Walmart and Kmart are shutting stores while dollar stores are adding locations, signaling what might lie ahead for the American economy.
Walmart will exit a few stores on April 22, and The Marketplace at Factoria’s store closure in the Bellevue, Wash. area will terminate 147 jobs, according to a Worker Adjustment and Retraining Notification, or WARN, filing. Stores in Louisville, Ky. and Greater Cincinnati are also set to close on Earth Day. Walmart declined to comment on the closures and any other store exits this year. It routinely closes select underperforming stores each year.
One of retail’s better-run companies, Walmart has chartered vessels, expanded InHome delivery and beta tested virtual fitting room technology in the service of customer convenience.
Meanwhile, Kmart will have just three U.S. locations left when it closes its Avenel, N.J. store Saturday. Last July, it closed its last remaining Manhattan store and entered 2022 with just six locations, a far cry its nearly 2,500 stores going into 2001.
Kmart shuttered a few hundred stores that year and by January 2002 filed for a Chapter 11 bankruptcy that axed 284 more locations. Founded as SS Krege Co. in 1899 before changing its name, Kmart found its fortunates fade as Walmart and Target eventually dominated the low-cost mass-market sector.
Kmart’s saga with Eddie Lampert’s ESL Investments hedge fund and a merger with Sears to form Transformco have kept the ailing has-been on nothing more than life support, indicating that retailers need component owners and operators and robust investments in future-facing technologies to survive with modern consumers.
By contrast the dollar store channel is growing by leaps and bounds.
Dollar Tree is planning to open 590 new locations in fiscal 2022. Dollar Tree Plus, the company’s business selling products at $1, $3 and $5, expects to open 1,500 locations in the fiscal year and at least 5,000 are expected by the end of fiscal 2024.
Dollar Tree, which touted “significant success” with its Combo Store format mashing up Dollar Tree and Family Dollar, expects to reach 3,000 stores over the next several years.
Competitor Dollar General is eyeing 1,110 new stores in fiscal 2022. In a fourth-quarter conference call in March, Dollar General CEO Todd Vasos said the retailer could pick up new shoppers as consumers begin trading down when hard times hit.
“We haven’t seen a lot of trade down yet,” Vasos said, but he expects “there’ll be more as inflation comes in.” He said that the retailer knows from credit card data that it picked up scores of new shoppers when the pandemic first hit many consumers’ finances, and he expects more as “inflation continues to take hold across the U.S.”
Moody’s Investors Service sees mid-price department stores and apparel retailers at greatest risk if inflation stays high. Since lower- and middle-income consumers are more easily impacted when inflation runs high, the credit ratings firm’ analysts expect these price-sensitive shoppers to trade down to low-cost retailers as they settle for more low-frills products. That should provide a boost to the dollar store and off-price retail channels.