Sears Holdings, which announced 400 job cuts on Tuesday, has fallen below the workforce size required to continue to receive millions in tax breaks from the state.
Also, the Illinois Department of Commerce and Economic Opportunity plans to examine records in the Sears tax deal "to ensure taxpayers are not on the hook for an out-of-compliance Edge agreement," department spokeswoman Jacquelyn Reineke said, referring to Economic Development for a Growing Economy income tax credits worth $15 million a year over 10 years.
The struggling retailer has fewer than the 4,250 workers needed to fulfill part of its much-publicized deal from 2011, when it was threatening to move out of state.
"For the first time since our agreement was enacted in 2011, we recently dropped below the required job figure for the Edge credit, as we are only allowed to count certain types of job," said Sears spokesman Howard Riefs. He would not say how many employees remain at the Hoffman Estates headquarters. Sears said the job cuts announced Tuesday are primarily at the headquarters. The parent company of Sears and Kmart stores said the cuts involve support functions globally, certain field operations and jobs related to store closures. The eliminated jobs represent less than half a percent of the 140,000 employees it had in late January.
The job cuts are part of Sears' previously announced plans to save $1.25 billion in annual costs. The retailer, which has been losing money for years, has been closing stores, selling locations and putting some of its famous brands, such as Craftsman tools, up for sale. The company is reportedly closing an additional 66 stores by early September. That's in addition to the 150 stores that closed in April.
Sears received about $20 million in Edge credits from Illinois in 2016, the first year it could collect. Sears moved jobs from other states to Illinois to meet the Edge agreement, Riefs said.
Hoffman Estates Mayor Bill McLeod said that despite the job losses at Sears, he believes the company will turn around.
"Anytime you lose jobs, you're concerned," McLeod said. "This is a company that's in it for the long haul and they intend to keep Sears viable. But this is the way it is. They have a chance to turn around and we're banking on that."
Illinois state Rep. David Harris, a Republican from Arlington Heights, said he was involved in drafting the 2011 agreement with Sears.
"It is distressing to see the company struggle financially," Harris said. "Retailers nationally have felt the intense pressure from online sales and decreasing mall traffic, and Sears is no exception. I hope the company can refine its corporate strategy to handle the challenges it faces and can bounce back to a firm profitable position."
Sears has yet to distinguish itself or find a viable niche in the modern marketplace, said Dave Aron of Naperville, an associate professor of marketing in the Dominican University Brennan School of Business in River Forest.
"This is how Sears indicates that nobody in-house has the answers," Aron said.
Although some cost reduction can contribute to the bottom line, Sears has to move beyond the seemingly endless cutting, store closings and asset selling if the company expects to revitalize itself, said Phyllis Ezop, president of LaGrange Park-based Ezop and Associates.
"It can't rely on cutting forever," Ezop said. "Sears needs to strengthen its retail business, ideally integrating online with the stores."
• Associated Press contributed to this report.