Wal-Mart Stores, Inc. (NYSE: WMT)
Wal-Mart made an important announcement yesterday. The company will be closing quite a few stores around the world. Today, we’ll talk about plans the company has to close stores, whether or not investors should be concerned, and what we can expect to see from WMT moving forward.
WMT Plans Store Closures
Early yesterday, Wal-Mart announced that it has made plans to close 269 stores around the world. The closures are the end result of an active review of the company’s portfolio that started in October 2015 and addressed whether or not the company’s assets were aligned with its strategy. According to WMT, the store closures affect less than 1% of the company’s revenue as well as square footage in active stores. 154 of the 269 stores are located in the United States. In the country, WMT plans on closing 102 of it’s smallest locations, many of which are within 10 miles of another Wal-Mart or produce minimal gains.
Should Investors Be Concerned With Regard To Store Closures?
In my opinion, this should not be a cause for concern among investors. The reality is that WMT is closing its least successful stores to open the door for the building of more successful stores. The 102 smallest format stores are Walmart Express stores, an idea that has been in pilot mode since 2011. Instead of focusing on this pilot, WMT will focus on strengthening supercenters, optimizing neighborhood markets, expanding pickup services for customers, and growing its e-commerce business, all of which are more profitable ideas than Walmart Express. In a statement, Doug McMillon, CEO at WMT had the following to say with regard to the closures and resulting growth:
“Actively managing our portfolio of assets is essential to maintaining a healthy business… 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 well more than 300 stores around the world next year. So we are committed to growing, but we are being disciplined about it.”
What We Can Expect To See From WMT Moving Forward
Moving forward, I have a relatively mixed opinion with regard to what I think we can expect to see from Wal-Mart. First and foremost, the news moves the market, and based on market movement following the announcement, it’s clear that investors weren’t too pleased with the news of store closures. So, in the short run, I am expecting for investor concern to cause more headaches for the stock. However, going off of statements made by the CEO of the company, as well as everything we’ve heard about WMT as of late, I believe that the store closures are actually a good thing. I’m sure that you’ve heard the term “A team is only as good as its weakest player.” Well, think of Wal-Mart stores as team WMT. To ensure that the team remains strong, WMT is trimming the fat so to speak. This is going to remove a ball and chain, allowing the company to grow further moving forward. With that said, I have an overwhelmingly bullish opinion of what we can expect to see from Wal-Mart in the long run.
What Do You Think?
Where do you think WMT is headed moving forward? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]