Cheers and jeers for Walmart at 50
Walmart observed its 50th anniversary in fine fashion this week as its share price hit an all-time high, even as the company faced familiar charges from vocal critics.
Walmart shares closed Tuesday at an all time high of $70.75, nearly 18% above the $59.97 level where they began the year and more than 46% above the 52-week low price of $48.31 seen late last summer. The move is nothing short of remarkable considering an investment in Walmart was dead money for the past dozen years as shares traded for a little more than $69 back in December 1999.
The recent run up comes as Walmart has logged three consecutive quarters of accelerating same store sales growth. Analysts are optimistic the company continues to experience favorable sales trends during the second quarter, especially in its U.S. stores, as merchandising initiatives to broaden assortment and more effective marketing around a familiar low price message are gaining traction just as moderating gas prices are leaving the company’s core shoppers with more money to spend.
The company’s improved stock price performance also is likely having an intangible effect on employee morale in stores, where the stock price is posted in common areas each day, and at the company’s home office.
Despite the euphoria undoubtedly felt by many Walmart employees who are benefitting form the increased share price, the company’s long time critics used the occasion of the Walmart’s 50th anniversary to level some familiar charges and engage in the type of class warfare in vogue during the election season.
"While the business model Sam Walton pioneered half a century ago has been great for Walmart, it hasn't been so great for the U. S. economy,” Stacy Mitchell, a senior researcher at the Institute for Local Self-Reliance said in an email with the subject line, “Walmart’s 50 years of gutting the middle class. “Walmart's explosive growth has gutted two key pillars of the American middle class: small businesses and well-paid manufacturing jobs. All Walmart has created in exchange are very low-wage jobs in its stores. It's no wonder that so many Americans are struggling to get by.”
Mitchell, author of Big Box Swindle, makes the familiar “high cost of low prices,” and “race to the bottom,” type of arguments that Walmart has long confronted. For example, she sees a correlation between the 40,000 U.S. factories she said closed between 2001 and 2007 and even as Walmart’s imports from China she said tripled to $27 billion from $9 billion during the corresponding period.
Walmart is responsible for the demise of independent retailers, an increase in poverty and reliance on public assistance, according to Mitchell.
"Whatever we may have saved shopping at Walmart, we've more than paid for in diminished opportunities and declining income," Mitchell said. Another group called SumOfUs.org repeated some of those themes while engaging in a bit of class warfare by highlighting the disparity between the wealth of Walmart founder Sam Walton’s heirs who now own about 50% of the company’s outstanding shares and the income of the typical Walmart employee.
The average Walmart sales associate would have to work for over twenty-one thousand years to equal the amount of money Walmart pays out to the average Walton heir annually and the six Walmart heirs have a net worth equal to the bottom 30% of Americans, according to the group.
“Walmart may brag about the low prices on its shelves, but it carries a huge price for each community it moves into, costing jobs, good wages and environmental damage,” according to Taren Stinebrickner-Kauffman, executive director and founder of SumOfUs.org “The world's largest retailer may be the world's biggest economic sinkhole. On its fiftieth anniversary, we should measure Walmart not by the goods it has sold, but by the good it has done, and the company with the slogan 'Save money. Live better' has in fact made life worse for its employees and communities worldwide.”
While the claims are certainly harsh, they have done nothing to dampen investor enthusiasm for the company’s shares or shoppers’ desire for low prices as evidenced by the company’s improved sales performance.