From the Kansas City Star:

Wal-Mart drew not only 7,000 store managers to its annual meeting Tuesday in Kansas City, but also one of its most vocal critics.

WakeUpWalMart.com, a union-supported advocacy group that seeks to change some of Wal-Mart’s business practices, used the occasion to announce a nationwide effort, “Working Together, We Can Change Wal-Mart.”

In an open letter to Wal-Mart managers, the group said Wal-Mart had initiated anti-family policies such as salary caps, open-availability scheduling, the elimination of low-deductible health-care plans, and a restrictive attendance policy. Members of the group passed out about 2,000 of the letters to store managers outside meeting areas at downtown hotels Monday and Tuesday.

“Wal-Mart managers are facing a moral dilemma — they are the ones being asked to implement policies that they know will hurt the people who work in their stores,” Paul Blank, campaign director for WakeUpWalMart.com, said Tuesday at a news conference at the Kansas City Marriott Downtown. “The managers see firsthand the negative impact these policies have on people’s lives.”

A spokesman for Wal-Mart, the world’s largest retailer, said Tuesday’s announcement was another in a series of publicity stunts by a union-funded organization.

“Our company is helping working families save money, creating thousands of good jobs every year and taking substantive steps to protect the environment while union leaders offer nothing but negative attacks,” said Bill Wertz, spokesman for Wal-Mart.

WakeUpWalMart.com just released the following letter, addressed to all Wal-Mart store managers, at a press conference in Kansas City, MO, where Wal-Mart managers are currently meeting.

Much like the hard-working Wal-Mart Associates in your stores, we know that Wal-Mart managers, like yourself, are good and decent people, who work hard to support their families and make Wal-Mart a successful and profitable company. But, we also know that much has changed at Wal-Mart stores over the last few years and not for the better.

Unfortunately, under the leadership of a small group of Wal-Mart executives, led by COO Eduardo Castro Wright, Wal-Mart has abandoned Sam Walton’s dream and implemented a series of new anti-Associate policies. These ‘flights’, as you know, have negatively impacted Associates, reduced morale, and threaten to undo Sam’s dream where workers, families, communities and our beloved country came first.

Sadly, these anti-family and anti-Associate policies, concocted by Mr. Wright and a bunch of consultants and accountants who have never run a store, have not only hurt Wal-Mart Associates and their families, but have even negatively impacted Wal-Mart’s sales.

Worst of all, as we have heard all too often from store management, these anti-family policies have caused many of you to struggle with the moral dilemma that you are now being asked to implement policies that many of you believe are unfair and hurt the very people who work so hard every day to make Wal-Mart a success.

As Wal-Mart rolls out these unpopular policies - from salary caps, to open availability scheduling, to the elimination of low deductible health care plans, to a restrictive attendance policy – it is you who has been asked, again and again, to use canned talking points in order to try and explain how losing hours, losing full-time status, or losing wages is actually “a good thing.” The truth is we can only imagine how hard it must be to look one of your hard-working Associates in the eye, see their fear and disappointment, and try to justify how such terrible policies are good for them or Wal-Mart.

As for us, the leaders of WakeUpWalMart.com, we want to make something crystal clear. Contrary to what you have been told, we are not out to destroy Wal-Mart. In fact, we believe that Wal-Mart can and should be a great company that reflects the best of American values. In fact, our sincere desire is to work with you to return Wal-Mart to Sam’s vision, to make Wal-Mart better, and to help create a Wal-Mart where people, family, and the community truly do come first.

In the coming days, we hope to hear from you so you can see how interested we are in being partners in changing Wal-Mart for the better. Please feel free to contact us toll-free at 1-866-587-2299 or via email at info@wakeupwalmart.com. We are happy to talk to you anytime, and we will always respect your desire for confidentiality and anonymity.

In the end, we hope you will appreciate the sincerity of our words and our shared goals. Above all, we hope, as we all move forward from this meeting in Kansas City, that you will be willing to work with us to change Wal-Mart and America for the better.

Thank you,

The Leaders of WakeUpWalMart.com

From the Arkansas Democrat-Gazette:

"Every week, more than 127 million customers visit Wal-Mart stores, supercenters, Neighborhood Markets and Sam's Club locations across America." "Wal-Mart employs 1.8 million associates worldwide, including 1.3 million in the United States." Those statements appear on Wal-Mart Stores Inc.'s news releases and its Web site.

Unfortunately for the world's largest retailer, some of those employees and customers sue for amounts small and large over wrongs real and perceived.

The company is battling what could become the largest U.S. class-action lawsuit ever, with billions of dollars at stake. At the same time, it faces new lawsuits every day from people who slip and fall in Wal-Mart stores, get robbed in its parking lots or believe they were wrongfully accused of shoplifting.

In May, Wal-Mart will fill the pages of the Connecticut Law Review with material drawn from a symposium in October at the University of Connecticut School of Law titled "Wal-Mart Matters." The symposium covered topics ranging from the potentially history-making Dukes vs. Wal-Mart Stores Inc. sex discrimination case and immigration law to anti-trust issues.

Wal-Mart is in the legal and political spotlight "probably because of the symbolic role that it plays as a company that has avoided being unionized," said Richard Vedder, an Ohio University economics professor and a visiting scholar at the American Enterprise Institute, which champions limited government and private enterprise.

"Being the largest retail corporation in America of course adds to its visibility," said Vedder, a panelist at the symposium.

Wal-Mart officials quit talking publicly several years ago about the number of cases pending against the company. It likely exceeds 10,000, based on numbers the company confirmed in 2001.

A sampling of new lawsuits in recent months offers a glimpse at the range of Wal-Mart's legal battles.

In Michigan, Julie Roehm, Wal-Mart's former high-profile advertising executive, sued for wrongful termination after she was fired, claiming she is owed hundreds of thousands of dollars.
She says in her lawsuit that Wal-Mart gave no examples of misconduct, then "made false and malicious statements to the media." In Indianapolis, a family sued Wal-Mart after a mirror in one of its stores fell on their 3-year-old son, killing him.

In Kentucky, a judge certified a class-action lawsuit by workers who claimed they were forced to work through breaks and meal periods. Pennsylvania Wal-Mart workers won a similar lawsuit in October, and several more are pending in other states.

In Iowa, a man sued Wal-Mart after he was charged with stealing a jacket. The charge was dropped when he produced a receipt for the jacket, which he'd bought at another Wal-Mart store.

John Simley, Wal-Mart's spokesman for legal matters, said each case is evaluated by lawyers at company headquarters, although cases are farmed out to hundreds of lawyers across the country. He declined to provide information about the number of lawyers Wal-Mart employs or cases pending against the company.

"It's not public information, so we don't provide details on that," he said.

THE BIG ONE

Among the current legal threats to Bentonville-based Wal-Mart, none stacks up to Dukes vs. Wal-Mart Stores Inc.

Filed in 2001 in California, the suit alleges that Wal-Mart discriminates against female employees by paying less-qualified men higher wages than women and promoting less-qualified men to management positions ahead of women.

Initially estimated to include a class of about a half-million women, the number may have grown to 2 million by now as employees come and go at the evergrowing company. All current or former female Wal-Mart workers since Dec. 26, 1998, are potential members of the class.

"There are none that are bigger than this one," said Joseph M. Sellers, co-lead counsel for the plaintiffs.

A federal judge certified the case as a class-action lawsuit in June 2004, a decision Wal-Mart appealed. A three-judge panel of the Ninth Circuit U.S. Court of Appeals heard arguments in August 2005 and has yet to rule.

"It's certainly a long time from the perspective of those of us who are awaiting a decision," Sellers said.

Depositions in the case have been on hold since 2003 while the certification issue is argued. Sellers, however, is seeking court approval to take former Wal-Mart Vice Chairman Tom Coughlin's deposition, citing his frail health.

Wal-Mart opposes the move. A hearing on the issue is set for Feb. 14.

Wal-Mart contends that female workers must sue local stores in state court because pay and promotion decisions are made at the store level.

Melissa Hart, an associate professor at the University of Colorado law school, has studied the Dukes case and finds the plaintiffs' arguments believable. Her areas of emphasis are employment discrimination, legal ethics and civil procedure.\

Particularly harmful to the company's case, she said, is a 1998 company-funded consultant's report that found a lack of equity between the sexes in management and recommended ways to address stereotyping. The plaintiffs argued the report was largely set aside and no changes were made.

As for potential damages, she said, "They'll be massive, whatever they are, when you have a class that size." Among the plaintiffs' arguments are that, in 2001, 67 percent of hourly workers and 78 percent of department managers were women, but only 36 percent were assistant managers, 14 percent store managers and 10 percent district managers.

