MARKET - Disruption Drives Walmart to Close 63 Sam's Clubs, Repurpose Others and Raise Wages

Further to the Story of Disruption, Walmart Responds with Closures, Repurposed Geography and Higher Wages. 

Yesterday morning clients and employees arrived at Sam's Club stores to find them closed and locked down. Late in the day, Sam's Club CEO, John Furner, announced:

"Transforming our business means managing our real estate portfolio — we need a strong fleet of clubs that are fit for the future. After a thorough review, it became clear we had built clubs in some locations that impacted other clubs, and where population had not grown as anticipated. We've decided to right-size our fleet and better align our locations with our strategy. ... We will work to place as many associates as possible in new roles at nearby locations, and we'll provide them with support, resources, and severance pay to those eligible."

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The wholesale club locations closing span from Alaska to Puerto Rico but some of the shuttered stores will be converted into e-commerce fulfillment centres according to the company.

Earlier in the day, Walmart had announced it would boost wages, hand out bonuses and increase other employee benefits. The official line was that all this became possible because of the passage of new tax legislation.

As the day progressed and customers became aware of the closurers they clogged up Twitter and Facebook to ask what was going on. Customers are also asking for a refund of their US$45 memberships and where they could pick up their prescriptions. To some observers, the move doesn't appear like an ordered, planned approach to a realignment. Others have suggested it seems more like a panic response to 4th quarter retails stats.

CNN Money Story about the PR Mess at Walmart yesterday

Cowen and Co. analyst Oliver Chen apparently wrote in a note to investors Friday morning:

"Walmart "is taking prudent steps to prepare for the next generation of retail warfare, one in which speed will be king and delivery will be judged by hours and not days, we believe Sam's Club leadership will continue to execute against other initiatives ... as management noted while results have improved over the last several quarters, the retailer can do better as Sam's Club has underperformed club peers." 

Daphne Howland, wrote a RetailDIVE article in September 2016 that identified Amazon as a competitive issue for Sam's Club, Costco and BJ's Plus, The Retail Dive Brief showed: 

• The percentage of U.S. households that pay for Amazon Prime but hold no other club membership has grown from 7.1% in 2013 to 16.2% in 2016, while the percentage belonging to just Costco fell to 9.8% from 14.9% and Sam’s Club fell to 9.7% from 16.9%, according to research from Cowen and Co. released Monday and cited by ETF Daily News.
• Cohen’s research also found that Amazon Prime is on the way to adding some 12 million new members this year, up from 10 million new members last year and 7 million in 2014, CNBC reported.
• Some 44% of U.S. households belong to Prime, according to Cowen, but that could jump up to 50% by the end of the year. Eventually, the firm predicts Prime could exceed 60 million households in the U.S., according to Cowen analyst John Blackledge.

Whatever the real story, other retail outlets will bear watching as a new year in retail unfolds.

RETAIL - Walmart Closes 269 Stores Globally, Sharpens Retail Focus

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Today is the last day of public access for 269 Walmart stores.

Walmart announced earlier this month that it is sharpening retail focus and will close several hundred stores. The closing are expected to affect approximately 16,000 associates. About 10,000 associates are in the U.S. where 95 percent of the closed stores in the U.S. are within 10 miles of another Walmart. 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 resume and interview skills training in keeping with the Walmart objective to help all associates find their next job opportunity.

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 more than 300 stores around the world next year. So we are committed to growing, but we are being disciplined about it.”

Walmart 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.

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