Wal-Mart Stores said it plans to close 269 stores in the U.S. and globally with Walmart Express being on the chopping board by the end of the January. The retailer is closing 11 stores in Arkansas.
The retailer is pulling the plug on its small store experiment and 102 of the 154 locations to be shuttered in the U.S. will be the Walmart Express which largely operate in small towns like Gravette, Prairie Grove and Gentry, Ark.
Also, Sam’s Club is losing about 400 operational jobs, and 150 corporate office workers were given pink slips on Friday (Jan. 11), according to multiple people close to the situation. The corporate cuts are the second in the past four months. On Oct. 2, the retailer announced 450 corporate job cuts at the home office in Bentonville. Company officials said the cuts were needed to move faster in the dynamic retail environment. Prior to the October move, the company employed around 19,000 in its home office region.
STORE CLOSURES, EMPLOYEE TRANSITIONS
Most of the store closures are expected to take place by the end of the month. Following are the Walmart Express store closings in Arkansas. All the stores are set to close Jan. 28.
Also in Arkansas, Wal-Mart is closing a Neighborhood Market store in Maumelle. A full list of the closures is available is scheduled to be posted on the retailer’s website later today.
Roughly 10,000 U.S. jobs are being impacted from this restructuring. Most of the small stores employ around 60 workers in towns as small as 2,000 people.
Wal-Mart said more than 95% of the closed stores in the U.S. are within 10 miles on average of another Walmart, and the hope is the employees will be placed in nearby locations. Where that isn’t possible, the company will provide 60 days of pay and, if eligible, severance, as well as resume and interview skills training.
In total, the retailer said the 269 stores it’s closing around the world is about 1% of its global square footage and revenue. The financial impact to the company’s earnings is expected to be between 20 and 22 cents per share. Most of that, 19 cents to 20 cents, will be felt in the fourth quarter which ended Jan. 31. The remainder of the impact will fall into the first half of fiscal 2017.
“Actively managing our portfolio of assets is essential to maintaining a healthy business,” Doug McMillon, president and CEO of Wal-Mart Stores, said in the statement. “Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future. It’s important to remember that we’ll open well more than 300 stores around the world next year. So we are committed to growing, but we are being disciplined about it.”
McMillon hinted about this move in October at the company’s meeting with investors. He said then that the company is looking at its real estate around the world and trimming its fleet size where necessary.
While the U.S. store closure involves 23 Neighborhood Markets, 12 Supercenters, seven stores in Puerto Rico, six discount centers, and four Sam’s Clubs, the brunt of the impact is the loss of 102 Walmart Express stores, which were an experiment harking back to 2011.
This is a reversal of fortune for several small towns across Arkansas, East Texas and North Carolina where Walmart just two and half years ago ramped up its small store format in largely rural areas to better compete with Dollar General, under the leadership of then CEO Bill Simon. The small stores – most around 10,000 square feet – were to be the future for the retailer’s improved sales as they were equipped with online pickup, pharmacy and fuel. Now it appears the focus will be on supercenters and Neighborhood Markets and grocery pickup at those locations along with e-commerce.
“The Express stores seemed like a great way to recapture fill-in business lost to Dollar stores, etc. but clearly the format wasn’t pulling its own weight. Walmart talks about their sharpened focus on stores and this is clearly a result of that initiative and holding stores more accountable in the internet age,” said Jason Long, CEO of Shift Marketing Group in St.Louis.
Retail watchers said the restructuring effort is nothing unusual in the competitive world of retail.
“I don’t think people should panic. Businesses have to make financial and strategic changes all the time to ensure the health of their operations. Every business makes mistakes and as a percent to total… it is minimal,” said Jami Dennis, co-owner of VendorMasters in Bentonville, a supplier consulting and training organization. “Wal-mart went through a rapid growth stage and in some cases, have multiple locations / formats too close to one another. I would be concerned if they were not opening any new stores; however, they are. For suppliers, it is essential that they work with their Walmart team to collaborate on exit strategies for those locations so they can help minimize inventory flow and possible markdowns in those locations.”
Peggy Knight, former Walmart employee and now supplier consultant, said the Express store experience is typical of the way Walmart has tested new formats over its 52-year history. She said customers dictate what formats make it and which ones don’t by how much they are used.
Carol Spieckerman, CEO of Spieckerman Retail, said the news will likely be dumped into other recent store closure announcements from Macy’s to Finish Line, but in Wal-Mart’s case the action represents only a fraction of the total fleet.
“The elimination of its Express locations doesn’t change Walmart’s multi-format operating model. Walmart has simply narrowed its small, medium, large approach to focus on medium (Neighborhood Markets) and large (supercenters),” Spieckerman said. “I’m sure that Walmart learned a lot from its small format foray and that its Neighborhood Market concept can efficiently address smaller markets without the operational retooling that more diminutive footprints require.”
For Spieckerman the question remains whether Walmart will expand its convenience store concept or continue to operate it as a limited-edition lab.
Wal-Mart said it still plans to open around 195 new stores in the U.S. this next fiscal year which begins Feb. 1. Roughly 60 of them will be Supercenters and 95 are to be Neighborhood Market stores.
Wal-Mart also confirmed that it’s closing about 60 stores in Brazil, or more than 10% of its locations in the country, as part of a restructuring of one of the retailing giant’s most important overseas markets.
Local experts told Talk Business & Politics in October that the retailer’s troubles in Brazil and other Central American operations like Chile continued to brew. Several experts believed Wal-Mart would either divest or scale back its operations in Brazil.
Clint Lazenby, a consultant with #OnShelf, said it doesn’t make sense to keep spending money in markets like Brazil that are riddled with corruption and spiraling downward economically. Brazil moved into a recession in June. He said Wal-Mart has been unable to assemble the three separate businesses into one cohesive business given difficult tax structures and other hurdles.
Other changes underway in the retailer’s Central American business is a shift in management. The retailer announced Thursday (Jan. 14) that Flavio Cotini, who has been the chief financial officer of the Brazilian business, would take over as CEO for Guilherme Loureiro who is being transferred to a similar role in Mexico. Cotini is the fourth CEO of Walmart’s Brazilian operations since 2008.