Sears, Kmart downsizing surprises loyal customers

2011-12-28T04:30:00Z 2014-09-11T17:14:30Z Sears, Kmart downsizing surprises loyal customersHolly Meyer Journal staff Rapid City Journal
December 28, 2011 4:30 am  • 

Doris and Lloyd Warner are longtime Kmart and Sears customers who were surprised to hear Tuesday that the company plans to close at least 100 of its stores across the country.

"I shop at Kmart all the time," Doris Warner said on Tuesday afternoon as she stood next to her husband in the East North Street store parking lot.

On this day, the Rapid City couple, who lives near the store, had just finished buying a pair of shoes for Lloyd Warner.

"The store is nice, wide and comfortable to shop in," Doris Warner said of Kmart. She also said she buys a number of her dressier clothes at the Sears store in Rapid City.

The Warners want to remain loyal Kmart and Sears customers, which is why they are hopeful the Rapid City stores do not make it onto their parent company's store closure list, which has yet to be announced.

After a disastrous holiday shopping season, Sears Holding Corp. announced Tuesday that it will close at least 100 Kmart and Sears 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.

In making the announcement, Sears Holdings Corp declared that it would no longer prop up "marginally performing" locations. The company pledged to refocus its efforts on stores that make money.

In addition to the Kmart store in Rapid City, the only other Kmart in the Black Hills is in Spearfish. Spearfish's Kmart could also be affected by the closure announcement.

Kathy Mraz and her son, Tony Mraz, were walking out of the Rapid City Sears store carrying a bag filled with new dress shirts on Tuesday when they heard that a number of Sears stores will close as well. The Rapid City residents said they are longtime Sears' customers.

One of the biggest worries for the mother and son is that the possible closure of the Rapid City location meant less competition among stores in town, which would hurt customers in the long run, they said.

After the nationwide closure announcement, value of Sears' stock quickly plunged, 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 Wal-Mart Stores Inc. and Target Corp. spruced up stores in recent years, Sears Holdings struggled with 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.

"There's no reason to go to Sears," added New York-based independent retail analyst Brian Sozzi. "It offers a depressing shopping experience and uncompetitive prices."

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, thanks to the addition of more small stores.

But the company hinted that more closings could be on the horizon.

The store closings were expected to generate $140 million to $170 million in cash as the company sells down their inventory. Selling or subleasing the properties could generate more money.

Spokesman Chris Brathwaite said the company had not determined which stores would close or how many jobs might be cut. He disputed speculation that the company will have problems surviving, noting it still has $2.9 billion available under its credit lines.

Still, the company's announcements were grim. In addition to the closings, it 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, meant to help cash-strapped customers buy presents by paying for them a little at a time, faltered as Wal-Mart and Toys R Us introduced or expanded competing programs. Sears stores reported softer sales of home appliances, usually a strength.

The company predicted that fourth-quarter adjusted earnings will be less than half the $933 million reported for the same quarter last year. It also expects a non-cash charge of $1.6 billion to $1.8 billion in the quarter to write off the value of carried-over tax deductions it now doesn't expect to be profitable enough to use.

Part of Sears Holdings' problem is the weak economy that is hurting virtually all retailers that cater to low- and middle-income shoppers, who are being forced to cut back on spending.

But both Lampert and Lou D'Ambrosio, who was named chief executive officer in February, have said the company needs to keep up with the changing retail landscape, where shoppers are going online for convenience and finding better prices on their smartphones even once they're in the store.

The Associated Press contributed to this story

Copyright 2015 Rapid City Journal. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(7) Comments

  1. bman123
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    bman123 - December 28, 2011 9:01 pm
    I'd have to agree w/Reppstar blogger, most average Americans wouldn't pay the bloated price tags for the products. A good example is shoes with most/or all coming from China. There are a few companies in the states that produce athletic shoes (New Balance - Boston) but the price comes at a steep cost of $135/pair. The typical blue collar family of 4 earning around $40K/year isn't going to be purchasing that type of shoe.
  2. reppstar
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    reppstar - December 28, 2011 5:49 pm
    Bull said: "Sears declining sales are a direct result of their policy and product changes trying to copy Wal-Mart. They went entirely CHINA when the best move would have been to go completly American where they could offer an alternative. Even the "Chraftsman" brand is now China made. Ignoring customers need always fails. "

    I don't understand your opinion. Walmart is destroying the competition, yet you think that Sears is failing because they are following Walmart's proven business model? Please explain why Walmart is doing so well then.
    If selling only American products was a good business model then more companies would do it. The problem though is that it's not. Hmm, 30 dollars for a t-shirt or 10 dollars for the same shirt? I wonder what Americans will choose to buy?
    Don't blame China because things are made there, blame the US companies that decide to move factories over there in-order to lower labor costs and make their products cheaper.
  3. wheresthesunshine
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    wheresthesunshine - December 28, 2011 9:10 am
    I would imagine they get more business from the stores far away from urban areas considering smaller towns don't have as many options where they shop.

    We went to the Sears a couple years ago to buy a brand new washer and dryer. They didn't have the colors I wanted and the sales associate didn't even bother to try to get them for us. We went to Best Buy where they didn't have the ones I wanted either, but a sales associate went straight to their online site to order for us, plugged in all the details, and made sure we had the necessary accessories. Even though we had to wait 3 weeks, they delivered right to our door, set it all up, left us a contact fridge magnet in case we had any issues, and we were good to go!

    I don't feel sorry if Sears closes. The only thing I buy there is maybe summertime sandals for my kids. I haven't shopped at KMart since I left my parents home to live on my own.
  4. alecsa
    Report Abuse
    alecsa - December 28, 2011 9:05 am
    I live in Spearfish and I love shopping at the Kmart here. It is never crowded and the employees are very friendly. It is a great alternative to Walmart and it's a lot closer than Target or the stores in RC. I hope they keep the Kmart here open, but the fact that it is never crowded kind of tells you that it is probably one on the list.
  5. AmericanPatriot
    Report Abuse
    AmericanPatriot - December 28, 2011 7:42 am
    In realty they says the most important things you can have is location, location, location. In retail sales in addition to customer service the most important thing you can have are inventory, inventory, inventory. I personally have notice a very high amount of empty shelves, hooks, and racks at both Sears and K-Mart. To replace Craftsman tools that were lost or stolen with a new purchase has many times taken weeks before even ONE item is stocked. Then the customer service has been simply terrible. Not knowledgeable, not friendly. I can get what I need online, pay less shipping than what the fuel to drive to the store would be, and actually get what I need right away, not just see an empty spot where the item USED to be!
  6. Bull
    Report Abuse
    Bull - December 28, 2011 6:26 am
    Sears declining sales are a direct result of their policy and product changes trying to copy Wal-Mart. They went entirely CHINA when the best move would have been to go completly American where they could offer an alternative. Even the "Chraftsman" brand is now China made. Ignoring customers need always fails.
  7. rdeed
    Report Abuse
    rdeed - December 28, 2011 6:20 am
    this is no surprise......should have happened 20 years ago considering their 1950s merchandising!!
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