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Why Did Sears Holdings Corp. Shares Lose 61% in 2017?
By Daniel B. Kline
The Motley Fool
January 15, 2018

Sears Holdings) has been in a downward spiral for over five years. The company has been losing money, closing stores, and selling assets in a desperate bid for survival.

What happened

Though the company has a turnaround plan, there are very few signs that it's working. CEO Edward Lampert would point to the fact that the company losses narrowed in Q3 -- from $748 million ($6.99 loss per diluted share) in Q3 2016 to $558 million ($5.19 loss per diluted share) in Q3 2017 -- but in reality the losses have shrunk in line with the company's overall decline.

Sears has lost over $1.6 billion in 2017 so far, following a $2.2 billion loss in 2016, and a $1.1 billion loss in 2015. It also has, as of the end of the quarter, total assets of $8.1 billion, down from $10.8 billion at the end of Q3 2016. Additionally, the struggling retailer has $12 billion in total liabilities, down from $14.2 billion a year ago.

So what

Basically, Sears has done very little to convince anyone that it has begun to turn its fortunes around. Mostly, the company has shown that none of the changes it has made has resonated with customers.

There's very little, if anything, to be encouraged about and investors took note. After closing 2016 at $9.29 shares fell to $3.58 at the end of 2017, a 61% drop, according to data provided by S&P Global Market Intelligence.

Now what

Sears has assets to sell and has put forth a plan to get through at least the next few months, but there are no guarantees it will work. At this point, it seems very clear that the company can put off the end, but that unless something changes, the end is inevitable.

The retailer has only survived this long because it has a portfolio of assets and real estate that it could sell. Most of those assets are gone and what's left may not be as easy to sell. Unless something changes, it's hard to see how Sears makes it to 2019.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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How Sears created modern retail in Illinois
By Eric Peterson
Daily Herald
January 14, 2018

Editor's note: Most people know about the Great Chicago Fire, but there's a lot more to Illinois history than that. Native American settlements thousands of years old, the battle over slavery, the transfer of influence from southern to northern Illinois, wars and riots, the gangsters and politicians and artists and athletes that shaped our state all will be part of a yearlong series of articles to mark Illinois' bicentennial. The Daily Herald and dozens of publications across the state are joining forces on the series, which will continue until Illinois' 200th birthday on Dec. 3.

As the home of Sears since the late 19th century, Illinois is the birthplace of modern retail.

Even today's colossus, Amazon.com, can trace the roots of its business model to Sears' original mail-order business that popularized the notion of buying products at home without first seeing and touching them in person.

"There were some small mail-order companies before, but Sears became the largest, the most successful, the giant," said Libby Mahoney, senior curator of the Chicago History Museum.

And if it now seems strange that such a retail company would grow strong enough to make its headquarters the tallest building in the world as Sears did in Chicago in 1973, consider today's intense competition among cities to house Amazon's second headquarters, she said.

It was Chicago's central position in the nation's railroad and highway networks that made it a better place for Richard Sears to operate the mail-order watch company he'd started in Minneapolis the previous year, 1886.

In Chicago, Sears partnered with watchmaker Alvah C. Roebuck, leading to the longtime name of the firm being Sears, Roebuck and Co. Its first catalog featuring only watches and jewelry was published in 1888, while its first large catalog of general merchandise came along in 1896.

Sears wooed customers with promises of savings gained by eliminating the middleman. It popularized the money-back guarantee to build trust with the consumer, Mahoney said.

The gradual diversification of the company's products seemed to know no bounds, perhaps best illustrated by the advent of Sears Modern Homes.

Between 1908 and 1940, Sears sold about 75,000 such homes around the country by mail order. Many of the homes, which came in 447 different designs, exist today.

Such a company at that time largely depended on the U.S. Post Office for its success and reliability, Mahoney said.

But eventually, Sears, Roebuck's original mail-order business began to be threatened by the greater urbanization of the country after World War I.

The solution -- championed by then-vice president and future company President Robert E. Wood -- was the introduction of brick-and-mortar stores in the 1920s.

Many other innovations followed under Wood's guidance, including getting into the insurance business during the Great Depression with the creation of Allstate Insurance. Like several other Sears-created brands, Allstate eventually would be spun off as a completely independent company, but not until 1993.

