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Retail Layoffs Signify Industry in Profound Flux


It's been a tough week for retail employees, many of whom were hit with layoff notices, which collectively underscore both the hyper-challenging climate and lingering struggles a trio of companies are facing to regain clout and better contend with a new breed of more sophisticated traditional and e-commerce grocery competitors.

The layoffs are particularly telling for two of the retail food industry's once-unstoppable forces – Wal-Mart Stores Inc. and Whole Foods Market –  the former of which laid off 450 workers at its Bentonville, Ark., headquarters across all areas of the company, including finance and e-commerce – and the latter, which is cutting 1,500 front-line jobs "as part of an evolution the company is going through to free up some more money to invest in lower prices, marketing and communication and technology upgrades," per Walter Robb, co-CEO, during the Fortune Brainstorm E conference.

Over the past year, both of the national chains, which reside on either end of the retail pricing pendulum, have posted weak financial performance, with Walmart suffering a 15 percent drop in net income in its most recent quarter alongside Whole Foods' stock plunging more than 40 percent.

The same day Walmart's job cuts were announced, Southeastern Grocers LLC, parent company of Winn-Dixie, Bi-Lo and Harveys, followed suit with a similar announcment to layoff 250 jobs at its store support center at its Jacksonville, Fla., headquarters, as well as regional support centers across its seven-state Southeast regional footprint, as part of a larger restructuring effort.

And let's not forget about the near 10,000 layoffs related to the recent bankruptcy of A&P, whose saga continues to become more painful with each passing week, with the latest evidence surfacing in reports of the bloated payments Tea Co. executives received as the Montvale, N.J.-based grocery chain headed toward its final demise.

With labor customarily viewed as retailers' single largest controllable expense, accounting for more than 10 percent of revenues, as well as being viewed in many cases as a cost driver rather than a sales driver, this period of widespread layoffs aren't terribly surprising. By the same token, it remains to be seen if the investments the aforementioned retailers (notwithstanding A&P) will make in other areas of their business – at the expense of people – will deliver on the turnaround plans each has in mind.

Here's hoping, and time, as always, shall tell.

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In terms of the severance packages offered to Whole Foods workers, the Gawker reported that affected associates can apply for open positions at other Whole Foods stores, "and the company will make up some of the salary difference if they land a lower-paying job than they had before." No relocation packages are being offered, so employees who elect the layoff will receive what the Austin, Texas-chain terms a "generous severance" pay, along with an extra payout of eight weeks salary if they agree not to re-apply at Whole Foods for six months.

According to Gawker's tipsters, "The Whole Foods severance pay plan, cited in one version of the letter we received, consists of 'a minimum of two weeks’ pay for every 2,000 hours of service and a maximum of 26 weeks’ pay, contingent upon the execution of a release of claims.' Not an especially generous package for newer employees, and fairly run-of-the-mill for white collar jobs, but the state of pay and benefits in most large corporate retail chains is so paltry that this offer makes Whole Foods look rather good by comparison."

You can check out the Whole Foods' severance letter here.

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