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Sears Holdings will move away from its practice of propping up “marginally performing” stores in hopes of improving their performance, instead devoting its resources on cash-generating stores.
“Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce ongoing expenses, adjust our asset base, and accelerate the transformation of our business model,” said CEO Louis D’Ambrosio. “These actions will better enable us to focus our investments on serving our customers.”
Sears Holdings has not yet commented on how many, if any, jobs would be cut. However, it does say store closings will generate $140 to $170 million in cash from inventory sales, as well as additional proceeds from the sale or sublease of real estate holdings.
Rival department stores like Macy’s (NYSE:M) and discounters like Target (NYSE:TGT) are responsible for some of Sears’ lost customers, but the poor economy has put a financial squeeze on its most loyal customers: the middle class.
Sears Holdings, which operates which operates Kmart stores, Sears, Roebuck and Co., and Lands’ End, has announced numerous closings this year, but today’s announcement is the largest group of closings to date by far, as hoped for holiday sales never materialized.
Same-store revenue for the present quarter fell 5.2 percent to date for both Sears and Kmart, the company said Tuesday.
Kmart’s 6 percent decline in revenue at stores open at least a year was blamed on diminished layaways and a drop in clothing and consumer electronics sales.
Sears also cited lackluster consumer electronics as well as home appliance sales for its 4.4 percent drop off. But while Sears’ clothing sales were flat, Lands’ End products sold at Sears stores rose in the mid-single digits.
Adjusted earnings were pulled lower by declining sales, ongoing margin pressure, and rising expenses, the retailer said. The company predicts fourth-quarter consolidated adjusted earnings will be less than half the $933 million from the fourth quarter of 2010. The company also expects a non-cash charge of $1.6 billion to $1.8 billion in the quarter for a valuation allowance on some deferred tax assets.
Sears Holdings said it will also aim to lower its fixed costs by $100 million to $200 million and trim its 2012 peak domestic inventory by $300 million from $10.2 billion in 2011 as of the third quarter’s end.
Sears Holdings operates more than 4,000 stores in the U.S. and Canada.
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