Although Sears has never been a manufacturer, its brands such as Craftsman tools, Kenmore appliances and DieHard batteries helped build the company's reputation.

Even as the biggest of all, Sears didn't take customer loyalty for granted, Mahoney said.

"They were really trying to improve the appearance of their products and make them stylish in the '30s," Mahoney said. "I think they were really savvy merchants."

The nation's economic recovery after World War II was what enabled such imitators as Kmart, Target and Kohl's, but probably not until the '70s or '80s did they start to have a significant impact on Sears' business, Mahoney said.

Even in the mail-order years, the Chicago-based Montgomery Ward was the country's distant second-place retailer, despite having started earlier.

"Sears always seemed to have the upper hand," Mahoney said.

Nevertheless, Ward's successfully carved a niche for itself by deliberately selling different products than Sears did, she said.

For the past 25 years, Sears has made its headquarters at the 780-acre Prairie Stone Business Park it created on the west side of Hoffman Estates.

Though the now-vanished Poplar Creek Music Theater was probably the first name that put Hoffman Estates on the regional map, Sears was an even bigger one, Mayor Bill McLeod said.

"When it was announced, it was a really big deal," McLeod said. "Sears was an iconic retailer. It obviously brought a lot of attention to the village. Sears made a big difference."

Among the other developments that have located around it are the Sears Centre Arena -- now home to the NBA G League's Windy City Bulls -- and the Chicago region's 185,000-square-foot Cabela's store.

The westward expansion of the village's commercial presence was followed by equivalent residential growth.

"There was very little housing on the west side of the village before Sears came," McLeod said.

Though headlines today often chronicle the company's present struggles, reminders of Sears' heyday are all around. These include the call letters of Chicago radio station WLS -- which stands for "World's Largest Store" for the four years Sears owned the station in the 1920s -- and the name of Schaumburg's massive Woodfield Mall, which honors both Robert Wood and iconic Chicago merchant Marshall Field.

But for a business based in the greater Chicago area for more than 130 years, Sears' longevity and influence are truly historic, Mahoney said.

"They've hung on longer than the stockyards," she laughed.

• Illinois 200 is produced as a project of the Illinois Press Association and the Illinois Associated Press Media Editors.

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Sears' latest $100 million loan again comes from CEO's firm
By Lauren Zumbach
Chicago Tribune
January 12, 2018

Sears Holdings Corp.'s most recent cash infusion came from some of its most loyal lenders: affiliates of Chairman and CEO Edward Lampert's hedge fund, ESL Investments.

Hoffman Estates-based Sears announced Wednesday it had received a $100 million loan, but it did not disclose the source of the funds. In a regulatory filing Thursday, Sears said entities controlled by Lampert's hedge fund provided the loan, which was backed by "substantially all of the unencumbered intellectual property of the Company and its subsidiaries, other than intellectual property related to the Kenmore and DieHard brands, as well as by certain real property interests," with some exclusions.

The deal would let Sears borrow up to $200 million more from other sources using the same collateral.

Protecting the Kenmore and DieHard brands lets Sears continue seeking ways to generate more cash from its best-known and strongest brands. Sears has widened sales of both brands outside Sears stores, notably listing Kenmore and DieHard products on Amazon. Sears sold its Craftsman tool brand to Stanley Black & Decker last year in a deal valued at $900 million.

The $100 million loan is the latest line of credit from Lampert and affiliates of his hedge fund, bringing the total they have lent in the past two years to more than $1.6 billion, with varying amounts outstanding at any given time.

Sears declined to comment Friday on discussions with lenders. On Wednesday the company said it is taking other steps to try to strengthen its balance sheet, including cutting an additional $200 million in costs, outside of store closures, and attempting to refinance more than $1 billion in debt.

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Sears Will Be Lucky To Make It Through 2018
By Daniel Jones
Seeking Alpha
January 11, 2018

Maybe no company in recent history has fought as hard as Sears Holdings) has in order to survive. Despite plummeting sales and massive cash outflows, the once-grand retailer continues to financially innovate in the hopes that they can make it back to profitability and survive for the long haul. New efforts particularly have caught the attention of investors, but absent a miracle, the business may not make it through this year.

