Brief

Report: Wal-Mart poised to eliminate 1K corporate jobs

Dive Brief:

  • Wal-Mart Stores plans to cut some 1,000 jobs in its corporate offices by the end of this month as the retail giant continues its ongoing efforts to slash costs and expand its e-commerce horizons, an unnamed executive told The Wall Street Journal.

  • Many of the cuts will target the human resources division: Sources say some senior Wal-Mart executives believe a streamlined HR department could function more efficiently, and in some cases their tasks could be taken up by outside consultants. The technology and e-commerce units could also experience job losses, the Journal added.

  • In response to questions about the report, Wal-Mart spokesperson Randy Hargrove told Retail Dive Wednesday morning that the company hasn't made any announcements about job cuts. “As we’ve previously shared, we are always looking for ways to operate more efficiently and effectively," he said.  “While we continually look at our corporate structure, we have not made any announcements. Like any organization, we make decisions based upon what’s best for our business and the customers we serve.”

Dive Insight:

Wal-Mart — the nation’s largest corporate employer, with 1.5 million staffers across the U.S. including corporate staff and store associates — has been changing up its workforce for months now as it makes changes to improve stores and charges ahead to boost e-commerce. Faced with messy stores and empty shelves in many areas of the country, Wal-Mart has taken a series of steps to drive efficiencies, improve logistics and boost customer service. These efforts are fueled part by increased personnel investments: In 2015, the retailer raised starting wages for full-time store employees to $9, or about $18,700 a year, and new hires can climb to $10 an hour after completing a six-month training program.

Wal-Mart's workforce evolution also entails job cuts. In June the retail giant began eliminating about 7,000 accounting and invoicing positions to shift employees from the back office into roles that emphasize direct interaction with shoppers. And at its annual Investment Community Meeting in October, Wal-Mart Stores executives detailed plans to pivot toward e-commerce, earmarking $11 billion in capital spending to boost online sales while drastically slowing down the number of new physical stores the company opens; those plans entail opening just 35 new supercenters in fiscal 2018 — half as many as the 69 it opened in fiscal 2016 — and will open just 20 new Neighborhood Market stores in the same period, way down from the 161 it opened in fiscal 2016.

Hargrove on Wednesday pointed to CEO Doug McMillon's comments at that meeting, where McMillon said his team was introducing "a new financial framework: strong efficient growth, operating discipline and strategic capital allocation."

"We must win with customers. We must grow this company for Walmart to have a future, but we need to do it in an efficient way," he said then. "It's not a growth at all cost mindset. We need to manage expenses even better, which includes changing how we do work inside the company. We've got to manage capital strategically. We have a lot of conversations these days about priorities. This before that, because in this situation, you can imagine there are lots of good ideas that we could go execute, but they're not all equal."

Wal-Mart has also made strides to compete more effectively in e-commerce. Alongside expanded omnichannel efforts like same-day delivery pilots, Wal-Mart last year acquired online retailer Jet for $3.3 billion, the highest price ever paid for an e-commerce startup.

Wal-Mart fell just short of expectations in the third quarter, with the Jet acquisition, improvements to stores and rising wages driving up expenses 9%. It posted Q3 revenues of $118.2 billion and a same-store sales increase of 1.2%, just missing analysts’ expectations, and store traffic rose 0.7%. Wal-Mart's e-commerce efforts seem to be paying off, however: Global Q3 e-commerce sales rose 20.6%, and the retailer boosted the low end of its fiscal year earnings forecast from $4.15 per share to between $4.20 and $4.35.

But while Wall Street has warmed to Wal-Mart’s significant (if expensive) new focus on digital sales and its willingness to take on Amazon, not everyone is so sanguine about its prospects. And not just because Wal-Mart can’t beat Amazon at Amazon’s game (though that’s part of it), says Nick Egelanian, president of retail development consultants SiteWorks International, but also because Amazon’s game isn’t really “retail” in the traditional sense.

While Egelanian agrees that the U.S. is over-stored in retail, he doesn’t believe that means brick-and-mortar retail is over. Egelanian believes that many analysts and retailers themselves are over-estimating the potential of e-commerce to yield profits. And Wal-Mart isn’t likely to raise its prices in order to make it work, he told Retail Dive.

“The internet couldn’t possibly be hurting Wal-Mart,” Egelanian told Retail Dive. “Go to any Wal-Mart and look at anyone shopping at Wal-Mart and you’ll find very few [Amazon] Prime customers. What Amazon is really good at is promotion and distribution — they can’t make money. Look at the core competencies of Wal-Mart — there’s no catching up to Amazon. There is no way there is a pro forma that could exist on that Wal-Mart campus. There is no path to profit in e-commerce for Wal-Mart as sure as I am sitting here.”

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Filed Under: E-commerce Corporate News
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