by Tyler Durden
The last 12 months have not been kind to WalMart.
When the world’s largest retailer bowed to pressure to raise wages for its lowest-paid employees, the living wage crowd cheered. In short order, it became apparent that the reverberations from the $1.5 billion endeavor would spell trouble for the company.
When a series of ill-fated efforts to squeeze the supply chain failed to plug the gap, the company resorted to store closures (or “plumbing” as WalMart calls it), job cuts in Bentonville, and reduced hours.
Finally, in October, WalMart threw in the towel and cut guidance. Its shares plunged.
Now, we learn the retailer is set to close nearly 300 stores, affecting some 16,000 employees worldwide.
- WAL-MART TO CLOSE 269 STORES
- WAL-MART SAYS 10,000 ASSOCIATES AFFECTED IN U.S.
- WAL-MART SEES ABOUT 16,000 ASSOCIATES AFFECTED
- WAL-MART SEES FINAL EFFECT 20C-22C ON EPS CONT OPS
- WAL-MART EXITS WAL-MART EXPRESS PILOT
This time around, “plumbing” was not cited as a factor.
Behold: the effect of an across the board minimum wage hike…
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Wal-Mart Stores, Inc. (WMT: NYSE) today announced plans to close 269 stores in the U.S. and globally.
In October 2015, the company said an active review of the portfolio was underway to ensure assets were aligned with strategy. Today’s action follows a thorough review of Walmart’s nearly 11,600 worldwide stores that took into account a number of factors, including financial performance as well as strategic alignment with long-term plans. In total, the impacted stores represent less than 1 percent of both global square footage and revenue.
“Actively managing our portfolio of assets is essential to maintaining a healthy business,” said Doug McMillon, president and CEO, Wal-Mart Stores, Inc. “Closing stores is never an easy decision, but it is 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.”
As part of today’s action, the company will close 154 locations in the U.S., including the company’s 102 smallest format stores, Walmart Express, which had been in pilot since 2011. Walmart instead will focus on strengthening Supercenters, optimizing Neighborhood Markets, growing the e-commerce business and expanding Pickup services for customers. Also covered in the closures are 23 Neighborhood Markets, 12 Supercenters, seven stores in Puerto Rico, six discount centers, and four Sam’s Clubs.
Internationally, the company is following a disciplined strategy of actively managing its portfolio. Consistent with this strategy, the company is closing 115 stores outside the United States. This includes 60 recently-closed, loss-making stores in Brazil, which represents only 5 percent of sales in that market. The company has already been able to relocate many affected associates in Brazil to other stores. The remaining 55 stores are primarily small, loss-making stores in other Latin American markets. Walmart will disclose more detail about those actions, including the number of stores per market, after completing local associate and community outreach.
Walmart will continue to invest in its future, with plans to open stores worldwide in the coming fiscal year. Domestically, Walmart intends to open 50 to 60 Supercenters and 85 to 95 Neighborhood Markets in Fiscal 2017, which begins Feb. 1. In the same period, Sam’s Club plans to open in seven to 10 new locations. Internationally, Walmart intends to open between 200 and 240 stores during the coming year.
The financial impact of these closures is estimated to be approximately $0.20 to $0.22 of diluted earnings per share from continuing operations, with approximately $0.19 to $0.20 expected to impact the fourth quarter of fiscal 2016. The remainder of the impact will fall into the first half of fiscal 2017. Approximately 75 percent of the impact relates to U.S. closings and the remaining portion involves Walmart International, with a large majority of the international impact relating to the closures in Brazil. Walmart will report its fiscal 2016 fourth-quarter and full-year results on Feb. 18. The estimated financial impact is not included in the company’s fiscal 2016 fourth quarter and full year earnings guidance.
Store Associates and Transition Assistance
In total, approximately 16,000 associates will be impacted by the decision, about 10,000 of them in the U.S. More than 95 percent of the closed stores in the U.S. are within 10 miles on average of another Walmart, and the hope is that these associates will be placed in nearby locations. Where that isn’t possible, the company will provide 60 days of pay and, if eligible, severance, as well as resume and interview skills training. Whether with Walmart or elsewhere, the company’s objective is to help all associates find their next job opportunity.
“The decision to close stores is difficult and we care about the associates who will be impacted,” McMillon said. “We invested considerable time assessing our stores and clubs and don’t take this lightly. We are supporting those impacted with extra pay and support, and we will take all appropriate steps to ensure they are treated well.”
Walmart will continue to serve the shopping needs of U.S. customers in the markets affected by today’s announcement through other Walmart locations and online at www.walmart.com. Customers can find the nearest Walmart store through the store locator function on the company’s website. A list of U.S. stores that are closing will be available today on the company’s website at approximately 11 a.m. CST.