Why You Should Dump Wal-Mart

Wal-Mart (NYSE: WMT  )  got a lot of attention this holiday shopping season, but not in the way they were hoping. Even as they made headlines for opening on Thanksgiving Day, a photo of bins at a Wal-Mart store collecting canned goods from employees to be given to other impoverished employees called attention to the low (some would say, "starvation") wages Wal-Mart pays. 

Add to this some high-profile Twitter skirmishes and Internet memes implying that taxpayers are footing the bill for Wal-Mart's low wages, and the world's largest retailer looked less like Santa and more like Scrooge. 

In light of all this, should you dump your Wal-Mart shares? And what if you want exposure to the retail sector, but with a clear conscience?  Does any other company stack up?

Check emotion at the door
There's no shortage of businesses that make their money in ways that might turn an investor's stomach. Altria (formerly Philip Morris) is just one example. In some cases, these stocks underperform the market, but often they produce outstanding returns. Here's a sampling of companies you might find unsavory and their performance over the last year:

SWHC Chart

Data by YCharts.

It just goes to show that one's moral compass isn't the best tool in an investor's arsenal.  So should you avoid buying shares of a company you detest? 

Well, ultimately that's up to you, but I'm a big proponent of the theory that an investor should be proud to own the businesses he or she holds stock in.  And you really can't be proud of a business you find icky. 

Ideally, an investor keeps emotion out of picking stocks to avoid making emotional, as opposed to rational, decisions about trading. And if every time you look at a stock, a shiver runs up your spine, you're having an emotional reaction. Which means you may end up selling the stock too soon or ignoring a gut instinct to sell by misidentifying it as your usual aversion to the stock. Bottom line: if a company makes you sick, stay far away from its products and its stock. 

Who measures up
Okay, but what about Wal-Mart? There's no question it's an investment that's done pretty well over the past decade, especially during the recession--but as you can see, lately it's not only been underpaying its employees, but underperforming the market too:

WMT Chart

WMT data by YCharts

Is any other retailer any better? What about rival Target (NYSE: TGT  ) ?  Same global reach, same strong brand identity, similar dividend (2.7% to Wal-Mart's 2.4%) and they pay their workers better...right?

Well, to be honest, no. Wal-Mart gets more attention in this regard only because of its size (its 1.4 million US employees dwarf Target's 361,000), but Target isn't much better in terms of income disparity between the top and the bottom. Target's CEO Gregg Steinhafel "only" makes 645 times the salary of its average worker, compared to 796 times the average worker's salary for Wal-Mart's CEO Michael Duke. 

Both companies pay most of their retail staff (Target calls them "Team Members," while Wal-Mart calls 'em "Associates") minimum wage.  And Target was likewise open on Thanksgiving Day. So what's an investor to do?

There is a third way
One retailer stands out as a model of pro-employee policy: Costco (NASDAQ: COST  ) . In stark contrast to Target and Wal-Mart, Costco's CEO Craig Jelinek only makes about 48 times the pay of its average worker. And that worker makes a minimum of $11.50 an hour, thanks to Costco's commitment to paying livable wages to all of its employees. Costco has also publicly come out in favor of an increased federal minimum wage.

Costco isn't just employee-friendly, but shareholder-friendly too, having repurchased nearly $2 billion worth of shares since 2010, and offering a 1.1% dividend. It's also outperformed the overall market as well as Wal-Mart and Target over the past five years:

TGT Chart

Data by YCharts

The Foolish bottom line
Any time you look at a business you own stock in and you don't like what you see, whether for moral or financial reasons, you should consider selling. And if you decide to sell Wal-Mart, Costco makes an attractive alternate investment. To paraphrase a well-known slogan: "All of the taste, none of the guilt!"

Wal-Mart's going down, so who's taking over?
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.


Read/Post Comments (34) | Recommend This Article (20)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 12, 2014, at 2:22 PM, JoeBrown wrote:

    Ah yes, the continuing war on Walmart ...

  • Report this Comment On January 12, 2014, at 2:25 PM, cbecker12 wrote:

    This propaganda is all because Walmart won't succumb to Big union threats.

  • Report this Comment On January 12, 2014, at 2:38 PM, janicelee9 wrote:

    I could not care less about dumping WalMart stock but do resent you comparing WalMart work ethics to Target. I am a retired woman who chose to go to work for Target. I worked in the "Corporate" world for all of my adult career with the "backbiters", "creeps", "liars", "fools" and a lot of just plain "idiots" who were two faced azzholes.

