Walmart joins others in cutting corporate jobs to offset consumer spending shifts due to inflation

04-Aug-2022 - Last updated on 04-Aug-2022 at 14:08 GMT

Source: Walmart

A week after warning of falling profits due to consumers pulling back on spending to offset rising food and gas prices, Walmart is laying off hundreds of corporate staff in a move some fear signals a cooling job market and increased risk of recession.

The retailer began notifying employees in its Bentonville, Ark., headquarters and other corporate offices this week as part of a larger restructuring effort that it says will eventually lead to new jobs in emerging areas that have become competitive flashpoints for industry players.

Around 200 of the 1.6m employees at Walmart will lose their jobs, according to media reports, as the retailer says it seeks to update its structure and clarify “evolving select roles” to “better position the company for a strong future.”

The retailer adds it plans to invest more in e-commerce, technology, health and wellness, supply chain and advertising sales. In addition, it will create jobs to better serve customers and suppliers.

The move comes as the Fed takes dramatic steps to cool the US economy, which has seen skyrocketing inflation – especially in prices for food at home and gas – driven in part by labor shortages. Demand for qualified workers have pushed many employers across segments to raise wages and offer other incentives that ultimately increase overhead costs that are then passed along to consumers, creating a spiral.

Within manufacturing, wages have increased well above the national average at about 5.9% compared to 5.1%, according to the Consumer Brands Association, which adds this increase isn’t enough to attract sufficient candidates to fill the CPG industry’s needs.

According to the June Bureau of Labor Statistics report, about 6,600 CPG were added in the first official month of summer, but as CBA notes this is not enough to fill the approximate 113,000 industry openings.

Managing margins becomes more challenging

The imbalance between the unfilled jobs that are necessary to sustain production and keep supply chains open and the need to reduce overhead costs to ease margin pressures is reflected in Walmart’s announcement and the layoffs concentrated on white-collar jobs.

The retailer’s decision to layoff staff in some areas and plan to hire more in others follows its unexpected and out-of-cycle warning last week that its profits would come in lower than expected for the quarter and fiscal year because consumers are shifting and tightening their spending in response to inflation.

Walmart explained that double digit price hikes in food and gas prices are causing some shoppers to pull back on spending in other areas, including apparel – forcing it to take more markdowns to move inventory in some segments. At the same time, the retailer has been adamant about keeping down prices for essential products, including most groceries.

The announcement last weeks didn’t ruffle many feathers in the food and beverage segments, which generally are considered recession-resistant if not recession-proof. But today’s announcement suggests that the repercussions of inflation may be farther reaching than anticipated – especially because Walmart is not the only one taking such extreme measures.

Target also recently cut its outlook as it tries to right-size its inventory through unanticipated promotions that are squeezing its margins, and other major employers in other segments are preparing to cut thousands of workers, including at Ford Motor, Microsoft, Netflix, Tesla and others.