Blame it on the Rain: The High Price of a Public Relations Disaster
For Immediate Release
Friday, May 13, 2005
Washington, D.C., May 13, 2005 – Yesterday, Wal-Mart stunned Wall Street with an earnings statement that failed to meet expectations. Wal-Mart claimed the bad news was due to “high gasoline prices and unseasonably cold and wet spring weather.” Analysts questioned Wal-Mart’s excuses and said that the company’s larger problems were affecting its sales.
Wal-Mart Earning Statement Was A Huge Blow for the Company:
“This was the second time in Wal-Mart’s history as a public company that it missed Wall Street estimates. The last time Wal-Mart disappointed was in the first quarter of 1994.” [Women’s Wear Daily, 5/13/05]
Shari Eberts, retail analyst with J.P. Morgan, said the company’s second-quarter forecast “is the largest negative revision in recent memory.” [Reuters, 5/12/05]
Analysts See Wal-Mart’s Policies, PR Disasters Dragging Down Stock Value:
There were “a lot of distractions over the past year, both internally generated and also external,” [A.G. Edwards retail analyst Robert] Buchanan said. “It could be that those distractions collectively are starting to affect performance.” He added, “I think that huge sucking sound in the back of the room is blue-collar jobs permanently migrating to the Pacific rim and that is taking a direct hit at Wal-Mart’s customers,” Buchanan said. [http://www.newratings.com/analyst_news/article_821889.html]
“From my visits to hundreds of stores, I sense that’s not sitting well with employees making minimum wage and struggling to make ends meet,” Buchanan said. [CNNMoney.com, 5/12/05]
“This stock is subject to considerable headline risk,” [Patrick McKeever, an analyst with SunTrust Robinson Humphrey] says, referring to the almost weekly bouts of bad news surrounding the company’s community and worker relations. [The Street.com, 5/11/05, http://www.thestreet.com/_googlen/markets/natworden/10222734.html]
UBS analyst Gary Balter had other concerns, given what he called “strangely low” guidance for quarterly same-store sales. “While gas is a convenient excuse right now, is there something deeper that should concern us,” he asked in a note to clients. [CBS MarketWatch, 5/12/05]
“Starting with the recession in the mid-70’s, the worse the economy got the better Wal-Mart sales would be. Now, like everybody else, Wal-Mart is using every excuse in the book to disguise company-specific problems,” said Burt Flickinger, retail analyst with New York-based Strategic Resource Group. [CNN Money, 5/12/05]
“Management distractions can have a tremendous effect on a company,” said Craig Johnson, retail analyst with Customer Growth Partners. “The good news is that Wal-Mart took some action and they’re putting more effort into their public relations.” [CNNMoney.com, 5/12/05]
Nothing New: Analysts Have Warned the Wal-Mart’s Problems Would Affect
its Business
Jon Jacobs at Cantor Fitzgerald cautioned, Wal-Mart “may be in for rougher going.” [Reuters, 4/24/05]
“All the negative publicity has pressured the stock,” Bill Dreher, analyst with Deutsche Bank said. [CNN Money, 2/22/05]
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