Walmart shuts down four Chicago stores due to years of losses

Walmart Inc. WMT 0.23%, has announced plans to close four stores in Chicago after previously closing some in urban areas, a sign that the company is retreating from urban stores that it had hoped would draw shoppers but that lag in profits compared to their suburban and rural counterparts.

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A store in Washington, D.C., near the White House, as well as two locations in downtown Portland, Ore., were also shut down by the country's largest retailer by revenue earlier this year. It did not reopen one of its stores in downtown Atlanta after a fire destroyed the building. 

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Walmart has been trying for years to figure out how to do business in urban areas, determining they were an opportunity for the company to expand beyond the base of consumers living in suburbs and small towns. As a result, the pullback in urban stores is significant because Walmart has tried for years to find a profitable way to operate in those markets.

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Walmart said Tuesday that collectively, its Chicago stores have not been profitable since we opened the first one nearly 17 years ago when the company opened the first store. "In just the last five years, these stores have lost tens of millions of dollars, and their losses have almost doubled in just that time period." 

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It is expected that Walmart will keep four Chicago stores open for the time being and that it hopes that its decision to close the others will allow the other four stores to remain open for a long period of time. In response to the increased losses, a Walmart spokesman said that there was no single cause for the increase in losses and that theft was not the driving factor. “We believe that closing these sites will give us the best chance to keep the remaining four stores open for the foreseeable future,” he said.

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The closures of the Chicago Public Library sparked criticism from the Mayor of Chicago, Lori Lightfoot. "I am extremely disappointed by the news that Walmart has announced that several of its locations will be closing, as they have been a strong partner in the past," she said. "Thousands of residents will be faced with barriers to basic necessities if these neighborhoods are abandoned without any ceremony." A Walmart spokesman declined to respond to the situation.

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In recent decades, Walmart's top executives have debated how to grow inside urban centers profitably, according to people with knowledge of the situation. Several top executives at Walmart, including Chief Executive Doug McMillon, believe that irrespective of where a Walmart store is located, product prices should be the same largely across all Walmart stores, according to some of these people who spoke to Trade Algo. 

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Walmart's stance on New York City has, in part, been the reason for its reluctance to open a store there. Some of the other retailers that have expanded into urban areas, such as Target Corporation, charge different prices for some products depending on the cost of doing business in a region and the level of competition in the marketplace, as well as the level of competition. Walmart declined to provide any further comment.

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Walmart has announced plans to close 19 stores so far this year, with some of these closings taking place outside of large cities as well. The company typically closes a few stores each year as part of its regular real-estate planning process. There is an increase in Walmart's aggressiveness this year, as the company is reviewing "our fleet of stores as sales and performance have normalized following the pandemic," according to a Walmart spokesman.

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The company had operated over 4,700 Walmart stores in the U.S. as of the end of January and employed 1.6 million people across its operations, which included Walmart and Sam's Club stores as well as its distribution centers as of the end of January.

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Throughout the Covid-19 pandemic and in recent quarters, Walmart has reported strong sales growth as shoppers pressured by rising price increases seek lower-cost groceries and other essential items from the retailer in order to save money. Over the past few quarters, the company has worked to reduce costs as consumers have shifted their spending toward necessities and cut expenditures on items such as clothing and home goods that carry higher profit margins.

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“In spite of the recession, customers are still willing to spend money,” Mr. McMillon said during an analyst presentation in February. "Clearly, it's not so clear to us what the back half of the year will look like yet."

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Over the course of the past year, Walmart has cut some corporate staff and closed three technology hubs. Recently, the company has cut thousands of jobs in e-commerce fulfillment centers, as online sales have slowed compared to earlier in the pandemic, and it is filling more of its e-commerce orders from store inventory than earlier in the pandemic. The executives of Walmart have said in recent weeks that the overall number of U.S. employees at the company will probably remain the same, but that the types of jobs will be changed. 

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In order to prepare for the future, the company is adjusting staffing and helping workers find jobs at other locations, according to a spokesman for the company.

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In 2006, Walmart opened its first store in Chicago. The site is still operating, and Walmart has since built a number of other stores, including its smaller-format stores that focus mainly on groceries. Furthermore, Walmart has a number of Walmart Health community health centers in the city, and it has constructed a Walmart Academy training facility as well. 

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The led in urban areas around the country have, at times, pushed back against Walmart vigorously, often with the support of labor unions as well as smaller merchants.

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As soon as Walmart was approved to open a store in Chicago in 2004, Chicago's aldermen passed a law requiring large retailers to pay their employees at least $10 per hour plus health benefits equal to at least $3 an hour. A veto was issued by then-Mayor Richard Daley and he persuaded the city council not to overrule his veto.

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As part of its efforts to improve business in Chicago, Walmart has tried strategies that include building smaller stores and localizing its product assortment. As for the closing sites, the company said that it would work with local leaders to find ways to reuse the buildings. Those working at the affected stores will be paid through Aug. 11 and will be able to transfer to other locations if they so desire. 

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“In the future, we will continue to work with local organizations to find solutions to the challenges faced by communities throughout the country, including racial disparities and food deserts”, the company said in a statement.