retail news in context, analysis with attitude

Bloomberg reports that Walmart is adjusting its store level organizational structure, “removing about 3,500 store co-managers, a salaried role that acts as a lieutenant underneath each store manager, according to people familiar with the move. It’s also adding about 1,700 assistant store managers, a slightly lower-paid role, who will oversee fast-growing areas like online orders, one of the people said.”

The move, the story says, “aims to weed out poor performers and create clearer paths to leadership, part of broader efforts to make Wal-Mart more efficient.”

Walmart released the following statement: “Retail is changing rapidly, and we are transforming to meet the needs of our customers. To help compete and win in this environment, we must make changes across our company to enable further investments in our strategic business priorities and growth.”

Bloomberg writes that “stores will now be allocated a certain number of co-managers depending on their sales volume. Previously, supercenters that typically generate more than $100 million in annual revenue could have had as many as four co-managers. Now, smaller stores under $80 million in annual sales won’t have any co-managers; mid-sized locations between $80 million and $90 million will have one; stores from $90 million to $125 million will have two; and the highest-volume locations will have three.”
KC's View:
I want to try to be fair about this, especially because I saw some commentaries refer to this as being part of “a pretty thin short-term con” by Walmart … because it came on the heels of its announcement last week of an increase in its US minimum wage to $11 an hour, bonuses of $1,000 to employees who have worked for the company for a minimum of two decades - and as simultaneous decision to shut down more than 6o Sam’s Club stores, or half the chain, which put thousands of people out of work.

I’m not sure calling it a “con” is entirely fair - though I do think that the company at the very least is sending mixed messages that undercut its position that it was able to be far more generous because of changes in US tax law. One person’s generosity is another person’s pity payment, and there was one analysis that said Walmart’s moves represented a whopping five hours of sales in its US stores.

From the beginning I’ve been skeptical of the impact of the new tax law, largely because I don’t think it addressed - or even could address, for that matter - the core cultural problem at most companies - that CEOs are compensated based on how high their investor dividends are and low low their labor costs are.

There is an argument out that that even the companies that have said they are benefitting from the tax law changes are making moves that are at least partially cosmetic. Maybe mostly cosmetic.

AT&T announced bonuses, then cut more than 4,000 jobs. Carrier said it would keep 1,000 jobs in the state, but then eliminated hundreds of those jobs through automation. And there’s Walmart.

It looks bad. It looks pretty cynical. And maybe it is. But let’s also be fair about one thing. Regardless of all the tax cuts, certain kinds of change continue to take place in a wide variety of business sectors. Automation isn’t going away, for example; in fact, it is gaining steam. And in the case of Walmart, when you eliminate all the other noise, certain things remain immutable facts. E-commerce is changing its business model, and Amazon is a growing threat. And so, if it sees that a membership club model such as Sam’s is less relevant in an Amazon world, it makes sense to cull out the dead wood and get more efficient.

Note that 10 of the Sam’s being closed are becoming e-commerce distribution centers. When you see that decision within the context of the job cuts and reassignments, the narrative becomes pretty clear - the company needs to get leaner and more customer-focused, and getting rid of bureaucracy and outmoded buildings is a big part of that.

Is some of the political tax cut talk a little hypocritical, or at least ill-advised and maybe a tad opportunistic? Sure. I’d buy that. But I also think that the narrative here, at least as I understand it, makes sense for Walmart, which can’t compete by doing things the way it always has done them.