Ahold-Delhaize Merger, Albertsons IPO, Status Of Former A&Ps Will Shape 2016 Landscape
If the number of industry changes in 2015 didn’t grab your attention, tighten your seat belts, because the next 12 months promise another year of disruption and enlightenment.
Just in the Mid-Atlantic alone, by the time 2016 ends the Ahold-Delhaize merger will have been completed, Lidl will likely have about 70 leases signed, two distribution centers nearly completed (and a possible third warehouse in Aberdeen, MD announced) and Albertsons (Safeway, Acme, et al) should be a publicly-traded company. Also, going the IPO route is another Cerberus-linked enterprise, Save-A-Lot, which would then become separated from its current parent Supervalu. Relatedly, with brilliant CEO Sam Duncan stepping down as SVU’s CEO next month, would the company become a pure play wholesaler and look to sell its corporately-owned retail division (Shoppers, Farm Fresh, etc.)? And could it sustain itself as a public-held company as only a grocery wholesaler?
You want some more possible changes? How many stores will the FTC mandate that Walgreens’ sell as it attempts to complete its purchase of rival drug chain Rite Aid? Similarly, how many stores will the FTC force Ahold USA and Delhaize America to divest to complete its $28 billion deal, which is headed for a mid-2016 completion? By this time next year, we expect about 60-70 former A&P stores to remain dark. However, as the new year begins, approximately 20 retail organizations have acquired about 175 of 296 potential A&P stores. The volume increases we’ve already seen from those refurbished stores that have reopened has been fairly significant and we expect at least another 35 deals to be made between landlords and prospective interested food retailers who will shortly be able to negotiate more freely without bankruptcy court or union barriers. How about a few more to consider? Can Fairway Market survive? What lies ahead for D’Agostino’s? Can The Fresh Market regain its mojo (especially in the Mid-Atlantic) now that CEO Rick Anicetti and CMO Pamela Kohn have joined the upscale merchant? How much of a disrupter will Wegmans continue to as its plans for future openings in Montvale, NJ; Hanover Township, NJ; Marple, PA; Lancaster, PA; and Brooklyn? Can Whole Foods rebound from what was arguably the worst year in its history?
And then there’s Wal-Mart. Can the Behemoth be a game changer again? Or will the still powerful retailer continue to be its worst enemy by not significantly improving service levels or associate morale? And what about family-owned regional chains operating in the Northeast such as Weis Markets, Price Chopper, Big Y and Giant Eagle? Would they consider selling or listening to offers from the likes of Kroger, Ahold (in areas where’s there’s no or limited market overlap), Albertsons or private equity organizations?
Lots to ponder. The last five years have shown us that just surviving the obstacle course is challenging enough, not even counting those independents or regional chains that no longer have the same passion for the business that they or their elders once had. There’s no shame in selling out given the emotional and financial pressures created by the current landscape.
The retail food business has never been one for the meek. Now the odds against success are even greater. Expect more change.
Save-A-Lot Files With SEC To Go Public: Parent SVU Challenged By Deflation
On January 7, Supervalu announced that it had filed an initial Form 10 Registration Statement (Form 10) with the U.S. Securities and Exchange Commission in connection with the possible spin-off of its Save-A-Lot business into a separate, publicly traded company. Upon completion of the separation, Supervalu stockholders will own at least 80.1 percent of the outstanding shares of common stock of Save-A-Lot.
“We believe that separating Save-A-Lot from Supervalu so that it can operate as an independent, publicly traded company is in the best interests of both Supervalu and Save-A-Lot. As two distinct publicly traded companies, each of Supervalu and Save-A-Lot will be better positioned to focus on its respective businesses, customers and strategic priorities and to capitalize on growth opportunities. After the separation, Supervalu and Save-A-Lot will each strive to be an industry leader in terms of both products and services in their respective businesses. We believe Supervalu will be able to focus on providing wholesale distribution services to independent retail customers and operating its five regionally based traditional-format grocery banners. Save-A-Lot will continue to be a leader in hard discount grocery retailing in the United States,” CEO Sam Duncan wrote in a letter to shareholders.
