Wal-Mart Without The Warts

What would the mass retailer be worth if it sharpened its PR?

It might be hard to believe, but Wal-Mart Stores Inc. (WMT ) once was a stock market rocket. Between 1997 and 2000, the company's share price soared sevenfold. Wal-Mart stock could probably take off again if the company recaptured the growth rates it used to log so reliably. Then again, the discount retailer might also raise its share value by simply doing a sharper job at PR.

By attaining Target Corp.'s (TGT ) reputation in three key areas—finances, management, and operations—Wal-Mart's stock price would increase 4.9%, according to a study by public-relations advisers Communications Consulting Worldwide. That works out to more than $2.35 a share at Wal-Mart's current price, or enough to lift the mass merchant's market cap by nearly $10 billion.

Digging deeper, CCW's analysts identified a half-dozen issues that most affect Wal-Mart's share price and another half-dozen that barely matter at all. Among topics that Wal-Mart should talk up more: revenue growth, entrepreneurship, and cost control. Meantime, it has said enough about suppliers, community, and the strength of CEO H. Lee Scott Jr.: Wal-Mart has generally received favorable media coverage on these points, but investors have heard those messages so often that they tune them out.

CCW, a 12-employee boutique within Omnicon Group's (OMC ) Fleishman-Hillard Inc. PR agency, evaluated Wal-Mart's image-shaping at the request of BusinessWeek. Although the report drew from fewer information sources than does CCW's usual work—its $75,000-to-$300,000 projects typically include internal data from customer and supplier surveys—the method was essentially the same.

CCW started by scoring tens of thousands of news stories about Wal-Mart from 2004 through 2006 based on tone and prominence, among other criteria, and sorted by subtopic. An article judged to be entirely favorable earned a score of 100, while one completely negative got a 0. CCW then compared a chronology of the ups and downs in these scores by subject to daily movement in Wal-Mart's share price to quantify impact. The consultancy also stacked up Wal-Mart's numbers against those of archrival Target to get another perspective.

The exercise revealed that, despite frequent knocks by unions and other critics, Wal-Mart garnered good press overall, with an average score of 59.5. But its image deteriorated over the study's span. During those two years, Wal-Mart had an average 66.4 score, for instance, when it came to fostering a corporate culture of entrepreneurship, but that number plunged to 0 at yearend 2006. Another high-impact topic, cost control, also went negative as the media started to equate Wal-Mart's tightfistedness less with low prices and more with offshoring.

Wal-Mart, which is advised by PR agency Edelman, one of Fleishman-Hillard's largest competitors, declined to comment on CCW's analysis. But David Tovar, the company's director of media relations, said: "We're focused on a long-term effort to proactively tell the Wal-Mart story."

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By Michael Arndt and Pete Engardio

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