Thursday, 29 December, 2011 6:13 PM
Holdings Corp. to close 100 to 120 Kmart and Sears stores
BY JASON RZUCIDLO / ©AMERICAJR.com
Kmart store, located at 37175 Grand River Rd. in Farmington, Mich.,
closed on Nov. 15, 2009.
Ill. -- Sears
Holdings Corporation ("Holdings," "we," "us,"
"our," or the "Company") (Nasdaq: SHLD) today
is providing an update on its quarter-to-date performance and planned
actions to improve and accelerate the transformation of its business.
Comparable store sales for the eight-week ("QTD") and
year-to-date ("YTD") periods ended December 25, 2011 for
its Kmart and Sears stores are as follows:
Kmart's quarter-to-date comparable store sales decline reflects
decreases in the consumer electronics and apparel categories and
lower layaway sales. Sears Domestic's quarter-to-date sales decline
was primarily driven by the consumer electronics and home appliance
categories, with more than half of the decline in Sears Domestic
occurring in consumer electronics. Sears apparel sales were flat
and Lands' End in Sears stores was up mid-single digits.
The combination of lower
sales and continued margin pressure coupled with expense increases
has led to a decline in our Adjusted EBITDA. Accordingly, we expect
that our fourth quarter consolidated Adjusted EBITDA will be less
than half of last year's amount. For reference, last year we generated
$933 million of Adjusted EBITDA in the fourth quarter ($795 million
domestically and $138 million in Canada).
Due to our performance
in 2011 we expect that we will record in the fourth quarter a non-cash
charge related to a valuation allowance on certain deferred tax
assets of $1.6 to $1.8 billion. Although a valuation adjustment
is recognized on these deferred tax assets, no economic loss has
occurred as the underlying net operating loss carryforwards and
other tax benefits remain available to reduce future taxes to the
extent income is generated. Further, we may recognize in the fourth
quarter an impairment charge on some goodwill balances for as much
as $0.6 billion. These charges would be non-cash and combined are
estimated to be between $1.6 and $2.4 billion.
"Given our performance
and the difficult economic environment, especially for big-ticket
items, we intend to implement a series of actions to reduce on-going
expenses, adjust our asset base, and accelerate the transformation
of our business model. These actions will better enable us to focus
our investments on serving our customers and members through integrated
retail – at the store, online and in the home," said
Chief Executive Officer Lou D'Ambrosio. Specific actions which we
plan to take include:
- Close 100 to 120 Kmart
and Sears Full-line stores. We expect these store closures to
generate $140 to $170 million of cash as the net inventory in
these stores is sold and we expect to generate additional cash
proceeds from the sale or sublease of the related real estate.
Further, we intend to optimize the space allocation based on category
performance in certain stores. Final determination of the stores
to be closed has not yet been made. The list of stores closing
will be posted at www.searsmedia.com when final determination
- Excluding the effect
of store closures, we currently expect to reduce 2012 peak domestic
inventory by $300 million from the 2011 level of $10.2 billion
at the end of the third quarter as a result of cost decreases
in apparel, tighter buys and a lower inventory position at the
beginning of the fiscal year.
- Focus on improving
gross profit dollars through better inventory management and more
targeted pricing and promotion.
- Reduce our fixed costs
by $100 to $200 million.
In addition to the specific
store closures listed above, we will carefully evaluate store performance
going forward and act opportunistically to recognize value from
poor performing stores as circumstances allow. 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.
We currently expect the
store closure and inventory reduction actions to reduce peak inventory
in 2012 by $500 to $580 million and reduce our peak borrowing need
by $300 to $350 million in 2012 from levels that may have resulted
in 2012 without such actions.
At December 23rd, we
had $483 million of borrowings outstanding on our domestic revolving
credit facility leaving us with over $2.9 billion of availability
on our revolving credit facilities ($2.1 billion on our domestic
facility and $0.8 billion on our Canadian facility). There were
no borrowings outstanding last year at this time.
During the fourth quarter
through December 23, 2011, we have not repurchased any of our common
shares under our share repurchase program. As of December 23, 2011,
we had remaining authorization to repurchase $524 million of common
shares under the previously approved programs.
The company currently
plans to release financial results for its fiscal 2011 fourth quarter
and full year on or about February 23, 2012, before the market opens.
About Sears Holdings Corporation
Sears Holdings Corporation
is the nation's fourth largest broadline retailer with over 4,000
full-line and specialty retail stores in the United States and Canada.
Sears Holdings is the leading home appliance retailer as well as
a leader in tools, lawn and garden, consumer electronics and automotive
repair and maintenance. Sears Holdings is the 2011 ENERGY STAR®
Retail Partner of the Year. Key proprietary brands include Kenmore,
Craftsman and DieHard, and a broad apparel offering, including such
well-known labels as Lands' End, Jaclyn Smith and Joe Boxer, as
well as the Apostrophe and Covington brands. It also has the Country
Living collection, which is offered by Sears and Kmart. We are the
nation's largest provider of home services, with more than 11 million
service calls made annually. Sears Holdings Corporation operates
through its subsidiaries, including Sears, Roebuck and Co. and Kmart
Corporation. For more information, visit Sears Holdings' website
| Facebook: http://www.facebook.com/SHCCareers
Source: Sears Holdings Corporation
Holdings Corp. releases list of Second Quarter Kmart store closings