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Wal-Mart reorganizing to better compete online

Wal-Mart Stores Inc. is restructuring its U.S. business, continuing the Bentonville-based retailer's push to improve the efficiency of operations as it battles competitors like Amazon.com.

The company said it will consolidate the number of business divisions from six to four.

As part of the consolidation, Wal-Mart also is trimming the number of regions from 44 to 36. Each Wal-Mart store is part of a market under the retailer's business structure. Each market is assigned to a region.

"As retail and the customer are changing, we're putting people who are equipped to run great stores and understand, embrace and execute change at an unprecedented rate in the right roles and in the right locations," Wal-Mart spokesman Kory Lundberg said in a prepared statement.

"Our last field restructure was several years ago and our business has changed over that time. The structure we are putting in place will help improve communication and execution, streamline decision-making and help us accelerate our pace of change," Lundberg said.

Wal-Mart did not comment on the number of employees who could be affected by the divisional and regional restructuring, but those affected could move into other roles within the business. A source said the reorganization is expected to be completed in October.

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The latest consolidation comes as no surprise to analysts who said Wal-Mart has been making similar decisions under Chief Executive Officer Doug McMillon as the company devotes a larger portion of its resources to strengthening its e-commerce business.

"I would say if it stops happening, that's what would be surprising," Randy Koontz, first vice president of investments for Pinnacle Wealth Management of Raymond James & Associates Inc. in Rogers, said of the restructuring. "I believe the company has got a focus to move digital, to have fewer employees, less overhead and get leaner."

Wal-Mart acquired online retailers Jet.com, Bonobos and ModCloth over the past year, continues to expand its online grocery offerings and introduced programs like free two-day shipping on products. The company also is testing package delivery options, including a partnership with Uber and a program that relies on employees to deliver items.

The investments have weighed on the company's profits, and Brian Yarbrough, a retail analyst with Edward Jones, said Wal-Mart consistently has been looking for ways to offset costs.

"I wouldn't be surprised to see more of it," Yarbrough said. "If they're going to try and run as lean as possible without cutting into muscle, they're going to cut as much fat as they can to try to figure out ways to offset the e-commerce losses and hopefully, over time, make that division more profitable."

Wal-Mart restructured its food and merchandising leadership teams in July. There were "a few dozen" layoffs as part of those changes, although a Wal-Mart spokesman said at the time that there were "several dozen promotions" as well.

The company also realigned its e-commerce and technology leadership teams in January. About 1,000 workers were laid off across multiple divisions before the end of the fiscal year on Jan. 31. There also were about 300 jobs eliminated at the company's internal systems division in Bentonville in early April.

In February, the company streamlined its buying operations, enabling one buyer from its store buying team to purchase products for both its store and online assortment. Previously, a supplier would have to work with separate buyers for the item to be available in both places.

"Wal-Mart is now a company that's in this stable phase of its operations as opposed to a fast-growing company," said Mervin Jebaraj, interim director of the Center for Business and Economic Research at the University of Arkansas Sam M. Walton College of Business. "So now it's all about realignment and making sure the resources they have are being used efficiently and making sure that whatever they have, they're using toward their core business processes."

Wal-Mart's current operations include six divisions: Southeast, south-central, west, northeast, north-central and mid-Atlantic. It's not clear what the new structure will look like with four divisions.

But Carol Spieckerman, a retail consultant and president of Spieckerman Retail, believes that the move makes sense on several fronts for Wal-Mart as it competes with Amazon and other retailers.

"With advanced data capabilities, Wal-Mart simply doesn't need as much people-powered decision-making at the regional level," she said. "Also, fewer divisions means faster decisions and better focus. This is very much in step with the overall right-sizing that is at work in retail. Much attention is being paid to store closures, but ongoing operational streamlining is also part of the picture."

A Section on 09/13/2017

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