Wal-Mart corporate reputation near the bottom of the retail sector

by The City Wire staff ([email protected]) 5,678 views 

Wal-Mart’s corporate reputation lags almost all of its competitors according to a new report published by Reputation Institute for U.S. retailers in 2015. The Bentonville-based retailer has never been in the top 100 of the closely watched report.

“In 2015, Wal-Mart ranked No. 593 out of the approximately 600 companies we measured. And they have never ranked in the top 100 in our annual survey,” said Jennifer Villarreal, corporate spokeswoman for Reputation Institute.

She said Wal-Mart’s reputation score of 56.82 is weak against its major competitors. Those competitors are:
• No. 1 Amazon at 84.08;
• No. 2 Publix at 78.36;
• No. 11 Kroger at 74.10; and
• No. 14 Target at 73.53.

The reputation score is calculated using a wide range of criteria that includes a company’s citizenship, governance, innovation, leadership, quality of service and the workplace. Each respondent is vetted and must correctly answer 75% of the company facts which range from governance to workplace before they can rate a company on reputation.

Brad Hecht, chief research officer at Reputation Institute, said the mission of the survey and corresponding report is done annually and is the largest U.S. reputation analysis. Hecht said his team surveyed 23,750 respondents who provided 80,000 ratings in the first quarter of this year which were used to compile the report.
He said reputations are closely connected to emotions. Positive emotions surrounding a brand also increase consumer appeal toward its products, investors want to own the stock, employees want to work harder and are more efficient. When there are negative emotions around a brand the opposite is true.

Hecht said the retail segment report which includes the top 50 scoring retailers had an average score of 69.51 this year. The top 10 ranking retailers in this survey included big box stores, grocers and specialty retailers. Following are the top 10.
• Amazon – 84.08
• Publix – 78.36
• Whole Foods – 78.15
• Tiffany & Co. – 78
• Costco – 77.52
• Lowe’s – 76.58
• Home Depot – 76.02
• Cabela’s –  75.72
• Ahold –  75.32
• Bath & Body Works – 74.56

He said a score of 80 is excellent and while Amazon was the only retailer to surpass an 80 the next three companies scored within 2 points of 80 and the entire top 10 list were within 5 points of an 80.

“A score in the mid 70s is still a very good ranking,” Hecht said. “Several retailers near the top continue to raise their scores year over year which has pulled up the average retail sector score.”

He said retailers like Wal-Mart who are near the bottom of the 600 company survey  have plenty of reasons to want to raise their scores because there is some direct correlation between corporate reputation and overall financial performance. For retailers, two-thirds of the reputation score has nothing to do with their products because workplace issues are a larger share of the score among retailers.

“Companies that are doing good things for their employees should be talking about it,” Hecht said.

That was precisely what Wal-Mart did with the 5,000 or so employees who recently attended the annual shareholders meeting in Fayetteville earlier this month. Aside from the raise in pay announced earlier this year, the company also tweaked its dress code, agreed to add back Wal-Mart radio, raise the temperature in stores, enhance its training protocol and unveiled a cash payout for the monthly winners of its Value Producing Items (VPI) contests.

Alan Ellstrand, corporate governance expert and professor at the University of Arkansas, applauded Wal-Mart for “listening to associates.”

He said many times a company’s corporate reputation is hard to detangle from its financial performance. When a company’s stock is performing well there can be a halo-effect on the rest of the company. 

Wal-Mart’s stock (NYSE: WMT) has lost 15% of its value this year. Shares trading at $72.43 on Monday (June 15) are down 7.3% in the past month. A component of the Dow Jones Industrial Average, Wal-Mart is an under-performer. Year-to-date the composite Dow Jones is up fractionally 0.43%. For the past month the Dow Jones is down 0.90%.

Wal-Mart’s workplace reputation is mixed but top U.S. executives are focused on decreasing turnover and giving employees more ownership in their jobs. Walmart U.S. CEO Greg Foran recently said turnover in the front-end of the stores has begun to abate since the retailer announced the wage increases. Foran said he can tell how profitable a store is by the turnover rate on the front-end.

“I know if the turnover rate on the front-end is high, then there is likely a customer service problem and sales will suffer. When turnover is low, that store is likely a solid performer,” Foran said.

Ellstrand was not surprised that Wal-Mart’s reputation score is lower than some competitors that are deemed “cool.” That said, Wal-Mart’s enormous size complicates things.

“Reputation on Wal-Mart’s expansive front lines can be difficult to manage. This is especially true when there are so many shoppers in their stores each day. Fights in stores, parking lot crimes and other negative incidents make the news creating a negative image which is often out of the realm of Wal-Mart’s control,” he said.

The ongoing investigation into the alleged Foreign Corrupt Practices Act by Wal-Mart also hangs over the retailer. Aside from the negative public perception that Wal-Mart cheated to fast-track its international growth, the cost to defend against the allegations and create future safeguards has cost the company at least $612 million since 2013.

During the recent shareholders week, each time a Wal-Mart exec spoke to employees in a large forum they talked about integrity and what is expected from each and every employee in that regard. Not only were workers told to do what is right without exception but they were also told to speak up when they see something wrong.

Wal-Mart Stores CEO Doug McMillon said the company will not take shortcuts in the area of integrity and corporate governance. He said efforts to turn U.S. store performance around are above board and will take several quarters to accomplish. Management has also said work abroad is managed strategically with regard to expansions which follow government and internal protocols.

McMillon said Wal-Mart is expected to “walk the talk.”

Hecht said retailers can bounce back after a reputation nightmare if they have built substantial brand equity beforehand. He said Target was often a top 10 retailer in the Institute’s survey. But the 2013 data breach and the retailer’ subsequent lack of transparency weighed heavily on Target’s corporate reputation in 2014 as it tumbled out of the top 50. By 2015, new management in Brian Cornell, a former CEO of Sam’s Club, helped Target rebound to No. 14.

Hecht said that would not have been possible if Target had not already achieved high brand loyalty.