After three years at the helm, Duncan will be retiring as Supervalu’s chief executive next month. In December, industry veteran and former A&P CEO Eric Claus was named chief executive for Save-A-Lot. He replaced Ritchie Casteel, who will be staying on as president of the soon-to-be publicly-traded discount chain.
“Our vision is to be the hard discount retailer of choice for value-seeking shoppers, said Claus. “Each store’s merchandising mix is tailored for local preferences through the use of demographic and ethnic specific product offerings. Our private-label program, which is a key driver of our value offering and our Save-A-Lot brand awareness, is responsible for a significant portion of our sales.
In describing some the details of issuing the IPO, Supervalu stated that the separation will be completed by way of a pro rata distribution of shares of Save-A-Lot common stock to Supervalu stockholders of record as of the close of business when the IPO is officially launched. Each Supervalu stockholder will receive one share of Save-A-Lot common stock for every shares of Supervalu common stock held by such stockholder on the record date. The distribution of these shares will be made in book-entry form, which means that no physical share certificates will be issued. Following the separation, stockholders may request that their shares of Save-A-Lot common stock be transferred to a brokerage or other account at any time. No fractional shares of Save-A-Lot common stock will be issued. Fractional shares of Save-A-Lot common stock that Supervalu stockholders of record would otherwise be entitled to receive in the distribution will be aggregated and sold in the public market by the distribution agent. The aggregate net cash proceeds of such sales will be distributed ratably to those stockholders who would otherwise have received fractional shares of Save-A-Lot common stock. The distribution of Save-A-Lot common stock is intended to be tax-free, for U.S. federal income tax purposes, to its stockholders except with respect to cash received in lieu of fractional shares. The prospectus said that share distribution does not require stockholder approval, nor do holders need to take any action to receive their shares of Save-A-Lot common stock. Immediately following the separation, shareholders will own common stock in Supervalu and Save-A-Lot. Supervalu’s common stock will continue to trade on the New York Stock Exchange under the symbol “SVU.” It is expected that Save-A-Lot common stock will be also listed on the NYSE under a yet undisclosed new symbol.
Supervalu first announced in July 2015 that it was exploring a separation of its Save-A-Lot business, and that as part of that process it had begun preparations to allow for a possible spin-off of Save-A-Lot into a stand-alone public company. With the filing of the Form 10, Supervalu is continuing preparations to separate Save-A-Lot.
As of September 12, 2015, Save-A- Lot operated 441 corporately-owned stores and provided wholesale distribution to 901 licensed (franchised) stores. Save-A-Lot’s network spans 38 stores as well as units in the Caribbean and Central America. Fiscal 2015 sales were $4.6 billion with approximately 57 percent of company revenue derived from its licensed stores.
Earnings were $84 million for the 12 months ended February 28, 2015. Five days after the Save-A-Lot spin-off announcement was made, parent firm Supervalu released its third quarter financials for the period ended December 5. All segments of the wholesale/retail firm – independent sales, corporate stores and Save-A-Lot – were down as the company said it struggled with deflationary issues. Supervalu reported third quarter fiscal 2016 net earnings from continuing operations of $35 million, or $0.13 per diluted share, which included $11 million in after-tax charges and costs related to asset impairments, the potential separation of Save-A-Lot, and employee severance and net sales of $4.11 billion. Net earnings from continuing operations for last year’s third quarter were $12 million.
“Although third quarter adjusted EBITDA was in line with our operating plan, we continue to operate in a challenging environment,” said president and CEO Sam Duncan. “Improving sales is a primary focus as we look to complete the fiscal year.”
