Why is Walmart closing 269 stores?

The retail giant is shuttering stores around the world. The closures could foreshadow a desire for greater adaptability.

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    In this May 9, 2013 file photo, a worker pushes shopping carts in front of a Wal-Mart store in La Habra, Calif. Wal-Mart is closing 269 stores, executives announced January.
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In an ever-changing marketplace, Walmart has announced it will close more than 250 stores around the world.

The world’s largest retailer is shutting down a total of 269 stores, with 154 of them in the United States, according to a Walmart press release. The bulk of the US stores closing will be the Walmart Express stores, a small store format that has been in testing since 2011. The corporate restructuring will affect 16,000 employees. 

The shutdown stores will represent two percent of Walmart’s global store count (11.600) and three percent of its US stores, total 5,310. 

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The retail giant’s restructuring may signal a growing trend as brick and mortar retailers gear themselves to be more competitive online.

“Amazon and online retailing is probably the biggest disrupter of retail since Walmart itself,” Brian Yarbrough, a retail analyst at Edward Jones in St. Louis, told Fortune in June.

The US Census Bureau reported in the third quarter of 2015 e-commerce sales increased 4.2 percent from the second quarter of 2015, while total retail sales increased 1.2 percent. Over a period of one year, e-commerce sales increased 15.1 percent compared to the 1.6 percent of total retail sales increase.

Despite the rapid growth, Walmart and other retail leaders have been slow to adapt to online sales. As a result, Amazon, the leading e-commerce retailer, has had more than $71 billion worth of online sales and Walmart has done a little over $13 billion, according to eMarketer data. 

In recent years, Walmart and Target, both relative latecomers to the online market, have been focusing more of their resources into establishing a presence on the Internet. Yet, despite having significantly larger total sales than Target, the latter has been able to sustain a higher rate of increase in digital sales, according to Phil Wahba at Fortune.

Analysts from Cowen & Co. told Fortune, Target’s success is likely a result of their smaller size, which allows them to adapt more quickly.

"No doubt our business has become both large and broad," Doug McMillon, Wal-Mart president and CEO, said to analysts in October. "It is more important now than ever that we evaluate our portfolio."

Of the 154 US Walmart locations that are closing, 102 will be Walmart Express stores. 23 Neighborhood Markets, 12 US supercenters, seven Puerto Rico locations, six discount stores, and four Sam’s Club locations will also be closing, according to the company press release.

The retail company will also close 60 locations in Brazil, where it struggles to operate in the slowing economy, and 55 locations spread throughout other Latin American countries.

According to the Walmart press release, the retail company will be opening 300 new stores around the world in 2016.

“Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future,” McMillon said in the press release.

 
 
 

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