As department stores grapple with bloated store counts and tanking foot traffic, real estate is making more headlines than hemlines.
The latest development comes from Sears Holdings.
The beleaguered chain, which has been offloading assets to maintain liquidity, announced Wednesday that it has gained the right to monetize 140 store locations. The Pension Benefit Guaranty Corporation (PBGC), the government agency that manages private-sector pension plans, has okayed a deal in which the locations, which had been protected, are released in exchange for a $407 million contribution to the Sears pension plans. The deal also reduces the retailer’s pension plan contributions for the next two years.
“This agreement with the PBGC is another positive step forward which, upon closing, will provide our company with financial flexibility while supporting our commitment to honor our obligations to the associates and retirees covered by the pension plans,” Edward Lampert, Sears Holdings’ chairman and CEO said in a statement. “While the lower interest rate environment has had a significant, unfavorable impact on the pension plans’ funding, Sears Holdings has demonstrated its commitment to honoring this obligation.”
The department store group gave no indication as to whether the sale of the properties would result in leases that would allow the locations to continue operating or if the stores in question would close. The news follows the announcement that 63 additional Sears and Kmart stores will shutter after the holidays.
The steady cascade of store closures has been an instrumental part in allowing Sears to achieve its $1.25 billion cost savings goal, which it highlighted in yesterday’s release.
The retail group also provided a preliminary update on its third quarter, which see losses narrowing. Sears Holdings expects a net loss between $595 million and $525 million for the quarter, compared to a $748 million loss during the same period last year.
Comp store sales for the group fell 15.3%, with Sears declining by 17 percent and Kmart down by 13 percent.
As the retailer struggles to hold on, reports of the company’s strained relationships with some vendors have continue to make news. Most recently, an article The Wall Street Journal about the ways in which suppliers are keeping the chain on a shorter leash prompted a retort from the Sears in the form of a blog post that attempted to clarify specific facts from the story.