(Reuters) – Sears Holdings Corp will close as many as 120 of its Kmart and Sears discount and department stores after its holiday sales slumped, sending its shares sliding more than 27 percent to their lowest level in three years.
The retailer, which is controlled by its chairman, the hedge fund manager Edward Lampert, has seen sales decline every year since the $11 billion merger of the two chains in 2005, and likely faces further closings to cut expenses, preserve cash and push back against rivals such as Wal-Mart Stores Inc and Amazon.com Inc, analysts said.
Sears also disclosed on Tuesday that it tapped its credit line to borrow cash and forecast that fourth-quarter earnings would fall by more than half. Under Lampert, the company, once one of the most successful U.S. retailers with a history going back to 1886, has let stores deteriorate, said analysts, who also faulted poor locations and ho-hum merchandise for its ongoing problems.
“They’ve neglected this business for so long,” independent retail analyst Brian Sozzi said, adding that he expects more closings. “They are letting Kmart and Sears die on the vine.”
In a memo to staff obtained by Reuters, Chief Executive Lou D’Ambrosio, who took the job in February, blamed the economy for some of Sears’ problems but acknowledged “we also did not execute with the consistency or speed necessary” in areas under Sears’ control. “We will do better,” he continued.
But Credit Suisse analyst Gary Balter is not so sure. “We do not see how they dig out of these problems,” he wrote in a client note.
The company also said it expects to record a noncash charge of $1.6 billion to $2.4 billion in the fourth quarter for a downward adjustment in the valuation of deferred tax assets, an indication it may not be generating enough income to use them, and for the impairment of goodwill.
Same-store sales at Kmart were down 4.4 percent in the eight weeks that ended Christmas Day, and down 6 percent at Sears’ U.S. stores. Overall, they were down 5.2 percent compared with the same period a year ago.
The closings follow Sears’ announcement last quarter it would shut 10 stores. Kmart and Sears have a combined 2,177 big-box locations.
A list of stores affected will be available at www.searsmedia.com once the retailer decides on the locations.
