At one point Walmart basically seemed unstoppable. Their business model of "be complete assholes so we can sell everything for cheap" seemed like a winning strategy, in terms of continuously growing and shutting down the competition. But at this point Walmart has pretty much stopped expanding, and in fact has to seriously downsize to maintain their current operations.Wal-Mart to Shut Hundreds of Stores
World's biggest retailer also abandons small-format Express
Closings affect less than 1% of square footage, company says
Wal-Mart Stores Inc. plans to shutter 269 stores, the most in at least two decades, as it abandons its experimental small-format Express outlets and looks to streamline the chain.
The move by the largest private employer in the U.S. will affect about 10,000 jobs domestically at 154 locations, according to a statement Friday. Overseas, the effort will eliminate 6,000 jobs and includes the closing of 60 money-losing stores in Brazil, a country where Wal-Mart has struggled.
The plan will affect less than 1 percent of its total square footage and revenue, the company said.
Chief Executive Officer Doug McMillon took the step after reviewing the chain’s 11,600 stores, evaluating their financial performance and fit with its broader strategy. The move also marks the end of its pilot Wal-Mart Express program, a bid to create a network of small corner stores to compete with dollar-store chains and drugstores. Wal-Mart will continue its larger-size Neighborhood Markets effort, though 23 poor-performing stores in that chain also will be closed. The company is still expanding its footprint in the U.S., adding 69 new stores and 6,000 jobs in January alone.
“We invested considerable time assessing our stores and clubs and don’t take this lightly,” McMillon said. “We are supporting those impacted with extra pay and support, and we will take all appropriate steps to ensure they are treated well.”
Wal-Mart shares fell 1.8 percent to $61.93 in New York as the broader market tumbled. They have lost 29 percent of their value over the past 12 months, dragged down by slow growth and profit declines.
Not Enough?
Some investors may be disappointed that the cuts aren’t deeper, said Brian Yarbrough, an analyst with Edward Jones.
“I don’t think this is enough to move the needle,” he said. “I think they need to exit some markets totally and close a lot more than they are closing.”
The shutdowns will reduce earnings from continuing operations by about 20 cents to 22 cents a share, the Bentonville, Arkansas-based company said, with as much as 20 cents of that coming in the fourth quarter.
Supercenter Shutdowns
Twelve of its massive supercenter stores, which employ an average of about 300 people, will be shuttered. Most of the closings will occur by the end of the month. Last year, Wal-Mart shut three supercenters.
The closing of the smaller-format stores signals a retreat for Wal-Mart from one of its main efforts to try to boost slowing U.S. sales. When the company introduced the stores in 2011, the aim was to attract shoppers who didn’t want the hassle of going to a sprawling supercenter to pick up a carton of milk after work. Other retailers, including Target Corp., have also been making a push into smaller stores.
The experiment seemed to be working. As recently as 2014, Wal-Mart announced plans to open an additional 90 Express stores and touted their “solid” sales growth. But the company said today it was planning instead to focus on the mid-sized Neighborhood Markets, which are about the size of a grocery store, and its supercenters, which sell everything from avocados to windshield wipers.
The closings are good news for dollar store chains, which had the most to lose from Wal-Mart expanding its small format, said Yarbrough.
Employee Severance
Wal-Mart will give employees the chance to relocate to nearby stores. It also will provide 60 days of pay and one week of severance for each year with the company. Wal-Mart has 1.4 million employees in the U.S. and 800,000 abroad.
McMillon had signaled to investors that he was considering closing some stores during the company’s investor meeting in October. Still, the move doesn’t mean Wal-Mart is reducing its overall U.S. stores, the retailer said on Friday. It plans to open 50 to 60 supercenters in the U.S. this year and 85 to 95 neighborhood markets, which are about the size of a typical grocery store. That is a slightly slower pace of growth than the 115 it added in 2014.
Wal-Mart has come under increased pressure to cut costs after giving a gloomy profit forecast for the next fiscal year. Earnings are expected to decrease 6 percent to 12 percent in the year ending January 2017. Sales haven’t been growing fast enough to offset the billions of dollars that Wal-Mart is spending on higher wages for its workers and improvements to its website.
This article doesn't really explain why this is happening. But there's a follow-up opinion piece that sort of tries to provide (hypothesized) ideas about why Walmart is fucking up:
http://www.bloomberg.com/gadfly/article ... owth-hopes
This still doesn't really explain why Walmart is failing to grow anymore, other than guessing that people have stopped shopping there for groceries. The comment about selling 20-pound dog food bags in Chicago is hilarious - and reveals that Walmart is sort of just brute-forcing their presence everywhere without necessarily thinking through any kind of strategy. I live in a city and take public transportation, so I rarely shop at Walmart, but I would have assumed that if you have a car, the only reason not to shop there would be moral reasons (since there's no real economic or financial case to be made for shopping anywhere else.) Then again, I don't think I've ever heard of anyone shopping at Walmart for groceries - people I know who live in the suburbs shop at regular grocery stores (Pathmark, Stop&Shop, etc.) or sometimes small convenience stores, but never "big box stores", for groceries. (Except for people who have membership at one of those "wholesale" big box stores, like Costco.)Walmart's decision to shutter its Express stores does not bode well for a company with few prospects for growth. The retailer, which already brings in half a trillion dollars of annual sales, announced 269 store closures Friday, with an added surprise: 100 or so of those will be its smaller Express stores, modeled after convenience stores.
And just like that, one of Walmart's only avenues for growth was closed at a time when its two other growth prospects -- international expansion and online sales -- are slowing. Shares dropped by 2 percent. Back in 2011, Walmart's cavernous super centers were losing customers who no longer wanted to traverse a giant store just to pick up eggs or milk. After having some success with Neighborhood Markets, medium-sized stores modeled after grocery chains, Walmart took a shot on smaller stores to help it win back customers.
Goodbye Growth
Walmart's sales are moving in the wrong direction.
The company has repeatedly declared that the smaller stores were its next avenue for growth. It even broke out "smaller-store" results on its financial statements to give investors more insight into their progress. But it never seemed like the company could fully adapt to thinking small. It often stocked superstore-type items, such as 20-pound dog food packages, in small Express stores in cities such as Chicago, where customers were walking, not driving, to pick up their groceries.
Walmart said it would build some 300 new stores this year and is committed to its Neighborhood Markets. The company hasn't released fourth-quarter sales results yet, but if the first 10 months of 2015 are any indication, then the results aren't likely to be great.
With more than 5,000 Walmart stores already in the U.S. and consumer spending stagnant, how many more traditional Walmarts can America really sustain? Giving up the convenience-store format will just make it easier for dollar stores and pharmacy chains to keep eating into Walmart's market share.
Meanwhile, prospects for international growth have dimmed amid a global economic slowdown, and e-commerce sales don't appear to be the saving grace, either: Year-over-year growth in online sales at Walmart fell to 10 percent in the third quarter, the lowest since Walmart began breaking out e-commerce sales.
The fact that it took Walmart five years to decide whether or not to scrap the Express effort -- roughly the same amount of time it took startups like Lyft and Snapchat to become household names -- underscores just how hard it is for the slow-moving giant to adapt to the fast-changing needs of consumers.
It could also be that all the bad press that Walmart has received about how shitty they are to employees, (as well as being run by overall shitty human beings) has finally taken some kind of toll - but I think it's more likely some combination of practical reasons that are fucking them over here. Perhaps the fact that they are perceived as somewhat "low class" compared to more expensive chains also hurts them.
