business news in context, analysis with attitude

“Liberal” and “Wal-Mart” are words that never used to appear in headlines or news stories together, unless the occasion was one attacking the other. But Newsweek has a piece in which it examines the accusation that Wal-Mart has become too liberal, with conservatives charging that its policies are hurting profitability.

“With its deep roots in Red State America and a reputation for upholding ‘family values,’ Wal-Mart seems an unlikely target for conservative criticism,” Newsweek writes. “It's the company that banned sales of CDs with offensive lyrics, refused to stock racy magazines like Maxim and declined (until 2006) to sell the Plan B emergency contraceptive pill. But in recent years, as it faced growing pressure from liberal activists, Wal-Mart has begun to make changes. It began offering more-robust health-insurance coverage to workers. Its CEO voiced support for raising the minimum wage. It has launched an ambitious environmental program. As a result, while Wal-Mart continues to face criticism from liberal groups, it's now simultaneously being criticized by some conservatives, who say the company's concessions to liberals are hurting its business.”

One of the chief critics is what Newsweek describes as “a tiny right-wing think tank called the National Legal and Policy Center (NLPC). The magazine reports: “In a 46 page report the NLPC will release this month, staffer John Carlisle writes that Wal-Mart customers aren't buying many of the organic products it's begun stocking; that the energy-efficient compact fluorescent light bulbs it's been touting aren't really good for the environment (because they contain mercury), and that its support for legislation to cap carbon emissions will only hurt consumers and its bottom line. (Wal-Mart responds that its environmental initiatives ‘are not only good for the environment—they are good for our business, too.’) The NLPC says Wal-Mart is naive to think incremental compromises will ever really placate liberal critics. ‘The more Wal-Mart tries to appease the Left, the more the Left demands,’ the report concludes.”

KC's View:
The thing about gadflies is that they never are satisfied – no matter which side of the political aisle they occupy. And the reason that so many of these people are described as occupying the so-called “lunatic fringe” is that they are, in fact, lunatics.

This is a fascinating charge against Wal-Mart, especially because no matter what the company has done, I never have believed for a moment that the company’s top priority has been anything other than sales and profits. It’s just that sometimes it makes sense to think about long-term profits…and a short-term approach, which often is more appealing so some folks, often can be at odds with extended viability and profitability.

One of the most important things that a retailer can do is try to look around the corner, to see what other companies don't see, and to act in a way that can preempt the competition. That’s what Wal-Mart is doing with its environmental initiatives, and, I believe, in most if not all of the other strategic decisions it makes.

By the way, this may be the other problem that the NLPC and its lunatic brethren may have. They are thinking tactically, and Wal-Mart is thinking strategically. In any extended scenario, it is the latter approach that makes the most sense.

By the way, Wal-Mart got positive coverage from Reuters over the weekend, as the company prepares for its annual meeting later this week. CEO Lee Scott, the news service notes, “comes into this year's meeting with the wind at his back. Last June, Wal-Mart faced anemic U.S. sales growth, it was trying to clear through heaps of unsold apparel, and it was battered by negative publicity, including a legal battle with ex marketing communications chief Julie Roehm, who was fired after less than a year on the job.

“A year later, the scandals have largely faded, and Wal-Mart is showing renewed vigor. It has slowed its U.S. expansion plans and gone back to basics, emphasizing low prices as U.S. consumers try to eke more out of every dollar. Through Thursday, its stock was up 22 percent this year.

“Analysts expect the world's largest retailer to emphasize ways it can grow by exploiting overseas opportunities or building new, smaller store formats in the United States. But they also want to know that the improvement Wal-Mart is showing is not simply a function of a tough economy driving cash-strapped shoppers into its U.S. stores, but a real turnaround that will stick when times get better.”

While there will be plenty of challenges remaining for Wal-Mart, it seems to me that the current economic downturn, which makes its low price approach seem more appealing, gives the retailer some breathing room in which it can develop tactics that will support the broader strategy. It has nothing to do with being liberal or conservative. It has to do with being profitable, products…and permanent.