THE SHOCKING TRUTH ABOUT WAL-MART AND GASOLINE PRICES

Original Story: finance.yahoo.com

Gasoline prices are at their lowest levels since February. But while that might spell relief for consumers, surprisingly, it may not benefit the world’s largest retailer.

Over the past two weeks, the price of gasoline fell nearly 9 cents based on data compiled by the Lundberg Survey. The average price of gasoline in the United States is $3.3741 per gallon. Conventional wisdom holds that gasoline prices move inversely to retail sales. Thus, lower gasoline prices should mean more sales ahead for the world’s largest retailer, Wal-Mart.

However, a closer look at the charts suggests otherwise.

“Intuitively, you might think lower prices at the pump [means] more money in your pocket [and consumers] go out to Wal-Mart and buy some more stuff,” said Rich Ross, global equity strategist at Auerbach Grayson and a “Talking Numbers” contributor. “But that’s not really how it has worked for about the last 10 years. What we’ve seen is a very strong correlation in the same direction between commodities like gasoline and the price of equities like Wal-Mart.”

To be sure, gasoline prices and Wal-Mart’s share prices don’t move perfectly together but are roughly where they were at the start of the year. Wholesale gasoline futures are down 8 percent on the year, while Wal-Mart shares are down 2.5 percent year-to-date. Contrast that with the broad market S&P 500 index which has gained almost 8 percent so far in 2014.

“It’s not a perfect match but in general, the trends move in the same direction,” said Ross, looking at a five-year chart of Wal-Mart stock versus the price of reformulated blended gasoline contracts (RBOB). “Higher gasoline has corresponded roughly with higher equity prices and vice versa, which is the situation we’re seeing today where gasoline and other commodities are breaking down. They’re eroding as a sign of weakening demand, a weaker economy, etc., and Wal-Mart is commensurately moving lower.”

Gina Sanchez, founder of Chantico Global, also says there is a fundamental misunderstanding about the price of gasoline and retail spending.

“Everyone wants to say that a penny at the pump causes a billion dollars of spending,” said Sanchez, a CNBC contributor. “That statistic is like 15 years old, and I think it’s hilarious that people continue to say it. Intuitively you would think that. However, over the last five years, I think that gasoline has been more an indication of demand.”

That demand, in turn, has been weak, according to Sanchez. “We’ve had a situation where a lot of people lost their jobs,” she said. “Wages have been slow to grow. Because of that, people have been slow to spend. We’ve seen that not online in the retail space but in the commodities space.”

One example Sanchez cites is natural gas, which after a spike during the “polar vortex” this past winter, is now down 9 percent for the year. “Commodity prices are barely showing a pulse right now and that’s a sign of weak demand, and that really hurts companies like Wal-Mart,” she said. “They need demand. Without that, we continue to see a decline in same-store sales…. This is an uphill battle for Wal-Mart right now.”

Missouri Bomb Threats Close Walmarts

 Story first reported from Detroit Free Press

At least seven Walmarts across Missouri were evacuated this week because of bomb threats, KCTV reports.

Stores in Gladstone, Raytown, Nixa, Ozark, Jefferson City, St. Peters and Piedmont all received threats Friday evening.

Dan Fogleman, a spokesman for Walmart, told The Kansas City Star that any retail establishment may be subject to such an event. He added however that it was uncommon for so many to be threatened in one evening.

"We're concerned anytime someone makes a threat that may endanger our customers," Fogleman told the paper. "We're grateful that no one was injured and we apologize to our customers for the inconvenience. We will work very closely with police in these jurisdictions."

It is unknown if police are investigating the threats as being connected, according to KCTV.

Recently, similar incidents have affected other parts of the country.

Two Walmart stores in Tulsa received bomb threats on the same day in June, The Kansas City Star reports.

Two Wal-Mart stores in Newton County, Ga., were closed for about three hours last month after a threat phoned into a 911 dispatch center said a bomb was planted in a Wal-Mart without identifying which one. No bomb was found.

In Detroit, recent bomb threats closed Detroit's Ambassador Bridge linking the city to Windsor, Ont.

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Wal-Mart Mexico in Trouble for Bribery

Story first appeared in Yahoo News.

Wal-Mart Stores Inc lost $10 billion of its market value on Monday on concerns that a bribery investigation in Mexico could be very costly and hinder its plans to grow.

In a sign that the problem was widening for the world's largest retailer, two U.S. lawmakers said they were launching their own investigation into allegations in a New York Times article that Wal-Mart de Mexico had engaged in a multi-year campaign of bribery to build its business. In Mexico, the front-running presidential candidate and lawmakers also called on local authorities to investigate.

If the allegations are true, Wal-Mart may have violated the U.S. Foreign Corrupt Practices Act (FCPA), which forbids bribes to foreign government officials, as well as run afoul of Sarbanes-Oxley rules that require corporate gatekeepers to report material violations of securities laws.

Legal and retail experts also raised concerns about the Wal-Mart Chief Executive and the former CEO, who were among senior executives allegedly aware of the situation, according to the Times.

Two Democratic U.S. lawmakers said that they were launching an investigation into the matter and sent a letter requesting a meeting with the Chief Executive.

The Times report raises significant questions about the actions of top company officials in the United States who reportedly tried to disregard substantial evidence of abuse.

Shares of Wal-Mart de Mexico, which is 69 percent-owned by Wal-Mart and known as Walmex, fell 12 percent to 37.89 pesos ($2.88). The drop wiped out a 12 percent year-to-date gain in the second-most-weighted stock on Mexico's IPC index.

Shares of Wal-Mart fell 4.7 percent to $59.54, wiping some $10 billion off their market value and more than erasing this year's gains. The stock is a component of the Dow Jones industrials index, which ended 0.8 percent lower.

The news raised concerns that Wal-Mart, the world's largest retailer, may have trouble expanding into new markets.

Entering additional countries is a cornerstone of Wal-Mart's growth strategy. The authorities in some key countries, notably India, may become dramatically less welcoming to Wal-Mart following the release of the allegations.

The New York Times reported on Saturday that a senior Wal-Mart lawyer received an email from a former Walmex executive in September 2005 that described how the Mexican company had paid bribes to obtain permits to build stores in the country.

According to the Times, Wal-Mart sent investigators to Mexico City and found a paper trail of suspect payments totaling more than $24 million. But the company's leaders shut down the probe and did not notify U.S. or Mexican law enforcement officials until after the newspaper informed Wal-Mart that it was looking into the issue, the Times reported.

Wal-Mart said it was deeply concerned about the matter and began an investigation into its FCPA compliance last fall. It said it disclosed the probe to the U.S. Department of Justice and the Securities and Exchange Commission, and declined to give any more details or to make executives available for comment.

A source familiar with the matter said the Justice Department has been conducting a criminal investigation into the bribery matter for months.

