Sam’s Club cuts 2,300 jobs, about 2% of workforce (Updated)

by The City Wire staff ( 26 views 

Sam's Club is laying off 2,300 workers as the warehouse club seeks to reduce the level of middle managers. The staff reduction is roughly 2% of Sam's workforce, and is the largest staff reduction by the retailer since 2010.

It is unclear if any of these layoffs will come from the corporate headquarters in Bentonville. The retailer has not returned multiple requests for additional information. 

Bill Durling, a Sam’s Club spokesman, reportedly said the layoffs would target a combination of salaried assistant managers and hourly employees. Certain positions, like telephone attendants, will be eliminated.

“We realized we had pretty much the same club structure whether a club had $50 million in revenue or $100 million in revenue,” Durling said of the distribution of assistant managers. “What we’re trying to do is balance our resources.”

Sam’s Club, operating as division of Wal-Mart Stores Inc. has about 116,000 employees, Durling said, and the job cuts will affect about four employees a store. 
Employees will have 60 paid days to find another job at the company. If they are not successful, they will be eligible for severance.

Sam’s Club will open at least 15 new stores over the course of the next fiscal year, which begins in February.

Last year Wal-Mart Stores recorded sales of $466 billion, and $56.423 billion of that came from Sam’s Club. While Sam’s Club generates 12% of the sales revenue for the corporation, it only represents 7% of the retailer’s bottom line.

Under the direction of CEO Rosalind Brewer, Sam’s Club raised its annual membership fee last year to $45. The rate increase was softened with a coupon book offering $3,500 in savings. The rate increase had the potential to raise revenue by $82 million this year. 

Nearly half of $56 billion in revenue came from membership fees, according to Michael Dastugue, chief financial officer for Sam’s Club. He said in June there had been very little push back from the fee increase.

Analysts said this streamlining effort by Sam's Club is another tale-tell sign of troubles brewing in the retail sector. This announcement is third of its kind since the new year began.

Earlier this week Target announced said it would cut approximately 475 jobs from its corporate headquarters as part of a cost-cutting effort. Target also reduced its earnings guidance for the recent holiday period and through the first half of 2014 as it continues to deal with fallout from the massive security breach that impacted 110 million Target customers.

Last week, J.C. Penney announced 2,000 job cuts and the closure of 33 underperforming stores. This was widely seen as a symptom of that company’s continued struggles after several tumultuous years of flux in its management and its strategy.

Macy’s, often seen as a shining star in the retail sector, also announced it would lay off about 2,500 workers in the coming weeks, despite decent holiday sales results.

Analyst said retailers on the whole saw lackluster holiday sales and continue to battle declining store traffic as they lose share to Amazon and other online retailers.

Wal-Mart and Sam’s Club will report their holiday sales Feb. 20, but the retailer already gave lower guidance at the end of third quarter, before ramping up inventory and advertising for the holiday season. Sam’s Club and Walmart U.S. each suffered from underwhelming same-stores in the past two quarters, and gave guidance from 0% to 2% growth for the balance of the year.

Sam's largest competitor – Costco – continues to set the bar high for the industry in terms of same-store sales growth and customer loyalty. For December Costco reported same-store sales growth of 3%, nearly twice the 1.8% expected by analysts.