Rajan Kamalanathan, vice president of Wal-Mart Ethical Sourcing released the following statement in regards to the Women in Factories program: "At Wal-Mart, we know that there is perhaps no single issue more essential to the progress of our world than the progress of women. Through this program, women in the supply chain will receive the education and training they need to achieve greater success in their jobs and live a better life. We are proud to partner with local NGOs to implement this innovative program and provide new opportunities for the people and communities that are involved in the global supply chain."
Let us pause for a moment to consider the irony that surrounds this program. The words, “Wal-Mart” and “women” fail to fit well together in my mind. When I think of the two words, I think of class action lawsuits and sexual discrimination. Although the program sounds excellent on paper, I cannot help but think of what Wal-Mart’s real motives are.
Consider the following quote from Michelle Gloeckler, senior vice president of Wal-Mart’s Home division: "Empowering women not only improves their lives but it is also good for customers and business across the industry. By educating and empowering women in factories and creating a stronger supply chain, suppliers realize greater efficiencies in their factories, which should result in higher quality products, lower prices and more reliable product availability for customers.” I interpret that quote as: “The more we can get out of these women, the more products we can make with low wages, meaning more sales in the long run.”
I hate to bring such negativity to what is supposed to be a positive program, but considering the fact that Wal-Mart has been the target of sex-discrimination lawsuits for years, this move of “empowering” women seems like they are simply saving face. Low wages, poor working conditions and strong anti-union policies have all battered Wal-Mart in the press. But this overseas move is humorously ironic considering the fact that the company has faced criticism for using sweatshops and prison labor as well as failing to adequately supervise foreign suppliers.
Just last year, the Supreme Court saved the retail giant from a class action lawsuit filed by 1.5 million female Wal-Mart employees. The employees claimed that they were treated unfairly by store management and by the company. The reason the lawsuit was rejected was because of the lack of evidence as well as the fact that store managers were in charge of the hiring and firing, not Wal-Mart as a whole.
It is not simply this one case: Wal-Mart has a history of failing to promote women to managerial positions, keeping them on the sales floor. So this move of empowering women in third-world countries is somewhat unbelievable to me. Do Wal-Mart’s customers even care about such things? Somehow I think that the answer is no.
Wal-Mart is not alone in regards to saving face after claims of discrimination. In July of last year, Target (NYSE:TGT) was ordered to pay a $160,000 settlement for a disability discrimination lawsuit. In the suit filed by the U.S. Equal Employment Opportunity Commission, they claimed that Target was accused of failing to provide reasonable accommodations to an employee who had cerebral palsy at a store in Orange County, Calif. But this hardly dented the company’s stock price.
Kohl’s (NYSE:KSS) is another retail chain that was hit with a disability discrimination lawsuit last year. The company was sued for refusing to accommodate a diabetic employee’s request for a regular schedule. The refusal allegedly forced her to quit her job at a store in Westbrook, Maine.
So How Should this Affect the Stock?
Frankly, I do not think that news of Wal-Mart’s initiative to empower women in third-world countries should make the stock any more attractive to investors. It might, however, help their reputation if these discrimination lawsuits continue.
For my money, I would not touch Wal-Mart. The stock is stale. Costco (NASDAQ:COST), trading at about $88 per share, has a higher sales volume and is a more ethical investment than Wal-Mart. A study by Borders showed that happier employees equal more sales volume. The study indicated that Costco employees earned approximately 40% more than those of Wal-Mart’s Sam’s Club. This in turn leads to better customer service and happier customers.
I would also look away from Wal-Mart and towards Bed Bath and Beyond (NASDAQ:BBBY). Trading at about $71 per share, it ended its fourth quarter by beating revenue expectations as well as earnings per share. Over the next five years, analysts expect earnings to increase by 15% annually.
If you want to hail Wal-Mart as a hero for empowering women in countries with low socioeconomic standards, you may be blind to the history of the retail giant. I never take Wal-Mart seriously, nor do I shop there. If you are looking for an investment of similar cost to Wal-Mart’s $60 per share, consider Target. Trading at about $57 per share, Target beat analyst expectations when same-store sales rose over 7% in March. Good luck, women of Wal-Mart.
About the author:
I fundamentally analyze every business from the top down.
In my personal life, I have a strong Jewish faith and enjoy playing Scrabble and entrepreneurship.