Kmart to sell as many as 54 stores to Sears

Published: Thursday, July 1, 2004 at 6:01 a.m.
Last Modified: Wednesday, June 30, 2004 at 11:51 p.m.
DETROIT - Kmart Holding Co. will sell as many as 54 of its stores to Sears, Roebuck and Co. for as much as $621 million, the retailers said Wednesday. Sears is also acquiring leases on seven stores currently held by the retailing giant Wal-Mart Stores Inc.
The exact number of the Kmart stores and their locations have yet to be determined. Kmart will continue to operate the stores that are to be sold until March or April 2005. Sears has agreed to consider offering jobs to Kmart employees at the converted stores, Kmart said.
The announcement came less than a month after Troy-based Kmart announced it was selling as many as 24 stores to Home Depot for as much as $365 million.
An announcement of a deal with Sears had been widely expected. Edward Lampert, chairman and majority shareholder of Kmart Holding, also is a large Sears shareholder.
Julian Day, chief executive of Kmart, said the locations being scooped up by Sears and Home Depot represent about 5 percent of Kmart's store base.
"Both transactions represent opportunities to realize value, which can be utilized to improve the remaining store base and to strengthen the company," Day said in a statement. "We are not currently in discussions regarding any additional significant store sales, although we will continue to evaluate opportunities as they arise."
He appeared to address growing concerns that Lampert is more interested in selling off Kmart bit by bit than reviving the company's retail business.
After the Sears and Home Depot transactions, Day said Kmart "will be able to direct all our attention on building upon and accelerating the considerable operating improvements that we have already achieved."
Kmart, which emerged from bankruptcy in May 2003, has achieved a speedy financial turnaround, posting a profit in the previous two quarters and amassing $2.2 billion in cash. But sales have continued to drop.
Sears, meanwhile, said it also will acquire the leases on seven Wal-Mart stores.
"These transactions will jump-start our strategy to grow the Sears brand off-mall, increase our points of distribution, and acquire well-located real estate at a fair value in key markets for Sears," said Alan Lacy, Sears chairman and chief executive.
Sears said it plans to convert three of the newly acquired stores to its new Sears Grand concept, with most of the rest to have a similar format. Sears Grand stores, introduced last fall, offer grocery and convenience items in addition to traditional Sears fare such as clothing, home appliances and tools.
Fighting to keep from losing more market share to Wal-Mart and other big-box competitors, Sears said it expects to be operating 12 to 14 Sears Grands at the end of next year.
The company said it will spend about $200 million to remodel the stores, completing their conversion by the fourth quarter of 2005.
Kmart shares climbed $3.78, or 5.5 percent, to $72 in midday trading on the Nasdaq Stock Market. Sears shares fell 40 cents to $37.86 and Wal-Mart rose 37 cents to $52.35 on the New York Stock Exchange.

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