In a memo entitled "Integrity" sent to Wal-Mart employees on Monday, the Chief Executive said that the company takes compliance with FCPA very seriously, and we will not tolerate violations anywhere or at any level of the company. The memo included a link to Wal-Mart's global ethics office website and phone hotline.

EXPENSIVE AND EXTENSIVE

In Mexico, the favorite candidate to succeed the conservative President, joined some opposition lawmakers in calling for the government to launch an investigation. Mexico's attorney general said that her office would act promptly if asked to do so by the Ministry of Finance or Ministry of the Economy. If licenses were given out where they shouldn't have been, there's fraud not only in the cities where that happened, but also there could have been fiscal fraud.

Bribery and corruption are pervasive in Mexico, where the justice system is weak and lower-level public sector workers earn relatively low salaries. A study last year by Transparency International showed that Mexican companies were perceived to be the third-most likely behind those in China and Russia to pay bribes abroad.

Still, the country has been taking steps to turn around this image and an anti-corruption law was recently passed by Mexico's lower house that would give the country new powers to fine companies for corruption.

A BMO Capital Markets analyst said in a research note that Wal-Mart's growth could be hurt both domestically and abroad by the bribery allegations. Articles like this will be used against the company by activists and competitors when it attempts to open stores in the U.S. and abroad.

Others said the share drop could actually provide a buying opportunity, given that Wal-Mart shares had been trading near a 52-week high on optimism over the recovery in its U.S. business. Options market activity also suggested a bullish bias on Wal-Mart stock.

Citigroup analysts said in a note that, after discussions with Wal-Mart, it believed that the retailer would conduct a thorough and transparent review and said any pressure on the stock was an enhanced buying opportunity.

The California State Teachers' Retirement System, which holds over 5.5 million shares of Wal-Mart Stores, will keep its exposure to the retail giant until it finds out what happened, CalSTRS's director of corporate governance, Anne Sheehan, told Reuters.

WALMEX RESULTS DISAPPOINT

Some hedge fund managers said Walmex was the more attractive target for short sellers.

Walmex said on Monday that it does not believe the allegations will hurt its business.

After the market close, Walmex's first-quarter earnings missed analysts' expectations. Executives on a pre-recorded call did not mention the bribery probe.

Walmex had been considered an extremely ethical company. It was a safe haven for investors.

Lawyers said Wal-Mart could face shareholder lawsuits accusing the company of securities fraud for having inflated its stock price by misleading investors about its FCPA compliance. Cosmetics maker Avon Products Inc faces similar lawsuits over its activities in China.

Wal-Mart executives and directors, like their Avon counterparts, could face "derivative" lawsuits accusing them of covering up or turning a blind eye to the alleged bribes.

These lawsuits seek to force executives, or their insurers, to pay money directly to Wal-Mart for breaching or ignoring their duties, and for the company to tighten internal controls.

Shareholders could also use the power of the ballot box. At Wal-Mart's June 1 annual meeting, they could vote out directors they deem responsible for allowing the bribery, including the four independent directors who comprise the audit committee.

Nearly 50 percent of Wal-Mart's shares are owned by the family of deceased founder, which may mute the power of other shareholders.


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CEO Of Wal-Mart Speaks About Jobs

Story frist appeared in USA Today


The largest employer in the U.S. says short-term economic fixes could work, but sustained job creation won't happen without tax reform and new trade agreements. One week after President Obama and Congress launched new jobs plans, Wal-Mart CEO Mike Duke says there are structural issues holding back American companies. One reporter caught up with the man running the largest retailer in the world to find out what to expect for the rest of the year and how to get businesses hiring again. Her conversation below has been edited for clarity and length.

Q: September caps what has been a tough summer after the U.S. credit downgrade and a volatile stock market. For the rest of the year, what do you expect to see for the economy?

A: I'm not an economist, so I always qualify any forecast with a simple approach of how I hear customers talking in our stores. And customers today are concerned. If we could start to see improvements in unemployment or lower fuel prices, then I could see that lead to more positive consumer confidence and consumer spending.

The overall global economy is still struggling. Because we operate in 28 countries, we get a pretty good perspective. I'm out visiting stores virtually every week, and consumer confidence is not good. Probably the single biggest topic of concern is unemployment and jobs. This lengthy period of high unemployment is causing that cycle of consumer confidence to really be down. Increases in fuel costs really take from the consumer's spending ability. The U.S. consumer is under a lot of pressure. Meanwhile, we have large businesses in China and Brazil, and that's a different story. Those markets have recovered faster. There's more optimism. A strong consumer and emerging middle class is leading to faster rates of growth in the emerging markets around the world.

Q: So growth is coming from outside of the U.S.?

A: We still see a lot of opportunity in the U.S. But there will be a lot of growth in emerging markets. In the U.S., we have pockets of areas that have very, very little penetration and have millions of customers that just really don't have access to a Wal-Mart store. So we do see growth in the U.S. Outside the U.S., our investment in capital and number of stores, potential acquisitions in emerging markets will be an area of real growth opportunity. I was really pleased recently that we completed an acquisition of South Africa-based Massmart. Even entering a new continent like Africa helps us to reach millions more customers in the emerging market status. We're growing rapidly in China, Brazil and other Latin American countries. So we will be having a greater percentage of our capital invested in emerging markets.

Q: What will it take to get businesses to create jobs in the U.S.?

A: The priority on jobs that Washington is giving right now is very appropriate. There will be short-term steps that I'm sure the president and Congress should be working on. But there are also longer-term structural issues that need to be addressed. I recently testified before the Senate Finance Committee about corporate tax reform because of the uncompetitive situation we put American companies in in a global environment. We need to lower the corporate tax rate as much as we can, make the tax base as broad as we can make it, and we need to move to a territorial system as quickly as we can. Corporate tax reform is one of those real structural issues that face American companies. Another would be the trade agreements that are holding up the development and expansion of American jobs. A third one is in the area of health care. We need to find ways to bend the cost curve for both public and private sectors of health care.

Q: In that testimony, you laid out specifically how the current tax code puts Wal-Mart at a disadvantage vs. international competitors. How?

A: Wal-Mart has an effective tax rate, and pays it, of about 34%. A very large international retailer based in the U.K. would have an effective rate in the range of 20%. When we are looking at expansion in markets around the world, we would be bidding for real estate or potential acquisitions against another competitor that has a much lower effective tax rate. So this competitor could afford to outbid us and be able to grow their company when Wal-Mart would kind of have one hand tied behind our back.

Q: Here at home there are other large online retailers, such as Amazon, not paying the same tax rates as you do. What can you do about it?

A: We're trying to communicate with elected officials because we do think there is a loophole in the current system. But it's not just Wal-Mart. The very small retailers, the locally owned retailers, are affected by this, those companies that create jobs locally across small towns and cities across America. It's the same customer, the same purchase, and if they buy it in a bricks-and-mortar store, they are paying a sales tax, and if they buy it from an online-only retailer, they're not. That's probably one of those loopholes that probably needs to be closed.

