Sam’s Club, the wholesale club arm of Wal-Mart is expected to cut 2300 jobs as a corporate exercise, but this may be indicative of other troubles for the multi-billion dollar retail corporation. Ever since it was founded in 1983, Sam’s Club has not been in the news as much as its parent company. It runs a quiet, non-controversial and profitable operation, delivering more than $56 billion in net sales in 2013—a growth of nearly 5% over the previous year. However, Wal-Mart’s decision to cut jobs at Sam’s Club seems to follow an industry trend that has seen competitors such as Target and Macy’s resort to cost-reduction layoffs. The nature of the layoffs at Sam’s Club appears to be targeting middle management with over a thousand assistant managers set to lose their jobs. Wal-Mart spokesperson Bill Durling issued a statement, “We’re rightsizing the number of managers per club, aligning it more appropriately to the revenue of the club.”
The latest round of layoffs at Sam’s Club may be a drop in the water for Wal-Mart, but could be indicative of other troubles. The mega-corporation employs over 2.2 million people around the world, of which nearly 116,000 work for Sam’s Club, and the cuts represent nearly 2% of the wholesale unit’s experienced staff. Cost optimization at Wal-Mart is almost a religious process bordering on an obsession with at least one or two significant layoffs every year. As a result, Wal-Mart spends millions of dollars hiring and training new employees around the world, the consequence of a turnover rate that is well above 40%, and expected to climb as share earnings remain volatile at best. For several years, Sam’s Club has quietly contributed to the parent coffers, recently breaking the $2 billion mark for operating income without significant staff additions. In the last six years, the wholesale unit has added a total of 5400 employees, a net growth of less than 1% and has delivered nearly $16.5 billion in sales. The numbers seem to indicate that Sam’s Club is doing something right—something that Wal-Mart may be undermining in order to offset its own rising costs. In addition to the 620 Sam’s Club stores at the end of 2013, there are nearly 25 new or upcoming stores that will certainly require the expertise of middle management employees who will now lose their jobs.
Wal-Mart has been in the news for several reasons over the course of the second half of 2013.The beleaguered parent company found itself in troubled waters over the outrage from its customers and employees when it asked store employees to donate to other employees who were perceived as being in need of financial support. Wal-Mart has also asked customers to make donations so that employees could “enjoy Thanksgiving dinner.” Amid growing criticism over product quality, customer service and slow checkout lines, the corporation also faced bribery charges over its Mexico operations and being labeled as one of America’s worst paymasters. As Sam’s Club employees brace for the layoffs that will see 2300 jobs axed, these cuts may be indicative of other strategic and tactical troubles at Wal-Mart. While this round may not seriously affect its performance, it is hoped that Wal-Mart will not transfer its woes to one of its most successful units.
By Grace Stephen