In an article on the case, Hart contends that Wal-Mart stores have always looked to Bentonville for directives.

"Although Sam Walton is long dead, the tightly controlled, highly centralized culture that he created remains integral to the superstore's structure," she said.

WAL-MART FIGHTS BACK

Simley, the Wal-Mart spokesman, said he couldn't comment on the company's potential liability beyond what Wal-Mart said in its annual report nearly a year ago.

If Wal-Mart ultimately loses the Dukes case, the report notes, "the resulting liability could be material to the company." It adds that company officials "cannot reasonably estimate the possible loss or range of loss which may arise from the litigation."

Sellers, the plaintiffs' lawyer, also declined to speculate on potential damages. As for negotiations with Wal-Mart, he said, "They've given us no indication whether they're inclined to settle this."

In its appeal of the certification, Wal-Mart argues that evidence presented to the judge showed that "any pay disparity was localized in fewer than 10 percent of the stores nationally" and that the plaintiffs' statistics do not establish that members of the class suffered a common injury.

The judge's certification of the class action lawsuit, Wal-Mart says, stripped the company of its right to show that no discrimination occurred at individual stores or against individual plaintiffs and that "the district court simply ignored Wal-Mart's actual companywide policies, which prohibit discrimination and encourage equal opportunity."

The judge altered substantive law "solely for the purpose of certifying the largest employment class action in history," Wal-Mart argues.

Roger Pilon, vice president for legal affairs at the libertarian Cato Institute in Washington, called the Dukes case an example of "one of the more abused areas of our law today." "Are we to believe that Wal-Mart has discriminated against 2 million people?

This is discrimination law run amok," he said.

The lawsuit can't be separated from the constant political pressure on Wal-Mart from union-funded groups, Pilon contends.

"The hypocrisy that surrounds this is all but boundless," he said.
"Whenever Wal-Mart opens its door and advertises for help, all the, quote, little people, unquote, for whom these groups pretend to be speaking are lined up to apply for these jobs, and they are shopping at Wal-Mart because of the lower prices."

TAKING ON THE GIANT

At a less visible level, Nashville, Tenn., lawyer Lewis Laska continues to work a niche he carved out several years ago.

Although he says he has never sued Wal-Mart, he sells the how-to kits after studying the company's litigation tendencies.

He concedes that his Web site, www. wal-martlitigation.com, has become a bit dated, but says he plans to spruce it up this year.

"It's turned out to be a much more difficult project than I imagined," he said, adding, "It's safe to say that I get e-mails every day from disgruntled employees, injured customers, vendors, all seeking specific information or global kinds of information."

For a modest price, as law work goes, he sells packets of information on the different types of lawsuits Wal-Mart typically faces: ice in parking lots, causing injury; debris in parking lots, causing injury; unknown substance on floor, causing injury; merchandise falling off shelf, causing injury; customer hit by employee-pushed carts, causing injury.

And the not-so-typical: assault by employee; employee falling on customer; exploding merchandise.

Wal-Mart has a history of not settling lawsuits, Laska said, and historically has been viewed favorably by most people.

"At one point, it was extremely difficult to get a judgment against Wal-Mart," he said.

He sees that changing with verdicts such as the Pennsylvania case, in which the company was found guilty of forcing off-the-clock work by employees.

"There is an increasing awareness in the public, particularly people that sit on juries, that Wal-Mart is not always the good citizen that it claims to be," Laska said.

From the Philadelphia Inquirer and the AP:

For years, the annual meeting of Wal-Mart store managers and suppliers has been mostly an occasion to celebrate the company's successes and discuss its growth. This year, things are different.

The world's largest retailer is struggling, and the thousands attending next week's meeting will want to know what it plans to do about the problems.

The annual conference in Kansas City, Mo., will gather about 7,000 store managers Monday and Tuesday and then, for the next two days, draw hundreds of companies that supply the merchandise that Wal-Mart Stores Inc. of Bentonville, Ark., sells in its nearly 4,000 U.S. stores.

Wal-Mart keeps the meetings closed to outsiders, including the media, investors and analysts.

The analysts say they will be watching for signs that chief executive officer Lee Scott has a plan for recovering from a disappointing 2006. The top question now is whether the company will continue a year-and-a-half-old strategy of prying more money from affluent shoppers with trendier products or go back to low-price basics.

Efforts to improve its image with trendier fashion brands and home fashion accessories have fallen flat, although its push for higher-price electronics has done well.

Wal-Mart reported its worst holiday season ever even as it started to reemphasize its low prices after months of playing down its discount strategy. That has left customers and observers confused about what Wal-Mart is trying to be.

"Wal-Mart urgently needs to regain its price initiative," said Robert Buchanan of A.G. Edwards & Sons. "They have sent a mixed message. They have to be crystal clear that they are a low-price leader."

The retailer also is starting a two-year effort to tailor its stores to communities, offering different merchandise to six target demographic groups such as Hispanics, African Americans, and what it calls "empty-nesters/boomers."

"They're going through a big shake-up. This [meeting] gives them a chance to get everybody on the same page as to the direction the company needs to be going," said Don Gher of Coldstream Capital Management in Bellevue, Wash.

That shake-up includes a reorganization announced this week in how Wal-Mart selects its merchandise. Wal-Mart also promoted John Fleming, its top marketing executive, to head the effort in the new post of chief merchandising officer.

Fleming, a veteran of faster-growing rival Target Corp., will oversee the categories the company considers key for growth: grocery, entertainment, apparel and home furnishings.

Yesterday, just after the announcement that Wal-Mart will have to pay $33 million in back wages to thousands of employees for paying too little in overtime, attorneys in Rock Island argued that 223,000 Wal-Mart and Sam's Club employees in Illinois are owed compensation for working off the clock and through their rest breaks. From the Quad-Cities Online:

A Rock Island County judge said he'll soon rule on whether a local lawsuit filed against Wal-Mart can be given class-action status.

Attorneys representing three local plaintiffs argued Thursday in Rock Island County Circuit Court that about 223,000 employees for Wal-Mart and Sam's Club employed in Illinois since 1996 are owed compensation for working off the clock and through their rest breaks.

Wal-Mart attorneys argue that not every person who worked at Wal-Mart even claims to be wronged and granting class-action status would be assumptive.

The suit, filed in 2001, is one of many suits filed against the retail giant regarding alleged wage and hour violations.

Last year, a jury awarded $78.5 million to 176,000 plaintiffs in a similar class-action suit filed in Philadelphia. Wal-Mart is appealing that decision and a $172 million verdict in a similar California case. The company settled a Colorado suit for $50 million, according to The Associated Press.

New York attorney Judith L. Spanier, arguing for local plaintiffs Lisa Brown, Cynthia Camp and Joseph Stanfield, listed numerous documents and statistics to show problems chain-wide and inside Illinois with Wal-Mart employees not getting scheduled breaks and forced to work off the clock.

Judge Mark VandeWiele told Wal-Mart attorneys, "If they could prove all of this at trial, it would seem Wal-Mart was taking advantage of its employees in Illinois."

Wal-Mart's own internal audit in 1992 showed 32 percent of required breaks were not taken, despite executive policy and federal law dictating every break must be taken, Ms. Spanier said.

"Wal-Mart cannot run away fast enough from its own policy," Ms. Spanier said. "For Wal-Mart to come in here and say they don't have accurate records is absurd."

An Oct. 9, 2000 letter from a corporate lawyer to Wal-Mart executives listed Illinois in the top 10 states with the highest possible liabilities due to "chronic problems" in meal- and rest-break violations. The letter, which was part of Ms. Spanier's presentation, listed possible liability to the company at $80 million to $100 million.

Rock Island attorney Matthew Pappas, representing Wal-Mart, objected to Ms. Spanier's showing of the document, arguing it was protected under attorney-client privilege. Judge VandeWiele put the document under seal.

Mr. Pappas said the plaintiff's "unoriginal" argument was the same presented in similar cases across the country. "There seems to be this thing going around that because you're Wal-Mart, you must be doing something bad," he said.

He said the more than a quarter-million Wal-Mart employees who would be given class-action status fit into 85 different class systems. He said some things happening at stores are the result of individual managers' decisions.

A Boston attorney for Wal-Mart, Donald R. Frederico, said statistics don't tell the full story of each employee, and federal judges have ruled facts must be proven true before certifying a class.

The three local plaintiffs allege they were forced to work off the clock. Ms. Brown previously gave a deposition that she was told to clean up the store without pay. Ms. Camp was told to set up a display and move carts and merchandise. Mr. Stanfield said he had to shelve merchandise with a forklift, Mr. Frederico said.

