The Holiday Paradox: A Season of Love and Layoffs
BY: IAN HOLLAND, CONTRIBUTOR
The holiday season is often a time of joy and excitement for many American consumers. It gives people an excuse to spend lavishly on gifts for close family members. And while families are enjoying their turkey on Thanksgiving, many blue- and white-collar workers are worrying if they’ll be able to keep their jobs over the cold winter months.
Walmart is currently making their own holiday preparations, with a recent announcement to lay off workers in its Bentonville, Arkansas headquarters. The announcement, which was originally reported by Sarah Nassauer of the Wall Street Journal, will affect nearly 500 people. However, this is not a completely spontaneous decision. Speculation surrounding the loss of a few hundred jobs has been rumored around the Bentonville headquarters for weeks. The Bentonville-based company plans to increase wages for its workers starting next month and increase the number of seasonal workers that it employs compared to last year’s figures during this time. Walmart’s stock price has experienced a 26 percent decline this year alone. This is primarily due to online retailers, such as Amazon, capitalizing on the convenience of shopping online, coupled with competition from common grocery stores and bargain chains. Walmart is investing heavily in its own e-commerce services, but they are still years behind Amazon’s seemingly perfect supply chain and expeditious distribution and delivery. Walmart’s prime competitor, Target, has also recently announced a plan to match any price from a list of 25 brick and mortar as well as online retailers, including Walmart. This could significantly influence Walmart’s ability to succeed amidst its rapidly growing competition.
This year hasn’t been tough exclusively on retailers, though. Technology companies have also felt their share of economic stress this quarter. Chip manufacturer AMD (Advanced Micro Devices Inc.) is expected to cut 5 percent of their workforce, following a restructuring decision that will total about $42 million. AMD has long been in the shadow of its biggest competitor, Intel, with it recently losing a significant portion of its market share to Intel. Again, this news comes at no surprise to investors, who have seen personal computer sales with AMD microprocessors suffer substantial declines in the 1st and 2nd quarters of 2015. Sprint, an American telecommunications company, is also experiencing its own economic distress. Tarek Robbiati, the Chief Financial Officer of Sprint, announced in a private memo that the company needed to cut an ambitious $2 to $2.5 billion in an attempt to reduce unnecessary expenditures by the company. According to Sprint spokesman Dave Tovar, “In order to be successful, we must change our cost structure so we can fuel our growth and operate more efficiently.”
In addition to Walmart, AMD, and Sprint, several other multibillion-dollar companies’ publicized losses will ultimately result in job loss. These include ConAgra (packaged foods), Qualcomm (smart phone semiconductors), and HP (laptops, desktops, and printers). Combined layoffs in the aforementioned companies could be in excess of 50,000 jobs, a telling sign for the future of not only these companies’ future growth, but the growth of the US employment sector as a whole. Yet not all companies are performing poorly this quarter. As crude oil prices in the US settle below $50 a barrel, the average US consumer will be less concerned with gas mileage. GM and Ford sales corroborate this, displaying record-breaking truck and SUV sales during August and September, while fuel-efficient vehicles from Nissan and Toyota were down from August sales. Car sales are expected to continue this pattern into the winter months.
So what does this mean for the average consumer? Car sales and earnings reports aside, it is worthwhile for consumers to understand the economic situation before they embark on their holiday shopping.
This is Mr. Holland’s first article. Please comment below!