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Sears Stores Closings Shed Further Light On Physical Stores’ Struggles

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Sears is the next in a line of big name brand retailers shuttering brick-and-mortar stores in 2016, after what the retailer described as a “challenging” holiday season. The department store, which is desperately attempting to turn around its business, will accelerate the closing of approximately 50 unprofitable Sears and Kmart stores within the next few months, according to a company statement.

The anticipated store closures represent yet another step Sears has taken to downsize its physical presence. The amount of operating Sears department stores has dipped from 868 in 2011 to 708 as of now, while Kmart is down to 950 locations from 1,309 just five years ago.

The century-old retailer is following in the footsteps of Macy’s, Walmart, Gap, Sports Authority and Finish Line, all of which will be downsizing their physical footprint in 2016 and beyond. For its part, Sears expects to take a big hit in same store sales at its Sears Domestic and Kmart locations, which experienced a 7.1% decline in Q4 and a 9.2% decline for the full fiscal year.

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The accelerated closings serve as another reminder that retailers are taking every step possible to save costs in an environment that appears to provide them with less returns each passing year. With many retailers cutting their underperforming stores, these merchants must now more than ever focus on emulating the strategies that are working in their best performing stores throughout the entire business.

The expensive overhead costs of employees, real estate and maintaining inventory mean that stores must continually generate enough revenue to justify their staying open. In the case of Sears, it’s clear that the retailer feels further cost reductions are necessary to stay afloat. The retailer, which expects 2015 revenues to total $25.1 billion, has announced overall cost cuts of $550 million to $650 million.

While predictions of the demise of the brick-and-mortar store as a concept have long been exaggerated, the store closing reports show that changes do need to take place among the big box and department store models, with these merchants furthering an emphasis on quality over quantity.

The success of any of Sears’ turnaround efforts are yet to be seen, but the retailer intends to bolster this quality in large part through the performance of its apparel business, specifically with changes to sourcing, product assortment, space allocation, pricing and inventory management practices.

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