Wal-Mart Mexico: “We are not saints, we come into this business for volume and profitability”
If you build it, they will come. Wal-Mart doesn’t offer banking in the US, but does to its customers in Mexico, at interest rates as high as 86%. In many cases, Wal-Mart is the only place where the service is available, giving the company a virtual monopoly. Lax regulations in Mexico allow these “industrial loan corporations,” whereas regulators blocked Wal-Mart’s attempt to do the same in the U.S. Wal-Mart’s entry into banking further widens the reach and pervasive influence of the massive retailer. It’s also a very convenient way to make more money off of its employees.
Wal-Mart Banks on the ‘Unbanked’ [BusinessWeek]
Its new Mexican lending arm taps a fresh source of growth
Every day 2.5 million people walk through the doors of a Wal-Mart (WMT) store in Mexico, generating nearly $20 billion in sales last year. Now they are potential customers of Banco Wal-Mart, the chain’s new lending operation. So are the company’s 12,000 Mexican suppliers, as well as its 155,000 employees. “We want to leverage this traffic we have in our stores,” says Julio B. Gómez, Banco Wal-Mart’s chief executive.
As in the U.S., Wal-Mart is Mexico’s largest retail chain. It has 997 locations, including supercenters, food and clothing stores, and restaurants. It has diverted many Mexicans from traditional commerce and stirred occasional opposition from local merchants. But the president of Mexico’s central bank, for one, publicly credits Wal-Mart’s high-volume, budget-conscious retail strategy with helping tame inflation to the low single digits. Mexican regulators say they expect the newly chartered Banco Wal-Mart to spark competition that eventually could lower the cost of consumer borrowing.
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Posted by Andrew Yonki on Friday, December 14 | 13 comments | Permalink
Dodd, Senate Banking Committee Seek To Limit Commercial Banks
According to the Dow Jones Wire, Senator Christopher Dodd, Chair of the Senate Banking Committee and 2008 Democratic Presidential hopeful, has circulated a draft of legislation that would narrowly limit the types of commercial companies that could own federally insured banks.
Wal-Mart’s banking application, along with Home Depot’s, created so much controversy when filed that the FDIC instituted an ongoing moratorium, freezing all pending applications until it received further guidance from Congress.
Dodd’s plan comes just two months before the moratorium is scheduled to expire. Wal-Mart, under heavy pressure from several sides, withdrew its application earlier this year, though Home Depot’s is still pending. After the filing, Ohio Congressman Paul Gillmor called for investigations into Wal-Mart’s attempt to enter the industry, concerned with the combining of commerce and banking:
Wal-Mart has previously attempted to enter the banking industry three times and in each instance, was rejected due to concerns regarding the mixing of banking and commerce. I would urge Chairman Powell to hold public hearings and proceed with caution when evaluating the merits of Wal-Mart’s application”, Gillmor said.
US Sen Dodd’s Plan Would Limit Commercial Ownership Of Banks [Dow Jones NewsWires, via SmartMoney]
WASHINGTON -(Dow Jones)- U.S. Senate Banking Committee Chairman Christopher Dodd, D-Conn., Thursday circulated a draft of legislation that would narrowly limit the types of commercial companies that could own federally insured banks.
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Posted by Corey Himrod on Friday, November 30 | 12 comments | Permalink
Retail Banking Loophole Remains Open
Fed urges Congress to close banking loophole [MarketWatch]
Congress should close a loophole that has allowed commercial firms and foreign banks to own specialized banks known as industrial loan companies, the Federal Reserve’s chief lawyer said Thursday.
In prepared testimony, Scott Alvarez told the Senate Banking Committee that such banks operate outside of the rules governing commercial banks and that that is a concern.
“Corporate owners of ILCs operate outside the prudential framework and statutory activity provisions that apply to all other corporate owners of full-service insured commercial banks,” Alvarez told senators.
Giant retailer Wal-Mart was seeking such a bank but dropped its bid after critics heavily opposed it.
A moratorium on new applications to the Federal Deposit Insurance Corp. expires in January.
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Posted by Alex Goldschmidt on Friday, October 05 | 3 comments | Permalink
Wal-Mart Tries Again for Bank…In Mexico
Wal-Mart To Open Banks In Mexico As Soon As November [Associated Press via Wall Street Journal]
Wal-Mart Stores Inc.’s Mexico unit said Tuesday it has passed the final regulatory hurdle to launching its own bank in Mexico and will open branches as soon as November.
Wal-Mart de Mexico SA, the country’s largest retailer and private-sector employer, said the National Banking and Securities Commission on Monday authorized it to start banking operations. The new bank will operate under the name Banco Wal-Mart de Mexico Adelante.
“With Banco Wal-Mart we will be able to complement the services we provide to the segment of the population that currently lacks the benefits of having accessible banking services,” Eduardo Solorzano, president and chief executive officer of Wal-Mart de Mexico, said in a news release.
Solorzano, who will also serve as chairman of the board for the new bank, added that the new services “will allow us to continue fulfilling our vision of helping to improve the quality of life for Mexican families.”
Wal-Mart de Mexico currently has 964 commercial units in Mexico, including “supercenters,” restaurants and Sam’s Clubs.
