Wal-Mart Stores Inc. plans to close 269 stores globally, including 154 locations in the U.S.
The retailer said in October that the company was reviewing its portfolio to make sure “assets were aligned with strategy.” The decision to close 269 stores worldwide, including the shuttering of its Wal-Mart Express pilot, completes the review of the group’s total portfolio of almost 11,600 stores. The company said factors taken into consideration in deciding which sites to close included financial performance, as well as strategic alignment with long-term plans.
By midday, shares of the company were down 2.7 percent to $61.37. Trading volume was lower than average. The stock’s 52-low is $56.30, and the high is $89.26.
The store closures “represent less than 1 percent of both global square footage and revenue,” the company said. While that seems small, the number of store associates impacted — at 16,000 — is significant. Of that number, the majority of associates — about 10,000 — are located in the U.S.
The company said that more than 95 percent of the sites to be shuttered are “within 10 miles on average of another Wal-Mart, and the hope is that these associates will be place in nearby locations.” The company said it will provide 60 days of pay and, if eligible, severance, as well as résumé and interview skill training for those not continuing their employment at Wal-Mart.
Doug McMillon, president and chief executive officer, Wal-Mart Stores Inc. said, “Actively managing our portfolio of assets is essential to maintaining a healthy business.”
McMillon added that while closing stores in never easy, the closures are “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.” He added that the company invested considerable time assessing its stores and clubs and are “supporting” the associates impacted with “extra pay and support, and we will take all appropriate steps to ensure they are treated well.”
Wal-Mart said it plans to open 50 to 60 Supercenters and 85 to 95 Neighborhood Markets in fiscal 2017, which begins on Feb. 1. During the same period, Sam’s Club, its warehouse format, plans to open in seven to 10 new locations. Internationally, the company plans to open between 200 and 240 stores during fiscal 2017.
The 154 stores in the U.S. scheduled for closure in 102 of the discounter’s smallest format stores, Wal-Mart Express, which had been a pilot concept since 2011. Wal-Mart said it will focus on strengthening its Supercenters and optimizing its Neighborhood Markets, as well as growing the e-commerce business and expanding Pickup services for customers. Included in the closures are 23 Neighborhood Markets, 12 Supercenters, seven stores in Puerto Rico, six discount centers and four Sam’s Clubs.
Internationally, 115 stores are slated to be closed, which includes the 60 recently closed, loss-making stores in Brazil. The discounter said the stores closed in Brazil represent just 5 percent of sales in that market, and that it has already been able to relocate many associates to other stores. The balance of the 55 stores are located mostly in small, loss-making stores in other Latin American markets, the company said.
Wal-Mart said the closures would cost between 20 cents to 22 cents of diluted earnings per share from continuing operations, with about 19 cents to 20 cents recorded in the fourth quarter of fiscal 2016. The balance of the charge would be posted during the first half of fiscal 2017. The discounter said 75 percent of the impact pertains to the U.S. store closings. The company said it plans to report fiscal 2016 fourth-quarter and full-year results on Feb. 18.
This past week, WWD published an in-depth report about the company — noting its challenges in the market. On the digital front, Wal-Mart faces a fierce competitor: Amazon Inc. There’s also the mounting labor costs that the company faces. And regarding the number of units, analysts have said the retailer may be too big. Dorothy Lakner, managing director at Topeka Capital Markets, said that the “new ideal store count for a U.S. national chain of clothing retailers is 600 to 700 stores.”
On that last note, Wal-Mart is not only is rethinking its store base. J.C. Penney & Co. and Macy’s Inc. have closed stores, or are in the process of closing additional units.
The chart below shows Wal-Mart’s annual headcount and headcount growth since 2005: