By DAVID MOON, Moon Capital Management
June 8, 2008
When asked why he never
visited a popular Minneapolis restaurant, former major league
catcher and manager Yogi Berra responded, 'Nobody goes there anymore. It's too
Sounds a lot like Wal-Mart.
If I didn't shop or read financial statements (I own
Wal-Mart stock), I might be influenced by the negative press regularly received
by the world's largest retailer. Someone is always protesting against the
company. It seems that every time Wal-Mart wants to open a new store, the entire
city is against it ' that is, until the store opens.
There is actually a website that aggregates negative news
about the company and sells T-shirts with a 'Hel-Mart' logo and slogans like
'Deal with the Devil.'
I wonder if the Hel-Mart folks realize that the Wal-Mart
folks have cut prices this year on hundreds of food items, albeit temporarily,
by as much as 30 percent?
As fuel prices have increased over the last year, food
middlemen have tried to maintain their profit margins by passing those costs on
to the grocery stores. Twenty years ago, this would have worked.
Wal-Mart doesn't subscribe to the old model. "When our
grocery suppliers bring price increases, we don't just accept them," says Pamela
Kohn, Wal-Mart's general merchandise manager for
Sure, that makes the suppliers angry, and it might even
cause some of them to lose money. But those fuel price increases are going to
come out of someone's pocket; whose would you rather it be?
In many cases, Wal-Mart simply eliminates the middleman
and buys directly from a producer. It buys coffee for its Sam's Choice brand
directly from a cooperative of Brazilian growers, eliminating three or four
steps from the typical process.
An article in The Nation magazine describing Wal-Mart's
presumably unfair treatment of its employees was titled 'WWJD? Protest
Wal-Mart!' The article described Wal-Mart protests held in churches around the
country. Bishop R.W. Harris of Grace Cathedral on Long
Island told a largely union crowd that 'if Jesus were here today,
he'd be with you' sticking it to Wal-Mart.
Workers mostly don't see it that way. In 2006, when
Wal-Mart opened a store in Chicago ' the heart of labor union country '
more than 25,000 people applied for 325 jobs.
Wal-Mart competes with small businesses in the only areas
it can: price and availability. The Wal-Mart haters don't get
In the early 1900s, there were over 200 truck
manufacturers in the U.S. Today there are two. Would the
AFL-CIO argue that the American consumer and worker would be better served by
the old model?
Ford and GM put the mom-and-pop auto makers out of
business. And in so doing, they made the automobile affordable by every
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).