Global retailer Walmart announced today plans to close 269 stores and re-align its brick and mortar retailing strategy to focus more on Supercenter format outlets. Today’s announced action comes after a comprehensive review of nearly all global stores that included financial performance as well as strategic alignment. All stores designated for closing will do so by the end of this month.
In today’s announcement, CEO Doug McMillon indicates that the retailer remains committed to growing but will be more disciplined about such growth. Actions call for the closing of 154 U.S. based stores including the entire smaller format Walmart Express stores. The latter is obviously being perceived as abandonment of the piloted smaller footprint store presence. Walmart Express outlets typically averaged upwards of 12,000 square feet and had been piloted since 2011. Walmart will instead focus on strengthening Supercenter and Neighborhood Markets format outlets, as well as continuing to invest in its online fulfillment presence.
Internationally, the retailer will close 115 stores primarily in Latin American markets including the previously announced closure of 60 outlets in Brazil.
In all, upwards of 16,000 employees will be impacted by today’s actions, nearly 10,000 of which are located in the United States. In its announcement, the retailer emphasizes that more than 95 percent of the closed U.S. stores are within 10 miles of another Walmart store, and efforts will be made to relocate employees to nearby outlets. However the announcement further indicates that dislocated employees will be provided was a severance benefits package.
In today’s announcement the retailer emphasizes its intention for continuing to invest in its future including the opening of from 50-80 Supercenters and 85-95 Neighborhood Markets in fiscal 2017 that begins in February. Today’s announcement, by our view, seems to leave the door open for other store closing actions in the coming fiscal year.
From a retail industry supply chain perspective, today’s Walmart announcement reinforces the structural impacts that Omni-channel and online customer fulfillment is having on physical stores. In essence, all retailers will have to rationalize their physical and supply chain presence in the light of consumers’ emphatically moving to online presence. Today’s announcement from Walmart is the initial shockwave of the new industry realities.
For supply chain teams dealing directly with Walmart, today’s announcement is an indication of the intent and seriousness of the retailer to trim its cost structures in areas that need to be trimmed. The revised strategy focus of blending Supercenter, neighborhood satellite stores and online fulfillment into a singular strategy of channel services will spill over to inventory strategies that service all channels while optimizing full inventories.