Under fire, Wal-Mart prepares schmooze fest
As retail behemoth readies for two-day media conference observers say it needs to stay focused on business and not get distracted by its image-boosting offensive.
NEW YORK (CNNMoney.com) - Once upon a time, Wal-Mart couldn't care less about the media.
Times have certainly changed for the world's largest retailer. For two years running now Wal-Mart has sent out "save-the-date" announcements to members of the media, inviting them for an exclusive face-to-face with its spin squad back at home next month.
The media event is planned for April 18-19 in Rogers, Arkansas.
Wal-Mart (Research) is not yet ready to divulge the details about its Media Day conference, spokeswoman Sharon Weber said. However, last year Wal-Mart trotted out senior executives that included CEO Lee Scott for individual presentations and rare question-and answer sessions.
Some industry observers speculate that Wal-Mart's efforts to get warm and fuzzy with the media are not purely altruistic but mainly because it must protect its image especially as the damaging public relations setbacks keep coming. [See Related Stories box]
Howard Davidowitz, chairman of New York-based retail consultancy and investment banking firm Davidowitz & Associates, said it's a burden Wal-Mart will have to bear because its size and industry leader status will always make it a bull's eye for watchdog groups like WalMart Watch and WakeUpWalMart, who criticize Wal-Mart for its employment and benefits policies.
Scott, referring to both groups, has repeatedly acknowledged that Wal-Mart is confronted by one of the most well-financed and well-organized corporate campaigns the company has ever seen.
"When you're as big as Wal-Mart, everybody's going to be after you," but Wal-Mart needs to get its story out too, Davidowitz said.
Watchdog groups have seen some success in tarnishing Wal-Mart's image, however, he said. "But who's funding these groups? It's the labor unions. Labor unions have their own agenda. They're trying to get more members at a time when their membership is dropping," Davidowitz said.
"Wal-Mart will never be unionized. I don't think Wal-Mart has to worry about that," he added. "What it need to be worried about is what happened in Maryland with the healthcare bill. Businesses don't want the government to get involved."
Careful, Uncle Sam's watching
Burt Flickinger, an independent retail analyst, agreed with Davidowitz that the Maryland "healthcare bill," which passed in January, could have substantial implications for the world's largest retailer.
The Maryland measure, also known as the "Fair Share Healthcare Bill," requires companies with more than 10,000 employees to spend at least 8 percent of their payroll on health benefits, or pay the balance into a state low-income health insurance fund. Wal-Mart currently employs about 17,000 in the state.
Wal-Mart has been a lightning rod for criticism about its wage, labor and benefits policies. Critics allege the retailer's high healthcare premiums tilt workers toward opting for taxpayer-funded public healthcare options, such as Medicaid, for their healthcare needs.
Flickinger worries that the Maryland vote could eventually result in more states to follow suit.
"Ohio and California are already a major battleground," he said, adding that as many as 30 other states have looked at the issue.
"I don't think the union-based special interest groups and the government are two separate issues. I think they're tied together," said retail consultant George Whalin. "Now more than ever Wal-Mart is facing a lot of pressure coming from so many different directions. I think that's why Wal-Mart is putting more effort into communicating with the media."
Is Wal-Mart's brand cachet suffering?
For instance, Wal-Mart fell to No. 12 from its previous No. 4 slot in Fortune magazine's 2005 ranking of America's most admired companies. The ranking is based on a survey which asks people to vote for the companies that they admired most.
Wal-Mart held the No. 1 position in both 2003 and 2004.
Robert Passikoff, a branding expert with Brand Keys Consulting, says the Wal-Mart brand has taken a hit. He cited the latest results of the firm's annual customer loyalty index based on a semi-annual survey of 16,000 consumers between the ages of 18 and 65 and their attitude toward more than 300 well-known brands.
Specifically, the index identifies the values that bond consumers with a particular brand and measures the relationship between brand loyalty and profitability.
In the January survey, Wal-Mart slipped in the ranking to No. 29 from No. 25 the previous year, Passikoff said.
Why should Wal-Mart take note? "In retailing, the success of a brand is determined by consumers votes. And consumers vote with their wallets," Passikoff said. "We're not saying this means fewer people are shopping at Wal-Mart but that maybe they're not going back a second or third time in the same week."
Others disagree. "Wal-Mart gets more than 100 million customers a week. It's still growing its sales double-digit every year," said Phil Rist, vice president of strategy for market research firm BIGresearch.
Wal-Mart logged $315 billion in sales last year, up 10 percent from the prior year.
"Wal-Mart's making consumers happy," said Rist. "In an era where gas prices, heating bills are rising and credit card companies are doubling payments, people can count on Wal-Mart on low prices all the time."
And let's not forget Wall Street
Even as it continues to boost revenues and profit, Wal-Mart's stock price has been rangebound between $40s and $50s for the past six years.
"I'm sure shareholders are frustrated," said Edward Weller, analyst with ThinkEquity Partners.
If Wal-Mart's management wasn't distracted by its public relations war, perhaps they could focus more attention on the business and improving the stock performance, he said.
"Wal-Mart has been accused of some pretty systematic shortcomings and I think the stock performance may be symptomatic of these other problems Wal-Mart faces," Wellers said.
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