Walmart Hiring More Workers to Help Boost Sales — Updated

Mega-retailer Wal-Mart Stores Inc. (NYSE: WMT) has denied as “blatantly false” reports that it has cut orders from suppliers as it works to reduce inventory. An earlier report at Bloomberg News said that Walmart had notified some of its suppliers that it will cut back on orders in the third and fourth quarters.

Walmart sales have been lagging for two reasons. First, customers are being more cautious. Walmart has only a limited ability to do something about that. Consumers have to eat and they have to buy basic goods, but everything else can be relegated to the remainder of disposable income.

Second, staffing in the stores is too low to keep the shelves stocked. This is a problem the company plans to address by hiring thousands of new permanent and temporary workers. Walmart announced earlier this week that it would add 55,000 seasonal employees in addition to moving 35,000 part-time workers to full-time status and 35,000 more temporary workers to part-time status. The 70,000 status changes are planned to occur in the next few months. Walmart also said it will keep the 70,000 employees on the payroll after the holidays.

The company knows that it has no choice but to keep products on its shelves. And the local store employees are the sharp end of the spear. Costs will rise, but Walmart is betting that having products on the shelves will more than make up for the incremental wage costs.

Unlike Costco Wholesale Corp. (NASDAQ: COST) which has adopted a higher-wage, lower-staffing model, Walmart promotes a wide range of merchandise when customers come to the store, and to fulfill that promise takes a lot of hands. That also requires more inventories with longer turnover periods.

Walmart also has to beat back the challenge from Amazon.com Inc. (NASDAQ: AMZN), where a customer can buy virtually any item at any time, day or night, without leaving home. That kind of attention to customers is expensive in a bricks-and-mortar store. It is also safe to say that Wal-Mart’s online sales presence has been far less than highly visible, and Wal-Mart has been unsuccessful in chasing the gains that Jeff Bezos has made inside Amazon.