Q: What would you like to see come out of the president's and Congress' jobs plans?

A: The discussions around infrastructure investment and other steps, potential payroll tax benefits that would attempt to provide for still some consumer spending ability. So these kind of short-term discussions that Congress and the president will be having and I know that businesses would support. But I think it would be a mistake to stop and not address the longer-term issues, the corporate tax reform and trade agreements.

Q: What are the priorities at Wal-Mart right now?

A: Wal-Mart U.S. is our largest segment, and the high priority on growing comp sales or existing store sales in the U.S. is the very, very top priority. The key to that is driving the productivity loop. At Wal-Mart it goes back to Sam Walton and the foundation and business model that we simply operate for less, or everyday low cost. We're known for operating in a very efficient way and then giving those savings to customers. That's why everyday low price is the second part of the productivity loop. Having low prices ends up driving traffic to our stores and increasing sales, which allows us then to lower expenses again and lower prices. A third would be global e-commerce and multichannel. Customers today are using technology to shop. Today in the world of the new technology, the way that customers are using social media is just fast changing. We are in a great position to be serving customers in this new age. And then the overriding priority that makes all of this happen is the development of people. I spend more time on the people-development priorities than I do any other single thing as CEO. The greatest responsibility rests with our people. We have about 2.2 million associates.

Someone asked me about what's it like managing 2.2 million associates, and I said, 'When they're Wal-Mart associates, it's not all that hard because of the quality and the depth of our talent.' I'm really proud of the fact that 70% of the managers in the U.S. started as hourly associates with our company. So talent development, people development, is the overriding, most important priority that enables those other priorities to take place.

Q: How do you keep fostering the Wal-Mart culture?

A: I was always intrigued when I was growing up, and then in engineering school, with the idea of a perpetual machine. I think of the Wal-Mart culture as that. It's kind of self-creating. Our day-to-day process of managing the company and the basic beliefs, the basic foundation of integrity in the company, the way that we train and develop people ends up perpetuating the culture of the company. Sam Walton, if he could come back today, would be very, very proud of the culture that he created and still exists at Wal-Mart.

WAL-MART TRYING TO GROW IN A RECESSION

Expanding globally and marketing to the next generation customer are Wal-Mart's long-term goals, its CEO told shareholders Friday, but the company also needs to fix slumping U.S. sales.
Wal-Mart President and CEO Mike Duke outlined a five-point program at the company's annual meeting to help the company sell more on the Internet at home and abroad while keeping costs and prices low.
He commented that their next-generation customer will include millions who are striving to join the emerging global middle class. They're connected to the world through smartphones and social media. They're in charge of when they shop and how they shop, and they know who has the lowest prices.
Duke said the company has five priorities:
• Grow by adding customers, opening new stores and acquiring other retailers.
• Keep costs low and pass the savings on to customers.
• Build a global Internet business.
• Develop talent, including a greater focus on women and minorities.
• Expand the company sustainability effort.
Wal-Mart's approval this week for its $2.4 billion purchase of a majority share in a South Africian retailer is a major step in its international strategy.
But Duke said the world's largest retailer will also win new customers in Chicago and New York, where Wal-Mart has struggled to win approval to build stores.
Wal-Mart is working to increase its presence on the Internet, particularly in China and the U.S., an effort Duke says must extend to all countries in which the company operates.
Duke commented they can combine their stores, their systems and their logistics expertise into one continuous channel to drive growth and serve the next generation customer around the world. They will play to win in this area also.
Duke also promised the company would to do more to develop diverse management and keep striving for higher sustainability goals, which he said customers want to see.
They are right in the sweet spot of the next generation customer. But to succeed, they must also be the best at how they run their business, and turning around the U.S. business remains the greatest priority for CEO and the entire Walmart U.S. team.
The company also announced a $15 billion share repurchase program Friday.
The buyback will replace a previous $15 billion repurchase plan begun a year ago. The company bought back 244 million shares worth $12.9 billion under that program.
This reflects the strong financial performance of the corporation. The news comes after the company in March increased its stock dividend in its current 2012 fiscal year from $1.21 to $1.46 per share, an increase of 21% that returned $1.3 billion to shareholders.
The shareholder meeting maintained the tradition of being part pep rally, part business, with actor Will Smith serving as master of ceremonies. The 2011 "American Idol" winner, Scotty McCreary, also appeared.
About 16,000 people packed the arena, including Wal-Mart employees from 15 countries.
Wal-Mart's international sales are sizzling, and much of the meeting focused on the happy topic of overseas growth. But the company is still trying to reverse a two-year sales slump at home, with no clear sign when that will happen.
They made a lot of progress over the last 11 months, and they believe they have the right plan.
It is also noted that two-thirds of the business has seen gains in a key measure of sales, most of which is coming from groceries.
But Wal-Mart leaders cautioned, "You certainly can't predict the weather and the economy." They also said it would take more time to straighten out mistakes Wal-Mart made on pricing and selection more than two years ago.
The company has been racing to restock thousands of items it pulled as part of its overzealous bid to clean up its stores two years ago. It's also gone back to its "Everyday Low Price" roots.
Wal-Mart is also battling increasing threats from competitors, particularly online rivals like Amazon.com and dollar stores, which have expanded their assortments and become more competitive on price.
Wal-Mart's low-income shoppers have also seen the source of their financial problems shift. A year ago, they were worried about losing their jobs. Now, rising gas prices and other household costs are squeezing their budgets and making it tough to stretch their remaining dollars.
Thursday's reports on May sales from major retailers, including rival Target, provided more evidence that rising prices for gas and other goods are causing shoppers to pull back on discretionary items like clothing and home goods.
On Thursday, Wal-Mart commented that low-income shoppers are going through a "prolonged malaise." Such financial woes could stall Wal-Mart's campaign to turn its U.S. business around.
Wal-Mart's fears have deep repercussions because it's a bellwether of consumer spending and accounts for nearly 10% of all nonautomotive retail dollars spent in the U.S.
Shares of Wal-Mart have tracked closer to its profits than its domestic sales this past year, and its robust international business, fueled by Mexico, China and Chile, has propped up revenue and profits. In the U.S., revenue at stores open at least a year has seen eight quarters of decline.
Wal-Mart stores account for 62% of the company's revenue, which reached $418 billion in its fiscal year ended Jan. 31; international makes up 26%.
The company's overall revenue is also getting a lift from its improving Sam’s Club division, which has enjoyed five quarters of gains in stores open at least a year. Sam's Club has benefited from better quality merchandise.

Wal-Mart Fires Shot in Toy War

The Wall Street Journal

Retailer Cuts Prices After Learning Target's Are Lower

 

 

The annual battle for the minds and wallets of toy-buying parents has gotten off to a particularly fierce start, with Wal-Mart Stores Inc. slashing prices in an effort to keep Target Corp. from being the low-cost leader this holiday-shopping season.

