Wal-Mart Stores, Inc. (WMT) and the “Living Wage” Bill Veto

Wal-Mart Stores, Inc. (NYSE:WMT) scored a major victory in Washington DC this Tuesday. They got Mayor Vincent Gray to override and veto the “living wage” bill by a close 7-6 vote in the council. The bill fell two votes short and didn’t make the two thirds majority needed to pass it.

This bill aimed to increase the employees´ minimum wage to $12.50 an hour, rising by 50% the city’s current minimum –already $1 higher than the federal one. It applied to every retailer that owned stores of 75,000 square feet or more and made $1 billion in annual corporate sales, at least. The bill excluded retail stores with unionized workers, and also provided a 4-year phase-in period for existing stores.

Approved last July, the bill put Washington DC and Wal-Mart Stores, Inc. (NYSE:WMT) and other retailers in the public eye. For one, it was at the center of a national debate on whether low-wage workers should be compensated, and whether the government should make big companies pay more.

The controversy was raised when some stated that large firms–like Wal-Mart—can actually afford to pay higher wages. Others pointed out that the bill was unfair as it singled out only certain businesses, negatively affecting their economic development and competitiveness.

After the bill was approved, Wal-Mart stated that it was going to cancel plans to build three stores in DC and review three other already under construction. If the bill would have been approved, the company would have increased its costs dramatically. Therefore the large retailer announced that it needed to reevaluate is legal and financial options.

It is clear that the veto has unblocked the path for Wal-Mart’s new constructions and has a positive impact on the stock. However, this is not the first time that the retailer has been put under open public scrutiny. The company has made several moves against legislation that would represent an increase in costs –including “Obamacare”. Now, two of the stores it plans to build are in an area that portrays a substantially higher rate of poverty and unemployment than the rest of the city.

Wal-Mart has been repeatedly accused of not acting “in the spirit of the laws”. In any case, the truth for stockholders remains the same and is shown in the progress of the stock these past days. The veto on the bill can only mean a positive thing for those who hold the firm’s “best” financial interests.

Disclosure: Pamela Gaviño holds no position in any stocks mentioned

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