Retail

Why Does Wal-Mart Have 4,574 Stores?

Douglas A. McIntyre

Published: June 18, 2016 9:10 am

Last Updated: January 13, 2020 6:40 am

Wal-Mart Stores Inc. (NYSE: WMT) has 4,574 stores in the United States that cover 689,647 square feet. Wal-Mart’s count of both store number and size continue to grow slightly in a period during which most large retailers have cut their number of locations. Why?

There is no ready answer. Wal-Mart’s same-store sales have barely increased in the United States recently, up only 0.6% in its most recent fiscal quarter, when the cost of fuel was backed out. However, revenue tells a different story. In the same period, revenue for Walmart U.S. was up 3.6% to $298 billion. The bad financial news for the segment and the period was that operating income dropped 10.5% to $19 billion.

One reason for the huge number of stores is a negative. E-commerce continues to be less than 5% of total revenue. Wal-Mart has set up a system by which customers can order items online and pick them up at local stores. That does not appear to have helped online sales enough for it to make even a tiny dent in the sales progress of Amazon.com Inc. (NASDAQ: AMZN), by far Wal-Mart’s largest rival.

A primary reason for the huge store count is that Wal-Mart continues to follow its plan that, as the nation’s largest retailer, it must be all things to all people everywhere. The plan is a fiction, given that Wal-Mart caters mostly to poor and lower middle-class consumers, and it has very few stores in large cities. Despite its size, its stores are concentrated in the southern half of the country, particularly in states relatively close to its home in Arkansas.

Wal-Mart’s “primary sales categories” also make it hard to retreat from most markets, unless it wants to give way to specialty retailers. What it calls its “strategic merchandise units” include groceries at 56% of sales, health and wellness at 11%, entertainment and hardlines at 9% each, apparel at 8% and home at 7%. This mix has not changed much over the past three years.

A look across these categories and it is obvious that any retreat would let huge retail chains like Best Buy, Kroger and Target to eat away at those businesses.

Wal-Mart needs so many stores because if it gets any smaller, competition will force it to be smaller still.