Surreal to so real – Sam’s closes 63 clubs after Walmart announces pay raise

Discussion
Photo: Sam's Club
Jan 12, 2018
George Anderson

Yesterday, Walmart announced to wide press coverage that it is raising the minimum wage it pays all its hourly workers to $11 while also giving eligible employees one-time bonus payments between $200 and $1,000. Later in the day, the company’s Sam’s Club division announced it will close 63 clubs, potentially putting thousands out of work. Huh?

Sam’s is closing underperforming clubs while planning to repurpose others as distribution centers to handle orders for the chain’s online business. With the closures, Sam’s will now have 597 clubs operating in the U.S.

Costco, the number one warehouse club chain, has 514 locations domestically. The retailer posted a same-store sales gain of 11.5 percent in December, the fifth straight month of double-digit increases for the business.

Walmart has said that it hopes to rehire as many affected workers as possible in nearby locations. Management pledged to provide affected employees with resources in helping to find work. It will also pay them the announced bonus and 60-day’s pay. Eligible workers will receive severance.

“We need great people to help lead us into the future and we hope that many of them will stay with the company at either a local store or club,” said John Furner, president and CEO of Sam’s, in a statement. “Change is never easy, but we’re making these decisions as part of running a healthy business.”

Sam’s has been putting greater emphasis on technology and e-commerce in recent years.

At last year’s Shoptalk conference, Jamie Iannone, president of SamsClub.com, discussed the company’s expansion of its Club Pickup click and collect service. He said the key to the service was inventory transparency and accuracy.

“All SKUs have to be online, whether bought digitally or in the club,” he said. “It’s part of the online experience.”

Sam’s has also been testing home delivery and its Scan & Go self-checkout app is available in all the chain’s clubs across the U.S.

DISCUSSION QUESTIONS: What is your reaction yesterday to the announcement that Sam’s is closing 63 clubs on the heels of Walmart’s pay raise news earlier in the day? Could Walmart have handled the communications in a way that might have played better from a public relations perspective?

Braintrust
"I thought Walmart was headed in a much more community-friendly direction. This is bad business and terribly bad PR."
"This is what some refer to in the marketing biz as the ol’ switcheroo."
"Walmart, a king of retail, is going to receive scrutiny with an expectation that any sudden moves they make have a direct economic impact."

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24 Comments on "Surreal to so real – Sam’s closes 63 clubs after Walmart announces pay raise"


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Paula Rosenblum
BrainTrust

First I thought it was no big deal, co-terminus leases and all that. Then I found out that a.) no one in the field was given any advance notice, the stores were just signed “sorry, store closed,” and b.) the company actually owns the real estate in at least one of those locations.

This move completely undid any good will Walmart might have achieved with its meager base pay increase. There was no reason to do this on that day. None.

It’s very disappointing. I thought Walmart was headed in a much more community-friendly direction. This is bad business and terribly bad PR.

Art Suriano
BrainTrust

The negative news will always stand out more than the positive news. Unfortunately, Walmart could have done a better job on the timing of their announcements. However, the fact remains they are closing 63 Sam’s Clubs due to weak sales. Walmart is a well-run company, and they understand when to cut costs and when not. What got missed in the media was that Walmart would attempt to rehire as many workers as they can and help find employment elsewhere for those they cannot rehire. That’s a powerful commitment to employees. And the increase in minimum wage to $11 an hour is also a great benefit for their employees. So perhaps the news should have been, “Although Walmart is closing 63 Sam’s locations because of poor performance, the company is working diligently to rehire as many of the employees they can and will be increasing the minimum wage to $11 an hour for all employees.” The results are the same, but it’s all in how you spin it.

Kwan Lee
Guest
8 days 6 hours ago

How could Walmart time it better? Retailers often close under-performing stores after the holidays. January is also the time for performance reviews, raises and bonuses.

Art Suriano
BrainTrust

It could have been one announcement. Having the minimum wage increase news precede the store closures news, made the store closures get the focus in the media.

Max Goldberg
BrainTrust

Walmart tried to offset a piece of bad news, the Sam’s Club closings, with news of pay increases. Once both stories were out, this didn’t go down very well with the media, which looked at both announcements cynically. Walmart could have handled this better.

Neil Saunders
BrainTrust

Walmart is keen to rid itself of dead weight and of stores that do not make a meaningful contribution. There is also a view in the business that more bulk grocery will migrate online to platforms like Walmart-owned Jet.com. That all makes sense and justifies the store closures.

