Wal-Mart Stores, Inc.WMT has been reportedly accused of labeling foreign-made products as “Made in the USA”. This was noticed by a non-profit organization, Truth in Advertising, which investigates false and deceptive advertising practices.
Per the organization, the retail giant’s website has more than 100 mislabeled items, which say that they are made in the U.S. but are actually made in foreign countries. Truth in Advertising also found that some of these made in USA products use only a percentage of locally-made components or are only assembled, not made, in the country.
Wal-Mart, on its part, stated that these errors are limited to a small percentage of items. Then, according to a report in the New York Post, Wal-Mart said that it will remove all such products in a week. It will also remove labels such as “Women’s Economic Empowerment” and “Sustainability Leaders” from its website.
Truth in Advertising pointed that Americans prefer to buy U.S.-made products and are also willing to pay a premium of as much as 60% for U.S.-made goods.
Such issues have raised questions on Wal-Mart’s initiative to encourage domestic sourcing of products. Wal-Mart took an initiative in late-Jan 2013 to contribute to the revitalization of the sluggish U.S. economy and intended to spend $50 billion in the next 10 years to buy more American merchandise. Later, Wal-Mart planned to invest $250 billion cumulatively over the next 10 years in U.S. made-goods.
Wal-Mart has always remained in the limelight for some reason or the other. The company has been accused of breaching food safety measures, slapped with bribery charges and faced labor disputes in the past. Such allegations significantly impact the company’s reputation and severely hurt investor confidence. Recently, a report by Americans for Tax Fairness accused the retail giant of having undisclosed subsidiaries in overseas tax havens.
In May, this Bentonville, AR-based company reported sluggish first quarter fiscal 2016 results. While its earnings matched the Zacks Consensus Estimate, revenues missed the same. Though the company reported positive comps at Wal-Mart U.S., a decline in sales at Sam’s Club and the international business and lower operating income led to the year-over-year decline in earnings. Huge investments in e-commerce initiatives, higher wages and training costs increased expenses. This along with unfavorable currency impact took a toll on revenues. E-commerce sales increased globally in the quarter. However, increased investments in e-commerce and pay hike led to a reduced guidance for fiscal 2016 earnings.
Wal-Mart carries a Zacks Rank #4 (Sell). A better-ranked retailer is Ingles Markets, Incorporated IMKTA, which holds a Zacks Rank #2 (Buy).
Stocks worth considering in the wider retail-restaurant industry include Jack in the Box, Inc. JACK and Zoe’s Kitchen, Inc. ZOES, both sporting a Zacks Rank #1 (Strong Buy).
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