3M Shares Drop 6% on Earnings Miss as Job Cuts Unveiled

3M (MMM), the maker of Scotch tape and Post-it Notes, fell 6.2% to a three-month low of $115.07 in New York trading after the company reported “slower than expected” growth in the fourth quarter and said it would cut 2,500 jobs, forecasting further declines in sales this year.

The company reported a profit of $541 million, or 98 cents a share, a drop of almost 60% from a year earlier. Its sales declined 6% over the quarter compared to year-on-year figures, totaling $8.1 billion. 

"In a year impacted by inflation, global conflicts, and economic softening, our team took actions to position 3M for future success," 3M chairman and CEO Mike Roman said, calling the planned manufacturing job cuts “a necessary decision to align with adjusted production volumes."

Further declines forecasted in 2023

The company will take a pretax restructuring charge in the first quarter of $75 million to $100 million. Sales for the first quarter will be down 10% to 15% from the same quarter a year earlier, the company forecast, while sales for the full year will decline by 2% to 6%.

The company's executives said demand for its disposable face masks is declining, while resurging Covid infections in China is hurting demand there, and periodic plant closures are disrupting production. They cited global market changes, such as its suspension of operations in Russia, and the impact of the strong dollar.

They expect earnings per share to drop in 2023 to between $8.50 to $9.00 a share, versus expectations set in 2022 of $9.88 a share. 

3M's planned layoffs are a harbinger of broader economic concerns as companies from tech to manufacturing prepare for slower sales and the threat of a recession. First to go are temporary workers. In the last five months of 2022, almost 111,000 temporary positions were cut by employers.

At the same time, some of the nation's largest corporations are moving to raise wages in an attempt to recruit more workers.

Walmart (WMT), the nation's largest employer, announced it would raise its minimum wage to $14 an hour from $12 as companies struggle to maintain retail and warehouse workers into the new year.

The move could have a significant impact in states that haven't raised their minimum wage beyond the $7.25 hourly federal rate. Other rivals of Walmart, such as Amazon (AMZN) or Target (TGT), have a $15 minimum wage. The company is trying to stay competitive with the market, Walmart CEO and president John Furner said Tuesday in a memo. Despite laying off hundreds of corporate employees in 2022, the company has 30,000 retail jobs listed as open on its website.