Sears, Kmart to shut 100-120 stores

@CNNMoney December 27, 2011: 10:29 AM ET

NEW YORK (CNNMoney) -- Sears Holdings on Tuesday reported a sharp drop in holiday sales compared to a year ago, and said the results will force it to close 100 to 120 Sears and Kmart stores.

The stores to be closed have yet to be identified. The company is one of the nation's largest retailers with more than 4,000 stores in the United States and Canada.

Sears Holdings said sales at stores open at least a year, known as same-store sales, tumbled 5.2% in the eight weeks leading to Christmas Day. That came from a 4.4% drop in sales at Kmart stores and a 6% slide in sales at domestic Sears stores.

Shares of Sears Holdings (SHLD, Fortune 500) plunged $8.29, or nearly 19% to $37.56 in early trading. Shares are now down almost 50% year-to-date.

The Sears and Kmart sales results were in contrast to the broader industry, which posted strong results the day after Thanksgiving. Final sales figures for the season are not yet available.

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Burt Flickinger III, managing director of Strategic Resource Group, said that while he thinks the final holiday sales gain will be okay -- up 2.5% to 2.6% -- that will represent flat to slightly lower profits for retailers when taking into account the higher prices they paid for goods, such as clothing.

He said the continued weakness in the economy, which has depressed wages, coupled with the increased competition from online competitors, has made it difficult for brick-and-mortar retailers such as Sears and Kmart.

"There's been a significant shift online because of the sales tax savings," he said. "Consumers see it as an instant discount and most online retailers are delivering for free. That puts Sears and other land-based retailers at a significant disadvantage for the foreseeable future."

He said that he believes most of the company's closings will be Kmart stores outside of its home base in the Northeast and Great Lakes region. He said Kmart has been caught in the crossfire of a price war between stronger discount retailers Target (TGT, Fortune 500) and Wal-Mart (WMT, Fortune 500).

Flickinger said that Sears has made some progress in fixing past problems. He said its Lands End store-within-a-store concept is working well and its customer satisfaction with Sears now rivals top retailers such as Apple (AAPL, Fortune 500) and Amazon (AMZN, Fortune 500).

Even so, Sears Holdings signaled that additional store closings may lay ahead for poor performing stores.

"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," said CEO Lou D'Ambrosio.

Flickinger said additional closings may amount to 5% to 10% of the nearly 4,000 stores it still has open.

The company will also cut its inventory in the stores that will remain open by $300 million as a cost-cutting measure. The company estimates the closings will generate between $140 million to $170 million in cash as the inventory of the closed stores is sold off, and additional cash from the sale or sublease of the real estate.

Sears said it has set a target of another $100 million to $200 million in fixed cost cuts.

The company said due to the weak sales, it expects to take a non-cash charge on certain deferred tax assets of between $1.6 to $1.8 billion. To top of page

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