Walmart to Close 269 Stores as Retailers Struggle
Walmart, whose supercenters once transformed the way Americans shop, announced on Friday that it would close a record number of stores in the United States and overseas, as it fights to hold its ground in a retail landscape under siege by the behemoth Amazon.
The giant retailer, based in Bentonville, Ark., said in a statement that it would shutter 154 stores in the United States, or about 3 percent of its locations, as well as 115 stores overseas. It will also end its Walmart Express small-store format, which failed to catch on in urban areas. As many as 10,000 employees could lose their jobs in the United States and 6,000 elsewhere, it added.
The closures underscore the turmoil faced by brick-and-mortar retail across a variety of fronts. Web merchants are gobbling up a growing share of shopping dollars, their vast online catalogs rendering Walmart’s sprawling superstores increasingly less relevant. And consumers are spending less on traditional retail items like apparel.
According to one estimate, Amazon accounted for almost a quarter of all retail sales growth last year. Other retail stalwarts, including Macy’s, Sears and J. C. Penney, are also shuttering stores after a weak holiday sales season.
“Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future,” Doug McMillon, Walmart’s president and chief executive, said in a statement.
“It’s important to remember that we’ll open well more than 300 stores around the world next year,” he said. “So we are committed to growing, but we are being disciplined about it.”
Mr. McMillon had warned investors late last year that the company was considering shifts in its retail strategy. At the higher end of its new plan to add 142 to 165 new stores, Walmart’s store base in the United States would still rise; at the lower end, Walmart would, for the first time, shrink its United States footprint.
The closings account for less than 1 percent of global square footage and revenue, which totaled $485 billion last year.
Walmart’s exit from its smaller-format stores also highlights the difficulties it has faced in reaching more urban consumers. Introduced in 2011, its Express stores are slightly larger than a typical dollar store and were an effort to establish the retailer in bigger cities. But they have failed to make significant inroads or generate enough returns in the face of cutthroat competition from dollar stores and other discounters.
Over all, Walmart has been slow to pull out of a flat sales period after the recession and was slow to react to the pace of growth in online shopping.
Although sales have improved, the retailer has warned of lower profits going forward because of its investments in its work force and e-commerce. Over the last year, Walmart’s stock has tumbled 30 percent to its lowest level in half a decade.
Despite heavy spending on e-commerce initiatives, Walmart’s online sales growth is slowing.
“Physical retail, and large box in particular, is at a tipping point,” Richard Church, a retail analyst at the data analytics firm Discern, wrote in an email.
“There are too many stores in the U.S. across all retail sectors, low end to high end and everything in between,” Mr. Church wrote. “This is never more evident than when consumer demand is sluggish and decelerating, as it is now.”
It is a difficult time for retailers over all. Though gas is cheap and the job market is strong, retail sales have struggled to gain any traction, falling 0.1 percent in December from the previous month, according to figures released by the Commerce Department on Friday.
The National Retail Federation, an industry trade group, separately estimated that holiday sales rose just 3 percent from the previous year, below its projection of 3.7 percent growth.
The tepid showing by consumers adds to worries among investors, already troubled by the market turmoil in China and elsewhere around the globe, that the recovery in the American economy remains fragile.
There are bright spots in retail, like Lululemon Athletica, which raised its earnings outlook as it continued to ride a boom in athletics wear. L Brands, which owns Victoria’s Secret, reported its “best December ever” after the lingerie brand generated holiday buzz with a star-studded fashion show.
But heavyweights like Gap and Macy’s reported dismal holiday sales as warm weather in much of the country hurt sales of winter clothing. And on Thursday, Best Buy said its winter had been disappointing so far; sales have been hurt by a lull in demand for smartphones and other consumer electronics despite heavy discounting.
Noam Paransky, a director in the retail practice at the consulting firm AlixPartners, said that retailers were reaching the limits of competing on price, especially with online merchants eager to beat prices.
Brick-and-mortar retailers needed to come up with a better proposition, he said, to lure shoppers into their stores.
“ ‘Stack it high and let it fly’ doesn’t work anymore,” he said. “They have to figure out how to make shopping fun again.”
About 16,000 store employees will be affected worldwide by the closings, Walmart said. The stores are scheduled to shut down by the end of January.
Walmart said it intended to transfer as many workers as it could to nearby stores and offer severance pay to those who do not find new positions. The company is the nation’s largest private-sector employer.
Workers’ groups blasted Walmart’s move.
“For Walmart, its workers are disposable,” said Jess Levin, communications director at Making Change at Walmart, a group backed by the United Food and Commercial Workers International Union and a longtime critic of working conditions at the retailer.
“These latest store closings could very well be just the beginning,” she said. “This sends a chilling message to the company’s hard-working employees that they could be next.”
Of the 154 locations Walmart will close in the United States, 102 will be Walmart Express stores. The company said it would focus more on the slightly larger Neighborhood Market format, which has logged stronger sales (though it will also close 23 of those stores). Walmart is also closing 12 supercenters and four Sam’s Club membership stores.
The bulk of Walmart’s 115 closings overseas are in Brazil, where the economy is slowing. The retailer will also close 55 primarily small, loss-making stores in other Latin American markets, it said. The closures are expected by the end of the month.
Walmart said that costs associated with the closings would shave an estimated 20 to 22 cents from its earnings per share, and that the effect would be felt mostly in its fourth-quarter results, which it reports next month. That effect is not reflected in its quarter or full-year earnings guidance.