Walmart is the largest retailer in the US (and other parts of the world) employing 1.2 million in the USA. In February 2015 Doug McMillon announced a series of employment changes, among other things raising minimum starting pay to $9/hr. with plans to further increase it to $10.hr. within one year.
He also announced increases in employee benefits (e.g. healthcare, 401k plan, educational support, etc.) and career development and promotion opportunities, etc.
Of course, these changes increased their costs substantially, and information on these (and future) cost increases was included in the announcements (or could be estimated by external analysts). Since January, Walmart’s stock price has declined substantially (approximately 30% by mid-September. When WMT announced their quarterly results, documenting their increased costs, the stock price fell more than 13% in just a few days! Note that these declines in the market value of Walmart’s stock are predominantly (if not completely) due to its Human Resource practices!
DISCUSSION QUESTION 7
1) How (P, Q, C, A) does Walmart compete?
2) Who are Walmart’s competition, and what changes have occurred in the past several years?
3) Why did Mr. McMillon (His HR head, the Board, etc.) make such broad changes in Walmart’s employment practices?
4) Why was the Stock Market’s reaction so negative?
5) Do you believe Walmart’s employment strategy will produce positive results?
6) When do you estimate those results will be recognized by investors?
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