Sears Celebrates Holidays by Closing 120 Stores
Sears Holdings (NASDAQ: SHLD) took the week between Christmas and New Year to spread holiday cheer amongst its employees by announcing that it will be closing between 100 and 120 of its Sears and Kmart stores, with 4Q sales off 5.2 percent from last year. If you would like to be alerted to Sears updates as they come out in real-time, signup for a free trial of Benzinga Pro's premium news service.
According to AP, SHLD has yet to decide which stores will close.
The article states that, “The company is moving away from its practice of propping up "marginally performing" stores in hopes of improving their performance. Sears said it will now concentrate 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."
At present, Sears is refusing to discuss how many jobs will be cut, but it is unlikely that everyone working at all of the closed stores will be relocated. Sadly, this decision spells a festive period full of uncertainty for thousands of people.
According to the AP article, “Sears Holdings said that the declining sales, ongoing margin pressure and rising expenses pulled its adjusted earnings lower. The company predicts fourth-quarter consolidated adjusted earnings will be less than half the prior-year period's $933 million. It also anticipates a non-cash charge of $1.6 billion to $1.8 billion in the quarter for a valuation allowance on some deferred tax assets.”
Like anyone else in retail, the Sears and Kmart brands are struggling to attract customers in this economy. Whether this mass store closure proves to be prudent or a panic move remains to be seen.
Traders who believe that Sears will find strength by cutting numbers might want to consider the following trades:
- Looking at this from a short-sighted point of view, fewer stores mean fewer overheads, and fewer employees means fewer wages. Costs will indeed be cut.
Traders who believe that this move is the beginning of the end for Sears may consider alternative positions:
- Macy's (NYSE: M) may not of reached the heights that it sets for itself, but the company still looksstrong, and the numbers are in the green.
- Ditto Kohl's (NYSE: KSS), which has had a steady year and does not seem to be closing any stores in the near future.
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