Wal-Mart scrimped on hiring as store space grew rapidly

Fri Nov 20, 2015 8:15am EST
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By Nathan Layne

CHICAGO (Reuters) - Wal-Mart has been dogged by criticism of the standard of its stores in recent years, including long checkout lines and insufficient stocking of its shelves. A Reuters analysis of the giant discount retailer’s growth and its employee numbers may help explain why.

Over the past decade, Wal-Mart Stores Inc (WMT.N: Quote) opened nearly 1,500 new stores in the United States, a 45 percent increase in space and equivalent to more than 4,000 American football fields, while its sales have grown by 50 percent. But based on rough headcount figures provided by the company, the expansion was in stark contrast to the growth in its U.S. workforce, which was only about 8 percent in that time. It means the store space per employee increased around 34 percent.

The disparity may help to explain why Wal-Mart acknowledged earlier this year that its customer service needed to be improved significantly as it was hurting sales growth, and why it is now investing a lot more in its workforce and technology to improve the standard of the stores and how shoppers are treated there.

Before the company began rectifying its problems, only 17 percent of stores got a pass mark in an internal survey in February. Customers were asked to judge the stores on their ability to provide clean, fast and friendly service.

Through July of last year, the company, which currently operates 5,283 stores under the Walmart and Sam's Club brands in the U.S., endured a six-quarter span in which same-store sales showed flat or negative growth.

Greg Foran, who became chief executive of the retailer's U.S. operations in August last year, says employee levels have at times been too low. "The reality is over the last probably four years it hasn't been enough," he said in an interview. Foran also said the company had been too focused on producing profits to benefit shareholders in the near term and this had come at the expense of customers.

Wal-Mart, which for many years built a reputation for providing the lowest prices, allowed that advantage to erode. "The customer lost because the price gap narrowed," Foran said. "And the shareholder won short-term." \

The Reuters analysis, based on data from the retailer's annual securities filings, shows that by January this year the store space per employee had increased to about 547 square feet from 407 square feet in 2005. The total number of U.S. employees increased to nearly 1.4 million in 2015 from around 1.3 million in 2005, according to the retailer’s figures.   Continued...

Jared Lawrence leads employees of Wal-Mart Stores, Inc. in a company chant outside company headquarters before a Walmart employee tour in Bentonville, Arkansas, in this file photo taken June 5, 2013.   REUTERS/Rick Wilking/Files