    I got bored this Christmas season and applied at Target, got hired and have found that it is truly one of the nicest atmospheres to work in. You say that the employees are overworked and under payed....well deary, this type of work is the easiest, mindless, most mundane work anyone could do...no rocket science degree needed to get or do this job. And, as for the pay....nobody should be paid more than minimum wage to do this work. Target and WalMart jobs are minimum wage positions. God forbid anyone would want to make a career out of working at WalMart!!!

    Take a walk in my shoes one workday and you will see just how hard it is (OR IS NOT) to refold clothes on a shelf, pull product forward, push a cart around and put back things that idiots leave all over the store and then complain...

    I make 8 bucks an hour and get about 25 per week. Unlike most of WalMart employees, I am not a high school dropout with 5 kids that the government is making work so he/she can continue to be on public assistance. The WalMart people who complain don't want to work anyway....take a good look at who is working at WalMart!!!!!!!

  • Report this Comment On January 12, 2014, at 2:39 PM, Number1FordFan wrote:

    The bottom chart shows it the best. The company that treats it employees the best finishes in 1st place.

    and there is wal-mart on the bottom where they belong.

  • Report this Comment On January 12, 2014, at 3:44 PM, 1thatisrght4 wrote:

    Hey, I work at Walmart.

    They pay low (Target pays more)for the same amount of work you at Target.

    I am not a high school dropout and neither are the rest of my co-workers.

    Most of them have to be on assistance to be able to buy food.

    How can one Major chain allow this, while the workers and customers make it possible for them to have huge bank accounts, nice homes and go on lavish "vacations".........how?

    I like you worked in a corporate world, now I prefer to make a difference in a strangers day! (The pay, could be more)

  • Report this Comment On January 12, 2014, at 3:47 PM, 1thatisrght4 wrote:

    *correction*

    "same amount of work you do at Target."

  • Report this Comment On January 12, 2014, at 4:22 PM, kwehlei wrote:

    I work at Walmart and make good money.There is plenty of opportunity to move up in the company. If you want to stay at mimnum wage (entry level) thats your problem. If you want to move up and make more money, apply yourself.Knowone is going to do it for you!

  • Report this Comment On January 12, 2014, at 5:03 PM, spankleelee wrote:

    Walmart may not succumb to big union threats, but they are still being charged for breaking labor laws by NRLB.

    Nor, let's see why this war is happening. Congress just passed a bill giving "RETAIL" investors more protection. Walmart is "RETAIL"

    The Koch brother agenda can not continue until they can begin the rolling shortages of food and other necessities. They can't force the middle class into poverty until they force the middle class to spend all of their savings. We can clearly see what's on the agenda.

  • Report this Comment On January 12, 2014, at 5:11 PM, Mathman6577 wrote:

    I intend to hold on to my $WMT stock and continue to collect dividends which have been increased every year since the mid-1970's.

    Regarding the bottom chart -- five years is too short a time to compare one stock vs. another.

  • Report this Comment On January 12, 2014, at 5:18 PM, dogjudge wrote:

    Let's see. Costco doesn't have any of the problems that WalMart is experiencing. I guess things can be done. And for the anti-union people. Costco is non-union also. Funny what treating your employees fairly does.

    I absolute LOVE the person telling everyone how great WalMart is and all you have to do is try hard to succeed.

    Given the lawsuits against WalMart from women and minorities, I suggest that you are incorrect.

  • Report this Comment On January 12, 2014, at 5:23 PM, Mathman6577 wrote:

    Wal-Mart is the world's largest private employer -- why is that ? Is management dragging the kicking and screaming people into their employ ? I don't think so.

  • Report this Comment On January 12, 2014, at 5:39 PM, TruthAlmighty wrote:

    Walmart is anti american and racist

    It treats hispanic workers as first class workers even if they don't perform. I've seen hispanics who openly tell that they've cross the border which is why they hardly speak any english words and they were not performing, complain way too much and yet they were given wages increase every 3 months. One guy who sports way too much tattoo was even just playing video games half of the time.

    these hispanic workers go over break time allowed ( usually close to 30 minutes ) and management has nothing to say.

    One hispanic went from new hire stocker to manager in just a month just because he is hispanic.

    They are pretty harsh on white caucasians as I see a lot of them getting fired inspite of working hard.

