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Sears planning more stores closures in its steep, uphill climb to profitability

According to yesterday's Wall Street Journal, Sears Holdings Corp. (SHLD) is expected to announce more store closures as part of a steep, uphill climb back to profitability, with the backdrop of its recently reporting its 28th consecutive quarterly loss of $358 million dollars in the 4th quarter of 2013. Sears will be announcing financial results for its fiscal 2014 first quarter on or about Thursday, May 22, 2014, said the company.

Sears Holdings is expected to announce more store closures as part of a plan to return to profitability. "You don't need 2,000 stores to be competitive in the U.S.," said Eddie Lampert, Sears's chief executive.
Sears Holdings is expected to announce more store closures as part of a plan to return to profitability. "You don't need 2,000 stores to be competitive in the U.S.," said Eddie Lampert, Sears's chief executive.
Photo by Joe Raedle/Getty Images
A bronze plaque hangs near the entrance of Sears' flagship store in the Loop on January 22, 2014 in Chicago, Illinois. Sears has announced that it plans to close the money-losing store which opened in the downtown location in 2001.
A bronze plaque hangs near the entrance of Sears' flagship store in the Loop on January 22, 2014 in Chicago, Illinois. Sears has announced that it plans to close the money-losing store which opened in the downtown location in 2001.
Photo by Scott Olson/Getty Images

Sears is sure to report its 29th consecutive quarterly loss, the only question remaining is how steep of a loss and how much cash is being burned. That report will also be significant in determining the number of stores to close.

When it comes to the store closings, Sears chief executive officer Eddies Lampert rationalizes it this way: "You don't need 2,000 stores to be competitive in the U.S." Lampert said this at the company's annual meeting at its headquarters in Hoffman Estates, Ill. Since 2005, Sears has closed more than 500 locations, Lampert said.

Yet losses keep mounting, in spite of these cost-cutting moves to return to profitability.

In the past, Mr. Lampert said he was more inclined to keep a marginal store open, but now if a store weren’t turning a healthy profit, his choice would be to not renew the lease. He didn't say how many stores would be closed.

Lampert is betting the entire business on their hope for success with its "Shop Your Way" rewards loyalty program. Thus far, in spite of having "millions of members," the losses mount.

Sears, which includes the flagship Sears and Kmart chains, is trying to reverse years of losses and declining sales. To do that, Mr. Lampert is building a loyalty program and investing in online initiatives. So far, the benefit hasn't been enough to offset weakness in Sears' brick-and-mortar stores, where the company still gets the majority of its sales.

Sears isn't alone in shrinking. As American shopping habits change with more sales online and fewer shopping trips to indoor shopping malls, many retailers are rethinking their stores' footprint.

The main question is this: Can Sears become a force in the online, ecommerce world?

The competition is heavy and the Sears "brand" has taken a beating with consumers over the years.

J.C. Penney, RadioShack Corp. and Staples Inc. have all announced plans to close stores this year. In addition, Office Depot Inc. said Tuesday it intends to close at least 400 stores in the U.S.

At Sears, many stores are simply too big, Mr. Lampert said. So he plans to continue to lease space at some desirable locations to other retailers like Sears has with Whole Foods Market and Dick's Sporting Goods Inc. Mr. Lampert sees rental income as a growing revenue stream in the future.

That sounds more like a dream, than a real plan.

Sources:

Wall Street Journal