Nov 22, 2013
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Sears CEO sees room to close more stores

Nov 22, 2013

NEW YORK, United States - U.S. retailer Sears, which has been struggling to generate cash from its operations, sees room to close more stores next year, Chief Executive Edward Lampert said on Thursday.

The operator of Sears department stores and the Kmart discount chain has closed about 300 U.S. stores since 2010, tightly managing inventory, selling real estate and shedding assets at home and in Canada as it tries to engineer a turnaround after years of declining sales.

"We need to make the difficult choice" in some cases when the stores are unprofitable and as more shopping moves online, Lampert said in an interview. He declined to specify the number of closings next year.

The comments by the billionaire hedge fund manager, who is also Sears' chairman and largest shareholder, helped to reduce the stock's decline to 2.2 percent on Thursday. It has risen 49 percent year to date.

The company has about 2,000 Sears and Kmart locations in the United States. Most of the stores closed since 2010 had leases that expired.

Earlier on Thursday, Sears reported a wider quarterly net loss on tepid sales at both chains and margin weakness due to more promotions targeting rewards members. Still, Lampert said focusing on that segment was essential to Sears' success.

"You may sell more or less products, but you know if John Smith and Mary Smith are visiting with us more, if they are buying more, if they are buying in more categories, if they are earning points and using those points," Lampert said. "That's something to really build on."

Lampert, who has often been criticized for not investing enough in stores and for relying on financial engineering to boost profits, said Sears was spending more to make targeted offers to members of its "Shop Your Way" rewards program.

Shop Your Way members account for about 70 percent of Sears' total sales, Lampert said, noting an increased focus on the program this holiday season.

But David Tawil, co-founder of Maglan Capital, is skeptical.

"I'm not sure how Sears membership is going to be any different than any other retailer's shoppers club," Tawil said. "No other retailer is staking their existence on it, and it doesn't make intuitive sense."

Shop Your Way has "tens and tens of millions of members," Sears spokesman Chris Brathwaite said, but he declined to provide a specific figure.

There has been a "positive trend" around the number of members shopping four or more times in the past 12 months, Brathwaite said, and the number of members redeeming points is increasing substantially.

Lampert said he expected Sears' e-commerce business to grow faster than overall sales during the holiday season.

Sears, whose brands include Kenmore, Craftsman and DieHard, will allow online shoppers to pick up their purchases at more stores without even getting out of their cars this season. Shoppers can drive to a local Sears store, text their parking spot number and wait for an employee to bring out their merchandise.


Sears has so far allocated more than $2 billion to cover pension plans over five years and expects those obligations to alleviate after one more "big payment" next year, Lampert said.

Lampert said the company did not have much debt maturing until 2016, and he will watch the capital markets closely and be "opportunistic" about refinancing any debt next year.

Hoffman Estates, Illinois-based Sears recently refinanced some debt, sold its stake in eight properties it owns with the Westcliff Group, and terminated some store leases in Canada. It said it was on track to generate $2 billion of liquidity during the fiscal year.

Sears has almost 2,500 full-line and specialty retail stores in the United States and Canada, according to its website.

The company is trying to engineer a turnaround. Sales have been falling since 2005, when Lampert merged Sears Roebuck & Co and Kmart in an $11 billion deal.

"I would have seen the tide turning by now," he said. "It hasn't turned yet. My expectation is that we have a resourceful group of people, and we are going to figure this out."

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