Troubled Department Store Chain Closes 50 More Stores Than Previously Announced, Appoints New CFO
Sears Holdings Corp. (NASDAQ: SHLD) expanded its previously announced plans to close 150 stores this year by adding another 50 locations to its store-closing list, and is now turning its attention to selling another $700 million in properties.
“Earlier this year, we initiated a strategic restructuring program and committed to improving our operating performance and financial flexibility in a very challenging retail environment,” said Edward S. Lampert, chairman and CEO of Sears Holdings. “While we have made significant progress in reducing our cost base and enhancing our member value proposition, we need to take further action.”
Lampert said the company is accelerating its efforts to wring cash from its real estate portfolio, which he believes will provide additional financial flexibility as it pursues a strategic transformation.
In addition, Sears is increasing its cost-cutting target by $250 million on an annualized basis to $1.25 billion.
So far this year, Sears said it has completed previously announced plans to close 150 non-profitable stores, consisting of 108 Kmart and 42 Sears locations.
In addition to those stores, Sears announced over the weekend that it has also closed 92 underperforming pharmacy operations in certain Kmart stores; and closed 50 Sears Auto Center locations.
“Consistent with our ongoing strategy of focusing on our best stores, best categories and best members, we will continue to take difficult yet necessary actions,” Lampert said. “As we sharpen our focus on profitable areas of our business, we will also continue to closely evaluate the longer-term viability of stores where a clear path to return to profitability is not in sight. We are determined to take all necessary actions to improve the performance of Sears Holdings and will leverage our lease optionality to reconfigure our stores and reduce capital obligations.”
Sears reported that it sold $177.5 million of properties in the first quarter, and also established a special committee of independent directors to market other real estate properties. The committee has retained Eastdil Secured, Centerview Partners and Weil, Gotshal & Manges LLP as advisors for the special committee.
The marketing process is actively proceeding. So far it has bids in excess of $700 million on more than 60 separate real estate properties and the committee said it expects additional bids in the near future. However, Sears said it could withdraw any property for which it cannot obtain an acceptable offer.
Lampert added that the retail environment has remained challenging in the first quarter with continued softness in store traffic and elevated price competition. Since the beginning of the fiscal year, comparable store sales at Sears and Kmart declined 11.9% on a combined basis, 10.8% when excluding consumer electronics, compared to the prior-year period.
“Despite the softness in our retail channels, our home services business continued to perform well and we believe it is positioned for continued growth for the balance of the year,” he said.
The company also announced that Rob Riecker, currently controller and head of capital market activities, has been appointed chief financial officer of Sears Holdings, effective immediately. Riecker joined the company in 2005.
