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Is Walmart’s HQ reorg a good thing or cause for concern?
Walmart is laying off workers as part of a reorganization of its corporate staff.
The decision, initially reported by The Wall Street Journal, comes on the heels of reducing its forecast for the current quarter and the year. The retailer is looking to promote and move inventory in overstocked categories at a time when its customers are spending a greater percentage of their shopping budgets on low-margin staples and cutting back on higher-profit discretionary products.
One person speaking anonymously to the Journal said that about 200 jobs at the company’s headquarters would be affected. Walmart has begun notifying employees of its plans. Personnel in global technology, merchandising and real estate will be among those needing to look for new jobs.
Walmart has confirmed the layoffs, but not the specific amount. It has also balanced the bad news of layoffs with hires in other departments, including ad sales, e-commerce, health and wellness, and supply chain operations.
The retailer said the changes it is making will “better position the company for a strong future.”
Anne Hatfield, a Walmart spokesperson, told CNBC that the restructuring is intended “to make sure we’re aligned” with changing shopper and customer behavior.
The retailer expects that its sales growth will slow against 2021’s high comps. Walmart expects that U.S. sales will be up three percent, excluding fuel, in the second half of the year. The company said its operating income for the second quarter will fall 13 to 14 percent. Operating income for the full year is expected to decline 11 to 13 percent.
Walmart is not alone in having cut its forecast. Adidas, Best Buy, Gap, Kohl’s and Target have lowered expectations for the year as they too seek to move excess inventory and find the right mix to address new realities that are causing many consumers to modify their shopping behaviors in subtle or dramatic ways, depending on their financial situations.
CEOs such as Best Buy’s Corie Barry have sought to assuage concerned investors that current challenges are manageable.
“While our financial results are not where we expected them to be this year, our sales continue to be higher than they were pre-pandemic,” said Ms. Barry, last week in a statement. “We remain a strong, profitable company with a unique position in an extremely innovative, vibrant industry that is more relevant than ever in the lives of consumers.”
- Walmart Lays Off Hundreds of Corporate Workers – The Wall Street Journal
- Walmart lays off corporate employees after slashing forecast – CNBC
- Walmart Inc. Provides Update for Second Quarter and Fiscal Year 2023 – Walmart
- Can Walmart roll back inflation? – RetailWire
- Best Buy cuts forecast in glass half full announcement – RetailWire
- Best Buy Provides Update on Second Quarter Performance and Fiscal 2023 Outlook – Best Buy press release
Discussion Questions
DISCUSSION QUESTIONS: What is your take on the layoffs taking place at Walmart? Do you expect that other retailers will be making similar moves in the months to come?
Poll
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DeAnn Campbell
Head of Retail Insights, AAG Consulting Group
Given the scale of Walmart this is a trim rather than a massive cut. However it shows that conditions are now tighter and profit growth more elusive. Against that backdrop all retailers will be assessing labor requirements, which is a big cost center. The signal this sends is not a good one. Despite recent economic issues, the labor market has been relatively robust. 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.
Even the most successful companies need to recalibrate, and this is a good example. While it’s sad to see anyone lose their job, this is likely not a result of business conditions since Walmart’s results are still strong and it’s a very profitable company. The headlines have been filled with retailers (and other businesses) laying off employees and I expect this will continue in the months to come. Sadly it’s all part of the ebb and flow of business — and life.
Walmart Corporate Layoff Quick Take: This non-recession recession ain’t going away any time soon!
From what I can gather, this is roughly a 2 percent head count reduction at Walmart’s home office. Not a huge number (unless, sadly, you are one of the people who lost your job) but certainly a signal that some belt-tightening is called for given the earnings warnings from Walmart and others.
Worth watching: Will Walmart reduce its store employee base, or the number of employees in its distribution centers? That’s where the vast majority of its associates work.
Layoffs are never a fun topic to discuss because it affects families and livelihoods, but the small number reflects a constant task of aligning skill sets to ever-changing marketplace dynamics. I hope this is a one-and-done for Walmart, but fear that our full-swing recession is going to have similar impact on other retailers like Walmart.
Walmart is just like any other business – they have to review the overall picture and make adjustments when conditions change, either positive or negative. This is not a surprise.
From my perspective the timing is awful, coming on the heels of the forecast slashing but, as Neil said, it’s a trim — not a “slash.”
I can think of a multitude of reasons why a trimming is a good idea, but I guess Walmart was trying to toss out all its bad news at once. That’s one thing companies do when they’ve had a rough go — toss out all the issues and appear to clean the slate.
