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' fourth-quarter declines.
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 year-over-year.
"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, D'Ambrosio said.
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.