It is cause for worry when the world’s largest retailer cuts 11,200 people right after a rough holiday sales season. Wal-Mart will fire that many people at its Sam’s Club division.
The warehouse club says it will hire an outside firm, Shopper Events, to handle product demonstrations in the stores. Many of the people who will be fired are part-time workers.
Sam’s Club results have trailed those of the flagship Wal-Mart division. The parent company closed 10 Sam’s Club locations last week.
The news will lead to speculation that Wal-Mart same-store sales are flagging and that the company will miss expectations when it releases quarterly numbers, or that the firm’s forecast for future quarters will be weak. Wal-Mart is expected to post $1.12 EPS for its quarter ending this month. That is up from $1.03 for the same period last year. The harsh holiday retail season may have overwhelmed Wal-Mart’s chance to make those numbers. The layoffs at least show Wall St. that the retailer is aggressively managing costs.
The move will cause investors to fear that results from other large retailers like Sears (SHLD) and Costco (COST) will be below estimates. Unexpectedly weak sales would trigger another round of layoffs. They may not be as large as they were a year ago, but could still be in the tens of thousands.
Whether there is a real increase in consumer demand for goods sold at retail stores has been in question since December sales numbers were lackluster. Wal-Mart’s layoffs are a sign that there was no sharp upturn retail, at last as the year ended and that may continue well into the first half of this year.
Douglas A. McIntyre
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