Rumors continue about deep job cuts at Wal-Mart, Sam’s Club HQ

Rumored corporate layoffs at Wal-Mart and Sam’s Club offices in Bentonville persist, with five sources each telling The City Wire on Wednesday (Sept. 23) that the retail giant will begin handing out pink slips as early as this Friday and continue through the fiscal quarter which ends Oct. 31.

This is a matter of simplification in a corporate structure that Wal-Mart CEO Doug McMillon told analysts in June that had become too bureaucratic. The City Wire first reported in early July the impending layoffs, which were expected to number up to 1,000 or roughly 5.5% of the corporate workforces of Wal-Mart and Sam’s Club. Wal-Mart has not confirmed, nor denied any specific number of jobs that may be eliminated among its corporate ranks this year.

“For any company of our size and scope it’s a natural course for us to review our management structure from time to time as we work toward better efficiencies and getting closer to our customers,” said Greg Hitt, vice president of corporate communications. 

When asked about the rumored layoffs, Hitt said, “I am not aware of anything imminent.”

This would be the second layoff among Wal-Mart’s corporate ranks this year after 50 positions were eliminated in February. Insiders reiterated to The City Wire Wednesday that many of the positions at risk involve marketing and lower-to mid-level management. 

McMillon and Walmart U.S. CEO Greg Foran have said many times their focus is to create a more efficient operation. McMillon has said the top priority of the home office is serve the stores. 

“There are no cash registers in the home office,” McMillon told analysts in June.

A home office restructure at Wal-Mart and Sam’s Club also is on trend with what other retailers are doing. Target, recently announced 1,700 jobs eliminated at its corporate headquarters in Minneapolis. That came on the heels of 1,500 jobs cuts announced in January. Dallas-based J.C. Penney cut 300 corporate jobs earlier this year, and last week American Apparel announced plans to slice $30 million in operating expenses over the next 18 months with corporate layoffs and store closures.

The timing of a fairly large layoff makes sense given McMillon’s efforts run a tighter ship. He also shook up the top management at Wal-Mart since taking over as CEO two years ago. Many wonder if Sam’s Club will be next given the weaker performance quarter-to-quarter for the past several years.

Any time a major employer trims its workforce there are ripple effects through the local economy. Benton County was recently tagged as one of the fastest income growing metros in the country, no doubt because of Wal-Mart, Sam’s Club and the retail mini-sector that surrounds it. So when higher-income jobs are eliminated in a region like Northwest Arkansas there is cause for concern.

Dr. Greg Hamilton, senior research economist with the Institute for Economic Advancement at the University of Arkansas at Little Rock, conducted an impact analysis on the possible layoffs. He looked at the impact of losing 100 high-paying jobs and 900 lower-paying jobs. In this scenario, Hamilton estimates there would be a $48.879 million negative impact to the local economy. He projects that 391 additional jobs would be lost in the region as a result of the Wal-Mart layoffs.

When 200 high paying jobs were cut and 800 other corporate positions eliminated, Hamilton projected a negative regional impact totaling $39.865 million, as well as 331 additional job losses as a result.

The last time Wal-Mart made large corporate cutbacks was in February 2009. At that time between 700 and 800 salaried employees were let go with severance pay. Those layoffs did have a negative impact on the local region, but economists point out that the overall economy is much stronger today than it was on the heels of the recession.

Consultants to the region’s supplier community have said while that sector is growing, there is no way it can absorb a massive layoff at Wal-Mart. In fact, depending on what jobs are eliminated at the retailer, the larger suppliers could also shift assets and personnel accordingly. 

Jeff Collins, an economist for The City Wire and former director of the Center for Business and Economic Research at the University of Arkansas, said other factors will reduce or inflate the impact of the rumored job cuts. Those factors include the number of jobs cut through attrition, job freezes, and how many of the high-paying layoffs are among those near retirement age. He also agreed that job cuts are never a good thing, but job growth trends in the Northwest Arkansas economy could help absorb the impact.

In terms of overall economic activity of the region, the impact of a $47 million reduction is less than 1% – 0.19% – of the gross domestic product of the metro area.

“On the margin the impact is real but it is on the margin. The BEA (U.S. Bureau of Economic Analysis) estimated FSR (Northwest Arkansas) Metro GDP at roughly $24 billion in 2013. The loss is a relatively small percentage of annual area GDP,” Collins said.