Sam's Club to Close 10 Stores, Lay Off 1,500 Workers

In a move that indicates consumers may be worse off than the economic pundits think, Sam's Club, the discount warehouse chain owned by Wal-Mart (WMT), is closing 10 U.S. locations and cutting 1,500 jobs.

"Despite the outstanding efforts of Sam's Club Associates, these Clubs continued to lose money and we have decided to close them," wrote Sam's Club president and CEO Brian Cornell in a memo to employees Monday.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%%Almost half of the closures will occur on the west coast. In addition to California locations in La Quinta, Vista, Irvine, and Sacramento, stores in Nampa, Idaho; Louisville, Colo.; Rolling Meadows, Ill.; Clay, NY; Houston and Phoenix will also be shuttered. Trying to position these closures as a strategic cost-saving move, Cornell emphasized that the chain will have opened six stores by the end of its fiscal year and finished the remodeling of 52 others. He also announced plans to open five to ten more stores and remodel between 60 and 80 locations in fiscal year 2011.

Sam's Club will host job fairs at all ten locations to help displaced workers find jobs at other Sam's Club and Walmart stores. The company has also offered to refund membership fees in areas where stores are being closed and is trying to steer customers to other store locations. The move is bound to affect revenues in locales where stores are shuttered: in the Louisville area, city officials anticipate that the shuttering warehouse club will cost the area more than $500,000, totaling approximately 5% of the city's general fund revenue.

Major layoffs like the one Sam's Club is embarking on have filled the news lately. In the past week, Lockheed Martin (LMT) announced it was dropping 1,200 workers and United Parcel Service (UPS) said it would let 1,800 people go. DailyFinance's parent Aol (AOL) has also been streamlining its workforce, with the aim of cutting as many as 2,500 jobs.

Still, there remains a key difference between Sam's Club and the other companies that are clearing the decks. Throughout the recession, the conventional wisdom has held that the retail slowdown was, to some extent, reflective of a consumer move from high-end to low-end stores. No longer able to justify expensive "aspirational" purchases, customers chose instead to patronize bargain-priced stores. In general, Walmart and Sam's Club were perceived to be the winner in this trend, as their business model was designed to appeal to lower- and middle-income families. But these closures, and the dropping revenue that has inspired them, represents a worrisome trend: after all, if the stores that are best situated to ride out a recession can't keep their heads above water, then the future looks bleak for more upscale establishments.
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