Hoffman Estates, Ill. — In one of his periodic essays, Sears chairman/CEO Eddie Lampert explained his rationale for shutting over 200 stores this year.
Writing on a Sears Holdings blog page, he said that despite efforts to improve their performance through various investments, formats and processes, most of the targeted locations were losing money, and were doing so for a long time.
In the past, the company sustained the losses to serve customers and preserve jobs, Lampert wrote, but “given changing circumstances, both in the retail industry and in our company, we can no longer afford, nor justify keeping these stores open.”
The new circumstances include the shift to online and mobile shopping, which has rendered some stores and stockrooms too large for Sears’ needs; the spread of new housing and shopping developments, which have bypassed older locations; and widening financial losses, which hit $548 million in the third quarter, ended Nov. 1.
Lampert said one remedy is to subdivide its most in-demand locations and lease out space to complimentary retailers, as it has done with Whole Foods, Dick’s Sporting Goods, Forever 21 and Primark, which provide both traffic and cash.
Sears is also looking to spin off up to 300 stores into a real estate investment trust (REIT) that it would form, and then lease back the properties from the new entity.
The other recourse is to simply close money-losing stores, which results in reduced expenses, improved cash flow, and “a path to restore profitability sooner,” he said.
The 235-odd closings leave Sears with thousands of fewer employees and about 1,700 Sears and Kmart big-box stores, encompassing approximately 200 million square feet.