100 to 120 Sears and Kmart stores to be closed

Declining holiday sales at Sears and Kmart stores are prompting owner Sears Holdings Corp. to close 100 to 120 stores, the Illinois-based company announced Tuesday.

The corporation did not say which locations would be eliminated or when, and a local owner of several area malls said no word had come down about what properties would be excised.

The company is projecting the move will generate $140 million to $170 million in cash as a result of selling off inventory at the targeted locations, according to a filing with regulators.

Comparable-store sales through Christmas Day were down 4.4 percent at Kmart and 6 percent at Sears, the company said. Those figures correspond to sales at stores open both this year and the same period a year earlier; that comparison is considered to be a key indicator of a retailer's health.

"Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce ongoing expenses, adjust our asset base, and accelerate the transformation of our business model," chief executive officer Lou D'Ambrosio said in a news release.

The drop in sales combined with higher expenses and tighter profit margins to create a trifecta of financial factors contributing to the decision to downsize.

At Sears, the sales decline was due largely to poor sales in consumer electronics and home appliance departments; more than half the decline in sales came from the consumer electronics category, the company said.

At Kmart, consumer electronics sales also were a culprit, as were apparel sales and the fact that fewer customers bought on layaway.

There are several dozen Sears and Kmart stores across the region, including four located at three shopping malls owned by Philadelphia-based Pennsylvania Real Estate Investment Trust.

But a top PREIT official did not greet the news with anxiety. Rather, he was optimistic, even though he did not know whether any local sites would be shut down.

All three malls - Willow Grove Park (Sears), Exton Square Mall (Sears and Kmart), and Moorestown Mall (Sears) - are in such desirable locations that new tenants would be easy to find, and for rents higher than what Sears and Kmart are currently paying, said Joseph F. Coradino, who oversees leasing as president of PREIT Services L.L.C. and PREIT-Rubin Inc.

"Wouldn't I love to get the Kmart store back on Route 100 in Exton?" Coradino asked, rhetorically. "There'd be a line out with who I'd put there.

"It's the fastest-growing county in the Philadelphia area. It's Route 100 - which is the new Route 30 - so I don't think about this as all that terrible," Coradino added.

PREIT, along with other large retail real estate trusts, in recent years has been converting old anchors into modern, larger retail space for higher-end, new tenants. A former Strawbridge's at Willow Grove is being converted to a Nordstrom Rack.

Sears officials hinted that locations beyond those selected in this round could be eliminated if they were deemed to be a financial drag. This departs from "past practice" of keeping "marginally performing stores open while we worked to improve their performance," the company said in its disclosure to investors.

"We no longer believe that to be the appropriate action in this environment," the company said, pledging to evaluate store performance and "act opportunistically."