Sears Holdings said Thursday that it would close another 28 Kmart locations as it continues its cost-cutting campaign amid a precipitous decline in the department-store sector.
The company also posted declining sales and profits, but the results outpaced analyst expectations and lead to an increase in its stock price.
The Kmart closures add to a list of 330 Sears or Kmart locations shuttered or set to be closed later this year as the retailer seeks stability.
The chain said it would notify Kmart employees later today at the affected locations.
The list of closing stores includes three in Michigan:
- Shelby Township: 7601 23 Mile Rd.
- Bay City: 4001 N. Euclid Ave.
- Sandusky: 545 W. Sanilac
The company, which will still have about 1,000 stores after the closures, said in a public filing that it believes it has at least another 12 months of cash to continue operating.
Sears is betting on a customer loyalty program, Shop Your Way, to help lead a turnaround. The company also recently won investors' favor with a deal to sell its Kenmore appliance brand on Amazon, providing some relief.
Sears shares rose 7.9% to $9.25 in pre-market trading.
"We will continue to right-size our store footprint to ensure we are positioned to meet the realities of the changing retail environment,'' Rob Riecker, Sears Holdings' chief financial officer, said in a call with investors.
Sales at Sears and Kmart stores open at least a year, a key metric in the retail industry, tumbled 11.5% for the period, the company said Thursday. S&P Global Market Intelligence analysts had estimated a same-store sales decline of 7.1%.
With many major retailers shuttering stores as shoppers increasingly browse online, Sears' latest round of closures was not unexpected, analysts said.
It "strikes me more as good store hygiene rather than a foreshadowing of another round of mass closures," said Greg Portell, lead partner in the retail practice of A.T. Kearney, a global strategy and management consulting firm. "It is good for a retailer to always be challenging their footprint.''
Pharmacy, grocery, household goods and consumer electronics sales fell sharply at Kmart. Home appliances, apparel, consumer electronics and lawn and garden sales tumbled at Sears.
The company posted a net loss of $251 million for its fiscal second quarter ended July 29, down from a loss of $395 million in the same quarter a year earlier. That beat S&P's projection of $266 million.
Revenue fell 23% to $4.37 billion, in part because of fewer stores. That was better than S&P's predicted $4.21 billion.
In a series of financial maneuvers, Sears said it had gained access to additional borrowing capacity and extended the maturity on certain loans to allow it to stay afloat longer as it continues its restructuring plan.
As recently as 2012, the company had 1,305 Kmart stores and 867 full-line Sears stores in the U.S. But by the end of the latest quarter, Sears said 619 full-line Sears and 610 Kmart locations remained.
For Sears, the iconic but beleaguered retailer that has steadily closed stores and borrowed cash to stay afloat, the upcoming holiday season may be more critical than most as it tries to rebound from yet another round of disappointing sales.
"We are making progress on the strategic priorities we outlined earlier this year and remain focused on returning our company to profitability," Sears CEO Eddie Lampert said in a statement. "The comprehensive restructuring of our operations is delivering cost efficiencies and helping drive improvements to our operating performance."
In March, Sears rattled investors when it said in a filing with the Securities and Exchange Commission that it had "substantial doubt" about its ability to stay in business unless it could borrow more and wring cash from assets. The notification was required based on a three-year-old rule change that requires companies to be more transparent about potential risks they face within a year of their reported financial statements.
At the time independent auditor Deloitte said it believed Sears Holdings was still viable. And Lampert has criticized talk of the company's demise as "harmful,'' and has argued that the company is battling hard to rebound.
Sears was one of the last major department-store chains to report this earnings season, and the results reaffirmed its difficulties, The retailer is trying to stay relevant in a retail environment upended by fast-fashion and online shopping.
Nordstrom was one of the few bright spots, posting a 3.5% increase in net sales to $3.7 billion. But Macy's, with sales better than analysts expected, still missed profit projections. J.C. Penney reported a net loss of $62 million, partly due to its closing 127 stores in a single quarter.
Sears has responded to its own crisis by shedding assets and closing stores. Earlier this year, the company sold its signature Craftsman brand for more than $900 million, set a goal to cut $1.25 billion in costs and continues to raise cash by selling off real estate.
But there are few quick fixes to Sears' troubles.
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