However, from reports I have read, it sounds like the process was badly managed. Anything that affects livelihoods needs to be handled with tact and sensitivity. Those values seemed to have been lacking in this case.

Steve Montgomery
BrainTrust

At best the timing is unfortunate. It makes it appear that the increased pay for Walmart employees comes partly at the expense of those workers in the 63 Sam’s Clubs it is closing. While they are separate divisions within the company I would have expected a more coordinated process for the announcements. I am not sure what the time delay between the two should have been to lessen the yin and yang impact. Certainly at a minimum a statement that one was not the result of the other might have helped.

Dr. Stephen Needel
BrainTrust

While there’s no way to sugar-coat the bad news and make it sound good (except to shareholders), I would think they could have separated the timing – I agree with Paula. They could have also spun the story better – one of the clubs is here in Atlanta and there was little news of job assistance or bonus or severance (just a quick throwaway line at the end of the story). The question I’ve not seen much in the media is whether this means that Costco is hurting Sam’s Club.

Joanna Rutter
BrainTrust
8 days 10 hours ago

This is what some refer to in the marketing biz as the ol’ switcheroo. Walmart made a strategic choice to announce both of these decisions on the same day, but I don’t think they cancel each other out, as I sense they hoped. Though of course I wish them well, I give Walmart zero gold stars on their Good Retailer chart for raising their hourly wages to a long-overdue “barely livable.” Especially when it’s framed as a PR move alongside these Sam’s Club closures. Workers are not pawns; they are the heart of a business. Treating them as the former is a bad look, even when it gets you a prominent headline.

Bob Amster
BrainTrust

The first announcement was a sham; a distraction from the following announcement, which was not good for the people that worked there. The ultimate beneficiaries will have been the shareholders, to whom every public company appears to owe its allegiance.

Lee Peterson
BrainTrust

So what? Wouldn’t you? Besides, the two moves are totally unrelated. Closing under-performing stores should not detract from spreading extra profits to employees. Two very disparate strategic moves. Re: stores: everyone knows that footfalls are down and e-commerce is way up so, isn’t that also a good move for all employees long-term? They have 660 stores, which, if you haven’t been keeping up with current events, is still too many stores, esp when the company reported not too long ago that its e-commerce sales were up 63 percent.

Closing stores will be a natural part of every retailer’s annual strategy for years to come now. I’d get used to that news as a non-event and start focusing on more positive stories like the recently reported 15 percent of sales being from BOPIS. Let’s move on to what stores will be, not what they were.

Brian Kelly
Guest
8 days 9 hours ago

I thought Walmart was brilliant with the pay announcement. Then the other shoe dropped and I felt bad for them. As the good deed will now go punished, by many haters out there looking for a way to poke them. And Walmart will suffer far more than Amazon would, as Galloway likes to point out, being a digital darling and all.

I get Walmart wanting to exit Sam’s Club. It seems like it was counter-cultural to the discounter’s mantra. Lots of executive churn over the years.

As Walmart amasses digital companies/capabilities to address Amazon, et al, the warehouse club is a distraction from the core franchise.

But the timing, jeez why didn’t you wait until Q4 earnings report?

Ken Cassar
BrainTrust

Sounds like there might have been some bungling on how the Sam’s news was broken to employees, but I applaud all of the decisions that Walmart made: Increasing worker wages, giving unplanned bonuses to all eligible employees and closing underperforming stores seems like Retail 101 to me.

Joan Treistman
BrainTrust

The announcement of the Walmart pay raise was misleading in that the average pay rate for Walmart full-time employee is about $13. Part-time workers are paid a minimum of $10. There is more to disentangle, e.g., who is actually to receive the bonuses, but it won’t offset the intended misinformation.

So I can’t help but wonder about the intention of the Sam’s announcement. I’m not questioning the business decisions, just the public relations strategy that is behind the timing of both announcements. And of course, I’m wondering about how well Walmart/Sam’s employees are actually going to be treated going forward.

Adrian Weidmann
BrainTrust

Once again, draconian business and greed trumps (yes, I said Trumps) valued and socially responsible business practices. It shows once again how superficial and thin the veneer is for anything beyond the pursuit of money.

