JUDGE: WAL-MART SUIT CLASS-ACTION

KATHERINE BOWERS / VICKI M. YOUNG

SAN FRANCISCO -- Wal-Mart Store's public relations headache reached migraine status last week as a federal judge here cleared the way for the largest gender-discrimination lawsuit against a U.S. company to date, potentially encompassing 1.6 million current and former female Wal-Mart employees.

If Wal-Mart loses or settles the case, punitive and lost-wage damages could surpass the $1 billion mark, according to the plaintiffs' lawyers and financial analysts.

The response of the world's biggest company was sharp and concise.

"Let's keep in mind that today's ruling has absolutely nothing to do with the merits of the case," said Wal-Mart spokeswoman Mona Williams in a statement on the company's Web site. "Judge [Martin] Jenkins is simply saying he thinks it meets the legal requirements necessary to move forward as a class action. We strongly disagree with his decision and will seek an appeal."

Betty Dukes et al v. Wal-Mart Stores Inc. alleges the retailer systematically discriminated against women in promotion and compensation, and fostered a culture that stereotyped females as unwilling to work long hours or relocate. Both are key requirements for hourly workers trying to enter salaried management ranks at the retailer.

Women make up the majority of Wal-Mart's customers, as well as the majority -- roughly 65 percent -- of its hourly employees.

In an 84-page ruling, Jenkins called the case "historic in nature" and noted his ruling coincides with the 50th anniversary of landmark civil rights case Brown v. Board of Education.

"This anniversary serves as a reminder of the importance of the courts in addressing the denial of equal treatment under the law wherever and by whomever it occurs," he wrote. Both sides are set to return to court July 28 to take up scheduling and case management issues.

The opinion of analysts Tuesday was that the suit would not keep frugal shoppers away from Wal-Mart, although it might depress the stock price prior to settlement or trial verdict. Either result is at least a year off, said legal experts.

Emme P. Kozloff, an analyst at Bernstein Research, New York, reduced Wal-Mart's one-year target price of its stock to $60 from $63, but said the cash-rich retailer should be able to weather the case.

"A settlement or judgment in the billions of dollars is not necessarily a death blow to Wal-Mart," wrote Kozloff in a research note.

Richard Hastings, retail analyst at Bernard Sands, New York, doesn't expect to see a huge impact on the consumer mind-set.

"In semirural communities, I think the psychology could be 'I love shopping there, but I don't have to work there.' The effect in cities and competitive suburbs could be only slightly negative, depending upon local availability of another supermarket with low prices or other discounter or value retailer," Hastings said.

Despite their dominance in hourly positions, women comprise only 14% of store managers, according to an analysis of Wal-Mart's employment data submitted during discovery for the trial. Women were also paid 4.5% to 5.6% less than men with comparable experience, the study found. Wal-Mart employs roughly 1.5 million people worldwide; the Dukes case would encompass current and former female employees since December 1998.

Citing the "Wal-Mart Way," Jenkins wrote: "There is no genuine dispute that Wal-Mart has carefully constructed and actively fosters a strong and distinctive, centrally controlled corporate culture," dismissing an effort by the company to portray its stores as having localized control.