American retail giant Walmart has announced plans to lay off 2,000 employees at online fulfilment centers, doing so just days prior to stating its intention to automate roughly 65% of its stores within three years, as the New York Post reports.

Additional details about the company's revelations came during its annual investor meeting held in Tampa, Florida, where its chief financial officer, John David Rainey, underscored the impact inflation continues to have on operations.

Automation ambition

As Axios detailed, Walmart harbors long-term plans to expand its retail endeavors by using automation in its facilities but also hopes to do so without substantially reducing its workforce.

“We believe, over time, the number of associates will grow, but at a slower pace than in the past as we complement people growth with technology and automation,” Rainey told investors.

That said, Walmart has also acknowledged that the company's adjustments in direction would lower the needed for jobs that tend to be on the lower end of the pay scale, according to the Daily Mail.

“As the changes are implemented across the business, one of the outcomes is roles that require less physical labor, but have a higher rate of pay,” the company indicated in a regulatory filing.

Unexploited efficiencies

According to Axios, the automation referenced by Walmart this week relates to supply chain and market fulfilment tasks, and the company is anticipating that more than half of the goods it sells will be processed via machine-operated facilities by 2026.

The automation initiatives will aid Walmart in preventing the degree of inventory backup that occurred last year when consumers responded to dramatic price increases on food and other goods by reining in their spending, the Post noted.

“This increased efficiency will not only support better inventory management, but it will also support Walmart's rapidly growing e-commerce business,” said an analyst from investment banking firm Stephens, Inc.

In Rainey's estimation, the investments Walmart has been making in newer revenue streams such as fulfilment services, advertising, and membership programs are beginning to positively impact profitability more than conventional, brick-and-mortar store initiatives, and as such, “[w]e think the opportunity for operating income growth over the next three to five years could be better than what we've outlined,” the Post added.

Recent layoffs prompt concern

As the Mail pointed out, however, the company has not provided clarity as to whether additional, near-term layoffs are anticipated, in addition to the hundreds of employees who were recently alerted to their impending joblessness.

Reuters reported in late March that several hundred workers at five Walmart e-commerce fulfilment centers received notice that they had 90 days to find positions at other corporate facilities.

The impacted fulfilment centers are located in Pedricktown, New Jersey, Fort Worth, Texas, Chino, California, Davenport, Florida, and Bethlehem, Pennsylvania, and affected workers in those locations are being relieved of their current duties because of an elimination or reduction of weekend and evening shifts, as Reuters noted.

“We recently adjusted staffing levels to better prepare for the future needs of customers,” a spokesperson for the company said, adding that Walmart would work to assist displaced workers in finding positions at other of its facilities.

Recession fears persist

Job losses at Walmart, according to some experts, could portend trouble for the broader American economy, as Reuters further notes, with concerns about an imminent recession reportedly on the rise.

As the outlet pointed out, retailers such as Lidl, Neiman Marcus, and Amazon are a few of the corporate notables that have slashed jobs, with a total of over 17,000 such cuts already announced in 2023.

Brian Sozzi of Yahoo!Finance recently reported that talk of recession among Wall Street prognosticators is on the rise again, with the latest Bank of America fund manager survey suggesting that the chances of such a downturn have increased in recent weeks for the first time since last fall.

Ed Hyman, chairman of investment banking advisory firm Evercore ISI also sounded the alarm recently, opining, as Sozzi noted, that “a recession is already baked in the cake, probably starting in the second half of this year,” and whether that will prompt additional layoffs at retailer juggernauts such as Walmart, only time will tell.