Sears Holdings (SHLD) Appears to be Accelerating Store Closures - Detwiler Fenton

It's no secret that Sears Holdings' (NASDAQ: SHLD) has been busy closing under-performing Kmart stores around the country for years. However, feedback being received by analysts at Detwiler Fenton suggests the number of closings is likely going to rise and there's hearing increased angst and concern from suppliers.

The firm said feedback in the marketplace over the past few weeks suggested that a large number of stores had received "going out of business" packages from the company. This was seen as a surprise in many cases and included signage for the stores and instruction for promotional cadence to begin the process of clearing our inventories.

The analysst noted increased discussion about consolidation of Appliance inventories to certain store locations, with floor sample appliances at 50% discounts. They also noted significant promotion (up to 70% of Apparel and Home last weekend) and very early exposure to Holiday goods. They've been picking up a meaningful increase in order cancelations with some large suppliers, some suggesting that the reductions could foreshadow as many as 300 store closings.

On the real estate, Wal-Mart (NYSE: WMT) could be on the other side of some real estate transactions. "From what we’ve heard, the Mass leader seem particularly interested in any locations where we’ve seen large grocery store closures in the past couple of years, which has not been unusually as this retail segment has been going through meaningful consolidation," the said. "We suspect that the strategy would be to combine and renovate in locations where it makes sense, keeping in mind that the exit of a Kmart might be the event that makes it make sense."

They said it does seem wheels are in motion with regard to a real estate monetization strategy for SHLD. "While numbers are relatively small on a WMT scale, we see it as the biggest beneficiary of any level of Kmart demise (with the exception of potential solvency advancement at SHLD)," they said. "Additional feedback suggests that Target (NYSE: TGT) and TJX (NYSE: TJX) have been felt pickup in markets where closures have occurred."

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