Going by the Washington Business Journal, the fourth largest broadline retailer in the United States, Sears Holdings Corporation (SHLD) has proposed the local jurisdiction of several areas in the U.S. for more than 1 million square feet area for shifting its corporate headquarter out of Illinois, Chicago, USA.
Sears Holdings’ decision to move out its corporate headquarter out of Chicago, is on the verge of expiration of property tax breaks, an agreement of economic development with Hoffman Estates. In January 2011, the lawmakers in Chicago have raised the state income tax rate to 5% from 3% and the corporate tax rate to 7% from 4.8%. Along with a personal property replacement tax rate of 2.5% of income, the corporations have to cough up an income tax rate of 9.5%. The company employs more than 6,000 people in its corporate headquarter.
The agreement was made in 1989 to woo the giant retailer to Hoffman Estate from the Sears Tower (now called Wills Tower) in the downtown Chicago with incentives including lands and highway development and tax breaks.
According to sources, the retailer giant is exploring options in the various areas of the U.S. including The Washington, Wisconsin, Indiana, Maryland, Virginia, Ohio, South & North Carolina, New Jersey, Texas and Georgia. The corporate tax rates in Indiana and Wisconsin are 8.5% and 7.9%, respectively. While, in New Jersey, a tax rate of 9% is levied on the businesses having a net income of more than $100,000. Virginia provides tax breaks and cash incentives in the form of contribution from the Governor’s Opportunity Fund.
Prior to this, Sears Holdings has slashed 700 jobs in the appliances section of its Kmart discount stores. The company seeks to re-engineer the process of selling its appliances to combat flagging sales.
The company has now set up point of sale systems (POS) at its appliances section that require trained employees to handle sales. These employees have the skill to address queries from customers regarding appliances. The company is also introducing a toll free number to provide further assistance to its customers.
The lay-off affects employees in 225 stores. Only in February this year, Kmart had multiplied the number of appliance stores to 1,300 from 270. In total, Kmart employs about 100,000 employees.
Sears Holdings, the fourth largest broadline retailer in the U.S., offers home appliances, tools, lawn and garden equipment, electronics, automotive repair and maintenance products through a countrywide network of over 4,000 retail stores. The company operates in a fiercely competitive industry, which includes retailing giants such as Wal-Mart Stores Inc. (WMT), Target Corporation (TGT), and Lowe’s Companies Inc. (LOW). Moreover, the company also faces competition from regional departmental stores, home improvement stores, consumer electronics dealers and specialty retailers. Consequently, this may dent the company’s future performance.
Sears Holdings currently has a Zacks #5 Rank, implying a short-term ‘Strong Sell’ rating. However, over the long term, we have an ‘Underperform’ recommendation on the stock.
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