Retail
In Walmart Store Closings, Texas Loses Out Far Worse Than California
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When big companies announce store closures, it means a loss of jobs, empty store locations, and generally doesn’t bode well for the immediate area. So what is the impact when the likes of a Wal-Mart Stores Inc. (NYSE: WMT) announced that 269 stores will be closed, and with 154 of them being located in the United States?
Of the 154 stores being shut down for good in the U.S., some 102 Walmart Express stores, 23 Neighborhood Markets, 12 Supercenters, 6 discount centers, and 4 Sam’s Clubs are getting the axe — along with 7 Amigo stores in Puerto Rico.
24/7 Wall St. has been covering Wal-Mart and covering wage and employment issues for years. With California and Texas each being massive economies with large populations, it turns out that the lower-cost base of Texas with lower wages and lower taxes is not protecting the state from losing stores versus California (nor versus elsewhere for that matter). Of the 154 U.S. closures, some 29 closures are in Texas alone — versus 9 closures in California.
Logic might have suggested that Walmart’s consideration would be areas where it has higher wages and operating costs. After all, California real estate, wages and regulations are generally deemed to be less business friendly than Texas. And the pressure for that $15 per hour keeps coming from outside groups in many industries, and has a much better chance of being seen in California than it does in Texas. That turns out not to be the case here, at least not in raw numbers of store closures.
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The List of Texas closures is as follows:
California store closures were listed as follows:
The reality here is that Wal-Mart is cutting its underperforming stores. This is good for the company, and it will keep opening stores where it thinks it can win.
Walmart’s statement showed that approximately 10,000 U.S. associates (workers) will be impacted by the decision, but noted that more than 95% of the closed stores in the U.S. are within 10 miles on average of another Walmart. The company hopes these associates will be placed in nearby locations. Where that transition isn’t possible, the company will provide 60 days of pay and, severance if eligible, as well as resume and interview skills training.
Walmart further said that the closures would result in a financial impact of about $0.20 to $0.22 of diluted earnings per share from continuing operations (approximately $0.19 to $0.20 expected to impact the fourth quarter of fiscal 2016).
A full list of Walmart closures is available for review. Walmart’s stock did not perform as badly as the overall market on Friday. Still, its shares did slide 1.8% to $61.93. Wal-Mart’s stock has a 52-week range of $56.30 to $89.26 and it has a consensus analyst price target of $63.50.
Now a question around the broader economic impact comes into play: Is this good for other stores around those Walmarts? While this is complicated, it could be a win for those businesses who lost sales due to Walmart’s presence as a low-cost competitor. The flip side is that the business which opened because they feed off the Walmart traffic will not likely do better with those stores vanishing.
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