Ahead of the Bell: Citi downgrades Wal-Mart Stores

NEW YORK - A Citi Investment Research analyst downgraded shares of Wal-Mart Stores Inc. early Tuesday, arguing that potential legislation to simplify the process of forming unions may boost the retail giant's labor costs.

In a note to investors, Citi analyst Deborah Weinswig noted Congressman George Miller, a Democrat from California, is expected to introduce a bill as early as Tuesday.

The legislation would make it easier for workers to form unions by eliminating the need for secret ballot elections. It would also increase penalties for employers who improperly interfere with union formation.

Weinswig, who lowered her rating to "Hold" from "Buy," predicted that Bentonville, Ark.-based Wal-Mart will be the "first target" for unions if the bill passes.

"If the unions are successful, the company could have to concede higher wages for more seasoned employees and increase employee benefits significantly," Weinswig said. "It would also experience diminished work force flexibility."

The analyst also lowered her share price target to $48 from $53.

Shares of Wal-Mart finished Monday's trading at $47.51.

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