A Lesson In Capitalism For The DC City Council

The Washington DC city council recently decided to teach evil Wal-Mart a lesson.

“D.C. lawmakers gave final approval Wednesday to a bill requiring some large retailers to pay their employees a 50 percent premium over the city’s minimum wage, a day after Wal-Mart warned that the law would jeopardize its plans in the city.”

So now Wal-Mart, and other retailers, will most likely avoid or leave the DC area and cause more people to be unemployed.  Why?  Because Leftists think Wal-Mart shouldn’t be making obscene profits.

“Activists celebrated Wednesday’s vote, saying the company, which reported net income of $17 billion on sales of $470 billion in its most recent fiscal year, could afford to pay better wages.”

Sigh.

It’s the same old emotional arguments from the Left that are ungrounded in sound business sense.  Let me teach the DC city council a lesson by looking at Wal-Mart’s 2012 annual report.

wal-mart 2012

Wal-Mart had total revenues of $446.95 billion which sounds truly obscene so maybe the Leftists have a point here.  But let’s move from the emotion to the factual and determine what Wal-Mart had to spend to get that revenue and how much they put in the bank at the end of the year.

After subtracting what it costs to buy, ship, store and sell their merchandise ($335.127 billion) and pay the people who work for Wal-Mart ($85.265 billion) they were left with $26.558 billion.  But they had to pay taxes on this ($7.944 billion) as well as paying interest on loans which left them a final profit of $15.699 billion.

That’s still a lot of money even when we’re talking about Federal Government levels but dividing that final profit by their total sales gives a final profit margin of 3.5%.

I wonder if Leftists would be satisfied with that kind of profit margin if they ever got the courage to start their own businesses.

Leftists also conveniently forget about the roughly $420 billion that Wal-Mart paid to people and other companies throughout the course of 2012 to sell their merchandise.  Now that is a real stimulus program!

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4 Responses to A Lesson In Capitalism For The DC City Council

  1. livinrightinpgh says:

    Cosmo….LOVE the point you make in the last paragraph. Yes. Walmart had revenues over $400 billion, but, as you state, that represents purchases made from various vendors to put those products on the shelves. So, not only does Walmart employ the people who transport, warehouse, display, and cashier those products, but they allow OTHER companies to employ people to manufacture those goods.

    I’m consistently amazed at the abject stupidity at which people look at a 3.5% profit margin and freak out. It’s probably why the profit is expressed in total dollars and not in percentages. Seventeen BILLION sounds obscene. 3.5% is marginal. But, given the dismal math and economics education of FAR TOO MANY, they are easy suckers for the argument.

    Years back, I ran a business in Pittsburgh. We sold cigarettes (boo….hiss!). The State mandated a 6% mark up over wholesale as “State Minimum Pricing”. To stay competitive with the larger grocery chains, you HAD to sell them at the price if you wanted to move product. At the time, a carton of Marlboros cost me $40, so I sold them for $42.40. 6% profit? OBSCENE! Yet, no one ever talked about the $16.78 per carton TAX that the STATE got out of every sale, PLUS a 7% sales tax. Who’s the greedy pig now?

    Hey Lefties: Wanna talk about the percentage of the cost of each gallon of gas that goes to the government vs. what those capitalist pigs at Exxon-Mobil get?

    • cosmoscon says:

      Leftists are ok with ‘obscene’ government taxes, it’s just the private businesses that aren’t allowed to succeed. I don’t know how our country got so out of whack.

  2. tannngl says:

    I love your posts.
    When we were looking at purchasing an apartment building, we were looking at a net profit margin of 8%. Our other business made 10%. But, we had to mortgage everything we owned including our daughter. (ha! she had to pay it back out of our estate if we both died…) We both worked in hospital jobs full time and the business 7 days a week. We worked hard. Yes, WE BUILT THAT!
    So, Walmart, at 3.5% profit is doing amazing stuff to stay in business. No way they could increase their employee wages that amount, nor any amount, I would guess.
    Did you know Walmart gets 70% of their managers from their employee hires?

    • cosmoscon says:

      Thanks for the complement!

      Full disclosure, I worked at Wal-Mart during high school and college and through stock purchase plan I was able to pay for much of my college on my own. It was hard work but through it I learned more than just how to sell sporting goods and automotive products.

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