Sears Just Doesn't Look Like It Wants Our Business Anymore

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Annalisa Linder
A glorious Saturday afternoon, and Sears is virtually empty. Merchandise is all jumbled; aisles are blocked; it looks dispirited. After a spate of photo stories on the disarray at Sears, I wanted to look for myself. The sadder side of Sears, indeed. J.C. Penney (JCP) and Macy's (M) in the same mall in suburban Maryland were busier, neater and drawing younger customers.
Annalisa Linder
If you remember the slogan, "the softer side of Sears," then you're the typical Sears age demographic, and if you never heard it, you are the younger shopper it desires but can't attract. Sears Holdings' (SHLD) sales have declined for years as it loses customers to Kohl's (KSS) and J.C. Penney and younger customers throng to Macy's.

Most mall anchor stores are struggling. A recent Piper Jaffray survey found that teens aren't hanging out at the mall anymore and prefer a social "experience," preferably at a restaurant. Sears and Sears Holdings' Kmart stores have been hit particularly hard. CEO Eddie Lampert noted on the most recent earnings call that shoppers only visit three stores per mall trip now, compared to five in 2007.

The Sadder Side of Sears

A Sears "experience" lately has been fairly grim. More stores are closing, 300 in the last four years and a possible 500 going forward, including its Chicago flagship store this month. Why would anyone shop there? The fashion is fresher at Macy's, prices often better at Kohl's or Target (TGT), tools and appliances available at Home Depot (HD) or Lowe's (LOW). Even J.C. Penney is cleaner and fresher looking. Photo-laden stories document disarray at Sears, Kmart and Walmart (WMT) stores.
Annalisa Linder

Last week on CNBC, Mark Cohen, former CEO of Sears Canada, gave a blistering indictment of Lampert's management for his lack of investment in the stores, calling them," outmoded ... dark, dirty and unattractive."

While J.C. Penney spent millions refreshing itself, Sears did not. Barron's writer Michael Santoli thinks that was a good thing, since many Sears Holdings' properties will simply be shuttered.

Instead, Sears Holdings is relying on several last-ditch strategies. It brought on the board Paul Podesta, of "Moneyball" fame, to manage its SearsYourWay Rewards membership program. Membership in the program has risen dramatically, with 72 percent of sales now coming from the program, up from 58 percent last year. The company plans to be more clicks than bricks, wooing consumers who embrace e-commerce giant Amazon (AMZN). That, too, is improving, with a 10 percent bump in e-commerce year over year. However, J.C. Penney's e-commerce arm grew more than twice that, 26 percent, in the same time frame.

Whether Sears can keep the lights on depends on how long it can keep making money spinning off or selling entire divisions, like Lands' End (LE) most recently, but also Sears Hometown and Outlet Stores (SHOS) and Orchard Supply hardware stores. There has been serious talk of splitting off the auto care division.

Also, Sears Holdings still has 241 million square feet of retail real estate it can sell or lease to stem the tide of losses, a $1.4 billion net loss in 2013 alone. But if you play Monopoly to the untimed bitter end (my family tradition) and sell off properties to stay in the game, you are going to lose. Cohen called these sales and the spinoffs, "the liquidation of a legacy store."

The Sadder Side for Shoppers and Shareholders

Despite celebrity collections from the oh-so-overexposed Kardashians, Nicki Minaj, Sofia Vergara and People's Sexiest Man Alive Adam Levine, Sears Holdings still struggles to keep Sears and Kmart relevant. Its stock price decline is a silent witness to this inability, dropping from a high of $191.93 in 2007 to a low of $29.20 in 2012.

What's left of the nation's family retailer? Remaining are the valuable proprietary Craftsman, Kenmore, DieHard brands, less valuable apparel store brands, the stores and the warranty service division with the 14,000 appliance service technicians who make 14 million service calls a year.

Sears was your hometown retailer, where you shopped for back-to-school items, Easter outfits, tools and appliances. Now Home Depot and better department stores have eroded any competitive moat Sears once had. The famous Sears & Roebuck catalog was discontinued in 1993. Sears & Roebuck was the chain that broke the back of Montgomery Ward, but other chains are wounding it today.

Hedge funds like Fairholme Capital and Baker Street Capital are investing in Sears Holdings mainly for the real estate sell-off potential. If Sears Holdings can manage to keep going long enough while losing billions a year, it is likely Sears will mainly exist on the Internet or as a membership model a la Costco. It is certainly what the company has been hinting at on recent earnings calls.

Closing Time

A decade ago Lampert boasted Sears would have the breadth and reach to compete successfully against Walmart. That hubris cost shareholders millions and workers thousands of jobs. The venerable concept started in 1893 just can't compete as is. If Sears exists another decade, it won't be Sears as you know it.


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164 Comments

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moon82514

Sears does need to go back to the old ways of doing things. Problem is that if they do they can't compete with the (WAY overpriced) Kohl's and cheap (both in product quality and $$) Target/Walmarts. What they don't realize is that they shouldn't be competing with them. They need to let KMart compete with Target and they need to rebrand outside of the MAcy's and Penny's to something old school like "Dependable and Reasonable." YEah, it's an old guy's slogan, but brand it with the nostalgia of 50's and 60's style 8mm home movies and kids always getting their clothes there growing up... kids who took their kids there in the 70's and 80's, and show some older people still going there, and their now grown son's and daughters taking their young children there for quality clothes and appliances, because when you want something that won't break and isn't planned to be obsolete as soon as the next model comes out, you go to Sears... Dependable and Reasonable, back to the basics of what made America great. They need to not go for the quick buck, but the long-term brand building that made them strong in the first place - don't compete, carve out a niche that was strangled and has now been too-long absent from the American consumer market that so many of us still crave.

