Dive Brief:
- Walmart has begun laying off some of its employees following the cut to its profit outlook issued last week. “We’re updating our structure and evolving select roles to provide clarity and better position the company for a strong future,” Walmart spokesperson Jimmy Carter said by email.
- About 200 corporate employees are affected, according to a source familiar with the situation. Including store associates, the company employs about 2.3 million people globally, about 1.6 million of them in the U.S.
- The Wall Street Journal reported that the roles were in merchandising, global technology and real estate. Walmart’s Carter said the retail giant is “investing in key areas” including e-commerce, technology, health and wellness, supply chain and advertising.
Dive Insight:
Stories of layoffs at retailers have grown in number in recent weeks. Victoria’s Secret last month similarly announced a restructuring that involves downsizing its workforce by 5%, in June StockX laid off 8% of its staff and Stitch Fix laid off 15% of its salaried workforce, and DTC brands Glossier and Allbirds announced layoffs just this week.
Retail is switching from struggling to fill jobs to trimming costs by downsizing operations, in part because inflation is making it difficult to raise prices, according to GlobalData Managing Director Neil Saunders, who noted in emailed comments that labor is one of the biggest expense items on the balance sheet.
“Most of this is happening in central functions and at headquarters rather than on the shop floor, although there is increasing caution about taking on new staff at all levels,” he said. “The dramatic change has been caused by growing pressure on retail bottom lines which, in turn, is a consequence of inflation, ongoing supply chain issues, and inventory problems.”
The cuts reported by Walmart on Wednesday amount to a lower percentage of its workforce than the plans at most of the retail companies so far. There isn’t much to cut, considering how frugally the company is run, and some of the reductions make more sense than others, according to Saunders.
“There are some functions such as technology where changing priorities after the ecommerce boom slowed mean that some thinning down is prudent,” he said. “Other departments require more care. Reducing headcount in merchandising can be done without too much short-term pain, but this is an area where – at least in non-food – Walmart needs to up its game and cutting too much could cause long term damage.”
The company’s new focus on areas like e-commerce, health and wellness, and tech follows a playbook similar to that at Amazon, whose revenue and profits mostly come from subscriptions, cloud services, logistics and advertising rather than retail. Meanwhile, though rival Target also slashed its guidance twice recently, Wells Fargo analysts this week said that retailer is poised to rebound this year thanks to prompt action to work through an inventory glut.
It remains to be seen if that holds, as Walmart’s news portends bad news for the wider economy, Saunders said.
“Despite recent economic issues, the labor market has been relatively robust,” he said. “However, as more and more retailers – and other businesses – feel the bottom line impact of a slowdown, their decisions to reduce jobs could further sour the economy and consumer confidence with it.”
