Sears Still Has Over 1,200 Stores

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Despite a string of store closings meant to align Sears Holdings Corp.’s (NASDAQ: SHLD) location count with its falling revenue, the company still has over 1,200 Sears and Kmart locations. It is unlikely it can keep anywhere near this number open.

The company’s most recent 10-Q states:

We are an integrated retailer with 1,275 full-line and specialty retail stores in the United States, operating through Kmart and Sears. We operate under two reportable segments: Kmart and Sears Domestic.

Over two dozen stores have been closed since the filing. Based on the P&L, Sears Holding’s trouble is far from over. Revenue fell to $4.3 billion in the period that ended April 29, compared to $5.4 billion in the same period of the year before. The company did post a net profit of $224 million, compared with a loss of $471 million in the same period a year earlier.

Sears has been mentioned as a possible bankruptcy candidate in the next several quarters. If revenue drops at the same rate as in the most recent quarter, that is a likely a forgone conclusion. In the meantime, stores have been closed in small clusters. The company recently announced it would close 20 more. That brings the total so far in 2017 to 260, or about 17% of total locations.

One possibility may be that Sears closes several hundred stores at once. That might save the company. However, it is hard to say how many of these stores are in locations that Sears Holdings leases. It may not be easy to break those without substantial penalties. Sears may not have the cash to take that path. And, as the company shrinks, it has severance obligations, which also can be expensive.

It has been pointed out again and again that Sears Holdings has been destroyed by e-commerce, particularly Amazon, and the hundreds and hundreds of stores at brick-and-mortar chains that compete with it. The company’s stock trades as if it were a liquidation candidate: down 45% in the past year to $6.95.

Why does Sears Holdings still have over 1,200 stores? On the face of it, the count makes no sense.