Kmart workers seem to believe all of their stores will be shuttered and that the company is bound for bankruptcy, Business Insider reported after speaking with store-level employees.
Sears Holdings, Kmart’s parent company, had already announced the planned closure of 68 Kmart stores for this year, and the retailer’s remaining 941 stores are reportedly being placed into phases, where each phase includes a cost-cutting measure like layoffs or shift length reductions, according to store associates.
Employees also told Business Insider they have seen stock room purges at the store, where all merchandise must be moved from the back room to the sales floor (overhead shelves will be added for anything that doesn’t fit), and employee message boards are saying stores typically have nine months to live after stock room purges.
In an effort to allay the speculation, Sears said in a blog post Wednesday that it is “highly focused on restoring profitability to the company and Kmart remains a key part of our asset portfolio.”
Sears Holdings is in dire need of efforts to restore profitability as the company reported a net loss of $471 million for the first quarter ended Apr. 30 compared to the prior year quarter’s $303 million loss.
Earnings before interest, tax, depreciation and amortization (EBITDA) was a $127 million loss and comparable store sales at Kmart fell 5 percent. Sears attributed the sales slump at Kmart to reduced demand for consumer electronics, grocery and household items, pharmacy, drugstore and home categories. At Sears, where comp sales were down a higher 7.1%, home appliances, apparel, electronics and footwear purchases were all down.
As of the first quarter end, Sears Holdings’ total long-term debt was $3.4 billion, up from $2.2 billion at the end of January.
Addressing the stock room purges, Sears said, “Our store associates are currently rolling out a phased project that gets our newly-delivered products on the stores’ shelved immediately rather than in the stock rooms and ensure that the member does not wait in line at the checkout.”
The retailer said the changes will help Kmart stores run more efficiently.
“We continue to educate associates on the strategy, just as we continue to evaluate and optimize our cost structure with a focus on store-level marketing expenditures, staffing levels and improved inventory management,” Sears said.