Report: Wal-Mart feels heat from proposed union legislation

Bentonville , Ark. The introduction of a new unionization legislation prompted Citigroup to downgrade Wal-Mart Stores from buy to hold status. The financial institution said the legislation could increase Wal-Mart’s labor costs, which could negatively impact the retailer’s earnings, according to a report in MarketWatch.

The Employee Free Choice Act, or “card check” bill, which could be introduced to the House of Representatives as early as Tuesday, would enable employees to form a union if a majority of workers sign authorization cards. It also would limit employers’ ability to sway associates away from unionization.

If the bill is passed, “Wal-Mart could be the primary target,” Citigroup's analyst Deborah Weinswig said in the article. “The retailer could have to offer higher wages for more seasoned employees and increase employee benefits significantly.”

The retailer also faces a slowdown of expansion plans while the bill comes up for vote, the article explained.

Based on the announcement, Citigroup decreased its price target on the retailer’s stock to $48. It was trading at $53.