Wal-Mart set to shutter 269 stores
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WAL-MART is doing some rare pruning.
The world’s largest retailer is closing 269 stores, including 154 in the US that includes all of its locations under its smallest-format concept store called Wal-Mart Express. The other big chunk is in its challenging Brazilian market.
The stores being shuttered account for a fraction of the company’s 11,000 stores worldwide and under 1 percent of its global revenue. Wal-Mart Stores Inc said the store closures will affect 16,000 workers, 10,000 of them in the US. Its global workforce is 2.2 million, 1.4 million in the US alone.
The store closures will start at the end of the month.
The announcement comes three months after Wal-Mart Stores Inc CEO Doug McMillon told investors that the world’s largest retailer would review its fleet of stores with the goal of becoming more nimble in the face of increased competition from all fronts, including from online rival Amazon.com.
“Actively managing our portfolio of assets is essential to maintaining a healthy business,” McMillon said in a statement. “Closing stores is never an easy decision. But it is necessary to keep the company strong and positioned for the future.”
Michael Exstein, an analyst at Credit Suisse, described the moves as “baby steps” in his report published on Friday, but he believes they are positive ones. He noted that this is the first mass closing that Wal-Mart has announced in at least two decades.
“It is a sign that Wal-Mart has begun the process of dealing with unproductive locations in a much more tangible and coherent way,” he wrote. “But we continue to believe that Wal-Mart needs a much larger restructuring of its store base in order to narrow its focus as it seeks to improve its sales and returns, especially internationally.”
Wal-Mart has seen sales perk up for a key revenue measure for the last few quarters in its US business. But it warned last October that its earnings for the fiscal year starting next month will be down as much as 12 percent as it invests further in online operations and pours money into improving customers’ experience in the stores. The company has been building bigger fulfillment centers devoted to e-commerce orders and expanding online services.
Of the 154 store closures in the US, 102 of them are under the Wal-Mart Express name, which were opened as a test in 2011. The company operates more than 5,000 stores overall in the US.
Wal-Mart Express marked the retailer’s first entry into the convenience store arena. The stores, which sold essentials like toothpaste, were meant to be a solution to the threat of the fast-growing dollar stores. Wal-Mart Express intended to be a two-pronged strategy: stores in small towns that aren’t big enough to support a full-size Wal-Mart and stores in big cities where building a supercenter was impractical. But the concept never caught on as the stores served the same purpose as Wal-Mart’s larger Neighborhood Markets: fill-in trips and prescription pickups.
Also covered in the closures are 23 Neighborhood Markets, 12 supercenters, seven stores in Puerto Rico, six discount stores and four Sam’s Clubs.
More than 95 percent of the stores set to be closed in the US are within 16 kilometers of another Wal-Mart. The Bentonville, Arkansas, company said it is working to ensure that workers are placed in nearby locations.
Wal-Mart will now focus in the US on supercenters, Neighborhood Markets, the e-commerce business and pickup services for shoppers.
The retailer said it also closed 60 loss-making locations in Brazil, which accounts for 5 percent of sales in that market. Wal-Mart, which operated 558 stores in Brazil before the closures, has struggled as the economy there has soured. Its Every Day Low price strategy has also not been able to break against heavy promotions from key rivals.
The remaining 55 stores are spread elsewhere in Latin America.
Wal-Mart said that it’s still sticking to its plan announced last year to open 50 to 60 supercenters, 85 to 95 Neighborhood Markets and 7 to 10 Sam’s Clubs in the US during the fiscal year that begins February 1. Outside the US, Wal-Mart plans to open 200 to 240 stores.
The financial impact of the closures is likely to be 20 cents to 22 cents per share from continuing operations, with about 19 cents to 20 cents expected to affect the current fourth quarter. The company is set to release fourth-quarter and full-year results on February 18.
In a separate move, Wal-Mart said that it’s merging its Arkansas-based team that creates technology for its stores with its Silicon Valley team that does the same for e-commerce. The move will help Wal-Mart create a more seamless shopping experience for customers who are jumping back and forth between stores and their mobile phones.
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