Toys are key to many retailers' success at Christmas, because parents will buy stuff for their kids even when the economy is awful. But in recent years shoppers have tended to snap up the biggest toy bargains and ignore stores' other offerings.

This year, with economic conditions somewhat improved, retailers are hopeful that if they can lure parents with a great price on electronic hamsters or Stinky the Garbage Truck, shoppers will make other purchases. But store chains continue to feel the need to stake their low-cost claims just days after Halloween.

"It will still be a very competitive season for toys," said Craig Johnson, president of Customer Growth Partners, a retail and consumer consulting firm. "The reason you are seeing so much early discounting is that retailers are trying to get an early share of the market."

When the biggest retailers came out with their initial holiday toy prices shortly after Halloween, Toys "R" Us Inc. and Amazon.com Inc.—which is touting 25% off hot toys—telegraphed aggressive price cuts.

Amazon's toy prices are for the most part within the range of Wal-Mart, Target and Toys "R" Us, which also offer a variety of free-shipping deals on toys to compete with Amazon. Online toy purchases are rising but still make up a small percentage of all toy sales.

Wal-Mart was offering discounts on a broader selection than the bare-bones list of inexpensive toys it promoted last year. But in many cases its prices were higher than those advertised by archrival Target.

Shortly after The Wall Street Journal asked Wal-Mart last week about its price disadvantage, the company issued a new price list, slashing the sticker on many hot toys.

"This underscores our commitment to offer the lowest prices on top toys," Wal-Mart said in a statement.

With its newly announced prices, Wal-Mart beat Target on many toy prices by just a few pennies. But a few big spreads persist.

For example, Wal-Mart is now selling a Barbie doll embedded with a video camera for $39, or $6 less than Target. Meanwhile, Target has priced Stinky the Garbage Truck—a Matchbox truck that tells jokes—at $49.99, after a coupon, or $6 less than Wal-Mart.

Both retailers say that if a shopper presents them with a print ad featuring a lower price, they will match it.

But Target has a new, potentially potent price weapon that Wal-Mart does not: Shoppers get an extra 5% discount on all purchases, including toys, if they pay with a Target credit or debit card or the Target Visa card.

A much lower proportion of Wal-Mart's customers use credit cards of any sort. Wal-Mart's Discover Card gives buyers 1% back on purchases. As of yet, it has not matched Target's 5% discount.

Casey Carl, vice president of toys and sporting goods at Target, said, "We are doing things differently this year. We're expanding our discounts throughout the season."

Target is putting half of its 2,000 toys on sale this year, an increase of about 10% from 2009. The discounts released last week expire Nov. 24, but will be followed by other sales through the holidays.

"From everything we heard, Target was disappointed with their toy sales last Christmas and they seem to be coming out swinging harder and faster," said Eric Johnson, professor of management at Dartmouth College's Tuck School of Business.

Wal-Mart, meantime, is trying to convey that its toy section, which had shrunk by 30% in recent years, is expanding again, at least during the holidays. It also has more than quadrupled the size of its toy-oriented circular for newspapers, which this year has 52 pages.

In a departure from the last two years, when Wal-Mart emphasized toys for under $10 and $5, the retailer is touting popular toys across a range of prices. The most expensive item on Wal-Mart's top toy list is Big Foot The Monster, which walks, talks and burps, for $84.88.

"We've expanded the selection of toys and widened the array of price rollbacks," said Laura Phillips, Wal-Mart's senior vice president of toys and seasonal merchandise.

Ms. Phillips said that while Wal-Mart's price cuts will last through the season, competitors are expected to raise and lower their prices until Christmas. At rival stores, she said, "customers will have to chase sales."

Dartmouth's Prof. Johnson said he sees a shift in Wal-Mart's strategy. "They don't seem as intent on running everyone out of the toy business," he said.

The holiday selling strategy at Toys "R" Us goes beyond price, said Chief Executive Gerald Storch. The retailer is stocking a wider variety of toys in general and more exclusive toys, where it is not necessary to compete on price. The company, for instance, made a big bet this year on a line of miniature die-cast trains called Chuggington that aren't sold by Wal-Mart, Target or other big chains.

Toys "R" Us also holds events that bring products to customers ahead of the competition, such as Sunday's sale on merchandise involving teen heart throb singer Justin Bieber.

In addition, the retailer offers shoppers who enroll in a loyalty program 10% back on holiday purchases up to $500, via store credit. And the company has created an iPad app where children can create a wish list.

But that doesn't mean Toys "R" Us is ignoring its rivals' prices, Mr. Storch said, adding, "At any time, anyone can have the lowest price on a toy and we respond accordingly."

Wal-Mart Bids for South African Market

Reuters

 

Wal-Mart (WMT.N) is in talks to buy South Africa's Massmart (MSMJ.J), a $4 billion deal that would give the U.S. retailer a big presence in fast-growing Africa and bolster its emerging markets strategy.

The world's largest retailer has been hit by weakness in the United States, where low-income shoppers are particularly vulnerable to unemployment and higher petrol prices. It has responded by focusing on cost cuts and international growth.

Buying Massmart, South Africa's third-largest listed retailer by value, would give Wal-Mart a considerable network in Africa's biggest economy and a foothold in 13 other countries in sub-Saharan Africa.

Home to some of the world's fastest growing markets, Africa also boasts an emerging middle class and roughly 1 billion consumers, making it an increasingly attractive target for overseas investors.

"Massmart is a very good fit with their business," said Bryan Roberts, global research director at industry research firm Planet Retail in London.

Other international retailers could eventually bid for one of Massmart's local competitors to tap the potential of sub-Saharan Africa, he said.

"There's no shortage of good businesses that could be acquisition targets -- Shoprite, Woolworths and the like."

Massmart and Wal-Mart said the U.S. company had made a non-binding proposal of 148 rand per Massmart share, valuing it at around 30 billion rand ($4.1 billion) or a premium of nearly 10 percent over Thursday's close of 134.75 rand.

Massmart said it has granted the U.S. firm an exclusivity period and said there was no certainty of a formal offer.

Shares of Massmart jumped more than 11 percent and were up 10.9 percent at 149.48 rand as of 5:58 a.m. ET, slightly exceeding the proposed offer price.

Shoprite shares were little changed while Woolworths stock rose around 1.4 percent.

Wal-Mart's bid values Massmart at 26.3 times its 12-month adjusted earnings per share, according to Thomson Reuters data. That compares to 21.5 times for Shoprite and 15.5 times for Woolworths.

The deal could boost South Africa's rand, which would benefit from an inflow of currency. The rand was near a 2-1/2 year high on Monday at 7.0100 to the dollar.

VOTE OF CONFIDENCE

Massmart sells general merchandise, electronics and food via a low-margin, high-volume model. It runs nearly 288 stores and nine different retail and wholesale chains.