"The idea that there is this uniform pressure from Wal-Mart to work off the clock or miss breaks doesn't hold up under the plaintiff's testimony," he said. "The plaintiffs allege all of these people were working in a uniform way."

Judge VandeWiele said he'll issue his ruling on the class-action status soon. When he does, he said he won't see the case again "for a few years" while the losing party takes his decision to the appellate courts.

From the Associated Press:

Wal-Mart Stores Inc. will pay more than $33 million in back wages to thousands of employees after turning itself in to the Labor Department for paying too little in overtime over the past five years, according to an agreement announced Thursday by the U.S. Labor Department.

Wal-Mart said the department's review of its overtime calculations also found it had overpaid about 215,000 hourly workers during the same five-year period. The company said it will not seek to recover any overpayments, which were at least $20 per worker...

One of Wal-Mart's most vociferous critics, union-backed WakeUpWalMart.com, said the overtime settlement was a sweetheart deal that favored the retailer rather than its workers.

WakeUpWalMart.com spokesman Chris Kofinis said workers were not represented in the settlement talks and added that the idea that Wal-Mart "would negotiate in the best interests of its workers is ludicrous on its face."

Read our press release about this here.

From MSNBC:

NEW YORK - Wal-Mart Stores Inc. may have wanted change when it hired Julie Roehm as its head of marketing communications last year, but Wednesday she said the world’s largest retailer rejected change once she arrived.

“Many companies — and Wal-Mart’s not the first — want change. They know that something needs to be done and they want to seek it,” she said, after speaking on a panel at a Reuters Newsmaker event in New York.

But just as a body can reject an organ after a transplant, so too can corporations reject the very type of change they are seeking, Roehm said.

“Sometimes, you know you need it to survive, but sometimes it just rejects,” she said.

Roehm declined to give specifics of changes she tried to push through.

Roehm was abruptly fired from Wal-Mart Dec. 4 after less than a year on the job.

Her departure came amid speculation she violated company policy by accepting a costly dinner hosted by Interpublic Group of Cos.’ agency DraftFCB while choosing an advertising agency for Wal-Mart.

Roehm has denied any inappropriate activity, and she has sued the retailer, claiming breach of contract and fraud. In her complaint, Roehm claims she was told by Wal-Mart that she was being fired because she had not been “fulfilling the expectations of an officer of the company.”

In court papers, Wal-Mart admits that Roehm was informed Dec. 4 that her employment was being terminated, but it denies the other allegations.

A Wal-Mart spokeswoman declined to comment.

Roehm was expected to help Wal-Mart expand its image beyond that of just a low-cost retailer and help it attract consumers who might spend money on high-priced electronics or trendy apparel.

She joined the retailer from DaimlerChrysler, where she was the director of marketing communications for the Chrysler, Jeep and Dodge brands and was known for pushing the limits with her ads.

In 2004, she pushed to have Chrysler’s Dodge brand sponsor a pay-for-view “Lingerie Bowl” that would feature scantily clad women playing football during halftime of the Super Bowl. But Chrysler canceled its sponsorship in the face of criticism from female customers.

Roehm said that after working in numerous cities in different companies, she was probably overly confident in thinking she could fit in to Wal-Mart’s culture and easily push through changes.

“The truth is that I was probably overly confident that I could adapt to their culture and succeed in that environment,” she said. “They were probably overly ambitious on the fact that they thought that I was the right person for them — that I was the right kind of change.”

While she did not last long at Wal-Mart, Roehm said she does not think her experience would keep others from working at the retailer.

“Anybody enamored with the idea of creating change at the world’s largest retailer will go” there, she said.

Since leaving Wal-Mart, Roehm said she has been talking to numerous companies about job opportunities, but has made no decisions yet about her next move.

From KCRA.com:

SACRAMENTO, Calif. -- A California state agency is hitting the nation's largest retailer with more than $1 million in fines and fees.

A letter was recently sent to Wal-Mart, telling the company it must pay the state more than $1.2 million related to pesticides sold in California.

The California Department of Pesticide Regulation said Wal-Mart is refusing to pay fees on more than $57 million in sales. The state requires retailers to pay a 2-cent fee on every dollar of pesticides sold.

So what happens if Wal-Mart refuses to pay?

"We will have no alternative but to turn to the state attorney general's office and they could file an unfair business practices complaint," California Department of Pesticide Regulation spokesman Glen Brank said.

That would not be good for Wal-Mart.

The company is already under criminal investigation by the U.S. Attorney in Los Angeles.

That investigation alleges Wal-Mart is illegally shipping hazardous waste out of state to avoid environmental fees in California.

California representatives from Wal-Mart have not returned calls from KCRA 3 Investigates seeking comment.

CNNMoney.com releases its "101 Dumbest Moments in Business," and Wal-Mart earns its 2006 Grand Prize:

1. Wal-Mart

Because if there's anything America loves, it's a politician...

In an attempt to put a smiley face on its tarnished image, Wal-Mart hires heavy-hitting public relations firm Edelman, which sets about using tactics derived from political races to reverse public perceptions of the giant retailer.

Dubbing its campaign "Candidate Wal-Mart," the firm trumpets all manner of new Wal-Mart initiatives: improved employee health-care benefits, higher starting pay levels, new stores in downtrodden neighborhoods, reasonably priced organic foods, and a flat $4 fee for hundreds of generic prescription drugs.

As a result, candidate Wal-Mart quickly becomes, well, the most popular politician since Spiro Agnew. By year's end Wal-Mart suffers its first quarterly profit drop in a decade, sees same-store sales decline in November's run-up to the crucial holiday shopping season, and suffers a series of public relations gaffes so stunning that it lands six spots in this year's edition of the 101 Dumbest Moments.

You can view 6 of Wal-Mart's Dumbest Moments of 2006 here.

From The Hometown Advantage:

The presence of a Wal-Mart store reduces a community's level of social capital, according to a new study by economists Stephan J. Goetz and Anil Rupasingha.

Bowling Alone author Robert Putnam defines social capital this way: "Social capital refers to features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit." Social scientists generally measure a community's social capital by looking at such factors as how many civic and social organizations it has and the degree to which residents participate in public affairs.

Communities with higher levels of social capital are healthier and more resilient, and their members are better able to work together to solve problems. Economists have found that social capital also contributes to economic growth and poverty reduction.

"Our results indicate that the presence of Wal-Mart depresses social capital stocks in local communities," concluded Goetz and Rupasingha in their study, "Wal-Mart and Social Capital," which was published by the American Journal of Agricultural Economics.

The implications include both a weakened social fabric and "real costs for communities in the form of reduced economic growth."

The study examined both communities in which new Wal-Mart stores were built in the 1990s and those that already had a Wal-Mart at the beginning of the decade. The study controlled for other variables known to affect social capital stocks in a community, such as educational attainment.

"Both the initial number of [Wal-Mart] stores and each store added per 10,000 persons during the decade reduced the overall social capital measure," Goetz and Rupasingha found.

They found that communities that gained a Wal-Mart during the decade had fewer non-profit groups and social capital-generating associations (such as churches, political organizations, and business groups) per capita than those that did not.

They also found that Wal-Mart's presence depresses civic participation. Communities that had or gained a Wal-Mart store in the 1990s had lower voter turnout in the 2000 presidential election.

Goetz and Rupasingha hypothesize that Wal-Mart's negative effect on social capital is partly a result of its impact on locally owned businesses. Wal-Mart harms not only local retailers, but also a wide variety of other businesses and professionals that serve local retailers, such as banks and accountants. When they disappear, the economists write, "the social capital they embody is destroyed, and their entrepreneurial skills and other forms of location-specific human capital are forever lost to the community."

Another factor they cite is the decline of the downtown and other neighborhood business districts that have long served as gathering places and helped to sustain the web of connections that knit communities together.

Goetz and Rupasingha urge local officials to take their findings into account when making land use and development decisions. The effect on social capital is "one more externality that needs to be considered" and weighed against the perceived benefits of a Wal-Mart store, they write.

From today's article in the Wall Street Journal:

Even as federal regulators weigh Wal-Mart Stores Inc.'s bid for a banking license, several more states are considering legislation that would bar the retail giant from opening company-owned bank branches within their borders...

This month, bills that would exclude Wal-Mart and other ILC-chartered banks from establishing branches in stores have been filed in Colorado, Kansas, Maine, Nebraska and Texas. Last year, similar legislation passed in five states...

Sponsors said the impending decisions by Utah and the FDIC lend immediacy to their bills. "The fact it's Wal-Mart that could be doing this under the application that's pending lends incredible urgency. Their scale is beyond that of any other entity," said Maine Rep. Sean Faircloth, who has filed a bill pending in the Maine House.