June 07 2014 at 5:09 PM Report abuse rate up rate down Reply
ruthnjay1958

Sears can blame no one but them selves. They seem to have ffofrgotten that for many, many years people loved Sears for being Sears. Now they have totally revamped the store and nothing is like it use to be. Use to be you could go in and purchase a sewing machine. Actually had some sitting in cabinets that the sales clerks would demo for you. That meant so much. Now all gone. There may be 3 or 4 machines in boxes but your on your own learning how to use them. Even the old tried and true under wear isn't the same as it use to be. So very sad. Went in Sears a few weeks ago to buy a gallon of paint. But now it seems I must travel a few more miles to the Sears hardware store to get it. So very sad. It is like we can feel them pushing us out of the store. This is a very sad time. I hope Sears realizes it needs to go back to the old Sears we all knew and loved. My brothers and I were always clothed from a Sears catalog sixty some years ago. Bring it back. Make Sears what it always was.

May 22 2014 at 4:40 PM Report abuse rate up rate down Reply
mshat53616

Purchased a Kenmore microwave overn that is installed over the stove. The light on the bottom of the microwave illuminates the top of the stove. The light bulb burned out and I called Sears with all of the nitty details and ordered a light bulb. When it was delivered The bulb was for the INSIDE of the oven ;not got the light on the outside bottom of the oven.
Not wanting to uninstall the oven I went to the Sears repair department in Boynton Beach Florida, with ALL OF THE PAPER WAORK AND MANUAL FOR THE OVEN TO RETURN THE WRONG LIGHT BULB AND GET THE RIGHT ONE. After much checking I was told my oven was not a Kenmore and I was charged postage for the bulb I DID NOT ORDER. SEARS CAN GO DOWN THE TUBES AND I WON'T MISS IT.

May 06 2014 at 11:53 PM Report abuse rate up rate down Reply
John Watson

Maybe you could write a nice article about Lampert's comical Randian mismanagement of the company and how treating workers like trash and trying to turn them against each other doesn't actually lead to good things for a company and will lead to employees being apathetic at best and antagonistic at worst.

April 21 2014 at 2:13 PM Report abuse rate up rate down Reply
1 reply to John Watson's comment
SYD SCHULDINER

I agree one hundred percent. It is impossible to write a nice article about Mr. Lampert, he does care about any of the associates that work for Sears. I know for a fact that the store that I used to work in the people there are very unhappy. They have no desire to really work hard They are looking to move on..

May 21 2014 at 4:27 PM Report abuse rate up rate down Reply
linderannalisa@yahoo.com

For all the Doubting Thomases out there from the author. I went into Sears without any expectations of disarray. However, the shopping experience was sadder than ever. I did not have to touch anything or rearrange anything to see a virtually empty store, salesclerks who never offered to help, signs falling down, littered floors, or dark lighting. As I wrote, J.C. Penney and Macy's were busier, cleaner, and more helpful. I just wanted to let readers know on a Saturday afternoon when the store should have been fully staffed and ready for business it didn't meet the challenge of even the few shoppers it attracted.

April 16 2014 at 2:34 PM Report abuse rate up rate down Reply
Margaret-Ann

And our darling president thinks they should make more money?????? What for this mess?????

April 16 2014 at 1:50 PM Report abuse rate up rate down Reply
YourFtr

If you go to the clothes aisles of most stores; 50 % of the time they are messed up
because people are looking for their sizes.......
Managers are too ignorant to stock merchandise by size and/or display it in an intelligent manner.
The merchandise is probably plopped onto the counter right out of the input shipping box...and sizes are not readily displayed.....!!

April 16 2014 at 12:58 PM Report abuse rate up rate down Reply
YourFtr

I don't think so.
two years ago; I replaced my dishwasher with a sears one and had it installed OK.
Last year I bought 4 tires at sears automotive and then I had Sears replace my garage door opener ; all installed OK.
When it comes time to replace my washer and dryer; I will let Sears do it.

April 16 2014 at 12:48 PM Report abuse rate up rate down Reply
SYD SCHULDINER

I saw the picture of the store with all the merchandise strewn all over. I am an ex employee of Sears, and the store that I worked in never looked like that. You have to blame the department manager and the store manger for letting things get to look so bad. It is just a shame that the company is in such bad shape. You have to blame the people in Chicago, especially Mr. Lampert.It seems that Sears has lost it's luster and unfortunately me be on the way out unless some one in Chicago wakes up and tries to save the company. Sears in some respects is selling under the K Mart format which is helping to kill them. WAKE UP CHICAGO>

April 16 2014 at 11:44 AM Report abuse rate up rate down Reply
jdrabe

I have a sears upright freezer in the basement. It is 48 years old, runs great, never had a problem. I miss the old sears: dependable, good service, clean, well paid professional employees, aisles you could walk down, the candy stand with the hot nuts, the sporting goods department with sears branded firearms, Ted Williams stuff, the catalouge. What happened? short term profiteering goals above maintaining a loyal customer base, creepy management, merger with kmart.

insane

April 16 2014 at 1:55 AM Report abuse +1 rate up rate down Reply