Sears Tax Breaks are Ending, so that must mean its Time to Hold up the Citizens Again!

Sears Holdings Corp. rattled Illinois officials Tuesday when it announced, less than two weeks after getting state tax breaks worth $150 million, that it planned to close more than 100 Sears and Kmart stores.

State Sen. Ira Silverstein, D-Chicago, said he was "shocked and disappointed."

"We gave them a beautiful incentive package," Silverstein said. "They put a lot of pressure on us to do this package because they wanted to stay in Illinois, and I think there's some explaining that has to be done by Sears."

The deal also extends a special taxing district, reducing the Hoffman Estate-based company's local property tax bill for another 15 years by an estimated $125 million for the period.

Gov. Pat Quinn said he was unhappy to hear of Sears' troubles, but he pointed out that the tax incentive agreement deals with the company keeping its headquarters in Illinois, not with retail operations.

"This is a nationwide story. Those stores aren't all in Illinois," Quinn said. "I hope not too many of them are in Illinois. But the headquarters of Sears is located in our state. We're happy about that."

On Nov. 17, Sears reported a third-quarter loss of $2.57 per share on revenue of $9.56 billion, missing analysts' estimates of a loss of $2.29 a share and revenue of $9.6 billion. Gross margin also fell to 25.6% from 26.4%, pressured by higher costs at Kmart.
This isn't a new story, of course. Sales at Sears Holdings have dropped every year since the company was created in 2005. In an effort to shore up profit, Sears is contracting out some of its storied brands like Craftsman and DieHard to other retailers like Costco Wholesale and Ace Hardware. The rub is though that shoppers now have even less of a reason to step in a Sears store.
The company is also leasing out some of its floor space in its massive fleet of 3,700 stores to retailers like Forever 21 and Whole Foods Markets .
In the near term, these strategies are expected to boost earnings and cash flow, but experts agree its only a short-term fix that may ultimately just speed up Sears' descent into irrelevance.
"Sears is past the point of no return," says Mark Cohen, a professor at Columbia Business School who is also a former chief executive and chairman of Sears Canada. "I don't know if they will necessarily go out of business in 2012, but they are digging themselves into the ground."

NEW YORK (AP) -- Sears said Thursday that it's unloading some of its profit-busting stores, but the retailer fell short of revealing how it plans to woo shoppers back into its remaining ones.
Investors have long speculated that the troubled retailer could sell off its massive real estate holdings to generate extra cash. But industry watchers say that will do little to solve Sears' main problem: Rivals have been able to lure customers away from the chain because of its drab stores and unexciting merchandise.
"The image is atrocious. The stores are old and they're run down. They don't look like a nice place to visit," said Ron Friedman, a partner in the retail and consumer products industry group of accounting firm Marcum, LLP in New York. "I don't think that the Sears we see today can be around from a year today. It has to change."

On Thursday Wal-Mart (WMT), the largest retailer in the world, reported second-quarter operating earnings of $762 million on $113.5 billion in sales. The results were more or less in line with estimates. (See: Did Wal-Mart Just Douse Hopes for a Recovery?)
Also reporting this morning was Sears Holdings (SHLD). The former holder of the title 'World's Largest Retailer' lost $132 million, or $1.25 per share. Revenues fell 6.6% to $9.47 billion. The average analyst estimate was for a loss of 86-cents, in line with what Sears called the "adjusted loss per share".
In response to these results shares of Sears were recently higher by nearly 6% while Wal-Mart was down 3.4%. Analysts and pundits groping for explanations on the juxtaposition are at a loss. No matter what you hear the Sears rip and Walmart dip aren't a function of expectations being higher for Wal-Mart than they were for Sears, though they were. The SHLD move also has nothing to do with the company's turnaround plan making progress. It isn't.
Sears' quarterly numbers don't matter because Sears isn't a retailer.
Eddie Lampert's ESL Investment's controls 62% of SHLD stock. Mr. Lampert is a lot of things, most of them positive. He's smart, focused, he's made a ton of money for himself and a decent chunk of change for others. But he's not a merchant.
Lampert is way too smart to run a company so operationally bad. The company posted negative comparable sales figures across the board but Sears' margin improved by 100 basis points by cutting SG&A expenses by over 6%. Lampert isn't even trying to run stores; he's engineering a fighting retreat from the retail industry.
Sears is selling off more than 1,100 Hometown and Outlet Stores in a move that could generate up to $500 million. According to streetinsider.com, Lampert is shopping Sears' Kenmore, Craftsman and DieHard brands and has already moved the assets into a separate unit of the company.
Sears shares are strong today because the company is making progress on its liquidation and taking step away from bankruptcy in the process. Lampert isn't telling anyone his larger plan but it seems to involve keeping the stores alive long enough to sell off the company's other assets.
Lampert isn't competing with Wal-Mart. He's competing with the banks and the bears. Whatever finish line he has in mind it would seem he's the winning the race.