Oct. 9, 2012 at 7:57 AM ET
Despite the many economic head winds still facing the U.S., much of the retail industry is anticipating a sharply improved holiday season compared to last year and is planning accordingly. Six of the largest store chains in America will, together, add more than 300,000 temporary workers during the season to handle the needs of the anticipated higher volume of shoppers. The National Retail Federation predicts that holiday sales this year will increase by 4.1 percent to $586.1 billion. After the severe damage the industry suffered during the recession and its immediate aftermath, retail sales appear to be on the rise again.
Each year, large American retailers add tens of thousands of employees during the holidays. Such retailer include Wal-Mart Stores Inc., Target Corp., Toys“R”Us, and Macy’s Inc. These companies try to predict how well they will do months in advance in order to estimate how many more workers they will need to support the busiest shopping season. The announcements about temporary job additions usually come at the end of September.
Of course, despite the extensive advanced planning, retailers always run the risk their predictions will miss the mark. Shoppers may either stay away or consumer activity may be better than expected. Stores do not want to be caught with too little or too much inventory or personnel. Excess inventory is sold off at low prices after year’s end. And those workers whose presence cannot be justified are laid off.
Large chains hire hundreds of thousands of people with the expectation that most won’t stay. Workers sign on because they need temporary jobs. They often don’t have jobs at all and hope that a good holiday season will mean the temporary job can turn into a permanent one.
Several factors, however, may put a dent in the holiday shopping season. National Retail Federation President and CEO Matthew Shay warned that “the upcoming presidential election, confusion surrounding the ‘fiscal cliff’ and concern relating to future economic growth could all combine to affect consumers' spending plans.” Despite these concerns, Shay remains bullish, stating that this year’s annual holiday forecast was the most optimistic one since the recession. “[O]verall, we are optimistic that retailers' promotions will hit the right chord with holiday shoppers,” Shay said.
However, the Tax Policy Center predicted that the average tax increase per household will be almost $3,500 next year if all current tax cuts expire. If this further affects consumer spending, Shay may find that his organization overestimated holiday business, and the gamble retailers took by hiring so many additional people may prove unsuccessful.
24/7 Wall St. looked at the holiday temporary hiring announcements of six huge retailers — Wal-Mart, Target, Kohl’s Corp., Macy’s, Toys“R”Us and Gamestop Corp. Together, they will add at least 324,700 temp workers. We also examined how many people the same retailers added last holiday season. We then looked at their revenues for the past two years as of July 2012 to see whether or not their overall retail prospects had improved. We also reviewed their total employee base to determine how large their temp job additions are in relation to their permanent payroll. SEC filings provided the sales and employment data.
These are the six companies hiring for the holidays.
Target’s sales rose a respectable 4.2 percent in the last 12 months compared to the previous 12 months. But the Minneapolis-based company will only hire between 80,000 and 90,000 temporary employees for the holiday season, down slightly from the 92,000 seasonal workers it added last year. The retailer said it doesn’t need to hire as many temporary employees because 30 percent of last year’s seasonal workers moved into permanent positions. In addition to the hiring for the 1,772 stores in the U.S., the company announced Monday it has started hiring for its first 24 Canadian stores, which will open in the spring of 2013.
Macy’s plans to hire 80,000 people for the upcoming holiday season, according to the company. The temporary workers will help in “its Macy’s and Bloomingdale’s stores, call centers, distribution centers and online fulfillment centers,” a company representative said. Macy’s has been doing well recently. In the last quarter, profits rose 15.8 percent compared to the same quarter in 2011, and the company raised its 2012 profit outlook from $3.30 a share to $3.35 a share. Macy’s has trimmed costs in some places. Earlier this year, the company closed five Macy’s stores and four Bloomingdale’s stores that were underperforming. Although more than 830 workers were affected by those closures, some of the employees had the opportunity to join other stores in the company.
The majority of Kohl’s planned 5,700 temporary positions will be in the company’s 1,146 stores. Some, however, will work in its distribution centers, and more than 30 will be working in seasonal credit operating positions. The uptick comes despite the company’s disappointing financial results as of late. While competitor Macy’s sales in the last 12 months have risen by 4.2 percent, Kohl’s sales have risen just 0.9 percent. The retailer’s second-quarter profit fell about 20 percent, and the company cut its full-year profit outlook. According to retail analysts, the company heavily discounted some products to compete with rivals while it was unable to quickly restock popular merchandise, which hurt its results in the first half of the year.
Compared to Wal-Mart’s 2.2 million employees worldwide the 50,000 temporary employees that will be hired to staff company stores during the holidays comprise just a small portion of the total. But it still beats last year’s increase. In addition, the company announced it would offer more hours to existing associates. The company can easily afford to add all these hires. Sales in the last 12 months have grown 6.7 percent from the previous 12 months. Although Wal-Mart is the second-largest company in the U.S. by revenue, it has recently cut back on some things. Wal-Mart began phasing out late-night greeters from its 3,000 U.S. supercenters in the past year, according to a Bloomberg news report in January.
The 45,000 temporary employees Toys“R”Us plans to hire during the holidays will work in the company’s 876 U.S. stores and its 10 distribution centers. The retailer said its holiday staffing increase is partially to help the company with its new online offerings such as the “Buy Online, Pick Up in Store” program. These temporary jobs may turn into something more permanent as well. The retailer reports that about 15 percent of the 2011 holiday work force continued to work for the company after the holiday season. Toys“R”Us said some of the seasonal jobs occupied by “high-performing employees” could once again turn into full-time positions.
Like many brick-and-mortar retailers, GameStop has struggled of late as more people purchase game consoles and video games online. Sales in the last 12 months were down 5.6 percent from the previous 12 months. The company is overhauling its business strategy to become a repairer and reseller of smartphones and tablets, especially Apple products. It believes that its retail presence of more than 6,600 stores around the world will help it achieve that goal. That strategy could reap dividends in the future. Wedbush Securities analyst Michael Pachter told the San Francisco Chronicle in August that GameStop could generate $1 billion in revenue during the next few years by reselling just 5 percent of the 230 million Apple devices owned by Americans.