Town tries to cope as Wal-Mart closes a store

Drug Store News, Nov 19, 1990 by Elizabeth Richardson

Town tries to cope as Wal-Mart closes a store

HEARNE, Texas - An announcement last month that Wal-Mart would close its store here by year-end took town officials by surprise and disappointed many citizens. Since the store included a pharmacy, the closing will leave this town of 5,600 with only two independent pharmacies.

Citing poor profits, Wal-Mart offered the store's 90 employees job opportunities in its Bryan and College Station stores, approximately 25 miles away.

"Some local merchants are already beefing up some areas in the hopes of attracting customers," said Archer Hoyt, owner of Hoyt's Pharmacy. "But everyone's shopping habits are already oriented to shopping at Wal-Mart." Hoyt feels that the 20-mile trek to the nearest Wal-Mart store in nearby Bryan or College Station won't be too much for consumers. "Most of them go there on the weekends anyway, so they'll probably continue to shop at the Wal-Mart there."

The Wal-Mart pharmacy is leased to True Quality, of McKinney, Texas. The chain operates leased departments in 31 Wal-Marts.

True Quality execs say they are considering keeping a pharmacy operation in Hearne, but at a different location.

In an attempt to change Wal-Mart's mind about the closing, shortly after the announcement, city officials launched a mass mailing campaign to the chain's corporate headquarters in Bentonville, Ark. Eariler this month a delegation of city officials and citizens also visited headqurters trying to reverse the decision.

The closing leads industry watchers to wonder what's in store for the giant discounter in the years to come. "We suspected [closings] would start happening sooner or later," says Iowa State University economics professor Kenneth Stone. Stone has been studying the discounter's progress the last few years and travels throughout the country speaking to smaller retailers on surviving the opening of a Wal-Mart in their communities.

Stone feels that softer leases enable the company to get out of a market easily, should a store not meet profit expectations. "From what I understand, the vast majority of leases are actually coordinated through a developer; who will assemble the land package and take the lease all the way through to the zoning approval stage, in exchange for a long-term lease with Wal-Mart," he said. "In general, I think there's some kind of provision added to the lease to let Wal-Mart get out easily somewhere down the road."

Stone feels once the discounter gets stores settled in 48 states, more closings will begin to occur, due to the smaller profits generated by stores located close to each other. "Some of these stores are 10-20 miles apart - it makes no sense," he said. "I would bet some more closings have to come somewhere down the line. After they're in all 48 states, they'll probably reassess the situation and start looking at their weaker stores to see if they're really profitable."