Sears to close 100 to 120 Kmart, Sears stores

NEW YORK - Sears Holdings Corp. plans to close between 100 and 120 Sears and Kmart stores to raise cash after a weak holiday shopping season for the retailer.

The closings fueled speculation about whether the 125-year-old retailer can turn itself around.

The closings are the latest and most visible in a long series of moves to try to fix a company that has struggled with falling sales and shabby stores as rivals like Wal-Mart Stores Inc. and Target Corp. spruced up their looks and turned into one-stop shopping sources.

"There's no reason to go to Sears," said New York-based independent retail analyst Brian Sozzi, "It offers a depressing shopping experience and uncompetitive prices."

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Billionaire investor Edward Lampert purchased Kmart out of bankruptcy in 2003 and bought Sears, Roebuck & Co. a year later. Since 2004 Sears Holdings -- which operates both Kmart and Sears stores -- has watched its cash and short-term investments go from about $2.09 billion for the year ended Jan. 31, 2004 to $1.34 billion for the year ended Jan. 31, 2011, according to FactSet. The figure now stands at about $700 million.

Credit Suisse analyst Gary Balter says the softer-than-expected holiday sales performance point to "deepening problems at this struggling chain and renewed worries about Sears survivability."

Balter added that Sears' weakening performance may lead its vendors to start to worry about their exposure. If vendors stop shipping to a retailer or start insisting on cash up front, it can spell the end.

That company disputes talk that it is in trouble financially or will have problems surviving. Spokesman Chris Brathwaite says Sears Holdings has more than $3.5 billion of liquidity, consisting of $700 million in cash and $2.9 billion available under its credit lines.

Still, Sears Holdings said its declining sales, ongoing pressure on profit margins and rising expenses pulled its adjusted earnings lower. The company predicts fourth-quarter adjusted earnings will be less than half the $933 million it reported for the same quarter last year.

The retailer also anticipates a non-cash charge of $1.6 billion to $1.8 billion in the quarter to write off the value of carried-over tax deductions it now doesn't expect to be profitable enough to use.

Some industry experts say part of the problem Sears is facing is that economic difficulties continue to grip its core customers. These middle-income shoppers have seen their wages fail to keep up with higher costs for household basics like food.

But the bigger issue, analysts say, is that Sears hasn't invested in remodeling, leaving its stores uninviting.

Preschool teacher Sara Kriz concurred. Picking up conditioner at a Kmart in Manhattan on Tuesday, Kriz said she shops at Kmart "only when I have to," which amounts to once every few months. Yet she goes to Wal-Mart or Target nearly every week because, she said, they are cleaner and better stocked.

"It seems easier to go to Target and Wal-Mart to get the same thing at the same price," she said.

Sears Holdings announced Tuesday that revenue at stores open at least a year fell 5.2 percent for the quarter-to-date at both Sears and Kmart. That includes the critical holiday shopping period. Its Kmart stores reported a 4.4 percent decline, with layaway faltering as rivals like Wal-Mart and Toys R Us found success with their own layaway programs, which allow financially stressed shoppers to finance their holiday purchases by paying a little at a time.

Both Kmart and Sears stores reported weak consumer electronics sales. Sears, whose same-store revenue dropped 6 percent, also reported softer sales of home appliances. The same-store revenue metric is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Sears Holdings appeared to stumble early in the holiday season, as it opened its Sears, Roebuck and Co. stores at 4 a.m. on Black Friday, the day after Thanksgiving. Rivals including Best Buy Co., Wal-Mart and Toys R Us opened as early as Thanksgiving night. Sears stores had opened on Thanksgiving Day in 2010. Kmart has been opening on Thanksgiving for years.

A hint that trouble might be brewing came in mid-December when Sears Holdings unexpectedly announced that 260 of its Sears, Roebuck and Co. locations would stay open until midnight through Dec. 23.

In an internal memo Tuesday to employees, CEO and President Lou D'Ambrosio said that the retailer had not "generated the results we were seeking during the holiday."

Like Sozzi, Balter believes the shopping experience is hurting Sears' performance.

"The extent of the (sales) weakness may be larger than expected but the reasons behind it are not. It begins and some would argue ends with Sears' reluctance to invest in stores and service," Balter said.

Sears has yet to determine which stores will close but said it will post on http://www.searsmedia.com when a final list is compiled. The company would not discuss how many, if any, jobs would be cut.

