Costco Wholesale Corporation (COST) - Get Report stock rose more than 2% on Thursday, Jan. 11, after Wal-Mart Stores Inc. (WMT) - Get Report said it would close 63 Sam's Club stores across the country.
Walmart told Business Insider about the closings after multiple local reports emerged Thursday. Sam's Club said on Twitter that it decided to "close a series of clubs and better align our locations with our strategy." The parent company hasn't made a formal announcement.
In a letter to employees, Sam's Club CEO John Furner cited geographical cannibalization as the reason for the closures. "After a thorough review, it became clear we had built clubs in some locations that impacted other clubs, and where population had not grown as anticipated," he said in an email obtained by Business Insider.
Up to 11,000 employees would be affected by the closures, Business Insider calculated, though 10 of the closing stores will be turned into e-commerce distribution centers.
The closing Sam's Clubs make up about 10% of its total number of stores, which may surprise some investors considering the warehouse discounter's consistent growth. In both the third and second quarters, Sam's Club reported comp sales on par with that of Walmart, 2.8% and 1.2%, respectively, compared with Walmart's 2.7% and 1.8%.
"It's been performing better, the stores look better, the operational issues they're working through, they're enhancing the supply chain, and there are things that Costco doesn't do," Telsey analyst Joe Feldman told TheStreet regarding Sam's Club in August.
Costco, nonetheless, is seeing faster growth. Comp sales in its most recent quarterly report rose by 10.3% in the U.S., with e-commerce gaining more than 43%.
Costco rose $3.96, or 2.1%, to $189.38 on Thursday. Walmart rose 35 cents to $100.02. Neither Costco nor Walmart could be immediately reached for comment.
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