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Penney’s and Sears Predicted to Close Hundreds of Stores in 2013

Yesterday, 24/7 Wall Street released predictions for 4 retailers that are likely to close in 2013. The top two, Best Buy and Barnes and Noble, have had their core businesses eroded by and other websites, and their big box model has proven inflexible in an age of spiraling logistics costs.

More surprising were numbers three and four. 24/7 Wall Street predicted that Sears Holding Corp., parent of Sears and Kmart will close between 275 and 400 stores this year, out of a U.S. total of 2,188. J.C. Penny is predicted to close 300 to 350 stores – nearly 1/3 of their total of 1100. This comes at a time when other retailers are reporting flat or positive sales trends.

Same-store sales at Sears are down 1.6 percent and are down 3.7 percent at Kmart. CEO Lou D’Ambrosio closed 172 stores in 2012 and is leaving the company this month to be replaced by majority investor Edward Lampert, who has minimal experience operating retail.

J.C. Penney has been struggling to successfully execute its turnaround plan under former Apple wunderkind Ron Johnson. Same-store sales are down 26.1 percent from 2011 to 2012. More critically, internet sales are down 37.3% in the third quarter. Internet sales have been a strong spot for retailers across the board, and their decline indicates that middle income consumers are not just abandoning Penney’s stores, but are abandoning their brand and image.

Johnson transitioned the company from frequent heavy discounting toward a lower overhead model involving everyday low prices. The plan is credited with alienating consumers and serious harming the firm’s turnaround prospects.

24/7 based its estimates on the weakest large U.S. retailers and analyzed their store counts, financials, competition, and average savings from store closures to predict how many stores would have to close in order to restore profitability.