Strategy

Wal-Mart to Close 269 Stores, Cut 16,000 Jobs

The closures include all 102 small-format Walmart Express stores, with the retailer choosing to focus on its Neighborhood Markets.
Katie Kuehner-HebertJanuary 15, 2016

Wal-Mart Stores said Friday it was closing 269 stores, including all 102 of its Walmart Express stores, a small-format concept that the retailer has struggled to make as profitable as Supercenters.

The closures represent less than 1% of both Wal-Mart’s global square footage and revenue, but about 16,000 employees, including 10,000 in the U.S., will lose their jobs.

“Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future,” Wal-Mart CEO Doug McMillon said in a news release. “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.”

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The restructuring could result in a hit of more than $600 million to earnings, most of which would occur in the current quarter.

“It’s good to see that management is willing to close stores because in the past we haven’t had that,” Brian Yarbrough, consumer analyst for Edward Jones, told the Wall Street Journal. “With that being said, it probably isn’t enough.”

Wal-Mart launched the Express concept in 2011, promoting the roughly 12,000-square-foot stores as a way to better compete with stores. The average Supercenter is about 178,000 square feet.

The retailer will now focus on its Neighborhood Markets, which, at about 40,000 square feet, are slightly larger than Express stores. In October, Wal-Mart US CEO Greg Foran said sales growth was strong at Neighborhood Markets, but the company would pull back store openings to improve profitability.

“We continue with our view that the combination of the Neighborhood Market and Supercenter is a powerful strategy in the food sector, with the Neighborhood Markets functioning as key components of Wal-Mart’s multi-channel strategy,” Moody’s lead retail analyst Charlie O’Shea said.

Outside the U.S., Wal-Mart is closing 115 stores, including 60 recently-closed, loss-making stores in Brazil, which represented only 5% of sales in that market. The remaining 55 stores are primarily small, loss-making stores in other Latin American markets.