business news in context, analysis with attitude

Bloomberg reports that the Walmart bribery scandal reported by the New York Times - revealing that its fast growth in Mexico over the past decade was fueled by bribes, and that top management was more concerned with details not being revealed and investigations not being allowed to move forward than it was with stopping the systematic corruption and adhering to US law that forbids American companies from bribing foreign officials - puts far more pressure on its new small store concepts to succeed.

There seems to be some skepticism that Walmart has solved the small store puzzle. According to the story, “Wal-Mart has found out how to make Neighborhood Markets more profitable since starting them in 2000, said two people familiar with the project. In the early years, the net margins for the Neighborhood Markets stores were about 1 percent. Some of them failed and closed. Now they make about 3 percent. Supercenters produce about 5.5 percent net margins...” The story also notes that “at an investor conference in March, Wal-Mart Chief Financial Officer Charles Holley said that Neighborhood Markets have ‘about the same return of a new Supercenter’.”

• The Wall Street Journal reports that Walmart has agreed “to pay employees $4.8 million in back wages and damages, as well as $464,000 in civil penalties, on Tuesday after the U.S. Department of Labor found the company failed to pay overtime to more than 4,500 workers ... the Labor Department found that workers employed as Wal-Mart or Sam's Club security guards or as managers in the stores' vision departments between 2004 and 2007 were denied overtime pay when they were incorrectly classified as exempt from the federal Fair Labor Standards Act's overtime laws.”

According to the story, “While the fine pales in comparison to the $352 million the Bentonville, Ark.-company paid in 2008 to settle 63 suits across the country over allegations it didn't provide workers with proper rest and meal breaks, the settlement highlights the lingering complaints Wal-Mart faces over how it treats its workers.”

• The Network of Executive Women (NEW) announced that Mike Duke, the president/CEO of Walmart Inc., will be inducted into the Network of Executive Women CPG/Retail Diversity Hall of Fame on June 28, 2012 during Women's Day at the LPGA, in Rogers, Ark.

Duke will receive the NEW William J. Grize Diversity Hall of Fame Award, named after the late CEO of Ahold USA, an early advocate of industry diversity. The award, previously known as the NEW Outstanding Champion Award, honors industry leaders who have demonstrated "an enduring commitment to the advancement of women and to creating a diverse and inclusive workplace," NEW announced.
KC's View:
First, about the NEW award to Mike Duke.

I’m sure this has been in the works for some time. I’m sure that NEW felt that it could not - and maybe should not - rescind the honor, despite the allegations incriminating Duke in the Mexico bribery scandal.

But they better hope that no more charges or accusations are made between now and June 28.

I also think that this is just part of what will be a concentrated effort to rehabilitate Duke’s and Walmart’s sullied reputations.

As for the need for the small Walmart stores to succeed ... we’ll see what happens. I’m not convinced that they have the operational discipline to make them work, but I easily could be wrong.

And regarding the fine Walmart is paying...I wonder if the retailer will be more willing to settle such cases for the foreseeable future, hoping to avoid any more bad publicity.