Supervalu’s third quarter sales decreased $111 million or 2.6 percent. Save-A-Lot network (licensees) identical store sales were negative 3.4 percent. Identical store sales for corporate stores within the Save-A-Lot network were negative 0.4 percent. Retail Food (corporate stores) identical store sales were negative 2.6 percent. Total net sales within the Independent Business segment decreased 3.5 percent. Fees earned under Transition Services Agreements (TSAs) in the third quarter were $46 million compared to $43 million last year.
Gross profit for the third quarter was $601 million, or 14.6 percent of net sales. Last year’s third quarter gross profit was $596 million, or 14.1 percent of net sales. Third quarter Independent Business (wholesale) net sales were $1.90 billion, compared to $1.97 billion last year. The company said the decrease was primarily due to lower sales to existing customers and lost stores, partially offset by increased sales to new customers and new stores operated by existing customers.
By segment, Independent Business operating earnings in the third quarter were $54 million, or 2.8 percent of net sales, and included a $6 million intangible asset impairment charge. When adjusted for this item, Independent Business operating earnings were $60 million or 3.2 percent of net sales. Last year’s Independent Business operating earnings in the third quarter were $60 million, or 3.1 percent of net sales.
Third quarter Save-A-Lot net sales were $1.07 billion, compared to $1.09 billion last year, a decrease of 1.5 percent. The sales decrease reflects identical store sales across the Save-A-Lot (licensee) network of negative 3.4 percent and the impact of closed stores. Save-A-Lot operating earnings in the third quarter were $32 million, or 2.9 percent of net sales, and included $2 million of store closure impairment charges. When adjusted for this item, Save-A-Lot’s operating earnings were $34 million, or 3.1 percent of sales. Last year’s Save-A-Lot operating earnings in the third quarter were $34 million, or 3.1 percent of net sales. Third quarter Retail Food (Shoppers, Farm Fresh, Shop ‘n Save, Cub, Hornbacher’s) net sales were $1.10 billion, compared to $1.13 billion last year, a decrease of 2.5 percent. The sales decrease reflects negative identical store sales of 2.6 percent. Retail Food operating earnings in the third quarter were $21 million, or 2.0 percent of net sales, and included $1 million of store closure impairment charges. When adjusted for this item, Retail Food operating earnings were $22 million, or 2.1 percent of sales. Last year’s Retail Food operating earnings were $28 million, or 2.5 percent of net sales. The decrease in Retail Food operating earnings was driven by higher employee-related costs.
Third quarter fees earned under the TSAs were $46 million compared to $43 million last year. Net corporate operating loss in the third quarter was $6 million and included $7 million of costs related to the potential separation of Save-A-Lot and employee severance. When adjusted for these items, net corporate operating earnings were $1 million. Last year’s third quarter net corporate operating loss was $66 million and included $64 million in charges and costs for a pension settlement charge and information technology intrusion costs, net of insurance receivable. When adjusted for these items, last year’s net corporate operating loss was $2 million. The improvement in net corporate operating earnings was primarily driven by lower employee-related costs and higher fees earned under the TSAs. Supervalu expects to invest more in pricing and promotions during its fiscal fourth quarter to try to mitigate the impact of deflation, company executives said.
At the follow-up conference call with financial analysts, Duncan focused on the challenges the company faced due to price deflation. “When we got here (three years ago), we did not have the deflation issues that we are facing now, and it’s up to us to do the right things to fight through that like I just mentioned a few seconds ago. If you look at where we were at approximately a year ago and where we are today, it’s a 10 percent swing on inflation and deflation,” he explained. “So that means when you open up the door, you’re 10 percent behind before you start, so you got to figure out ways to fight through that. We don’t know when we are going to start seeing some inflation and we keep thinking we are going to see it, but it hasn’t happened so far and we’ve thought that way for about six months now, but hopefully we will see some in the future. But right now we just got to work through, work on things to fight through that both on the retail side, the regular retail and Save-A-Lot. So it’s a significant factor right now.”
Adding more color to that comment was Sue Grafton, SVU’s CFO, who noted: “The deflationary environment has deepened and lengthened relative to our expectations six months ago and is something we simply must continue to work through. However, we don’t see the deflationary environment changing much in the fourth quarter.”
