Now it's Sears' turn as retailers sound retreat
By MARK ALBRIGHT
© St. Petersburg Times, published January 5, 2001
An economy that had been losing steam faster than retailers realized has left a post-holiday hangover that's costing thousands of people their jobs and closing hundreds of stores.
Add it up. Since Christmas, Montgomery Ward said it is closing for good after 128 years, putting 28,000 out of work. Kmart gave pink slips to about 3,000 full-timers. Etoys Inc., the troubled online retailer, is closing two warehouses and firing 700 workers. Office Depot is cutting 1,590 jobs.
And on Thursday, Sears, Roebuck and Co. joined the crowd, saying it will eliminate 2,400 jobs, close 89 of its 2,109 stores and get out of the pest control business.
Of the 89 stores being closed, four are full-line department stores, including one in Homestead. The rest are Sears Hardware stores and National Tire and Battery outlets. Sears will take a $150-million charge against fourth-quarter earnings to pay for the closings and terminations.
While much of the recent layoff news has centered on the auto industry, retailers are cutting back even more. Of 133,700 jobs that U.S. businesses in the past month have said they are eliminating, 39,700 are at retailers, according to a survey by Challenger, Gray & Christmas, a Chicago employment agency.
"That's just the tip of the iceberg," said Michael Niemira, an economist with Bank of Tokyo-Mitsubishi. "Retailers will continue tightening their belts, adjusting to an economy that will have less consumer spending. All of 2001 will be a tough for them."
Official retail sales numbers won't be out for two weeks, but Niemira's firm, which tracks retail sales at 85 of the nation's largest chains, estimated Thursday that December sales gains were the weakest in years. Sales in stores open more than a year increased only a dismal 0.7 percent in December. That's down dramatically from a 6.7 percent same-store gain in the same month of 1999.
It's the worst December since Niemira's firm began tracking retail performance in 1970. Adjusted for inflation, it was the worst showing since 1995.
Retail analysts have repeatedly lowered their earnings and sales projections through the holiday season.
"Consumer spending clearly hit bottom in December," said Kurt Barnard, an economist who publishes Barnard's Retail Trend Report. "Yet even with the interest rate relief (the Federal Reserve provided on Tuesday to stimulate the economy) it is going to be months, late spring at the earliest, before any of this will filter down to Main Street."
Retailers who had been counting on a growing economy to provide enough consumer spending for gains of 3 to 4 percent through 2001 are now gearing down for half that. The cutbacks will be wrenching because retailers have been on a three-year expansion binge, opening more stores and bulking up their staffs as the stock market and consumer confidence soared to new highs.
Earlier, when it became evident the holidays would be lackluster at best, economists blamed the slowing growth of the economy on higher energy prices and six interest-rate increases the Federal Reserve imposed to ward off inflation. Now many are noting that job growth peaked well before the holidays and that personal income did not grow as fast as consumer spending through the second half of 2000. As a result, much holiday spending went on credit cards, as consumer debt soared to a 10-year high and consumer confidence plummeted.
Many big retail chains reported dismal December sales on Thursday. The weakness was essentially across the board, with only drugstores, shoe stores and consumer electronics outlets declared "relative winners" by Niemira. Discount stores and warehouse clubs once thought almost impervious to downturns were among the losers this time.
Many of the bulwarks of U.S. retail industry reported tepid sales in stores open more than a year and lowered their earnings projections: Wal-Mart Stores Inc., the world's biggest retailer, reported a 0.3 percent sales gain compared to Kmart Corp.'s 0.7 percent. Wal-Mart's performance was only a fraction of the modest 1.5 percent gain analysts were expecting. At Target Stores Inc. sales were down 0.1 percent. Dillard Department Stores was down 4 percent. Limited Inc., the nation's largest specialty apparel chain, reported no sales growth at all. Sears said sales fell 1.1 percent.
One exception: Talbots, a women's wear retailer, reported sales up 13 percent.
Montgomery Ward filed for bankruptcy court protection last week and says it will go out of business by spring, ending its 128-year history.
Sears, Roebuck & Co. said Thursday it will cut about 2,400 jobs and close 89 stores after December same-store sales declined.
Kmart fired a few thousand employees nationwide the day after Christmas after keeping its stores open around-the-clock for the last few days of holiday shopping.
EToys said Thursday it will slash its work force by more than two-thirds, or 700 jobs, and close its European operations. Its stock has lost more than 99 percent of its value in the past year.
JCPenney in November reported a third-quarter loss of $30-million. Its Largo-based Eckerd Drug unit lost $63-million.
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