Wall Street seems to love Eddie Lampert’s ongoing trick-or-treat show at Sears Holdings Corp.
Even as the retailer continues to spiral downward, its shares jumped 4.5 percent Thursday to close at $35.95 as the company has begun closing additional Kmart and Sears nameplates, as well as select Sears Auto Centers.
Nor is Lampert, Sears Holdings’ chairman and chief executive officer, wasting any time as he pulls every lever he can to shore up Sears’ crumbling balance sheet. The closures began around late August, and those affected are already in liquidation mode. These stores are scheduled to close at yearend. At least 25 stores to date are being shuttered in multiple states, and perhaps about 750 positions are being impacted so far. Most workers are part-time store associates.
In past closings, workers were given the opportunity to apply for jobs at nearby Sears and Kmart stores. Sears also is closing some Sears Auto Centers, a business operation it has been trying to find a buyer for since earlier this year. The centers targeted for closure are adjacent to the Sears stores that are being shuttered.
Reports that the number of Sears store closings could impact more than 5,000 workers and total 100 stores are inaccurate, said a Sears spokesman.
In typical fashion, he put a positive spin on the cuts. “As we have previously communicated, adjusting our physical footprint to focus on our best-performing locations is a core component of our transformation,” the spokesman said. “While this has resulted in store closures where appropriate — decisions that we do not take lightly — we continue to have a substantial nationwide footprint with a presence in many of the top malls in the country. We will update our store count in our Q3 financial results announcement later this year.”
It wasn’t clear from survey checks what that number could be, but the latest store closures are on top of the 75 Kmart stores and 21 Sears sites shuttered in the first half of this year. When the company posted second-quarter results in August, it said it would close up to 130 stores this year. Sources familiar with the stores that are closing said they are either underperforming locations or are leased sites that are about to expire. Many are also outdated and dilapidated sites, one contact said. One individual said more closures are on the way, while another said the current batch in liquidation were planned earlier this year, with affected store associates and managers notified weeks in advance of the scheduled closing. A third contact confirmed that layoffs are solely at the store level, and that there is no reduction in headcount at company headquarters.
While Wall Street cheered the store closures and resulting job cuts, the long-term benefit to Sears remains to be seen. Lampert has been scrambling over the last few weeks to shore up the retailer, pumping more money into it and cutting more deals.
But the retailer continues to sink. For the second quarter ended Aug. 2, the net loss widened to $573 million, versus a net loss a year ago of $194 million. On an adjusted basis, the net loss was $313 million compared with a net loss of $78 million last year.
Sears operates 1,870 stores, according to a quarterly report with the Securities and Exchange Commission. That’s a 45 percent drop from the 3,400 stores in operation for the year ended Jan. 28, 2006. Lampert’s Kmart Holding Corp. acquired Sears, Roebuck & Co. in 2005 in a deal valued at $11 billion, and the new firm was renamed Sears Holdings Corp. When the company reported fourth-quarter results on March 15, 2006, nearing the first anniversary of the merger, Sears’ stock was trading at $132.29.
Lampert’s financial moves to shore up the retailer’s balance sheet during the holiday selling season amid rumblings of a high cash-burn rate include a rights offering for Sears’ common stock to raise up to $625 million in proceeds, a rights offering for Sears Canada that is expected to raise up to $380 million, a short-term $400 million loan from Lampert’s hedge fund ESL Investments and the leasing arrangement for seven Sears sites to house Primark stores.
Following the financial moves so far, the retailer will have generated $2.07 billion in liquidity. Sears’ chief financial officer Rob Schriesheim has said that “over the next six to 12 months, it intends to evaluate its capital structure” and could take further actions as needed.
For Lampert, it is all part of his grand plan to be a retail visionary. He said in the January blog that he has been working on a “major transformation of Sears and Kmart,” which reflects the changes in consumer shopping patterns. Lampert also said, “The consensus about decreased store traffic also highlights another decision that has steered our work: We very often need less space to serve our members better and we may need fewer locations as well.”
Lampert’s focus has been increasing in customer service at the locations in operation, as well as the technology to fuel an online and mobile customer.
For Wall Street, it may not matter whether it’s a liquidity issue that gets kicked down the road or a rebalancing of the brick-and-mortar presence. Either way, one course of action is certain: There will be undoubtably more store closures ahead.