Retail giant Wal-Mart Stores, Inc. (NYSE:WMT) is the latest Pandora Media Inc (NYSE:P) poster-child. Video advertisements for Wal-Mart began appearing with Version 4.4 of Pandora Radio, released on July 8. The 30-second advertisement shows a number of Wal-Mart Stores, Inc. (NYSE:WMT) employees being asked about their career paths, and reaches the conclusion that up to 75% of Wal-Mart store managers began their jobs as an entry-level associate.
I once heard a quote, “When your work speaks for itself, don’t interrupt.” Similarly, if your business has a strong reputation, it’s not necessary to spend valuable advertising dollars to maintain a positive public image.
In the case of Wal-Mart Stores, Inc. (NYSE:WMT), the company is engaging Pandora listeners as part of a larger public advertising campaign. The Bentonville, AR headquartered Wal-Mart launched a national initiative in May 2013 to show “The Real Walmart” as it struggles to maintain a positive image with its American consumer base.
Wal-Mart Stores, Inc. (NYSE:WMT) is likely to incur a heightened level of social and legal pressures in the next five years. On July 10, lawmakers in Washington, D.C. gave final approval to require large retailers to pay their employees at least 50 percent more than the city’s minimum wage. The District of Columbia mandates a $8.25 minimum wage, a dollar higher than the federal minimum wage. The July 10 ruling by lawmakers will require Wal-Mart to pay its employees at least $12.50 an hour once the bill is signed by D.C. Mayor Vincent C. Gray.
Following the D.C. ruling, Wal-Mart Stores, Inc. (NYSE:WMT) corporate announced it was abandoning plans to open three new stores in the District. Lawmakers responded by saying, “We’re at a point where we don’t need retailers. Retailers need us.”
Wal-Mart appears expensive at the higher end of its historical valuation range. The company has also lost market share to smaller footprint dollar stores in the last three years, such as Dollar General Corp. (NYSE:DG) and Dollar Tree, Inc. (NASDAQ:DLTR). On a final note, Reuters is reporting that Wal-Mart Stores, Inc. (NYSE:WMT) is beginning to hire temporary workers rather than permanent employees at its stores. This contradicts the national advertising campaign which is currently being run by the company.
Foolish takeaway
For a company with a market capitalization of $3 billion, Pandora Media Inc (NYSE:P) trades similarly to a penny stock, the junk food of personal finance.
Fundamentals at the company are deteriorating as management has decided to expose its listener base to a massive number of advertisements and restrict listening options. I believe this will ultimately cause customers to lose their loyalty for Pandora Radio and migrate to new offerings such as iTunes Radio from Apple Inc. (NASDAQ:AAPL).
I consider Pandora Media Inc (NYSE:P) to be non-investable for Fool readers who seek to own companies for the long-term.
Wal-Mart could endure further market share losses to the dollar stores in coming years, and the company is likely to face increased scrutiny from local government and employees following the resounding victory by D.C. lawmakers. I recommend staying away from the stock.
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John Macris has no position in any stocks mentioned. The Motley Fool recommends Pandora Media Inc (NYSE:P).
The article Has Pandora Media’s Advertising Destroyed its User Experience? originally appeared on Fool.com.
John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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