After months of being dogged by its critics for everything from its wages and health care offerings to its environmental practices, Wal-Mart this week launched a national advertising campaign designed to fight back.

Faced with tough adversaries, analysts say its smart for the company to try remind people of the discounters folksy roots, and to tout the good it believes it does for communities, workers and families.

But theres no guarantee the strategy will work. While companies commonly use public relations campaigns to show themselves to be good corporate citizens, the major pitfall they face is that customers may not believe them.

What theyre trying to do is communicate to somebody about their image, and people know its coming from Wal-Mart, so its a source credibility problem, said John Antil, associate professor of marketing at the University of Delaware.

The latest effort to sway public opinion comes as the company is struggling with efforts to lure in more upscale shoppers and fend off competitors, irking some shareholders. And the ads are appearing amid major upheaval in the companys advertising and marketing efforts, including the abrupt exit of a top executive.

David Tovar, spokesman for Bentonville, Ark.-based Wal-Mart Stores Inc., said the television spots were the brainchild of the companys corporate affairs department, and are separate from its other advertising and marketing plans.

We know that we have to tell our story. Otherwise people will tell it for us, Tovar said.

Wal-Marts two television spots feature happy parents frolicking with carefree kids, sentimental pictures of folksy founder Sam Walton and beaming employees extolling the virtues of working at Wal-Mart. Soothing voiceovers remind viewers of the companys small-town roots and offer statistics arguing that Wal-Mart saves money for families and provides health insurance for workers.

The advertisements have already drawn criticism from activist group Wal-Mart Watch, which filed formal complaints with the attorneys general of Arizona and Nebraska after the ads aired in test markets last summer. Wal-Mart Watch spokeswoman Laura Jack said officials did not appear to investigate the groups claims that the ads were misleading, but the group is standing behind complaints.

It attempts to paint Wal-Mart in a much better light than we and many other people see them in, Jack said of the campaign.

Faced with such detractors, a company like Wal-Mart has almost no choice but to respond with its own public relations campaign, said Jennifer Chang Coupland, clinical assistant professor of marketing at Penn State University.

She also thinks its smart to capitalize on the warm feelings people have for founder Sam Walton, and perhaps replace in consumers minds the more recent, negative things they have heard.

Such a strategy could work with shoppers who have liked the Wal-Mart brand and want to be reassured that its OK to keep shopping there, she said. But people who were already skeptical of the company may see the ads as a way for Wal-Mart to cover its tracks, raising the potential of a backlash.

Adam Hanft, chief executive of the branding and consulting firm Hanft Unlimited, thinks the ads could backfire precisely because they bring to mind the companys beginnings, which are in stark contrast to its current standing as a multibillion-dollar merchandising powerhouse.

Theyre trying to go back to their roots, which was Sam Walton, he said. I think the problem is theyre light years beyond the avuncular guy who lived in Bentonville, drove a pick-up and got 99-cent haircuts or whatever.

Such a down-home message also is inconsistent with other communications from the company, such as its recent acknowledgement that it is using advanced technology to schedule its thousands of workers more efficiently. To send such mixed messages can hurt a companys credibility, Hanft said.

Wal-Mart is under huge pressure. Its image is being threatened on a number of different fronts, and what were seeing out of Bentonville is a kind of schizophrenic, knee-jerk response to all this, he said.

Hanft thinks the company would have more success if it more closely coordinated its public relations campaigns with its other advertising and branding messages. He also thinks the company should focus on areas where it can make concrete positive statements, such as its improving environmental commitment.

He would also recommend that Wal-Mart take more of a mea culpa approach.

They need to be more transparent and more honest, and I think they need to admit that they did things wrong, he said.

Antil, from the University of Delaware, said he sympathizes with Wal-Marts predicament, and thinks the company is facing some unfair criticism. Still, he doesnt know if the ads will help.

Will it work? Id say the jury is still out on that, Antil said. 2007 MSNBC Interactive

Following is asampling of stocks that recently jumped to 5 stars. By way of background, we award a stock 5 stars when it trades at a suitably large discount–i.e., a margin of safety–to our fair value estimate. Thus, when a stock hits 5-star territory, we consider it an especially compelling value.

