Holiday Season of Pain begins – Macy’s to lay off 10,100 Sears Closings Accelerate

The 2016 Holidays were a season of pain for some of the biggest names in retail. Dismal sales are leading mass layoffs and store closings across the country.

Macy’s (NYSE: M) is planning to lay off 10,100 employees, and accelerate store closings, CNBC reported. The department store operator took the action after its sales fell by 2.1% in November and December.

Around 6,200 management and other positions in Macy’s offices will be eliminated to save money. Another 3,900 people will lose their jobs when Macy’s accelerates the closings of 68 department stores. The 68 stores are among 100 closures that Macy’s had previously announced.

Sears is planning to close 150 stores or is it 196?

Not surprisingly even greater pain and more weird stuff is going on at Sears Holdings (NASDAQ: SHLD) which also owns Kmart.

Sears has exercised its right to terminate leases on 19 unprofitable stores, Seritage Growth Properties (NYSE: SRG) reported. Sears will vacate the stores by April which should be good news for Seritage investors. Seritage is the real estate investment trust (REIT) that Eddie Lampert set up to takeover Sears’ real estate.

The situation at Sears is certainly bad the retailer is planning to close 150 stores during the first three months of 2017, Business Insider reported. 108 Kmart and 42 Sears locations accounting for 10% of the company’s foot print are on the chopping block.

Those closures are addition to 46 shutdowns the company had announced internally on December 27. If these reports are true, Sears might be closing 196 stores. That’s more than 10% of Sears’ footprint, it currently operates around 1,500 stores.

Unfortunately the reports are hard to verify because Business Insider got its information from “an internal Sears document” leaked by an unidentified source at the company. That sounds like information deliberately leaked by Lampert or one of his henchmen in an attempt to avoid being seen as bearers of bad news.

The closures should not surprise us because Sears has closed almost 60% of its stores since 2011 when it operated 3,500 locations. The closures are only part of Eddie Lambert’s latest strategy to “save Sears.”

Lampert Loans Sears $500 million and sells Craftsman

The only thing apparently keeping Sears doors open is a $500 million line of credit that Lampert’s firm ESL Investments Inc. arranged for the company. Bloomberg reported that the credit will include $321 million in immediate funding probably to keep creditors from taking legal action and $179 in future credit.

The loan; which apparently comes with an 8% interest rate, will be paid back by selling off Sears’ real estate possibly to Seritage. One thing is certain Sears is incapable of paying off the line of credit with its sales. It lost -$1.51 billion in cash from operations during third quarter 2016.

Sears also reported a “net income” of -$2.194 billion, and a free cash flow of -$808 million on October 31, 2016. That gave the company a “profit margin” of -14.87% and an earnings per share figure of -20.54. These numbers are for real if you want to check for yourself see ycharts.

Those numbers will not be offset by Lampert’s other latest coup. He’s sold the vaunted Craftsman brand to Stanley/Black & Decker for $525 million in cash now and $250 million in two years, CNN reported. That cash will be of little help, and might further damage Sears because Craftsman tools might soon be for sale at home improvement stores like Lowe’s and Home Depot and listed on Amazon. That will give customers one less reason to go to Sears.

One has to wonder what Sears will do with the money raised by these desperation moves, most likely pay things like utility bills and rent. That avoids embarrassing situations like the electricity or the gas getting shut off at Sears, or landlords trying to evict the retailer.

Sears Lost $9.4 billion in the last Eight Years, Way to Go Eddie

The line of credit and the Craftsman sale are only a temporary reprieve because Sears will need raise $1.5 billion to make it through 2017 Moody’s Analyst Christina Boni told Bloomberg Markets. This means a Sears’ shutdown or bankruptcy is still likely in 2017 despite Lampert’s loan.

One has to wonder what will happen if Sears shuts down completely. Although it might be that great a loss, Bloomberg estimated the retailer has lost $9.4 billion over the past eight years.

It looks as if the retail jobs apocalypse is about to get worse. Thousands of people are about to get thrown out of make President-Elect Trump’s promise of more jobs a hollow lie.

On January 3, Trump bragged that Ford was creating 700 jobs. That will not be of much consolation to the 10,000 people losing jobs at Macy’s and the thousands of Sears and Kmart employees heading for the unemployment lines.

Note: an accurate list of Sears and Kmart closings is hard to find because the company has been trying to hide them. The best list I could find was in this Business Insider article, treat it with skepticism because the source is questionable. There might be more closings we are unaware of.