Walmart Gets More Decisive with Store Portfolio

Closing less than one percent of your square footage, especially when your announced CapEx plans will add more than that in new stores should not be big news but with Walmart everything is news. In reality this is a necessary first step but not a big one.

In this case it is good news. Walmart needs to be more decisive on the bottom 5-10% of their stores – fix, replace or close them. 1% is a  start.

This announcement includes the announcement of closing the 102 “pilot” Walmart Express program which was rolled into Neighborhood Market management last year and will be closed entirely this.

• While a strong case can be made for small stores, organic growth of this format when there are a lot of weak players with greater penetration of urban markets where these sales could be incremental to Walmart as an acquisition
• But Walmart has more potential economic benefit from growing neighborhood markets and supercenters, adding in drive and pick up options for both.
• Walmart’s business model and logistics can make a 33k sqft store work just fine ROIC wise, but the smaller express stores just don’t work for the management or logistics efficiency. A Save-A-Lot model would make more sense than organic growth of owned and managed stores where the owner operator is responsible for store management and Walmart would leverage its logistics as a wholesaler.

Bottom line aside from the express stores, Walmart is closing “23 Neighborhood Markets, 12 Supercenters, seven stores in Puerto Rico, six discount centers, and four Sam’s Clubs.” This is not a lot from a company with ~4000 stores in the USA. But it is a start