Management is raising cash & pushing lenders to let up

No matter how you look at it, the past year has been especially bad for Sears (even by Sears' standards). Even after seeing shares rise 5.1% on January 10th in response to fresh news regarding its survival plans, the company's share price was still trading 77% below its 52-week high. This translates to a market capitalization of $354.05 million. In spite of this low equity value, though, management was able to raise $100 million in new financing from lenders, plus they are currently in the process of trying to get a further $200 million.

In addition to these arrangements, the retail chain is in talks with Pension Benefit Guaranty Corporation to get $407 million in additional first-lien debt through a credit facility, plus a further $200 million in a second-lien tranche. Assuming this comes to fruition, it will come at a cost to shareholders beyond just interest and future principal payments. As collateral, Sears is offering up 138 of its stores in what is called a "ring-fence arrangement". For lending/borrowing purposes, these 138 stores, which management said have an aggregate value of $985 million, will be broken up into a separate legal entity that will serve to close those assets off from potential bankruptcy. The retailer will still own these assets, but should a Chapter 11 filing (or similar action) take place, the lender will have first dibs on the underlying assets.

Raising additional funds isn't Sears' only hope though. While specifics have not been provided, the firm said that it is in discussions with lenders to try and change the terms of some of its debt with a value in excess of $1 billion. Management said that this could take the form of reduced interest expense, a longer duration on the debts in question, or it could be a mix of the two. One positive indicator is that the business was able to get other lenders to relax some of its covenants on a short-term basis and to increase the advance on inventories from 65% of their stated value to 75%.

The scariest of these changes, from my view, is management's agreement to ring-fence some of its assets. If done properly, the risk to the lender in question is low. This has positive attributes to it, but it also puts that lender (or lenders) in a position where they don't care about the overall health of the business. If Sears fails, they can walk away with their collateral and there should be no real threat to their assets from other parties. This doesn't carry the same level of care that typical lending arrangements would otherwise incentivize.

Performance is still horrible

In its press release, the management team at Sears said that the company's goal for this year is to return, at last, to profitability. In pursuit of that, the business claims to have identified a further $200 million (unrelated to store closures) in potential cost reductions. This is an obvious positive and it's not unreasonable to think that the business could break even or profit in 2018. After all, for the fourth quarter of 2017 the business is forecasting a net loss of between $200 million and $320 million, either of which would be a sizable improvement over the $607 million loss reported the same time a year earlier.

That said, profit isn't what Sears needs right now. Rather, what the retailer needs is positive cash flow and there is no evidence that I've seen that indicates that's likely to improve materially, if at all. In the first three quarters of 2017, for instance, the business generated negative cash flow of $1.90 billion. This compares to an outflow of $1.41 billion during the same three quarters of its 2016 fiscal year. In the three years ending in 2016, total operating cash flows totaled $4.935 billion. It was only due to net asset sales of $3.540 billion and similar separation-related activities that brought in $1.234 billion on a net basis that the business was able to survive. During tough times, profitability is a positive, but ensuring the business has the cash flow it needs to avoid or at least mitigate financing needs is significantly more important.

Even though asset sales announced over the past several months are expected to bring in cash for Sears, neither those nor cost reductions will likely help the firm on anything beyond a short-term basis. This is because of the role that comparable store sales play on the retailer. During the first two months of its fourth quarter for last year, comparable store sales at its locations fell by between 16% and 17% versus a year earlier. Adjusted for pharmacy and electronics differences, this number is between 14% and 15%. To put this in perspective, adjusted comparable store sales in the first three quarters of 2017 fell 12.8% compared to 2016. This is on top of years of declining comparable store sales and, often, when the low margin retail space is more affected on the bottom line than on the top when comaparable store sales contract.

Beyond revenue and cash flow, there's also the balance sheet Sears and its shareholders are stuck with. As of the end of its latest fiscal quarter, the retail chain had a $4.01 billion negative book value. Not only this, but its total debt stood at $4.40 billion. This reeks of insolvency and further bolsters my argument that what Sears needs most right now is cash flow. Fortunately, asset sales will help to some degree, but for as long as comparable store sales suffer these will be nothing but a short-term fix.


