With layoffs, retailers aiming to be safe rather than sorry
The retail industry is trying to figure out its correct size.
Retailers, faced with skyhigh demand from shoppers during the pandemic, spent the past three years ramping up their operations in areas like human resources, finance and technology. Now times have changed.
A public that rushed to buy all sorts of goods in the earlier parts of the pandemic is now spending less on merchandise like furniture and clothing. E-commerce, which boomed during lockdowns, has fallen from those heights. And with consumers worried about inflation in the prices of day-to-day necessities like food, companies are playing defense.
Saks Off 5th, the off-price retailer owned by Hudson Bay, laid off an unspecified number of workers last week. Saks.com is laying off about 100 employees, or 3.5% of its workers.
Stitch Fix laid off 20% of its salaried workers this month and closed a distribution center in Salt Lake City.
Wayfair recently said it would lay off 1,750 people, or 10% of its workforce, and Amazon started laying off 18,000 workers, many of them in its retail division.
Bed Bath & Beyond cut its workforce this month as it tries to shore up its finances and prepares for a possible bankruptcy filing.
While it’s not unusual for major retailers to announce store closings and some job cuts after the holiday season, the recent spate of layoffs is more about structural changes as the industry recalibrates itself after the rapid growth from pandemic-fueled shopping.
And it accompanies broader worries about the state of the U.S. economy and layoffs by prominent tech companies.
“Retailers are really being cognizant of capital preservation,” said Catherine Lepard, who leads the global retail market for the executive search firm Heidrick & Struggles. “They don’t know how long this cooler economy is going to last, and they want to make sure they have the right cash to get through that. For retailers that are struggling, it really means tightening the belt with some cost cutting.”
Sales during the all-important holiday shopping season were weaker than in years past, when growth hit record levels. December retail sales increased 6% from the same period last year, but that number was not adjusted for inflation, which was at 6.5%.
Department stores posted sizable sales declines. At Nordstrom, sales in the last nine weeks of 2022 decreased 3.5% from a year earlier, with the company noting that they “were softer than prepandemic levels.” Macy’s said its holiday sales had been on the lower end of its expectations.
The layoffs at certain retail companies are a sign that the industry is bracing for a slowdown and another change in how people shop.
Not all retailers are in a defensive crouch. Walmart announced last week that it was raising the minimum wage for its store employees in a bid to attract and retain workers.
Still, some retailers are becoming focused less on bringing in new customers — an expensive undertaking — and more on retaining those they gained during the pandemic.
That means fewer projects that require lots of money and time, and more investments where a company can start seeing results quickly.
The retail layoffs are an about-face from 2021 when companies couldn’t hire front-line workers fast enough. After the initial jolt of the pandemic, which led many retailers to furlough or outright fire workers, many people received stimulus checks from the government. They wanted to spend that money, and when companies needed to ramp up in-store services again, they often struggled to find enough workers.