story by Michael Tilley
mtilley@thecitywire.com
Wal-Mart Stores CEO Doug McMillon on Friday announced 450 corporate job cuts at the home office in Bentonville. The cuts have been rumored for several weeks, with McMillon noting in an e-mail to all employees that the cuts allow the home office to “move with speed and purpose.”
Greg Hitt, vice president of corporate communications for Wal-Mart, said the cuts were made after several months of evaluation and said it was a “fair and consistent process throughout.” However, it was not easy, he said.
“At the end of the day, the decisions that were made were not made lightly,” Hitt told The City Wire.
McMillon said the cuts were needed to move faster in the dynamic retail environment. Prior to Friday's move, the company employed around 19,000 in its home office region.
“Our customers are changing, retail is changing and we must change. We need to become a more agile company that can easily adapt to shifting customer demand,” McMillon said in his statement. “After months of evaluation, we’ve concluded there is an opportunity to better position our Home Office teams to move with speed and purpose. This results in 450 associates being displaced today.”
Hitt would not discuss at what level the job cuts were made or what departments may have been cut the most. Hitt also said he is not aware of any other round of job cuts at the corporate office. Hitt said laid off employees will receive 60 days of pay with benefits, and severance pay that is equal to two weeks of pay for each year of employment with the retailer. Job search assistance will also be provided.
The City Wirefirst reported in early July the impending layoffs, which were expected to number up to 1,000 or roughly 5.5% of the corporate workforces of Wal-Mart and Sam’s Club.
The paring down of corporate jobs aligns with other restructuring moves in the past year. Wal-Mart management has vowed to add lower level managers back its 4,500 stores as well as bump up hourly worker pay to the tune of a $1 billion impact to the retailer’s bottom line. The job cuts may also be a way to help lower expenses in the face of investments in the retailer’s e-commerce business. Analysts have said the company would have to find a place to cut costs to afford placing more people in stores and beefing up the e-commerce business.
The retailer in recent quarters has been unable to convert slight revenue gains into profits. Wal-Mart Stores posted second quarter net income of $3.475 billion, 15% below the same period in 2014 and well below the consensus of analyst estimates. Total quarterly revenue was $120.229 billion, just ahead of the $120.125 billion during the same quarter of 2014.
The company has lowered its full-year earnings guidance from a range of $4.70 to $5.05 per share to $4.40-$4.70 per share. The cost of higher wages, training and more store workers will pull 24 cents from per share earnings for the year, with 8 cents of that coming in the third quarter. Investments in e-commerce is estimated to lower full year earnings per share by between 6 cents and 9 cents.
Wal-Mart shares (NYSE: WMT) were moving lower in mid morning trading and are trading near the 52 week low. The share price closed Thursday at $64.27, and was down about 50 cents in the mid morning. During the past 52 weeks the share price has ranged from a $90.97 high to a $61.50 low.
STATEMENT FROM WAL-MART STORES CEO DOUG MCMILLON
“Today we are announcing structure changes that will impact people we care about. As a leader, these are some of the toughest decisions to make. While difficult, I believe these changes will help us become a more nimble organization that serves customers better.
“Our customers are changing, retail is changing and we must change. We need to become a more agile company that can easily adapt to shifting customer demand. After months of evaluation, we’ve concluded there is an opportunity to better position our Home Office teams to move with speed and purpose. This results in 450 associates being displaced today.
“We are grateful for their service. Taking care of them in this transition is a priority, and we are providing these associates access to services and resources that will help them find their next opportunity.
“This is an important time in our history – requiring all of us to think critically about our business and not be afraid to challenge the status quo. For the company, this in part means pulling back in some areas and investing in others.
“Today you will be hearing from your leadership about the changes occurring in your area. Please engage your leaders and have the courage to ask questions. We must be transparent with each other so we can begin the process of moving forward.
“As we move into the holidays, stay focused on serving our customers. I’m optimistic about our future and the work we will do together. Thank you for all you do every day for each other and our great company.”