Fundamentally, there's no doubt about it. Sears is suffering and is nearing its end. If management can lock down all the financing they are striving for, the business might be able to make it into 2019, but that would probably be it. Without the financing and absent further asset sales, the firm will be hard-pressed to survive through 2018. Large cash outflows and falling performance across its stores will offset any profitability management might be able to achieve this year. Indeed, management's statement that it will consider "all other options" in an attempt to maximize shareholder value should its financing strategy fail may only be able to refer to Chapter 11 or some other highly-dilutive move.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Sears looks to strengthen finances, or 'consider all other options'
By Lauren Zumbach
Chicago Tribune
January 10, 2018

After another holiday season of steep sales declines, Sears Holdings Corp. said it is trying to refinance more than $1 billion in debt and seeking other deals to strengthen its balance sheet.

But if those steps fail, the company's board "will consider all other options to maximize the value of its assets," the Hoffman Estates-based department store chain warned Wednesday in a news release.

Sears said it has identified up to $300 million in additional financing and is planning another $200 million in cost cuts. The moves "make clear our determination to remain a viable competitor in the challenging retail environment," Sears Chairman and CEO Edward Lampert said the release.

They were also meant to help the company push back against skepticism among outsiders and win support from lenders and vendors, Lampert said in a blog post on the company website, where he touted steps the retailer had taken over the past year and a half to increase cash reserves and cut costs but acknowledged bigger changes were needed.

"While these actions have so far helped our Company survive the so-called 'Retail Apocalypse,' many observers are not persuaded that Sears Holdings can be a viable competitor in the long term," he wrote. "It is obvious that to overcome such skepticism and obtain the support of outside lenders and our vendor community - which is crucial to the success of any retailer - we need to undertake further measures."

Last week, Sears said it plans to close 103 stores, on top of 63 already closing after the holidays. Sears said Wednesday it had identified ways to save another $200 million in costs unrelated to those store closures. That's on top of $1.25 billion in costs Sears said it saved last year.

The company also said it received a $100 million loan "supported by ground leases and select intellectual property," which could be expanded by another $200 million under certain circumstances, but declined to comment further on the source of the funding or specific assets used to secure it.

In the past, Lampert and affiliates of his hedge fund have contributed, lending the company $600 million last year backed by mortgages on Sears' properties.

The retailer's shares closed at $3.29 on Wednesday, up 5 percent.

Sears' holiday sales results won't help efforts to convince skeptics. Several retailers, including Macy's, Kohl's and J.C. Penney, reported year-over-year improvements in holiday sales, citing the strong economy, confident consumers, and payoffs from investing in store and online services. Sears, however, said its sales at stores open at least a year declined 16 to 17 percent in the last two months of 2017.

Both Fitch Ratings and S&P Global Market Intelligence put Sears on short lists of chains at risk of defaulting on debts, which in Sears' case added up to $752 million due in 2018 after a pair of December transactions that paid down some debt and gave it an extension on another $400 million. In October, Sears announced it would no longer sell Whirlpool appliances, saying the company’s demands made it difficult to sell its products at a competitive price.

Earlier this week, Lands' End CEO Jerome Griffith said the company, spun off from Sears in 2014, was working to become less reliant on the department store chain. The overwhelming majority of Lands' End's stores are currently inside Sears, but Lands' End plans to open six new independent stores this year, the first in Chicago this spring. Lands' End plans to have 40 to 60 in the next five years.

"It's our expectation that our Sears business at a point in time will go away and that we'll be talking directly to the consumer through our own stores," Griffith said at a conference with investors.

Sears, meanwhile, reaffirmed its goal of returning to profitability this year. The company last reported an annual profit in 2011.

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Bets Against Malls Come Up Short
By Esther Fung
The Wall Street Journal
January 10, 2018

Owners refinance debt and find new tenants to fill the vacated spaces A rash of store closures and bankruptcies last year prompted some investors to bet against debt tied to the retail property sector.

So far, at least, the bets haven't paid off.

The wager against commercial mortgage-backed securities largely has focused on the CMBX 6, a credit-default-swap index that tracks the values of bonds backed by mortgages on malls as well as office buildings and other commercial properties.

