Hoffman Estates, Ill. - Sears Holdings will close upward of
120 Sears and Kmart stores in the wake of sharp holiday declines in CE and
ongoing weakness in majaps.
More than half of Sears' 6 percent decline in fourth-quarter
comp sales stemmed from CE, the company said, and the category was a chief
contributor to a 4.4 percent drop in Kmart's comps.
White goods were also a primary driver in Sears'
Together the sister chains posted a 5.2 percent decline in
comp sales for the three months, ended Dec. 25.
The lower sales, coupled with higher expenses and continued
margin pressure, will cut the company's adjusted EBITDA (earnings before
interest, taxes, depreciation and amortization) by more than half
"Given our performance and the difficult economic
environment, especially for big-ticket items, we intend to implement a series
of actions to reduce ongoing expenses, adjust our asset base, and accelerate
the transformation of our business model," said CEO Lou D'Ambrosio. "These
actions will better enable us to focus our investments on serving our customers
and members through integrated retail - at the store, online and in the home."
Besides the store closures, which comprise about 6 percent
of the chain, the actions include reallocating floor space in certain stores
based on category performance, and reducing inventory next year by $300 million
excluding the effect of the store closures. Total inventory reductions could
total $580 million.
The company will also look to improve its gross profit
through better inventory management and more targeted pricing and promotions,
Sears said the store closures represent a departure from its
past practice of trying to improve marginally performing locations. "We no longer
believe that to be the appropriate action in this environment," the company
said, and indicated that it will continue to carefully evaluate store
performance and close poorly performing locations as circumstances allow.
In a research note, Credit Suisse retail analyst Gary Balter
said the preliminary Q4 report "points to deepening problems at this struggling
chain and renew worries about Sears' survivability. The moves announced by
Sears point to desperation ... [and] one wonders if vendors begin to worry about
their own exposure."
Balter attributes Sears' woes to it ongoing reluctance to
invest in stores and service, fierce majap promotions from Lowe's and The Home
Depot, and its lack of price competitiveness in CE.