Walmart quietly closed at least 101 locations last year — a smart move for what's next

Walmart is refocusing its physical retail strategy on bigger stores. Dominick Reuter/Business Insider

• Walmart quietly reduced its store count in 2023 even though the company was doing really well.
• In addition to closing underperforming stores, the retailer shut at least 79 small-format locations.
• Analysts say the moves are smart preparation for Walmart’s big expansion plans that start this year.

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 when Walmart reports earnings on Tuesday, one figure is sure to stand out as having 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 any changes since November will be reflected when the company files its annual report.

The company declined to provide additional details about the closures to Business Insider before the SEC’s pre-earnings quiet period.

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 22 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.

The reason so many store closures flew under the radar has to do with their size: 79 locations were extremely tiny small-format locations of roughly 2,500 square feet, which do not typically employ enough workers to trigger the layoff notice requirement.

Given what Walmart has planned for the next few years, the shuttering of so many 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.