While a few slices of the index have slumped due to the perceived greater exposure to struggling mall properties and retail bankruptcies, more mall mortgage defaults would have to occur before investors get a windfall.

"Has the bet paid off? Not quite," real-estate data provider Trepp Inc. said in a recent report. So far, Trepp said, only four loans tied to the CMBX 6 incurred losses, totaling just $4.3 million. Credit default swaps are insurance like contracts that pay out when a company defaults on its debts.

Some landlords have refinanced their debt or found new tenants to take up space vacated by departing retailers. At the same time, some retailers have worked out deals with landlords that allowed the owners to keep up their mortgage payments. A positive holiday sales season also took some shine off the trade.

The owner of Holiday Village Mall in Great Falls, Mont., refinanced its loan on the property when it reached maturity last month. The landlord was able to secure new leases with Hobby Lobby and Pet Smart last year after Sears Holdings Corp. in 2014 closed its Sears store and auto center at the two-story mall.

Overall, the delinquency rate for commercial mortgage backed security loans made after the financial crisis is 0.52%, while the delinquency rate for the CMBX 6 constituency is 0.96%, according to Kroll Bond Rating Agency.

"It is higher, but a delinquency rate of less than 1% is not devastating," said Steve Kuritz, managing director at Kroll.

Some short sellers—investors who bet a company's share price will fall—anticipated that Sears Holdings would be in bankruptcy proceedings by now, which would result in a wave of store closures in malls across the country that would be tough to fill quickly.

While Sears said on Thursday that it would close an additional 103 Sears and Kmart stores in March and April on top of the 63 stores it said in November that it would close, it still has more than 900 Sears and Kmart stores in business.

Some short sellers did make money from the decline in weaker slices of the CMBX 6 last year. The portions of the index rated BB and BBB-minus declined 12.1% and 9.5%, respectively, in 2017.

Steve Pei, founder and chief investment officer at Los Angeles- based hedge fund Gratia Capital LLC, said the magnitude of the declines more than offset the 3% coupon cost of the trade, so it was profitable for his firm.

"There will be a lot more closures in the next few years in our view; the trend is pretty clear-cut even though the pace may fluctuate," Mr. Pei said. He added that his firm has taken both long and short positions- wagers that shares would rise or decline—in individual retail stocks.

Investment firm Alder Hill Management LP, which issued a 58-page report last year that described its bet on lower quality malls and how malls would struggle with mortgage repayment, remains in the trade, according to people familiar with the matter.

The report, issued in January 2017, said 26 out of roughly 40 mall loans in the index were expected to default before maturity or in 2022.

"The number of distressed retail mortgages will likely increase as they inch closer to their scheduled maturity dates and collateral performance continues to deteriorate," according to the report from Trepp.

The question is when. Landlords say they remain positive about their ability to get new tenants, pointing to retailers and entertainment operators that are still expanding.

At the Newgate Mall in Ogden, Utah, a 141,000-squarefoot Sears store is scheduled to close in coming months. The mortgage loan backing Newgate Mall is linked to the CMBX 6 index. Last year, the landlord signed leases with retailer Down East Home & Clothing, which took up space vacated by Sports Authority.

It also leased a lot on the outer edge of the mall to Fly High, a trampoline park operator. It is searching for a replacement for Sears.

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Retailers Get Bump From Holiday Sales
By Imani Moise
The Wall Street Journal
January 9, 2018

After a year marked by same-store-sales declines and store closures across the sector, retailers are reporting strong sales during the critical holiday shopping period from November to December.

Kohl's Corp. said Monday comparable sales over the holidays jumped 6.9%, versus a 2.1% decline a year earlier. Shares jumped $2.54, or 4.7%, to $56.90 as the department store chain also raised its annual adjusted profit outlook.

Kohl's, helped by stronger store traffic, is the latest retailer to feel the holiday cheer. Its report comes after Macy'sInc. and J.C. Penney Co. last week reported improved sales in the holiday period, benefiting from a healthy economy and strong consumer spending.

Macy's said its same-store sales rose 1% in November and December from a year earlier, while J.C. Penney reported a 3.4% increase.

