The recent announcement by Sears Holdings (SHLD) that it will close another 66 stores, including 49 Kmart locations, while not surprising, really hit home. It was nearly a year ago that my column focused on our local Jersey shore Kmart, or what was left of it.
Located in a high-traffic area that has experienced massive growth the past several years, this particular Kmart may as well have been on the moon. I made several trips there last summer just to see whether my initial visit had been on a bad day. As it turns out, having more employees than customers in the store was the norm. That particular Kmart made the closing list and will be shuttered by September; indeed, the liquidation sale started yesterday.
For its part, Sears stock is down more than 50% since last summer as the company desperately tries to stay afloat. In January, it announced the closure of 150 underperforming stores, including 108 Kmarts, and the sale of its Craftsman tool business to Stanley Black & Decker (SWK) for $900 million. On Tuesday, Sears Holdings announced it was slashing 400 corporate jobs as part of an effort to save $1.25 billion.
Sears Holdings still owns Kenmore appliances and DieHard batteries, though there long has been talk that it would sell those brands as well. In the case of Kenmore, it may have waited too long, as the brand's foothold in the appliance market has slipped considerably. Competition in appliances, which used to be one of Sears' strong areas, is now fierce, with Lowe's (LOW) now the top appliance retailer. I remember vividly purchasing a set of appliances at Sears 20 years ago; it was the place to go for appliances. But now you have Lowe's, Home Depot (HD) , Best Buy (BBY) and others, and Sears is simply an afterthought, located in a mall that we rarely visit.
I don't see how Sears pulls out of the death spiral I believe it already is in. For me and probably some others in my generation, and the one before, this is bittersweet. But times are changing, consumers have changed, and brick and mortar is in trouble. Unfortunately, watching it unfold is a bit like watching a train wreck in slow motion. I don't see how Sears ever returns to profitability before running out of runway.
The market occasionally becomes a momentary believer that Sears Holdings can rise from the ashes; from February to April, SHLD shares rose from under $6 to $14 in the wake of CEO Eddie Lampert's announcement that he would turn the company around. Since then, the stock has given back most of that gain.
I wonder what will become of all the real estate from the closed stores. Once believed to be extremely valuable and part of the stock's value proposition, it will be interesting to see whether these locations will be occupied down the road, and if so, by whom.