It has also been one of the most aggressive of South Africa's retailers in expanding into the continent.

Wal-Mart's proposal is the third bid by a big overseas firm for a South African company in recent months.

"It's a big vote of confidence for the South African retail economy and for South Africa," said Syd Vianello, an analyst at Nedcor Securities.

By joining forces with Wal-Mart, Massmart could put more pressure on its rivals, said Nedcor's Vianello.

"It also has lots and lots of pricing and competition implications for the South African retail industry. Wal-Mart is the world's largest retailer, it can source products cheaper than anyone else in the world."

Both Massmart and Shoprite had long been seen as potential targets for Wal-Mart, which has over 8,600 retail units around the world but no material presence in Africa.

Massmart shares have risen more than 50 percent this year, compared to a rise of more than 36 percent in the South African retailers index .JGERE and a little over 2 percent in the broader market .JTOPI.

Deutsche Bank and Goldman Sachs advised Massmart.

Wal-Mart Radio Tags to Track Clothing

The Wall Street Journal

 

Wal-Mart Stores Inc. plans to roll out sophisticated electronic ID tags to track individual pairs of jeans and underwear, the first step in a system that advocates say better controls inventory but some critics say raises privacy concerns.

Starting next month, the retailer will place removable "smart tags" on individual garments that can be read by a hand-held scanner. Wal-Mart workers will be able to quickly learn, for instance, which size of Wrangler jeans is missing, with the aim of ensuring shelves are optimally stocked and inventory tightly watched. If successful, the radio-frequency ID tags will be rolled out on other products at Wal-Mart's more than 3,750 U.S. stores.

"This ability to wave the wand and have a sense of all the products that are on the floor or in the back room in seconds is something that we feel can really transform our business," said Raul Vazquez, the executive in charge of Wal-Mart stores in the western U.S.

Before now, retailers including Wal-Mart have primarily used RFID tags, which store unique numerical identification codes that can be scanned from a distance, to track pallets of merchandise traveling through their supply chains.

Wal-Mart's broad adoption would be the largest in the world, and proponents predict it would lead other retailers to start using the electronic product codes, which remain costly. Wal-Mart has climbed to the top of the retailing world by continuously squeezing costs out of its operations and then passing on the savings to shoppers at the checkout counter. Its methods are widely adopted by its suppliers and in turn become standard practice at other retail chains.

But the company's latest attempt to use its influence—executives call it the start of a "next-generation Wal-Mart"—has privacy advocates raising questions.

While the tags can be removed from clothing and packages, they can't be turned off, and they are trackable. Some privacy advocates hypothesize that unscrupulous marketers or criminals will be able to drive by consumers' homes and scan their garbage to discover what they have recently bought.

They also worry that retailers will be able to scan customers who carry new types of personal ID cards as they walk through a store, without their knowledge. Several states, including Washington and New York, have begun issuing enhanced driver's licenses that contain radio- frequency tags with unique ID numbers, to make border crossings easier for frequent travelers. Some privacy advocates contend that retailers could theoretically scan people with such licenses as they make purchases, combine the info with their credit card data, and then know the person's identity the next time they stepped into the store.

"There are two things you really don't want to tag, clothing and identity documents, and ironically that's where we are seeing adoption," said Katherine Albrecht, founder of a group called Consumers Against Supermarket Privacy Invasion and Numbering and author of a book called "Spychips" that argues against RFID technology. "The inventory guys may be in the dark about this, but there are a lot of corporate marketers who are interested in tracking people as they walk sales floors."

Smart-tag experts dismiss Big Brother concerns as breathless conjecture, but activists have pressured companies. Ms. Albrecht and others launched a boycott of Benetton Group SpA last decade after an RFID maker announced it was planning to supply the company with 15 million RFID chips.

Benetton later clarified that it was just evaluating the technology and never embedded a single sensor in clothing.

Wal-Mart is demanding that suppliers add the tags to removable labels or packaging instead of embedding them in clothes, to minimize fears that they could be used to track people's movements. It also is posting signs informing customers about the tags.

"Concerns about privacy are valid, but in this instance, the benefits far outweigh any concerns," says Sanjay Sarma, a professor at the Massachusetts Institute of Technology. "The tags don't have any personal information. They are essentially barcodes with serial numbers attached. And you can easily remove them."

In Europe some retailers put the smart labels on hang tags, which are then removed at checkout. That still provides the inventory-control benefit of RFID, but it takes away other important potential uses that retailers and suppliers like, such as being able to track the item all the way back to the point of manufacture in case of a recall, or making sure it isn't counterfeit.

Wal-Mart won't say how much it expects to benefit from the endeavor. But a similar pilot program at American Apparel Inc. in 2007 found that stores with the technology saw sales rise 14.3% compared to stores without the technology, according to Avery Dennison Corp., a maker of RFID equipment.

And while the tags wouldn't replace bulkier shoplifting sensors, Wal-Mart expects they'll cut down on employee theft because it will be easier to see if something's gone missing from the back room.

Several other U.S. retailers, including J.C. Penney and Bloomingdale's, have begun experimenting with smart ID tags on clothing to better ensure shelves remain stocked with sizes and colors customers want, and numerous European retailers, notably Germany's Metro AG, have already embraced the technology.

Robert Carpenter, chief executive of GS1 U.S., a nonprofit group that helped develop universal product-code standards four decades ago and is now doing the same for electronic product codes, said the sensors have dropped to as little as seven to 10 cents from 50 cents just a few years ago. He predicts that Wal-Mart's "tipping point" will drive prices lower.

"There are definitely costs. Some labels had to be modified," said Mark Gatehouse, director of replenishment for Wrangler jeans maker VF Corp., adding that while Wal-Mart is subsidizing the costs of the actual sensors, suppliers have had to invest in new equipment. "But we view this as an investment in where things are going. Everyone is watching closely because no one wants to be at a competitive disadvantage, and this could really lift sales."

Wal-Mart won't disclose what it's spending on the effort, but it confirms that it is subsidizing some of the costs for suppliers.

Proponents, meanwhile, have high hopes for expanded use in the future. Beyond more-efficient recalls and loss prevention, RFID tags could get rid of checkout lines.

"We are going to see contactless checkouts with mobile phones or kiosks, and we will see new ways to interact, such as being able to find out whether other sizes and colors are available while trying something on in a dressing room," said Bill Hardgrave, head of the RFID Research Center at the University of Arkansas, which is funded in part by Wal-Mart. "That is where the magic is going to happen. But that's all years away."

Walmart, Best Buy in Sub-$300 Laptop Price War

PC World

 

Walmart and Best Buy appear to have kicked off a price war in time for the back-to-school shopping season, with both retailers offering Compaq laptops with 15.6-inch screens for under US$300.