This was the last analysts’ call for Duncan who is scheduled to retire when SVU’s fiscal 2016 ends on February 29. The search is continuing to find his successor. And let me once again praise the stellar job that Sam did in his three year run in turning the entire Supervalu organization around by all measures.
‘Round The Trade
The recent Fairway news that it could be reclassified or even delisted by Nasdaq because its stock price has fallen under $1 per share for more than 30 consecutive days could be a further sign that the company may be getting closer to its hand being forced. A Chapter 11 filing or even a sale of the company is not of reason in the next six months, if performance doesn’t improve significantly or new financing can’t be gained…another “good for you” retailer with Big Apple woes has settled its issues. Whole Foods has agreed to pay the piper when it said it would cough up $500K to resolve its overpricing problem with some bulk and pre-packaged items at its nine New York City stores. As part of the settlement agreement (the city of New York was originally seeking $1.5 million), WFM is now mandated to conduct quarterly in-store audits at all of its big apple units. The Austin, TX merchant also announced that it is seeking to raise $1 billion in a debt offering designed to repurchase of $1 billion of its own stock. Credit ratings firm Standard & Poor’s clearly wasn’t doing back flips over the announcement when it said, “Our ratings and the negative outlook on the corporate credit rating reflect our view that Whole Foods remains the leader in the natural and organic sub segment of the highly fragmented food retail industry, yet its overall share of the food retail industry is still relatively small and under pressure.” Moreover, in a strategic shift in response to increased penetration of grocer peers into the natural and organics space, Whole Foods has noted that it expects to be more price competitive going forward, and could face earnings pressure in the near term as it faces more competition than it has previously experienced.” S&P said in a release. It then gave the offering a “BBB” rating, the bottom rung of the investment grade credit ladder… as the world turns: Albertsons announced earlier this month that it would convert its three remaining Florida stores in Largo, Altamonte Springs and Fort Lauderdale to the Safeway banner, but remain part of the company’s 65-store Houston division, nearly 1,000 miles away. On one hand, it seems kind of a reach in strategy to convert and upgrade three less-than-stellar supermarkets that far away from its distribution center. On the other hand, this seems like a test to see if Albertsons (which once had a strong share of the Florida market) can reinvent itself with a new format that could lead to further organic expansion, or more likely, a future acquisition. What’s interesting about this move is that former Acme president Jim Perkins will continue to supervise the Florida stores as part of his job of overseeing nearly 1,000 stores from New England to Denver. In 2004 (for those old enough to remember) during the Larry Johnston era (pre-Supervalu), Acme Markets was given oversight of 121 Albertsons stores in the Sunshine State under then Acme president Carl Jablonski. The man who was appointed to run the day-to-day Florida operation – you guessed it, Jim Perkins!
