Economic Outlook: Walmart's woes

By ANTHONY HALL, United Press International  |  April 24, 2012 at 9:41 AM
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The New York Times took a sizable swipe at Walmart on Sunday, publishing an article alleging extensive use of bribery to develop stores in Mexico.

The allegations concern stores up and running in one of Walmart's most prominent subsidiaries, making it illogical to imagine that authorities would ever hire a wrecking crew to remove stores put in place by illegal activities.

Just imagine how that would look on a resume: An executive in charge of development of a retail operation that ended with authorities bulldozing stores to the ground, because the stores should not have been there in the first place.

Communities around the country have split views of the retail giant. Some have long considered Walmart an affront to their sensibilities, given the wages they pay as they displace local mom and pop operations with their expansion juggernaut. Many of these communities will revisit their records to see just how Walmart ended up building a superstore on the corner of No Thanks and Not in My Backyard. On Monday, investors took the matter to heart, as Walmart shares plunged 4.66 percent on the Dow Jones industrial average.

Congress is next. Reps. Elijah Cummings, D-Md., and Henry Waxman, D-Calif., have already begun to scratch around for information in a case that is sure to provoke some high-minded grandstanding inside the Beltway. Neither of these congressmen is particularly shy.

There are two developments that make the Walmart case especially notable. The first is the point that the Times alleges that highly placed Walmart executives squashed an internal investigation on the bribes, despite strident legal advice not to do that. Secondly, under the Foreign Corrupt Practices Act, the company faces possible fines and executives face possible jail time.

Of course, one item executives cannot sweep under the rug is share prices. While Walmart dropped more than 4 percent in New York, Walmart de Mexico stock plunged more than 12 percent Monday.

On stock markets, timing is everything, and it is Facebook Inc.'s ill fortune, for the moment, to report that first quarter profits and revenue dropped compared to the fourth quarter of 2011.

Facebook is headed for a public debut that will likely be one of the largest in history and could value the firm as high as $100 billion, analysts say.

Last week, Facebook spent $550 million to buy the lion's share of patents that Microsoft Corp. had just purchased from AOL for $1 billion.

Facebook did not necessarily get the best end of the deal or the worst. The New York Times explained that Microsoft is expected to keep the patents related to search, while Facebook takes the patents related to mobile, Web and instant messaging.

Facebook will also buy the rights to the patents it does not assume outright, the Times said. The company in the prior week said it would buy Internet start-up Instagram for $1 billion.

Meanwhile, Facebook said its revenue dropped 6 percent to $1.06 billion in the first quarter.

Flexing muscle is what some companies do before their grand public debut. Facebook is likely trying to say, "move over, here we come," and give investors some more tangible evidence the company is a good bet.

In international markets Tuesday, the Nikkei 225 index in Japan gained 0.24 percent, while the Shanghai composite index in China was flat, up 0.01 percent. The Hang Seng index in Hong Kong rose 0.26 percent, while the Sensex in India climbed 0.65 percent.

The S&P/ASX 200 in Australia added 0.18 percent.

In midday trading in Europe, the FTSE 100 index in Britain shed 0.02 percent, while the DAX 30 in Germany gave up 0.13 percent. The CAC 40 in France rose 0.68 percent, while the Stoxx Europe 600 gained 0.17 percent.

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