On Tuesday morning, Walmart released sales data that indicates the company’s plan to cut its way to growth isn’t working. According to fourth quarter figures, the retail giant missed sales and profit expectations. Most analysts expected growth somewhere between 1.8 percent and 2 percent at stores open for at least a year. Instead, Walmart posted just a 1.5 percent increase, most of which appears to have been simply the result of inflation. Even more troubling for investors, Walmart still shows negative growth over the past three years.
The bad news for the company doesn’t end there. Walmart continues to lose ground to competitors,. That’s problematic for the top executives because it means that Walmart’s problems can’t be blamed on the troubled economy. Consumers are starting to spend more at retail outlets, but the customers are abandoning Walmart for other options. As a result, Walmart’s market share has declined from 13.8 percent in FY10 to just 12.9 percent in FY12.
Another question: Why is Walmart having all of these problems? Corporate leadership would like you to believe it is because the company has been forced to slash prices because of the recession. However, a recent study from Deutsche Bank found that Walmart was actually raising prices faster than competitors. So what are the real factors behind Walmart’s apparent decline?
Many of Walmart’s problems are linked to aggressive cuts in staffing over the past few years. For example, many Walmart associates across the country have reported seeing an increase in shoplifting after the company started cutting back on the iconic greeter position. Another report found that Walmart had the lowest customer satisfaction level in the entire retail sector. Anyone think this might have something to do with cuts in staffing. Finally, Walmart has faced challenges in stocking shelves overnight because of cuts to employee hours. All of these factors are hurting Walmart’s bottom line.
So how can Walmart reverse its decline? The first step is to stop cutting staff hours. Instead, Walmart should start treating employees with respect. That means giving more hours to employees who want to work full time. Walmart has to realize that the “slash and burn” tactic to economic growth is simply not going to work.