Over-employment erodes profits! Amazon and Walmart can no longer bear it

It is learned that in the past few months, companies across the United States have faced a common problem, that is, insufficient staff. However, the two largest retailers in the United States, Amazon and Walmart, are facing a problem of overstaffing, which even affected their profits in the first quarter.

Walmart

Walmart CEO Doug McMillon said on the company's quarterly earnings call on Tuesday that it experienced "weeks of overstaffing" in the first quarter of fiscal 2023, largely due to the waning of the COVID-19 pandemic.

Walmart hired additional employees at the end of 2021 to supplement workers who were furloughed due to the COVID-19 pandemic, but when COVID-19 cases fell in the first half of the quarter, employees returned to work earlier than expected.

Weeks of overstaffing meant weeks of wage pressure, which ate into first-quarter profits for Walmart, which reported a 24.8% drop in profits from last year and announced Tuesday that it was cutting its full-year profit forecast.

Of course, high wage costs weren't the only culprit for Walmart's poor first-quarter performance. Rising inventory levels and higher prices for shipping containers, warehousing and fuel all contributed to Walmart's profit decline.

McMillon said the overstaffing problem would be addressed in the second quarter, primarily through layoffs.

Amazon

Walmart's main competitor in the United States, Amazon, has the same problem. The reason for Amazon's overstaffing is similar to Walmart's, both of which are caused by employees returning to work early. Amazon's Chief Financial Officer Brian Olsavsky said that overstaffing has added about $2 billion in costs to the company.

Amazon has added hundreds of thousands of fulfillment center jobs since the pandemic, but it has been laying off workers faster than it has been hiring them. A New York Times investigation last year found that the turnover rate for Amazon's hourly workers was about 150% per year, leading some executives to worry about staffing shortages.

Despite adding 270,000 jobs in the second half of 2021, Amazon is still on a hiring spree that is causing chaos throughout its logistics network.

By 2022, the problem shifted from a labor shortage to overcapacity, which Amazon expects to disappear in the second quarter, but did not specify how.

Editor✎ Ashley/

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