Sears "burning money" & closing stores

[tomturbomatic]

From CNN Money:

Sears has been on a downward spiral almost since the day it merged with Kmart in 2005. And that plunge seems to be picking up speed.
The company said this week that it may sell its 51% stake in Sears Canada, which operates nearly 20% of the company's stores worldwide. It has quietly closed nearly 100 U.S. stores in the last year. Next week, it's expected to announce dismal fiscal first quarter results and possibly yet more store closings.
"They have too many stores and they're losing a lot of money, burning cash," said John Kernan, an analyst with Cowen.
Kernan expects the company to close 500 of its 1,980 U.S. stores in a few years and, ultimately, to go out of business.

"The lights are going off at Sears and Kmart," he said. "There are tumbleweeds blowing through the parking lots at Kmart. They're basically completely irrelevant."
The company won't comment on store closings, but CEO Edward Lampert reportedly told shareholders at this month's annual meeting that "closing stores are going to be part of our future. The world has shifted." A company spokesman did not dispute that quote.


Sears was once the nation's largest retailer and biggest employer. The iconic company reshaped shopping in the United States with both its catalogs and its massive department stores. But the Kmart merger has been a disaster from the start. Sears Holdings (SHLD, Fortune 500)' sales have declined every year since 2006, and it's been losing money since 2011.

Today it's losing out to competitors from Home Depot (HD, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500), to Target (TGT, Fortune 500) and Amazon (AMZN, Fortune 500).

Brian Sozzi, CEO of Belus Capital Advisors, says he expects that there will be more Sears closings without any formal announcement.

"If they come out and say they are closing hundreds of stores, their stock would plunge and the cost of borrowing would shoot up," said Sozzi.

Selling the Canadian stores would raise much-needed cash. The company recently spun off its Lands' End unit that it paid $1.9 billion for in 2002. Two years ago it sold a line of specialty stores, Sears Hometown and Outlet Stores (SHOS).

Analysts say Sears is suffering from a lack of investment in its stores; it's investing very little in its retail space compared to competitors.

"It's evident that Lampert's been putting Sears Holdings through a slow, orderly liquidation," said Allan Ellinger, co-founder of MMG, a retail investment bank and restructuring advisor. "Every other retailer is investing in the business. This guy is doing nothing."

 

[NYCWriter]

Not really ...

"CEO Edward Lampert reportedly told shareholders at this month's annual meeting that 'closing stores are going to be part of our future. The world has shifted.'"

The world may have "shifted", but the world is still going to stores and buying stuff, as evidenced by the strong numbers at Home Depot, Walmart, and Target.

The problem is, Mr. Lampert, YOU failed to shift with it, and now your empire is suffering.

How do you even still have a job??

 

[frigilux]

The writing is on the wall with Sears and as Matt pointed out the CEO has a lot to answer for.

I wonder if someone will purchase the Kenmore name and continue the line when Sears finally goes under. Kenmore has models at or near the top of Consumer Reports' ratings in kitchen and laundry appliances.

 

[washman]

Kmart and sears have both been dying

for years now. The so called merger of equals back in the day was a disaster from the get go. Neither company complimented one another, both had different merchandising, different inventory systems, different POS systems, and different marketing systems. Nothing was combined or streamlined and the ending result was a mess.

PUtting Diehard batteries in Kmart and Martha Stewart in Sears never worked. Not investing in technology and logistics is preceisely WHY both are punch drunk and ready to fall.

I saw this beginning back in 1989 when I first hired in at Kmart. We still did blue light specials but within 6 months of working there, I could already see the wheels ready to come off.

Instead of investing in the core Kmart operations, Joe Antonnini, the feisty CEO, thought it better to buy Builders Square, Waldenbooks, etc and create "power Centers" with a Kmart on one end and another big box at the other. While visionary, it was the total lack of execution that doomed this pie in the sky ideal. And is sucked up cash and muddied the focus of the company overall.

We CONSTANTLY had inventory issues at my store. On any given weekly circular, we'd be out of stock on at least half the merchandise and wrote many rainchecks. My store in Indiana had 5 hi powered bolt action rifles to sell but no one at HQ understood that in Indiana you cannot hunt deer with a hi powered rifle. Yet we kept getting them in.

Kmart was spending roughtly 26 cents per dollar in SGA expenses while walmart was spending about 14 cents. You don't need a degree in accounting to see that walmart had a 12 cent price advantage on everything. Thus matching walmart on price resulted in zero or negative profit and cash flow.

Frankly, I am very surprised BOTH have managed to stick around this long. Eddie Lampart has proved that once again, you NEVER and I mean NEVER put a bean counter in charge of things no matter what the size of the company or what line of business you are in.

