The third largest big box chain in North America has just announced that it will be closing 64 stores across 28 states, which means several thousand employees will be left without a job. According to local news reports and employees who spoke to Business Insider, Sears Holding, the owners of Kmart and Sears, announced the closures to their employees on Friday. The soon-to-be closed stores will begin their liquidation sales this weekend and shut their doors for good in December.
Sears Holding stated that closing down these stores was the only way that they can "accelerate its transformation and return to its profitability".
In a statement released by Edward S. Lampert, the chairman and CEO of Sears Holdings, he states that the decision to close down these stores was a "difficult, but necessary step", as they look to look to strengthen their company by taking "aggressive actions" in an effort to fund their transformation and restore its profitability.
In April of this year, 78 stores - 10 Sears stores and 68 Kmart locations - were closed as part of its efforts to help stop the bleeding. This accounts for five percent of its entire store base, which totals 1,700 stores.
The once prominent company, which became popular because of its Blue Light Specials, has been experiencing a gradual decline over the last two decades.
It's profitability and sales were at their peak in 1992, but have since been dropping due in large part to competition from Target, Walmart, and online shopping. It closed 110 stores in 1994 and unlike its two biggest competitors (Target and Walmart), it was not able to invest in computer technology which could have helped managed its supply chain. Furthermore, the company maintained a high dividend, meaning it did not have enough money to invest in the improvement of its stores. Its failure to create and maintain a coherent and consistent brand image has also contributed to the corporation's struggles.
According to Moody's analysts, Kmart and Sears do not have enough money to keep themselves in business for much longer and that their shutdown is imminent. In a note published by Moody's last Wednesday, the analysts downgraded Sear's liquidity rating, saying that the company is practically bleeding cash at this point and will have to continuously rely on outside funding or the sale of certain assets, such as real estate, in order to maintain operations.
This recent announcement of Kmart closing stores has now left it with only 870 locations, which is down from 1,300 in 2012. Sears Holdings has been struggling for quite a while now due to weakening sales and their inability to keep up with stores that sell home appliances, such as Home Depot, and the ever growing trend of internet shopping in websites such as Amazon.com and eBay.
In 2011, Sears Holdings had a total of 4,000 stores, but they have been selling assets for years in a somewhat desperate attempt to raise cash.
Sears has also been drifting away from its focus of operating a store network and has instead chosen to turn it into a member-focused business. Loyal shoppers are given incentives to buy from their stores, but unfortunately for Sears, this move hasn't really done much to help them gain any traction from their shoppers.
Last year, the company had a fourth-quarter net loss of $159 million, and it has only gotten worse as it reported a fourth quarter net loss of $580 million for 2016.
Sears has refused to comment on the exact number of employees that will be affected by these closures, but it said that a vast majority of them are part-time workers.
In a bit of good news, eligible associates will be provided with severance and given a chance to apply for any available positions at area Sears or Kmart stores.
A complete list of the closing stores can be seen here.
[Featured Photo by Daniel Boczarscki/Getty Images]