Walmart clouds pay rise by closing Sam Club's stores

Walmart Image copyright Getty Images

Walmart has revealed plans to close 10% of its Sam's Club wholesale stores and lay-off thousands of workers.

The closures were revealed on the same day the world's biggest retailer said it would start paying its US staff at least $11 an hour and hand some of them a one-off cash bonus.

Walmart said the pay rise was due to the US tax overhaul which has cut the corporate rate from 35% to a flat 21%.

Hourly-paid employees will receive the higher wage from next month.

Walmart is closing 63 of its 660 Sam's Club stores.

US Treasury Secretary Steven Mnuchin claimed that Walmart's pay deal was further proof that the new US tax bill is returning money to workers as the administration promised.

However, at a press conference on Thursday, Mr Mnuchin dismissed questions about the layoffs.

"Lots of things are going on in the economy," he said. "We appreciate what Walmart's doing."

Senate Democrats, who opposed the tax changes, said the store closures are a reminder that lower corporate tax bills will primarily benefit "wealthy shareholders, leaving thousands of workers standing in the cold without jobs."

'Portfolio review'

Like a cash-and-carry in the UK, Sam's Club, which is named after Walmart's founder Sam Walton, is a membership-only retailer that sells bulk merchandise to small businesses and individual shoppers.

The closures come a few months after executives said they were focused on boosting profitability at the brand.

They said they would refocus the business to target families with incomes between $75,000 and $125,000.

Each store typically employs more than 150 people. In Illinois alone, where seven shops are slated to be closed, more than 1,000 people face layoffs, according to notices the company filed with the state.

The company said 12 of the impacted clubs will be converted to eCommerce fulfilment centres.

Sam's Club said that following "a thorough review of our existing portfolio, we've decided to close a series of clubs and better align our locations with our strategy".

"Closing clubs is never easy and we're committed to working with impacted members and associates through this transition."

Pay deal

Doug McMillon, chief executive of Walmart, said that the retailer is still assessing the full impact of the lower corporation tax.

However, it is the latest in a line of large US companies who have promised to pass on some of the benefits of the corporate tax cut to staff.

Others, including Wells Fargo and AT&T, have also pledged wage rises or bonuses.

On Thursday, Fiat Chrysler announced that it would pay a special bonus of $2,000 to around 60,000 workers in the US.

It also said it will move production of its Ram pickup trucks from Mexico to Michigan in 2020 which it said was enabled "by the passage of U.S. tax reform legislation".

The carmaker said the move would add 2,500 new US jobs.

Image copyright Getty Images

Walmart had already raised its minimum wage to $9 an hour in 2015 and the following year offered a $1 rise to those who completed an internal training scheme.

With the new increase, hourly workers will be paid between $11 and $24.70 an hour starting from next month.

The increase will boost the average hourly pay at Walmart for full-time employees from $13.85 to $14.50.

Some full and part-time workers at Walmart will receive a bonus of up to $1,000 based on their length of service.

Those with 20 years of service will get the full $1,000.

The bonus payments will cost the company, which has a market value of $295bn and made a full-year profit of $13.6bn, a total $400m.

More on this story