People work during Black Friday deals week at an Amazon centre in Madrid, Spain. Picture: REUTERS/ANDREA COMAS
People work during Black Friday deals week at an Amazon centre in Madrid, Spain. Picture: REUTERS/ANDREA COMAS

NEW YORK — Dismal holiday results from retailers are prompting executives across the industry to shrink or adapt their stores, and rethink the cost of growing their online operations.

On Thursday, Kohl’s said it would close 18 stores after reporting weak sales, while Sears Holdings is considering selling $300m in assets after reporting yet another loss.

Best Buy warned of weak demand for electronics, and shares of Restoration Hardware plunged as much as 29% ON Thursday after it blamed poor sales on a "pullback by the high-end consumer".

Declining shopper traffic is prompting companies such as Macy’s and Wal-Mart Stores to close low-performing locations this year.

The shift to online shopping is also vexing chains: Nordstrom said it would curtail technology spending after profits fell 29% last quarter, in part because of costs related to Web sales.

In his annual letter to shareholders, Sears CEO Edward Lampert noted on Thursday that 2015 was the year when the effect from e-commerce and other factors reshaping the industry "spread more broadly to retailers that had previously proven to be relatively immune to such shifts", including Wal-Mart, Nordstrom and Macy’s.

Sears has been trying for years to adapt to the changes with limited success.

Its loss widened to $580m for the period ended January 30, compared with a loss of $159m a year ago. The loss in the recent period included a $180m write-down of the Sears trade name.

Revenue fell nearly 10% to $7.3bn. Sales excluding newly opened or closed stores declined 7.1%.

Sears said in January that it planned to close 50 stores, but on Thursday it indicated it was likely to reduce its footprint even further.

The company noted that more than half the leases on 1,253 stores expired in less than five years.

Moreover, Sears has the right to terminate space with respect to 266 stores that it contributed to Seritage Growth Properties, a real-estate investment trust it created last year.

Kohl’s, in addition to closing 18 stores, plans to open seven smaller locations.

The smaller stores will average 10,600m², compared with about 26,800m² for its full-line locations.

The retailer said the fast pace of digital sales, which increased 30% in the fourth quarter and exceeded expectations, prompted it to take a harder look at its store base.

Categories that have a high level of digital demand will have less space in the smaller stores, although Kohl’s did not elaborate.

Kohl’s profit plunged 20% to $296m for the three months to January 30 2015. Total sales for the period fell 0.8% to $6.39bn, while sales excluding newly opened or closed stores rose 0.4%. The company said it expected to fall short of a previously set goal of reaching $21bn in sales by 2017. It ended its most recent financial year with sales of $19.2bn.

In addition to a shift to online shopping, retailers are grappling with other issues, including rising wages and unusually warm weather that left them awash in inventory.

Kohl’s CEO Kevin Mansell said the company was experiencing "wage pressure" in its stores, but hoped to offset that by reducing marketing costs and inventory.

The company plans to reduce inventory by 10% per store, and is looking to use more personalised advertising to reduce its overall marketing costs.

On Thursday, Best Buy warned weak electronics sales during the holidays were expected to continue in the first half of 2016.

CEO Hubert Joly said the smartphone market, which had buoyed its sales, was approaching a saturation point.

In the quarter to January 30, domestic sales excluding newly opened or closed stores slipped 1.7% after rising 2.8% a year earlier. The company said weaker sales of mobile phones and tablets dragged down revenue. Earnings fell 7.7% to $479m.

Furnishings retailer Restoration Hardware warned on Wednesday that profit would fall 20% in the quarter to January 30. The company blamed shipping delays and weak demand, as slumping energy prices and stock market swings sapped demand for its upscale goods.

Gap ended the fourth quarter with 73 fewer Gap stores in North America, part of a continuing strategy to prune underperforming locations. Profit fell 33% to $214m in the three months to January 30, including $25m in restructuring costs. Total sales slid nearly 7% to $4.39bn. Sales excluding newly opened or closed stores fell 7%.

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