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Here's What Sears and Kmart Are Doing for Black Friday

Rich Duprey, The Motley Fool

Sears Holdings (NASDAQOTH: SHLDQ) may be in bankruptcy protection, but it's still operating and has plans for Black Friday that go beyond securing financing to keep its doors open.

The retailer hopes to use the start of the holiday shopping season to boost sales in a bid to eventually emerge from bankruptcy court protection as a much smaller but stronger business. Don't expect going-out-business sales, but do expect enticing "doorbuster" offers.

People crowd around a Sears Welcome Center at an Oakbrook, Ill., store

Image source: Sears Holdings.

Kicking it off on Thanksgiving Day

Hundreds of Sears and Kmart stores will close over the next few months, and a few dozen are heading straight to liquidation and won't be offering Black Friday sales. But the rest will open at 6 p.m. on Thanksgiving Day, close at midnight, and then reopen Black Friday at 5 a.m. Kmart stores will reopen at 6 a.m.

The trend of opening on Thanksgiving Day started in earnest in 2013 when a quirk of the calendar meant there were six fewer shopping days between Black Friday and Christmas. Having recently come out of the Great Recession and with a fear of another recession looming, retailers opened their doors to customers on the holiday. Each year thereafter, more stores opened in the hours ahead of Black Friday, but that created a backlash among consumers, as well as employees who had to work.

While the pendulum is beginning to swing back the other way, many of the largest retailers including Walmart, Macy's, and Kohl's will be open for business on Thanksgiving. Moody's believes most retailers don't benefit from opening on Thanksgiving Day as shoppers can only get to so many stores, and ShopperTrak data shows that after peaking in 2014, in-store traffic on that day has slowly but steadily been declining. It is also far, far less than what retailers enjoy on Black Friday itself.

Its last, best chance

Sears Holdings doesn't have the luxury of choosing whether to be open or closed -- it needs every dollar it can get if it hopes to survive. It just secured a last-minute $350 million loan to keep operating at least through the Christmas holiday, and if it can generate sufficient sales, it might even be able to repay the loan, which comes with an onerous price: the Libor rate plus 11.5%, along with a 3% closing fee.

In announcing its Black Friday schedule and some of the deals customers will find, Peter Boutros, Sears' and Kmart's chief brand officer, said, "We want our members and customers to know that we're open to serve them online and in stores, both at Kmart and at Sears."

To make the most of the event, Sears is leading with its best foot, heavily stocking up on Craftsman tools, name-brand toys, home appliances, and apparel. Its top doorbuster deals include saving 55% on a Kenmore French-door refrigerator priced under $890; a 41% discount on a 320-piece Craftsman mechanics' tool set for under $150; and women's fashion boots for $20, regularly priced at $40 to $70. The company says doorbusters will be available online and in store on Thanksgiving and Black Friday while supplies last.

Having the deals available online beginning on Thanksgiving Day should work better for the company. According to Adobe, shoppers spent $2.87 billion online on Thanksgiving last year, up 18.3% from 2016, while Black Friday online sales surged 16.9% to $5.03 billion. The entire Thursday-through-Sunday holiday sales weekend saw a 14% increase in online sales. And Cyber Monday had its biggest day ever last year with more than $6.6 billion in sales, a near-17% increase.

The key takeaway

Sears is doing its best to do it right this year. Its Shop Your Way member loyalty program may become even more relevant as it gave members special access to doorbuster deals on Nov. 18 from 4 p.m. to 9 p.m. Members can also earn cash back on the doorbuster deals and get free two-day shipping on qualifying online orders.

Just because Sears Holdings has declared bankruptcy doesn't mean it's no longer in business. And if it wants it to stay that way, it needs to take advantage of every opportunity. This Black Friday will be a test of how well that strategy is working.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Adobe Systems. The Motley Fool has a disclosure policy.