  • Report this Comment On January 12, 2014, at 6:41 PM, Cadamia wrote:

    There is one more reason that Target will not beat out Walmart. Target does have more interesting fashions but when you realize that most people shop a Walmart super center to get everything from food to oil for their cars and food for the dogs in the same place, Target simply doesn't compete across the board. So if you shop Walmart to avoid the hassle of shopping more than one place and saving on gas, Target is not a good substitute.

  • Report this Comment On January 12, 2014, at 6:50 PM, Cadamia wrote:

    After reading the comments above, most of you got it wrong. Until this last December, I had worked for WalMart for more than 6 years.The first couple of years it wasn't bad. After that the store and the company began to take a nose dive. There are practically no full time day and evening shift positions. To get full time you are almost forced into night shift. They have cut most stores to bare bones numbers on all shifts and pay only enough to make it really hard to leave. For those of you who like working for Walmart it is obvious to me you have a good store manager. All too often it is not talent that keeps the manager there but connections. The manager at the Hewette, Tx store, one Ronnie Bush, was given the store after the job he had held with the company before hand was eliminated. He never should have been offered store manager as the store has nearly become impossible to work for since. Take it from me I would know.

  • Report this Comment On January 12, 2014, at 7:37 PM, truthspeaking121 wrote:

    You think Walmart's bad? Target in Seal Beach, CA is not far behind. I used to work at Target. After graveyard shift is done, they try and get you to stay over, so they don't open the doors on time to let you out, and they give you the guilty treatment by asking you what job you have after working there at Target. They separate the Asians and put them in with the Hispanics and Whites, so that the Hispanics can slow down and take it easy. Asians aren't allowed to talk, but the Hispanics are boisterous. There is usually one Asian with 3 or 4 Hispanics and/or whites. They know Asians are the best workers. After 3 months, they were supposed to give me a pay raise. They raised the pay of the Whites and Hispanics, but not me, to get me to work harder. I would work an aisle by myself, then they would give the college kids work credit for that job well done! I left them my resignation letter after they totally ignored me when I told them face to face. After a week, they started calling me to come back to work, threatening me that if I don't, I won't be able to get a job with Target ever again. Well you know what? I don't need to work for Target anymore.

  • Report this Comment On January 12, 2014, at 8:44 PM, StopTreason wrote:

    You Should Dump Wal-Mart just as Walmart has Dumped YOU! The American Workers!

    Walmart is addicted to China slave labor so please Dump and Boycott Walmart starting ASAP!

  • Report this Comment On January 12, 2014, at 8:45 PM, madmilker wrote:

    Well, this O'fart is gonna make this very short and very sweet....

    1975 the last year America had a trade surplus. Total US Government Debt was a mere $533 billion dollars.

    There were not 48 million Americans on food stamps.

    There were not over 20 million Americans unemployed.

    and ...

    Wal*Mart's Global Procurement Office wasn't in China.

    fast forward 38 years....

    and understand this...

    Over $16.5 trillion has been added to US government total debt.

    Retail makes NOTHING....it only moves a countries currency....

    Wal*Mart moved its Global Procurement Office from Hong Kong to China years ago...

    Wal*Mart commissioned super cargo ships years ago to bring Made In China to America....

    Wal*Mart partnered with a billionaire from Hong Kong in 2006 on a port in Mexico...

    Wal*Mart puts less than 5% foreign in all its stores in China...

    NOW...

    The sour part...

    America has a 6 to 1 trade deficit with China...

    and with a $16 trillion GDP it will take about 40 years before America runs out of dollars...

    but the Federal Reserve hasn't stopped the US Treasury from using over 10 tons of ink each day printing dollars...

    duh..!!

    BUT...

    WHEN IT DOES....

    Katy bar the door.

    You young Americans thumbing the sh!! out of all those foreign gadgets ....

    not even God will be able to save all those little 0's and 1's....

  • Report this Comment On January 12, 2014, at 8:46 PM, onewhoknows wrote:

    Walmart

    There problem is

    Too many Bosses and not enough Indians,

    Not enough Hours,

    Cut in Hours from 40 down too 34,

    favoritism in promotions,

    And your right Low PAY

  • Report this Comment On January 12, 2014, at 9:15 PM, carmeno wrote:

    Having work part-time for both Walmart and Target I can say with zero doubt that if I had to work again, I would work for WALMART in a second. There in no way in h double l that I would work for TARGET. I was treated much better and paid more by Walmart than Target. I go to the Walmart where I worked three years ago and ALL the managers still greet me and call me by my name. My supervisors at Target never even called me by my name when I worked there. And I worked in the "high end" departments of electronics and jewelry where you needed to have a higher security clearance. To those people I was a "hey". I'm sick and tired of hearing how Target is not "much better". Target is MUCH WORSE.

