Sales at Union Gap Sears thought to be holding up
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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.
Ryan Conger, manager of the Sears store in Union Gap, declined to comment Tuesday on the recent announcement.
But there may be a reason to believe that the Valley Mall anchor is not an underperforming location.
In a column published in the Yakima Herald-Republic in March 2010, the store manager at the time, Troy Larson, said the local store's sales at the time had not fallen compared to drastic sales declines reported by other Sears locations nationwide.
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 Walmart 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.
Some customers complained that they have a hard time connecting with the Kmart and Sears of today.
Preschool teacher Sara Kriz, picking up hair conditioner at a Kmart on Tuesday in Manhattan, said she used to shop at Kmart often but now goes there only once every few months: "Only when I have to," she said.
"It seems easier to go to Target and Walmart to get the same thing at the same price," Kriz added. "The stores are cleaner and they're better stocked."
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 U.S., 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.
The store closings were expected to generate $140 million to $170 million in cash as the company sells down their 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 announced that 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.
Kmart's layaway program, meant to help cash-strapped customers buy presents by paying for them a little at a time, faltered as Walmart and Toy R Us introduced or expanded competing programs. Sears stores reported softer sales of home appliances, usually a strength.
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.
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* Yakima Herald-Republic business reporter Mai Hoang contributed to this report.
Source: http://www.yakima-herald.com/stories/2011/12/27/sales-at-union-gap-sears-thought-to-be-holding-up
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