A small cut designed to recalibrate as we come out of COVID-19 protocols and learn what positions are and are not essential. Sorry to hear, but nothing to be concerned about.
The entire retail industry has hit a major change point. Many longstanding companies have begun to make layoffs in their executive ranks, not for cost cutting but to enable fresh approaches to today’s unprecedented challenges. In order to become the hyper-flexible and unified company that retail consumers demand, entrenched thinking has to give way to new ideas. I see these layoffs as a sign that the industry has begun to make these foundational changes in their structure to position themselves for success in the next decade.
Lots of corporate HQ reorgs should be predictable at this point. A myriad of lessons were learned about the efficiency and effectiveness of different people and different job functions when the pandemic shut us down. Reorgs as a result of those lessons learned should not be at all surprising. Plus we now have the so-called non-recession and what looks like a year of inventory markdowns pressuring margins even more. So yeah, reorgs should be fairly predictable at this point.
Seems more like they’re shifting to meet current business needs than undertaking dreaded cutbacks, so this is business as usual. The press over-reacting is my take.
Economic conditions have provided a reflection period for corporations – many of which made major changes in the last two and a half years that they likely did not have time to process. Walmart is a prime example of this: Walmart.com today looks more like Amazon than it did years ago, and its in store operation is more like a warehouse/membership club with more self-service and the Walmart+ subscription. It would be concerning to stakeholders if Walmart did not announce layoffs after all this change.
Anytime Walmart makes a move the rest of the world takes notice. These changes will essentially gives other companies “permission” to make their own cuts. Look for the layoff activity to increase.
This is just a trim and an adjustment to respond to a longer-term change in consumer behavior that I’d expect any business to be making at this time.
Walmart is making small adjustments to its corporate staff in response to slowing revenue and forecasting of how their future business might change. It does not appear that Walmart is adjusting to a fundamental change in their business. Other retailers will be making similar adjustments as market conditions change. I anticipate revenue will be slowing as the full effects of the recession are felt which will cause additional staffing adjustments in the future.
I see it as a positive sign that Walmart is taking action to right-size and refocus as the market changes. They are working to remain as nimble as possible given their massive scale and continuing to evolve their business.
Walmart is often the barometer for the retail industry. These lay-offs are both unfortunate and an indicator of what’s on the horizon for retail in 2022 and early 2023.
More focus will be on maximizing opportunities to drive omnichannel sales in the back half and meet year-end revenue expectations. Given the market uncertainty and shifting consumer behavior, I’d say expect more news like this to come.
Any business and technology transformation effort is a marathon and not a sprint-like experience. Even companies the magnitude of Walmart will conduct an analysis of their corporate structure and, unfortunately for those who have been impacted, there are rationalization efforts to position the company for continued growth and variability in our digital age.
There are plenty of trepidations and concerns about the health of our economy, the continued impact of inflation, and the macro-economic impacts of the war in Ukraine. In addition, the daily narrative about layoffs and organizational restructuring across the technology and retail sector is another sign of things to come as companies gear up for the potential recession.
Consumer confidence is a fragile thing and is often led by our emotions. The continued layoffs and overall concerns about job security will have an impact.
This is standard business as usual. Consolidate bad news so you only have to announce it once. The bad news is not so significant in this case as 200 layoffs is hardly noticeable across 2.3MM employees. There are at least 10,000 open Walmart jobs on Indeed.com right now. I still believe the retail sector is holding its own. There is still high demand for jobs and low unemployment across all industries including retail.
What might be interesting are comments from Walmart that these positions are “updating and evolving” suggesting that technology is at play, maybe AI or more efficiency in merchandising. Robots taking over corporate jobs is a much more viable picture.
It’s a “telltale” sign. The two short term profit levers: payroll and marketing. Payroll: headquarters then field. Marketing: promotional then branding.
No doubt WMT’s core customer is experiencing spending restrictions due to inflation. And WMT’s clearance-driven inventory surplus will detract from profit. The unemployment rise will be problematic for the Fed.
Fasten your seatbelts, it’s gonna be a bumpy night.
Walmart has more than 2M employees … 200 is less than one one-hundredth of one percent of this total; granted, every one of them doesn’t work at the HQ, but I think we all get the idea: this isn’t even a “nothingburger,” it’s a nothingburger wrapper.
Save your “thoughts and prayers” for the laid off … the company itself is just fine.