Walmart is selling Hewlett-Packard's Compaq Presario CQ62-219WM for $298 through its online store. Best Buy is selling a Compaq Presario CQ60-615DX for $299 on its website.

The cheap laptops have similar specifications. Both come with a single-core Intel Celeron 900 processor running at 2.2GHz and include 2GB of DDR2 memory. They also have 250GB hard drives, wired and 802.11 b/g/ wireless networking capabilities, DVD burners and Intel's 4500M integrated graphics.

The systems come with Microsoft Windows 7 Home Premium 64-bit OS and include other applications often referred to as bloatware. One notable feature absent from the laptops is a webcam.

Best Buy is also selling a $299 Toshiba Satellite C655-S5049 laptop on its website. That laptop also has a 15.6-inch screen and Celeron 900 processor, but includes 2GB of the faster DDR3 memory type.

The price war is similar to one that broke out before last year's back-to-school season, said Stephen Baker, vice president of industry analysis at The NPD Group. That battle ignited last July when Best Buy offered an Acer laptop for $299, and Walmart undercut the price by $1 with a Compaq machine.

"They are selling them because they drive traffic into the stores, provide great value to their customers [and] help each other compete against one another," Baker said.

The stores will keep at it for as long as PC makers supply them with products that allow them to hit those price points, Baker said. Cheap PCs may have tweaked configurations, by reducing the amount of memory or hard drive capacity, for example, to let the stores sell the machines for less.

But reviewers seem to be content with the products. On the Best Buy website, 463 reviewers gave the Compaq laptop an average rating of 4.5 out of 5 stars. On the Walmart site, 15 reviewers gave its $298 laptop close to a 5 star rating.

One Walmart reviewer said the discount laptops are good for basic productivity and Internet applications, but not for more demanding tasks.

"With an Intel Celeron 900 processor and 2GB of RAM, don't expect to be zipping through video editing apps, especially considering it is a single-core CPU," wrote one reviewer under the name noraaregnilc.

Rivals Fizz over Wal-Mart Soda Prices

Chicago Tribune

Beverage pricing points to retailer's influence on rivals, suppliers

 

 

Walk into the lone Chicago Wal-Mart to stock up on pop in the summer heat and there, rising like a palm tree in an oasis, is a stack of Coke cases at a special price: 24 cans for $5.

A brand-name beverage like Coca-Cola for about 20 cents a can is more than a great deal. It's a sign of Wal-Mart's purchasing might, a warning shot to competitors and less than good news for the beverage industry.

Experts call that kind of intimidating power "disruption," and it will come to the Chicago area in a bigger way now that Wal-Mart plans to open a second store in the city, on its way to what it hopes will be dozens more urban locations.Squeezed by higher bottling costs and a decade of stagnant pricing, beverage companies had only recently managed to persuade consumers to pay more for soda, according to industry analysts. Now, in one swoop, Wal-Mart has gotten attention for itself while taking a bite out of soda sales at other chains.

The promotion, which began shortly before Memorial Day, is pushing other retailers to roll back prices to pre-1990s levels to compete. And it has stirred new fears about Wal-Mart's ability to wield its massive buying power to work against the interests of the industries that supply their stores.

"They just have so many stores that they can really push back, they can really squeeze, not just soft drink companies but other food firms, to force them to take the hit and take their margins down," said Philip Gorham, an equity analyst with Chicago-based Morningstar who covers the beverage sector.

Wal-Mart's power is indisputable. It is the largest retailer in the world, which gives it the ability to negotiate with manufacturers to get lower prices that other stores, particularly smaller independent ones, may struggle to match.

Price cuts on such products as soda are part of an aggressive initiative Wal-Mart announced in October 2008 and began to roll out in spring 2009. In May of this year, deep discounts on products like pop, ketchup and other items raised Wal-Mart's pricing lead versus other competitors fivefold compared with the previous month. Analysts say the promotions are expected to appear around every holiday through the second half of this year.

"Wal-Mart is so huge that any action they take tends to have a big consequence. So if they do a rollback on a core product, they drive huge volume, so much that they disrupt the supply chain of producers," said David Garfield, who is based in Chicago and leads the Consumer Products practice of AlixPartners.

Soda is the single-most consumed beverage in the U.S., and a $70 billion-plus market. For many retailers, it is also considered an important driver for pushing traffic into their stores. But for the megachains like Costco and Wal-Mart, soda is less important, which gives them more negotiating clout.

"There's been a power shift over the past 10 years where the power has shifted from packaged-goods firms to these huge grocery store chains," said Gorham at Morningstar.

A dispute over pricing in 2009 led Costco to stop selling a number of Coca-Cola brands in its stores. And while the two sides eventually made up, it represented the first time a retailer was bold enough to go up against a powerful brand like Coca-Cola.

Wal-Mart can afford to be bold, and its impact is readily seen. Median sales decrease 40 percent at similar high-volume stores when a Wal-Mart enters the market, 17 percent at supermarkets and about 6 percent at drugstores, according to a study published in June 2009 by researchers at multiple universities and led by the Tuck School of Business at Dartmouth College in Hanover, N.H.

Stores that fail to prepare by adopting a new strategy to survive tend to feel the greatest impact. Similar high-volume stores, like Target, fare the worst when a Wal-Mart moves into an area because they are forced to compete by reducing regular prices, the study found.

"We're fiercely competitive on price and routinely shop our competitors, including Wal-Mart, to ensure we're providing our guests with the best possible value," said Jennifer Mooney, a spokeswoman for Target.

Mooney also said the chain has a promise to match any print-advertised price on an identical product featured by a local competitor, including Wal-Mart.

Drugstores like Deerfield-based Walgreens are the least impacted, according to the study, and are generally able to stay afloat by increasing their assortment size.

"Overall we compete very well with Wal-Mart," said Jim Cohn, a spokesman for Walgreens. "We cater to a wide customer base, and often the need or occasion for a Walgreens shopping trip is different from many of our competitors."

Supermarkets, the study found, can survive by doing their best to differentiate themselves from Wal-Mart, rather than attempting to compete.

Karen May, a spokeswoman for Jewel-Osco, said the company has responded to Wal-Mart's deep discounts by offering a variety of promotions "every day" and by promoting low-cost private-label brands. She said Jewel-Osco has not seen a change in pop sales since Wal-Mart's promotions began.

A Dominick's spokeswoman said "customers have other fluids they continue to look for," including water, sports beverages and energy drinks.

But a recent analysis by J.P. Morgan found that Wal-Mart's rollbacks on pop have already upset grocery stores and have the potential to disrupt the beverage industry.
Following Wal-Mart's soda promotions in anticipation of Memorial Day weekend, national soda sales shifted dramatically to Wal-Mart and away from other grocers, the equity research firm found. Memorial Day weekend is traditionally seen as a lift for beverage sales, but sales volume dropped 9 percent during the four weeks ended June 12, according to data from the Nielsen Co.

More of that disruption may come to Chicago.