Local Notes
Just before presstime we learned that RMG (Thriftway/Shop ‘n Bag) has named Bozzuto’s as its new primary wholesaler for its 27 store group. RMG had utilized White Rose (AWI) for many years until the company went bankrupt in late 2014 and was ultimately acquired by C&S, which has been servicing the divergent independent group for the past 18 months…more C&S news: the nation’s largest wholesale grocer has agreed to sell its Nell’s Shurfine Market in Carlisle to Ahold USA (a long-standing C&S customer), which will convert the 51,800 square foot unit to a Giant store by late March. The former Nell’s store will be the second Giant store in Carlisle, where the company also maintains its U.S. corporate headquarters. This is the second Nell’s store that C&S has sold since it acquired former parent firm AWI in late 2014 – Weis Markets acquired the Nell’s store in Hanover, PA last year. On the positive side of the ledger, the Keene, NH-based distributor will add Shaw’s/Star Markets’ frozen food business to its portfolio effective March 7. According to the West Bridgewater, MA-based retailer, “This new business venture will allow the expansion of Shaw’s & Star Market dry grocery warehouse capacity at our Wells, ME facility to meet the company’s needs now and in the future. This change will not result in any job losses or layoffs in the distribution center or our transportation division, Clifford W. Perham Transportation, Inc.” And there’s more good news for C&S. Ahold USA announced just before presstime that it plans to close two Western NY distribution centers – in Lancaster and Cheektowaga – that were part of its American Sales Co. (ACS) unit that handled HBC/non-foods. C&S will be the beneficiary of that move, adding those items to warehouses in Bethlehem, PA (where C&S is expanding its distribution footprint) and South Hatfield. MA. About 600 AUSA associates will be impacted by the closings. “Decisions to transfer facilities are not easy, and we understand the concern that this change will cause for ASC associates and their families,” said Jan van Dam, executive VP-supply chain and e-commerce for Ahold USA. “ASC’s operations in the Buffalo area are strong, but they are no longer located within the markets served by Ahold USA’s retail divisions,” van Dam added. “Ahold USA continuously evaluates its business processes and supply chain to ensure that we are providing the highest level of service at the lowest cost for our local retail divisions and, ultimately, their customers.” The transition is expected to start in April and be completed by August… I haven’t written too much recently about the pending debut of Lidl in the U.S. in 2018. That’s kind of by design, because the company is still in the process of signing leases and adding personnel to its new U.S. division which will be based in Arlington, VA and plans to operate several hundred stores from New York to Georgia when it opens its first batch of stores under the guidance of Brendan Proctor, former president of Lidl’s Irish division. What I can report is that we believe that Lidl has completed about 40 lease signings including its most recent one (to our knowledge) – a 4.85 acre site in Chesterfield County, VA near the Chesterfield Towne Center. Lidl paid $3.23 million for that tract and plans to build a 36,170 square foot store there. It’s clear that Lidl is not skimping on any aspect of its U.S. investment. The majority of its stores are going to be built from the ground up and should be about twice as large as current Aldi units in the U.S. (the competitor it’s most compared to). There will be a significant perishable presence in all stores, and much like its highly successful European operation, price will still serve as the prime differential component. I’ve spoken to about a dozen vendors who have recently called on Lidl and most said that offering top-notch product quality is a priority. Several added that Lidl is positioning itself to occupy the space between Trader Joe’s and Whole Foods. That’s a pretty ambitious goal. We will continue to compile more research and hard data and hope to have a more detailed story about Lidl in a couple of months… Sheetz, the dynamic c-store chain based in Altoona, PA, announced earlier this month that it will invest more than $15 million to raise the wages of store employees across the company without cutting back on hours for full-time employees. “While other businesses in the industry might have to cut back on employee hours or new hires as a result of wage increases, Sheetz is working hard to provide full time hours to as many employees as possible, providing them with an opportunity to earn more and secure health benefits,” said Stephanie Doliveira, VP-human resources at the $6.9 billion convenience store retailer which operates more than 500 stores in the Mid-Atlantic. “As a family-owned business, we’re committed to attracting, retaining and developing the best people. We believe that paying wages at the upper end of the retail scale is necessary to achieve that goal. In addition to paying competitive wages, we provide our employees with increases based upon tenure, access to health insurance, quarterly bonuses, college tuition reimbursement, adoption assistance and paid time off, among many other benefits, continuing to prove that Sheetz strives to be a great place to work.” Excellent point about raising wages and not cutting hours, which seems to be the “dirty little secret” that usually occurs after many retailers give self-praise to their new found “generosity.”