December 28, 2011 in Business

Sears, Kmart to cut back

Parent company to close some stores to generate cash following weak sales
Michelle Chapman Associated Press
 
Asset sell-off

The projected closings represent only about 3 percent of Sears Holdings’ 3,560 U.S. stores.

The closings were expected to generate $140 million to $170 million in cash as the company sells those stores’ inventory. Selling or subleasing the properties could generate more money.

NEW YORK – After a disastrous holiday shopping season, the parent company of Sears and Kmart will close at least 100 stores to raise cash – a move that sparked speculation about whether the 125-year-old retailer can avoid a death spiral fed by declining sales and deteriorating stores.

Sears Holdings Corp., a pillar of American retailing that famously began with a mail-order catalog in the 1880s, declared Tuesday that it would no longer prop up “marginally performing” locations. The company pledged to refocus its efforts on stores that make money.

Sears’ stock quickly plunged, dropping 27 percent.

The closings are the latest and most visible move by Eddie Lampert, the hands-on chairman who has struggled to reverse the company’s fortunes.

As rivals Wal-Mart and Target Corp. spruced up stores in recent years, Sears Holdings confronted falling sales and perceptions of dowdy merchandise.

Some analysts wondered if it was already too late, questioning whether the retailer can afford to upgrade stores as it burns through its cash reserves.

The sales weakness “begins and some would argue ends with Sears’ reluctance to invest in stores and service,” Credit Suisse analyst Gary Balter wrote in a note to clients.

“There’s no reason to go to Sears,” added New York-based independent retail analyst Brian Sozzi. “It offers a depressing shopping experience and uncompetitive prices.”

Spokesman Chris Brathwaite said no one had determined which stores would close or how many jobs might be cut. He disputed doubts about the company’s survival, noting it still has $2.9 billion available under its credit lines.

“While our operating performance has not met our expectations, we have significant assets,” including brands such as Kenmore, Brathwaite said.

© Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email