Bob Hallstrom, general counsel of the Nebraska Bankers Association, which helped prepare a bill sponsored by the chairman of the state's banking, commerce and insurance committee, said supporters want to have legislation ready to thwart any move by the FDIC that would allow Wal-Mart to operate its own bank.

"We are moving forward to have something in place" in the event the FDIC lifts the moratorium on applications this month, Mr. Hallstrom said. The FDIC's actions in the next few weeks "will have an impact on the timing of what goes forward in Nebraska," he said.

In Colorado, a Senate bill would go further than barring in-store bank branches. It would bar a financial institution from operating within a mile-and-a-half of a facility owned, leased or controlled by a non-bank affiliate.

From BusinessWeek.com:

A year after Wal-Mart (WMT) laid out ambitious plans to become a much bigger player in the organic foods business, the giant retailer is running into trouble over its organic effort with consumer activists and government regulators.

It was March of 2006, at an analysts' conference, when Wal-Mart's vice-president of marketing, Stephen Quinn, said that the company would double its offerings of organic products within weeks. The company promised to make organics affordable to more consumers by offering what executives called "the Wal-Mart price." In July, the Bentonville (Ark.) retailer even launched an ad campaign on The Food Network, HGTV, and parenting and women's magazines, with tag lines like: "Know what goes well with organic milk? Organic cereal and knock-knock jokes" (see BusinessWeek.com, 3/29/06, "Wal-Mart's Organic Offensive").

"An Isolated Incident"

Now there are questions about whether "the Wal-Mart price" might come at a cost to organic foods. State officials in Wisconsin have launched an investigation into the retailer's practices after complaints that Wal-Mart may be misleading consumers.

A central question is whether signs on store shelves and banners above the shelves describe foods as "organic," while the foods nearby do not qualify for the label, under federal guidelines. "We are beginning an investigation that will look into signage and whether it can be considered misleading," says Jim Rabbitt, director of the Bureau of Consumer Protection at the Wisconsin Department of Agriculture, Trade & Consumer Protection in Madison. The bureau plans to examine the practices of Wal-Mart and other retailers for 30 to 60 days to determine how big an issue this is.

The U.S. Agriculture Dept. is reviewing a complaint about Wal-Mart's practices from the same watchdog group that notified Wisconsin officials. The USDA has not decided whether to pursue its own investigation. "We are seeking more information to determine what action should be taken," says Joan Schaffer, spokeswoman for the national organic program at the USDA.

Wal-Mart officials say that the company has done nothing wrong. A spokeswoman points out that the company has more than 2,000 locations that offer up to 200 organic selections, in addition to thousands of nonorganic offerings. Karen Burk, company spokeswoman, wrote in an e-mail that if there were any inaccurate signs or banners around organic foods "we believe it to be an isolated incident." She added that, "The USDA certification label is featured on the packaging of the organic selections we offer for further customer information and verification. We have sent procedural guidelines to our stores for proper management of these identification tags."

Strict Requirements

Retailers and farmers involved in organic foods worry that giants like Wal-Mart may muddy the waters about what is and is not organic. Some are upset over the allegations and wonder whether other supermarkets will take steps similar to those alleged. "A huge amount of work went into coming up with a standard of quality in the organic industry," says Randy Lee, CFO at PCC Natural Markets, the largest co-op operating in the U.S., which runs eight stores in the Seattle area. "If these allegations are true, then it very easily erodes those standards and comes with a significant business impact on other retailers that have higher standards."

The watchdog group that prompted the Wisconsin investigation is called The Cornucopia Institute and has been active in what it calls "family-scale" farming. It has produced photographs of items that are not certified organic or are only partially organic that appear on shelves at Wal-Mart with banners or signs that say "Wal-Mart Organics." The photos from Cornucopia show items that could be easily mistaken for organic. Many have descriptions such as "all natural" or "natural," including Stonyfield Farms All Natural Yogurt and Florida Crystals natural sugar.

Organics have been a booming business for food manufacturers and for retailers, growing 15% annually for the last five years. It's extremely lucrative: Supermarkets typically charge a 30% to 40% premium in price for organic food, compared with conventionally grown food (see BusinessWeek.com, 5/25/06, "Going Organic: The Profits and Pitfalls").

Diluting the Movement?

Retailers and farmers are anxious to protect this growing business. Lee, of PCC Natural Markets, says that if Wal-Mart is placing nonorganic items under its organic banner, then it will have a ripple effect on other national grocery chains. PCC and other organic retailers say that they train their employees and store managers rigorously to ensure high organic standards. They wonder how strong Wal-Mart's commitment to organics is. "Where is the USDA in all this?" asks Lee.

The USDA has come under fire in the past for not taking action on similar complaints. Two audits of its organic program, performed by the American National Standards Institute in 2004 and by the USDA's Office of Inspector General in 2005, were highly critical of how the USDA has handled complaints of potential violations of organic standards. The 2005 report states that "in fiscal year 2003, the eight complaints referred to the national organic program for a decision have not been resolved, one of which involved a possible prohibited substance being added to an organic product." The USDA counters by saying that complaints about organic food aren't treated like an emergency. "It's not like this is a food safety issue," says spokeswoman Schaffer.

Mark Kastel, co-director of The Cornucopia Institute, says that it launched its inquiry after a visit in September to Wal-Mart's prototype store in Plano, Tex. After noticing labeling problems in its organic offering, it sent off a letter to Wal-Mart's CEO Lee Scott suggesting that the company correct the problem. Kastel says that consecutive visits to Wal-Mart showed that the company hadn't heeded its advice, so Cornucopia filed a legal complaint with the U.S. Agriculture Dept. in November and followed up with a complaint with the Wisconsin Agriculture Dept. on Jan. 13. The latest assessment came after visiting stores and finding alleged violations in at least four states—Wisconsin, Illinois, Iowa, and Minnesota. "Wal-Mart is coming up with a different kind of organic for its consumers," says Kastel.

From the Denver Business Journal:

Colorado's bankers are launching a pre-emptive strike against retailers who want to get into the banking business.

Senate Bill 40, introduced Jan. 10, would prevent a business from running a bank within one-and-a-half miles of its own retail or commercial premises.

"We want to protect the independent banker," said Sen. Lois Tochtrop, D-Westminster, who is sponsoring the bill in the Senate. Rep. Rosemary Marshall, D-Denver, is the bill's House sponsor.

Tochtrop refused to name names. But one of the bill's obvious targets is Wal-Mart, the retailing giant whose 18-month effort to enter the banking business worries commercial bankers nationwide.

Wal-Mart's July 2005 application to the Federal Deposit Insurance Corp. (FDIC) to open an industrial bank in Utah caused such an uproar that the FDIC last summer placed a six-month freeze on new industrial bank applications, to give itself time to consider the issue more carefully. That freeze is scheduled to end on Jan. 31.

Industrial banks -- also known as industrial loan corporations, or ILCs -- were first chartered in the early 1900s as small loan companies for industrial workers. But over time, chartering states gradually have allowed them greater powers, and ILCs now offer many of the same products and services as state commercial banks.

Other retailers operate them, including Target and Nordstrom. Still others would like to -- Home Depot and DaimlerChrysler both have ILC applications pending at the FDIC.

But it's the application by retailing juggernaut Wal-Mart that has caused the most consternation, with groups including the AFL-CIO and American Bankers Association urging the FDIC to reject the request.

Wal-Mart told the FDIC that it isn't interested in lending, but wants to be able to handle its own electronic check processing, and credit card and debt card payments from its customers, instead of paying third-party service providers to do it.

But many bankers believe that if Wal-Mart enters the industry, community banks will face the same challenges that have overwhelmed many mom-and-pop retailers in the small towns where Wal-Mart has opened stores.

"If [retailers] are allowed to open their own banks, and can offer discounts to people opening accounts there, it's going to hurt the independent bankers and all the branch banks," Tochtrop said. "In the long run, it also hurts the consumer, because people lose the one-on-one, face-to-face relationship that they have with an independent banker."

"Small businesses depend on their community banks for unbiased credit decisions in order to sustain and grow their operations," officials at Independent Bankers of Colorado (IBC), the driving force behind the bill, said in a statement. "Would a retailer's bank loan money to competing businesses?"

SBl 40 would prohibit a financial institution from establishing an office, loan production office, deposit production office or branch within 1.5 miles of premises owned, leased or otherwise controlled by an affiliate that engages in commercial activities.

On Tuesday, the Senate Business, Labor and Technology Committee approved the bill by a 5-to-1 vote. The measure will now move to the Senate floor.

The ban wouldn't affect commercial bank branches located inside supermarkets or other commercial establishments, because the banks don't own those retail businesses.