Al McClain
Staff

The timing was terrible and the headline for the press release was corporate-speak in the extreme, “Sam’s Club Shares Changes to Club Fleet.” If they weren’t embarrassed by the action, the headline would have been more straightforward. I’m a little amazed at some of the experts here giving them props for closing stores. BJ’s and Costco are not closing stores and their sales are growing rapidly, so it isn’t the case that club store sales have to decline because of e-commerce. Also, there is no good way to “spin” this, try as they may. Closing 63 large stores is going to be a negative, no matter how you spin it.

Dan Raftery
BrainTrust

Two smart business decisions on the same day, early in the year. It shows Walmart is on the move and not afraid to make waves. The U.S. has been over-stored for years. Add to that increasing volume going digital and the strength of Costco.

Walmart is not the only retailer closing stores. More than 5,000 were shuttered In the first half of 2017. The extreme value channel is the only one adding footprint to any degree. The business of retail is changing, folks. Walmart is not the only operator responsible for making big waves. They must also navigate through the waves of others.

Shep Hyken
BrainTrust

Any time Walmart closes stores will make headlines. They are in the retail HOF and anyone would have to wonder reasons for store closings — or any negative news. That said, this is a trend in retail. Stores and malls are closing. No retailer is immune from changes in business, traffic, etc. So, it makes sense for Walmart or any other retailer to close stores that aren’t performing or don’t meet other criteria. That’s just good business.

Craig Sundstrom
Guest

My reaction is: “and…?” Do people really think businesses are going to stop opening and closing stores because the PR department decided to publicize a routine business decision (at least I hope small raises and bonuses are routine)? Admittedly some might see the timing as awkward, but given the retention of the average person, I think yesterday’s news has (already) been filed back there with knowledge of Gettysburg … history.

Ricardo Belmar
BrainTrust
“Left-hand, meet right-hand — perhaps you two should get better acquainted and coordinate your activities from now on!” That’s what should have been said at top management levels at Walmart prior to those announcements being made. Poorly handled is an understatement! It’s hard to believe Walmart could have accidentally issued both statements the same day — the timing just feels too precise and that leaves us no choice but to assume the first announcement about wage increases and bonuses was meant to hide the second announcement in the hopes no one would notice as last-minute signs went up in 63 store windows announcing they were suddenly closed. While yes, all retailers need to evaluate store performance and make tough decisions around poor performing stores, why is it that Sam’s Club is the only one of the big warehouse stores closing doors? Not to mention that any announcement by Walmart, a king of retail, is going to receive scrutiny with an expectation that any sudden moves they make have a direct economic impact. No doubt this… Read more »
Harley Feldman
BrainTrust

While the Sam’s Club closing news detracted from the positive news about Walmart raises and bonuses, most will understand the closings have to do with underperformance. Walmart also announced that it will help employees transfer to other stores or provide services to help in a transition along with severance pay. These two messages demonstrate that Walmart is concerned about its employees and runs their business efficiently and profitably. So while the store closings are negative news, I believe most listeners to the stories will give Walmart credit for doing the right things.

Roy White
BrainTrust

Talk about timing and poor planning for these announcements. The pay increases are vitally important since many Americans are extremely suspicious that any of the corporate tax benefits are going to be flowing into the pockets of workers. That they are at Walmart (at least initially – suspicion here again) is a big score.

Why the stores were shuttered at this particular moment with no prior announcement in many cases is odd. Sam’s Club has been performing poorly for some considerable time, so the decision to shutter stores has to have been on the table for discussion and determination for some considerable time. To make it worse, however, ironically, in the third quarter ended October, Sam’s not only made money, the division increased profits by 13%. I doubt the stores absolutely had to go at this particular moment.

Naomi K. Shapiro
BrainTrust

Right decisions. Really poor timing and PR. I believe I read that the two companies are “separate,” but if you don’t know what your right hand is doing, you’d better check and use your hands more closely.

Camille P. Schuster, PhD.
BrainTrust

My response was when do the next wave of closings come? Assuming that these stores are closing because of poor sales in an environment when consumers are trying to save money (as evidenced by the fact that Costco, Walmart, and Dollar Stores are doing well), what is going on at Sam’s Clubs? Is Walmart giving up on Sam’s Club? Will it only become an online store? Why was there no notice (not even 30 days)? This overshadowed the announcement by Walmart to raise wages, leaving a negative impression.

wpDiscuz
Braintrust
"I thought Walmart was headed in a much more community-friendly direction. This is bad business and terribly bad PR."
"This is what some refer to in the marketing biz as the ol’ switcheroo."
"Walmart, a king of retail, is going to receive scrutiny with an expectation that any sudden moves they make have a direct economic impact."

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