NEW YORK—Wal-Mart is doing some rare pruning.
The world’s largest retailer is closing 269 stores, including 154 in the U.S. 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 less than 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 U.S. Its global workforce is 2.2 million, 1.4 million in the U.S. alone.
Michael Exstein, an analyst at Credit Suisse, described the moves as “baby steps” in his report published 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 U.S. 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 U.S., 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 U.S.
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 U.S. are within 10 miles 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 U.S. 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 U.S. during the fiscal year that begins Feb. 1. Outside the U.S., Wal-Mart plans to open 200 to 240 stores.
The financial impact of the closures is expected 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 scheduled to release fourth-quarter and full-year results on Feb. 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 is expected to help Wal-Mart create a more seamless shopping experience for customers who are jumping back and forth between stores and their mobile phones.
Shares of Wal-Mart Stores Inc. fell $1.13, or 1.8 percent, to close at $61.93 amid a broad market sell-off.
Friends Read Free