The holiday season could give Kohl's back-to-back quarters with comparable sales increases. The retailer reported a slight rise in the metric in its third quarter after more than a year of declines, citing strong back-to-school sales. Kohl's executives have said that the department store has benefited from sweeping store closures at its mall-based competitors.

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Analysis: Holiday performance puts Kohl's firmly in the winner's circle
By Neil Saunders
Chain Store Age
January 8, 2018

After good updates from both Macy's and J.C. Penney, Kohl's positive sales growth comes as no surprise. However, the extent of the increase is impressive and suggests that Kohl's grew its market share over the holiday season. In our view, the 6.9% uplift in comparables puts Kohl's firmly in the winner's enclosure.

Admittedly, growth comes off the back of a weak prior year, when comparables declined by 2.1%. Despite this, we believe that Kohl's performance demonstrates that many of the initiatives undertaken over the past year are now paying off.

Among these are the improvements in the in-store offer, with the thinning out of the range and the incorporation of more branded products both helping to boost footfall and conversion rates over the holidays. Some of the more radical steps, such as allowing Amazon returns in some stores and the introduction of Amazon shop-in-shops also paid dividends.

Away from stores, digital was the star of the show and was the underpinning of Kohl's better numbers. Again, the presence of branded products helped to drive traffic to the website. Omnichannel services, like collect in store, were also highly valued by customers seeking convenience over the holiday period.

Kohl's marketing also deserves mention for the role it played over the holidays. Focusing on both the benefits for gift receivers and gift buyers (who could get Kohl's Cash) went down well and won over customers.

Like other department store groups, Kohl's has further work to do in the year ahead. However, these numbers signal it is firmly on the right track.

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Why some malls may be in deeper trouble than you think
By Crain's Chicago Business
January 8, 2018

The damage inflicted on America's malls by the rise of e-commerce may be worse than it appears.

As embattled retailers announce store closures at a record pace, some tenants are shrinking their footprints more quietly by choosing not to renew expiring leases, according to a report from property-research firm Green Street Advisors. Of 2,468 in-line stores that closed in 2017-a category that excludes department stores-979 weren't announced, the report produced by the firm's advisory and consulting group shows.

"When leases expire, they just don't renew them, as opposed to breaking leases and doing something a bit more aggressive," Jim Sullivan, president of the advisory group, said in an interview.

The study examines the downsizing trends of the top 25 national retailers lining the hallways of malls across the U.S. These tenants have a bigger impact on landlords' profitability than the large anchors such as Macy's or Bloomingdale's, which typically pay minimal rents or own their stores.

"While the department stores take up a lot of space, they don't generate much revenue for the mall owner," Sullivan said. "The mall owner makes most of its money from the in-line tenants."

Even retailers that aren't outwardly struggling are constantly evaluating their options and making strategic decisions about closing stores, according to Green Street. Because in-line tenants have higher rent burdens and shorter lease terms than anchors, they are more likely to leave a center where sales are sagging, and can be better indicators of future problems at a property, the analysts wrote.

More than two-thirds of U.S. malls saw a decrease in national retailers, including chains such as Wet Seal, Bebe and Rue 21, which announced a combined 427 store closings last year, Green Street data show. Companies that closed stores without making public statements include Stride Rite, which shuttered 160 locations, and Hallmark, with 101 closures.

There are still merchants that are expanding, such as fast-fashion retailer H&M and Bolingbrook-based cosmetics chain Ulta Beauty, according to Green Street. Still, these companies are growing at a slower rate than successful retailers of the past, and are more selective about the malls they enter, the analysts wrote.

The best malls are faring relatively well when it comes to national retailers, though they haven't escaped unscathed, while the worst centers have already lost many such tenants, according to Green Street. It's the malls in the middle of the quality spectrum where the departures of in-line tenants could prove most telling, the data show.

"Those are the malls that are going to make it or get a lot worse over the next 10 years," Sullivan said.

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Sears to Shut 100 Stores in Coming Months
By Alsha Al-Muslin
The Wall Street Journal
January 5, 2018

Sears Holdings Corp. is closing more than 100 stores in the next few months as it continues to reduce its footprint after a years long sales decline.

