Thu, Dec 29, 2011 - Page 10 News List

Company to close at least 100 Sears, Kmart locales


A Sears, Roebuck and Co sign is seen outside a Sears Holdings Corp store in Brooklyn, New York, on Tuesday.

Photo: Bloomberg News

After a disastrous holiday shopping season, the parent company of Sears and Kmart will close at least 100 stores to raise cash — a move that sparked speculation about whether the 125-year-old US retailer can avoid a death spiral fed by declining sales and deteriorating stores.

Sears Holdings Corp, a pillar of US retailing that famously began with a mail-order catalogue in the 1880s, declared on Tuesday that it would no longer prop up “marginally performing” locations. The company pledged to refocus its efforts on stores that make money.

Sears’ stock quickly plunged, dropping 27 percent.

The closings are the latest and most visible move by Eddie Lampert, the hands-on chairman who has struggled to reverse the company’s fortunes.

As rivals Wal-Mart and Target Corp spruced up stores in recent years, Sears Holdings struggled with falling sales and perceptions of dowdy merchandise.

Some analysts wondered if it was already too late, questioning whether the retailer can afford to upgrade stores as it burns through its cash reserves.

The sales weakness “begins and some would argue ends with Sears’ reluctance to invest in stores and service,” Credit Suisse analyst Gary Balter wrote in a note to clients.

“There’s no reason to go to Sears,” added New York-based independent retail analyst Brian Sozzi. “It offers a depressing shopping experience and uncompetitive prices.”

Sears Holdings has watched its cash and short-term investments plummet by nearly half since Jan. 31, from about US$1.3 billion to about US$700 million.

The projected closings represent only about 3 percent of Sears Holdings’ US stores. And the company has actually added stores since the Sears-Kmart merger in 2005. It has about 3,560 stores in the US, up from 3,500 right after the merger, thanks to the addition of more small stores.

However, the company hinted that more closings could be on the horizon as it focuses on honing the better-performing stores.

The store closings were expected to generate US$140 million to US$170 million in cash as the company sells down their inventory. Selling or subleasing the properties could generate more money.

Spokesman Chris Brathwaite said the company had not determined which stores would close or how many jobs might be cut. He disputed speculation that the company will have problems surviving, noting it still has US$2.9 billion available under its credit lines.

“While our operating performance has not met our expectations, we have significant assets,” including inventory, real estate and proprietary brands like Kenmore and Craftsman, Brathwaite said.

Still, the company’s announcements were grim. In addition to the closings, it announced that revenue at stores open at least a year fell 5.2 percent for the eight weeks ended Dec. 25, a crucial time because of the holiday shopping season.

The company predicted that fourth-quarter adjusted earnings would be less than half the US$933 million reported for the same quarter last year.

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