Sam’s Club to cut 11,200 jobs – over 1,200 in Texas
09:36 AM CST on Monday, January 25, 2010
From Wire and Staff Reports
Wal-Mart Stores Inc . will cut about 11,200 jobs at Sam’s Club warehouses, including more than 1,200 in Texas, as it turns over the task of in-store product demonstrations to an outside marketing company co-operated by Plano-based Crossmark Inc.
The move is an effort to improve sales at Sam’s Club, which has underperformed the company’s namesake stores in the U.S. and abroad.
The cuts represent about 10 percent of the warehouse club operator’s 110,000 staffers across its 600 stores. That includes 10,000 workers, mostly part-timers, who offer food samples and showcase products to customers. The company also eliminated 1,200 workers that recruit new members.
Sam’s operates 72 warehouse clubs in Texas, including 20 in the Dallas-Fort Worth area. The cuts average about 18 workers per store. If that average is true for North Texas stores, about 360 jobs would be lost here.
Employees were told the news at mandatory meetings Sunday morning. Some workers in North Texas said they were given two weeks’ severance pay.
“In a memo posted on Wal-Mart’s Web site, Sam’s Club chief executive Brian Cornell said eligible workers will receive severance pay and benefits, and that the company will help them find opportunities at other Sam’s Clubs and Walmart stores and with Shopper Events, which is taking over the in-store demonstration operations.
“In the club channel, demo sampling events are a very important part of the experience,” Cornell said in a phone interview with The Associated Press. “Shopper Events specializes in this area, and they can take our sampling program to the next level.”
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Shopper Events, based in Rogers, Ark., works with Walmart stores on in-store demonstrations. It’s a joint venture with Irvine, Calif.-based Advantage Sales & Marketing and Crossmark.
Wal-Mart chose the two sales and marketing services companies to share responsibilities for Shopper Events in October 2008 after evaluating vendors and testing potential programs at its Walmart Supercenters.
Sam’s Club is looking to the company to improve sampling in areas such as electronics, personal wellness products and food items to entice shoppers to spend more.
Sam’s Club has performed weaker than Walmart stores in the U.S. and abroad. Cornell has been working to improve results since taking the helm in early 2009, with new store formats, price cuts and more variety and more brands of items, from take-home meals to baked goods.
Cornell joined Sam’s from Irving-based Michaels Stores Inc., where he had been CEO.
As consumers eat out less in the shaky economy, Sam’s Club has tried to steal customers from grocery chains and rival warehouse stores such as Costco Wholesale Corp. by offering more everyday goods such as food and health and beauty items and paring its assortment of general merchandise such as furniture and clothes.
But during Wal-Mart’s most recent quarter, revenue at the Sam’s Club division slipped nearly 1 percent to $11.55 billion, while U.S. Walmart stores posted a 1.2 percent sales increase to $61.81 billion.
Earlier this month, Wal-Mart closed 10 underperforming Sam’s Club locations, resulting in the loss of about 1,500 jobs. The only Texas location that closed was in Houston.
“Sam’s has been the relative laggard, and it has lagged relative to its direct competitors, Costco and the smaller BJ’s [Wholesale Club],” said Craig Johnson, president of retail consultancy Customer Growth Partners.
The move to outsource its food sampling efforts is a way for the company to tout its fresh food offerings in a cost-effective manner, Johnson said.
“‘Fresh’ is where the real competitive battles are being fought in the club sector,” he said.
Shopper Events will launch a demo program called “Tastes and Tips,” with new carts, signs, uniforms and a trained team, Cornell said. He said the move was not made to save money.
“It’s not a cost-cutting measure, it’s really an investment in enhancing our demo program,” he said.
Cornell added that Shopper Events plans to hire “roughly the same number of people” cut, and that Sam’s Club workers are invited to apply for those positions.
Of the decision to eliminate the membership recruiting unit, Cornell said, “We have found that we can more effectively drive membership through targeted member acquisition events and by increasing our partner membership programs.”
Net effect
The cuts come as many Americans had hoped job losses would be slowing as the economy gradually recovers. However, analysts said Sunday that while this marks Wal-Mart’s largest job cut, they expect many employees to be picked up by Shopper Events, so the net effect on the economy probably won’t be that bad.
“I would argue that from an economic standpoint it’s somewhat nominal,” said David Strasser, a retail analyst with Janney Montgomery Scott. “It looks a lot worse than it really is from a layoff standpoint. My read is the majority of employees are going to be picked up by Shopper Events.”
Strasser said he did not expect the move to materially affect Wal-Mart’s fourth-quarter earnings results. Wal-Mart reports results for the quarter and full year in February.
“It really should be neutral to the economy,” Johnson agreed.
He said Wal-Mart remains the largest private employer in the world and in the U.S. “None of that changes.”
The Associated Press and Dallas Morning News staff writer Maria Halkias contributed to this report.
Source Dallas Morning News