Today, just one Wal-Mart stands within Chicago's city limits. But following a six-year battle to open more stores in Chicago, the behemoth saw progress last week when the City Council voted unanimously to let Wal-Mart build a second store on the South Side.

The chain says it hopes to open dozens of stores in the city through a community partnership agreement that would mean millions of dollars for Chicago charities and a guaranteed higher-than-minimum wage for Wal-Mart employees in Chicago.

Wal-Mart's impact goes beyond retailers, but the exact impact on manufacturers isn't clear because few will discuss private negotiations. Some brands have said that Wal-Mart pays for big promotions itself, essentially taking a loss on some sales to bring in more traffic. There are indications that manufacturers also are making concessions to keep Wal-Mart from bullying them off the shelves.

A Wal-Mart spokeswoman said the company does not comment on pricing strategy, industry speculation or sales on a particular product. She said lower soda prices are part of the company's commitment to "helping families save money so they can live better."

Representatives for Dr Pepper Snapple Group and PepsiCo Group did not reply to requests for comment. Coca-Cola said the company does not comment on customer relationships.

Analysts say when customers see cheap pop in bulk quantities, the tendency is to stock up, which means a lull in sales following a promotion.

"The risk of such rollbacks are several," J.P. Morgan wrote in its analysis. "For one, a rollback creates a powerful lift and thus demand for a product, necessitating a production spike and disruption to the supply chain. Inventories can be thrown off kilter. And ultralow pricing poses a threat to brand equity."

Pradeep Chintagunta, a marketing professor at the University of Chicago Booth School of Business, said retailers are less likely to react to low pricing when a single Wal-Mart moves to an area. But the threat of dozens of Wal-Marts could mean significant changes for Chicago, particularly among chains that rarely localize their promotions on a store-by-store basis.

Kusum Ailawadi, professor of marketing at the Tuck School of Business, said chain retailers usually promote according to "zones," although they could benefit from a more nuanced strategy.

"Let's say you now define this as a Wal-Mart zone. Retailers I've spoken with have said, 'We essentially cut our prices down almost across-the-board but especially in the departments where we have more overlap with Wal-Mart,'" she said.

Wal-Mart Offers 1.4 Million Employees College Courses

Bloomberg / Business Week

Wal-Mart Stores Inc., the world’s biggest retailer, plans to offer its U.S. employees the opportunity to earn college degrees in a partnership with American Public University.

Workers will be eligible for grants from American Public totaling 15 percent of tuition, the Charles Town, West Virginia- based online educator said today in a statement. Earning degrees in fields such as security management, employees will receive credit for on-the-job experience, American Public University said. Academic work will be done through online classes beginning in September.

“Our partnership with APU will not only help you build an even better life for yourself and your family, but will help put you ahead in your Wal-Mart career,” Eduardo Castro-Wright, vice chairman and U.S. stores chief, said today in a letter to employees.

Wal-Mart, based in Bentonville, Arkansas, employed 2.1 million people worldwide and 1.4 million in the U.S. as of Jan. 31. The retailer’s stock price was unchanged at $51.72 in New York Stock Exchange composite trading at 4:15 p.m. The shares slipped 3.2 percent this year.

APU, part of American Public Education Inc., offers 70 undergraduate and graduate programs through online classes. Undergraduate courses cost $250 per credit hour and graduate classes are $300. Each Wal-Mart employee enrolled in the program will receive grants totaling 15 percent of tuition, the retailer said on its website.

American Public Education increased $1.11, or 2.7 percent, to $42.24 on the Nasdaq Stock Market. The shares have jumped 23 percent this year.

Wal-Mart Asks Suppliers to Cede Control of Deliveries

Bloomberg

 

Wal-Mart Stores Inc., the world’s largest retailer, is seeking to take over U.S. transportation services from suppliers in an effort to reduce the cost of hauling goods.

The company is contacting all manufacturers that provide products to its more than 4,000 U.S. stores and Sam’s Club membership warehouse clubs, said Kelly Abney, Wal-Mart’s vice president of corporate transportation in charge of the project. The goal is to take over deliveries in instances where Wal-Mart can do the same job for less and use those savings to reduce prices in stores, he said.

“It has allowed our suppliers to focus on what they do best, manufacturing products for us,” Abney said in a telephone interview yesterday from Bentonville, Arkansas, where Wal-Mart is based. “With lower costs usually comes increased sales.”

Under the program, Wal-Mart is increasing the use of contractors, as well as its own private fleet of trucks, to pick up products directly from manufacturers and transport the goods to its distribution centers and stores. The retailer currently moves most goods only from its distribution centers to stores.

The plan allows Wal-Mart’s fleet of 6,500 trucks and 55,000 trailers to carry more per truck and improve on-time delivery rates, said Leon Nicholas, a director at consulting firm Kantar Retail. Wal-Mart would also have more sway in negotiating fuel prices, he said.

“They are reaching further back into the supply chain,” said Cambridge, Massachusetts-based Nicholas, who has spoken with vendors about the move. “It is an effort to ultimately reduce costs of goods sold, which will ultimately increase their gross margins. They believe they can ship and transport product more efficiently than the suppliers can.”

Cost Disconnect

The price cuts Wal-Mart is seeking are twice as much as the cost for transporting goods in some cases, said officials from two suppliers. In two instances, Wal-Mart asked for a 6 percent reduction in the price it pays for products based on its own cost calculation, while suppliers estimated the actual expense was equal to about 3 percent, the people said.

“There may be a disconnect when we walk into the room on what that cost might be,” Wal-Mart’s Abney said. “But we work collaboratively. As soon as a supplier shares the data, almost always those differences are quickly resolved.”

Abney said Wal-Mart has thousands of suppliers and he has taken part in talks with more than 100. Some manufacturers have already shifted their deliveries and associated costs to Wal- Mart, he said.

Lowering Expenses

One side effect of the plan is that manufacturers may face increased transportation costs on deliveries to other retailers as they lose scale, said Randy Huffman, a former Wal-Mart executive who now runs GBD 360, a Bentonville consulting firm that works with suppliers.

“That aligns with Wal-Mart’s taking cost out of the supply chain for their benefit and not their competitors,” he said. “Suppliers are going to have to apply that increased freight cost somewhere, so it’s more than likely it will be passed onto other retailers.”

Wal-Mart is looking to defray expenses after saying this week that sales at U.S. stores open at least a year fell for a fourth straight quarter. Mike Duke, who took over as chief executive officer last year, pledged in October that costs would rise slower than sales.

Since then, Wal-Mart has sharpened its focus on transportation expenses, escalating talks to take over trucking from suppliers this year, Abney said.

Wal-Mart gained 7 cents to $51.37 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 3.9 percent this year, compared with a 0.4 percent decline for the Standard & Poor’s 500 Consumer Staples Index.

