Diary

Card Check Threat Weakens WalMart Stock

Democrats tell us that Card Check won’t do any harm to the economy – that it will only help American workers. Tell that to the people who hold stock in WalMart – many of whom are WalMart employees:

Citigroup Inc. lowered its rating on Wal-Mart Stores Inc. to hold from buy on Tuesday, citing concern that legislation intended to make it easier for employees to unionize would raise the retail giant’s labor costs and hurt its competitiveness.

Deborah Weinswig, a Citigroup analyst, cut her price target on the Bentonville, Ark.-based retailer to $48 from $53…

The proposed Employee Free Choice Act, a top priority for unions this year, could be introduced to the House as early as Tuesday by Rep. George Miller, D.- Calif., the analyst said. Wal-Mart would be the “primary target” if any such bill were to be passed, especially because the U.S. food retail industry has historically been unionized with the exception of Wal-Mart, the largest food retailer, she said.

In that case, Wal-Mart might have to shoulder higher wages for more seasoned employees and increase employee benefits significantly. In addition, its flexibility in the job functions of its workforce could be decreased, while relationships between store-level managers and store associates could be impaired, the analyst said. Wal-Mart could also see its competitiveness reduced if it’s forced to raise prices to help offset higher labor costs, she wrote in a research note.

It “could be a significant drag to earnings,” she said.

If Card Check is a drag on the earnings of WalMart, is there any non-unionized company that would be any different? As the earnings of these companies fall, that would impede their ability to hire new workers, expand market share, and hold down the price of their products.

Of course, the flip side is that once unionized, a company like Wal Mart could join some of the other great union success stories of the last 50 years — such as the steel industry, the automobile industry, and other unionized sectors. In a few decades, Democrats will be bailing WalMart out.

Be sure to check out Tom Maguire, who catches Jane Hamsher arguing that this is a blatantly political act by Citi, with no justification in the real world. She believes that once WalMart is forced to pay their employees more, their profit is bound to go up; I think it has something to do with unicorns, but you may want to read for yourself.

You may laugh, but a majority in Congress agrees with her.