Sam's Club, the warehouse club division of Wal-Mart Stores Inc is cutting roughly 11,200 jobs, or about 10 percent of its workforce, as it outsources in-store product demonstrations and eliminates positions used to recruit new business members.
Sam's Club Chief Executive Officer Brian Cornell said on Sunday that the retailer would outline charges associated with the job cuts in February, when it releases fourth-quarter results. He said he did not expect any material impact on its financial results.
We look at this as an investment in the in-club experience, Cornell said in an interview. This is not a cost-cutting move for us in the short term. We really hope it will be cost neutral for our operation. It's an investment in building loyalty, enhancing the member experience and driving future growth.
Cornell took the helm at Sam's Club on April 3 last year and has been looking for ways to boost its sales and increase its membership ranks. Members pay an annual fee to shop in its clubs and get discounts on everything from bulk-sized packages of toilet paper to raspberries.
Sam's Club said it will use Shopper Events, a third-party company, instead of its own employees to run in-store product demonstrations and hand out food samples -- a popular tactic used by warehouse clubs to entice shoppers to buy new items.
In a memo to employees, Cornell said Shopper Events will develop a demo program, called Tastes and Tips, that will offer improved demonstration of items like food, beverages and electronics.
The shift means Sam's Club will cut 10,000 jobs primarily held by part-time workers. Current Sam's Club demo employees can apply for new jobs with Shopper Events.
Brian Pear, general manager for Shopper Events, said his company would hire about the same number of employees being let go by Sam's Club. But he said there was no guarantee it would hire former Sam's Club employees to fill the positions.
Cornell and Pear declined to disclose terms of the deal.
Sam's Club, the No. 2 U.S. warehouse club operator behind Costco Wholesale Corp, also said it was cutting the new business membership representative position, or employees in its stores who focused on recruiting new members. That will result in the loss of about 1,200 jobs, or about two jobs per every location.
Sam's Club said it was having more success recruiting members through direct marketing or doing price comparisons, where it shows consumers how much money they could save by shopping in its clubs.
Craig Johnson, president of consulting firm Customer Growth Partners, said it made sense for Cornell to announce such extensive job cuts early on in his tenure.
If you need to take a hit to get your cost structure down, you want to do that sooner versus later, he said. Given that it's the end of the fiscal year, now is probably the best time to take the hit.
Wal-Mart's fiscal year ends on January 31.
While Sam's Club said the move was not a cost cutting one, Johnson said companies like Shopper Events, which specialize in in-store sampling, can typically deliver those types of services less expensively than a retailer can.
The latest job cuts come after Sam's Club said earlier this month that 1,500 jobs would be lost as it closed 10 money-losing stores.
At Wal-Mart's meeting for analysts in October, Cornell said that Sam's Club was shifting its focus from opening new clubs to remodeling existing ones as it works to increase sales.
He said then that the retailer was testing a new store layout, adding more food and drugs to its shelves, and streamlining operations to reduce labor hours in its clubs by 6 percent to 8 percent over the next five years.
Sam's Club operates some 600 clubs and has about 110,000 employees.
Wal-Mart shares closed on Friday up 2 cents at $52.94.
(Reporting by Nicole Maestri, editing by Maureen Bavdek and Tim Dobbyn)