Sears In Trouble?

Last week, and just after the holiday shopping season concluded, Sears Holdings went public with the bad news that apparently the Grinch had stolen their Christmas.

In a press release, Sears said it planned on closing between 100 and 120 stores this year, as a result of what it called a “combination of lower sales and continued margin pressure coupled with expense increases.” Specifically, the Sears and Kmart family said they saw decreased sales in their apparel and electronics departments, and also had less layaway sales then in years past.

Following the announcement, Standard and Poor’s chimed in saying that Sears Holdings would be under review for a possible downgrade, insinuating that the planned store closings would not improve the company’s performance.

Also, last week Fitch Rating reduced its long-term rating by 3 notches, citing a “lack of visibility to turn operations around.”

Late in the week, Sears came out with what appears to be a preliminary list of closings, when they released the locations of 79 stores they plan to board up. Almost half are Kmart stores and the closings will take place in 25 states. The hardest hit area will be Florida, where 11 stores are slated for moth balls, followed by 6 store closings per state in Michigan, Georgia and Ohio. 

So how will this impact the slow growing economy? According to CNNMoney, the Sears family is among the largest retail operations in North America, with 4,000 stores in the U.S. and Canada.

According to Searsholdings.com, They have over 280,000 associates. In a December 27th press release, they also left no savings opportunity unturned, saying, “While our past practice has been to keep marginally performing stores open while we worked to improve their performance, we no longer believe that to be the appropriate action in this environment.  We intend to accentuate our focus and resources to our better performing stores, with the goal of converting their customer experience into a world-class integrated retail experience.”

So more store closings may result in the coming year. With about 40 to 80 employees per store, the end result of these initial closings and lay-offs could number as little as 4,000 to as many as 9,500, when all is said and done.

Obviously, considering the local economies they serve, Sears will have an impact on the economy as a whole. How much of an impact remains to be seen? However, what is obvious is that another American icon seems to be biting the dust, as the new economy leads people to online and discount shopping stores.

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