Wal-Mart Stores is again scaling back its corporate workforce as the retailer reportedly will eliminate its jewelry business and decrease the number of co-managers per store, and reduce areas such as direct-store-delivery receiving, according to persons familiar with the changes.
The reduction has been the norm for the retail giant who said a year ago it was continually looking for ways to run a leaner operation as it invests in e-commerce capabilities. Wal-Mart’s fiscal year ends Jan. 31 and the latest restructuring falls in line with the time frame when the company usually does scale back.
News of the pending layoffs hit social media feeds in December, but the company would not then confirm to Talk Business & Politics any such corporate downsizing. Again, on Friday (Jan. 12), the retailer released the following statement regarding the corporate restructuring reported by the Wall Street Journal: “As we’ve previously stated, we’ve been looking at our structure for some time as we explore ways to operate more effectively. We continue to do that but are not going to comment on rumors and speculation.”
Talk Business & Politics learned a meeting was held Friday with store management and that’s when some of the news leaked to the media. Again, Wal-Mart didn’t confirm nor deny jobs were being eliminated. Talk Business & Politics also confirmed recently with other sources the company’s Information Systems Division, the technology arm in Bentonville, continues to shed jobs — moving some of the work to India.
This marks the fourth round of corporate job reductions by Wal-Mart Stores since January 2017. At that time Wal-Mart CEO Doug McMillon released the following statement in a memo to employees: “We need more speed and less bureaucracy to better serve shoppers to save them money and time. In an effort to stay lean and fast some positions within the company are being eliminated.”
Around 300 jobs were eliminated in April from ISD, or WalmartLabs, in Bentonville. McMillon then told employees lower costs were needed and that was going to mean a change of the company from the inside. He forecast then that the need for continued investment and capital discipline would ultimately mean the elimination of positions in some areas of the business.
“These are hard choices. We care about our friends and colleagues and will do our best to handle these transition smoothly and always with respect.” McMillon concluded in the April memo.
Areas seeing personnel cutbacks in the past 12 months include transportation, real estate, merchandising, buying, replenishment, finance and global shared services.
As with any layoff at Wal-Mart corporate, employees are allowed to apply for open positions within the company and they remain on the payroll for 60 days while looking for another job. If they haven’t secured another job at the end of 60 days they receive a severance package commensurate with their position and years of service.
Wal-Mart’s investment in e-commerce totals an estimated $6 billion over the past two years along with a $1 billion investment in higher wages for store employees in 2015 and an incremental $1 billion the following year to fund the second step of wage hikes for hourly store employees.
Most equity analysts applaud Wal-Mart’s efforts to invest in its people and e-commerce. In the short-term, the investments have helped with improved same-store sales and rapid growth in e-commerce, according to Budd Bugatch, an analyst with Raymond James & Associates.
Mervin Jebaraj, director for the Center for Business and Economic Research at the University of Arkansas, told Talk Business & Politics the retail sector faces challenging times and Wal-Mart isn’t immune. He said recent acquisitions by the retailer likely created some duplication of roles. He said companies of all kinds review operations near year-end and streamline where they need to, and that’s especially true in retail with the challenges the sector faces on the whole.
PUBLIC RELATIONS BLUNDER
The bad news at Wal-Mart in recent days is outshining the good news. The company announced Thursday (Jan. 11) another pay bump for starting wages and one-time bonuses as well as expanded benefits packages.
News also broke Thursday that Sam’s Club was closing 63 stores, a possible elimination of more than 9,000 jobs. Wal-Mart finally confirmed late Thursday the closures, saying around 10 would be converted into e-commerce distribution centers.
Wal-Mart and Sam’s Club execs were criticized on social media sites and mainstream media for the lack of notice given to members and employees of the affected clubs. An email was sent to notify the workers of the club closures Thursday morning and some of the clubs closed effective that day, with no notice to paying members.
Alan Ellstrand, an associate dean at the Walton College of Business at the University of Arkansas, said Friday the retailer missed an opportunity to tell the whole story.
“I am in disbelief of the way the news was handled because it’s not the way this company typically operates. I am very surprised at the little to no notice of the club closures because their membership is typically loyal. I know how I would feel if I drove up to the Fayetteville [Sam’s Club] and found it closed with no notice,” he said.
The employees are also a valuable asset to the retailer, Ellstrand said, and telling them of their job loss via an email is very surprising given the retailer could have called a meeting and done it that way with some forewarning.
Other retail insiders weighed in on the PR blunder by Wal-Mart on Thursday via the Retail Wire blog site.
“First I thought it was no big deal, co-terminus leases and all that. Then I found out that a.) no one in the field was given any advance notice, the stores were just signed “sorry, store closed,” and b.) the company actually owns the real estate in at least one of those locations. This move completely undid any good will Walmart might have achieved with its meager base pay increase. There was no reason to do this on that day. None. It’s very disappointing. I thought Walmart was headed in a much more community-friendly direction. This is bad business and terribly bad PR,” wrote Paula Rosemblum, managing partner for RSR Research.
Joanna Rutter with the marketing firm Dor said Wal-Mart gets no gold stars for raising the hourly wage which is barely livable, especially when it’s framed as a public relations move against the club closures.
“Workers are not pawns. They are the heart of the business. Treating them as the former is a bad look even when it gets you a prominent headline,” Rutter said.