- Walmart-owned Sam's Club plans to open more than 30 new clubs in the U.S.
- The warehouse club is expanding after seeing sharp gains in sales and membership during the Covid pandemic.
- Inflation makes the club's value packs, cheaper gas and private label offerings more relevant, CEO Kath McLay said.
Walmart-owned Sam's Club on Thursday said it will open more than 30 new stores in the U.S., marking its most aggressive expansion in years.
The warehouse club's next store is expected to open in Florida in 2024. Sam's Club also plans to open five fulfillment and distribution centers this year, with the first of those opening in Georgia.
CEO Kath McLay said the retailer wants to reach more customers, after sharp gains in sales and an all-time high in membership at its current clubs. It plans to build about 30 clubs over the next five years and likely more in the two years after, she said.
And, McLay added, as prices of goods and services remain high, she said Sam's offering has become more relevant.
"During times like inflation, times when people have pressure on their household budget, it's a time when Sam's Club can really show up," she said in a CNBC interview. "So I think the time is really right for us."
For Sam's Club, the expansion marks a return to store footprint growth. The club chain has about 600 stores in the U.S., including Puerto Rico. Yet it hasn't opened a new club in years. It shuttered 63 clubs around the country in 2018, converting a small number of those clubs into e-commerce fulfillment centers.
Its last major expansion was in the 2010s, when it opened five to 10 clubs per year on average. Its most recent new club opened in 2017 in Hanover, Pennsylvania.
McLay said the new stores will open in high-growth suburban areas where Sam's Club has few stores or no stores, but declined to specify the locations, citing competitive reasons. She declined to say how much the company's build-out of the clubs and e-commerce facilities will cost.
It will also add more people to Sam's Club's workforce. Each club typically employs about 150 to 175 people, McLay said. At its fulfillment centers, like the one that is coming to Georgia, Sam's Club typically employs as many as over 1,000 people and its distribution centers average around 120 workers.
Sam's Club's new stores will be about 160,000 square feet — larger than Sam's Club's typical footprint of about 140,000. They will include extra space for a sushi island, a full-service floral area and a larger waiting area for customers with a hearing or optical appointment.
New clubs will cater to habits that shoppers picked up during the Covid pandemic, too. There will be more dedicated space for online options, such as a canopy where drivers can retrieve orders by curbside pickup and larger coolers to help employees who prepare online orders for delivery.
Over the past three years, more customers have turned to warehouse clubs, including Sam's Club rivals Costco and BJ's Wholesale Club. In the early days of the pandemic, shoppers loaded up their pantries with value packs of toilet paper, food and more. Then, as gas prices rose last year, the clubs drew customers by offering a cheaper way to fill up the tank. And as inflation hit a four-decade high, that ratcheted up interest in buying the club's private labels and bulk items as a way to stretch dollars.
That's reflected in stock gains. Shares of Costco, for instance, have shot up by nearly 60% since the pandemic began.
Sam's Club is joining its competitors BJ's and Costco in also opening stores.
Sam's Club has seen close to double-digit same-store sales gains for more than a year, excluding fuel costs. In the most recent quarter, which ended in late October, its same-store sales rose 10% or nearly 24% on a two-year basis. Its membership income increased 8%.
Private labels are also a big draw to warehouse clubs. Sam's Club's private brand, Member's Mark, accounts for 30% of the store banner's sales and more than a third in terms of units, McLay said.
For Walmart, Sam's Club's expansion plans mark another bullish move for Walmart at a time when some economists anticipate a recession and other retailers hunker down for a tougher year. On Tuesday, the retail giant said it will raise the minimum wage for Walmart store employees in early March as it competes for talent.
Jefferies retail analyst Corey Tarlowe said the club channel, in particular, tends to hold up well, even during an economic downturn.
"People don't actually tend to cut their memberships, believe it or not because they have to buy food and they want to buy food at the cheapest possible price," he said. "So they tend to keep their memberships and some people trade into the club channel."
Along with its store expansion plan, Sam's Club has stepped up efforts to compete with other grocers and clubs. It raised its membership fee in October, bringing it closer to Costco's. It redesigned existing clubs to make them brighter and less cluttered. And it has added tech-enabled features to Scan & Go, a mobile app that allows customers to skip the cashier line, quickly check out at the gas pump and ship bulky items like TVs instead of carrying them home.
And in November, it knocked down the price of its hot dog-and-soda combo from $1.50 to $1.38 – to undercut rival Costco's $1.50 combo.