Hoffman Estates, IL—Lately, store closings have been a signal that business is off at some channels of retail. New closings reported by Sears Holdings Corp. on Wednesday are being given particular scrutiny due to the department store company’s struggling business overall.
In what it called an annual review of its network and cost-cutting measures, Sears Holdings said Kmart and Sears stores would close this year.
“We are going to be closing some Kmart and Sears stores in various cities across the country. It is a very small percentage of our overall number of stores,” said Sears spokesman Howard Riefs, who didn’t disclosed the number of affected locations.
“Every year we evaluate our store portfolio and make changes based on leases or stores with poor performance,” he said.
Sears Holdings owns the Sears department store and Kmart discount store chains. It had 952 Kmart stores and 735 Sears stores as of the end of October, according to its latest financial disclosure.
Riefs said the closures would be primarily Kmart stores.
Last month Sears also cited sluggish apparel sales in reporting that comp store revenue fell 9.6% at Sears and 7.5% at Kmart in the third quarter, though its loss narrowed due to cost cuts.
Grim Reaper Approaches?
Sears is scheduled to report its Q4 earnings in late February.
In a recent report from retail analyst Brian Sozzi of The Street, he noted that Sears Holdings has “the Grim Reaper walking up to the steps at Sears Holding as we speak. The year ahead will bring major headlines of a looming cash crunch for the storied department store retailer and owner of discounter Kmart.”
“Sears’ balance sheet starting 2016 in horrible shape following a disastrous 2015 holiday season. Sears will be forced by the market to raise cash very quickly in the year to fund inventory for holiday 2016. More real estate will somehow have to be turned quickly into cash by failed CEO Eddie Lampert, Sozzi a vocal critic of Lampert’s skills.
“Any outside borrowing will be severely penalizing in terms of interest rates. While Lampert scrambles for the life preserver to save himself from the ship in which he has purposely shot holes, the market will hammer the stock on fears of a bankruptcy filing in 2017,” Sozzi wrote.
Noting that the company’s shares have lost 37% of their value in 2015, Sozzi predicted that by the end of 2016, that loss would be cumulative to nearly 87%.
Berkowitz’s Fairholme Capital Management, which holds a 26% stake in Sears Holdings, wants to increase shareholder value, according to a Dec. 8 regulatory filing, and “will be in contact with members of management, Board of Directors and other significant shareholders” regarding Sears’ “long-term prospects.”
“Fairholme likely will press for more asset sales and cost reductions,” said Richard Church, managing director of Discern Investment Analytics, adding that Sears has been “underinvesting in its physical assets for years, a major reason behind its horrid sales.”
Berkowitz began increasing his stake in Sears earlier this month when Sears reported a $454 million loss in the third quarter. In all, he has purchased 1.45 million shares in December.
Though still unconfirmed press accounts listed some of pending-closed locations. The Detroit Free Press said the Kmart and Sears store closings in Michigan include Ironwood and Fort Gratiot Township.
YesWeCoupon.com said Kmart stores targeted for closing include multiple outlets in California (Anaheim, Chula Vista, Citrus Heights and San Mateo); Iowa (Duluth, Ottumwa); Florida (Daytona Beach, Tampa); Georgia (Milledgeville, Rome), Arizona (Glendale, Prescott), and South Dakota (Pierre and Mitchell).
Kmart stores in Superior, WI; Terre Haute, IN; Boardman, OH; North Topeka, KS; North Logan, UT; Braintree, MA; Glendale Arizona; Virginia Beach, VA; Canton, IL, Exton, PA; Pocatello, ID; and Cleveland, TN, also made the list.