  • Report this Comment On January 12, 2014, at 11:11 PM, fsteph wrote:

    It all depends.

  • Report this Comment On January 12, 2014, at 11:14 PM, NiallMac wrote:

    It just is not true that "most" or even any of its associates minimum wage. I am a Walmart associate and I know. Even new hires get a bit though not much above minimum and with annual increases, specially if you are a good performer, it can get quite a bit above that. I currently make about $15 and a co-worker, a cart pusher, recently confided in me that he makes $18 and hour after 18 years. These are not princely wages and I would hate to have to raise a family on them but the truth needs to to be told.

  • Report this Comment On January 12, 2014, at 11:20 PM, qwanlee wrote:

    People assume Walmart pays min wage and that is false. I think the cashiers start at 9ish. I know custodians who have been there 10+ years making 14 an hour.

    Tell me what strip mall or fast food employee is making what Walmart pays? This is just BS propaganda against Walmart from businessed who arent paying what Walmart does.

    There are CSM's at Walmart making 28 bucks an hours but they have been there about 25 years.

    Walmart UNDERPAYS? Cmonn...compared to who?

  • Report this Comment On January 12, 2014, at 11:26 PM, qwanlee wrote:

    To the guy who commented about Costco. Costco is a fad.. I walked around in a Costco just chuckling about the "low" prices that even when you buy the 100 pound bag of rice or whatever MONSTER size

    quantitiy Costco sells its about the same price as Walmart.

  • Report this Comment On January 13, 2014, at 2:23 AM, joemama wrote:

    First off, now one who wants to save a buck is going to dump Walmart. The key word is Save.

    People are whores when it comes to saving a buck. They talk about being loyal to one store or another but they will sneak into any store where they can pay less. Lastly, if they really want to stop being criticized by the press etc. They need to follow this rule. Give big bucks to liberal causes. Bingo!! Your off the radar.

  • Report this Comment On January 13, 2014, at 4:45 AM, Juanmart wrote:

    Wow! So mislead...First off I've worked at K-mart and saw their demise in the early 90s. Retail is rough I know. Kmart failed for many reason. number one reason? Major management retired and left. This contributed to graft and corruption in their stores and distribution warehouses. Managers stole product and supervisors didn't care to ship the correct products to the stores.

    Target hires management and supervisors with college degrees only. Want to move up at Target? Employees who do get help with tuition get a degree and get promoted.

    Walmart? No need to have a high school diploma!

    The difference? What do you think? I'm not saying that being educated guarantees you are a

    decent, moral person. I'm not saying that uneducated people have no work ethic! Sure Walmart is wonderful if you have limited occupational choices. A typical wal-mart warehouse worker works 40 hours and makes 3 dollars less per hour on average in the logistics industry. Target pays their workers much high wages than average. Wal-mart executives have been charged with embezzlement, graft and theft.

    Google Tom Coughlin. Wal-mart has since then removed profit sharing and many employee benefits. I was approached by a walmart employee who offered to "sell" me stolen Electronics and large screen Televisions. He laughed at how easy it was to unload merchandise from the receiving truck because management are clueless puppets for the corporation.

  • Report this Comment On January 13, 2014, at 5:12 AM, Juanmart wrote:

    In another instance, Wal-Mart was accused of failing to provide adequate safety equipment (gloves) for its fabric cutters and seamstresses overseas. According to one report, in Wal-Mart’s cost-benefit analysis, it was cheaper to wash workers’ blood from clothing before shipping the clothing overseas for sale than it was to provide gloves.

  • Report this Comment On January 13, 2014, at 8:21 AM, ponchoman49 wrote:

    The only problem is that Walmart has all but destroyed every other business in many cities today. Gone are such fine department stores such as Montgomery Wards, Bradlees, Ames, Zayres and Woolworths with Sears, Kmart and several others hanging on by a thread. Apparently this is what the idiot generation wants because nobody is doing anything about it and things just keep getting worse!

  • Report this Comment On January 13, 2014, at 9:07 AM, smilingdon wrote:

    Walmart is a dump! Just go in one, it's like a jungle with misarranged merchandise, no one to help you. If you are handicapped you are in big trouble. Usually their two electric carts are in use.