Posted by Alex Goldschmidt on Thursday, October 04 | 0 comments | Permalink
What’s Wrong With Wal-Mart
BNet’s analysis of Wal-Mart’s current challenges, how the company fell from grace, and what its doing to stem its losses. If you’d like to read (cough) nearly all (cough) of what’s in this article, please consult the growth report we released in June (PDF). For further discussion of Wal-Mart’s extensive problems, visit BNet’s feature.
Why Wal-Mart Needs Help [BNet]
The world’s most successful retailer needs help. Although Wal-Mart generated gross profits of $84 billion on $349 billion in revenue in 2006, its share price has stayed virtually flat since 2000. Domestic same-store sales crept up by just 1.9 percentage points in 2006 — the worst showing in Wal-Mart’s history. International growth has been beset by humiliating failures. Public relations gaffes continue to dog the company, and there are few inefficiencies left to squeeze from Wal-Mart’s hyper-efficient distribution system. The worst part is, all of these problems are interrelated, and they’re coming to a head just as competition from rivals like Target and Costco is heating up. Let’s take a closer look at the issues that are dragging Wal-Mart down.
1. Domestic Saturation
The Summary: After years of U.S. expansion, Wal-Mart is running out of real estate.
The Challenge: Opening new markets by overcoming opposition in U.S. urban centers.
The Key Fact: Half of all Americans already live within a 10-minute drive of a Wal-Mart store.Most retailers will tell you, “If you have the opportunity to grow, you take it.” That’s just what Wal-Mart did, opening 2,200 Supercenters — its largest and most profitable store format — since 1988. Now, however, the company is confronting the realities of domestic saturation as it becomes harder and harder to find spots to erect new stores. “It’s a huge issue for them,” says Philip C. Bonanno, a management consultant with Management Ventures Inc.
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Posted by Alex Goldschmidt on Thursday, August 16 | 0 comments | Permalink
MarketWatch on Wal-Mart’s Quarterly Earnings
Retail consultant Burt Flickinger III weighs in on Wal-Mart’s financial problems. He calls the retailer’s quarterly earnings a “train wreck,” and explains that the stopgap measures Wal-Mart has been employing - cutting staff and raising prices - are no longer going to work. He calls for new leadership for the company, citing poor labor relations as one of the reasons why the retailer is struggling with its bottom line, and insists that financial problems will dog Wal-Mart until the deeper, underlying issues are resolved. From MarketWatch:
Transcript:
John Wordock: Two major retailers are reporting news. Wal-Mart says that it is cutting its estimate for the fiscal year, despite a nice 49% rise in net income, and Home Depot is also signaling some trouble: it is saying that the housing slump is taking a toll on its business. Joining us to talk about the impact that the slowing economy or the housing recession (as some are calling it) is having on these two major retailers is Burt Flickinger III, he the managing director at Strategic Resources. He’s a retail consultant. Burt, let’s tackle Wal-Mart first. What do you make of this news coming out of Wal-Mart?
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Posted by Alex Goldschmidt on Tuesday, August 14 | 16 comments | Permalink
Full Shelves, Empty Aisles
Woes mount for Wal-Mart [Toronto Star]
It was business as usual for Wal-Mart last Tuesday for a superstore opening in Peru, Ill., which is to say the mood was of righteous self-assuredness. A marching band played “The Star-Spangled Banner,” store manager Mitch Lippert whipped up his troops ("Who’s fired up!"), and Rev. Oscar Shepherd of Christ Family Foursquare Church sought the Almighty’s blessing “as we interact with each other in the marketplace.”
You’d never know Wal-Mart Stores Inc. was in a heap of trouble.
The company’s growth rate has slowed to a crawl, overtaken by rivals once thought to be no match for the “beast of Bentonville.” Average annual profit growth lags that of Target Corp., Costco Wholesale Corp. and other competitors. Wal-Mart’s repeated efforts to push upscale merchandise have ended in tears. Expansion at home is still thwarted by hundreds of U.S. communities; and several forays abroad are struggling or have been scrapped. The stock price is down 32 per cent since the turn of the century, when CEO Lee Scott took the reins, while the Morgan Stanley retail index has soared 180 per cent.
If Wal-Mart wasn’t 40-per-cent controlled by the heirs of founder Sam Walton, an “activist investor” like Carl Icahn or Kirk Kerkorian would be calling for Scott’s head and the spin-off of Sam’s Club, an also-ran to Costco.
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Posted by Alex Goldschmidt on Monday, August 13 | 21 comments | Permalink
‘The High Cost of Low Prices’ Airs on Starz
Brave New Films’ “Wal-Mart: The High Cost of Low Prices” will be airing throughout July on the Starz network. It’s a great chance to see the movie if you haven’t already, or to introduce friends and colleagues to the issues raised in the film.
The director’s cut of the film will be airing on the following dates:
| Starz Cinema July 25, 11:15 am | Starz Cinema July 25, 8:20 pm | |
| Starz Cinema July 26, 3:14 am | Starz Cinema July 30, 6:00 pm | |
| Starz Cinema July 31, 4:00 am | Encore Drama August 21, 2:20 am |
Be sure to also check out some of the bonus scenes that were not included in the film.
Click here for more info on the screening.
Posted by Alex Goldschmidt on Tuesday, July 17 | 13 comments | Permalink
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