To get our http://screen.morningstar.com/AdvStocks/Results.html?pgid=wwhome2b2&preset=5-StarStocks of 5-star stocks–including our considerbuying and selling prices, risk ratings, and moat ratings–simply take Morningstar Premium Membership for a test spin. https://members.morningstar.com/memberstpages/pm_stocks.html?referid=ONEWSTOANAto sign up for a free trial.

Newest 5-Star Stocks

Panera Bread

- Economic Moat: None
- Business Risk: Average
- Price/Fair Value Ratio*: 0.75
- Consider Buying: $57.80 or Below
- Consider Selling: $94.00 or Above

In Morningstar analyst John Owens’ opinion, Panera Bread http://quote.morningstar.com/Switch.html?ticker=PNRA has carved out a lucrative niche between fast food and casual dining thanks to distinctive menu items and acompelling dining experience. Owens has been impressed with the chain’s ability to grow sales beyond the busy lunch period via new menu introductions such as egg souffles and hand-crafted pizzas. He sees ample opportunity for expansion, as the company’s density is only a fraction of the dominant fast-food and casual-dining players’ density. Its success, however, has not gone unnoticed, and rivals are now responding more aggressively. For instance, McDonald’s http://quote.morningstar.com/Switch.html?ticker=MCD continues to promote its “premium” items and has sought to recast its restaurants in a more-upscale decor. Nevertheless, those risks appear to be factored intoPanera’s stock price, which remains well below Owens’ fair value estimate.
http://quicktake.morningstar.com/stocknet/MorningstarAnalysis.aspx?Country=USA&Symbol=PNRA

Ruth’s Chris Steak House

- Economic Moat: None
- Business Risk: Average
- Price/Fair Value Ratio*: 0.73
- Consider Buying: $21.60 or Below
- Consider Selling: $35.10 or Above

Ruth’s Chris http://quote.morningstar.com/Switch.html?ticker=RUTH is a leader in the growing upscale steakhouse segment of the restaurant industry. The chain has a respected and well-known brand, built over the last 42 years, and is also the largest upscale steakhouse chain. In the U.S., the company leverages its size and coast-to-coast footprint with national advertising, complemented by targeted local media, which has helped to boost average unit volumes at company-operated restaurants. With these attractive unit economics and an in-house development team, Ruth’s Chris is well positioned for growth, in Morningstar analyst John Owens’ view. Management believes the chain could ultimately expand up to 250 domestic restaurants, including an additional 75-100 steakhouses in the 50 most populous cities and a further 25-50 in smaller markets. And this is to say nothing of the company’s growth potential abroad. While there are risks to management’s expansion aims, not the least of which are eroding operating standards, lost brand equity, and intensifying rivalry with competing chains, Owens thinks these risks have been discounted into the stock and then some.
http://quicktake.morningstar.com/stocknet/MorningstarAnalysis.aspx?Country=USA&Symbol=RUTH

* Price/fair value ratios calculated using fair value estimates and closing prices as of Friday, April 20, 2007.

Recent Updates on 5-Star Stocks
Raising Washington Mutual’s Fair Value
We are raising our fair value for Washington Mutual http://quote.morningstar.com/Switch.html?ticker=WM to account for the firm’s repurchase of more than 60 million shares during the first quarter. We recognize that the mortgage business will drag on results in the near term, but we believe there is value in WaMu’s diversified business platform and strong retail banking operations that will enable it to weather the current issues in the housing market.
Erin Swanson

