Key Points
The latest implementation of a shifting retail strategy was the spark that lit the fuse under Verizon Communications (NYSE: VZ) stock on Thursday. Cheered by the move, investors pushed the big telecom’s stock up by more than 2%, on a day when the S&P 500 index only ticked up by 0.4%.
Franchises on the rise
Verizon announced that it aims to sell 274 of its stores around the U.S., and cut roughly 500 corporate jobs as part of a broader restructuring program.
All told, this round of store transitions will affect around 3,000 of the company’s retail and corporate employees. The stores are to be sold to third parties that will operate them under franchise agreements; many of the affected workers would likely be retained by those entities.
Increasingly, Verizon’s retail outlets are being managed under the franchise model. Currently, around 5,000 company stores are run in this manner. Following the sale announced on Thursday, Verizon will directly operate only about 1,000 of its outlets.
Just after current CEO Dan Schulman took the reins last October, the company announced plans to cut roughly 15% of its workforce, or around 13,000 people. This is partly in anticipation of artificial intelligence (AI) taking over certain functions, such as aspects of customer service.
Other components of this corporate makeover include a recently introduced, simplified service plan for clients and a refreshed loyalty program.
The dividend difference
While it’s never heartening to learn of potential job cuts, the silver lining is that the current program could result in a genuinely leaner, more efficient Verizon if done well. Shareholders would currently welcome the return of solid growth for the company, but as it stands, it’s a reliable (if unspectacular) performer that pays a handsome, high-yield dividend (over 6%).
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
