Walmart memo orders stores to improve grocery performance

Steven Greenhouse and Hiroko Tabuchi
Nearly-empty trays with produce for sale at a Walmart in Valley Stream, N.Y., Nov. 11, 2014.
Source: The New York Times

The dairy section in the Walmart supercenter here, just across the border from Queens, was sparsely stocked. Some gallon jugs of milk were dented, others soiled with what looked like dirt. The meat aisle had run out of ground beef patties and strip steak, and residue streaked some shelves.

The disarray and out-of-stock items at just one store appear to be examples of wider problems that Walmart is pressing store managers to address.

Last month, the retailer issued an "urgent agenda" memo to managers across the country pushing them to improve performance on "Chilled and Fresh" items in its dairy, meat and produce departments, part of an effort by Walmart to stem long-sluggish sales. It also reflected customer complaints that Walmart has received in recent years as it has expanded offerings of organic foods and produce, often at cheaper prices than its competitors.

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The memo, marked "highly sensitive," tells Walmart marketing managers to make sure that the company's 4,965 United States stores discount aging meat and baked goods to maximize the chance that those items will sell before their expiration dates. The memo—leaked for public use by a Walmart manager unhappy about understaffing—also tells stores to be sure to "rotate" dairy products and eggs, which means removing expired items and adding new stock at the bottom and back of display cases.

In discussing produce, the memo tells managers to "validate that stores are fully executing on 'Would I Buy It?'"—a plea to make sure that every store removes moldy or rotting fruits and vegetables.

Sent on Oct. 2, the memo reminds managers that their No. 1 concern must be sales. For the last 18 months, Walmart's sales have been sluggish in stores open at least a year. The memo also urges managers to reduce backup inventory to trim costs, and warns them not to exceed budgets for their stores.

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Some retail analysts say these problems stem from Walmart's failure to have enough employees in its stores to do the many chores needed, like marking down aging items, rotating milk or getting needed goods from the back room to stock shelves.

"Labor hours have been cut so thin, that they don't have the people to do many activities," said Burt P. Flickinger III, a retail consultant. "The fact that they don't do some of these things every day, every shift, shows what a complete breakdown Walmart has in staffing and training."

In an investment analysts' report last month, Wolfe Research said "if its employees' growth had kept up with square footage growth in the U.S. over a number of years," Walmart would have 200,000 more employees. Walmart has 1.3 million American workers.

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Doug McMillon, Walmart's chief executive, told analysts at a meeting last month that the company recognized many of these problems, saying, "There are places where we need to put more hours in the store." He noted that "we have room to improve on in-stock on the shelf" and "improve on our checkouts."

And in August, Greg Foran, chief executive of Walmart U.S., said the company was allocating additional hours for workers to spend time in areas like the delicatessen, bakery, overnight stocking and cash registers.

A Walmart spokeswoman, Deisha Barnett, confirmed the memo's existence, and acknowledged some of the problems outlined in it. She pointed to the start last year of a 100 percent money-back guarantee for customers dissatisfied with less-than-fresh products.

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"We certainly have been focused on fresh for quite some time now and our C.E.O. has been vocal about our need to improve in this category. We've made a lot of progress, but are always working to do better," Ms. Barnett said.

But one assistant store manager in the South, who insisted on anonymity for fear of retaliation, said the company was refusing to let him add more employee hours to complete needed daily tasks, like discounting older meat or eggs. As a result, he said his store had been forced to throw out far more milk, eggs and produce than in previous years.

Indeed, a visit to the back of the Valley Stream store, as well as various YouTube videos apparently shot by employees, point to great clutter and thousands of cases waiting to be put on shelves.

Some analysts say Walmart's acknowledgment of the problem is a step in the right direction. "They seem to get it," said Craig Johnson, president of Customer Growth Partners, a retail consultancy in Connecticut. "They know that they are still weak in fresh. And that if the produce is overripe or out of stock, people are going to go somewhere else."

"But this isn't going to be an overnight fix," he added.

The memo calls for comprehensive markdowns across 32 departments and for stores to find creative ways to merchandise clearance items. It also says stores should keep "complete records of daily throws" of meat and poultry.

For meat departments, the memo says markdowns should start at 7 a.m. and be executed multiple times daily. The memo points to other practices that might not have been followed, saying "confirm stores water plants 7 days a week," and "ensure Deli oil is tested and filtered daily."

At the same time, the memo warns managers not to exceed the weekly hours assigned to their stores. It tells managers to examine whether they are assigning employees too many hours or overtime beyond what the company had budgeted.

Walmart has about 20 percent of the nation's dry grocery business, but 15 percent of the fresh grocery business, indicating that it is less competitive there.

Janet Sparks, a customer service manager at a Walmart in Baker, La., and a member of OUR Walmart, an employee group pushing for improved wages and working conditions, said, "Understaffing from the sales floor to the front end has greatly affected the store." She said substantial staffing cuts began in 2010.

Ms. Sparks said there used to be five customer service managers per shift, who often helped cashiers with problems, while now is there just one. That, she said, sometimes causes long lines and customers having to wait 30 minutes when numerous cashiers have questions or problems.

Audrey Lessoro, 50 and a mother or four, said shopping at the Valley Stream Walmart was an increasingly unpleasant experience. "They could do more to keep the store neat," she said.

Ms. Lessoro, who has difficulty walking, said there was often not enough staff to help her find a scooter to navigate the store, saying she had to wait 15 minutes on a recent visit.

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"And they're often out of artichokes," she said. "I have to get them somewhere else."