For decades, Walmart commercials have advocated for “falling” or “slashing” prices. Today, Walmart Inc. has something “falling” and “slashed” besides prices – just a week after the retail giant announced falling profits, hundreds of corporate roles are getting “slashed.”
The retailer began notifying employees at its Bentonville, Ark., headquarters and other corporate offices of the restructuring efforts. Various departments are being affected by the cutbacks; merchandising, global technology and real-estate teams, to name a few.
Last week the retailer said the food and fuel prices were putting a “dent in consumer spending” and causing markdowns on other products. In May, the retail giant warned it was “stuck with too many unsold goods.”
Consequently, cutting prices to reduce the excess inventory levels at its flagship chain and Sam’s Club warehouse chain is the route it was taking. However, according to the Wall Street Journal, the problem with slashing prices will cause company profits to fall in the second quarter and fiscal year. The announcement last week sent Walmart shares down by nearly 10%.
Walmart pointed to the higher prices for food and fuel as the culprit hurting general merchandise, especially apparel. The company’s full second-quarter report is slated for Aug. 16.
Doug McMillon, Walmart Chief Executive, said, “The increasing levels of food and fuel inflation are affecting how customers spend, and while we’ve made good progress clearing hardline categories, apparel in Walmart U.S. is requiring more markdown dollars.”
He said the company expects the pressure to remain on general merchandise for the remainder o the year, even throughout the holiday shopping season.
Walmart expects its operating income to decline between 10% and 12% for the fiscal year ending in January. In May, the company thought the decline would be 1%.