A large portion of American consumers now know about the “fiscal cliff” and a sizeable number of them expect the debate over it to curb their holiday spending, according to the chief executive of Wal-Mart Stores Inc.
In the week before last month’s U.S. presidential election, only 25 per cent of its core U.S. shoppers knew what the term “fiscal cliff” meant, CEO Mike Duke told a gathering on Tuesday in New York.
“One week after the election it was up to 75 per cent,” said Duke, adding that 15 per cent of those customers said the debate in Washington would affect what they spend for Christmas.
Wal-Mart, the largest retailer in the United States and the world, polls its shoppers regularly.
The latest poll could bode poorly for retailers like Wal-Mart, which rely on the year-end holiday shopping season for an outsized portion of their annual revenue.
The “fiscal cliff” refers to the automatic steep tax hikes and spending cuts set for Jan. 1 that the White House and members of Congress have been negotiating to avoid. Fears about the cliff stand to weaken consumer spending, which accounts for some two-thirds of U.S. economic activity and is already being hurt by lingering unemployment.
Duke’s appearance at the Council on Foreign Relations attracted protesters, many of whom blasted the company’s wages and labour practices. Criticism has increased since a factory fire in Bangladesh last month that killed 112 garment workers making clothes to be sold by retailers including Wal-Mart.
Duke admitted that Wal-Mart still had work to do in terms of enforcing its own standards and discipline on its global supply chain and setting an example for others in the industry.
“It takes work every day. We will never be there completely,” Duke said.
Wal-Mart has done extensive work in Bangladesh, he said, to improve the safety of factories. In 2010 he said Wal-Mart stopped doing business with 94 factories that didn’t meet the company’s standards and helped raise standards in 23 others. Some 3,000 factories went through training, he said.
When asked if Wal-Mart’s need for low retail prices and profitability was at odds with safe working conditions, Duke said there was no conflict.
“We will not buy from an unsafe factory. This is not a price discussion,” he said. “If a factory is not going to operate with high standards then we would not purchase from that factory. There’s no discussion about pricing.”
Duke was also asked about an investigation into allegations of bribery being overseen by the audit committee of its board of directors, which is working with U.S. authorities. He said he did not know when it would end.
“I think these things are intended to be very, very thoughtful, deliberate, well-done and very, very complete.”
The company became the subject of a probe over potential violations of the Foreign Corrupt Practices Act, a U.S. law that forbids bribing foreign officials, earlier this year after a New York Times story alleged that its Mexican unit used a campaign of bribery to grab market dominance.
Duke was responsible for the company’s international operations from 2005 to 2009.
The New York Times reported that a senior Wal-Mart lawyer received an email from a former executive at the Mexican division in September 2005 describing how the Mexican affiliate had paid bribes to obtain permits to build stores in Mexico.
The paper said senior Wal-Mart officials stymied an internal investigation into the alleged bribery, which involved suspect payments worth $24 million.
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