Walmart has followed rival Target in closing stores due to what it sees as increased theft. Generally, these are stores in cities where shoplifting and organized crime appear to be bigger problems for the chain.
The retail giant closed 24 stores in 2023 across 14 states and Washington, D.C. That's up from the 15 closures the chain had planned. Walmart, like Target, has cited retail crime as contributing to its decision to close stores.
Related: Costco quietly makes a massive food court change
CEO Doug McMillon started banging this drum in December 2022. "Theft is an issue. It is higher than what it has historically been," he told CNBC. "If that's not corrected over time, prices will be higher, and/or stores will close."
It would be easy to dismiss McMillon's comments as political, but Brian Cornell his counterpart at Target, a company often painted as being left-leaning or woke, mirrors Walmart's (WMT) reasons for closing stores.
"In this case, we cannot continue operating these stores because theft and organized retail crime are threatening the safety of our team and guests, and contributing to unsustainable business performance," Target said in a news release. We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all."
Image source: Justin Sullivan/Getty Images
Walmart closing more stores
Both Walmart and Target (TGT) have stepped back from the political minefield of talking about theft as the reason they close stores. Instead, both companies have been a little more cagey in explaining why they're closing stores.
Walmart did that in a news release explaining its 2023 Chicago-area store closures:
"These stores lose tens of millions of dollars a year, and their annual losses nearly doubled in just the last five years. We have invested hundreds of millions of dollars in the city [of Chicago]. ... It was hoped that these investments would help improve our stores’ performance. Unfortunately, these efforts have not materially improved the fundamental business challenges our stores are facing."
The company has given a similar reason for its recent round of closures, which affected several stores. The company has not released a full list of planned closures.
"This decision was not made lightly and was reached only after a careful and thoughtful review process," the company said in a media statement.
"We have nearly 5,000 stores across the U.S. and unfortunately some do not meet our financial expectations. While our underlying business is strong, this store hasn’t performed as well as we hoped."
Walmart is also investing in stores
While Walmart has been closing stores, it also has been adding them.
"Not long ago, we shared that we would be building 30 new Sam's Clubs in the U.S. over the next several years," McMillon said during the company's fourth-quarter earnings call. "And more recently, we announced we will add more than 150 supercenters in neighborhood markets in the U.S. over the next five years. Most of those are new builds in locations where we need a new store."
Walmart also has big plans when it comes to remodeling existing locations.
"We're investing in remodels and supply-chain automation to improve the customer experience and increase productivity. Those things are going well. We'll remodel 928 stores and clubs globally over the next year, including 650 stores in the U.S.," he added.
The CEO says brick-and-mortar locations remain a key part of his company's brand proposition.
"Our physical fleet is getting stronger, and it plays a hybrid role serving customers and members when they visit and simultaneously enabling an important portion of e-commerce," he said. "Beyond our stores and clubs, we're continuing to strengthen our first- and third-party e-commerce capabilities and scale those businesses around the world."
Related: Veteran fund manager picks favorite stocks for 2024