  • Report this Comment On January 13, 2014, at 11:28 AM, lbm wrote:

    not only do they rip off their employees, but they are Ripping Off the consumer with their "Roll Back" prices. I watched several items over several months waiting for a sale etc... What I found.....ei: item is regularly priced at $59.00 for a few months then walmart raises the shelf price on that same item to $64.00 and Tags the item at $59.00 with a roll back price tag. The only thing rolled back is your wallet.

  • Report this Comment On January 13, 2014, at 11:42 AM, edteked wrote:

    Huh? This makes no sense! I hate Apple, but I'ld be a fool if I didn't have Apple Stock in my portfolio! Everybody knows that Mac-tards will buy *ANYTHING* that Cupertino produces everytime Apple announces it! So yeah...owning Apple stock is just smart! I rely on idiots to make me money!

  • Report this Comment On January 13, 2014, at 11:45 AM, edteked wrote:

    @smilingdon

    Then you are going into the wrong Walmarts!

    I challenge you to makes these observations at the Walmart in Durango Colorado! You will find neatly stocked shelves. Well behaved children and well dressed adults. Civil customers with no hidden agenda. And register people that speak clear english. Why is this? Well...the population of Durango Colorado predominantly caters to tourists...and it is too expensive to be a vacation destination for the vast majority of minorities.

  • Report this Comment On January 13, 2014, at 12:16 PM, Computerworgen wrote:

    Sadly, most Investors are heartless soulless 2 legged vermin who could care less about how workers are treat, & only care about how much money they will get on their Investment. If raising workers salaries means they will make $5 Billion instead of $8 Billion, They will Scream & Cry! This country has lost it's soul long ago. It's all about "Me me me" these days. I read a Story awhile back that Investors were a bit angry because Costco paid Employees better, & that they wanted Workers Wages cut & Customers Shafted so they could get Larger Returns. This is the Typical Attitude of every Investor. So trust me when I say, Wallmart could beat their employees like Slaves & force them to work for free, & Investors could care less. As long as they are making $$$ off it. If they are losing any sleep over this,

    And to you Fools who say it's the workers fault. If they aoll got up, & move to better Jobs, you would cry saying that we need more Mexicans to do the Jobs that Americans don't want to do because it is below them.

    Typical Retard Mentality. Americans want to work for a FAIR WAGE, not be worked like a Slave for money that will all go in Bills & not even put food on the Table unless they go get Food Stamps. WallMart Savings, subsidized by taxpayer Food Stamps. Americans would not need to be paid $16 an hr if the cost of living wasn't so dam high, such as rent, Food, Phone, Clothes.

    I Bet you Investors can't wait until Corporate America finds a way to repeal Minimum wage & Child Labor Laws. Bet good money they are thinking about it.

  • Report this Comment On January 13, 2014, at 5:46 PM, lobo012847 wrote:

    I continue hearing how :unfair" it is and how those working at Walmart/Target "make it "possible for those shopping there to have big bank accounts and large homes". There is a MAJOR misunderstanding of economics at work here! You see folks shopping at a particular store does NOT increase your bank account or give you a large home. Working at a high(er) paying job does that!!! If you want those things GET SOMNE TRAINING or GO TO SCHOOL!!!!!!!!!! GET OUT OF THE MINIMUM WAGE JOB CATAGORY! This move to raise minimum wage to $15/hr is nuts. All it will do is raise prices on EVERYTHING -- and a year or two later the $15/hr will have the same buying power as the minimum wage of today. PLUS there will be many low wage earners that will NOT be hired due to the increase in the minimum wage!! You ALL need to stop the whining and improve your skills!! Then you will earn more!!!

  • Report this Comment On January 30, 2014, at 2:13 PM, Truth2Power wrote:

    janicelee9,

    Thanks for the comment. I have to respectfully disagree with your statement that I "compare Walmart work ethics to Target." All I have compared between the two companies is their pay rate and the difference between the salaries of their CEOs and average workers. There may be additional ethical issues to consider when looking at both companies, but this was not the primary focus of my article.

    Interestingly, I have walked in similar shoes to yours: I worked retail during a holiday season at a (now-defunct, I believe) mall store called People's Pottery, and another holiday season I worked at an Amazon.com warehouse as a "picker." I did make more than minimum wage at Amazon; I worked the overnight shift to maximize my pay.

    --John (Truth2Power)

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