In something of an overstatement, McMillon said the job cuts will make Wal-Mart, which claims about 2.2 million employees worldwide, a “more nimble organization that serves customers better.” According to a copy of the memo obtained by Fortune magazine, McMillon said:
Our customers are changing, retail is changing and we must change. We need to become a more agile company that can easily adapt to shifting customer demand. After months of evaluation, we’ve concluded there is an opportunity to better position our Home Office teams to move with speed and purpose. This results in 450 associates being displaced today.
McMillon’s memo continues:
This is an important time in our history—requiring all of us to think critically about our business and not be afraid to challenge the status quo. For the company, this in part means pulling back in some areas and investing in others.
Walmart’s sales growth has been slow, and profit growth is even slower. Part of the problem, of course, is the company’s sheer size. Revenues in the second quarter rose just 0.1% year over year, and operating income was down 10%. U.S. e-commerce revenues contributed only about 0.2% of total revenues, even though e-commerce revenues rose 16%, compared with a total U.S. sales increase of 4.8%.
Moving the needle on a company the size of Wal-Mart is going to take more than double-digit increases in its e-commerce business. Likewise, the company’s small-footprint Neighborhood Market stores posted a same-store sales gain of 7.3%, compared with a same-store sales gain of 1.5% overall in the United States. A significant increase to a small base simply cannot make enough of a difference.
One might also argue that cutting 450 people from a total of 2.2 million, while it’s a start, is unlikely to improve Wal-Mart’s bottom line.
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Shares traded down about 0.5% in the noon hour Friday, at $63.95 in a 52-week range of $61.50 to $90.97. At the same time the DJIA, which traded down as much as 1.6% earlier in the day, had moved back to about 0.12% below the break-even line.
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