Will Female Shoppers Stray?

Leahndra O’Neal doesn’t like reading that the world’s largest retailer, Wal-Mart Stores Inc., is accused of discriminating against its female workers. But a class-action lawsuit isn’t enough to make her spurn Wal-Mart’s renowned low prices.

“I still have to shop at discount stores in order to stay within my means,” O’Neal, a 26-year-old personal trainer for a fitness chain, said during a recent visit to Wal-Mart’s store at the Baldwin Hills Crenshaw Plaza in Los Angeles. “I hope it’s not coming off as a bad attitude, but I’m more or less a realist.”

Other shoppers echoed O’Neal’s sentiments last week. And analysts predicted that the millions who flock to Wal-Mart every day would choose prices over principles.

As a ubiquitous peddler of inexpensive merchandise, Wal-Mart has become so woven into the nation’s consumer culture that its name has morphed from noun to verb. Its patrons might sympathize with the women suing Wal-Mart, but ultimately most are probably still more concerned with saving a buck.

“I don’t think a lot of people are happy about it [the lawsuit], but I don’t think it’s going to hurt their sales,” said Alan Siegel, chairman of Siegel & Gale in New York, a leading provider of corporate brand and image strategies.

If there ever is a backlash, it could stem from the huge retail chain’s particular vulnerability: Most of its shoppers are women.

So far, though, there are no signs that the legal dispute is causing Wal-Mart’s sales growth to slow, or that competitors such as Target Corp. and Costco Wholesale Corp. are taking market share from the big chain, analysts said.

Wal-Mart last week did shave its June forecast for stores open at least a year to a gain of 2% to 4%, down from the 4% to 6% increase it had previously expected. But Target also lowered its June forecast of so-called same-store sales, and analysts blamed the slowdown at both chains on factors unrelated to the lawsuit, such as cooler weather and poor Father’s Day demand.

Wal-Mart’s stock price drifted a bit lower in the days after the lawsuit became a class-action case, but so did the general stock market. (The stock closed Friday at $51.93 a share, up 17 cents, on the New York Stock Exchange.) And Standard & Poor’s Corp. said the development had no effect on its ratings of Wal-Mart’s debt.

The sex discrimination suit doesn’t represent the only bad publicity for Wal-Mart. The suit, “regardless of its merit, is another negative psychological blow to Wal-Mart,” analyst Daniel Barry of Merrill Lynch & Co. said in a recent report.

The company already faces dozens of lawsuits alleging that it failed to pay overtime to workers. A federal grand jury in Pennsylvania is investigating whether Wal-Mart knowingly used outside janitorial firms that hired illegal immigrants.

At the same time, communities such as Inglewood have blocked efforts by nonunion Wal-Mart to build its gigantic Supercenter stores -- which combine a full supermarket with a conventional Wal-Mart store -- contending that they would depress local wages and harm smaller retailers.

Sales Continue to Rise

Yet Wal-Mart’s sales haven’t appreciably slowed because of those setbacks. Its same-store sales have been rising 4% to 6% each month for the last year.

History shows that bad publicity can at least temporarily hurt a company’s sales, especially if product safety is involved. But often Americans ignore troublesome corporate problems if they are personally unaffected, experts said.

Siegel noted that a breakout of E. coli bacteria at some Jack in the Box Inc. restaurants in 1993 badly damaged the San Diego-based company’s sales as patrons feared food poisoning, but the chain eventually bounced back. In the late 1990s, sneaker maker Nike Inc. also came under fire for claims that it used sweatshop labor overseas, “but I don’t think it hurt their sales,” he said.

Jeff Caponigro, president of Caponigro Public Relations, a Southfield, Mich., crisis management specialist, said the greatest factor in how a company weathers a crisis “is the amount of goodwill it has going into it.”

“People will be forgiving,” he said, “if it doesn’t affect the integrity of the product or service.”

And Wal-Mart still has a powerful weapon that prevails over negative headlines: a huge selection of goods at low prices at more than 3,500 U.S. stores, a discount empire so vast and popular that it has been credited with helping curb U.S. inflation.

“Barring a complete shift in consumer psychology that I’m not detecting, I don’t anticipate this [lawsuit] is going to impact their sales at all,” said Fred Crawford, a principal and retail specialist at consulting firm AlixPartners in New York. “When it comes to affairs of the pocketbook or wallet, most people vote with their wallets over their principles.”

The gender discrimination suit, originally filed by six women, claims that Wal-Mart has paid female employees less than men for the same jobs, passed them over for promotions and retaliated against those who complained.

It swelled into a major case June 22 when a federal judge in San Francisco granted it class-action status. That means as many as 1.6 million current and former female Wal-Mart employees could join the suit, the largest such action in U.S. history.

Analysts said Wal-Mart -- which had sales of $256 billion in its fiscal year ended Jan. 31 -- could possibly face a multibillion-dollar payout if it lost the case before a jury or settled the matter out of court.

Wal-Mart, based in Bentonville, Ark., denies that there is a companywide problem, though it has not commented on the specifics of the lawsuit. The company also declined to comment for this story.

Since its founding by Sam Walton in 1962, Wal-Mart has grown so big that it’s defined by a list of head-turning statistics. It’s the largest U.S. company by sales, accounts for 2.2% of the nation’s gross domestic product, employs a workforce of 1.5 million people and is the largest employer in 21 states.

George Whalin, president of Retail Management Consultants in San Marcos, Calif., said there was one more statistic that matters: He estimates that at least 70% of Wal-Mart’s customers are women.

“If it’s proven that Wal-Mart has systematically not been paying women the same as men for the same jobs, and not promoted women the same, I think it could really hurt them” in terms of losing sales, Whalin said.

Conflicted Customers

Some female shoppers agree. At the Wal-Mart at Baldwin Hills Crenshaw Plaza, Wanda Parker, 52, said she would stop patronizing the chain if it lost the case. At a Target store in Duarte, college student Katie Soldinger said the lawsuit had made her even more resolved to stick with Target, even if Wal-Mart has lower prices.

“It’s almost sickening to know that is still going on, so much inequality,” Soldinger, 21, said in reference to the suit. “It’s very hard for women when they’re seen as less than equal.”

In Pearland, Texas, southeast of Houston, Nancy Peskin, who was piling detergent into her cart at Wal-Mart, said she was unsure what to think about the gender-bias allegations, which she said she couldn’t reconcile with the benevolent image Wal-Mart projects in its advertising.

“I was surprised because I always thought they were so fair,” said Peskin, 60, an accounting assistant. “They always use their employees in their ads.”

That skepticism isn’t surprising, said AlixPartners’ Crawford, who co-wrote “The Myth of Excellence,” a book that examined consumer habits and corporate strategies.

“Americans have become so cynical and so jaded about institutions and the media and the legal profession,” Crawford said, “that everything is taken not with a grain of salt but with a gigantic shaker of salt.

“People say, ‘If it [discrimination] did occur it wouldn’t surprise me, and if it didn’t occur and this is just a class action to take advantage of Wal-Mart’s deep pockets, that wouldn’t surprise me either.’ ”

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Correspondent Dana Calvo in Houston contributed to this report.