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Walmart announced recently that it is closing 269 of its stores, including 154 locations in the United

States. At the time of such groundbreaking announcement Doug McMillon, president and CEO of WalMart Stores, said Closing stores is never an easy decision, but it is necessary to keep the company strong
and positioned for the future.
The main reason behind this major decision is still unknown although it is assumed that it was made after
an analysis of the Wal-Mart stores' financial performance and their alignment with the company's longterm goals.
Based on the analysis and available information by now we have made two assumptions behind WalMarts recent shutting down stores:
Assumption 01:

Rationalizing store footprint to prioritize growth:

Wal-Mart Stores Inc. (WMT) is rationalizing its store footprint to prioritize growth. Wal-Mart introduced
its express stores in the year 2011 but recently they decided to exit their express stores. Along with that,
they are going to shrink its Brazilian store base. Wal-Mart made such major and prudent decisions as the
company is about to intensify its e-commerce growth, strengthening supercenters, optimizing
neighborhood markets and new initiatives such as pickup services for customers which provide a higher


As previewed at the company's analyst day in October, Wal-Mart announced that following an active
review of its entire portfolio the company will be closing 269 stores out of its total store base of 11,600
stores or less than 1% of global square footage and revenue. Wal-Mart still intends to invest in store
growth and open new stores in future including in domestic and international locations.
The decision to exit the Wal-Mart express's pilot of 102 stores could be resulted from unsatisfactory
domestic profitability for the smaller boxes, customers' willingness to drive farther to get a bigger
assortment at a Wal-Mart supercenter and more oversight of the supply chain process rather than a plug
and play supercenter.
Wal-Mart still remains committed to growing its smaller concept neighborhood markets, which is
primarily food and consumables and the priority for top-line growth remains e-commerce and omnichannel initiatives such as grocery pick-up. In terms of the 115 Wal-Mart international locations, the
closures are primarily a function of store profitability and local country economics, as was the case with
the closure of 60 loss-making stores in Brazil which accounted for roughly 5% of Brazil's sales. The
bottom line is the financial impact of the closures is expected to be 20 to 22 cents to EPS.
Assumption 02:

Closing down stores to exit a business:

Wal-Mart has over 11,500 stores around the world. It shouldn't be any surprise that it would shut a few
each year, but that's what so many headlines blared after the companys announcement on store closures.

The roughly 270 stores the mega-retailer is shutting account for around 2% of the company's total outlets
and 1% of revenues. At the same time, it's opening some new locations along the way as well, which
retailers do all the time too. So the impact from the closures won't be that big. But there's still valuable
information here because what's really going on is Wal-Mart is abandoning its small store format which
has notable implications.


Wal-Mart's original growth engine was the big box store located in rural locations. It was able to grow
this business for many years. However, growth slowed and the company had to find a new source to fuel
its expansion. It found grocery stores. That allowed the retailer to continue growing and was copied by
Target which is one of Wal-Marts main rivals.
But a company can only grow in a sector for so long before growth reaches to the saturation point because
every sector or market in business has an absorption capacity. Wal-Mart appears to have reached that
point or very close to that point. It's not that there's no room for growth in its mega-stores, club stores or
grocery stores, but that its growth in the future isn't likely to be as robust as growth in the past.

Wal-Mart is, at least in part, both a cause and a symptom of what went wrong in the economy, as well as a
hint of what might be done to correct the problem. Wal-Mart represented a logical business strategy to an
economy in which real hourly wages have been stagnant for more than three decades. Wal-Mart presented
the face of low prices (which were not in reality always lower than elsewhere). At the same time, WalMart contributed to the low wage environment that made it such a successful business. Besides paying
low wages to its own workers (and sometimes not even paying all the wages that it owed), Wal-Mart
helped to lower wages elsewhere. For example, grocery stores have put enormous pressure on their
unionized workers because of competition from Wal-Marts nonunion operation. Admittedly, Wal-Mart
displaced some small retailers that may have paid lower wages. As is well known, part of Wal-Marts
strategy was to rely on imports from countries that paid low wages. Competition from these imports both
destroy jobs and limited wages from jobs that remained in the U.S. According to a somewhat dated report,
if Wal-Mart were a country, it would rank as Chinas fifth-largest export market, ahead of Germany and

