Wal-Mart – Tyson/IBP represent economic destruction
Wal-Mart represents a real and present danger to the economy and a serious threat to this nation’s safe and dependable food supply. Tyson/IBP, through their abusive market power, steal the livestock that are processed into meat to be sold to Wal-Mart, now the nation’s largest food retailer. Wal-Mart, then builds a super center in the same community to sell the meat (marked up with obscene profits) back to farmers, ranchers, and consumers under an exclusive marketing arrangement with Tyson/IBP. The economic multiplier effect (often referenced by economic development experts), of a dollar produced and circulated through a community, becomes negative when the raw commodity is taken below cost of production and the finished goods are sold back to the community by a non-resident company that only leaves minimum, below living wages behind.
Last year in San Antonio, TX, in a discussion with John Tyson, CEO, Tyson Foods, I explained the class action lawsuit, now awaiting a trial date, against IBP. I explained to him that the lawsuit, if successful, could cost his company more than IBP’s total market capitalization. He very indignantly responded, “You should be suing Wal-Mart [instead of IBP], they are the problem. They tell us what they will pay and we have no choice but to pay you less.”
This illegal monopoly/cartel control of our food system is sucking the life blood out of farmers, ranchers, and main street businessmen, leaving financial ruin in our rural communities. It destroys the ability of agriculture to fuel our economy with a yearly infusion of new wealth. It undermines a safe and sustainable domestic food supply for our country.
Meanwhile, this administration stands in support of their friends at Wal-mart, Tyson/IBP, Cargill, ConAgra, ADM, etc….Companies, without loyalty to any country, that rather than pay the higher mandated costs of producing commodities in the U.S., prefer to import at the expense of foreign producers (whose markets they also control). This administration is failing in it’s duty to agriculture, consumers, and main street America by refusing to enforce existing laws designed to prevent these extreme injustices.
When we lose our markets, we lose our freedom. When we lose our food supply…
Mike Callicrate
P.O. Box 748
St. Francis, KS 67756
785-332-3344
mike@nobull.net
www.nobull.net
08/13 01:01
Wal-Mart CEO Relies on Groceries to Shield Against Slowdown
By Rachel Katz Bentonville, Arkansas, Aug. 13 (Bloomberg)
Wal-Mart Stores Inc. Chief Executive H. Lee Scott has opened about three warehouse- size stores each week since May. Some investors, concerned consumers are reducing spending, say he should keep up the pace.
These so-called supercenters, which include supermarkets, are part of Scott’s strategy of encouraging consumers to do their grocery shopping at the world’s largest retailer in the hope they’ll pick up other products as well. He plans to open almost four times as many supercenters this year as regular Wal-Mart stores, which are about half the size.
Using groceries to attract customers more often is key for Scott to meet his goal of increasing earnings at the same rate as sales in a faltering economy, some investors said.
“Even when the economy’s bad, you’re going to buy toothpaste,” said Maureen Depp, who helps manage $48.8 billion in assets at State Street Research & Management Co., which owns about 4.33 million Wal-Mart shares. Wal-Mart is “in the best position possible, because of the high proportion of basic goods.”
The Bentonville, Arkansas-based discounter said second- quarter net income will at least meet its forecast of 44 cents to 45 cents a share even after July sales missed expectations. Analysts expect Wal-Mart to report profit of 45 cents today, according to Thomson First Call.
Low Prices
People will shop at Wal-Mart in a slowing economy because of low prices, investors said. A prolonged economic stumble may hurt because shoppers probably will skip more-profitable items such as televisions, they said.
“If there’s a broad consumer slowdown, Wal-Mart’s going to be affected,” said Erik Becker, an analyst with Waddell & Reed, which owned about 1 million Wal-Mart shares among $26 billion in assets as of March.
Wal-Mart shares have fallen 16 percent this year, while the Standard & Poor’s 500 Index has dropped 21 percent. No. 2 U.S. discounter Target Corp. has shed 22 percent.
Shares of Wal-Mart fell 79 cents to $48.41 yesterday. They have declined 25 percent since Scott took over in January 2000.
Consumer spending rose at a 1.9 percent annual rate in the quarter, the slowest pace since the third quarter of 2001, the U.S. Commerce Department said. Consumer confidence fell in July by the most in nine months, according to economic consulting firm Conference Board.
Wal-Mart’s sales at stores open at least a year in July rose 4.5 percent, less than the company’s predicted 5 percent to 7 percent. The increase was triple the industry’s rise, which was 1.5 percent when Wal-Mart is excluded, according to Bank of Tokyo- Mitsubishi.
Bond Sale
Bond investors have bet Wal-Mart can maintain profit levels in an economic slowdown.
Wal-Mart last month sold $1 billion of five-year debt at an annual interest payment, or coupon, of 4.38 percent. At the time, the interest payment was lower than that on all 384 corporate debt securities of similar maturity in Lehman Brothers Holdings Inc.’s U.S. Credit Index.
“At this point, you couldn’t get a more secure holding” than Wal-Mart, said Joanne Fisher, a fixed income analyst at Pioneer Investment Management, which owns $2 million in Wal-Mart bonds among $4.5 billion in debt holdings. Pioneer didn’t buy any of the July offering.
Scott declined to be interviewed, said spokesman Tom Williams. The 53-year-old executive was paid $3.14 million in salary, bonus and other compensation last year, along with $5 million in restricted stock.
The company missed Scott’s goal of boosting earnings at the same rate as sales in 2001, when profit rose 6 percent and sales gained 14 percent. In the first quarter, profit jumped 20 percent while sales climbed 14 percent.
Grocery Bills
Wal-Mart, with sales of $218 billion last year, had 3,313 stores in the U.S. at the end of July, including 1,156 supercenters and 512 Sam’s Club warehouse stores. The company also has more than 1,200 stores outside the country.
Scott also is testing traditional grocery stores called Neighborhood Markets. Wal-Mart’s low prices enable people to cut their grocery bills by as much as 20 percent, analysts said.
“They’re going to buy less, but what they do buy, they’ll buy at Wal-Mart,” said David Abella, an analyst with Rochdale Investment Management, whose $1 billion in assets included 120,000 Wal-Mart shares.
Wal-Mart began using groceries to help insulate it from economic slowdowns in the early 1980s. Scott plans to open as many as 185 supercenters this year, an increase from 178 in 2001.
Rival Target, which doesn’t offer as many groceries, is more susceptible to a slowdown because it sells a larger portion of discretionary fashion items, analysts said. Same-store sales at Target’s discount stores rose 2.2 percent in July. Kmart Corp. filed for bankruptcy in January after trying to match Wal-Mart’s low prices.
Non-Essential Furniture
Wal-Mart’s reliance on groceries, which are typically low- margin, may backfire in an extended slowdown, investors said. Wal- Mart needs to sell non-essential items such as patio furniture to meet Scott’s earnings goal, they said.
“If consumers weaken dramatically, some of the bigger ticket items at Wal-Mart would suffer first,” said Keith Goddard, director of research at Capital Advisors Inc., whose $900 million in assets include about 1.1 million Wal-Mart shares.
