Wal-Mart says it is reducing worker hours only in a ‘small number of stores’

by The City Wire staff (info@thecitywire.com) 44 views 

Media reports of Wal-Mart Stores CEO Doug McMillon asking store managers to reduce worker hours to better align with sales projections are not entirely accurate, according to Wal-Mart spokesman Kory Lundberg.

Lundberg told The City Wire that a “small number of stores” – namely outlying supercenter locations – were recently asked to trim hours that have surpassed their budgeted levels in the past few months. Worker hours and pay were increased as part of the retailer’s much-publicized efforts to address Walmart U.S. CEO Greg Foran’s “Clean, Fast, Friendly” initiative.

Lundberg would not clarify how many stores were asked to reduce worker hours, saying only that the number varies from week to week. He said overall hourly store workers are getting more hours, better pay, and more predictable schedules than last year. Lundberg also said this labor hour reduction does not have anything to do with retailer’s other agenda to scale back the number of stores which are open 24-hours a day.

“Managing hours is a routine part of running a sustainable operation, and in select number of stores, it requires keeping those hours to what was originally budgeted,” Lundberg said.

He reiterated that the recent progress Walmart U.S. has demonstrated in improving traffic and store comps are evidence that Foran’s initiatives are working.

“Doing better means staying focused on an aggressive strategic plan to improve the customer experience in our stores, and deliver sustainable top and bottom line growth for the long term. … Amid the investment, we’re focused on growing sales and controlling costs – as you would expect from Walmart. We are staying true to our roots. However, we are committed to improving the customer experience and we will protect the investments necessary to achieve this goal,” Foran noted in the retailer’s second quarter earnings statement on Aug. 18.

Foran told analysts that Walmart U.S. remains committed to improving the shopping experience for its customers and that includes continuing with the “checkout promise” to have more lanes and cashiers present during peak shopping hours.

Wal-Mart’s $1 billion investment in higher wages for its store workers is a drag on corporate earnings but the impact to the retailer’s second quarter operating margin was negligible, according to Chad Morganlanders, analyst with Stifel Nicolaus. 

“In the case with Wal-Mart the higher wages resulted in less than 1/10th of 1% drag on their margins in the quarter. Wal-Mart said the biggest reasons for margin compression were related to shrink and negotiated payment in its pharmacy business,” Morganlanders said.

McMillon reportedly began telling store managers about the hourly reduction at the retailer’s holiday meeting held in Denver in early August. Since then some stores trimmed hours from their schedules, asked employees to leave shifts early or told them to take longer lunches, according to more than three dozen employees from around the U.S. The reductions began in the past several weeks, even as many stores enter the busy holiday season, according to Bloomberg.

Lundberg stressed that the reduction in worker hours are only taking place in stores where managers have over-scheduled staff. An insider with Wal-Mart told The City Wire that some managers were being asked to shave between 10% and 25% of their total labor hours and still adhere to Foran’s “Clean, Fast and Friendly” agenda.

Bloomberg also reported that some store workers near Houston were being asked to go home early over the past two weeks as a store manager was told to cut 200 hours of labor a week. Those positions included sales-floor workers and department managers, which were recently added back to the stores.

“Walmart isn’t just yanking store associates and hoping for the best, it is simultaneously streamlining processes which, if done right, should allow remaining store associates to work more efficiently,” said Carol Spieckerman, CEO of newmarketbuilders. “Initially there will be bugs to work out and that is where the department managers can do a bit more heavy lifting in terms of oversight. All in all, I think Walmart is on the right track and at the end of the day, may very well establish an in-store labor model that is emulation-worthy.”

Jason Long, CEO of Shift Marketing Group, said it’s smart for Walmart to analyze quality versus quantity regarding store labor. 

"More workers doesn’t necessarily mean a better in-store experience. Walmart may be able to dial back the hours of lower performing workers and still improve the customer experience with a higher paid and higher level employee," Long said.

Other analysts aren’t as optimistic about Wal-Mart’s efforts to rein in labor costs in some of its stores.

By cutting hours, Wal-Mart now risks losing some of its best employees to competitors that can provide more stable schedules, according to Burt Flickinger, managing director at Strategic Resource Group. He said Wal-Mart has made gains during the past year in addressing customer complaints of empty shelves, dirty stores and long check-out lines, but some locations still aren’t staffed enough during peak times.

Flickinger said Wal-Mart risks a talent drain at a time when McMillon has made meaningful improvements in the company.

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