Amgen Buoyed by New Safety Data
Amgen http://quote.morningstar.com/Switch.html?ticker=AMGN has released new Aranesp data that support the safety of its erythropoiesis-stimulating agents (ESAs); this alleviates some of the recent concern that has weighed on the biotech’s stock. However, the news has a neutral effect on our fair value estimate, as we’ve stood by our belief that the drug is safe for approved uses.
Karen Andersen

eBay Reports Strong First-Quarter Results (Maintaining)
After reviewing eBay’s http://quote.morningstar.com/Switch.html?ticker=EBAY first-quarter results, we’re sticking with our fair value estimate. The company delivered another strong performance, with revenue rising 29% from the prior-year quarter. On the back of this growth, non-GAAP earnings per share (excluding stock-based compensation expense and amortization of acquired intangible assets) soared 39%, boosted by positive leverage in marketing, product development, and infrastructure costs. Given its strong cash flow, solid balance sheet, and, in our opinion, still deeply undervalued stock, we were encouraged that eBay repurchased about $333 million of its shares. The company may buy as much as an additional $2 billion of stock through January 2009 under its current program. Finally, we were pleased that eBay once again raised its forecast for 2007.
John Owens

Ugly First Quarter for Motorola, But Making Headway(Maintaining)
Although Motorola’s http://quote.morningstar.com/Switch.html?ticker=MOT first-quarter earnings weren’t pretty, the company showed some signs of stabilization in its handset business, in our opinion. While we reiterate our belief that a turnaround at the company will take some time, we continue to believe that Motorola can emerge from its troubles a stronger company. Our fair value estimate remains unchanged.
John Slack

RaisingOur Wal-Mart Fair Value Estimate
After revising our discounted cash flow model for Wal-Mart http://quote.morningstar.com/Switch.html?ticker=WMT to account for 2006 results, we have boosted our fair value estimate. We are assuming approximately 6% annual store expansion in the U.S. Wal-Mart business, 3% expansion for the Sam’s Club chain, and about 8% annual international store expansion. In light of recent results, we aren’t comfortable assuming that the company will be able to boost same-store sales above the low single digits, but if that were to happen, our fair value estimate would rise. Historically, the company has been able to offset higher selling, general, and administrative spending by squeezing its suppliers. However, this has not been as strong in the past couple of years, so we are assuming minor margin deterioration over the next five years.
Joseph Beaulieu

Leaders in South-East Asia signed a ground-breaking agreement with China yesterday that liberalises trade in services, five years after a similar pact on goods.

The agreements will help countries such as Thailand, Indonesia and Singapore to tap Chinas growing economic might.

The balance of power has long been tilted in favour of their larger neighbour, which has a multibillion-pound trade deficit with a region that is feeding its relentless appetite for raw materials.

The agreements are among the most recent achievements by Asias answer to the European Union, the ten-member Association of South-East Asian Nations (Asean).

The body was founded 40 years ago as a bulwark against communism as war raged in Vietnam and as China was in thrall to the Red Guards and the Cultural Revolution. Today the grouping is dominated by economic concerns and it acknowledges that it needs to stay relevant in the face of Chinas growing power.

Ong Keng Yong, Secretary-General of Asean, told The Times ahead of the meeting: If we dont pull together, we will be swallowed up by China, India and globalisation. But we cant turn things around overnight.

The tariff agreements with the Chinese were first proposed by China, not by Asean.Zhu Rongji, the Prime Minister at the time, sought the tie-up in 2000 to help to acclimatise his officials before Chinas entry into the World Trade Organisation, according to Mr Ong.

History will think of Zhu Rongji with a great deal of awe, he added. Even today, some of the Chinese leaders wonder what would have happened if he hadnt done this.

Trade with China was aided by the presence of diaspora Chinese in Asean, where they have dominated the business community, Mr Ong added.

This weekend, leaders of the ten nations gathered in Cebu in the Philippines and signed an agreement that will set up a free-trade zone by 2015, which could also include China. Asean said that it signed the Cebu Declaration because it must reposition itself. Challenges included the major shifts in the Asian landscape brought about by the rise of China and India, and Asias widening links with the rest of the world.

Mr Ong admitted that this would not be easy for Asean to achieve. Collectively, there is some distance to go in terms of banking, finance and transparency. This is especially important because we need to move towards a freer flow of capital, he said.

Kerry Brown, a China expert at Chatham House, the foreign affairs think-tank based in London, said that there is very little political unity in Asean, although members do share general uneasiness about Chinas economic power.