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More Store Closings, Asset Sales May Not Be Enough to Save Sears, Analyst Reports

Also This Week: The latest new property availabilities from firms downsizing and closing up shops in California
November 4, 2013
Sears Holdings Corp. announced a number of actions this past week prior to releasing its earnings report for the third quarter. Sears warned that its third-quarter EBITDA loss will widen to $250 million to $300 million, compared with last year’s comparable-period EBITDA loss of $156 million.

The beleaguered retail giant said it would continue to evaluate its U.S. stores by reviewing each location, including leased locations that are set to expire, and decide whether or not to renew leases for them.


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"We expect to improve our financial performance by removing unprofitable locations, and redeploying the capital tied up in those locations, while sharpening our focus around existing Sears and Kmart stores that have higher levels of profitability,” the company said. “We believe this will be accomplished without incurring significant closed store lease liabilities due to the nature of our leases.”

Chicago-based Sears also announced it was evaluating spinning off both its Lands' End and Sears Auto Center businesses.

Also, this week, Sears' Canadian operation announced an agreement to sell five store leases to Cadillac Fairview Corp. for $383 million.

Four of the five stores are in Ontario and the fifth store is British Columbia and co-owned by Ivanhoé Cambridge and Cadillac Fairview. The transaction requires Sears to vacate three of the locations by Feb. 28, 2014 and the other two a year later.

Scott Tuhy, a Moody’s Investors Service vice president and senior credit officer, noted that, as the retailer's losses widen, planned asset sales are unlikely to help.

"As losses widen, Sears is getting more aggressive in paring back non-core holdings,” Tuhy said, adding that the efforts to pare back non-core holdings could help Sears to some extent. Tuhy said the Sears Auto Center business, which Sears has been working to reposition, would likely be of greater value to other firms that have greater leverage and scale in auto parts and related services than the rest of Sears does.

“However, while these asset sales will provide liquidity, they do not help Sears overcome its bigger problem - namely, how to stem losses and stabilize revenues, Tuhy said.

Sears, which had 3,418 stores, including its Kmart brand, as of March 2007, now has fewer than 2,073 - a reduction of nearly 40%.


Facility Closures & Downsizings


Charles & Colvard Ltd. exercised its right to terminate its lease with an affiliate of Duke Realty for its space at 300 Perimeter Park Drive in Morrisville, NC. It will pay a termination fee of $112,000. The company entered into a non-binding letter of intent to lease approximately 36,000 square feet of mixed-use space at another unidentified new location, which it intends to use for its headquarters upon termination of the lease agreement.

In connection with a post-closing merger integration between Knight Capital Group Inc. and Getco Holding Co., KCG Holdings Inc. commenced a workforce reduction impacting approximately 5% of KCG’s global workforce. The securities firm is based at 545 Washington Blvd. in Jersey City, NJ, Knight had 1,269 full-time employees as of March 31, 2013.

Vertex Pharmaceuticals Inc. announced a reduction of its workforce primarily related to the support of Incivek following the continued and rapid decline in the number of people being treated with it as other new medicines for the treatment of hepatitis C virus infection near approval. As part of this restructuring, it is eliminating 370 full-time positions globally, representing approximately a 15% reduction in its workforce. Approximately 175 positions are being eliminated in Massachusetts. The company is based at 130 Waverly St. in Cambridge, MA.

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CompanyAddressCityStateClosure or LayoffNo. of LayoffsImpact Date

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Accurate Metal Solutions2100 E. Orangewood Ave.AnaheimCAClosure32611/18/2013

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Cashcall1600 S.Douglas RoadAnaheimCALayoff48612/1/2013

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Rio Tinto Minerals (U.S. Borax)14486 Borax RoadBoronCALayoff23411/27/2013

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JP Morgan Chase-Mortgage Bank9200 Oakdale Ave.ChatsworthCALayoff8811/22/2013

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Bimbo Bakeries USA10115 Iron Rock Way, Suite AElk GroveCAClosure11211/8/2013

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Novartis Vaccines & Diagnostic4560 Horton St.EmeryvilleCALayoff5411/22/2013

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Labcorp2601 Campus DriveIrvineCALayoff8412/7/2013

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Keolis Transit America601 Golden St.Long BeachCAClosure7711/26/2013

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ASIG (Aircraft Service International Group)5720 Avion Drive, Department 145Los AngelesCAClosure9011/30/2013

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McDonaldsTom Bradley International AirportLos AngelesCAClosure5512/1/2013

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NBC Universal Media5750 Wilshire Blvd.Los AngelesCALayoff9711/11/2013

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The Proud Bird11022 Aviation Blvd.Los AngelesCAClosure9611/21/2013

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Elite Slides11220 Wright RoadLynwoodCALayoff7811/30/2013

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JC'S 5 Star Outlet4410 Mills CircleOntarioCAClosure13611/30/2013

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Cashcall1 City Boulevard WestOrangeCALayoff28312/1/2013

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Accurate Metal Solutions400 Statham ParkwayOxnardCAClosure7811/16/2013

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Accurate Metal Solutions2800 Sturgis RoadOxnardCAClosure2211/16/2013

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Ricon7900 Nelson RoadPanorama CityCALayoff5012/1/2013

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Quad/Graphics1221 California Ave.PittsburgCAClosure8811/22/2013

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Silgan Containers3250 Patterson RoadRiverbankCALayoff3011/10/2013

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Sutter Roseville Medical CenterOne Medical PlazaRosevilleCALayoff6812/1/2013

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Sutter Oaks Midtown Nursing Center2600 L St.SacramentoCALayoff12812/2/2013

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Dedicated Management Group2612 Shenandoah Way & 4472 Georgia Blvd.San BernardinoCALayoff5011/9/2013

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McLane/Suneast D/B/A Mclane Southern Ca4472 Georgia Blvd.San BernardinoCALayoff5311/11/2013

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BCI Coca-Cola Bottling Company of Los Angeles1348 47th St.San DiegoCAClosure9211/8/2013

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PSS World Medical -Mckesson Corp.3000 W. Warner Ave.Santa AnaCAClosure3411/15/2013

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PSS World Medical -Mckesson Corp.1221 E. Dyer Road, Suite 270Santa AnaCAClosure411/15/2013

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King Bros.29101 The Old RoadValenciaCAClosure8311/22/2013

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Trinity Sports2067 E. 55th St.VernonCAClosure16411/30/2013



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