Walmart to close 269 stores, including all Express stores

Walmart announced last week that it plans to close 269 stores, including all of its 102 Walmart Express small-format stores. Of the store closings, 154 will take place in the U.S.

According to Walmart, the impacted stores represent less than 1 percent of the 11,600 stores worldwide and will impact 16,000 employees (10,000 in the U.S.).

The small-format stores, typically in the 12,000 - 16,000 square foot range, began to roll out in 2011. Walmart envisioned thousands of Express stores and hoped they would compete well with discounters like Dollar General.

Instead, Walmart will now focus on strengthening Supercenters, optimizing Neighborhood Markets, growing its e-commerce business and expanding pick-up services.

The U.S. closures include 23 Neighborhood Markets, 12 Supercenters, seven stores in Puerto Rico, six discount centers, and four Sam's Clubs. There are no closures planned for the Greater Philadelphia Region.

Walmart said that more than 95% of the closing stores in the U.S. are within 10 miles on average of another Walmart.

The company plans to open 50-60 Supercenters, 85-95 Neighborhood Markets, and 7-10 Sam's Club locations in fiscal 2017.

Traditional supermarkets continue to lose market share

An article in the February issue of Shopping Centers Today reported on the affect grocery discounters are having on the supermarket industry, stating that traditional supermarkets are losing market share "thanks to a rapidly advancing horde of competitors seeking to outdo them on price, convenience and quality."

The article quoted an analyst from JLL who said that "consumers are now splitting their grocery shopping across multiple channels - as many as five," and that "by 2018, traditional supermarkets' share of grocery dollars in the U.S. will have shrunk 300 basis points to 37.2 percent."

As we all know by now, the list of traditional supermarket competitors includes large wholesale clubs, supercenters, fresh grocers, and small-format, dollar, drug, convenience and online stores.

And, of course, the Germans are coming. Aldi plans to expand from 1,300 to 2,000 American stores in the next three years, and Lidl is planning to open stores here in 2018.

According to an analyst from PerishablePundit.com, "A box of laundry detergent or Kellog's Corn Flakes is the same no matter where it is sold. That makes it easy for price-conscious shoppers to hunt for bargains on commoditized goods by website, in dollar stores, at Walmart, or in a multiplicity of other food selling outlets. Even if traditional supermarkets can continue to sell center-store items, they have to do so at such deep discounts that they're just not able to generate profitability."

To combat this issue, major chains are focusing more on fresh and prepared foods, and creating "foodie-friendly cheese caves, wine bars, mini-restaurants and more." They are also trying to alter their product mix to include the types of products found at warehouse clubs. Ultimately, traditional supermarkets are trying to make their stores appeal to everyone (like they used to) - discount-oriented consumers, aspirational consumers and affluent consumers.

Meanwhile, online grocery sales continue to grow. The online grocery spend in 2014 was $23 billion, and it is expected to be nearly $100 billion by 2019, or 12 percent of total grocery spending.

Sales in non-traditional grocery formats up 3.1%, according to study

An annual survey conducted by Barrington, IL firm Willard Bishop revealed that sales within traditional grocery formats increased 1% to nearly $523 billion in 2013, while sales within non-traditional formats rose 3.1% to about $442 billion.

The market share for traditional formats decreased 0.5% to 46%, while the market share for non-traditional formats increased 0.4% to 39%.

In addition, the survey found that convenience store sales accounted for 15% of sales - up from 14.9% - with stores selling gas accounting for 12.8% of the total.

E-commerce sales for food and consumables, which are included in the non-traditional grocery category, rose 13.7% to $21.1 billion, and the report projects that e-commerce sales will grow at a rate of 9.5% per year through 2018.

Food sales growth:

Fresh formats - 10.4%
Dollar stores - 8.9%
Limited-assortment stores - 4.1%
Supercenters - 4%
Super warehouses - 3.5%
Small grocery stores - 2.4%
Convenience stores - 2.4%
Wholesale clubs - 2.3%
Drug stores - 1.4%

Small format plans get bigger for Walmart

Walmart announced last week that it plans to open 270-300 new Neighborhood Market and Walmart Express stores in the next year. Late last year it had announced that they would open only 120-150 of the small format stores (Walmart to accelerate small format growth). The forecast for 115 new supercenters remains unchanged.

The existing 346 Neighborhood Market stores and 20 Walmart Express stores continue to generate positive results, according to the company. Last year, comparable-store sales for the Neighborhood Market rose 4%, driven largely by fresh food and pharmacy.

As a result of the revised store forecast, Walmart increased its capital expenditure budget for the U.S. division by $600 million to a range of $6.4 - $6.9 billion.

Walmart CEO Bill Simon said that small store expansion "will strengthen our market share and create greater efficiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience."

Along with the announcement about the small store growth plan, Walmart announced that total company sales in the fourth quarter increased 1.4% to $128.8 billion, while net income and earnings per share fell 21% and 19.8%, respectively.

For the full year (2013), sales increased to $473.1 billion, while net income and earnings per share fell 5.7% and 3.2%, respectively.

The company blames a portion of its results on bad winter weather and a reduction in the federal government's Supplemental Nutrition Assistance Program. Walmart expects challenging market conditions to continue in 2014.

Walmart to accelerate small format growth

Last week Walmart reported that it plans to accelerate the growth of its small-format stores - mostly Neighborhood Markets - and projected that they will open between 120 and 150 of them in fiscal 2015, compared to 120 in the current fiscal year. The company also said they plan to open 115 supercenters in the next fiscal year.

According to President and CEO Bill Simon, "We will accelerate growth of our Neighborhood Markets because of their strong returns, consistent comp-sales performance and double-digit net sales increases; and we will continue to build and leverage the supercenter format, which remains our primary format for growth."

In addition, Walmart expects to open between 17 and 22 new Sam's Clubs stores in fiscal 2015 at a cost of $1 billion.