Why Walmart is raising wages -- and cutting hours
Posted: Aug 31, 2015 6:24 PM CDT
Less than three months after announcing plans to raises the wages of 100,000 workers, Walmart (WMT) is scaling back the hours of some employees as it tries to rein in costs.
According to the retailer, which is also the largest U.S. private sector employer, the move affects a \"small number of stores\" that were \"significantly\" overscheduling workers. The company didn't provide more specific information but stressed that the cuts wouldn't hurt its efforts to improve customer service, which has long been a weakness.
Big-box retailers work to reclaim shoppers
CEO Doug McMillon is under pressure from Wall Street to breathe new life into Walmart's U.S. operations, which have lost ground in recent years to a plethora of competitors ranging from TJX (TJX), the parent company of TJ Maxx, to Amazon (AMZN) and the dollar stores. Walmart's latest earnings report disappointed investors, further raising pressure on the world's largest retailer.
\"It's not just raising wages, they have put labor back into the stores,\" Brian Yarbrough, an analyst with Edward Jones who rates Walmart shares as a \"hold,\" told CBS MoneyWatch. \"The problem is you're putting all these investments in the stores and all these expenses, and you aren't getting the (expected) sales return. It's crushing profits.\"
Unions and other critics have blasted Walmart for years for underpaying its employees (now numbering more than 1.4 million), a perception the chain has argued is unfair. Nonetheless, it has recently begun addressing the issue and plans to spend $1 billion this fiscal year on its workers.
Walmart workers getting a raise
All hourly workers have earned at least $9 per hour since April under a wage increase plan announced earlier this year. They'll earn at least $10 per hour starting in February 2016. In June, the chain announced plans to increase the wages of more workers, including some department managers. Walmart now expects to add 8,000 new department managers and more 3,500 pickup department managers before year-end.
\"The reduction in hours is taking place only in locations where managers have overscheduled workers, staffing the store for more time than they've been allotted,\" wrote Walmart spokesman Kory Lundberg in an email to CBSNews.com. \"The reductions won't affect efforts to better staff stores, shorten checkout lines, and improve cleanliness and stocking.\"
Investors have faulted the chain not investing enough in its 5,000 U.S. locations. As a result, customers have complained that shelves aren't adequately stocked and checkout lines aren't adequately manned. Walmart ranks dead last among its peers in the closely followed American Customer Satisfaction Index.
\"We now have further evidence that Walmart's so-called 'wage increase' was nothing more than a cruel PR stunt,\" wrote Jess Levin, a spokeswoman for the union-backed Making Change at Walmart campaign, in an email. \"Hard-working Walmart workers -- many of whom did not even see a raise in pay -- are having their hours cut all so Walmart can pad its bottom line.\"
Shares of Walmart, which have plunged more than 24 percent so far this year, were down some 24 cents (0.4 percent) to $64.72 in Monday afternoon trading.
Editor's note: The headline has been corrected to say hours are being cut, not jobs.
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