Why I Won't Touch Wal-Mart

Last week, Wal-Mart (NYSE: WMT  ) shares lumbered up to a new 52-week high; apparently the discount giant's pretty popular with investors right now. However, popularity doesn't make a good investment for the long term.

Granted, Wal-Mart's got friends in high places. American Express (NYSE: AMX  ) has recently made a deal to offer its Bluebird service through the giant discounter. That way American Express can target Wal-Mart's low-income customers seeking an alternative to traditional banking and its fee-heavy structure.

Bluebird allows users to load cash onto pre-paid cards through options such as direct deposit, traditional bank accounts, and even at Wal-Mart registers. A key point is that the Bluebird service won't include overdraft charges, minimum balance rules, annual charges, or activation fees.

Wal-Mart also offers similar services through Green Dot (NYSE: GDOT  ) , but obviously, exclusivity wasn't part of the deal.

Wal-Mart's been getting growth back on track lately, but the current macroeconomic climate continues to be a dangerous, uncertain one. Meanwhile, some of the financial products it offers may help its low-income consumers who are far too squeezed by fees, but on the other hand, many of its own employees reside within that struggling demographic, too.

Some Los Angeles-based Wal-Mart workers recently staged a strike, accusing the discount giant of cheap labor practices that critics have complained about for years. These include a reluctance to hire full-time employees and offering such low wages and minimal benefits that Wal-Mart workers are forced to turn to government programs for assistance.

Granted, retail isn't exactly renowned for great pay and perks, but some retailers have made it a priority to offer their employees much more than they're required to, competitively or otherwise. For example, Costco (Nasdaq: COST  ) , Starbucks (Nasdaq: SBUX  ) , and Whole Foods Market (Nasdaq: WFM  ) all offer some variation of worker-friendly policies such as higher-than-industry pay, health-care benefits, and stock and stock options to rank-and-file employees.

Wal-Mart's currently trading at 14 times forward earnings, which on the face of it, looks far cheaper than Costco and just a tad pricier than Target (NYSE: TGT  ) . I don't buy that Wal-Mart's shares are anything close to a deal, though. Between the poor economy and continued allegations that it's part of the problem, not the solution, given its own struggling workforce, Wal-Mart's future growth is still threatened on several fronts.

Alyce Lomax owns shares of Starbucks and Whole Foods Market. The Motley Fool owns shares of Costco Wholesale, Starbucks, and Whole Foods Market and has options on Starbucks. Motley Fool newsletter services recommend Costco Wholesale, Starbucks, and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 10, 2012, at 3:43 PM, chopchop0 wrote:

    Sounds like the same person that probably wrote to sell WMT when the Mexican bribery scandal broke this spring

    ;)

    Disclosure: Long WMT

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