Walmart strategically closing stores to reopen moreWalmart strategically closing stores to reopen more
Store closures to affect 16,000 Walmart employees.
January 15, 2016
Wal-Mart Stores Inc. announced last week plans to close 269 stores in the U.S. and globally.
In October 2015, the company said an active review of its portfolio was underway to ensure that assets were aligned with strategy. The 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 affected stores represent less than 1% 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 chief executive officer of Walmart. “Closing stores isnever 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 the action, the company said it 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, Walmart is also closing 115 stores outside the U.S. This includes 60 recently closed, loss-making stores in Brazil, which represent only 5% of sales in that market. The company already has been able to relocate many affected associates in Brazil to other stores. The remaining 55 stores to be closed are primarily small, loss-making stores in other Latin American markets. Walmart said it will disclose more detail about those actions, including the number of stores per market, after completing local associate and community outreach.
Walmart said approximately 16,000 associates will be affected by the decision, about 10,000 of whom are in the U.S. More than 95% 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 said it will continue to invest in its future by opening new stores worldwide in the coming fiscal year. Domestically, Walmart intends to open 50-60 Supercenters and 85-95 Neighborhood Markets in fiscal 2017, which begins Feb. 1. In the same period, Sam’s Club plans to open in 7-10 new locations. Internationally, Walmart intends to open between 200 and 240 stores during the coming year.
The financial impact of the closures is estimated to be approximately 20-22 cents of diluted earnings per share from continuing operations, with approximately 19-20 cents of that expected to affect the fourth quarter of fiscal 2016. The remainder of the impact will fall into the first half of fiscal 2017.
Approximately 75% 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, the company noted.
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