Tag: wmt

Two things on this:

1- Target (TGT) management has proven once again to be a step behind that of Wal-Mart (WMT)
2- There are no altruistic intentions here…..

From Dow Jones:

NEW YORK (Dow Jones)–Target Corp. (TGT) may join Wal-Mart Stores Inc. (WMT) in supporting the U.S. government’s drive to require all large companies to provide health care benefits to their workers.

The nation’s second-largest retail discounter behind Wal-Mart supports the program “in concept,” but would have to see the final language of any legislation to formally back it, Target spokeswoman Kay Rubbelke said.

Target has met with a number of different groups throughout the Senate and House to discuss the employer mandate proposal, Rubbelke said.

Rubbelke’s comments follow Wal-Mart’s creating a firestorm at the beginning of July by breaking with most other retailers to support the congressional proposals, which are part of President Barack Obama’s roughly $1 trillion effort to see that just about all Americans receive health-care coverage.

The so-called employer health care mandate is seen by the retail industry in particular as too onerous, given retailers’ reliance on legions of low-payed employees and the industry’s high turnover rate. Retailers say that meeting the mandate could force layoffs to pay the extra expense of coverage.

The National Retail Federation, the retail industry’s main trade group, is strongly lobbying against mandated coverage and has already fired back at Wal-Mart, asking members to strongly oppose its support.

The NRF has also spoken with Wal-Mart about its move and would likely approach Target if the retailer went the same route, said Neil Trautwein, the NRF’s chief health-care lobbyist.

Target, which like Wal-Mart, is not an NRF member, would be “embracing an ideal that is bad for the rest of retail and the rest of the general community,” if it ends up supporting mandated coverage, Trautwein said.

Target currently offers a number of health care plans with different levels of coverage and the majority of its eligible employees participate, Rubbelke said.

Target, like Wal-Mart, also operates in-store health clinics and pharmacies that could benefit from greater healthcare coverage.

Wal-Mart also operates a prescription program for employees of Caterpillar (CAT) and wants to expand it to other companies.

The health care mandate the House of Representatives is looking at would require most employers to provide workers with basic benefits or pay 8% of their payroll toward helping the government get them coverage, with potentially a lesser percentage for smaller employers. Measures that two Senate committees are considering would penalize most employers that don’t participate in the mandated coverage, Trautwein said.

Like I said when Wal-Mart made the first forray into the debate,:

Wal-Mart provides health care to it employees. Much of the competition does not. Should they then be required to, their cost basis for their business suddenly rises…considerably. Should that happen, in order to offset their new cost increases two things must happen. Either they offset it with pay freezes or reductions for new hires OR increase their prices to consumers.

Either scenario aids Wal-Mart immensely as it slows growth in their payroll and/or increases their competitive price advantage over the competition.

The same hold true for Target.

Were I a Target shareholder, I would be more than annoyed, especially given the recent contentious proxy battle that management is still reacting to Wal-Mart, not taking a leading role growing the business.

How? Target and Wal-Mart both stand to benefit substantially with increase health care coverage. Yet it is Wal-Mart in the forefront taking steps on the issue to capture that business, with Target now tagging along in a “oh yea, we could make money in that” moment.

I am making no opinion as to the national program, its costs/benefits etc to the economy as a whole. Regular readers can probably make an accurate guess where I come down on it. It does seem likely something is coming and were I a Target shareholder, I’d like to think my company would be out in front of the debate as a possible huge beneficiary.

Sadly, that does not seem the case…

Disclosure (“none” means no position):Long WMT, none