Like most brick-and-mortar retailers, Walmart has seen a slump in its sales during the past few quarters. And while every retailer will have its peaks and valleys, Walmart has reached a point that calls for some drastic measures.
As many as 500 employees of the retailer’s Bentonville, Arkansas headquarters are expected to be laid off as soon as this week, people said to be familiar with the matter told The Wall Street Journal under condition of anonymity.
With labor prices increasing due to pressure to raise the minimum wage, which Bloomberg View estimated would give approximately 500,000 store associates at least $10 per hour wages by February, layoffs could free up resources not only to pay for compensation increases, but also for improvements to customer service and eCommerce efforts that have proven successful to date.
In an August earnings call, Walmart CEO Doug McMillon hinted that cuts would be coming despite Walmart’s insistence on growth.
“For the back half of the year, we will manage these items closely with a continued commitment to efficiency, cutting costs where appropriate, even in a period of investment,” McMillon said, as quoted by Fortune.
Reuters explained that the investment McMillon referred to was the roughly $1 billion earmarked for bankrolling wage increases for store associates. The company’s stock is still down 26 percent since January 2015, though, which could explain the decisive moves being made at Walmart HQ.
While layoffs may be more headline-worthy, Walmart has also turned its increasingly frugal eye onto the suppliers that helped it rise to the top of the retail heap. Through charging storage fees and adjusting its payment schedule for partnering suppliers, Walmart has sent clear signals that it is time to tighten its retail belt.
Walmart is scheduled to hold its annual conference with analysts and investors in late October, though it’s unclear if the layoffs will be made official before that meeting.
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