Wal-Mart ‘juggling a lot of balls’

BENTONVILLE, Ark. — Wal-Mart Stores Inc. is fighting battles on multiple fronts after posting its first quarterly profit decline in 10 years, and analysts question whether the world’s largest retailer can regain the feverish growth rates of its past.

Wal-Mart’s woes range from high energy prices, which hit its lower-income customer base and its own costs, to setbacks in its international strategy, to public relations stumbles like this week’s sudden resignation of civil rights icon Andrew Young as its public ambassador.

Young quit as head of a pro-Wal-Mart advocacy group after he was quoted in the Los Angeles Sentinel newspaper as saying inner-city stores that overcharged black customers were run by “Jews, then it was Koreans and now it’s Arabs.” Wal-Mart, which has made repeated public commitments this year to diversity, said Young’s comments did not reflect its views.

On the plus side, analysts say, Wal-Mart has ambitious programs to stock trendier products, remodel most of its more than 2,000 Supercenter stores and tighten its grip on the costs of inventory, labor and energy.

Combined with an ongoing public relations offensive to counter critics who claim its pay and benefits are skimpy, Wal-Mart is juggling a lot of balls at once and analysts say the outcome is still up in the air.

“I think they’re in so much transition right now that it’s hard to measure whether or not they’re making progress,” said Patricia Edwards, portfolio manager and retail analyst at Wentworth, Hauser & Violich in Seattle, which manages $8.2 billion in assets and holds 51,000 Wal-Mart shares. “It is a lot to handle.”

George Whalen of Retail Management Consultants in San Marcos, Calif., said Wal-Mart has a track record of handling multiple tasks: “When you get to be the biggest in the world, you fight battles on every front sometimes.”

Second-quarter results showed the first profit decline in a decade on the cost of selling its loss-making business in Germany. It quit another loss-maker, South Korea, in May but still operates in 13 countries in Asia, Latin America and Britain and intends to keep expanding, especially in China.

But the quarter’s sales and profit growth also slowed at Wal-Mart’s U.S. stores, its biggest division, as high fuel prices kept customers away, cut their spending power and drove up Wal-Mart’s own costs for a fleet of 7,000 trucks.

Some analysts question whether Wal-Mart can regain growth rates that made it a darling of Wall Street in the 1990s.

After precipitous gains in the 1980s and 1990s, the stock peaked at around $70 in January 2000 before losing steam to linger mainly in the $50-$60 range. It has lost another 3 percent this year to current levels around $45.