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Local Macy's, Sears stores escape new round of closures

January 4, 2017

Central Indiana dodged a flurry of planned store closings announced Wednesday by national retailers Macy’s and Sears Holdings.

Department store chain Macy’s said it would close 68 stores and eliminate more than 10,000 operations and retail jobs after a disappointing holiday shopping season.

Local Macy’s stores at Castleton Square, Glendale Shopping Center and Greenwood Park Mall were not included on the closure list.

Macy’s seven other stores in Indiana (Bloomington, Lafayette, Muncie, Fort Wayne, Terre Haute, Mishawaka and Merrillville) also will remain open.

Sears Holdings, meanwhile, plans to close 108 Kmart stores and 42 Sears department stores.

Sears operates two local department stores in the Indianapolis area, in Castleton and Greenwood. It also operates two Kmart stores in Indianapolis, as well as Kmart stores in Anderson and Elwood.

Indiana did not completely escape the Sears Holdings closure list. A Sears department store in Kokomo and Kmart stores in Chesterton and LaPorte are slated for closure.

Problems for Macy’s

Macy’s lowered its full-year earnings forecast Wednesday after reporting that sales at its established stores fell 2.1 percent in November and December compared to the same period last year.

Cincinnati-based Macy's Inc. pointed to changing consumer behavior and said its performance reflects the challenges that are facing much of the retail industry.

Macy's said the 68 store closures, which span the nation, are part of the 100 closings it announced in August. Of the 68, three were closed by the middle of 2016, 63 will close in the spring and two will be closed by the middle of 2017.

Some employees may be offered positions at nearby stores, but Macy's estimates that 3,900 employees will be affected by the closures.

Macy's also said it plans to restructure parts of its business and sell some properties. This will lead to the reduction of 6,200 jobs. The moves are estimated to save $550 million annually.

The company, which has been under pressure from investors to sell some of its valuable real estate, is selling or has sold three locations. It is leasing the properties back and will keep operating those stores.
Overall, Macy's said, the job reductions represent about 7 percent of its workforce.

The company, which owns the Macy's and Bloomingdale's brands, has been struggling with declining traffic in its stores, where the bulk of its business is still conducted.

Longtime CEO Terry Lundgren, who is stepping down early this year and will be succeeded by Macy's President Jeff Gennette, said in a written statement the company is closing stores that are "unproductive or are no longer robust shopping destinations" as well as selling those with highly valued real estate.

Macy's has seen sales growth slow as it and other traditional department store chains face competition from online and off-price rivals. It has tried new ways to attract shoppers, such as by offering more exclusive products, designating areas featuring "smart watches" and launching an Apple shop at its flagship New York store in Herald Square.

The company said Wednesday it plans to invest some of its savings in growing its digital business.

Shares in Macy's fell more than 10 percent, to $32.20 each, in after-hours trading.

Sears Holdings’ woes

Sears Holdings is banking on making another big real estate deal. CEO Eddie Lampert has agreed to loan the company $500 million, secured by Sears’s properties, in anticipation that a future sale of its sprawling real estate could help pay back debts.

Sears previously generated a big payday from its properties in 2015. That’s when it spun off 235 stores into a real estate investment trust—a transaction that raised about $2.7 billion. Sears has continued to operate many of the stores through a leaseback arrangement, but it’s also steadily reduced its footprint by shutting down locations.

The company’s main business—department stores—has continued to hemorrhage cash in recent years. And that’s prompted Lampert, a hedge fund manager, to repeatedly step in and provide financing to the struggling chain.

The latest loan matures in July 2020, according to a statement Wednesday. It will provide $321 million in funding now and an additional $179 million in the future, the Hoffman Estates, Illinois-based company said.

The funding will “support our operations as we meet all of our financial obligations,” Chief Financial Officer Jason Hollar said in the statement.
Investor Relief

Last month, Sears announced that it would be getting a letter of credit worth as much as $500 million through affiliates of Lampert’s firm, ESL Investments Inc. The move helped reassure investors, who’ve grown increasingly concerned about the chain’s plummeting sales and mounting red ink.

Sears’s shares jumped 10 percent, on Dec. 29, the day the letter of credit was disclosed. They rose an additional 1.8 percent, to $9.89 each, on Wednesday.

Earlier in December, Sears reported another huge quarterly deficit—$748 million—bringing its total losses to about $9.4 billion in the past eight years.

Christina Boni, an analyst at Moody’s Investors Service, has said that the company needs to raise roughly $1.5 billion to make it through 2017 comfortably.

The loan announced Wednesday bears an 8 percent rate and is meant to help finance the company while it sells a new portfolio of real estate.

 

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