How A Secular Decline Begins
Last week we received some sad, no tragic news. Delivered in that unique way we do on Wall Street, absolutely without emotion, just the numbers. As if we can blunt the emotional impact of lost stores and jobs by using numbers and data.
The news was that Walmart was closing several hundred stores nationwide, including all the stores in Portland, Oregon. Portland, you’ll recall, is the city that endured night after night of riots and looting. The City of Roses survived unrestrained lawlessness for nearly a year and a half.
Like it is in nearly every town and city in America, Walmart is where the citizens of Portland shop. They can purchase that hardware fixture from the DIY Section in the back of the store, casual clothes from the center, or groceries up front.
Walmart is the largest private employer in America, where seemingly everyone goes to find a bargain. Begun as the vision of a hard-working man from Arkansas named Bill Walton, the company has withstood natural disasters, economic hard times, and, recently, the Covid-19 Pandemic. Yet it continues to flourish.
Walmart learned how to prosper in an arena where many have failed. Macy’s is still here, but Gimbles is gone. Sears Roebuck limps along, while Montgomery Wards faded long ago. We all remember a favorite store that is no longer with us. But that fate had not reached Walmart.
Walmart seemed invincible.
That is until Walmart reached Portland and all those cities like Portland that have become lawless. Over the past couple of years, we’ve all seen the videos. The surveillance cameras catch the action, petty criminals casually walking out with everything from clothes to appliances and televisions. Generally, with no one to stop them. No store clerk wants to fight with these people, and no police are in sight. So thousands, if not millions, of dollars of inventory is lost each year. And who pays the price? Walmart.
If enough inventory walks out the door, the inevitable will happen. The store loses money and eventually will close. Last week the task fell to Doug McMillion, Walmart’s CEO, to announce that the final two stores in Portland as well as a couple of hundred other stores around the country, will be closing.
As the Street says, euphemistically, the “shrinkage” was too significant. That’s right, and Wall Street calls this pilfering shrinkage. More to the point: the level of stealing was too great to overcome. Walmart was being “ripped off,” “burglarized,” and “shoplifted” to death.
Last December, McMillion, during an interview on CNBC, warned the citizens of Portland and all the other high-crime cities that “Theft is an issue. It’s higher than it historically been…I think that local law enforcement being staffed and being a good partner is part of the equation (solution…” to bring law and order back…”If that’s not corrected over time, prices will rise, or stores will close.”
For Portland, their Walmart Stores will close a week from this coming Friday. It’s a tragedy for Portland, the Management and workers at Walmart, and the city of Portland. No one wanted this outcome. Except, perhaps, for those local “perps” who made off with all the goods. Who reveled for a day in their ill-gotten gain. But if history is any guide, they are likely no better off today than before they rushed that 54-inch big screen out the front door of the Walmart Super Center.
And worst still, these thieves usually walked to their car without opposition, not so much as a “Hey there, bring that back.” There were no consequences for their actions. Those actions were reinforced and will likely be seen again.
But not at the Portland Walmart. Walmart Management took the only action they could under the circumstances. They closed.
Walmart is also closing two large warehouse complexes near me in greater Philadelphia. That’s the downstream result of closing over 200 of these “shrinkage” stores. About 4% of Walmart’s total number of stores are closing, not counting the number of warehouses and support staff associated with those stores.
So come April 1, when all those local Walmarts have closed, the staff is given their final severance package. When the leases have all been given back to the real estate owner, perhaps it will begin to dawn on Portland and the other communities that this is permanent. When the signs for the old Walmart are gone, and the parking lot is empty. And you’ll get that funny feeling in the pit of your stomach as you drive by that something has disappeared forever, sad. We’re not the community that we used to be. It’s depressing.
And that, my internet friend, is how a secular decline begins.
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