Walmart confirmed Thursday that it is closing 10 percent of its Sam's Club warehouse stores — a move that a union-backed group estimated could cost thousands of jobs — on the same day the company announced that it was boosting its starting salary for U.S. workers and handing out bonuses.
The world's largest private employer said it was closing 63 of its 660 Sam's Clubs over the next few weeks, with some shut already. Up to 12 are being converted into distribution centers to handle online orders, the company said late Thursday.
As CNBC reported, the 63 stores set to close compares with a total of five stores the company has closed since fiscal 2013, securities filings show.
Ten to 12 of the closed stores could be converted to e-commerce facilities, a company spokesperson said. The news is consistent with Sam's Club's ongoing plans to optimize its stores to fulfill more online orders and keep pace with internet retailers such as Boxed.
It did not disclose how many people would lose their jobs, but said some workers may be placed at other Walmart locations. Making Change at Walmart, a campaign backed by the United Food and Commercial Workers International Union, estimates that 150 to 160 people work at each Sam's Club store, meaning the closures could affect about 10,000 people.
Reports of the closings began to emerge Thursday from local media outlets in Texas, Chicago, New York, New Jersey, Connecticut, Massachusetts and Puerto Rico, amid complaints from disgruntled employees and confused customers. In some cases, employees weren't notified in advance that their workplace was closing immediately, CNBC reported.
José Luis Pérez worked for five years at the store in Barceloneta, Puerto Rico. He told Telemundo Puerto Rico that he did not know his location was closing until he showed up for his shift Thursday morning.
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"I arrived at 7 a.m. to work my shift and found the store closed," he said. There had been "rumors" the store might close at some point, he said, but no one had heard anything official.
Lauren Fitz, 22, said she was at her other job as a church secretary when a colleague texted to say that the Sam's Club where they both worked in Loveland, Ohio, had closed. Fitz had been pleased earlier to read the news that Walmart was boosting starting salaries and offering bonuses.
"I thought, 'This is really cool.' And then to find out that my store is closing," said Fitz, who said she had worked as a sales associate in the jewelry department for two months. At home, she got a call from her manager and had a letter in the mail saying the store had closed and she could seek employment at another Sam's Club or Walmart store.
"It was very sudden and very shocking," Fitz said. "I don't think our managers had any inkling yesterday. It was a normal shift."
A Walmart spokesperson didn't immediately respond to CNBC's request for comment. But the Sam's Club Twitter account appeared to be responding to general concerns online.
"After a thorough review of our existing portfolio, we've decided to close a series of clubs and better align our locations with our strategy. Closing clubs is never easy and we're committed to working with impacted members and associates through this transition," it said.
A Sam's Club in Linden, New Jersey, was among the locations that closed abruptly Thursday, NBC New York reported. Union County officials said they would offer assistance to any county resident among the estimated 200 full-time and part-time employees laid off by the sudden closure.
Walmart had earlier cited tax legislation that will save it money in announcing the higher hourly wages, one-time bonuses and expanded parental benefits that will affect more than a million hourly workers in the U.S.
Rising wages reflect a generally tight labor market. The conversion of stores to e-commerce sites also illustrates how companies are trying to leverage their store locations to better compete against Amazon as shopping moves online.
Online retailers typically pay warehouse employees who pack and ship orders more than store jobs pay. Job postings at an Amazon warehouse in Ohio, for example, offer a starting pay of $14.50 an hour.
"This is about the evolution of retail," said Michael Mandel, chief economic strategist at the Progressive Policy Institute. "The rise of e-commerce is leading to higher wages."
Large employers also have been under pressure to boost benefits for workers because unemployment rates are at historic lows, allowing job seekers to be pickier.
But low unemployment has meant that retailers have had trouble attracting and keeping talented workers, experts said. Walmart employees previously started at $9 an hour, with a bump up to $10 after completing a training program. Target had raised its minimum hourly wage to $11 in October, and said it would raise wages to $15 by the end of 2020.
The timing of the increase coincides with the new California minimum wage of $11 per hour that took effect Jan. 1. With planned annual increases approved by state lawmakers, the state's minimum wage will be $15 per hour by 2020.
"They raised the minimum wage because they have to," Mark Zandi, chief economist at Moody's Analytics, said. "The labor market is tight and getting tighter."
Many small and independent retailers struggle to find workers even when they try to pay well and offer benefits.
Laurie Rose, owners of Olde Naples Chocolate usually has six workers during the winter months, the busy season in the resort city of Naples, Florida. But right now, she has just three. The store pays $12 an hour and offers a 401(k) account after a staffer has worked for a year, but Rose realizes that may not be enough for many potential workers. Rose would like to pay more, but she'd have to raise her prices and fears that would turn away customers.
While many department store chains such as Macy's and Sears are struggling, retailers as a whole are still trying to hire. The retail industry is seeking to fill 711,000 open jobs, the highest on records dating back to 2001, according to government data. The longer those jobs go unfilled, the greater pressure on employers to offer higher wages.
Walmart, which reported annual revenue of nearly $486 billion in the previous fiscal year, said the wage increases will cost it an additional $300 million in the next fiscal year. The bonuses will cost it about $400 million in this fiscal year, which ends on Jan. 31.
"The wage increases will make a big difference to Walmart's lowest-paid associates, but do not yet match Target's commitment to raise pay to $15 an hour," said the Organization United for Respect at Walmart.
