Walmart faces inflation, overstocking, and overstaffing

  • Walmart has eliminated hundreds of corporate roles.
  • The company has repeatedly sounded the alarm about inflation and economic uncertainty.
  • Given Walmart’s influence and reach, its struggles could portend industry-wide struggles for retailers.

Walmart caused a stir on Monday when it laid off about 200 company employees — a move that suggests the retail giant is turning around to cope with falling profits and an uncertain economic climate.

But it wasn’t the first sign of recent troubles for Walmart. From inflation to overstocking to overhiring, the world’s largest employer has been on its heels throughout 2022 after nearly two years of pandemic highs.

“A 200 job cut isn’t material in the context of a huge employer like Walmart,” John Zolidis, the president of Quo Vadis Capital, told Insider. “However, the campaign does not send out a feel-good message about the business. Nor does it suggest a duplication of the kind of incremental investments needed to build capacity and fuel growth.”

As the largest brick-and-mortar retailer in the United States, Walmart has a significant influence in the industry. It seems the Arkansas-based retailer isn’t alone in its current struggles. Big-box competitor Target has also said it will rely on deep discounts to shed excess inventory, loungewear, housewares and electronics. And convenience store chain 7-Eleven recently cut at least 900 jobs at the company.

Here are three factors that have plagued Walmart all year that preceded the company’s layoffs.

inflation

At the start of the pandemic, inflation proved to be a boon for big-box companies. Soaring prices across the country prompted shoppers to favor discount and value-based retailers like Walmart.

Philip Melson, customer partner at Fractal Analytics, told Insider in November 2021 that Walmart “appears confident that it has the scale needed to absorb inflation well enough not to pass significant price increases on to its customers.”

But prices have continued to rise to a point where Walmart customers are slashing their budgets and focusing only on basic groceries. The need for grocery spending coupled with high gas prices prompted Walmart customers to avoid spending on general merchandise at the retailer.

“Rising food and fuel inflation is having an impact on customer spending,” Walmart CEO Doug McMillon said in a statement in late July, just as Walmart cut earnings guidance.

overstock

Higher prices and supply chain issues have forced Walmart to stock far too many products that the company can’t sell fast enough.

After the retail giant reported a 32% rise in inventories late last quarter, store-level employees told insiders horror stories from their backrooms — including countless pallets making floors unwalkable, towering crates blocking access to private nursing rooms and bathrooms, and outdoor trailers filled with overstock.

Behind the scenes, Walmart Corporate has been scrambling to deal with this overstock, especially ahead of the holiday season. In late July, an internal memo to store managers said Walmart was allowing stores to turn off their automatic stock ordering systems to reduce excess inventory.

And when Walmart announced its change in earnings guidance, the company ordered store managers to clean up bloated inventories with rollbacks and markdowns.

overstaffed

Other strategic decisions that benefited the retailer early in the pandemic also proved problematic in 2022.

Like its peers, Walmart embarked on a massive hiring push in late 2021 to address staffing shortages related to COVID-19. On the company’s May conference call, McMillon disclosed that these “weeks of overstaffing” hurt the chain’s bottom line.

“As the number of Omicron variant cases fell rapidly during the first half of the quarter, more of our employees who were on Covid furlough returned to work faster than expected,” he said. “We hired more staff late last year to cover the holiday makers so we ended up being overstaffed for weeks. During the quarter, this issue was primarily resolved through attrition.

In the business world in general, several large companies have reported “overstaffing” as a problem and initiated layoffs to rectify the problem.

Are you a Walmart employee who has been fired or do you know someone who has been fired? Email [email protected] or [email protected] or contact us on the encrypted messaging app Signal +1 (703) 498-9171.

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