The company said that the store closings will generate $140 to $170 million in cash from inventory sales. It expects the sale or sublease of real estate holdings to add more cash.

The Hoffman Estates, Ill., company has more than 4,000 stores in the U.S. and Canada.

Its stock dropped $10.66, or 23.3 percent, to $35.19 in midday trading. The shares dipped to their lowest point in more than three years at $35.13 earlier in the session.

[tekkitan]

Whenever I walk into a Sears, I feel like I crossed a line back into the 90s. The stores aren't updated at all. Their computers are still from the 90s even. I feel like I'm shopping in a Big Lots back when I was 12 with my dad, except the prices are higher.

[RunsWithWolves]

From the tone of these posts, you would think Sears is going out of business. They have 4000 stores.......and are closing 100 to 120. Minor adjustment I would say. But Americans do need to be more patriotic and buy American whenever possible....and our politicians need to change rules to punish American companies for moving overseas with tax penalties. A bit of Nationalism wouldn't hurt America at this time.

[tmittelstaed]

Sears needs to get out of clothing with the exception of work clothes like overalls and such, and greatly expand appliances, tools and electronics. We are in the age of the specialists stores. Sears stores cannot be everything to everybody anymore, they spread themselves too thin and then don't have enough selection in any one department.

[GoUnion86]

I'll take Sears for better quality products and friendlier workers. The employees at Walmart and KameApart seem like the unhappiest people on Earth.

[FerdFerkle]

Sears has been under staffed for many years, so it's aggravating to shop when there's no help at the register. They've dug their own grave.

[Stevie851]

Sears should look at its appalling lack of customer service before they blame the consumer and close stores. They are the WORST! They don't stock parts on the appliances they sell so you have to wait weeks for new parts and then they don't have in-house service personnel - so you have to get on the list from one of their overloaded outside vendors. Personally, I will never buy anything from Sears again - so it doesn't matter to me how many stores they have.

[InnerView]

Sears has a stagnant image. The problem I think is location, many a Sears just simply stayed in their same location, rather than refreshing themselves, modernizing, their stores. As for what they sell, its fine. Beats the Dollar Tree or 99 Cent stores for tools right?

I hate to stomp on an American company when its failing, it feels un-American to do so. Many complain about the Chinese made products or the Kraftsman tools becoming cheap or whatever but its not that bad.

None of you offer any solutions or new ideas, just a bunch of whiners, complaining, what energy expenditure in that, what do you get out of it.

As for made in China vs. Made In The USA - take New Balance, which you find at Sears, by the way, if I need work shoes and or boots - I go to Sears, New Balance shoes are made IN THE USA but, their materials, fabrics, etc. all made in China.

Same goes for almost anything else that carries a badge of Made In The USA. A t-shirt... look at the actual label - where do you think thats made? In China. OR a Chinese owned factory in the USA.

As for USA workers losing jobs to China - look at how Chinese are almost super disciplined like an military academy, they work at the same pace, wear the same thing, are all about the same height, body build and age, all focused building your cheap junk.

They beat out USA workers because here we'd have unions, or teens or other adults that arrive to work all spent from all the junk food they eat. All gossiping, giving each other looks, wearing their pants on the floor, looking down on the jobs and expecting $20 an hour and full benefits, backstabbing each other, etc. etc.

Thats why your stuff in made in China or Taiwan. Think about it.

[buttahflah]

The Sears in my city looks just as it did in the 70s. It's haphazard displays block the aisles, it's filthy, it's hot and the escalator whistles at you like construction men on lunch. They had all of 2 cashiers for the whole first floor and while they were fast & friendly, the wait was unbearable due to the sauna like temperatures in the store. I used to love the store and was sad to see it in such a shamble. Rather than close it, I would love to see them bring it up to date and make it more appealing for me to shop in. I might come back then.

[n8dude]

So...does this mean all the middle management that failed to make a difference at their regional Kmart and Sears stores will be rewarded by being redistributed to equal or higher status within the company elswhere?

[RunsWithWolves]

yes

[credibility2]

I avoid Walmart. I occasionally shop at Target and rarely at Sears or Kmart.

[Jaylah54]

Don't blame this on Sam Walton. Back when he was still alive, Wal~Mart was actually a good place to work. They offered health insurance to hourly employees, and even paid a living wage so that those hourly employees could afford the plan. Sam was also committed to selling American-made goods whenever possible.

Blame what Wal~Mart has become on his incredibly greedy heirs.