Time For Wal-Mart To Close Store (WMT)

December 7, 2006 by Douglas A. McIntyre

Newsweek has come up with the most intelligent explanantion of Wal-Mart’s problems published recently in the popular press. With 4,000 US stores, almost every US resident is within 25 miles of one. The stores compete with one another: “Wal-Mart is overstored,” says retail consultant Burt Flickinger III. “They need to go down to 100 to 125 new stores a year.”

Even this may be understated. If sales at the stores are fundamentally flat, getting same-store sales moving back up in the 5% range may mean shutting 200 stores. At least that is the simple math. If some of these stores are especially poor performers, the figure might be slightly less.

On the back of an envelop, Wal-Mart’s US store count needs to be in the 3,750 to 3,850 range. If the company adds stores it is difficult to see how comparisons to previous years can be anything but poor.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.