Business

Up to 120 Sears, Kmart stores to close; fate of Kentucky locations uncertain

Sears Holdings Corp. will close as many as 120 Kmart and Sears full-line stores after sales of consumer electronics declined in the holiday shopping period.

The company, based in Hoffman Estates, Ill., did not release a list of the stores that will close. In Central Kentucky, Kmart operates stores on Nicholasville Road in Lexington and in Winchester, Georgetown, Versailles and Frankfort. Sears has only one full-line store in the area, at Fayette Mall in Lexington.

The closings will generate $140 million to $170 million of cash from sales of inventory and the leasing or sales of the buildings, the company said Tuesday in a statement. Sears will record total non-cash charges of as much as $2.4 billion in the fourth quarter, related to a valuation allowance and goodwill impairment.

Hedge-fund manager Edward Lampert, who with his hedge fund owns 60 percent of Sears, has presided over 18 consecutive quarters of declining sales. Before Tuesday's announcement, Sears had closed 171 of its large U.S. stores since merging with Kmart in 2005. To revive growth, Lampert has been leasing space to other retailers, accelerating franchising and turning to smaller store formats.

"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 Lou D'Ambrosio said in the statement.

Sears has more than 4,000 stores in the United States and Canada. Total same-store sales fell 5.2 percent in the eight weeks that ended Sunday, Christmas Day, according to the statement. Comparable sales at Sears namesake locations dropped 6 percent, driven by declines in consumer electronics and home appliances. Sales at Kmart fell 4.4 percent.

The company attributed the results at Kmart to lower consumer-electronics and apparel sales and lower layaway sales. Analysts have said Wal-Mart's decision to relaunch layaway on toys and electronics also hurt demand at rivals, including Target.

At the Sears chain, the company said demand was hurt by lower electronics and home-appliance sales. Sears apparel sales were flat, although demand for Lands' End was up in the 5 percent range.

Sears, the biggest appliance seller in the United States, has faced increased competition on that front from rivals including Home Depot and Lowe's, analysts said. For the other categories, it has lost share to its mid-priced rivals including Kohl's, analysts have said.

Sears' earnings before interest, depreciation and amortization in the fourth quarter will be less than half of last year's $933 million.

The company also expects to reduce 2012 peak domestic inventory by $300 million, according to the statement.

Sears is scheduled to report fourth-quarter earnings on Feb. 23.

Shares of Sears plummeted 27 percent, or $12.47, to close at $33.38 on Tuesday.

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