In a bid to simplify operations, departmental store giant Walmart Stores Inc. (NYSE:WMT) is cutting out a middle-management level of employees from their stores. Company spokesman Kory Lundberg says that Walmart will be eliminating the zone manager role and transferring the functions to the roster of other managers, he told Bloomberg. Employees were notified of the changes at the beginning of this month.
This move would affect 14,000 Walmart employees while more power would be transferred to department managers across 4,500 Walmart stores in the United States. Zone managers, traditionally, held sway over several departments such as pharmacy, health and beauty, women’s apparel etc. Walmart has about six zone managers per store and recently, Walmart has been known to employ both zone managers as well as individual department managers.
U.S. CEO Greg Foran’s focus has been to improve customer service, and he is known to believe that department managers are more in tune with what the customer wants. One of his priorities has been to improve customer relationships across Walmart stores in a "simple, repeatable and sustainable" way.
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The world’s largest retailer, Walmart is in the throes of an expensive turnaround plan, with CEO Doug McMillion at the helm. He took over a little over a year ago and has since been seen attempting to hold on to employees in a stifling labor market. More than 500,000 out 1.3 million employees in total are getting a raise, from $9 an hour to $10 an hour in the next year. In this recent zone manager to department/assistant manager move, employees will be paid $13 an hour this year and $15 an hour in the next year.
Existing zone managers will be shifted into assistant manager roles or department manager roles. “We think this is going to be something that allows them to focus on customers more,” believes Lundberg. The employees moved to their new roles will not be taking a pay cut. The company is expected to finish rolling out these changes by mid-June.
These changes come close on the heels of a controversial shutting down of five stores in Texas, California, Florida and Oklahoma. The Arkansas-based company is said to have given employees only a few hours to recoup with the news and had to shut down the stores due to plumbing problems. Some 2,200 employees across these locations were left out of work because of the abrupt closure brought on by clogs and leaks that were affecting the availability of water at these stores, according to Walmart.
Share price performance in 2015 has been on an upswing compared to 2014, with stock peaking at just over $90 per share in January 2015. But Friday’s close of $77.88 was 1.72% down, and at the lower end of the spectrum. Friday’s lowest was $77.55 and 52-week high/low ranged between $72.61 to $90.97. With $5.05 EPS, Walmart’s P/E ratio stands at 15.42. The shares currently yield dividend at 2.47% and EPS in the most recent quarter ended January 2015 bested analyst’s estimates by 4.55% to stand at $1.61.
Fourteen of 19 analyst firms, polled by Zacks Investment Research, gave Walmart shares a ‘Hold’ rating, though community sentiment is bullish. With minimum wage workers’ protests across the United States taking on the dimensions of a mass movement, Walmart will be not be able to hold out much longer.