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Al Norman

Al Norman

Posted: April 25, 2010 12:20 PM

Wal-Mart Net Sales Worst Ever

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It's been a very disappointing sales year at Wal-Mart.

The giant retailer just announced its worst net sales increase in history---just a 1% increase over 2009 levels. Despite these tepid numbers---or perhaps because of them---Wal-Mart's drive to expand in urban markets like Chicago and New York City are intensifying.

Wal-Mart's net sales grew by only $3.9 billion in 2010, one-seventh of the $27.3 billion in net sales increase the company experienced in 2009. Between 2006 and 2009, Wal-Mart's net sales growth averaged 9.3%. By contrast, the 1% sales growth announced in the company's 2010 Annual Report has got to have shareholders coming to the June 4th annual meeting very uptight.

The implosion of sales growth only makes Wal-Mart more determined to push into more lucrative markets abroad---but also into urban markets in America.

Wal-Mart is waging two urban guerilla wars simultaneously---one in Chicago, the other in New York City. Never before has a retailer had to resort to such intense efforts to build a store.

Much of the problem stems from the fact that Wal-Mart stores are loaded with two things: cheap Chinese imports, and cheap American jobs. This profile explains in large measure why urban markets---where organized labor is most concentrated---have been so difficult for this retailer to break into.

Wal-Mart has opened up its corporate checkbook to buy its way into urban centers. The New York Times reported this week that the Arkansas retailer is trying to bulk up its Chicago efforts to site a second store by hiring two former employees of Mayor Richard Daley. A Wal-Mart spokesman said the company's new lobbyists would be "helping us to tell the Wal-Mart story."

Mayor Daley likes that story, and has been urging the Chicago City Council to hold a vote on a southside Wal-Mart and be done with it. The Mayor doesn't want to bother with passing the project through the city's Zoning Committee---where it is likely to encounter stiff Chicago winds. Wal-Mart is therefore buying more political muscle to try and punch a hole in Chicago's zoning process.

"Vote it up or down, and then go back and tell the people 'Hey, I got a job as alderman, but you don't have one, ha ha ha,' " Daley was quoted as saying. "Laugh at the people: 'I got a job, OK, you don't have a job.'" Daley must count himself among the economic illiterates in this nation who still believe that giant retail corporations "create" jobs---even as other national and regional retailers drop by the wayside---taking thousands of jobs down with them. Daley has a jobs calculator---it just has no minus pad on it.

Meanwhile, Wal-Mart has been trying to get a bite out of the Big Apple for years, with nothing to show for it. The retailer rolled snakeyes in Queens and Staten Island---but is now hoping for better luck in Brooklyn. On March, 28, 2007, Sprawl-Busters reported that Wal-Mart's then-Chairman Lee Scott told The New York Times his passion to locate a superstore in Manhattan had cooled off. "I don't care if we are ever here... I don't think it's worth the effort." The newspaper called Scott's comments "a surprising admission of defeat, given the company's vigorous efforts to crack into urban markets and expand beyond its suburban base in much of the country." Wal-Mart clarified later that Scott was only referring to Manhattan.

This week Crain's New York Business reports that Wal-Mart still thinks New York City is worth the effort. Wal-Mart is reportedly the surreptitious tenant in a massive Brooklyn project known as the Gateway II. The landowner, Related Cos., says no leases have been signed---but often in such cases Wal-Mart orders the developer not to disclose the retailer's interest. Related has already survived the toughest part of the process: Gateway II passed through the city's land-use process last summer. By hiding off-site, Wal-Mart can now reveal its interest, unbruised by the permitting process.

Wal-Mart allowed its Director of Community Affairs to tell Crain's, "We know that New Yorkers want to shop and work at Wal-Mart, and as a result, we continue to evaluate potential opportunities here. New Yorkers want quality jobs and affordable groceries, and it remains our goal to be part of the solution."

