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Hernando Today

Wal-Mart Profits Rise: Is That Good Or Bad?

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By TONY HOLT

Hernando Today

Published: February 20, 2009

SPRING HILL - The weaker retailers are tumbling toward bankruptcy as the recession continues.

Wal-Mart looks ready to swoop in and gain an even bigger market share based on its latest figures.

Discount and wholesale stores have turned a profit in recent months, while other chains are suffering double-digit losses.

The latest trends have not only bolstered Wal-Mart's outlook, but also its critics.

"They've made these profits off the backs of their employees," said local activist Brian Moore. "It's a corporation that takes things to the extreme."

The chain's sales for the fourth quarter of 2008 rose 1.7 percent. The company anticipates further earnings throughout 2009 although the retail industry as a whole is expected to stumble at least through the summer.

"Wal-Mart's solid (fourth quarter) earnings ... served as a reminder of how well-positioned (the company) is to gain share in today's challenging times," according to a report published Wednesday by Goldman Sachs.

It is considered encouraging news to some, but ominous to others.

"By any way you cut it, Wal-Mart is benefitting from a recession," said Eric Bull, a spokesman with Wal-Mart Watch, an advocacy group that joined forces with local residents two years ago to prevent a supercenter from being built along Barclay Avenue.

"They have a lot of power," Bull continued. "Wal-Mart is the biggest private employer in the country. It could do a lot to help stimulate the economy ... There's no doubt they offer low prices, but the cost we pay for those low prices are more than people realize."

Wal-Mart is often criticized for paying their employees low wages, refusing overtime, not offering benefits, pushing smaller businesses out of communities and spurning unions.

A Wal-Mart spokesman did not return a call for comment.

There are three Wal-Mart locations in Hernando County. The Barclay location would have been the fourth.

To Bull and many other consumer advocates, Wal-Mart's growth during the lean economic times has increased its chances of infiltrating even more cities and towns. Chicago, for instance, has famously blocked the chain from establishing locations there. Recently, it has begun making headway and is eyeing at least 12 sites, according to the Wal-Mart Watch Web site.

"Clearly they're making a power play and are trying to grab as much of the market share that they can," Bull said. "They're already slipping into some markets that have resisted them in the past."

Moore, who ran for president in 2008 on the Socialist Party USA ticket, said Wal-Mart is guilty of "slave labor" tactics.

"They shouldn't be allowed to operate in this fashion," he said. "Wal-Mart hides behind the image of being community-oriented. They're not. They're very greedy and very selfish. Wal-Mart actually hurts a community."

David Kelley is a philosopher with The Atlas Society, formerly The Objectivist Institute. He rebukes Moore's anti-capitalist point of view and said it is incorrect to accuse Wal-Mart of earning high profit margins "at the expense of others."

"Workers are there voluntarily ... They're not serfs," he said. "Their alternatives might not be great, but there is nothing in the nature of life that guarantees you're going to have a job that offers everything."

Kelley said customers have choices either to go buy a bar of soap at the local Wal-Mart or go to a mom and pop store and pay a few cents more. Most of the time, they choose Wal-Mart.

"Consumers are voting with their feet," he said. "If you complain about that, you're complaining about freedom."

Retail data show if Wal-Mart and its wholesale partner, Sam's Club, were not part of the equation, the 2 percent sales decline recently seen in the industry would have been closer to 8 percent.

"Wal-Mart makes a huge impact," said Erin Hershkowitz, a spokeswoman with the International Council of Shopping Centers. "Right now, people are looking for value with their purchases and Wal-Mart is sort of synonymous with low prices."

Brink Lindsey, an economist with the Cato Institute, published a report four years ago claiming consumers save $100 billion a year because of Wal-Mart's low-price business model.

For fiscal year 2008, Wal-Mart reported a net profit of $13.4 billion compared to $12.73 billion a year earlier.

Reporter Tony Holt can be reached at 352-544-5283 or wholt@hernandotoday.com.

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