Dominick Reuter/Business Insider
Last year was unquestionably a good one for Walmart, with the retail giant showing respectable performance across nearly every aspect of its business.
The coming year is also set to be a big one for the company, due in large part to the kickoff of an expansion plan that will see 150 new or upsized Walmart locations over the next five years.
But one figure has gotten noticeably smaller last year: the number of US stores.
The company quietly reduced its fleet by more than 100 locations between January and August last year, according to data from the company's investor website.
Walmart reported a combined 4,717 supercenters, discount stores, and smaller format locations at the start of its fiscal year, and declined to 4,616 in the span of two quarters. No closures were reported in the third quarter, and one discount store was reported closed in the fourth quarter.
Over most of last year, BI tracked the major Walmart closures across the US through federally required layoff notices filed with state workforce agencies.
Of the combined 23 supercenters, stores, and neighborhood markets that fell off the company's tally during the year, spokespeople said the locations' financial performance was not meeting expectations.
As it happens, the reduction of 79 small format locations was not due to closure per se, but the sale of the Moosejaw and Bonobos brands, which at the time had 14 and 65 stores, respectively.
Dick's Sporting Goods, which bought Moosejaw, went on to close most of those stores.
In addition, Walmart's 20 remaining small-format stores are a comparatively tiny 2,500 square feet on average, and may not typically employ enough workers to trigger the layoff notice requirement if they were to close.
Those locations are primarily standalone fuel stations and pharmacies, according to a new footnote that was included with the fourth quarter counts, which were released after initial publication of this article.
Given what Walmart has planned for the next few years, the move away from smaller locations makes sense. Analysts told BI that both the closing of underperforming stores and the pivot away from unsuccessful formats are smart moves for a company that wants to stay in good financial shape.
Walmart under CEO Doug McMillon has shown a willingness to experiment with different retailing ideas, to let them go if they don't perform well, and to reinvest the savings in other areas of the business, said Scot Ciccarelli, managing director and senior equity research analyst at Truist Securities.
"It's a repositioning more than anything, and good retailers are going to do the same with their store portfolio," Ciccarelli told BI.
Small stores simply weren't working for Walmart, GlobalData retail analyst Neil Saunders told BI.
"Walmart has always struggled with smaller stores," Saunders said. "Partly because they don't really know what to put in them — it's not really what Walmart is known for and the economics are much more challenging."
Large retailers — and Walmart is of course the largest of them all — typically are more concerned with the total square footage of their physical footprint than they are with the number of locations.
In other words, big box brands care more about floors than doors, Ciccarelli said.
By that metric, Walmart will offset last year's square-footage reductions from closing dozens of small-format stores with the opening of just one new supercenter, and the company has plenty more of those in the queue.
In addition to new stores, many existing locations are being upgraded to Walmart's "store of the future" concept, including 650 projects this year.
These bigger buildings are far better aligned with Walmart's omni-channel retailing strategy than their itty-bitty counterparts. The extra space is especially important when it comes to offering a broad selection of food and non-food products, as well as fulfilling e-commerce orders.
In short, Walmart's paring back in 2023 set the stage for its expansion in 2024 and beyond.
" US store remodels continue to perform well," CFO John David Rainey said in the company's earnings call on Tuesday. "We're also excited to be returning to store growth in the US."
Correction, February 19, 2023: After the publication of this article, Walmart clarified that the reduction in 79 small format stores was a result of the sales of Moosejaw and Bonobos, not location closures as stated in the original headline and story text.
Update, February 20, 2023: This story was revised to include final full-year figures and quotes from Walmart's earnings call Tuesday.
