Police Chief Macon Moore said two employees were at work when they were killed.
Southaven is a city with a population of close to 50,000 and is located close to the Mississippi/Tennessee border and is 13 miles south of Memphis.
"When the cops run into the Walmart, you hear more gunshots", Odom said.
Walmart released a statement, saying their hearts are with the victims and their families.
He was shot and a police officer was also injured by a bullet which struck their vest but both are expected to survive. The former employee was taken to the Regional Medical Center after he was shot twice. It was not immediately clear whether the reports were legitimate.
The Memphis Commercial Appeal reports that the Southhaven Police Department were called to the scene at 6:32 a.m. after receiving a call regarding a shooting inside of the store.
Jones said he saw the body of a store manager on the floor as they ran out of the store. At least a dozen people were injured; the shooter was killed by police who were working the festival.
Customer Carlos Odom was walking out of the store when "I heard a bunch of gunshots".
The officer was taken to the hospital in unknown condition.
One witness to the police response tweeted, "Something serious just happened at Southaven Wal-Mart".
Moore said about 60 employees were inside the store when the shooting occurred.
"We'll continue to focus on assisting law enforcement in their investigation and on supporting our associates".