Edward S. Lampert’s digging in his heels.
The chairman and chief executive officer of Sears Holdings Corp. said he remains committed to the company’s Kmart retail format and that he would continue to emphasize the Shop Your Way membership program to transform the ailing retailer.
Commenting in a blog post on what he described as “frequent false and exaggerated claims” suggesting “Kmart will cease its operations,” Lampert wrote Monday: “There are no plans and there have never been any plans to close the Kmart format. In fact, we’ve been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innovations and Shop Your Way.”
If investors were worried by the whispers, they were unmoved by the denial and shares of Sears fell 0.8 percent to $11.37 on Wall Street Monday — giving it a market capitalization of $1.21 billion.
In making his case for Kmart, Lampert pointed to:
• The chain’s more than 700 stores.
• The fact that “a significant number of these stores are profitable and have been profitable for many years.”
• The company’s clear intent to improve the performance of unprofitable stores and to close those stores if efforts to improve them are unsuccessful.
Lampert noted the company has reduced inventory in stockrooms to make stores easier to operate.
“Decisions to close stores are never easy, but we recognize that the way people are shopping is changing significantly,” Lampert said. “This is why we have made major investments in our online and mobile platforms and this is why our focus on serving members through Shop Your Way is so important. We are acting more aggressively and continuing to evaluate stores as leases expire and as other opportunities present themselves that improve the economics of Sears Holdings.”
Last month there were rumblings that Sears could close more than 60 Kmart doors after the firm notified Seritage Growth Properties — the REIT spun out of Sears last year — that it would shutter 17 doors. That notice involved stores that were part of a sale-leaseback agreement with Seritage.
Despite these closures as well as a continuing string of sales declines and concerns from Fitch Ratings and others that Sears is a candidate for bankruptcy court, Lampert sees a company in the midst of serious transformation.
“We expect to end up with a large chain of stores, some owned and some leased, but with a company focused on serving members broadly through Shop Your Way rather than exclusively or predominantly through our stores,” he said. “Our stores remain extremely important to our future, but as part of an overall focus on serving our Shop Your Way members.
“We are working to restore the company to profitability,” he said. “Our significant asset base gives us the wherewithal to fund our business, but we don’t intend to use our asset value to support losses.”
Lampert has started to come under pressure, even from supporters, to stem net losses at the company, which over the past five and half years have totaled $9.11 billion, according to S&P Capital IQ.
Sears’ second largest shareholder behind Lampert, Fairholme Capital Management’s Bruce Berkowitz, has pushed the company to focus on profitability and this year joined its board.
When asked in August if the money Sears has spent trying to stay competitive has been worthwhile, Berkowitz said: “If Sears is able to return to profitability this year, which is the company’s most important focus during 2016, then yes, it has been worthwhile. A considerable portion of the past cash burn is voluntary, based on the transformation of the retail businesses.”