As The Guardian reports, Wal-Mart is trying to separate itself from this event, promising more factory inspections but refusing to go along with a legally binding agreement, fearful of what this might mean in an American court. So are the new TV ads advertising meant for growth, or political face-saving? My concern here is strictly financial. If you're spending money defending yourself, you're not making money for shareholders.
Wal-Mart shares are up 15.46% so far this year, which sounds great until you realize that the S&P 500 is up 15.72%. Despite spending about $2.5 billion on advertising in 2012, Wal-Mart is barely running in place. A recent report about the company and its advertising, which Colin Parajon of Interpublic posted on Slideshare, illustrates the problem.
Wal-Mart has 10% of the total U.S. retailing market, concentrated in southern states, and among low-income demographics. But a brand image word cloud from Brandtags shows words like "monster," "greedy" and "monopoly" alongside more positive terms. Focus groups use words like "cheap" and "dirty" to describe it. Target (TGT - Get Report) has a better image, according to the slide deck. Wal-Mart is doing image ads, it's playing defense. Your money may be better invested in companies that are playing offense. Target (TGT - Get Report) shareholders are doing better than Wal-Mart shareholders this year, with a gain of 18.03%, ahead of the S&P average.