2016/04/26

The Incredibly Shrinking Sears

Photographer: David Paul Morris/Bloomberg
Sears is half the retailer it used to be — literally.
The merchant announced yet another round of store closings, which will leave it with about 1,500 Sears and Kmart locations once those units go dark in June, confirmed a company spokesperson. That stands in stark contrast to its heft a decade ago, when Sears Holdings SHLD -2.87% boasted approximately 3,400 stores.
The retailer will shutter 68 Kmarts and 10 Sears units over the next few months, adding to the 50 stores it earmarked for closure in February. This follows store closures last year.

The latest slate of closings will “accelerate its transformation and its return to profitability,” said Eddie Lampert, chairman, CEO and majority shareholder, in a statement.

The long struggling retailer has posted over a decade of sales declines, failing to carve a meaningful niche in the retail landscape for the Sears brand amid department store brethren such as Kohl’s and J.C. Penney, and for Kmart in the mass merchant space, where Wal-Mart and Target TGT +0.33% dominate.
Lampert is banking on the store closures to generate substantial cash from the “liquidation of store inventory and from the sale or sublease of some of the related real estate.”
Indeed, selling assets for cash has been central to Sears’ strategy since hedge fund guru Lampert purchased the chain in 2004, merging Sears and Kmart.
Since then, Lampert has spearheaded the spin-off of various Sears’ assets to boost its liquidity – from its Hometown and Outlet Stores to part of Sears Canada — as it has sold off chunks of real estate. It’s a strategy that has taken precedence over investing in merchandising initiatives, critics say.

Lampert is now on a quest to transform the retailer into an omnichannel, service oriented operation by focusing on members of its Shop Your Wayloyalty program, which account for about three quarters of its sales.

It’s also betting big on what Lampert has dubbed its “Integrated Retail” initiative, which includes perks such as In-Vehicle Pickup, whereby customers retrieve their online purchases at any Sears store within five minutes of arrival from the comfort of their car, and Meet With An Expert, a service that connects shoppers considering a major appliance purchase with Sears product experts.
Yet according to Lampert, Sears has gotten little credit for these innovations while facing “unfair” criticism for its poor performance in recent years.

The “tectonic” shifts upending the retail industry have been felt by a cross section of retailers, from Wal-Mart to Nordstrom JWN +0.81%, Lampert said in his Chairman’s Letter in February. “Because of Sears and Kmart’s longstanding history and cultural impact, we are targeted for criticism when our results are poor,” he said. “But it is unfair to evaluate our approach through the rearview mirror without acknowledging the changing circumstances in our industry as well as our bold attempts to change the way we do business to meet this changing reality.”

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