Don Childears, president and CEO of the Colorado Bankers Association, said that his group supports SB 40. The CBA also plans to introduce a separate, similar bill within the next couple of weeks.

"We and the IBC have met and discussed our respective bills several times," Childears said. "We found that we took different approaches, but they are not inconsistent. So we felt that the best thing was to proceed with both of them, and I think generally both of us are supportive of the other's bill."

From The Morning News:

The Cornucopia Institute, a Wisconsin-based activist group, has filed a legal complaint against Wal-Mart Stores Inc. for allegedly mislabeling non-organic products as being certified organic in some of its stores.

The Institute has filed the complaint with the Wisconsin Department of Agriculture, Trade and Consumer Protection. Institute spokesman Mark Kastel said his organization filed the complaint after Wal-Mart President and CEO Lee Scott did not respond to a letter sent by the group.

But Wal-Mart spokeswoman Karen Burke said the issue boiled down to one of misplaced signs.

"We believe it's an isolated incident if one of those organic tags should accidentally shift in front of the wrong item, and this is what the issue is about," she said.

Wal-Mart is working on the problem at the stores where the incidents took place, Burke said.

Kastel countered, however, that the mislabeling was a "systematic problem" with Wal-Mart and not just an isolated incident.

"This is no mom and pop store. This is happening all over (Wal-Mart) stores across the country," he said.

The Cornucopia Institute earlier filed a complaint with the U.S. Department of Agriculture after receiving no response to its letter to Scott, Kastel said. The organization followed up with a complaint to the state of Wisconsin after finding out that a USDA investigation could take between one and two years, he said.

From Pensions and Investments Online:

New York City Employees’ Retirement System and Illinois State Board of Investment, Chicago, introduced a shareholder proposal at Wal-Mart Stores Inc. calling for the company’s board of directors to issue a report on the company’s alleged failure to comply with International Labor Organization standards on workers’ rights.

“As shareholders, we are concerned with the vast reports of noncompliance with international labor standards in Wal-Mart’s operations, rendering the company a negative reputation and causing (it) considerable economic harm,” William R. Atwood, executive director of the $11.9 billion Illinois fund, wrote in a letter to Thomas D. Hyde, corporate secretary of Wal-Mart.

Representatives of the two funds have talked with Wal-Mart officials about the concern but failed to reach agreement, prompting the funds to sponsor the proposal, Mr. Atwood said in an interview.

The $37 billion NYCERS owns 2,953,214 Wal-Mart shares and ISBI, 451,055 shares.

Wal-Mart officials declined to comment on the talks or the proposal, said John Smiley, spokesman for the Bentonville, Ark.-based company. Wal-Mart’s annual meeting hasn’t been scheduled yet but is typically in June, said Jami Arms, Wal-Mart spokeswoman.

Our newest press release on the Wal-Mart health care saga:

WAL-MART CONTRADICTS WAL-MART ON COMPANY’S LATEST HEALTH CARE FIGURES

WAL-MART IGNORES OWN STATEMENTS PROVING THE NUMBER OF WORKERS INSURED BY THE COMPANY DECLINED IN 2006/ ATTEMPTS TO BLAME MEDIA FOR “ERRONEOUSLY” REPORTING PAST HEALTH CARE DATA

WASHINGTON, DC - Yesterday, in an attempt to hide the shocking fact that Wal-Mart’s own health care figures prove that the actual number of Wal-Mart workers insured by the company declined in 2006 from 638,000 to 636,391, Wal-Mart argued that the national media, including the Wall Street Journal, New York Times, and Pittsburgh Post Gazette, “erroneously” reported that Wal-Mart provided health care to 638,000 employees at the beginning of 2006.

According to an article yesterday by Reuters, “The Wal-Mart spokesman, Dan Fogleman said that the 638,000 figure was erroneously reported…”

However, the fact that Wal-Mart told the media that it provided health insurance to 638,000 employees was not erroneously reported. Both in December 2005 and in January 2006, Wal-Mart spokesman Nate Hurst confirmed, in separate interviews with the Pittsburgh Post-Gazette, the Harrisburg Patriot News, and other media outlets that 638,000 Wal-Mart workers were insured by the company.

The exact passages from the articles are provided below:

* “Wal-Mart, which is considering challenging the Maryland law, will fight such efforts in Pennsylvania and elsewhere, spokesman Nate Hurst said Friday. Nationwide, 638,000 of Wal-Mart's 1.3 million workers have health insurance through the company, he said. The company expects support from other businesses that could be targeted next, Hurst said. [Harrisburg Patriot News, 1/19/06]

* Mr. Hurst said Wal-Mart provides health insurance coverage for 638,000 of its 1.3 million workers. Many of those not covered by Wal-Mart's health plans are young people covered by their parents' insurance or senior citizens covered by Medicare, he said. "We have made some significant changes in our plan to increase affordability and access," Mr. Hurst said. [Pittsburgh Post-Gazette, 1/6/06]

Therefore, based on Wal-Mart’s own reported figures the number of Wal-Mart workers covered under the company health care plan actually decreased, not increased, in 2006 by nearly 2,000 employees. Wal-Mart’s claim that it increased enrollment by 8% year over year is false.

Based on the misleading statements made Wal-Mart spokesman Dan Fogelman, WakeUpWalMart.com released the following statement attributable to Chris Kofinis, communications director for WakeUpWalMart.com.

"To add insult to injury, Wal-Mart’s own spokespeople are now contradicting one another and are trying to blame the national media for their own deceptions. The reality is, Wal-Mart’s deception is either a desperate attempt to hide the fact that Wal-Mart now insures fewer workers than it did a year ago or Wal-Mart falsely inflated last year’s figures to try and avoid paying its fair share for health care. Either way, Wal-Mart should be ashamed.

We call on Wal-Mart to apologize to the national media and to own up to the fact that its own figures prove that the Wal-Mart health care crisis is worsening. Clearly, with well over half of its employees and families left uninsured by the company, it is more evident today than ever before that Wal-Mart’s health care is unaffordable and must be changed. We hope that Wal-Mart will face this simple and obvious truth and take steps to live up to its health care responsibilities.”

Today, Wal-Mart confirmed that over half of its employees, 53%, are not covered under the company’s health care plan.

Yet, despite these shameful numbers, Wal-Mart is trying to mislead the public by falsely claiming that its health care plans have actually improved. Here are the facts. Last year, Wal-Mart told the New York Times that it provided company health care to 638,000 employees. Now, Wal-Mart claims it provides company health care to only 636,391 employees.

I don’t know about you, but that sounds to me like a decrease, not an increase, of almost 2,000 employees.

We have to tell the American people the truth. And, the truth is that with $11 billion in annual profit, it is a national disgrace that Wal-Mart still fails to provide company health care to over half of its employees.

Please take a moment and write a letter to the editor about the Wal-Mart health care crisis.

Contrary to Wal-Mart’s publicity stunts, the reality is that the Wal-Mart health care crisis is getting worse. In the last few months, Wal-Mart decided to eliminate its traditional and standard health care plans for all new hires leaving employees to choose between a high-deductible, catastrophic health care plan and Pres. Bush’s privatized health savings accounts.

How many Wal-Mart employees do you think can afford a $1,000 deductible for individual coverage and $3,000 deductible for family coverage (not to mention additional deductibles for hospital care and pharmaceuticals), when the average Wal-Mart Associate makes $2,000 below the poverty line for a family of four?

That is why we need you. Only you have the power to change Wal-Mart and put enough pressure on the company to provide affordable, quality health care to all of its employees.

Please write a letter to the editor and tell your community about the Wal-Mart health care crisis.

Our latest press release:

WAL-MART'S NEW HEALTH CARE FIGURES PROVE THAT WAL-MART’S HEALTH CARE CRISIS WORSENED IN 2006

WAL-MART’S FIGURES CONTRADICT EARLIER STATEMENTS AND SHOW THE NUMBER OF WAL-MART EMPLOYEES INSURED BY THE COMPANY ACTUALLY DECREASED IN 2006

WASHINGTON, DC - Today, Wal-Mart falsely claimed that the number of Wal-Mart employees covered by the company health care plan increased in 2006. Wal-Mart’s latest health care numbers directly contradict Wal-Mart’s figures from last year and prove that the company’s health care crisis actually worsened. In fact, both in absolute numbers and on percentage basis, the number of Wal-Mart workers covered under the company health care plan actually decreased in 2006.

Last year, at the end of Wal-Mart’s health care enrollment period, Wal-Mart made public statements to the New York Times, the Wall Street Journal, and other media outlets claiming that "638,000 workers were now insured by the company.” Today, Wal-Mart said at the end of this year’s enrollment period it now insured only 636,391 workers. Therefore, Wal-Mart’s new health care enrollment decreased, not increased, by almost 2,000 workers compared to the same time last year.

