It was the classic “good news, bad news” day at Wal-Mart Stores. On the same day (Jan. 11) the world’s largest retailer announced hourly wage increases for U.S. employees, Sam’s Club abruptly closed or moved to close around 60 stores.
Several television stations across the country broke the news of the closures when employees and members found closed signs posted on the door of their local Sam’s Club.
Sam’s Club did provide a brief statement on Twitter noting: “After a thorough review of our existing portfolio, we’ve decided to close a series of clubs and better align our locations with our strategy. Closing clubs is never easy and we’re committed to working with impacted members and associates through this transition.”
Sam’s Club CEO John Furner reportedly notified employees of the closures in a company-wide email sent Thursday. The email said 10 of the shuttered clubs will be turned into e-commerce distribution centers. He did not say where the clubs are located. Employees of the affected stores will have the opportunity to reapply for positions in those locations. Some of the stores closed immediately. The retailer said the remaining clubs will stay open for a few weeks before permanently closing.
Thursday’s action came as a surprise given there was no initial notice in several of the clubs that closed. The closure in Baton Rouge, La., caught some employees off guard as they and members found the doors locked on Thursday and the store phone went unanswered, according to media reports. Similar scenes played out in Memphis and Indianapolis and Southern California.
Members like Kathryn Higa of Rena, Wash., took their frustrations to social media on Thursday. Higa said while brick and mortar stores are under pressure and it’s crucial to manage the top and bottom lines, putting nearly 10,000 people out of work with no prior notice indicates an absence of any conscience. Higa said she votes with her dollars and she’s spent her last penny with Wal-Mart or Sam’s Club, and she’ll be watching to see how much the top execs get in bonus pay.
Natalie Crane of Cooper City, Fla., noted in her Facebook post: “They weren’t losing money. Just a very greedy company. They profited big from the new tax plan and then played their workers like a fool.”
A typical club employs about 150 workers, some full-time and some part-time, according to previous information from Sam’s Club officials.
Wal-Mart does provide hourly employees compensation for 60 days while they look for other opportunities in nearby clubs or Walmart stores. After that time, eligible employees not relocating will be paid a severance commensurate with years of service and that is also the case for Sam’s Club employees.
Sam’s did clarify in a Twitter post that club pharmacies will remain open for two weeks and the retailer will work with each state pharmacy board to guide the transition.
The news of the club closures are a sign of the times in retail, but several industry watchers said the closures were not handled according to usual protocol. During the day, Sam’s Club made no public release, nor did its parent company Wal-Mart Stores, who instead focused its Thursday media message on the higher wages and bonus pay with expanded benefits packages for its own U.S. employee base.
“This is unprecedented and comes across as heartless and is against Sam Walton’s belief that associates are the company’s greatest asset. I am without words that this could happen. It’s thoughtless for the millions of members who pay to shop Sam’s Club and those small restaurant owners and other business members who showed up this morning at various clubs only to find them closed with no warning,” said Peggy Knight, a supplier consultant and retired Wal-Mart and Sam’s Club professional. “This lack of communication from corporate to stores is not acceptable protocol for members who pay to shop at Sam’s Club.”
However, shortly after 5 p.m. (CST), Walmart Corporate Communications sent the media a press release with more details on the closures. The company plans to convert up to 12 of the clubs to eCommerce fulfillment centers. The first site will be located in Memphis.
“Transforming our business means managing our real estate portfolio and Walmart needs a strong fleet of Sam’s Clubs that are fit for the future,” John Furner, president and CEO of Sam’s Club, said in the statement. “We know this is difficult news for our associates and we are working to place as many of them as possible at nearby locations. Our focus today has been on those associates and their communities, and communicating with them.”
As to workers affiliated with the closed stores, Furner noted: “We need great people to help lead us into the future and we hope that many of them will stay with the company at either a local store or club. Change is never easy, but we’re making these decisions as part of running a healthy business.”
Wal-Mart will see a 14 cent per share hit to earnings to account for costs related to the closures. Most of that charge will come in the fourth quarter, the company said. Wal-Mart posts fourth-quarter and full-year financials on Feb. 20.
Walmart U.S. and Sam’s Club operate more than 5,400 U.S. locations. After the actions announced Thursday, the company will have 597 clubs.