The firm's poor reputation no longer matches the new corporate reality.
Wal-Mart (WMT) may not be the first firm that comes to mind when investors think of "socially responsible" firms. But I think the company has been trying to do the right thing for some time now, and it deserves some credit. After all, "socially responsible" is not a destination. It is a process.
(In the interest of full disclosure, I should point out that in 1997, Wal-Mart's treasurer approached my firm seeking information on women and minority-owned banks, which we were only too happy to provide.)
Perception
Wal-Mart has been accused of all manner of improprieties:
- Discriminating against women.
- Discriminating in favor of Latino immigrants.
- Blocking unionization.
- Not providing health care insurance to low-wage workers.
Reality
The firm has responded aggressively lately. Let's review some of their recent moves:
- On April 26, the company introduced pet food with all-natural ingredients.
- On April 26, the company announced they will start designing stores to fit in with local architecture.
- On April 24, Wal-Mart appointed two new board members - the former administrator of the U.S. Small Business Administration (who happens to be Hispanic) and an African-American professor from Harvard Business School. Certainly this reflects increasing sensitivity to communities of color.
- On April 21, the firm announced an effort to reach out to "upscale" customers. These customers will be more concerned with social issues.
- On April 18, The company announced plans to expand health care coverage for part time workers.
- On April 12, the company announced it would publish data detailing the race and gender of all employees.
- On April 10, a hearing was held about the company's plans to open a bank. This will require the company (or at least its bank) to abide by the Community Reinvestment Act (CRA). The CRA guidelines will make the firm even more responsive to community needs.
Sailing in a New Direction
That is a lot of progress in a very short period of time. This, I feel, reflects a new strategic direction for the company. If I know anything about Wal-Mart it is this: Wal-Mart is a battleship. Steering requires deliberation and time. When they move, they move with great deliberateness and effectiveness. They will, eventually, win out. I think they are moving in the right direction.
The Payoff for Shareholders
So it looks like all this "touchy feely" stuff is paying off. April sales rose 6.8%, which was above management's own forecast for an increase of 4% to 6%. WMT rose 2% on Monday to close at $45.93.
Source: StockCharts.com
Nevertheless, the stock price has been under pressure, as the chart shows. I think it is in a downward trending trading channel. I'd buy the stock at $45, sell at $49. After that I'd repeat the process, but with my buy and sell levels $1 lower. So I'd buy at $44 and sell at $48. So I think this stock is range bound until it makes a strong move to the upside.
Position: No positions
