By Mark Albright, Times Staff Writer
Tuesday, December 27, 2011
Sears becomes the first chain to report taking its lump of coal during a holiday shopping season expected to turn out modestly better than last year for retailers overall.
Proving that a rising tide does not lift all boats, Sears Holdings Corp. on Tuesday said that its sales declined 5 percent so far this quarter, operating profits have been halved by discounting and a new round of cost cutting will include closing up to 120 of the company's Sears and Kmart stores.
It was bad enough to lead some analysts to say Sears' long-term troubles are coming to a head that will unleash more cuts.
Credit Suisse analyst Gary Balter sees "deepening problems at this struggling chain and renewed worries about Sears survivability."
"They've neglected this business for so long," retail analyst Brian Sozzi told Reuters, "They are letting Kmart and Sears die on the vine."
Sears stock, which had already lost half its value this year, dropped 27 percent Tuesday to close at $33.38, down $12.47.
The nation's fourth largest broad lines merchant with 900 department stores and 1,300 discount stores, Sears did not identify which stores will close.
But sales dropped 6 percent at Sears U.S. stores thanks mainly to plummeting television prices that forced many retailers to sell them at a loss.
At Kmart discount stores, sales were down 4.4 percent after more rivals relaunched layaway programs in a big way this year, a sales tactic for the credit-poor that Kmart once all but had to itself.
Meantime, Sears online sales are up 20 percent over last year, compared to 15 percent for all online retailers.
Sears, based in Hoffman Estates, Ill., has been shrinking since it was taken over by hedge fund manager Edward Lampert in 2004. Sears has steered clear of remodeling its old store base while transforming in slow motion from a real estate-based retailer to one more integrated with e-commerce and in-home services.
"Our past practice has been to keep marginally performing stores open while we worked to improve their performance," Sears said in a statement. "We no longer believe that to be an appropriate action in this environment."
"These actions will enable us to focus investments through integrated retail at the store, online and in the home," said Lou D'Ambrosio, chief executive.
Sears expects to churn up to $170 million in cash selling the leftover inventory in closed stores.
Information from the Associated Press was used in this report. Mark Albright can be reached at albright@tampabay.com or (727) 893-8252.