- Walmart has nixed hundreds of corporate roles.
- The company has repeatedly sounded the alarm about inflation and economic uncertainty.
- Given Walmart’s influence and reach, its struggles could indicate industry-wide struggles for retailers.
Walmart made a major splash Monday when it laid off around 200 corporate employees – a move that indicates the retail giant is pivoting to deal with declining profits and an uncertain economic climate.
But it wasn’t the first sign of recent trouble for Walmart. From inflation to overstock to over-hiring, the world’s largest employer has been on its heels throughout 2022 after riding nearly two years of a pandemic high.
“A cut of 200 roles is not material in the context of a giant employer like Walmart,” John Zolidis, the president of Quo Vadis Capital, told Insider. “However, the action does not send a feel-good message about the business. It also does not suggest a doubling-down on the kind of incremental investment necessary to build capacities and drive growth.”
As the largest brick-and-mortar retailer in the United States, Walmart holds significant influence in the industry. It appears that the Arkansas-based retailer is not alone in its current struggles. Big box competitor Target also has announced that it will rely on deep discounting to rid itself of excess inventory, loungewear, home goods, and electronics. And convenience store chain 7-Eleven also recently cut at least 900 corporate jobs.
Here are three factors that have plagued Walmart throughout the year and that preceded the company’s layoffs.
Earlier in the pandemic, inflation proved to be a boon for the big box companies. Rising prices across the country pushed shoppers to favor discount and value-focused retailers like Walmart.
Philip Melson, client partner at Fractal Analytics, told Insider in November 2021 that Walmart “seems to be confident that it has the scale necessary to absorb inflation well enough to not pass on significant price increases to their customers.”
But prices have continued to climb to a point where Walmart customers are cutting their budgets to the bone, focusing only on basic grocery items. The necessity of grocery spending coupled with high gas prices led Walmart customers to avoid spending on general merchandise at the retailer.
“The increasing levels of food and fuel inflation are affecting how customers spend,” Walmart CEO Doug McMillon said in a statement in late July as Walmart cut profit guidance.
Higher prices and supply chain issues have forced Walmart to carry far too many products that the company can’t sell quickly enough.
After the retail giant reported a 32% increase in inventory at the end of last quarter, store-level employees told Insider horror stories from their backrooms – including myriad pallets rendering floors unwalkable, towering boxes that have blocked access to private breastfeeding rooms and bathrooms, and outdoor trailers stuffed with overstock.
Behind the scenes, Walmart corporate has scrambled to deal with this overstock, particularly before the holiday season. An internal memo to store managers in late July said that Walmart is allowing stores to turn off their automatic inventory-ordering systems to help mitigate excess inventory.
And as Walmart announced its change in profit guidance, the company ordered store managers to clean up bloated inventories through rollbacks and markdowns.
Other strategic decisions that benefitted the retailer early in the pandemic also proved problematic in 2022.
Like its competitors, Walmart undertook a massive hiring push to cover COVID-19-related staffing shortages at the end of 2021. In the company’s May earnings call, McMillon announced that these “weeks of overstaffing” hurt the chain’s bottom line.
“As the Omicron variant case count declined rapidly in the first half of the quarter, more of our associates that were out on Covid leave came back to work faster than we expected,” he said. “We hired more associates at the end of last year to cover for those on leave, so we ended up with weeks of over-staffing. That issue was resolved during the quarter primarily through attrition.
In the business world at large, multiple large companies have flagged “overstaffing” as an issue, and have embarked on layoffs to correct the issue.
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