retail news in context, analysis with attitude

In advance of meetings with Walmart senior executives this week, at which the company’s leaders are expected to lay out their strategies and tactics for reviving the chain’s stagnant US same-store sales, a number of investment analysts met with current and former Walmart employees who laid out their assessment of the company’s problems.

According to a report on the meeting released by the employees, they charged that Walmart’s low-cost approach to doing business has created a “vicious circle” resulting in nine consecutive quarters without any sort of sales growth.

“Walmart is facing significant challenges as competitors are squeezing the company from all sides and same-store sales in U.S. are down year over year,” the statement said. “Management's single-minded focus on cost cutting has led to pervasive understaffing. This short-handedness, combined with the computerized management initiatives imposed by the Walmart home office, in turn leads to many long lines at the register and bare shelves as restocking lags. The shopping experience deteriorates for many customers, leading some not to return. That translates into lost sales, further increasing pressure to keep costs down-and the cycle repeats again.

“The consensus inside and outside Walmart is that the company needs to change its approach,” said Greg Fletcher, a current Walmart associate from Duarte, CA. “The only way to break the vicious circle and increase profits is to invest more in workers and listen to what we are saying about how to improve store operations.”

Among the specific observations made by the employees:

• “Lower staffing levels implemented during inventory rationalization efforts, such as the ‘Win, Play, Show’ (WPS) initiative, remain even after the company abandoned WPS and added back SKUs to the assortment. This is leaving many stores dramatically understaffed, with many over-burdened employees unable to move inventory out of the supply room onto the sales floor. Even when inventory does make it onto store shelves, some employees are forced to cut corners at cash registers, undermining the company's point of sale data.”

• “Training is virtually non-existent for many new associates, because many of them don’t have time to learn the company’s systems while completing their assigned tasks in the time required by the company’s computer systems.”
KC's View:
Now, these employees aren’t just interested in Walmart being more profitable because they are altruists, or because they own stock - their stated goal is to get the Bentonville Behemoth to pay its employees more, which they say will translate into higher productivity and greater effectiveness.

What’s interesting to me about this is that many of the problems these folks are pointing out are the same ones that I hear about in emails both from Walmart employees and outside observers ... especially the lack of focus in the stores and persistent out of stocks.

Let’s see what Walmart says in its meeting with the analysts. I suspect they won't be announcing any across the board salary increases, but the other issues will be more difficult to deny.