Sears turns to sublets

Jennifer Collins Sep 23, 2011

Sears turns to sublets

Jennifer Collins Sep 23, 2011

Bob Moon: If you’re struggling to pay the bills, this idea might sound familiar: It pays to take on a roommate.

Sears has offered to take on roommates — typically other stores — at almost all of its locations across the country. Now, it’s announced two new deals.

Marketplace’s Jennifer Collins reports on the economics of the subletting.

Jennifer Collins: Sears is what’s known in the retail business is over-stored: too much space, too few sales.

Matt McGinley: People just aren’t going to their stores in the way they used to.

Analyst Matt McGinley of ISI Group says Sears stores bring in $1.28 a square foot in profit — a year. For Macy’s, that figure is closer to $15. For Autozone, it’s $55. McGinley says Sears:

McGinley: Could rent that space to a retailer that can ultimately give them higher profitability in that space than what Sears can get.

In California, Sears is giving up a chunk of its space to an athletic club, a grocery store, a Forever 21.

Faith Hope Consolo is with Prudential Douglas Elliman Real Estate.

Faith Hope Consolo: Will it help them in sales of their other products? I could see how this synergy could be interesting.

Best Buy and J.C. Penney have also announced subleasing deals. Marianne Bickle of the Center for Retailing at the University of South Carolina says stores have gotten more efficient about stocking merchandise.

Marianne Bickle: So retailers are getting really smart on how to really have a smaller footprint.

Sears, which also owns Kmart, has around 4,000 spaces available. Analyst Matt McGinley says some are more desirable than others.

McGinley: They have sites in locations like Flint, Mich., where there’s very little chance of them being able to have a retailer come in.

McGinley says the only solution for Sears may be the ultimate downsizing: closing stores.

I’m Jennifer Collins for Marketplace.

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