Sears Holdings (SHLD) continues to close stores at a rapid rate, with the latest count indicating 245 store closures in 2017. This is helping Sears get to its $1.25 billion annualized cost savings goal. Sears is also losing a substantial amount of revenue from store closures though, as its cost savings initiatives will result in probably at least $2 billion in lost revenue.
- Sears appears to be closing at least 175 Kmarts and 70 Sears locations in 2017.
- This is helping drive its $1.25 billion in annualized cost savings, but will likely come with a $2+ billion revenue hit.
- Cuts in non-revenue generating areas seem substantially smaller.
- Inventory reductions may benefit Sears’s cash flow by hundreds of millions in 2017.
- Kmart store base is shrinking rapidly, with a 40% of stores closing between the start of 2016 and beginning of 2018.
Savings Come With A Revenue Hit
Sears mentioned that it expects $1.25 billion in annualized cost savings from its initiatives, but it appears that the bulk of those savings will come from store closures. Those store closures will also result in a significant revenue loss. Sears indicated that the initial 150 stores set for closure had generated around $1.2 billion in revenue. Thus its current store closure list probably is associated with around $2 billion in revenue.