As it turns out, Walmart is facing challenges bigger than anyone thought. A second round of store closings was just announced, and the company is saying that half of its stores in one major U.S. city will be permanently shut down because they are losing tens of millions of dollars every year. Many locations are underperforming right now as shoppers complain about double-digit price increases at Walmart and turn to other retailers for “greater” value. The big-box retail chain is also in a complicated financial condition, missing investors’ earnings expectations and reporting growing cash flow problems. The situation has become so alarming that one industry CEO is warning about a flood of bankruptcies in the sector in 2023 as America’s biggest retailers cope with an increasing amount of distress.
Shoppers are noticing that prices at the big-box retailer have continued to rise in 2023 despite inflation numbers cooling down. For several quarters now, Walmart is losing sales and losing shoppers. As previously reported by GOBankingRates, a study from the value investing site ValueWalk found that Walmart grocery prices climbed by 21.5% over the past 12 months.
According to Walmart CFO John David Rainey, shoppers will have to prepare themselves for another year of price increases. In an interview with Reuters, the executive said the world’s biggest retailer might still have to raise prices to deal with higher costs. “We’re assuming that this year is going to be somewhat anomalous… [We’re] still feeling the effects of higher prices,” Rainey said.
However, this may further squeeze the company’s bottom line as more and more customers turn to discount stores. The outlook for Walmart in 2023 has suffered a drastic shift. In January, executives seemed to believe in the retailer’s ability to recoup its 2022 losses and report strong sales growth this year. But those views were shaken, and this week, the big-box store chain just announced another round of closings, citing poor financial performance at several locations.
The stores affected this time are located in DC, Georgia, Florida, Hawaii, Indiana, New Mexico, Texas, Washington, and Wisconsin. The retailer confirmed it will lay off thousands of store employees and hundreds of hundreds of workers at five fulfillment centers across the US.
More worryingly, Walmart is permanently shuttering half of its stores in the city of Chicago. “The simplest explanation is that collectively our Chicago stores have not been profitable since we opened the first one nearly 17 years ago – these stores lose tens of millions of dollars a year, and their annual losses nearly doubled in just the last five years,” it revealed.
Walmart’s troubles should alarm everyone in the industry. According to CNBC, due to its massive size and substantial market share, Walmart is considered a barometer for the nation’s economy as a whole. So any trends we’re seeing in Walmart will likely be reflected in your local grocery store as well.
Everything is falling apart faster than anyone predicted, and even the biggest chains are struggling to survive in such a difficult environment. If the biggest retailer in the world is coping with this many challenges, smaller companies will likely experience even more serious problems this year. The retail apocalypse spares no one, and the next chapters of this crisis will chill many people to the core.
Article cross-posted from The Epic Economist.