Sears Accelerates Belt-Tightening Amid Brutal Q4 - Twice

Sears Accelerates Belt-Tightening Amid Brutal Q4

Considering more store closures, layoffs and asset sales
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Sears said it is considering additional store closures, layoffs, loans and asset sales to help stem mounting losses.

Sears said it is considering additional store closures, layoffs, loans and asset sales to help stem mounting losses.

This morning the company pre-announced an expected net loss of between $525 million and $625 million for its fiscal fourth quarter, compared to a year-ago net loss of $159 million.

Total revenue is expected to fall 9.9 percent, to $7.3 billion, and comp sales are projected to decline 7.1 percent, comprised of a 7.2 percent drop at Kmart and a 6.9 percent slip at Sears stores.

The company attributed the poor fourth-quarter performance to “historically warm weather and intense competition pressuring margins and driving comparable-store sales declines,” especially in its apparel and soft-lines categories.

To address the setbacks, the company is looking to cut upward of $650 million in costs. Efforts will include reducing fixed costs and improving inventory management, and speeding up the timetable for about 50 store closures that were scheduled for the next few months.

Other cost-saving measures under consideration include reducing local advertising, trimming store-level personnel, and shutting additional unprofitable stores as the company continues to move toward an “asset-light” multichannel retail model.

Sears will also look to sell off at least $300 million in real estate and business assets during the first half of the year, possibly including its Sears Auto Center operation, and may tap into its over $4 billion of credit lines to bolster liquidity.

For the full year, total revenue is expected to fall nearly 20 percent to $25.1 billion and total comps will decline 9.2 percent, including a 7.3 percent decrease at Kmart and an 11.1 percent drop at Sears.

As if to add insult to injury, the retailer said the sales declines and store closures will likely reduce the value of its Sears trade name by as much as $200 million.

Industry observers see Sears in a long, slow, one-way descent. As Credit Suisse analyst Gary Balter once noted, the company is “running out of arrows in the quiver,” and famously described its asset sales as a “slow dismemberment” of the business that, like the children’s game of Jenga, will leave too few pieces to support the structure.

More recently, Prosper Insights & Analytics director Pam Goodfellow observed in a Forbes blog that “Quite literally, Sears shoppers are a dying breed,” citing the disappearance of its core 55-and-over customer base.

Given Sears’ accelerating burn rate however, her point may prove to be moot.

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