Wal-Mart to Remove Zone Managers in Store Overhaul - Analyst Blog

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Retail giant Wal-Mart Stores Inc. WMT announced that it is eliminating the job position of zone managers from its U.S. stores in an effort to streamline its operations. The change will affect around 14,000 employees, as there are generally about six zone managers per store. The company will re-assign these zone managers as assistants and department managers with no changes in their pay structure, Bloomberg said.

The zone managers own responsibility of several departments, which may include overseeing the pharmacy, health or beauty-product sections. The position was created in addition to individual department managers to improve efficiency and customer service and hence sales.

However, the Bentonville, AK-based company reportedly found that department managers better understand and interact with shoppers instead of zone managers.

The decision to remove the zone managers' post is thus justified on part of the retailer, as it has been working to improve customer service. The move is expected to reduce bureaucracy, improve customer service, and will give more responsibility to front-line workers.

In addition to the shift of zone managers, the world's largest retailer stated that it has plans to add 7,000 to 8,000 department managers as part of an overhaul of its store operations. Increasing the number of department managers will help the company better understand customers' needs. The company is expected to complete the changes by mid-June.

We note that Wal-Mart is undergoing a turnaround plan in order to improve its sales, business operations and customer service. As part of the strategy, the company expects to strengthen the roles of the department managers and will raise the starting wage for some of these positions to at least $13 an hour this summer and at least $15 an hour early next year, as was stated in the open letter to employees in February.

Walmart also stated that it will raise entry level wages to at least $9 an hour this month and to at least $10 an hour by Feb 2016. In addition, the company would spend around $1 billion to raise wages of approximately 500,000 full-time and part-time associates at Wal-Mart U.S. stores and Sam's Clubs in the first half of fiscal 2016. (Read: Wal-Mart Pay Raise to Put Pressure on Other Retailers ).

The strategy also involves addressing other perceived weaknesses such as poorly stocked shelves or stale grocery offering. (Read: Wal-Mart Working to Improve Grocery Offerings ).

It is encouraging that Wal-Mart has been vigorously working on improving its shopper trends through these initiatives. The company also believes that assigning ownership of work to department managers will help to retain good employees in a restricted labor market.

Zacks Rank

Wal-Mart has a Zacks Rank #4 (Sell).

Some better ranked stocks in the retail sector include The Kroger Co. KR , The Fresh Market Inc. TFM and Whole Foods Market, Inc. WFM . While Kroger sports a Zacks Rank #1 (Strong Buy), Fresh Market and Whole Foods Market hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: WMT , KR , TFM , WFM

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