Outlook for Kmart Is Grim: Sears Announces The Closing Of Stores Across 13 States By Year End
By Christine Kern, contributing writer
Moody’s analysts say that Kmart is in imminent danger of closing altogether.
Despite concerted efforts to revive sales by infusing capital into its ecommerce platforms, Sears and Kmart have been struggling to right the ship for several years. Moody’s analysts now say that the chains may be in imminent danger of shuttering altogether, according to AOL Finance. On the heels of this new rating, Sears Holding has informed employees that Kmart stores in at least 13 states will be closing in mid-December. Those stores will begin liquidation sales on September 22.
This new wave of closures follows an earlier announcement that 68 Kmart and 10 Sears stores across the country would be closed this summer.
Moody’s analysts said that Kmart was particularly troubling for Sears, and downgraded their ratings for Sears Holding, noting that the new ratings “reflect our view on the uncertainty of the viability of the Kmart franchise in particular, given its meaningful market share erosion.”
According to Moody’s, Sears and Kmart don’t have enough money to stay in business. In August, Sears reported that its cash and equivalents had fallen to $276 million, down from $1.8 billion just one year ago. The analysts wrote, “We recognize the risks associated with relying on these sources and continued shareholder support to finance its negative operating cash flow which is estimated by Moody’s to be approximately $1.5 billion this year.”
Net sales fell 8.8 percent to $5.7 billion in the second quarter, with same-store sales plunging 7 percent at Sears stores and 3.3 percent at Kmart stores. Sales have been falling for years, with Sears' sales falling from $41 billion in 2000 to $15 billion in 2015. Meanwhile, Kmart sales fell from $37 billion to $10 billion in the same period.
Moody's analysts noted that Sears has a sizable asset base, but "its debts are significant with approximately $3.5 billion of funded debt as well as an unfunded pension and post-retirement obligation of $2.1 billion."
Business Insider compiled a list of the potential Kmart closing nationwide, which may be found here.
Sears’ financial difficulties reveal a changing retail landscape in which traditional leaders are struggling to maintain a market share against innovative, new, and more omnichannel flexible competitors. And Sears’ competition is eager to take advantage of its demise: JCPenney, for example, has recently entered the home appliance game to leverage on Sears store closings.
But Sears is not yet ready to give up the ship, banking on its Shop Your Way and integrated retail platforms to help right its passage through this storm.