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Waiting for shoe to drop; Sears Holdings has been slow to update its local properties, but planned closings promise broad impact on retail market

Sears Holdings Corp.'s announcement Monday that it will close up to 120 unidentified Sears and Kmart stores has communities across the nation wondering: Will it be us?

After a disappointing holiday season that saw same-store sales fall 5.2 percent leading up to Christmas Day, the company said it will shutter underperforming stores.

"Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce ongoing expenses, adjust our asset base and accelerate the transformation of our business model," said Louis D'Ambrosio, Sears Holdings' chief executive officer.

No list of stores slated for shutdown has been released, but each of Western New York's five major malls hosts a Sears store. Western New York's eight Kmarts are in Batavia, Buffalo, Cheektowaga, Depew, Jamestown, Niagara Falls, Olean and West Seneca.

Retail expert Burt Flickinger, managing director at Strategic Resource Group in New York City, said Sears Holdings took a short-sighted view of the Buffalo Niagara market.

Buffalo and Cleveland have historically been two of Kmart's best markets but lost some retail relevance as the company did not invest enough in local stores. Buffalo's smaller population may have been misleading to executives unfamiliar with the local retail terrain, he said.

"Maybe Wall Street hedge fund manager [Edward] Lampert [and chairman of Sears Holdings] is more used to the major markets and managing from his skyscraper offices in Manhattan," Flickinger said.

If the company had not turned its back on local stores, it could have seen great returns from Western New York's loyal customers, he said. But instead, the customers were drawn to competitors who continued to upgrade stores here.

Target and Walmart whisked away many Kmart shoppers. Kohl's, Macy's and J.C. Penney distracted Sears' soft-lines shoppers, while Home Depot and Lowe's drew away Sears' hard-lines customers.

"[It] didn't keep up its stores. Particularly with so many cross-border shoppers, they're important to maintain," Flickinger said.

The Kmart store on Military Road in Niagara Falls and Sears stores in the Boulevard and Summit malls were especially neglected. Their shortcomings were underscored as Walmart built gleaming new supercenters nearby, Kohls rolled out sleek new locations, and Macy's and J.C. Penney got makeovers, Flickinger said.

If any local malls lose a Sears anchor, it could affect the rates other tenants pay, Flickinger said. Most leases have material adverse change clauses, and the loss of a Sears could lead to lower customer counts and lower sales, he said.

While many local Kmart stores are on shaky ground, the Walden Avenue location in Cheektowaga may be a prime target for closure, given that it's a high-priced lease on prime real estate near the busy Walden Galleria, Flickinger said.

"The lease at Walden Galleria is worth significantly more money in subletting given the number of national and international retailers that want to move into that center," Flickinger said.

The closures will generate up to $170 million from sales of inventory and the leasing or sales of the locations, the company said in a statement.

Sears has already closed 171 of its large U.S. stores since merging with Kmart in 2005. In an attempt to resuscitate the brand, the company has been leasing space to other retailers, accelerating franchising and turning to smaller store formats.