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Wal-Mart vows changes in health care, environment

Posted on: Tuesday, 25 October 2005, 12:36 CDT

By Emily Kaiser

CHICAGO (Reuters) - Wal-Mart Stores Inc., under attack from critics including labor groups and environmentalists, has vowed to cut energy usage, reduce waste and offer lower-priced health care to employees.

In a speech to employees released on Tuesday, Chief Executive Officer Lee Scott said the world's biggest retailer needed to take the lead in efforts such as switching to renewable energy sources, and even called on Congress to raise the national minimum wage from the current $5.15 an hour.

Some of Wal-Mart's most vocal critics dismissed the efforts as little more than a charm offensive, but others applauded the retailer for taking at least some small steps to change the way it does business.

Scott said the U.S. minimum wage "is out of date with the times," noting that many Wal-Mart customers do not have enough money to buy basic necessities between paychecks.

"While it is unusual for us to take a public position on a public policy issue of this kind, we simply believe it is time for Congress to take a responsible look at the minimum wage and other legislation that may help working families," he said.

Scott presented the changes as a positive for both employees and shareholders, saying goals such as using only renewable energy and creating zero waste can boost profits.

For example, he said improving fuel mileage in the trucking fleet by one mile per gallon would save more than $52 million per year. The company also aims to cut energy usage at its stores by 30 percent.

Wal-Mart recently opened an experimental store in McKinney, Texas, to study environmental efforts such as heating the store with used cooking and motor oil. Scott said the savings so far were not enough to cover the cost of building the store, but it may be economically feasible if Wal-Mart takes advantage of its size and rolls out such changes across the chain.

NOT ENOUGH?

But some Wal-Mart observers said the retailer did not go far enough to address concerns about employee wages, treatment of suppliers and environmental damage.

Wal-Mart Watch, a group initially funded by the Service Employees International Union that has called on Wal-Mart to change its labor and other practices, said the retailer can afford to do more.

"Wal-Mart Watch credits Wal-Mart for recognizing that their employee health plan is inadequate for their employees and unfair to taxpayers forced to support their use of Medicaid," the group said in a statement.

"We call on Wal-Mart to go further and address the full range of deficiencies in their plans, from affordability to eligibility to out-of-pocket costs to waiting periods. This is a company that can well afford to remedy those problems."

Wake-Up Wal-Mart, a group backed by the United Food and Commercial Workers union, dismissed the efforts as "empty actions" that shift responsibility to suppliers and others.

"What this truly is, is a publicity stunt meant to repair a faltering public image," Chris Kofinis, a spokesman for Wake-Up Wal-Mart, said.

Wal-Mart has acknowledged that it has an image problem, and has stepped up its marketing efforts in the hope of convincing critics that it treats employees fairly and gives back to the community. Scott said the retailer spent a year meeting with critics, and the latest changes were partly in response to concerns raised in those discussions.

The retailer, which is hosting a two-day analysts meeting beginning on Tuesday, also has to convince investors that it is changing for the better as lawsuits alleging worker mistreatment pile up.

Wal-Mart faces the largest ever class-action lawsuit, charging it with discriminating against women in pay and promotions. Analysts say a settlement could reach into the billions of dollars.

The bad news - what Wall Street calls "headline risk" - is clearly weighing on the stock, which is down some 20 percent from a November 2004 peak. Its shares trade at 15.4 times analysts' profit forecasts for next year, below rival Target Corp.'s price-to-earnings ratio of 18.

Shares of Wal-Mart were off 45 cents, or 1 percent, at $45.76 in morning New York Stock Exchange trading.

Source: REUTERS

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