I say within 5 years, if not sooner, there will be a mass liquidation of both. Get ready to hit bargain outlets as there is where you will find the masses of merchandise to be sold.

Sad too. Once upon a time, both were the titans of retail. How far they have fallen.

 

[NYCWriter]

Sad indeed ...

Sears may have never been high end, but it was the closest thing to high end that most of the middle class got in its early days of "Sears and Roebuck".

It really was "where America" shopped.

 

[wayupnorth]

Good friends of mine opened a Sears Hometown store in a neighboring city way before the merger. In the beginning it was a very lucrative venture but slowly things turned the other way. When the merger took place, Sears cut their store commission rates to the bare bones and their store profits tanked. They eventually sold out to another Sears store owner and never regretted the move. Both said they will never step foot in another Sears store after what Sears did to them.

 

[jeffg]

"but CEO Edward Lampert reportedly told shareholders at this month's annual meeting that "closing stores are going to be part of our future. The world has shifted." A company spokesman did not dispute that quote."

He should have at least corrected it imo.

Sears could have easily written the book on how to botch implementation of the internet into 20th Century corporate business models. It started when they stopped accepting phone calls to their stores for stock checks and product info, and the few times we've ordered things online from them, we got the distinct impression it was the very first online order the company has ever handled. E.g. the national customer service center didn't have a clue about our orders or delivery.

Sooner or later our country is going to wake up to the fact that this isn't a recession, it's a permanent realignment of economic power in the world. Our dollar (like currencies of many Western nations) has been a subsidary currency of China's ever since Nixon took us off the gold standard in 1971. You should research where Henry Kissinger and Hank Paulson decided to retire.

 

[rp2813]

I would hope that the Kenmore badge would survive.  In spite of all Sears has done to it, the name Kenmore still conveys quality and value, if only perhaps along generational lines these days. 

 

I see Craftsman tools are currently being sold through retailers unrelated to Sears (ACE, I think, to name one) so there may be a chance that both of these iconic brands could continue on.  Whether in name only would remain to be seen.

 

[carmine]

I agree with Washman

I started at K-mart in Nov.'88 as Christmas help. As a 16-year old kid I saw the stupidity in the way K-mart was being transformed. I stayed 3-years and it was a very different place when I left (for the worse).

Joe Antonnini trivia: Eminemm (the rap guy) lives in Joe's old house.

 

[washman]

Among other things

1. We used to get time and a half on Sundays and we worked 10-6 only
2. used to get a Christmas party on company dime

Before I left all that was snatched away. Along with payroll cuts, not actual layoffs but moving full time to part time and cutting part time to 1-2 days per week.

Then we had the TYFSOK. Then the 10 foot rule. Then Rollback USA. Then we posted a greeter. (All these were in RESPONSE to what walmart was doing). Nothing kmart did during this time was innovative.

1990 we went CM/AR that took away local ordering and moved it to a mainframe. It should have worked but when your data is for want of accuracy we ended up with more GE headlights for example that there were cars in the US.

Carmine did you ever do any blue light specials? We once blue lighted half a truck load of 2 liter pepsi in less than an hour for 25 cents a bottle!

 

[washman]

Part 3

Actually the wheels came off in 1972. Or the lug nuts loosened anyway.

that was when Harry Cunningham retired and was replaced by the accountant Bob Dewar. It was Beancounter Bob who came up with the "group 9" series of stores that ranged from 35-45 thousand sq ft because he felt they would do just as well as a full size kmart but wouuld be cheaper to build and stock.

Next he resisted automation again due to being scared to spend money. Finally he resisted upgrades to the stores even though in 1977 Kmart opened about 270 stores and changed from SS Kresge to Kmart Corporation. Which is fine BUT as both walmart and tar-jay have shown, you still need to put money into your existing stores to keep them fresh and relevant. Kmart seemed more focused on opening more stores and before things really burned had 2400 stores in the US and Canada. Problem was at any given time half of the store base was more than 15 years old and had not seen a coat of paint.

Much ink has been spilled on this subject and the general consensus is had Harry Cunningham stayed on as boss, Kmart would have been in better shape and probably would have been stronger for longer.

Interested note, Eddie Lampert has presided over 27 straight quarters of declining sales. Amazing! Could you imagine his pay package if he actually did something besides breathe air and take up space on my planet?

 

[whirlcool]

The capital investment firm that owns Sears Holdings is just sucking every last bit of blood out of Sears while it can. For years now they have not invested anything at all in Sears stores.

