Sears Holdings, the struggling department store chain, said Thursday it would close another 72 Sears and Kmart stores as sales plummeted, continuing the decline of what was once the country's largest retailer.
The company said sales dropped 31 per cent in the most recent quarter, leading to a loss of US$424 million (NZ$604 million). Sales have fallen for more than six straight years, despite efforts to revamp stores, stock more mattresses and appliances, and partner with sites such as Amazon. Analysts said they had little hope that the retailer could turn around its business.
"The demise of Sears has felt like a prolonged drip, drip, drip," said Mark Hamrick, an analyst for Bankrate.com. "By diminishing the quality of the in-store experience, Sears has basically trained consumers to avoid going inside."
The latest round of closures - which will begin in early September - includes more than a dozen Kmart locations, as well as Sears stores in Atlanta, Indianapolis and Tampa. Workers at those stores will receive severance pay and can apply for openings at other nearby Kmart or Sears stores, according to the company.
After the closures, there will be about 820 remaining Sears and Kmart stores, down from about 2,000 locations five years ago when hedge fund billionaire Eddie Lampert took over as chief executive.
The 72 stores were among 100 Sears identified that are no-longer turning a profit. Sears is monitoring those additional locations, executives said, and "will make further adjustments as needed."
Despite the company's lacklustre performance, executives said they hoped to "remain a competitive retailer for years to come."
"As we've stated before, our top priority is to return to profitability," Rob Riecker, the company's chief financial officer, said in a Thursday earnings call. "This is an ongoing process, and there is still more work to be done."
Investors, though, didn't seem convinced. The company's stock fell 12 per cent, to US$2.81, Thursday afternoon. Shares are down more than 90 per cent from five years ago, when they were trading at $36.83.
Executives said Thursday they were also looking into selling the retailer's Kenmore brand of appliances - one of the few bright spots in the company's performance - to Lampert's hedge fund. Lampert, the company's largest shareholder, has also become one of its biggest lenders. Last year his hedge fund, ESL Investments, doled out $1 billion in financial support to the ailing retailer.
The arrangements between Sears and Lampert's businesses - which also include Seritage Growth Properties, a real estate investment trust that in some cases has effectively become Sears' landlord - have raised concerns among shareholders. Last year, Lampert and Sears' board of directors paid $40 million to settle a lawsuit alleging that Lampert had tried to syphon off the company's best real estate by selling it to Seritage. Sears shareholders argued that the "highly conflicted transaction" would probably "plunge the company into insolvency."
Sears currently has US$5.2 billion in debt, up from US$4.2 billion a year ago.
The sale of Kenmore would be part of a broader effort by Sears to sell off its successful brands. The retailer sold its Craftsman line to Stanley Black & Decker for $900 million last year.
Earlier this month, Sears said it would begin selling tires on Amazon.com, where it already sells its Kenmore line of appliances, giving consumers yet another reason to avoid its stores. (Jeff Bezos, the founder and chief executive of Amazon, owns The Washington Post.)
"This company is on life support," said Sucharita Kodali, a retail analyst for research firm Forrester. "I don't think anyone - whether a competitor, supplier or landlord - thinks otherwise. It will not be a shock to anyone when it finally does shut down."
Sears, founded in 1893 as a mail-order business, has struggled to keep up with changing consumer habits as more people shop online. It has also faced growing competition from stores like Home Depot, Lowe's and Best Buy. Sales at Sears stores open at least one year, a closely watched industry metric, fell 13.4 per cent during the most recent quarter, while same-store sales at Kmart declined 9.5 per cent. Revenue, meanwhile, declined to $2.9 billion from $4.2 billion a year earlier.
"It's been death by a thousand cuts," said Lee Peterson, executive vice president of brand, strategy and design for the retail consultancy WD Partners. "It's baffling that Sears is still grasping at straws, but it's clear that it's in a death spiral."
- Washington Post