Sears could kill hundreds of American shopping malls

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Sears' decline is threatening to kill off at least 200 shopping malls, according to a new report.

The retailer has closed 22% of its stores in the last decade, and it's expected to shutter even more locations as it struggles to stay afloat following years of declining sales, Credit Suisse analysts wrote in a recent report.

When anchor stores like Sears shut down, shopping malls tend to suffer financially and eventually shut down.

That's because malls must find a replacement tenant for the massive retail space that the anchor store occupied, which is nearly impossible — especially in malls that are already financially strapped — when every major department store is reducing its retail footprint.

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TORONTO, ONTARIO, CANADA - 2016/03/08: Sears store entrance, is an American chain of department stores. Known for selling high quality clothing article from shoes to shirts. (Photo by Roberto Machado Noa/LightRocket via Getty Images)
Macy's Inc. signage is displayed at a department store in New York, U.S., on Monday, Feb. 22, 2016. Macy's Inc., the largest U.S. department-store company, is scheduled to report fourth-quarter 2015 earnings before the opening of U.S. financial markets on February 23. Photographer: Michael Nagle/Bloomberg via Getty Images
J.C. Penney Co. signage is displayed outside of a store at the Gateway Shopping Center in the Brooklyn borough of New York, U.S., on Saturday, Aug. 8, 2015. J.C. Penney Co. is scheduled to release earnings figures on Aug. 14. Photographer: Michael Nagle/Bloomberg via Getty Images
UNITED STATES - JUNE 09: Customers enter the Dillards department store at Parkdale Mall, in Beaumont, Texas, Wednesday morning, June 9, 2004. A judge declared a mistrial in a lawsuit brought against Dillard's Inc. by 17 black shoppers in Texas who claimed that security guards at the department store chain harassed them because of their race. (Photo by Scott Eslinger/Bloomberg via Getty Images)
MIAMI, FL - APRIL 19: A Nordstrom sign is seen outside a store on April 19, 2016 in Miami, Florida. Nordstrom on Monday said in a cost-cutting measure they are expecting to lay off 350 to 400 people. (Photo by Joe Raedle/Getty Images)
The sign outside the Kmart store is seen in Broomfield, Colorado November 19, 2009. Sears Holdings Corp posted a narrower-than-expected quarterly loss November 19, 2009, helped by the first increase in same-store sales at its Kmart unit in four years. REUTERS/Rick Wilking (UNITED STATES BUSINESS)
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If Sears continues on its current trajectory of closing unprofitable stores, about 200 malls where it currently operates will be at risk of shutting down, worsening an ongoing trend of failing malls, according to the analysis by Credit Suisse.

The analysts came up with that number by looking at how many malls shut down after the now-closed department-store chain Montgomery Ward went out of business in 2001.

After Montgomery Ward declared bankruptcy (for the second time) in 2000 and closed its last 250 stores, roughly 33% of the shopping malls where it operated closed down, according to the Credit Suisse analysts.

By applying a similar metric to Sears, analysts estimated that about 30% of the malls — or 200 locations — where Sears operates will shut down if those stores are closed.

Sears-anchored malls will be at heightened risk of closing down — compared to malls anchored by higher-end stores like Macy's — because many of them are already financially strapped.

Credit Suisse defines about 184 shopping malls in the US as "least valuable property" — meaning those that are at risk of shutting down — and Sears anchors 110 of those locations. Overall, about 16% of Sears' total locations are in "least valuable property" malls.

Sears currently has 683 stores in operation, down from 873 in 2005.

The company's net sales fell 8.8% to $5.7 billion in the second quarter. Same-store sales plunged 7% at Sears stores and dropped 3.3% at Kmart stores.

Moody's analysts said in a research note earlier this month that the company doesn't have enough money — or access to money — to stay in business.

Sears said in August that its cash and equivalents have fallen to $276 million from $1.8 billion one year ago.

As a result, the retailer was forced to accept $300 million in financing from Sears CEO Eddie Lampert's hedge fund, ESL Investments, in the most recent quarter.

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