I wrote Walmart and got back, and I quote from their response to my 3-mail, they are

"converting the the fabrics and crafts department in some stores to a newly expanded assortment of merchandise that focuses on life's celebrations. We are thrilled to offer our customers this exciting new crafts and celebrations center that makes available craft and party planning needs along with information on current trends and new ideas in the area of life's celebrations, such as holidays, weddings, and birthdays."

They will still have the 'notions' department that will have sewing machines, yarns, needles, thread, etc. They will continue to carry 'cut fabric' in most of their stores. By 'cut fabric' I think they mean fabric in bulk amounts that they find fit to carry.
How many of us have parties that we need to go to Walmart to get ideas and supplies that we can't find every where else? WE SEW, and can't go just everywhere for fabric. I don't want to have to buy a 3 yard length of fabric if I just need a yard of something, and if I need 4-5 yards of fabric, I don't want to have to get it in 2 pieces for what I need.
As far as I'm concerned, Walmart will see less of me as I find other places to get the other things I got there when I went in to 'check out what new fabric has come in.

I even attached a link to this thread when I sent my e-mail. Maybe they will read it. Send it again, any of you this wish to do so. It can't hurt, and maybe it will open their eyes to see that we do sew and quilt and buy fabric and other things when we go to check out the fabrics.