The 64 Kmart stores and 39 Sears stores will close in March and April, the company said on Thursday. Liquidation sales will begin as early as January 12.

The company said it told associates about the store closures on Thursday. Eligible associates affected will receive severance and will be able to apply for open positions at other Kmart and Sears stores.

Sears "will continue to right size our store footprint in number and size," the company said.

In November, the company revealed plans to close 63 stores by late January, comprising 45 Kmart and 18 Sears locations. The company operated roughly 1,100 stores at the end of its quarter ended in October.

Chief Financial Officer Rob Riecker said during an earnings call in November that a reduced footprint and specialized stores selling mattresses, appliances and car services will help the struggling retailer get back on track.

Sears once dominated American retailing and helped build famous brands, including Whirlpool appliances, Craftsman tools, Schwinn bicycles and Allstate insurance.

Sears shares fell 4.8% in Thursday trading and have fallen 65% in the past year.

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Sears Stopped Buying National TV Ads in Critical Holiday Season
By Suzanne Vranica & Suzanne Kapner
The Wall Street Journal
January 2, 2018

It is highly unusual for a retailer reliant on brick-and-mortar stores to back off TV ads during the holidays, advertising experts say

The holiday season is typically a time for retailers to blanket the airwaves with commercials. This year, one company was noticeably absent: Sears Holdings Corp.

The struggling parent of the Sears and Kmart stores hasn't run paid national television commercials since late November, according to ad research firm iSpot and a person familiar with the situation. The Kmart brand has been absent from national TV networks since Nov. 24, iSpot said, while Sears hasn't run a paid national TV spot since Nov. 25-the Friday and Saturday after Thanksgiving.

That compares with about $8.4 million the Sears brand spent on national TV ads in December 2016, while the Kmart brand shelled out roughly $6.5 million during the period, according to iSpot estimates.

Sears Holdings Chief Executive Edward Lampert has championed the use of digital marketing over traditional TV and print advertising, arguing that digital is more cost-effective and quantifiable, according to people familiar with the situation. And at first, other Sears's executives agreed the company needed to rebalance it's marketing to focus more on digital, these people said.

But many executives have come to believe the company has gone too far and the retreat from traditional forms of advertising is hurting the business, these people said.

Sears said in a statement that it is always "evaluating the effectiveness" of it marketing channels. "This ongoing evaluation has meant we have made significant shifts over the past few years in where we've allocated our resources, including less traditional print and television, and more digital and social channels," the statement continued. It pointed to recent marketing efforts including having its Kmart brand integrated into the late-night talk show "Jimmy Kimmel Live."

For a retailer to back off TV ads during the holidays is highly unusual, ad experts said. "Retailers establish their value and relevance with consumers during key shopping times," said Dean Crutchfield, a corporate branding expert.

Indeed, retail rivals such as Macy's Inc. and J.C. Penney Co. spent tens of millions of dollars during the final month of 2017. Macy's shelled out some $32 million on national TV ads during the first 29 days of December while Penney spent roughly $27 million during the period, iSpot estimates indicate.

Struggling Toys "R" Us Inc., which filed for chapter 11 bankruptcy protection in September, spent about $13.3 million on TV ads during the period, according to iSpot.

Sears Holdings, of Hoffman Estates, Illinois, has been slashing expenses as it struggles to turn its business around.

Sears losses totaled $565 million for the nine months ended Oct. 28, bringing cumulative losses since 2011 to $11 billion. Revenue in the period fell 23% to $12.33 billion as the company closed stores and sold less from existing locations. As of the end of October, it operated 1,100 Sears and Kmart stores, down from 1,500 a year earlier.

In December, the retailer extended terms of a $400 million loan and announced new planned borrowings to cover pension contributions.

As its business has shrunk, Sears has scaled back spending on measured media. Sears spent $285.1 million on paid advertising in 2016, of from $664.2 million in 2011, according to estimates from Kantar Media, an ad-tracking company owned by WPP PLC; the estimates don't include some forms of digital advertising.

While Sears cut its spending on TV and newspaper ads by roughly two-thirds during the period, it ramped up spending on digital marketing. By 2016, digital had surpassed newspapers and was second only to TV in terms of Sears's spending, according to Kantar.

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