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No smiles for Wal-Mart in California
L.A. suburb rejects retailer's effort to get exemption to local zoning regulations.
April 7, 2004: 10:29 AM EDT

LOS ANGELES (CNN) - The world's biggest retailer's effort to build a supercenter in Inglewood, Calif., suffered a blow Tuesday as voters overwhelmingly rejected a Wal-Mart Stores Inc.-sponsored initiative that would have exempted the company from zoning and environmental restrictions in the L.A. suburb.

When the Inglewood City Council rejected Wal-Mart's proposal last year to build a store the size of 17 football fields, the company gathered 6,500 signatures calling for a ballot initiative that would have bypassed the government and allowed the construction without the traffic reviews, environmental studies or public hearings required of other developments.

Wal-Mart's campaign included employees from other stores handing out free meals to citizens. But the initiative failed Tuesday as 60.6 percent of the votes said "no" to Wal-Mart and just 39.3 percent supported the initiative, according to Inglewood City Clerk Yvonne Horton. There were 11,649 ballots cast, Horton said.

Industry watchers, however, said that the Wal-Mart veto in Inglewood is just a minor setback to the world's largest retailer's expansion plans in the Golden State.

Local opponents charged Wal-Mart (WMT: Research, Estimates) with attempting a corporate takeover of their city.

Wal-Mart on a mission

Wal-Mart spokesman Bob McAdams said despite being freed from local regulations, the project would "meet every single or exceed every single city code in the city of Inglewood."

McAdams said the company resorted to the initiative when it became clear city council members would not support the project.

"This is not any kind of end run," he said. "It's just the normal process of letting voters decide."

At least one analyst agreed with McAdams. Ulysses Yannas, analyst with Buckman, Buckman & Reid said that although the ballot-box loss is another indication that the world's largest retailer is having a difficult time in the Golden State, the defeat won't stop it from forging ahead with its expansion plans in California.


"It's good for Wal-Mart to get into California but it's not as if Wal-Mart's future depended on this vote," said Yannas. "At the same time, what the Inglewood decision could have some effect on is Wal-Mart's attempts to get closer to metropolitan cities, especially if we see other cities around the country putting up similar opposition to having Wal-Mart in their neighborhood."

About two years ago, Wal-Mart said it had plans to open at least 40 of its supercenter formats in California. But the process has been stymied by pockets of opponents in cities and counties around the state who argue that the huge centers will cause traffic congestion, hurt smaller independent businesses and drive out better-paying jobs.

The story erroneously reported in the original version of the story that Wal-Mart first introduced its supercenter format in 1998.

Wal-Mart supercenters, which average close to 190,000 square feet, sell groceries in addition to other merchandise. The retailer introduced the supercenters in 1988 and has close to 1,500 of these stores around the country, but only one in California.

"Wal-Mart is not unionized so there is already a constituency against them in California. But from another standpoint, a lot of businesses do sprout around a Wal-Mart such as restaurants and dollar stores that want to take advantage of the traffic a Wal-Mart generates," said Yannas. "I think Wal-Mart does have another weapon in its quiver. It can always penetrate cities not with its supercenter stores but with its smaller neighborhood store formats."

Howard Davidowitz, chairman of New York-based Davidowitz & Associates, said Wal-Mart is on a mission in California.

"Wal-Mart has identified a strategy of urban expansion, and they're not going to walk away from it," said Davidowitz. "They know that operating in an urban market is different from the suburbs and I'm sure they were already aware of things like zoning laws. Did they really need to put up a fight in Inglewood? No. What they did here is lay down the marker. Wal-Mart is saying that they've identified a new market and they're going to move it and attack."  Top of page

-- CNN Correspondent Frank Buckley and Producer Jamie McShane contributed to this report, as did CNN/Money staff writer Parija Bhatnagar.

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