Wal-Mart’s ongoing restructuring could cost more jobs as it retools for the future

by Kim Souza (ksouza@talkbusiness.net) 3,786 views 

News of job cuts during 2017 from the region’s largest employer Wal-Mart Stores may become as familiar to Northwest Arkansas residents as orange barrels and interstate construction.

The retail giant will not disclose how many jobs could be in question, but in January Wal-Mart confirmed 1,000 corporate jobs across the business would be eliminated. Wal-Mart said it was wrong to assume the majority of the cuts were in Bentonville, but that is where the vast majority of the corporate support jobs are located.

Talk Business & Politics reported last week that around 300 additional jobs were being eliminated in the company’s Information Systems Division (ISD). Sam’s Club and the International division are also again having layoffs, though Wal-Mart will not say how many jobs are being cut. The retailer did refute rumors of 1,840 jobs being purged as well as 400 more jobs from the ISD being shuttered this week.

Wal-Mart confirmed a few local jobs were cut in the International division, adding that rumors of hundreds more cuts aren’t true.

REGIONAL IMPACT
He said as Wal-Mart continues to look carefully at the business there will be jobs eliminated and positions added. He gave no details or specifics. When asked about local employment numbers, Hargrove also said the company won’t break those out any longer, but will refer to total company employment in the U.S., internationally and combined.

Talk Business & Politics research indicates that Wal-Mart has shuttered close to 1,000 jobs in Northwest Arkansas this calendar year. Those jobs came from several departments such as replenishment, Human Resources, Sam’s Club, technology and international positions in Bentonville.

Hargrove said just because a job is eliminated doesn’t mean the displaced worker will leave employment with the retailer. He said there are always jobs open and displaced workers can apply for those positions. He did not say how many did apply, nor how many open positions the company has.

Cameron Smith, CEO of Cameron Smith & Associates, an executive search firm focused primarily on retail vendor companies, said his office continues to receive dozens of emails and calls from displaced Wal-Mart employees. He said his office is again in triage mode trying to help those displaced. The next two weeks are also packed with layoff interviews. Other technology companies in the region report interest in hiring some of the displaced tech talent, and Smith’s team is working to help those with transferable skills.

Michael Harvey, interim CEO of the Northwest Arkansas Council, said Wal-Mart has to do what’s necessary to remain a vibrant company in a sector that’s in the midst of transformation. He said the lost jobs will be felt in the region, but there is some insulation as a number of smaller enterprises continue to grow, with some of those being service providers to Wal-Mart.

Greg Hamilton, senior economist for the Institute of Economic Advancement at University of Arkansas Little Rock, modeled the impact of the 1,000 lost corporate jobs in Northwest Arkansas. Hamilton confirmed Thursday (April 13) the loss of 1,000 corporate jobs could create an economic loss of $47 million annually and also result in the loss of 390 non-Wal-Mart jobs. He said that loss also factors in the displaced workers leave the region, which is not likely the case for everyone. He said a silver-lining could be found by smaller service-related companies such as CaseStack or Rockfish now finding the talent they need to expand.

“That’s precisely how urban economies are born,” Hamilton said.

When looking at the retail job growth in Benton County, Michael Pakko, chief economist at the Institute of Economic Advancement, said Benton County experienced strong growth in retail jobs in recent years. Between 2007 and 2015 retail jobs in the county grew by 35%, compared with 8% in Washington County and 5% statewide. He said statewide retail jobs had been one of the strongest sectors of growth. Between 2010 and February 2017 retail jobs increased 15% across the state. He said that growth has since flatlined.

RISING EXPENSES
Over the past 10 years Wal-Mart Stores’ its Selling, General and Administrative costs (primarily overhead expenses and labor-related costs) rose 59.4%, growing from $63.892 billion in 2007 to $101.853 billion at the end fiscal 2017 which ended Jan. 31.

However, net sales revenue grew from $344.759 billion in 2007 to $481.317 billion in 2017, a gain of 39.6%. Expenses which include salaries and employee overhead costs have certainly risen faster than sales.

“We need more speed and less bureaucracy” to better serve shoppers to save them money and time, Wal-Mart CEO Doug McMillon noted in a January memo to employees. In that same memo, McMillon said in an effort “to stay lean and fast” some positions within the company were being eliminated, but some positions would be created.

In 2007, Wal-Mart reported 1.36 million employees in the U.S. and 550,000 employed internationally for a total payroll of 1.91 million people. In 2017, Wal-Mart said it employs nearly 1.5 million in its U.S. division and 800,000 abroad for a total of 2.3 million people. Over the decade Wal-Mart has grown its total employment by 390,000 people, or 20.4%.

Hargrove confirmed Wal-Mart has eliminated about 18,000 jobs since early last year. He said many of the affected employees have been reassigned with other jobs in the company. For instance, about 6,000 of the 7,000 back-office jobs eliminated in September 2016 were reassigned.

Likewise, he said more than 50% of the 10,000 jobs lost with store closures in February 2016 were also retained. Earlier this year Wal-Mart announced plans to hire 10,000 to staff its new store expansion (55 stores) this fiscal year. While Wal-Mart has slowed its new store expansion, it plans to remodel 550 stores this year.

Wal-Mart has also increased its spending on boosting wages, enhanced training academies, online fulfillment capacity and enhanced technology capabilities to the tune of more than $4 billion in the past two years. The moves were largely applauded by Wall Street even at the expense of earnings through next year.

The business restructuring is likely to continue as the retail sector grapples with omni-channel demands. Harvey say it’s important that Wal-Mart invest for tomorrow and thankfully the company has the financial wherewithal to do so. He said as many retail brands struggle with this transformation, Wal-Mart is retooling itself for the long-run which is a positive for Northwest Arkansas, even if that means the retailer employs fewer people in the region.

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