After a disastrous holiday shopping season, the parent company of Sears and Kmart will close at least 100 stores to raise cash - a move that sparked speculation about whether the 125-year-old retailer can avoid a death spiral fed by declining sales and deteriorating stores.
Sears Holdings Corp., a pillar of American retailing that famously began with a mail-order catalog in the 1880s, declared Tuesday that it would no longer prop up "marginally performing" locations. The company pledged to refocus its efforts on stores that make money.
Sears' stock quickly plunged, dropping 27 percent.
The closings are the latest and most visible move by Eddie Lampert, the hands-on chairman who has struggled to reverse the company's fortunes.
As rivals Walmart and Target Corp. spruced up stores in recent years, Sears Holdings confronted falling sales and perceptions of dowdy merchandise.
Some analysts wondered if it was already too late, questioning whether the retailer can afford to upgrade stores as it burns through its cash reserves.
The sales weakness "begins and some would argue ends with Sears' reluctance to invest in stores and service," Credit Suisse analyst Gary Balter wrote in a note to clients.
Spokesman Chris Brathwaite said no one had determined which stores would close or how many jobs might be cut. He disputed doubts about the company's survival, noting it still has $2.9 billion available under its credit lines.
"While our operating performance has not met our expectations, we have significant assets," including inventory, real estate and valuable proprietary brands such as Kenmore and Craftsman, Brathwaite said.
Sears and Kmart were both retail pioneers. Sears' catalog and department stores were fixtures of American life stretching back to the 19th century before being hurt in recent years by competition from steep discounters and by missteps that included forays into financial services and the decision to sell off a lucrative credit card business.
Kmart helped create the discount-store format that Walmart Stores Inc. came to dominate.
Some customers complained that they have a hard time connecting with the Kmart and Sears of today.
Preschool teacher Sara Kriz, picking up hair conditioner Tuesday at a Kmart in Manhattan, N.Y., said "it seems easier to go to Target and Walmart to get the same thing at the same price. The stores are cleaner, and they're better stocked."
Sears Holdings has watched its cash and short-term investments plummet by nearly half since Jan. 31, from about $1.3 billion to about $700 million.
The projected closings represent only about 3 percent of Sears Holdings' U.S. stores. And the company has actually added stores since the Sears-Kmart merger in 2005. It has about 3,560 stores in the U.S., up from 3,500 right after the merger, due to the addition of more small stores.
But the company hinted that more closings could be on the horizon as it focuses on honing the better-performing stores.
The closings announced Tuesday were expected to generate $140 million to $170 million in cash as the company sells those stores' inventory. Selling or subleasing the properties could generate more money.
The company announced that revenue at stores open at least a year fell 5.2 percent for the eight weeks ended Dec. 25, a crucial time because of the holiday shopping season.
Kmart's layaway program faltered as Walmart brought back layaway for the holiday season after getting rid of the program in 2006. And Sears stores reported softer sales of home appliances, usually a strength.
Sears operates department stores with auto centers at Tucson Mall and Park Place.
Parent Sears Holdings Corp. operates Kmart, which has one local supercenter at 7055 E. Broadway, also the location of a Sears Outlet store.
Sears also has a customer-service call center that employs an estimated 450 people at 4755 S. Butterfield Drive.
Sears Holding Corp. ranked 47th in the Star 200 survey of Southern Arizona's major employers, with an estimated 975 employees at its call center and stores.
Sears lists eight department stores in the Phoenix area; other Arizona store locations include Sierra Vista and Flagstaff.
The company hasn't yet said which stores will close nationwide.