Economy

Bowing To Demands Of Wall Street, Walmart Cuts Hours To Trim Costs

CREDIT: AP Images/Spencer Tirey

Walmart CEO Doug McMillon

After raising the minimum wage for its lowest compensated workers, Walmart is now cutting some workers’ hours to try to trim costs.

Store managers were recently told to cut back on hours to reduce costs, which has led to them eliminating hours from the schedule, telling workers to leave their shifts before they end, or having employees take longer lunches, Bloomberg News reports. A spokesperson told Bloomberg that these changes are only happening in stores where managers had overscheduled employees.

One anonymous Walmart worker near Houston told Bloomberg that her store had cut more than 200 hours a week by asking people to go home early. Another in Fort Worth was told that the store would cut 1,500 hours and said that employees who had been asked to stay late for extra work earlier in the week were told to take two-hour lunch breaks later on to make up for those hours.

In February, Walmart announced that it would raise its base pay to at least $9 an hour by April and $10 an hour by early next year, increasing wages for about 500,000 employees and spending more than $1 billion on the effort. At the time, the CEO said the company expected those changes to lower employee turnover and attract better talent, as well as to lead to better customer service that would boost sales.

But earlier this month, the company lowered its annual earnings forecast based in part on the higher cost of employee compensation. It had originally said the cost of higher pay would reduce profit by 20 cents per stock share, but then revised that to 24 cents a share. “The changes we need to make require investment, and we’re pleased with the steps we’ve taken,” CEO Doug McMillon said at the time. “Even if it’s not as fast as we’d like, the fundamentals of serving our customers are consistently improving, and it’s reflected in our comps and revenue growth.”

And while the company announced the higher pay would reduce profit, it also announced that the changes are helping to increase growth. Its comparable-store sales rose 1.5 percent the previous quarter, beating projections.

Part of the motivation behind Walmart’s pay increase was to improve customer service. Empty shelves and long lines had led to widespread customer dissatisfaction, hurting sales, which had led analysts to downgrade the company. When it raised pay, McMillan noted, “We know what customers want from a shopping experience, and we’re investing strategically to exceed their expectations and better position Walmart for the future.”

The company is now assuring the public that that focus won’t be sacrificed with the new schedule changes. The company spokesperson said reductions in hours won’t affect the focus on better staffing stores, reducing checkout lines, and filling shelves. “[W]e are committed to improving the customer experience and we will protect the investments necessary to achieve this goal,” Greg Foran, head of U.S. operations, said.

The increased pay also came after years of protests and worker strikes at its stores from employees who were demanding higher pay, better schedules, and the right to form a union. They have demanded to be paid at least $15 an hour and more full-time work for those who need it.

Walmart may be one of the many corporations stuck between responding to the short-term demands of Wall Street and the long-term investments that don’t pay off as quickly but can increase growth in the long run, like employee compensation. Large corporations have been spending most of their earnings on stock buybacks and dividends, which serve to boost their short-term stock prices and enrich investors. They’re expected to collectively spend $1 trillion on these moves this year. Between 2003 and 2012, buybacks and dividends consumed 91 percent of earnings, leaving just 9 percent to invest in workers, equipment, research, or other long-term investments.