Taking Stock

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Walmart To Shutter 63 Sam’s Clubs; 10 Units To Shift To eCommerce Hubs

Sam’s Club, a division of Walmart, abruptly announced on January 11 that it will close 63 stores nationally. Approximately 10 stores closed on the same day as the announcement; the rest are slated to be shuttered by the middle of February. Approximately 11,000 associates will be impacted.

On the same day parent firm Walmart increased its starting minimum wage to $11 an hour and offered bonuses of up to $1,000, the Sam’s Club announcement was made on its Twitter account: “After a thorough review of our existing portfolio, we’ve decided to close a series of clubs and better align our locations with our strategy. Closing clubs is never easy and we’re committed to working with impacted members and associates through this transition.”

The retailer acknowledged that 10 of those closed units would be converted into ecommerce distribution centers. Specific locations for those conversions were not named.

A week later, multiple news reports stated that parent firm Walmart is planning to eliminate more than 1,000 corporate jobs, according to published reports. Most of the cuts will be made at corporate headquarters in Bentonville, AR and are expected to be completed by the end of the company’s fiscal year on January 31. Bloomberg reported that the large retailer will eliminate approximately 3,500 co-manager positions and add about 1,700 assistant store managers who would earn slightly less.

As for the Sam’s stores that will close or have closed, they are located in 23 states. Illinois was the state hardest hit with seven stores affected. Thirteen of those units are in the Mid-Atlantic and Northeast. They include club stores in: Manchester, CT; Orange, CT; Owings Mills, MD (where a new Costco is coming); Seabrook, NH; Budd Lake, NJ; Linden, NJ; Princeton, NJ; Jamestown, NY; two stores in Rochester, NY; Syracuse, NY; Norfolk, VA; and Richmond, VA.

With the closing of those 63 club units, Sam’s Club will operate approximately 595 stores nationally and in Puerto Rico. Total sales last year were $57 billion.

Sam’s Club ranked second nationally in annual revenue to Costco, Issaquah, WA, among club retailers. Costco’s 746 stores globally, including about 520 in the U.S., amassed sales of $126 billion in fiscal 2017.

Trade observers were not surprised by the announcement with several noting that in the past 18 months Walmart has radically shifted its priorities heavily towards ecommerce and its digital walmart.com platform.

“Walmart has tried for more than a decade to improve Sam’s and although they’ve made some progress in the last few years, they’re still significantly behind Costco in sales, product assortment and creativity,” said a senior VP for a large retailer that competes with Sam’s in the Northeast. “With the parent company making headway with their ecommerce initiatives which has also helped the core Walmart stores, it seems that Sam’s has become kind of the odd man out.”

Speculation about a sale of the other large club player, BJ’s Wholesale, which ranks third nationally in the club store derby (but second to Costco on the East Coast), has also been bandied about. Private equity firms Leonard Green and CVC Capital Partners control the Westborough MA discounter. BJ’s annual sales are estimated at $12.5 billion at its approximately 210 stores.