Wal-Mart the Ex-Banker; They Still Don't Get It

Wal-Mart (WMT) has withdrawn its Industrial loan charter application, in what is an obvious throwing in of the towel.  This will generate a sigh of relief among community bankers and regional finance and banking operations. 

What is odd is that if you read through the comments and quotes you will see that this company has not learned what the public and the media are trying to tech it: humility and a better personality.  I have personally noted that Lee Scott is not doing the right job of leading the company and not helping out investors.  He needs to go for sure, and his recent pay package "bonus" is one that went above and beyond what investors would consider an alignment with shareholders.  The company needs a new face, and if the rest of the board and the Walton heirs would get their act together and replace Scott with a better face person it would generate a better feel from Wall Street. 

After reading this woman’s comments below it may even be evident that the company need an entire Spring cleaning.  Wal-Mart Financial Services President Jane Thompson released the following statement today (condensed from original version):

"We notified the FDIC today that Wal-Mart has withdrawn the application we made in July 2005 for an Industrial Loan Company (ILC) charter.  This action follows January’s FDIC decision to extend the moratorium on a number of pending ILC applications.  Unlike dozens of prior ILC applications, Wal-Mart’s has been surrounded by manufactured controversy since it was submitted nearly two years ago. At no stage did we intend to use the ILC to establish branch banking operations as critics have suggested — we simply sought to reduce credit and debit card transaction costs.  Wal-Mart’s financial services already save customers over $245 million a year so they can live better. Since the approval process is now likely to take years rather than months, we decided to withdraw our application to better focus on other ways to serve customers. We fully intend to continue to introduce new products and services that champion those who deserve convenient, lower priced financial services."

This reads just like the normal belligerent Wal-Mart of late.  The company tried coming out with a new commercial campaign that showed a better, kinder, and more generous Wal-Mart.  It just made a huge deal in China that investors should frankly be ecstatic about because it was an instant doubling of its presence in China for what seemed like a bargain.  But this company needs to learn to smile and show a better face.  I will be the first to admit that there are always going to be anti-Wal-Mart activists regardless of what the company does, but the company can make certain attempts that it is not making.  For heaven’s sake, stop whining.  Some critics can never be pleased, but that doesn’t mean keeping the same strategy is the right move.  The company needs to find a spokesperson and face man like a Will Rogers that knows Wall Street and Main Street. 

Will Rogers probably never met Lee Scott.  Lee Scott is the head of the company and he should not let any spokesperson issue a whining statement like this.  He just got a $22 million bonus because of some internal sales targets, and that is after a $5.23 million salary and a total package that amounted to roughly $15.7 million.  It is amazing that shareholders haven’t picketed the headquarters when the consumer activist groups are the ones on the offensive. 

The tides were against the company ever launching a banking unit because of how Wal-Mart has dominated the retail sector.  The company should be thankful if you think about it, even if they claim to only want to save on their internal processing fees.  Sure, and we are all swim suit models.  There was so much talk that Wal-Mart was going to get in the mortgage business, and now the company at least doesn’t have to worry about getting caught up in the Sub-Prime Slime that has been the prevailing theme of the last two weeks.  Anyhow, enough about this for now.  This was about as obvious 2+2=4 and the company just needs to learn to act better. 

"Always Low Prices" may be the company slogan, but shareholders don’t want it to pertain to the price of their stock.

Jon C. Ogg
March 16, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.