Hard times for Sears as retailer notes doubt about future
Sears, a back-to-school shopping destination for generations of kids and the place newlyweds went to choose appliances, has said that after years of losing money there is “substantial doubt” it will be able to keep its doors open.
It’s a dramatic acknowledgment from the chain that owns Sears and Kmart stores, which has long held fast to its stance that a turnaround is possible, even as many of its shoppers have moved on to Wal-Mart, Target or Amazon.
Sears has survived of late mainly with millions in loans funneled through the hedge fund of Chairman and CEO Edward Lampert, but with sales fading it is burning through cash. Sears Holdings Corp. said late Tuesday it lost more than $2 billion last year, and its historical operating results indicated doubt about the future of the company that started in the 1880s as a mail-order catalog business.
At a largely empty Sears store in St. Paul, Minn., where the available parking far outstripped the number of cars in the lot, 85-year-old Jack Walsh and his 82-year-old wife, Mary Ann, said they have shopped at Sears their entire lives, buying items from curtains and window treatments to tires and tools.
“I bought my tools from Sears and I’ve still got them,” Jack Walsh said.
The company known for DieHard batteries and Kenmore appliances has been selling assets, most recently its Craftsman tool brand. But it says pension agreements may prevent the sale of more businesses, potentially leading to a shortfall in funding.
“It’s a sad story. This is the place that created the first direct to consumer retail, the first modern department store. It stood like the Colossus over the American retail landscape,” said Craig Johnson, president of Customer Growth Partners, a retail consulting firm. “But it’s been underinvested and bled dry.”
Company shares, which hit an all-time low last month, tumbled more than 12.3 percent Wednesday. Sears tried to soothe investors’ fears, saying in a post on its site that it remains focused on “executing our transformation plan” and that news reports miss the full disclosure that it’s highlighting actions to reduce risks. It also said the comments made in the filing were in line with “regulatory standards.”
Lampert combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. He pledged to return Sears to greatness, leveraging its bestknown
brands and its vast holdings of land, and more recently planned to entice customers with its loyalty program. The company, which employs 140,000 people, announced in January it would close 108 additional Kmart and 42 more Sears locations, and unveiled yet another restructuring plan in February aimed at cutting costs and reconfiguring
debts to give itself more breathing room.
But it has to get more people through the doors or shopping online for what it’s selling. Sears, like many department stores, has been thwarted by a new consumer that has ripped up the decadesold playbook the industry has relied upon. A plethora of new online players have also revolutionized
the market.
Sears has upped its presence online, but is having a hard time disguising its age. Its stores are in need of a major refresh as rivals like Wal-Mart and Target invest heavily to revitalize stores. Sales at established Sears and Kmart locations dropped 10.3 percent in the final quarter of 2016.
Industry analysts have placed the staggering sums of money Sears is losing beside the limited number of assets it has left to sell, and believe the storied retailer may have reached the point of no return.
The company has lost $10.4 billion since 2011, the last year it made a profit. Excluding charges that can be listed as one-time events, the loss is $4.57 billion, said Ken Perkins, who heads the research firm Retail Metrics LLC, but how the losses are stacked no longer seems to matter.
“They’re past the tipping point,” Perkins said. “This is a symbolic acknowledgement of the end of Sears of what we know it to be.”
For Sears to survive, Perkins believes it would need to do so as a company running maybe 200 stores. It now operates 1,430, a figure that has been vastly reduced in recent years. As for Kmart, Perkins does not see much of a future.
For decades, Sears was king of the American shopping landscape. Sears, Roebuck and Co.’s storied catalog featured items from bicycles to sewing machines to houses, and could generate excitement throughout a household when it arrived. The company began opening retail locations in 1925 and expanded swiftly in suburban malls from the 1950s to 1970s.