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The Top 10 Stories of 2004: 7. Wal-Mart’s Woes

Someone actually said “no” to the world’s largest company. <BR><BR>In a year of tumult, Wal-Mart managed to increase its considerable revenue and got aggressive about growth in China, but it wasn’t all roses. The retail giant...

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Wal-Mart faced opposition on many fronts in 2004, including being rejected for broad expansion plans in California.

WWD Staff

Someone actually said “no” to the world’s largest company.

In a year of tumult, Wal-Mart managed to increase its considerable revenue and got aggressive about growth in China, but it wasn’t all roses. The retail giant was turned down on its expansion plans in California, is facing the biggest gender discrimination class-action lawsuit in history as well as investigations into hiring subcontractors that use illegal immigrants, and is being challenged in the American discount market with the November announcement of the $11 billion merger between Sears, Roebuck & Co. and Kmart. While still less than a fifth of Wal-Mart’s volume, at a combined $55 billion in sales, the new union will create the nation’s third-largest retailer and poses another front on which the Bentonville behemoth must fight.

So to counter the public relations black eye and try to build back its public favor, the company launched an unprecedented corporate image-boosting campaign this year, blitzing TV with tales of being a good corporate citizen and taking out full-page ads in 15 California newspapers in September in an effort to refute criticism of its expansion in the state.

The ads, which appeared in The Los Angeles Times, the San Francisco Chronicle, the San Diego Union-Tribune and other newspapers, said Wal-Mart pays competitive wages in California that average $10.37 an hour, offers medical coverage to full- and part-time employees, generated more than $650 million in California sales tax revenue last year and is a major part of the state’s economy in areas as diverse as agriculture, entertainment and technology.

The retailer, which in October opened its third SuperCenter in California in Riverside County, wants to build 40 superstores in California in the next several years. It has come under fire from state residents who say the 200,000-square-foot SuperCenters, which combine a traditional discount store with a supermarket, hurt small businesses and that the retailer pays unfair wages, causes more crime and traffic and discriminates against women.

Sears’ answer to the SuperCenter has been the creation of Sears Grand, which opened its first California store — the fourth in the U.S. — in Rancho Cucamonga in October. Eighty percent of the merchandise is what customers find in a regular Sears store, while 20 percent comprises convenience items like lunch meat, cereal, household cleaning supplies, baby and pet supplies, health and beauty products, a plant nursery and more.

This story first appeared in the December 7, 2004 issue of WWD.  Subscribe Today.

At the moment, however, it’s Wal-Mart that’s fighting opposition efforts to its expansion. In April, voters in the Los Angeles suburb of Inglewood rejected a ballot initiative that would have allowed construction of a 60-acre Wal-Mart. But the retailer in September won permission to build a Supercenter in Rosemead, about 12 miles east of downtown L.A., where the city council approved the project in a 5-0 vote.

In addition, the retailer also has been sued over the hiring of illegal aliens who worked in cleaning crews. Wal-Mart said it was unaware of the practice and blamed a subcontractor.

Meanwhile, the discrimination lawsuit involves 1.6 million current or former workers and is based on a complaint initiated by several female employees. Betty Dukes et al. v. Wal-Mart Stores Inc. alleges the retailer systematically discriminated against women in promotion and compensation, and fostered a culture that stereotyped females as unwilling to work long hours or relocate, which are key requirements for hourly workers trying to enter salaried management ranks. The company just last week asked a federal appeals court to nix the class-action status of the suit — which could take 10 years before it’s sorted out, according to some estimates.

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