The evidence that sales at many companies are struggling and that employment will suffer are almost everywhere. Several large companies will almost have to cut employment. Most are industries which are already in trouble. This is the 24/7 Wall St. list of companies that will have to cut jobs, probably over 10,000 in each case, to make ends meet or improve earnings between now and the end of 2008.
Sears is still one of the largest employers in the US, with well over 300,000 workers. It has not made any large cuts to its workforce, yet. Housing, food, and gas prices are catching up to the people who shop at Sears and K-Mart. Same-store sales are dropping and whatever bump the company may have gotten from tax rebates is behind it. Sears cannot afford its current expense structure and one of the few places it can make big cuts is in people.
Citigroup CEO Vikram Pandit has promised to cut expenses at the financial services company. In one cut, Citi let 17,000 people go last year. But, that is not going to reach the firm's goal of taking out $15 billion in expenses. Citi has 350,000 employees. Pandit has not sold off any major divisions and has already been criticized by many for not cutting enough weight from the start of his tenure. That leaves him with limited options for bring down expenses.
Shares in Washington Mutual trade as if the mortgage company many not make it. The stock is at $4.40, near a 52-week low and well down from its period high of $39.25. Mortgage defaults are still rising and home sales still falling. WaMu may have to cut more people in its retail bank, brokerage and mortgage businesses. Dropping another 10,000 people would be a horrendous cut, but it may be necessary for the firm's survival.
Rite Aid is a dog of a company. It recently traded into penny-stock land, falling to $.98, off of its 52-week high of $5.20. Same-store sales rose 1.1% last month, under Wall St. projections. Rite Aid has almost $6 billion in debt. In the quarter ending May 31, the firm lost $157 million on $6.6 billion in revenue. Interest expense was $118 million. Rite Aid has 5,000 stores and 113,000 "associates." With such a large debt load, Rite Aid needs to cut a large number of people.
AT&T would seem like an odd candidate to cut 10,000 or more people. AT&T has over 310,000 employees and, while some of its business, especially cellular, are growing fast, its landline business is shrinking. AT&T's adjusted operating expenses for the second quarter of 2008 totaled $23.1 billion, versus $22.7 billion in the same period last year. So, as it loses residential phone customers it will likely want to cut costs. Wireline voice revenue dropped almost 8% in the latest period to $9.8 billion.
Circuit City is as close to being insolvent as almost any large public company in the US. Circuit City has a market cap of $325 million which means it trades at an astonishingly low 3% of revenue. The stock hit a 20-year low late last month. CC may be sold. If another retailer buys it, the consolidation of stores will mean lost jobs. CC could enter Chapter 11. That could also trigger lay-offs. If the company wants to stay independent, it will have to admit it has too many outlets.
Gap's August revenue was down 5% to $1.24 billion. Comparable store sales were off 8%. As the recession deepens, those numbers are not going to get better. Gap's flagship stores in the US and overseas are doing relatively well. Gap operates a total of 3,100 stores across its three brands and has 150,000 employees. Gap has already announced a strategic review to consolidate some of its Gap brand locations, which may spells more layoffs.
Merck's current generation of drugs are under siege, some because they will go "off patent" and others because of FDA troubles. The Big Pharma operation has managed to get its shares near a 52-week low at $34.50. That is down from a period high of $61.62. Merck still faces some level of risk from suits involving its drug Vioxx. Merck has 60,000 employees. It will have to do with a lot less.
AIG's new CEO Robert Willumstad say that things are so bad at the big insurance firm that "everything is on the table". That probably includes a fair number of the company's 116,000 people. AIG plans to bring in $15 billion in new capital. It has managed to lose more than that over the last three quarters. Press reports say that AIG is actively considering spinning-out is worst assets. That should mean a lot of jobs related to operating those parts of the company will be gone.
Blockbuster is Wall St.'s perpetual whipping boy. Renting movies in stores is old world. The stock trades for $2.30. That is 10% of where it sat five years ago. In the last quarter, BBI lost $42 million on revenue of $1.3 billion. Blockbuster has 7,600 stores. If Blockbuster is ever going to post meaningful profits again it will have to continue cutting stores and staffing. As the stock moves closer to $2, the decision becomes easier.
Why would IBM, one of the world's most successful technology companies, ever cut staff? To save money. There were rumors over a year ago that the firm would lay-off 150,000 people and bring them back as consultants or move the jobs to Asia. IBM may not cut 10,000 worldwide, but it is a good bet that a lot of jobs will be sliced in the US. Most of that work is going to India.
August car sales at Ford fell by 26% to just over 155,000 units. The company said the second half might be worse than the first. Ford promised to cut production for the balance of 2008. Ford is running low on cash and its credit ratings have been dropped due to rising default risks. Once it has switched its product mix to fuel-efficient models, it still have to deal with Toyota and Honda who own that end of the market.