In its ongoing effort to cut costs and return to profitability, embattled retailer Sears Holdings Corp (NASDAQ:SHLD) announced that it is closing eight of its namesake department stores and 35 Kmart locations. The news, which affirms that the dying retailer still can’t get its act together, sent SHLD stock down as much as 4.7% Friday.
SHLD stock closed $7.78 and has lost more than 16% of its value year to date, versus a 8% rise in the S&P 500 index. “We have fought hard for many years to return unprofitable stores to a competitive position and to preserve jobs and, as a result, we had to absorb corresponding losses in the process,” CEO Eddie Lampert said in the statement.
SHLD Remains a Falling Knife
In the new Amazon.com, Inc. (NASDAQ:AMZN)-dominated world of retail, closing stores has been a recurring theme for Sears — once the nation’s largest retailer — every couple of months. But, the competitive problems Sears continues to experience are not consistent across all retail.
As the company closes stores, however, the likes of Wal-Mart Stores Inc (NYSE:WMT) and Dollar Tree, Inc. (NASDAQ:DLTR), which owns Family Dollar Stores, Inc. (NYSE:FDO), continue to make acquisitions and open new locations.
Meanwhile, Sears — which said in February it would cut costs this year by at least $1 billion — has struggled. Same-store sales, which measures the performance of stores opened at least one year, have plunged in 11 out of the last 12 quarters.
Amid years of losses and declining revenue, Lampert hasn’t been able to keep the retailer relevant as consumers shift their buying habits away from the mall in favor of online properties. Sears has failed to turn a profit in the past 29 out of 37 quarters.
“This [closing of stores] is part of a strategy both to address losses from unprofitable stores and to reduce the square footage of other stores because many of them are simply too big for our current needs,” Lampert wrote in a blog post Friday.
Now, the company’s partners and suppliers are taking action to avoid holding the bag as the company’s perpetual restructuring continues. Aside from reducing shipments, some vendors are seeking better payment terms to protect themselves against possible default.
“We reached the point in the past 12 months where some of our vendors have reduced their support, thereby placing additional pressure on our business,” Lampert said. At the same time, Lampert seems confident that the company can emerge stronger once this new wave of closings is completed, saying Sears was on track to meet its cost-cutting targets.