But Wal-Mart is part of the problem, because the company cannot deliver on 'quality jobs.' It's own "associates," assail the company perennially over such issues as wage and hour theft, lack of decent health care benefits, and gender and racial bias in hiring, pay and promotion. The company's impact on retail jobs has been similar to this week's tornados in Tennessee and Mississippi: the weak retailers collapse, and those that remain standing look badly beaten up.

"We don't care if they're never here," the executive director of the New York City Central Labor Council said last summer. "We don't miss them. We have great supermarkets and great retail outlets in New York. We don't need Wal-Mart."

But by June of 2008, Lee Scott was talking about New York City again. Speaking at an analysts meeting, Scott said that New York's Mayor Michael Bloomberg wanted a Wal-Mart. "I just talked to the Mayor who wants us," Scott told the analysts. "And Donald Trump called this week. And he'd like to have us. But in general, New York City hasn't called and said please put a store there. Things get bad enough, they will." Most New Yorkers will not be swayed by Donald Trump's endorsement.

In Chicago, Wal-Mart is banking on the fact that the recession has worn down some leaders in the low-income community who see a national chain store as their pathway out of poverty. The local self-reliance that used to be the hallmark of these communities has now turned into a pathetic whine for a corporate savior to make them baggers and clerks. But organized labor in Chicago is not about to drop its insistence on decent jobs at livable wages.

According to Crain's New York Business, Wal-Mart proposals in the past were killed by "labor unions and community members who worried that the store's low prices and modest wages would eat into the market share of unionized retailers like Pathmark, Key Food and Duane Reade and put mom-and-pop shops out of business." True enough. But Wal-Mart could also face behind-the-scenes problems from BJ's and Target, which are both anchors in the Gateway I retail center.

Last summer, when Crain's first wrote that Wal-Mart was still beating the boroughs for a retail site, Wal-Mart sent an email to Crain's which said, "Wal-Mart, for sure, is a very different company than we were five years ago." But Wal-Mart today is the same exploitive company that made it one of America's most vilified employers---it's just $120 billion bigger in net sales today. "The reality remains the same," Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union told Crain's. "Wal-Mart is not welcome in New York City, and it should not try to take advantage of these economic times to slither in."

That sentiment was echoed last summer by New York City Council Speaker Christine Quinn, who told the media, "While Wal-Mart claims to have improved corporate practices, these efforts appear to be little more than window dressing. Until they make actual changes, providing a living wage and ending the practice of preying on small businesses, I will block any attempt to locate in the five boroughs."

City Councilman Charles Barron of Brooklyn also threw down the challenge. "We don't like how they treat workers as it relates to salaries and benefits, and we're not going to have them in our community. They will have the fight of their lives."

Wal-Mart may be counting on Gateway II to be their hidden gateway into New York City, and Mayor Daley may be counting up his former staff who are now on Wal-Mart's payroll, but two things are certain: Wal-Mart's 2010 sales were terrible, and its guerilla warfare in urban markets is going to turn into a string of ugly frontpage stories.

The United Food and Commercial Workers is gearing up for a protest in the Gateway II neigborhood soon. "Wal-Mart was never, ever mentioned once through the entire land-use process," says Pat Purcell, assistant to the president of UFCW Local 1500. "In this area, it's a job killer. It's just the wrong use." Eight months ago, Purcell gave Wal-Mart shareholders a similar warning: "The day they open their doors in the city, you will see a historic labor battle the likes of which has not been seen since the [1990-91] Daily News strike and the [2005] transit strike."

Net sales at Wal-Mart have tanked. Stoking up a fight in Chicago and New York is not going to help their overall performance one bit. It will only reinforce the notion that Wal-Mart is the most reviled retailer in American history.

Al Norman has been helping communities fight big box stores for 17 years. His website is http://www.sprawl-busters.com. His guidebook is Slam-Dunking Wal-Mart: How You Can Stop Superstore Sprawl In Your Hometown.