Retailers Right-Sizing Amid 2014 Uncertainty

January 27, 2014

Revelations of job cuts at leading retailers, the latest involving Sam's Club, are a reminder that pro-active expense control remains retailers' best friend when it comes to ensuring profitability when faced with a murky outlook for consumer spending.

Sam's Club on Friday became the latest retailer to disclose plans to eliminate 2,300 hourly and middle management positions.  The move was characterized as a rebalancing of resources, according to Sam's Club spokesman Bill Durling.  Other retailers such as Macy's and Target also recently announced job cuts.

"In order to position ourselves for future growth, Sam's Club has made the difficult decision to implement a job reduction in our field organization impacting approximately 2,300 associates, or approximately 2% of associate population," Durling said.  We're doing this to rebalance our resources more effectively across our clubs to align our structure more closely to the current and future revenue of each club.  We are eliminating certain hourly positions, in some cases reducing the number of assistant managers, and in some cases creating new, more senior level positions."

Sam's operates roughly 630 clubs throughout the U.S., so the cuts equate to about four people per club.  However, in all likelihood few people will be left without work or a paycheck.  Sam's is giving affected employees their regular salary for two months and the opportunity to apply for other positions at Sam's or Walmart.  Those unable to secure a new position will be given an undisclosed severance package.

The net effect on Sam's overall workforce is likely to be minimal as well since the warehouse club operator has fairly ambitious growth plans in place for 2014 that will result in new hires.  The day before the job cut announcement, Sam's opened two new clubs in Warwick, R.I. and Moorsesville, N.C., which resulted in the hiring of roughly 300 employees.  During the new fiscal year which begins February 1, Sam's plans to open between 17 to 22 new clubs, inclusive of relocations and expansions, which could result in the hiring of between 2,000 and 3,000 employees based of similar staffing levels.

The job cut announcement by Sam's Club and other retailers tended to garner some sensational headlines, but in reality retailers tend to focus on right-sizing their field and store level operating structures early in the year based on sales expectations and customer service priorities for the coming year.  In fact, it is somewhat surprising given the emphasis on efficiency that prevails in the warehouse club environment that Sam's had not already taken action to more closely align labor with sales.

As for Macy's, the 2,500 job cuts it announced several weeks earlier also will have a minimal impact since many of those affected will be able to secure positions elsewhere in the company.  Overall, Macy's doesn't expect the cuts to reduce its total workforce because of gains elsewhere.

A similar situation exists at Target where plans to cut 475 jobs at its home office and leave another 700 positions unfilled are likely to prove temporary.  Putting aside the nightmare the company is facing regarding its data breadh, Target continues to have ambitious growth plans that it will eventually require adequate staffing levels to execute.

Source: Retailing Today