Sears, Kmart to close at least 100 locations

  • Updated: December 27, 2011 - 9:21 PM

The holiday shopping season was disastrous for the retail icons.


The setting sun is reflected on a window with the Sears logo, in Springfield, Ill.

Photo: Seth Perlman, Associated Press

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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 struggled with 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."

Sears and Kmart were both retail pioneers. Sears' catalog and department stores were fixtures of American life stretching back to the 19th century before being hurt in recent years by competition from steep discounters and by missteps that included forays into financial services and the decision to sell off a lucrative credit card business.

Kmart helped create the discount-store format that Wal-Mart Stores Inc. came to dominate.

Sears Holdings has watched its cash and short-term investments plummet by nearly half since Jan. 31, from about $1.3 billion to about $700 million.

The projected closings represent only about 3 percent of Sears Holdings' U.S. stores. And the company has actually added stores since the Sears-Kmart merger in 2005. It has about 3,560 stores in the nation, up from 3,500 right after the merger, thanks to the addition of more small stores.

But the company hinted that more closings could be on the horizon as it focuses on honing the better-performing stores.

In Minnesota, there are 28 Kmart stores and 12 Sears department stores, according to regulatory filings.

In the Twin Cities, there are at least 14 Sears and Kmart locations, based on the company's online store finder. Except for the freestanding Sears store near downtown St. Paul, most are in regional malls, including Ridgedale, Burnsville, Brookdale and the Mall of America. Kmart locations include Minneapolis, St. Paul, New Hope, West St. Paul, Blaine, White Bear Lake, Oakdale, Burnsville, Anoka and Monticello.

Selling down inventory

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

Spokesman Chris Brathwaite said the company had not determined which stores would close or how many jobs might be cut. He disputed speculation that the company will have problems surviving, 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 inventory, real estate and proprietary brands like Kenmore and Craftsman, Brathwaite said.

Still, the company's announcements were grim. In addition to the closings, it said revenue at stores open at least a year fell 5.2 percent for the eight weeks ended Dec. 25, a crucial time because of the holiday shopping season.

The company predicted that fourth-quarter adjusted earnings will be less than half the $933 million reported for the same quarter last year. It also expects 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.

But both Lampert and Lou D'Ambrosio, who was named CEO in February, have said the company needs to keep up with the changing retail landscape, where shoppers are going online for convenience and finding better prices on their smartphones even once they're in the store.

Hedge fund manager Lampert engineered the combination of Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. Skeptics criticized the combination as the marriage of two weak companies that would only hurt each other.

Both stores were once giants. Sears, which started with a lone Minnesota watch seller in 1886, helped define the mail-order catalog industry, selling shoes, clothes, guns and even ready-to-assemble homes to farmers across the country.

Kmart, which started as a five-and-dime in Detroit in 1899, once commanded a retail empire that included Waldenbooks, Borders, OfficeMax and Sports Authority before spinning them off. A long sales decline and an ill-advised price war against Wal-Mart led to its 2003 bankruptcy filing, which let Lampert gain control of the company.

Star Tribune staff writer Jackie Crosby contributed to this article.

  • In Minnesota

    There are 12 Sears stores and 28 Kmart stores in the state.

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