The High Price of a Public Relations Disaster

THE HIGH PRICE OF A PUBLIC RELATIONS DISASTER

For Immediate Release
Thursday, May 12, 2005

Washington, D.C., May 12, 2005 – Wal-Mart announced this morning that its first-quarter earnings fell below Wall Street expectations and that profits for the second quarter would be no better. Wal-Mart CEO Lee Scott tried to explain away the company’s difficulties on high gas prices, but Wall Street analysts have already been commenting on Wal-Mart’s “headline problems” affecting its bottom line:

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 PR DISASTER DRAGGING DOWN STOCK VALUE:
  • “All the negative publicity has pressured the stock,” Bill Dreher, analyst with Deutsche Bank said. [CNN Money, 2/22/05]
  • Starting earlier this year, investment firm Prudential Equity Group has surveyed consumers who have shopped at Wal-Mart during the past year, and found that 8 percent of respondents expressed negative sentiments regarding Wal-Mart's reputation as a corporate citizen, including its treatment of workers. “While we expected some negative feedback regarding corporate policy, this figure was a little higher than we anticipated,” analyst Wayne Hood said in an April 12 report. [Chicago Tribune, 4/23/05]
  • Jon Jacobs at Cantor Fitzgerald cautioned, Wal-Mart “may be in for rougher going.” [Reuters, 4/24/05]

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