerto Rico) (US$201.4 billion)
    • Discount Stores: 1,353
    • Supercenters: 1,713
    • Neighborhood Markets: 85
  • S