Trucker Mike

The retailer has sought to offer goods like cereal and laundry detergent for less to lure shoppers back to stores, and lowering transport costs provides room to do that. The strategy is part of what Wal-Mart calls its “productivity loop” -- efficiency reflected in lower bills at the cash register.

The loop is already the theme of a national commercial, where a truck driver identified as Mike touts the system, saying packing fuller loads has cut fuel costs and retail prices. Last year, Wal-Mart truckers logged 749 million miles, or about 100 million miles less than in 2008, according to spokesman Lorenzo Lopez. That trimmed expenses by almost $200 million, he said.

A Wal-Mart truck coming from a distribution center in Bentonville to stores hundreds of miles away may pick up goods from manufacturers on the way home, said Don Lanham, Milwaukee- based director of consumer products at Clarkston Consulting.

“It’s efficient, economical and environmental to have fully loaded trucks, not empty ones,” said Lanham, whose firm advises suppliers to Wal-Mart and other retailers. “Those Wal- Mart trucks are all over the United States.”

Price Cut Pledges

Shoppers are seeing the benefits, with Wal-Mart pledging on May 18 to cut prices on 22 items families routinely purchase for an average savings of 30 percent.

As for the suppliers, they may have to give in even if their other transport expenses rise, given Wal-Mart’s status as the world’s largest retailer, said Vic Gallese, an independent retail consultant based in Fort Worth, Texas.

“The vendors might say, ‘My other overhead costs will rise,’” said Gallese, who has spent 25 years in the industry. “And Wal-Mart will say, ‘That’s your problem.’”

Wal-Mart Pulls Cyrus Jewelry Over Cadmium Concerns

Associated Press

Wal-Mart said Wednesday it is pulling an entire line of Miley Cyrus-brand necklaces and bracelets from its shelves after tests performed for The Associated Press found the jewelry contained high levels of the toxic metal cadmium.

In a statement issued three hours after AP's initial report of its findings, Wal-Mart said it would remove the jewelry, made exclusively for the world's largest retailer, while it investigates. The company issued the statement along with Cyrus and Max Azria, the designer who developed the jewelry for the 17-year-old "Hannah Montana" star.

Wal-Mart Stores Inc. had learned of cadmium in the Miley Cyrus jewelry, as well as in an unrelated line of bracelet charms, back in February, based on an earlier round of testing conducted at AP's request, but had continued selling the items. It said as recently as last month that it would be too difficult to test products already on its shelves.

In its statement, Wal-Mart did not say whether it would also remove the bracelet charms.

Exactly how many of the items have been sold was unclear. The charms - also available exclusively at Walmart stores - were sold under the name "Fashion Accessories," though Wal-Mart has not said when they began appearing on shelves. The Miley Cyrus jewelry hit stores in December.

Long-term exposure to cadmium in such things as dolphin jewelry can lead to bone softening and kidney failure. It is also a known carcinogen, and research suggests that it can, like lead, hinder brain development in the very young.

Cadmium in jewelry is not known to be dangerous if the items are simply worn. Concerns come when youngsters bite or suck on the jewelry, as many children are apt to do.

Wal-Mart said that while the jewelry is not intended for children, "it is possible that a few younger consumers may seek it out in stores."

"We are removing all of the jewelry from sale while we investigate its compliance with our children's jewelry standard," Wal-Mart said.

That was a reference to a policy Wal-Mart voluntarily implemented last month, under which suppliers are required to prove their products contain little cadmium, or else Wal-Mart would not accept them.

The company's policy of not checking products already on the shelves appears to have changed: In its statement, Wal-Mart said it reviewed children's jewelry and pulled "the few products that did not" comply with its new testing regimen.

Cadmium in children's jewelry became a public concern in January when the AP published the results of an investigation that showed items at Walmarts and other large chains were as much as 91 percent of the toxic metal by weight.

That testing was conducted by chemistry professor Jeff Weidenhamer of Ashland University in Ohio. In February, Weidenhamer was asked to provide to Wal-Mart headquarters detailed results of tests on items he bought at Walmarts as part of testing he had done for AP. Those items included 10 of the charms and three from the Cyrus line.

To judge the continued availability of pieces that Wal-Mart has known were contaminated, AP dispatched reporters throughout the country last month to buy any of the 13 items they could find. The packaging said they were made in China; all were bought for $6 or less.

All but one of the 13 were on store shelves in the eight states where AP reporters looked. Contrary to Wal-Mart's statement Wednesday, which said the Miley Cyrus jewelry was sold in the women's apparel section, AP reporters found the items either in the jewelry section or discount bins.

The items were then tested by Weidenhamer. Of 61 samples, 59 contained at least 5 percent cadmium by weight, with 53 of those measuring 10 percent or higher.

Weidenhamer's prior research has shown that the testing method he used - an X-ray gun that can roughly tell the amount of cadmium in an item - typically underestimates how much is present.

Representatives of the jewelry industry have argued that the presence of cadmium, even at high levels, is not by itself proof that an item is dangerous. The important thing, they say, is how much can escape if the item is sucked, bitten or swallowed.

Lab testing conducted by Weidenhamer at AP's request showed that several items easily shed the metal when exposed to a mixture that simulated human stomach acid.

The day after AP's original report, Wal-Mart said it was pulling two of the highlighted items - pendants with themes from the Disney movie "The Princess and the Frog." Within three weeks, the chain had agreed to recall all the pendants already sold.

Since then, the U.S. Consumer Product Safety Commission has issued two more recalls, for charm bracelets sold at the international jewelry chain Claire's and at a Dollar N More store. Last week, the agency's spokesman said there will be more recalls.

While AP's January investigation focused on jewelry clearly intended for children, the items tested for AP this time were labeled "not intended for children under 14 years." That is an important legal distinction: Under current law, children's items are defined as for kids 12 and under, and children's products are subject to regulations that others are not.

For reasons that are not fully understood, girls ages 6 to 11 - an age range that includes many fans of Cyrus' "Hannah Montana" TV show, movies and CDs - appear to be more at risk from cadmium.

Data from a major national study found that girls of that age absorb more cadmium than other children or adults, according to Bruce A. Fowler, a toxicologist with the Centers for Disease Control and Prevention.

The increased absorption could be because those girls typically have iron deficiency and their bodies grab on to cadmium as a substitute, Fowler said, or it could be because they encounter more of the metal in objects such as jewelry.

The importer of the bracelet charms, Cousin Corp. of America, said that earlier this year, it persuaded one of the Chinese factories with which it works to stop using cadmium. The cadmium-heavy jewelry Weidenhamer tested was produced in 2008 and 2009 at the problem factory, said Roy Gudgeon, vice president of merchandise at Florida-based Cousin.

"Our intention as a company is to never willingly cause harm to a child," he said.

Federal regulators' own research says that kids start becoming interested in making their own jewelry around ages 6 to 8. As for products featuring Cyrus, her fans include teenagers, tweens, even kindergartners.