As per media reports, retail giant
Wal-Mart Stores Inc.
) announced that it is eliminating 2300 employees at its Sam's
Club warehouse division in an effort to streamline its business
structure. The job cuts have been aimed at assistant managers and
some hourly workers like phone attendants.
Wal-Mart assured that the workers receiving notices will
continue to get paid for the next 60 days. In the two-month time
period, the workers may apply for a job at Wal-Mart or in other
areas of Sam's Club operations. On failing to secure a position,
they will receive severance after 60 days.
The decision to lay off employees came on the back of the
company aiming to streamline management at clubs and improve
operations. The company believes that rightsizing the number of
managers per club in accordance with revenues earned will
well-position the company for future growth.
Sam's Club pulled in $14.1 billion in sales during its third
quarter fiscal 2013 ending Oct 25, up a paltry 1.1% from the
prior-year quarter. Sam's Club comps grew 1.1% in the quarter as
positive traffic increase was offset by a decline in average
ticket. Same-store sales growth was within the guidance range of
flat to 2.0%, but lower than 2.7% recorded in the prior-year
quarter due to a tough retail sales environment.
The company expects the challenging sales environment and
currency headwinds to continue to hurt fourth quarter fiscal 2014
results as well. For the fourth quarter of fiscal 2013, Sam's
Club comps are expected to range between flat and 2%, lower than
1.8% in the prior-year quarter. However, Sam's Club remains on
track to open 15 new clubs in fiscal 2014, adding to its current
total of 630.
Wal-Mart is not the only retailer to cut its workforce. It
follows a string of announcements from other retailers which are
trimming their head count. Last week, specialty retailer
) announced that it would lay off 475 employees worldwide to
reduce costs. In early January,
J. C. Penney Co., Inc.
) also announced layoffs as part of their cost-cutting
initiatives. Macy's said it would cut 2,500 employees from its
U.S. workforce; J.C. Penney indicated that it would close 33
stores and remove 2,000 positions.
The layoffs announced across the board in the retail sector
were a function of a weak holiday season sales. We note that the
holiday season has been a particularly tough one for many
retailers like Wal-Mart because of the competitive promotional
These retailers struggled in vain to lure budget-constrained
consumers. They also trimmed their forecast due to
lower-than-expected sales and margin pressure. Wal-Mart lowered
its fiscal 2014 earnings guidance in view of a challenging sales
environment and currency headwinds. Currently, Wal-Mart holds a
Zacks Rank #4 (Sell).
PENNEY (JC) INC (JCP): Free Stock Analysis
MACYS INC (M): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
To read this article on Zacks.com click here.