Sears Holdings on Friday informed associates at eight Sears and 35 Kmart stores that their locations would be closing by early October, Chairman and CEO Eddie Lampert said in a company blog post, in which he called the stores “unprofitable.”
Lampert tried to downplay the negative news by also touting store launches, including a smaller-format appliances store in Fort Collins, CO, opened in May 2016, and another in Pharr, TX opened last month. “The smaller store concept allows us to focus on some of our stronger categories, complemented with our Shop Your Way membership program, home services and credit offerings,” Lampert wrote. “We expect to introduce additional smaller, specialized concept stores in the upcoming quarters while simultaneously reducing the number and/or the size of larger-format, less competitive stores.”
Eligible associates let go in the process will receive severance and can apply for open positions at other area Kmart or Sears stores, the company said. Liquidation sales will begin as early as July 13, the company also said in a separate note regarding the closures detailing which stores are shuttering. A Sears store in Schererville, IN will close in early August; otherwise, Sears stores in Peru, IL; Elkhart, IN; Cranberry, PA; Paris, TX; and Kenosha, WI will close their Auto Centers in late July, while those Sears stores and the other Sears and Kmart stores in this round will shutter in early October.
Sears was once a commercial giant, a pioneer of catalog and department store retail and arguably the disruptive Amazon of its day. At this point, though, along with its now-sibling Kmart, the retailer is a shadow of its former self. Friday’s announcement of yet more closures — just the latest in a stream of such announcements — is further indication that even its shadow might soon disappear.
Lampert on Friday insisted that the closures are part of a concerted strategy to rationalize its footprint. "We have fought hard for many years to return unprofitable stores to a competitive position and to preserve jobs and, as a result, we had to absorb corresponding losses in the process," he said. "So, it is obvious that we don’t make decisions to close stores lightly. Our efforts have been, and will continue to be, fact-based, thoughtful and disciplined, with the goal of making Sears Holdings more relevant and more competitive for our members and other constituents."
Queasiness on the part of the company's vendors have been a factor in these decisions, Lampert also suggested. "As I have said before, the level of support we have from our vendors is an important factor in defining the size of our business and the number of stores we can operate responsibly going forward," he said. "We reached the point in the past 12 months where some of our vendors have reduced their support thereby placing additional pressure on our business. Despite this challenge, we have been working and fighting hard to improve our operational performance and streamline our organization."
Lampert in recent weeks has railed against news reports of the company's poor health, indicating that what he deems overblown coverage on the company's financial situation is providing suppliers with an excuse to demand stiff terms.
But the coverage, by and large, comes from the company's own press releases, filings and actions. Earlier this year Sears Holdings warned it might not be able to survive as a going concern. That followed years of layoffs, store closures, asset sales, operating losses, sales declines and criticism from many corners regarding Lampert's retail acumen.
The company shocked the retail world this year when it announced the sale of its popular Craftsman brand to Black and Decker for $900 million. This year saw other moves to shore up the company’s balance sheet, including 270 store closures, 530 layoffs and agreements to restructure some debt and pension obligations. The moves will save millions in annual costs, but analysts still see long-term liquidity constraints for Sears. Fitch Ratings and Moody’s still give the company a C-grade bond rating, and Fitch analysts see significant risk that Sears could need to restructure in the next year or two.
Meanwhile Sears Canada, which split from Sears Holdings in 2014, but is still 45% owned by Lampert and his hedge fund ESL Investments and another nearly 12% owned by its former parent, has filed for creditor protection in court. The Canadian retailer plans to slash almost 3,000 jobs and close 60 stores, and eventually reemerge as a going concern.
All these moves, however, are the equivalent of “taking an Advil to cure a heart attack,” GlobalData Retail managing director Neil Saunders told Retail Dive in an email this spring, adding that its quarterly results could only be described as dire.
“Not only are sales down, but the pace of decline has accelerated sharply,” Saunders noted. “At total level, some of this is the result of store closures across the year — something we believe is sensible and prudent in light of changing patterns of demand. However, much of the dip is also attributable to a slump in the number of shoppers visiting Sears and Kmart, and a continued deterioration in conversion rates among those that do.”
The death knell has been rung for Sears several times in recent years, but its rich real estate assets in particular have helped it hold on despite the ever-rising odds against it. Debtwire retail analyst Philip Emma told Retail Dive late last year that while assets could continue to keep Sears afloat for quite a while, it doesn't mean the retailer can regain its footing.
“I mean, sure, there’s always a chance, but why assume the status quo will change until it does change. Absolutely they’re an asset rich company … but inevitably, any retailer has to make money as a retailer,” Emma said. He compared the situation to that of grocery chain A&P years ago, where “over the course of two decades of deterioration, you have resources, and eventually you run out of that.”