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Wednesday, July 30, 2014

Up to 120 Sears, Kmart stores to close as holiday sales fall short

By MICHELLE CHAPMAN and ANNE D’INNOCENZIO
Ass

Sears Holdings Corp. plans to close between 100 and 120 Sears and Kmart stores after poor sales during the holidays, the most crucial time of year for retailers.

The closings are the latest and most visible in a long series of moves to try to fix a retailer that has struggled with falling sales and shabby stores. There were no immediate signs Tuesday that Wichita’s two Sears stores and two Kmart stores would be included in the closings.

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.”

Sears Holdings said it has yet to determine which stores will close but said it will post on its website when a final list is compiled. Sears would not discuss how many, if any, jobs would be cut.

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

The company’s revenue at stores open at least a year fell 5.2 percent to date for the quarter at both Sears and Kmart, the company said Tuesday. That includes the crucial holiday shopping period.

Abby Marr, a spokeswoman for Wichita’s Towne West Square, said the mall has no indications its Sears store will be included in the closings. “Although down slightly, they’re not doing horrible,” Marr said.

Towne East officials declined comment.

Managers at Wichita’s two Kmart stores, 4200 W. Kellogg and 4830 S. Broadway, said they don’t expect the Wichita stores to close in the wake of solid Christmas sales, and officials at the South Broadway store said a new lease has just been signed there.

The announcement also isn’t all that unusual, the Kmart managers said, since Sears Holdings annually closes between 75 and 80 underperforming stores.

Sears Holdings said the 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.

Sears Holdings 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.

Sears said it will no longer prop up “marginally performing” stores in hopes of improving their performance and will now concentrate on cash-generating stores.

“These actions will better enable us to focus our investments on serving our customers,” D’Ambrosio said.

The weaker-than-expected performance reflects what analysts say is a deteriorating outlook for the retailer.

The results point to “deepening problems at this struggling chain and renewed worries about Sears survivability,” said Gary Balter, an analyst at Credit Suisse. “The extent of the 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.”

The company has seen rival department stores like Macy’s Inc. and discounters like Target Corp. continue to steal customers. It’s also contending with a stronger Wal-Mart Stores Inc., the world’s largest retailer, which has hammered hard its low-price message and brought back services like layaway, which allows financially stressed shoppers to finance their holiday purchases by paying a little at a time.

The tough economy hasn’t helped, either. Middle-income shoppers, the company’s core customers, have seen their wages fail to keep up with higher costs for household basics like food.

But the big problem, analysts say, is Sears hasn’t invested in remodeling, leaving its stores uninviting.

“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.”

D’Ambrosio acknowledged in his internal memo that criticism over Sears Holdings’ performance was likely to come, but that the company was prepared for the days ahead.

“We will bounce back and become stronger than ever,” he said.

Contributing: Bill Wilson of The Eagle

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