Unfortunately, Wal-Mart wrongly claimed today, and several media outlets mistakenly reported on this wrong number, that Wal-Mart’s figure of 636,391 employees represents an 8% increase in enrollment.

It is impossible for Wal-Mart to have increased enrollment by 8% unless Wal-Mart lied to the New York Times and the Wall Street Journal and only insured 589,250 employees last year, not the 638,000 it claimed.

Even on a percentage basis, Wal-Mart’s figures are not accurate. This year, Wal-Mart claims it increased the percentage of workers covered under the company health care plan to an embarrassing 47.4%. But, at the end of last year, Wal-Mart told the Wall Street Journal that it provided company health care to 49% of its workers. Therefore, the 47.4% actually represents a decrease of 1.6%.

Based on the misleading statements made today by Wal-Mart, WakeUpWalMart.com released the following statement attributable to Paul Blank, campaign director for WakeUpWalMart.com.

"Incredibly, Wal-Mart's own health care numbers prove that the Wal-Mart health care crisis has worsened. The sad truth is that despite making $11 billion in annual profit, Wal-Mart still fails to provide company health care to over half of its employees.

Given the enormous cost American taxpayers must pay to subsidize Wal-Mart’s health care crisis, we call on Wal-Mart to stop misleading the American people and our elected leaders who expect, if nothing else, that America's largest private employer will live up to it's health care responsibilities.

At a minimum, Wal-Mart should have the decency to remember how many workers they actually provide health care to and stop changing the numbers in a deliberate and desperate attempt to mislead the public and the media as the company tries to repair its faltering public image.

In the end, we hope that Wal-Mart will wake up and realize that continuing to make misleading statements about its health care crisis will not only fail to improve its faltering public image, but will only further stoke the anger of the American people and our elected leaders who expect Wal-Mart to finally change for the better.”

#######

Click here to read the story in the Washington Post.

From the Springdale Morning News:

Lee Scott, president and CEO of Wal-Mart Stores Inc., picked up almost $1.5 million this week when he sold more than 30,000 shares of Wal-Mart shares.

In two separate transactions filed Friday with the U.S. Securities Exchange Commission, Scott sold 31,544 shares of common stock at $47.39 and another 594 shares at the same price to pay taxes on the 31,544 shares sold.

The two transactions left Scott with just under $1.5 million.

Scott took home more than $10 million in salary, bonuses and other compensation from Wal-Mart in 2005, according to the company's 2006 proxy statement filed with the SEC.

Both Wal-Mart Stores Inc. and Scott have come under increasing criticism lately from analysts and others for the company's sluggish stock performance, which began a downward slide when Scott took over as president and CEO six years ago.

Wal-Mart's stock has fallen 22 percent since Scott took the reins from David Glass in January 2000, wiping out $90 billion in market capitalization, according to a Fortune.com article published Monday.

Wal-Mart stock (NYSE: WMT) closed Tuesday at $47.39, up 39 cents. In the past 52 weeks, the stock has ranged from a $52.15 high to a $42.31 low.

From Fortune Magazine:

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 percent in December - ahead of analysts' predictions of 1 percent, but still skimpy. (Same-store sales at Costco and Target were up 9 percent and 4.1 percent, respectively.) And Wal-Mart's stock, currently about $47 a share, was flat in an otherwise strong year for stocks.

Then there were the public relations fiascoes. Wal-Mart had to sever its relationships with political consultant Terry Nelson and former Atlanta mayor Andrew Young. Nelson had a hand in the race-baiting "Harold, call me!" spot in the U.S. Senate race in Tennessee, and Young, while speaking on behalf of Wal-Mart, accused Jewish, Korean and Arab shopkeepers of selling spoiled food to inner-city blacks.

Bad years do happen to good companies. But for Wal-Mart, 2006 was just another downer in a period of decline that's lasted seven years and overlaps the tenure of the company's current CEO, Lee Scott.

Unhappy investors

Wal-Mart's stock has fallen 22 percent since Scott took the reins from David Glass in January 2000 (the Standard & Poor's 500 index is down just 2 percent over the same period), wiping out $90 billion in market capitalization. Those are huge numbers, and at any other company there would be a groundswell of rage from investors - the kind that just cost Robert Nardelli the CEO job at Home Depot (Charts). (During Nardelli's six-year tenure, Home Depot's stock outperformed Wal-Mart's, 3 perent to 7 percent.)

At Wal-Mart there has been no uprising apart from some speculation in the retail trade press last summer that Scott's job might be in jeopardy because he had taken May off. (Wal-Mart denied the reports.)

Still, Wall Street seems to be losing patience. Among institutional investors unloading Wal-Mart shares last year were American Century, MFS, Marsico Capital and Chase Investment Counsel. Chase, an independent investment firm that operates the Chase Growth Fund, sold its entire four-million-share stake late last summer in favor of positions in Kohl's and J.C. Penney.

Asked what Wal-Mart could do to get back on track, Chase Growth manager David Scott (no relation to Lee) says, "I don't know. That's probably why I no longer own the stock."

There are those on Wall Street (though none would speak for attribution) who think Scott himself is the problem. "It's like he's forgotten what the business model was all about - driving the top line by relentlessly lowering prices," says one Wall Street analyst. "But you look at their margins, they seem to be getting away from that."

Indeed, Wal-Mart has been taking a bigger profit on each item sold. Wal-Mart's gross margins, according to Baseline, have increased to 25 percent this year from 22 percent in 1999, which appears at odds with the chain's historical commitment to "everyday low prices."

Others are more charitable. "If anything, I think investors sympathize with [Scott] for being under the gun the way he is," says Margaret Gilliam, president of Gilliam & Co. and a veteran retail analyst, who was close to the late Sam Walton and remains in touch with the Walton family. Sam's heirs, along with other insiders, control 40 percent of the company's stock.

"I know [Scott] has the support of the family," Gilliam says. She points out that Scott has been forced to spend a considerable amount of time fighting persistent (and unfair, in Gilliam's view) attacks by two union-funded anti-Wal-Mart groups - Wal-Mart Watch and Wake-Up Wal-Mart - who complain about employee pay and benefits (see "Attack of the Wal-Martyrs"). Those campaigns may have hurt. According to a 2004 McKinsey & Co. report, 2 percent to 8 percent of Wal-Mart customers surveyed have ceased shopping at the chain because of negative press.

Getting back its mojo

It's true that Scott faces huge challenges. With expected sales of $350 billion for the fiscal year ending this month, Wal-Mart is such a behemoth that increasing the top line by 10 percent means adding $35 billion in yearly sales. That's roughly equal to the combined revenues of Staples, Barnes & Noble, Starbucks and Nordstrom.

And Wal-Mart under Scott has done some things right. Its green strategy - which includes everything from cutting back on packaging to selling more energy-saving light bulbs - has generated positive press, deservedly so (see "The Green Machine").

Scott himself has come out of the Bentonville bunker and made himself more accessible to the public - although he declined to be interviewed for this article. Scott also deserves credit for knowing when to cut his losses in South Korea and Germany. And unlike Home Depot's recently deposed Nardelli, Scott has neither a garish pay package nor a reputation for imperiousness. None of that, though, has budged the stock.

How can Wal-Mart get its mojo back? Here are four ideas from Fortune interviews with analysts, investors and retail experts:

Spin off Sam's Club. Sam's Club was designed to compete against warehouse clubs like Costco. Costco, though, has run circles around Sam's, and warehouse club pioneer Sol Price offered an explanation in a 2003 interview with Fortune: "The biggest thing with Sam's was that it didn't have a free hand to compete with Wal-Mart."

Spinning off Sam's would be good for Wal-Mart shareholders. Not only do spinoffs typically outperform the S&P 500 - by as much as ten percentage points during their first two years - but the stock of the parent company fares better too. "

Companies do much better when they're run on their own," says retail guru and Wal-Mart bull David Berman of hedge fund Durban Capital. "The same CEO is going to be hungrier and working harder."

Stop trying to be a growth stock. Wal-Mart has lately looked for growth in upscale goods and expansion into Europe and Asia. The problem is, says UBS analyst Neil Currie, "when Wal-Mart travels outside the U.S., the scale advantage doesn't mean as much." And Wal-Mart is still trying to figure out how to compete with chains that offer better service on pricey items like flat-screen TVs. Bear Stearns analyst Christine Augustine, another Wal-Mart bull, says, "If they don't take any risk, they'll never move forward."

