Wal-Mart (WMT) Commences Planned Layoff to Reduce Cost

As per Was Street Journal, supermarket giant, Wal-Mart Stores Inc.WMT initiated its layout strategy and is underway to cut nearly 1,000 corporate jobs, as was announced earlier this month . Wal-Mart is eliminating jobs, mostly in the human resources department, as an attempt to reduce its cost. This move is in sync with the retail giant's efforts to streamline stores and make them more efficient.

The layoff is expected to affect employees involved with the company's supply chain.

Further, media reports state that several top executives are planning to leave the company. Wal-Mart plans to reshuffle responsibilities for others to focus on eCommerce and store operations.

Since the beginning of 2016, Wal-Mart has trimmed a large part of its workforce in order to reduce cost. The company plans to invest the savings to boost eCommerce sales and improve existing stores, areas that are expected to provide growth in the future.

Wal-Mart along with other companies in America is trying to establish a balance between their obligation to investors in developing a leaner and efficient operation as well as meet Trump's new administration's requirement of achieving higher U.S. job growth.

Consequently, Wal-Mart has reportedly promised to create 10,000 new U.S. jobs this year. The new employees, including hourly workers, department managers and supervisors, are likely to be employed across the 59 new stores announced in Oct 2016.

Though it is creating new jobs, Bentonville, AR-based Wal-Mart, carrying a Zacks Rank #4 (Sell), has been grappling with near-term headwinds. Increased competition from traditional and online players and a slowdown in international operations, along with a strong dollar, are hindering sales.

In the past two years, the stock has exhibited a bearish run on the index. Notably in the said period, the stock has declined by 20.9%, underperforming the Zacks categorized Retail-Wholesale sector which showcased growth of 8.1%. Notably, the broader Retail and Wholesale sector is placed at bottom 6% of the Zacks classified sectors (15 out of 16).

Wal-Mart has also pledged to invest $2.7 billion on raising employees' wages and provide them with additional training in fiscal 2017. Under this initiative, the company increased its minimum wage from $9 an hour in Apr 2015 to $10 per hour in Feb 2016. The initiative of paying higher wages is expected to help reduce turnover and increase retention, but will also raise expenses of the retailer. Higher labor costs, along with the company's efforts to overhaul its stores and investment in its online operations, will weigh on earnings.

Stocks to Consider

Some better-ranked retail wholesale stocks from the broader sector, which investors can consider include Big Lots Inc. BIG , Dollar Tree Inc. DLTR and Foot Locker inc. FL , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 (Strong Buy) Rank stocks here.

Big Lots has expected long-term growth rate of 13.5%, Dollar Tree has a long-term growth rate of 17.8% and Nordstrom has an expected earnings growth rate of 9.7%.

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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.

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

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