Wal-Mart, the world’s largest retailer, is not having a good year. The giant box store failed to meet its sales projections this year,same store sales have declined for five quarters,profits in the last quarter were down by 21% and Wall Street is taking another look at the future of the Arkansas-based chain.
But while Wal-Mart is having a rough time, in the tradition of corporate America, executives took home $298 million in performance-based bonuses. Rewards were handed out for leading the company into the dumpster. What a great country!
There are a range of reasons that Wal-Mart is in a slump. Part of the reason is the poor winter, which has had an impact on many businesses, although the first question that has to be asked is why the downturn in five quarters? The winter season by my meterological calculation is one quarter. So something else is at work here.
The most likely candidate for the downturn at Wal-Mart are the cutbacks in government assistance to the poor- the key consumer group tnat shops at the stores, It doesn’t take a Nobel Prize economist to figure out that when you cutback on food stamps, unemployment compensation and stimulus work programs in a weak economy there will be a negative impact on a segment of the population that relies on this assistance, in this case the shappers at Wal-Mart.
Even those high-priced executives admit publicly that the government cuts have affected the bottom line as customers who used to come to Wal-Mart a few times a week, now only shop once a week and buy only the bare essentials. If there ever was some tangible evidence of the existence of income inequality and its affect on the American economy, it is the disappointing financial ledger at Wal-Mart.
Now Wal-Mart, which by the way is opposed to increasing the minimum wage for its own employees, is not in the forefront of lobbying Congress for a change in all those so-called dependency programs of the Federal government. But Wal-Mart has not been shy about sending its high-priced lobbyists to push for a tax code provision that lets companies in this country deduct the cost of performance-based pay for its top managers. What a great country!
Of course Wal-Mart will weather the storm and likely get back on track, and an effort of shareholders to stop the pay raises is certain to fail. So don’t feel sorry for poor Wal-Mart, its executives are living large while the poor are barely making it.