No Relief in Sight for Wal-Mart

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Wal-Mart (NYSE: WMT  )  is being excoriated after the Cleveland Plain Dealer reported on a food drive being arranged by management of a Canton, Ohio, store for its employees. It's proof, critics say, the big-box giant underpays its employees.

Rather than a feel-good story about how Wal-Mart employees care for one another, the tale is being spun into one of a multibillion-dollar behemoth with so little regard for its employees' welfare that the workers need to have a collection taken up for their succor by their fellow employees.

Yet for all the railing against the retailer for its pay practices, the average national wage of its full-time employees is $12.83 per hour. That might be several dollars per hour less than what Costco (NASDAQ: COST  ) pays, but then Wal-Mart is a much different business than the rival to which it's often compared. It has almost nine times more employees, 10 times more stores, 35 times more SKUs, all the while serving a clientele that earns as much as 66% less than the $85,000 earned by Costco customers.

While the food drive program that's generating all the controversy was set up by employees at the store level, the retailer itself offers an employee relief program for those in need. Wal-Mart's corporate plan began in 2001 and has provided more than $80 million in grants to its employees. It seems hard to argue the retailer is as callous as it's being portrayed. And if the point is that employee assistance programs are evidence of a company not doing right by its workers, then there are lots of companies that ought to be subject to the same vitriol. 

Lowe's, for example, has offered an employee relief fund since 1999 and has contributed some $12 million in assistance to more than 11,000 workers and their immediate family members while JetBlue has run a program since 2002 to assist its crew members and their immediate families when they have no other means to support themselves. In fact, according to a national survey by the Families and Work Institute, 37% of all employers provide special support programs to help employees manage their financial situations. That number jumps to 46% for employers with 1,000 or more workers.

Yet as the Plain Dealer article suggests, this may have more to do with union muscle-flexing than any real outrage over the presence of a food drive in an employee break room, since that particular store has run similar efforts for several years without raising any eyebrows. The organization mounting the effort against Wal-Mart is a group of employees that's been staging strikes against the retailer since Black Friday of last year.

But perhaps all the constant critiques of the retailer are having the desired effect -- not the one in which it starts paying workers more, but the one in which people shop there less. In reporting third-quarter earnings last week, Wal-Mart said same-store sales declined by 0.3% in its U.S. division. That was the third straight quarter in which comps have fallen, cumulatively pushing them down 0.7% so far this year.

Not only is the situation not improving -- Wal-Mart forecasts flat comps in the fourth quarter -- but the company has had to revise its guidance downward twice already this year. It now expects earnings of $5.11 to $5.21 per share, compared to its previously reduced forecast of $5.10 to $5.30 per share.

Slowing growth doesn't create employment opportunities, and companies harangued into a decline definitely don't hire. Wal-Mart isn't disappearing, and its woes involve more than just being criticized at every turn, but it's not the retail juggernaut it once was. The retailer's critics might want to consider what kind of financial assistance its employees might need if Wal-Mart doesn't just stop hiring people but rather begins laying them off.

Any company can always improve itself and its image, but flogging the retailer for good acts of its employees is hardly a charitable thing to do.

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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


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5/24/2016 1:38 PM
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