I remember last year a news story on a local station remarked that even as late as December 15, Sears had not stocked it's stores with Christmas inventory levels. They hinted that some suppliers may already have Sears on a cash only basis.

So you have this company that's falling apart and then they go and start mistreating their customers with bad service, cheaper goods that don't last. And they still expect to be around. I think Sears is beyond saving.

We've never been big Sears shoppers. The only things we have from Sears are some Craftsman tools and that is all. Nothing else. Now if you look at my nutty sister most everything they have comes from Sears.

 

[tomturbomatic]

Solid as What?

The historic Kenmore name was only as good as the suppliers and the service. Whirlpool is no longer the sole source supplier for laundry and service, at least on appliances, has gone to hell. Three service calls is the norm now. Maybe it is because of all of the foreign crap they sell and the fact that they don't want to stock a lot of parts, but how does the customer feel about Sears when a refrigerator is down for two weeks? Not everyone has a spare.

Sears started slipping in the 70s when they put in those pods with terminals to ring up sales from several departments. Finding people who knew stock in a particular department like, say, window treatments became more difficult. Department stores need department employees who know their departments, their stock and some knowledge about how it is used. At least the tool department had its own register, but I was in a store one Saturday evening when there was a single cashier with a line and finally the older man apologized to everyone and said that he had been on the floor for 6 hours without a break and he just had to go to the bathroom. Everyone felt sorry for him. I think it would have been funny if suddenly there had been a moderate tsunami coming from the direction in which he had gone with a wall of water between 6 and 12 inches in height washing across the floor. Think of all the short circuits it would cause when it hit the vacuum cleaner area with all of those cleaners plugged in.

 

[rpms]

Sears took over the Eatons store in Toronto. Not sure what there is now? It is a huge store to fill.This was in February of this year. There wasn't any bargins and it was all summer stuff they were selling from the year before.

 

[wayupnorth]

The breaking point for my friends to abandon their Sears store was when they mandated they pay for new signage with no more capital letters. It had to be sears, not SEARS or even Sears. Stupid move on their part because who cared what the logo looked like.

 

[petek]

I think Nordstrom will be moving into the downtown Toronto store but only using 2 or 3 floors.

According to today's paper there's really no buyers left for the rest of Sears in Canada. It's likely the pieces will make more than selling it whole. Macy's and Kohls aren't interested, they've been scared off by the huge disaster Target made when they came here plus neither of them are doing that well themselves. JCP looked at moving to Canada a few years ago and declined, they're also in trouble.

 

[danemodsandy]

This Goes to Show You.....

....How long you can mismanage a really big company and still delude yourself that you're doing a good job.

I began forming a very negative impression of Sears in the late '70s, when sales help got skimpy, product quality decreased and catalog sales service began getting cut back.

By the early '80s, service standards had fallen so far that I hung it up with Sears. If I placed a catalog order, it was certain that much of what I'd ordered wouldn't be ready for pickup. If I needed a part, it became an ordeal. If I tried to complain, I got runaround, disinterest and sometimes open contempt.

That was 30 years ago, and if this news story is a surprise to anyone at Sears, it's sure as Hell not a surprise to me. My disenchantment with Sears was so total that I don't even want their vintage stuff in the house. It's too painful to look at reminders of what once was and then think about today's colossal pile of incompetence that used to be the "World's Greatest Retailer."

 

[tomturbomatic]

Tim, Perhaps the elimination of capital letters in the signage was related to the loss of capital that Sears, I mean sears was experiencing. No capital letters, WTF? Maybe they were not wanting to jar awake any customers walking through the store in a daze or a doze.

 

[washerboy]

sad

I know Sears has done themselves in and at this point the ship is almost sunk. However sad...in my family there was several generations that shopped Sears. When I was growing up everything we owned either was bought with S&H green stamps or came from the Sears catalog. There is only 1 Sears store in Little Rock and 1 in North Little Rock.. to be honest...I'm amazed at how and why they keep the one in Little Rock open. It's about 6 blocks from my office and no matter what time of day I drive by it there's only a handful of cars in the parking lot..and you have to figure in some of the cars belong to their staff. I've long since given up on trying to shop there. The store is dirty and the staff just don't give a flip..I can go one block futher and go to Target where it's clean, bright and outside of appliances and power tools they carry same or similar items. Not my last venture to Sears but the one before that..I went to buy a set of tires for my truck...I could not get anyone to wait on me..so like a fool I left and went back latter in day. Still couldn't get anyone to help me so I went to Good Year and bought the same set of tires for 70.00 cheaper. I made one finial attempt about 2 years ago and was grossed out by the dirty physical plant and the nasty employees..so..I'm done.