But Staples founder Tom Stemberg thinks Wal-Mart should "quit trying to be a growth company, stop being distracted by [Europe and Asia], and focus on the U.S., Canada and Mexico," says Stemberg, now a partner with private-equity shop Highland Capital. That would free cash for stock buybacks and dividends. "Instead," Stemberg says, "they've decided they're going to defy the laws of gravity by expanding to half the world and trying to go upscale in fashion."

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 percent 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.

Show some urgency. Perhaps what's most troubling about Wal-Mart is that neither Scott nor those around him seem to feel investors' pain. "Why would our CEO be on the 'hot seat' in a year where we've had record sales and earnings?" Wal-Mart spokeswoman Mona Williams asked Fortune in an e-mail. Williams blames the stock drop on Wal-Mart's 12-month trailing price/earnings ratio of 54 when Scott took over: "Was that a realistic number long-term?" (Wal-Mart's P/E is now about 17.)

When Scott does acknowledge problems, his diagnoses seem off. In an October meeting with analysts, Scott blamed Wal-Mart's surprisingly weak same-store sales growth on high gas prices and on store remodelings. HSBC's Husson says, "They've done remodels before - they should know what the effect is." As for gas prices, Scott predicted sales would rebound when energy prices fell. Prices did fall, from $3 a gallon in August to $2.30 in late December, yet Wal-Mart's slide in same-store sales growth continued, from 2.7 percent and 1.8 percent in August and September to - 0.1 percent and 1.6 percent in November and December. While December's number was touted as a rebound, it was well below the 3.3 percent retail average for the month.

Scott may yet turn things around, of course. Bets in China and India for instance, may start paying off. But Wall Street is not likely to put up with a 2007 from Wal-Mart that looks anything like the year that just ended.

From MarketWatch.com:

CHICAGO -- Wal-Mart Stores Inc.'s turnaround strategy is on a rocky path littered with uncertainty, according to a Goldman Sachs analyst who Monday called for senior management changes and pulled back her rating on the shares.

"Wal-Mart's strategy seems to be in flux," Adrianne Shapira said in a research note in which she cut back her rating on the stock to neutral from buy. The world's largest retailer had a tough fiscal 2006 and is likely to find that fiscal year 2007 is one of transition, at best.

Wal-Mart shares were off marginally to $47.15.

While Wal-Mart has touted improve return on invested capital as a major goal, it has stumbled in its efforts to step up sales with initiatives that just don't seem to gain traction, she said. Wal-Mart has sought to entice better-heeled customers to buy apparel and electronics - what Wal-Mart calls "crossing the aisle" - at the same time that it has been cutting prices and advertising them broadly as a means to attract bargain-hunters and lower-income customers.

As a result, Shapira said, Wal-Mart appears to be "straddling the fence, attempting to do both and not garnering much success," she said. Last week Wal-Mart said sales at stores open longer than a year, the industry's benchmark of growth, rose 1.6% in December -- a marketed month-over-month improvement from November's minus -- 0.1%. "Will Wal-Mart continue to target incremental sales from higher-end consumers," she queried. "Or will the company go back to its roots to reinforce its pricing message?"

Considering that the strategy is uneven, Shapira thinks that some "critical senior management positions" also might be.

"There are clear voids in marketing and merchandising missteps suggest the need for some new talent," she said. "More leadership change means more strategy change, which all adds time to the turnaround."

From today's AP article "Wal-Mart to Air Reputation Ads:"

Wal-Mart Stores Inc. will run national television ads starting Monday praising its record as an employer and corporate citizen, taking its arguments straight to the public in an ongoing battle over its reputation with unions and other critics.

The world's largest retailer, increasingly a lightning rod for politicians as well as labor unions and other activists, cites the legacy of late founder Sam Walton in a folksy 60-second ad. A 30-second ad focuses on Wal-Mart's health insurance plans for its more than 1.3 million U.S. employees...

Union-funded campaign groups have also recruited national Democratic figures to back their calls for higher wages and better health care at Wal-Mart, including potential 2008 presidential contender Sen. Barack Obama of Illinois and declared 2008 candidate John Edwards.

WakeUpWalMart.com, a union-funded campaign group, said the ad campaign proves Wal-Mart is seeing damage to its bottom line from a worsening reputation. The retailer had its worst holiday sales season in years, WakeUpWalMart.com spokesman Chris Kofinis said.

"Wal-Mart is living in a bizarre state of denial, where no matter how bad their public reputation is, they still believe that a tired ad campaign can fool the American public into believing it is OK to exploit millions of working families," Kofinis said.

WakeUpWalMart.com and another union-backed group, Wal-Mart Watch, claim Wal-Mart pays poverty wages, runs small businesses out of town and pushes employees onto tax-funded public health care. Wal-Mart denies those allegations.

With today's official reporting of December same-store sales numbers, Wal-Mart's 2006 holiday sales are "the worst on record."

According to today's AP article, "Stores Report Disappointing Dec. Sales":

Wal-Mart, which warned early in the season that its same-store sales gain would be no better than 1 percent, posted a 1.6 percent increase for December...

The results followed Wal-Mart's 0.1 percent decline in same-store sales in November, its first monthly same-store sales drop in a decade.

Wal-Mart had its weakest December performance since 2000, when it posted a 0.3 percent gain, according to Thomson Financial. The slim 0.8 percent increase for November and December combined was the worst since Thomson Financial began tracking same-store sales data in 1995.

From AZCentral.com and the Associated Press:

PHILADELPHIA - Wal-Mart workers in Pennsylvania who won a $78.5 million judgment for working off the clock and through rest breaks returned to court Wednesday to seek another $72 million in damages and interest.

They argue that about 125,000 plaintiffs in the class-action suit deserve an additional $500 each in damages, or $62 million, under Pennsylvania labor laws because the jury found that the world's largest retailer acted in bad faith. These so-called liquidated damages are designed to compensate people for the delay in payment.

The remaining 61,000 plaintiffs - who do not qualify for those damages because of legal time limits - should share in $10 million in interest on the back pay, lawyer Michael Donovan argued.

Wal-Mart Stores Inc., which denies wrongdoing and is appealing the jury award, opposed the added damages and interest. Company attorneys said that Donovan merely estimated the number of potential plaintiffs, and has not proven that each was shortchanged.

"They don't even know who they are," Wal-Mart lawyer Brian Flaherty said.

The workers already are expected to receive anywhere from about $50 to a few thousand dollars each from the initial award, depending on how long they worked for the company.

Philadelphia Common Pleas Judge Mark Bernstein did not immediately rule on the issues argued Wednesday. He questioned why Donovan sought liquidated damages of $500 per worker when the statute could be interpreted to allow $500 in damages each time a worker was shortchanged.

"If I'm a claimant, I'm entitled to everything the law says I'm entitled to, and if that's $500 every time I was shorted and I was shorted 24 times a year, then it's $12,000," Bernstein said.

Donovan said he did not interpret the state wage law that way. He added that Wal-Mart's lack of record-keeping would make it impossible to determine the number of individual violations.

Bernstein oversaw the five-week trial, which culminated in October when the jury rejected Wal-Mart's claim that some employees voluntarily chose to work through breaks and that the off-the-clock work was minimal.

The suit covers current and former employees who worked at Wal-Mart and Sam's Clubs in Pennsylvania from March 1998 through May 2006.

Wal-Mart, based in Bentonville, Ark., earned $11.2 billion in profits on $312.4 billion in sales in the last fiscal year. Donovan argued at trial that the unpaid work gave Wal-Mart an unfair advantage in the marketplace.

Lead plaintiff Dolores Hummel said she put in about 10 hours each month off the clock to keep up with demands at a Sam's Club in Reading, where the single mother worked for 10 years to support her son. Sam's Clubs are a division of Wal-Mart.

Donovan has also petitioned the court for more than $40 million in legal fees, plus $5.5 million in expenses. Wal-Mart, which must pay the fees unless the verdict is overturned, objected to the request and asked for more details.

Wal-Mart is appealing a $172 million verdict in a similar California case and settled a Colorado suit over unpaid wages for $50 million.

Wal-Mart policy in Pennsylvania gives hourly employees one paid 15-minute break during a shift of at least three hours and two such breaks, plus an unpaid 30-minute meal break, on a shift of at least six hours.

Our latest press release:

WAL-MART'S HOLIDAY SALES PERFORMANCE IS WORST IN 6 YEARS

WakeUpWalMart.com Achieves Record Milestone During 2006 “Hope for the Holidays” Campaign

Washington D.C. - WakeUpWalMart.com, America’s campaign to change Wal-Mart, began the New Year by officially announcing the group had achieved a series of record milestones during its 2006 “Hope for the Holidays” campaign, including reaching over 306,976 supporters as of December 31, 2006. In stark contrast, Wal-Mart experienced its worst holiday sales performance in 6 years - even worse than last year’s poor performance.

