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Sears to Shut Downtown Chicago Store

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Bloomberg reported that broadline retailer, Sears Holdings Corp. plans to shutter one of its Chicago-based flagship stores in April. The move is part of the company’s strategy of reducing store network and divesting underperforming assets to minimize costs, contain fall in sales and generate cash.

As per the company, the store which is located at 2 N. State St. – a prominent shopping and business district in Chicago – has been an unprofitable zone since its opening. Hence, management has decided to shut it down to minimize operating losses. The 160 employees working at this store will receive severance and can apply for job at the company’s other stores in Chicago.

Sears Holdings is making endeavors to optimize its financial performance through various measures for enhancing its growth prospects. Currently, the company is focused on improving its structure by reducing investment in sections of the company that no longer contributes significantly to its growth.

Last week, in order to slash expenses, the cash-strapped broadline retailer’s subsidiary, Sears Canada Inc. decided to outsource part of its business to a third-party vendor. For this, Sears Canada entered into an agreement with International Business Machines Corp. (IBM - Free Report) which will result in the layoff of 1,345 staff. Further, the Canadian subsidiary has opted to dismiss 283 more employees to reorganize and simplify its logistic division operations.

Furthermore, in Dec 2013, in a regulatory filing Sears Holdings revealed that it would spin off one of its subsidiaries, Lands’ End Inc. Additionally, as part of its transformation plans, the company is expected to spin off its Sears Auto Center business. The separation will provide additional liquidity and help to focus on its core business.

Sears Holdings has long been grappling with soft top- and bottom-line performances. The company’s restructuring initiatives have not been successful and Sears Holdings is constantly lagging its peers Target Corp. (TGT - Free Report) and Macy’s Inc. (M - Free Report) .

The company’s woes continued into the holiday season of 2013 as it experienced one of its most disappointing holiday shopping performances with comparable-store sales declining 7.6% for the nine-week period ended on Jan 6, 2014.

At present, Sears Holdings is concentrating on cost containment, inventory management and implementation of merchandise initiatives to inflate margins. However, the company still has a long way to go and investors are more concerned about the company’s current performance than buoying their hopes on the turnaround strategies.

Currently, Sears Holdings carries a Zacks Rank #4 (Sell).

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