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Sears no longer where America shops: 235 stores to close shortly

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By Troy Dredge, Catholic Online
12/7/2014 (4 years ago)
Catholic Online (https://www.catholic.org)

Analysts say it's only the beginning of closures to make company profitable once again

Few retailers are as American as Sears, one of its former and most popular taglines being "Where America Shops." That's no longer the case, as Wal-Mart has long seized that throne. It was a heavy heart that Sears announced that 235 under-performing stores would be closing this year.

Analysts called the move a step in the right direction for the company, which has been tapping into its real estate in creative ways to compensate for downward-spiraling sales.

Analysts called the move a step in the right direction for the company, which has been tapping into its real estate in creative ways to compensate for downward-spiraling sales.

Highlights

By Troy Dredge, Catholic Online
Catholic Online (https://www.catholic.org)
12/7/2014 (4 years ago)

Published in Business & Economics

Keywords: Sears, retailer, closures, real estate


LOS ANGELES, CA (Catholic Online) - The ailing department store recently announced an adjusted net loss of $296 million, which was in line with the updated guidance it gave in November.

Sears initially announced the closure of 130 under-performing stores before it announced in its second-quarter earnings release, swelling the number to a total of 235 stores.

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In October, Sears announced it would lease out space at seven of its locations to European retailer

In October, Sears announced it would lease out space at seven of its locations to European retailer Primark, saying it will retain a "significant presence" at six of these locations.


Analysts called the move a step in the right direction for the company, which has been tapping into its real estate in creative ways to compensate for downward-spiraling sales. Even more stores will eventually be closed in an effort to make the store profitable once again.

"This is the primary problem remaining at Sears, as management needs to find a way to stop the over $1 billion of negative cash flow that is undermining the positive repositioning moves," Credit Suisse analyst Gary Balter said.

Although the store closings will no doubt help Sears trim its losses, CEO Eddie Lampert said they produced a loss of about $50 million in 2013. Moody's analyst Scott Tuhy said those savings will only go so far for a company that's posting an adjusted loss closer to $300 million.

The retailer likely needs to close another 200-plus locations in 2015, according to Belus Capital Advisors analyst Brian Sozzi said. As of November 1, Sears had 1,050 Kmart locations in the U.S., and 781 domestic Sears stores. In its conference call, the retailer said that it owns about 700 of these locations.

Sears' strong real estate portfolio as its greatest opportunity. Not only does it have the ability to sell off a number of these locations, but because it's held many of its leases for so many years, it has the flexibility to close many of its stores at a low cost, Tuhy said.

Sears says it is considering converting hundreds of its stores into a real estate investment trust (REIT) to boost its finances. If it were to go through with the plan, the retailer would own between 400 and 500 stores, and lease between 1,300 and 1,400 locations.

In October, Sears announced it would lease out space at seven of its locations to European retailer Primark, saying it will retain a "significant presence" at six of these locations.

"They are really becoming more focused on the real estate," Tuhy said.

It's high time, analysts say, as Sears hasn't announced a profit as far back as 2012.

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