As a result of a mounting public image problem, worker unrest, and management woes, Wal-Mart’s same store sales for December rose 1.6% - significantly lower than last year’s disappointing 2.2% increase. In fact, over the last 6 years, Wal-Mart’s December same-store sales performance has steadily declined from 8.0% in 2001 to 1.6% in 2006. A breakdown of Wal-Mart sales performance between 2001 and 2006 is below.

“Even with unprecedented price cutting, a November decline in same-store sales, and an extremely low December comp, Wal-Mart faces the harsh reality of another poor holiday season. Wal-Mart must wake up and realize that the American people care about values, and want America’s largest employer to change for the better. The big question for Wal-Mart this year is will 2007 finally be the year that Wal-Mart realizes its image problem is now its business problem and it is time to wake up and do what is right for America? We can only hope,” said Paul Blank, campaign director for WakeUpWalMart.com.

During the last two months of 2006, WakeUpWalMart.com executed its most ambitious and aggressive holiday campaign to date. The group’s 6-week non-stop 2006 Hope for the Holidays campaign achieved new records in grassroots support by building 1,172 events in 43 states, distributing over 400,000 flyers, and holding actions such as candlelight vigils and press conferences at over 925 Wal-Mart stores during the holiday season.

Wal-Mart’s December Same-Store Sales Performance 2001-2006 (combined Wal-Mart Stores & Sam’s Club)

2006
1.6%

2005
2.2%

2004
3.0%

2003
4.3%

2002
2.3%

2001
8.0%

From the Wall Street Journal:

The nation's biggest private employer is about to revamp the way it schedules its work force, in a move that could shake up many employees' lives.

Early this year, Wal-Mart Stores Inc., using a new computerized scheduling system, will start moving many of its 1.3 million workers from predictable shifts to a system based on the number of customers in stores at any given time. The move promises greater productivity and customer satisfaction for the huge retailer but could be a major headache for employees.

The change is made possible by a software system that can crunch an array of data, part of a shift toward computerized management tools that can help pare costs and boost companies' bottom lines. But it also could demand greater flexibility and availability from workers in place of reliable work shifts -- and predictable paychecks.

Wal-Mart began implementing the new system for some workers, including cashiers and accounting-office personnel, last year. As the world's largest retailer, the Bentonville, Ark., company often sets the standard for others, and many chains already are heading in the same direction.

Others that have rolled out advanced scheduling systems in the past year or are currently doing so include Payless ShoeSource Inc., RadioShack Corp. and Mervyns LLC. Payless expects to have its system in 300 of 4,000 stores by the end of January. The system, designed by Kronos Inc., tracks individual store sales, transactions, units sold and customer traffic in 15-minute increments over seven weeks, and compares data to the prior year's, before scheduling workers.

Payless hopes to "optimize our schedules to better anticipate when customers will be in our stores so that we can better engage them," says Larry Leibach, the shoe retailer's director of project management.

A company using these fine-tuned programs might start the day with a few employees on hand at many stores, bring in a bunch more during busy midday hours, and gradually pare down through the day before bulking up for the evening rush.

Staffing is the latest arena in which companies are trying to wring costs and attain new efficiencies. The latest so-called scheduling-optimization systems can integrate data ranging from the number of in-store customers at certain hours to the average time it takes to sell a television or unload a truck, and help predict how many workers will be needed at any given hour.

Companies also hope the scheduling systems will cut litigation by helping them comply with federal wage-and-hour laws, and variations at the state level on everything from the timing and frequency of breaks to how many hours minors can be scheduled. Moreover, retailers say tighter scheduling lets them better serve customers by shortening checkout lines.

"There's been a new push for labor optimization," says Nikki Baird of Forrester Research Inc. "You want to have the flexibility to more closely match ... shifts to when the demand is there."

But while the new systems are expected to benefit both retailers and customers, some experts say they can saddle workers with unpredictable schedules. In some cases, they may be asked to be "on call" to meet customer surges, or sent home because of a lull, resulting in less pay. The new systems also alert managers when a worker is approaching full-time status or overtime, which would require higher wages and benefits, so they can scale back that person's schedule.

That means workers may not know when or if they will need a babysitter or whether they will work enough hours to pay that month's bills. Rather than work three eight-hour days, someone might now be plugged into six four-hour days, mornings one week and evenings the next.

Some analysts say the new systems will result in more irregular part-time work. "The whole point is workers were a fixed cost, now they're a variable cost. Is it good for workers? Probably not," says Kenneth Dalto, a management consultant in Farmington Hills, Mich.

Unions have criticized Wal-Mart for its scheduling changes, saying the company is forcing people to be available to work more hours each week but to sacrifice a more regular schedule. Paul Blank, campaign director for WakeUpWalMart.com, funded by the United Food and Commercial Workers union, says the new scheduling system has "devastating implications" for employees. "What the computer is trying to optimize is the most number of part-time and least number of full-time workers at the lowest labor costs, with no regard for the effect that it has on workers' lives," he says.

Wal-Mart spokeswoman Sarah Clark says the system isn't intended to schedule fewer workers, and hasn't where it has been implemented so far. The company says that in one test last year in 39 stores, 70% of customers said the checkout experience had improved. "The advantages are simple: We will benefit by improving the shopping experience by having the right number of associates to meet our customers' needs when they shop our stores," Ms. Clark said.

In the past, store managers for Wal-Mart and other huge retailers, including Sears Holdings Corp.'s Kmart, Payless and J. Crew, scheduled workers based on store promotions and weekly sales figures from the previous year. By comparison, the software systems created by workforce-management software companies such as Workbrain Inc., Kronos and CyberShift Inc. rely on real-time data feeds, such as sales rung up at the cash register and customer traffic.

The systems can boost productivity by freeing up managers. While it can take managers an entire day to create schedules for several hundred workers at a single big-box store, staffing can now be drawn up across an entire company in a few hours. Workbrain says it generates schedules for Target Corp.'s 350,000 U.S. employees at 1,500 locations in less than six hours. Target declined to comment on its scheduling system.

Store chains spent $55 million on licensing fees for work-force-management software in 2005, up from $44 million in 2004, according to AMR Research Inc. in Boston. AMR analyst Robert Garf estimates revenue for these systems grew by 15% to 20% in 2006. "We're really at this tipping point today," he says.

Wal-Mart is rolling out the new "optimizer" system from an outside vendor in all its stores and for all employees this year. Wal-Mart asks hourly employees to fill out the hours they can work on "personal availability" forms. A copy provided by WakeUpWalMart states that all full-time cashiers and customer-service workers are encouraged to consider including "if at all possible" a weekend shift every week. "Limiting your personal availability may restrict the number of hours you are scheduled," the form reads.

Some workers say the form has been used to pressure them to be open to more shifts. Tami Orth, a full-time cashier in Ludington, Mich., says she used to work a regular schedule of nearly 35 hours a week, with Mondays and Wednesdays off. In May, managers began to assign her as few as 12 hours a week, and her shifts began to fluctuate. "You can't budget anything," says Ms. Orth, who earns $9.32 an hour.

Some longtime workers also say they believe managers use the system to pressure them to quit. After working 16 years at a Wal-Mart in Hastings, Minn., Karen Nelson says managers told her she had to be open to working nights and weekends. After she refused, her hours were trimmed, though they have been restored in recent months. "The store manager said he could get two people for what he pays me," says Ms. Nelson, who earns about $14.50 an hour.

Ms. Orth and Ms. Nelson both had contacted union critics of the company in recent months.

Ms. Clark denied managers use the system to pressure people to change their availability or force out seasoned workers. She also said the new system makes schedules more consistent.

The Wall Street Journal selected "choices for the best and worst ads and other marketing gimmicks in 2006." The first listing under "The Worst" is Wal-Mart:

CLIENT: Wal-Mart Stores Inc.

AGENCY: Edelman, a unit of Daniel J. Edelman Inc.

CONTENT: Edelman set up a blog called Wal-Marting Across America, which tracked the life of "Jim" and "Laura," a couple who drove cross-country in an RV visiting Wal-Mart stores. On the pro-Wal-Mart blog the duo conducted interviews with happy Wal-Mart workers.

FEEDBACK: In a sign of how things can quickly go wrong for brands online, critics complained the company failed to disclose on the blog the full identities of two people -- one the sister of an Edelman employee -- whom it enlisted to write the pro-company blog. The controversy quickly spilled over into the mainstream media. Richard Edelman, president and chief executive of the public-relations giant and a long-time proponent of PR transparency and blog ethics, ended up apologizing on his blog.

Click here for more on Jim and Laura's blog.