…Natural Markets Food Group (owned by Canadian hedge fund Catalyst Capital Management) opened two new stores earlier this month – a Mrs. Green’s store in Winnetka, IL and a relocated larger unit in Edmonton, Alberta under the Planet Organic banner. The Irvington, NY-based organics merchant also closed two units in December in Katonah, NY and Mahopac, NY. Although I think NMFG has a long way to go to produce the volumes necessary to successfully operate fresh and organic (and high shrink) stores, new CEO Pat Brown has done a good job of regaining associate loyalty while also restoring company focus…The Fresh Market has hired Pamela Kohn as its new executive VP and chief merchant. Kohn comes to the Greensboro, NC merchant from Wal-Mart where she spent 12 years and also has conventional supermarket experience with Food Lion and Stop & Shop…we have a few obituaries to report this month. Two of those deaths were from the music world. Natalie Cole, Grammy winning singer and daughter of the late and great Nat King Cole, died late last month at the too young age of 65. She received two Grammy awards in 1976 for best new artist and best R&B artist for her song “This Will Be (An Everlasting Love),” which was revived as the theme for a years’ long eHarmony ad campaign. Cole possessed a beautiful voice and her music was marked by its versatility, combining the influences of rock, jazz and soul. In the early 1990s, after emerging from what she described as a painful and destructive drug addiction, she released my favorite of her albums, “Unforgettable: With Love,” which featured a technology-assisted duet with her father of one his biggest hits. Perhaps experiencing life on Mars is David Bowie, the great singer and actor who died earlier this month at the age of 69. Inducted into the Rock and Roll Hall of Fame in 1996, Bowie was a true performance artist, who created alter ego-like characters such as Ziggy Stardust and composed classic songs like “Rebel, Rebel,” “Under Pressure,” Starman,” and “Changes.” He also acted in such films as “The Man Whole Fell to Earth” (1976) and Martin Scorsese’s “The Last Temptation of Christ” (1988). Bowie also did a three-month stint on Broadway as the “Elephant Man” in the 1980s. Two days prior to his death and on his birthday, January 8, Bowie released his final album, “Blackstar.” David Bowie was born in South London as David Jones. He changed his name in 1966, after Davy
Jones of the Monkees achieved fame. David Bowie, a true original, may you rest in peace…also passing on last month was Wayne Rogers, whose acting career spanned 44 years. He will certainly be best remembered as wisecracking Army surgeon “Trapper” John McIntyre during the first three seasons on the iconic TV series “M*A*S*H.” Rogers continued acting full-time until the early 1990s, but then scaled back much of work and put his Princeton education to good use as a money manager, investor and advisor. He was 82… entering basketball heaven last month was “Meadowlark” Lemon, the “Clown Prince of Basketball” who played for the Harlem Globetrotters for more than 30 years. Known for his amazing trick shot wizardry and his hilarious court jester antics, Lemon was a college basketball star at Florida A&M before joining the Globetrotters in 1954. Wilt Chamberlain called Lemon the greatest basketball player of all time (Chamberlain had a short stint with the Globetrotters, and like Lemon, is a member of the Naismith Basketball Hall of Fame). A man who brought a lot of smiles to the faces of many children, he was 83… and finally, earlier this month we learned of the passing of Pete Manos, former CEO of Giant/Landover, at the age of 79. I could fill a small library with memories from the relationship he had with Dick Bestany and me. Pete, along with his mentor Izzy Cohen, not only accelerated our credibility and visibility in the early years, he was also a dear friend with whom I shared so many interesting and hilarious times. Pete captured his own persona accurately when, upon his retirement in 1999, he said, “While there is much I will miss about our great company, I will miss the daily companionship of the people in the Giant family most of all. They have been an inspiration to me and have made my job easier.” I can attest many Giant associates felt the same way. Pete, I love ya and I’ll miss you dearly…just before presstime, Wal-Mart announced that it will close 269 stores, including 154 U.S. units. Included in the U.S. store closure breakdown are all 102 “Express” small format units, 23 Neighborhood Markets, 12 Supercenters, seven stores in Puerto Rico, six discount centers, and four Sam’s Clubs. There are no “Express” units in the Northeast, although a “Division 1” Wal-Mart store in Baltimore closed on January 17 and three Sam’s Club’s in New England – Fall River, MA; Seekonk, MA; and Warwick, RI – will close on January 28. Moreover, plans for two additional Washington, DC stores have been scrapped (Wal-Mart currently operates two DC units, with a third store currently under construction). Prior to this announcement, Wal-Mart said in October 2015 that it had begun an active review of its portfolio to ensure assets were aligned with strategy. These announced store shutterings follow a thorough review of Wal-Mart’s nearly 11,600 worldwide stores that took into account a number of factors, including financial performance as well as strategic alignment with long-term plans. In total, the impacted stores represent less than 1 percent of both global square footage and revenue, the Bentonville, AR retailer noted. “Actively managing our portfolio of assets is essential to maintaining a healthy business,” said Doug McMillon, president and CEO, Wal-Mart. “Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future. It’s important to remember that we’ll open well more than 300 stores around the world next year. So we are committed to growing, but we are being disciplined about it.” Wal-Mart noted that it will focus on strengthening Supercenters, optimizing Neighborhood Markets, growing the e-commerce business and expanding pickup services for customers. Internationally, the company said it is also following a disciplined strategy of actively managing its portfolio. Consistent with this strategy, the company is closing 115 stores outside the United States. This includes 60 recently-closed, loss-making stores in Brazil, which represents only 5 percent of sales in that market. The company has already been able to relocate many affected associates in Brazil to other stores. The remaining 55 stores are primarily small, loss-making stores in other Latin American markets. Wal-Mart will disclose more details about those actions, including the number of stores per market, after completing local associate and community outreach. Wal-Mart said it will continue to invest in its future, with plans to open stores worldwide in the coming fiscal year. Domestically, Wal-Mart intends to open 50 to 60 Supercenters and 85 to 95 Neighborhood Markets in Fiscal 2017, which begins February 1. In the same period, Sam’s Club plans to open in seven to 10 new locations. Internationally, Wal-Mart intends to open between 200 and 240 stores during the coming year. The financial impact of these closures is estimated to be approximately $0.20 to $0.22 of diluted earnings per share from continuing operations, with approximately $0.19 to $0.20 expected to impact the fourth quarter of fiscal 2016. The remainder of the impact will fall into the first half of fiscal 2017. Approximately 75 percent of the impact relates to U.S. closings and the remaining portion involves Wal-Mart International, with a large majority of the international impact relating to the closures in Brazil. Wal-Mart will report its fiscal 2016 fourth-quarter and full-year results on February 18. The estimated financial impact is not included in the company’s fiscal 2016 fourth quarter and full year earnings guidance. In total, approximately 16,000 associates will be impacted by the decision, about 10,000 of them in the U.S. The world’s largest retailer stated that more than 95 percent of the closed stores in the U.S. are within 10 miles on average of another Wal-Mart, and the hope is that these associates will be placed in nearby locations. Where that isn’t possible, the company will provide 60 days of pay and, if eligible, severance, as well as resume and interview skills training. Whether with Wal-Mart or elsewhere, the company’s objective is to help all associates find their next job opportunity. “The decision to close stores is difficult and we care about the associates who will be impacted,” McMillon said. “We invested considerable time assessing our stores and clubs and don’t take this lightly. We are supporting those impacted with extra pay and support, and we will take all appropriate steps to ensure they are treated well.” After Wal-Mart came clean with the analysts during its “Black Wednesday” Investors Day, there was little doubt that every area of the Behemoth’s operation was going to be scrutinized. The fact of the matter is that, other than operating SuperCenters (which it still does well, but not nearly as well as a decade ago), the company’s execution of other formats in the U.S. really isn’t very good. “Express” was being touted as Wal-Mart’s godsend into the small format realm (to compete against dollar stores and c-stores) when it debuted in 2011. It never left the “pilot” stage. Neighborhood Market was hailed as the Behemoth’s mano a mano entry against the conventional supermarket channel. And despite an attempt at re-energization over the past two years, the truth is that as a supermarket operator Wal-Mart is very mediocre. And Sam’s Club is an also-ran in the club store triad, lacking the innovation and flair of Costco and unable to match the localness of BJ’s.