1. Wal-Marts Economic Impacts: Net Loss of Jobs, Fewer Small Businesses

Wal-Mart store openings kill three local jobs for every two they create by reducing retail employment by
an average of 2.7 percent in every county they enter. Wal-Marts entry into a new market does not
increase overall retail activity or employment opportunities. Research from Chicago shows retail
employment did not increase in Wal-Marts zip code, and fell significantly in those adjacent.
Wal-Marts entry into a new market has a strongly negative effect on existing retailers. Supermarkets and
discount variety stores are the most adversely effected sectors, suffering sales declines of 10 to 40% after
Wal-Mart moves in. Stores near a new Wal-Mart are at increased risk of going out of business. After a
single Wal-Mart opened in Chicago in September 2006, 82 of the 306 small businesses in the surrounding
neighborhood had gone out of business by March 2008.
The value of Wal-Mart to the economy will likely be less than the value of the jobs and businesses it
replaces. A study looking at the estimating the future impact of Wal-Mart on the grocery industry in
California found that, the full economic impact of those lost wages and benefits throughout southern
California could approach $2.8 billion per year.
Chain stores, like Wal-Mart send most of their revenues out of the community, while local businesses
keep more consumer dollars in local economy: for every $100 spent in locally owned businesses, $68
stayed in the local economy while chain stores only left $43 to re-circulate locally.

2. Wal-Marts Costs to Taxpayers

Wal-Mart has thousands of associates who qualify for Medicaid and other publicly subsidized care,
leaving taxpayers to foot the bill. For instance in Ohio Wal-Mart has more associates and associate
dependents on Medicaid than any other employer, costing taxpayers $44.8 million in 2009.
According to estimates, Wal-Mart likely avoided paying $245 million in taxes 2008 by paying rent to
itself and then deducting that rent from its taxable income. Wal-Mart has admitted a failure to pay $2.95
billion in taxes for fiscal year 2009.

3. Wal-Marts low paying jobs contribute to the decline of the Middle Class
Median household income declined by 1.8% nationally and 4.1% in New York City in 2009. This decline
will be exacerbated by low paying Wal-Mart jobs.
Wal-Marts average annual pay of $20,774 is below the Federal Poverty Level for a family of four.
A Wal-Mart spokesperson publicly acknowledged in 2004 that, "More than two thirds of our people... are
not trying to support a family. Thats who our jobs are designed for.
Wal-Marts 2010 health care offerings have a high annual deductible of $4,400 which means a family
would have to spend $5,102 of their own money on health care before Wal-Marts insurance pays
anything. Based on the average salary of a Wal-Mart employee this payment represents almost 25% of
their annual income.

America absolutely loves Wal-Mart. 100 million customers visit Wal-Mart every single week in this
country. But is Wal-Mart good for America? That is a question that most people never stop and ask.
Most of us love shopping in big, clean stores that are packed with super cheap merchandise, but the truth
is that Wal-Mart is destroying America in a lot of ways. As you will see below, Wal-Mart has destroyed
tens of thousands of small businesses and countless manufacturing jobs over the past couple of decades.
Wal-Mart has become a gigantic retail behemoth that sells five times more stuff than any other retailer in
the United States. Unfortunately, about 85 percent of all the stuff sold at Wal-Mart is made overseas.
What that is costing the U.S. economy in terms of lost jobs and lost revenue is incalculable. But WalMart is a perfect example of where our economic system is headed. Our economy is becoming
completely and totally dominated by highly centralized monolithic predator corporations that ruthlessly
crush all competition and that will stoop to just about anything in order to cut costs. In the future, will we
all be working for gigantic communal entities that funnel all of the wealth and economic rewards to a
very tiny elite. That sounds very much like how communist China works, and red-blooded Americans
should want no part of that. America is supposed to be about free enterprise and competition and working
together to build up this country, and Wal-Mart is destroying all of that.
Wal-Mart Stores Inc. is increasing the pressure on suppliers to cut the cost of their products, in an effort to
regain the mantle of low-price leader and turn around its sluggish U.S. sales.
The retailing behemoth says it has been telling suppliers to forgo investments in joint marketing with the
retailer and plow the savings into lower prices instead. Makers of branded consumer products from
diapers to yogurt typically earmark a portion of their budgets for marketing with Wal-Mart, spending on
things like eye-catching product displays and online advertisements.
Wal-Mart has long had a reputation for pressing its suppliers to cut costs to help lower prices, but the
retailers new leadership has embraced the concept with fresh vigor. Wal-Marts price advantage against
its competitors has been eroded, and it has steadily been losing market share in the U.S. since the
recession ended, while rivals including Kroger Co. and Costco Wholesale Corp. gained share, according
to data from the consultancy Kantar Retail. To conclude Wal-Mart will not change their current strategy
and will continue the business they are running