Dive Brief:

• Walmart is closing at least eight Walmart Neighborhood Markets, Business Insider reported, with sources saying stores will close by April 19. Grocery Dive reached out to Walmart for further details and comment, but did not receive a response. Company officials have confirmed the closings to local media outlets over the past few weeks.
• The stores slated for closure are located in Arizona, California, Kansas, South Carolina, Tennessee, Virginia and Washington.
• Walmart currently operates almost 700 Neighborhood Markets across the U.S.

Dive Insight:

Eight Neighborhood Market stores is a mere fraction of the banner’s total footprint, but the closures are notable for a retailer that is otherwise white-hot when it comes to grocery sales.

Walmart Neighborhood Market was first launched in 1998 and stores are about 38,000 square feet, around one-fifth of the size of Walmart’s supercenters. The banner focuses primarily on grocery offerings including fresh produce, meat, bakery and deli departments and pharmacies.

Walmart did not respond to Grocery Dive’s request for comment, but news of Neighborhood Market closures has been trickling out. Earlier this month, Walmart announced locally that it would close locations in North Chesterfield and Virginia Beach, Virginia. A Walmart spokesperson told local newspapers that closings were related to several factors, including the stores’ financial performance, and that employees of the stores have the option to transfer to other locations. The closing of a Walmart Neighborhood Market in San Jose, California, was announced last week for "overall performance," with its 83 employees being offered transfers.

This is not the first time Walmart has shuttered small format stores. Last September, three Walmart Neighborhood Markets closed in San Antonio, with a company spokesperson citing an adjustment in company strategy. In 2016, Walmart closed hundreds of stores across the U.S., including 23 Neighborhood Market stores and all of its Walmart Express stores, which accounted for 102 locations at the time. The Walmart Express brand, which was created to compete with dollar stores, was terminated so Walmart could focus on supercenters and e-commerce.

Walmart has said recently that it will slow its brick-and-mortar expansion, and correcting its smaller format store count could be a strategic move to account for growing online sales and an increasingly competitive grocery landscape.

"While it’s true that Walmart is looking to grocery to drive growth and future relevance ... it is also concentrating on investing in its most productive assets," said Laura Kennedy, vice president at Kantar Consulting, in an email to Grocery Dive.

Company-wide, Walmart’s growth in grocery has surged. Walmart is the top seller of groceries in the U.S. and has invested heavily to expand delivery and pickup options to support its growing e-commerce business. The company has also been remodeling locations at a rapid clip, and will look to utilize its existing supercenters more effectively as online sales continue to increase.

"It’s also fair to say that Walmart does see its bigger stores, supercenters, as the most productive boxes," Kennedy said. 

A spokesperson recently told the Virginian-Pilot that Walmart is still committed to the smaller store concept, so some of these store closings may simply be related to financial performance and local conditions. But on a larger scale, the closures raise questions of whether or not Walmart can operate small format stores successfully.