As if it weren’t already obvious, several recent moves by Wal-Mart Inc. further underscore the retail giant’s focus on e-commerce and digital, where sales in the second and third quarters, jumped 50 and 60 percent, respectively.
Wal-Mart on Jan. 11 said it will close 63 Sam’s Club stores, which is about 10 percent of the fleet, an announcement that almost got lost in the news that same day about the retailer’s plans to raise the hourly wage of full-time sales associates to $11.
The retailer has no tolerance for underperforming stores or lagging international units. Wal-Mart is reportedly talking with buyout firm Advent International Corp. to sell a major stake in its Brazil operations, which has been hurt by the country’s economic slowdown and competition from discounters.
A spokeswoman for Advent declined to comment. Asked about the sale of the Brazil unit, the director of communications for Wal-Mart Latin America, said, “We don’t comment on rumors or speculation.”
Related Galleries
A source familiar with the situation confirmed to WWD that Advent and Wal-Mart are holding discussions regarding the retailer’s Brazilian business, but those talks are “very preliminary.”
Walmart.com’s marketplace and Jet.com, “that’s where they’re expecting the lion’s share of growth going forward. If you combine the Sam’s Club announcement and think of what’s potentially going on in Brazil, it’s the company continuing to shift away from the traditional brick-and-mortar business they’ve been known for,” said Gordon Haskett analyst Chuck Grom. “What matters most is the U.S. business, improving the stores and growing the e-commerce business.
“Think of Wal-Mart five to seven years ago,” Grom added. “They had different international markets they were trying to grow and were opening all these big-box stores.”
“Sam’s Club overexpanded,” said Craig R. Johnson, president of Customer Growth Partners. “Every Sam’s Club has a Wal-Mart that’s close by. Sam’s was conceived in the Eighties as a B2B club, so Sam’s wasn’t cannibalizing Wal-Mart. The consumer business became a bigger part of the business in the last 10 years. Sam’s Club is now much more of a competitor to Wal-Mart. There’s been rumors that they’re going divest Sam’s Club.
“If you’re a smart retailer, you’ll prune the underperforming divisions,” Johnson added. “Advent might take a piece of Brazil, which may be a precursor to a sale. They’ve been banging their heads against the wall with Brazil for a long time. Japan was teetering for a while, China is doing better, but ASDA in the U.K. is a difficult market. “
Brazil wouldn’t be the first country Wal-Mart has walked away from. In the mid-Aughts, it sold its German retail business and exited South Korea.
“They might have hinted about the international pruning at their analyst day in October,” Grom said. “They showed a slide of countries that were more of a priority, and Brazil was in the bucket of those that are less of a priority. They’ve been signaling about decisions to get out. Wal-Mart has Every Day Low Price. Brazil is a high-low business. They’ve struggled to convert from a high-low model to EDLP.
“My guess is that [Brazil] was in the works for some time,” Grom said, noting that the report comes as Judith McKenna was appointed president and chief executive officer of Wal-Mart International. “I definitely sensed in October that [divesting] a market was something they’re looking to do. It wouldn’t surprise me if there are more countries that they’ll look to get out of.”
In additional to the jobs lost as a result of the Sam’s Club closures, a reported 1,000 jobs will be cut at Wal-Mart’s Bentonville, Ark., headquarters, and a shake-up at the store level could see the elimination of 3,500 co-store manager positions, with 1,700 lower-paid assistant managers hired.
“We’re adding 1,700 new assistant managers in stores, including a new e-commerce assistant manager role, which will oversee the various areas where e-commerce is integrated across the box, for example, pickup and online grocery, among other things,” a Wal-Mart spokesman said. “We’re undertaking a review and restructuring of the co-manager role, but I’m not sure where that 3,500 number is coming from.”
“If they continue to be more efficient with capital, the market will continue to reward them,” Grom said. “Wal-Mart is trying to compete and they’re growing their marketplace. There are only two strong ecosystems out there, Wal-Mart and Amazon.”