Sears points to retail store decline
Sears Holdings’ chance of survival is being called into question by none other than the company itself, which now concedes it has “substantial doubt” about sticking around.
That recent revelation, made in its annual report, is not unexpected. Sears is a longtime corporate life-support case. But the owner of Sears and Kmart is far from being the only sickly retailer dealing with such deep despair this year.
Reeling from weak 2016 holiday sales, established chains such as Macy’s and J.C. Penney are slashing costs and closing stores. RadioShack is among those going the bankruptcy reorganization route.
Such industry upheaval and disruption won’t end very soon as store operators scramble to compete against online retail giants, led by Amazon. Chains also are testing new merchandising approaches aimed at attracting a changing customer base led by millennial shoppers.
“This is a real shake-up for bricksand-mortar stores,” says Bridget Weishaar, a senior equity analyst at Morningstar.
Those reverberations are definitely rattling Sears, a mainstay at Southland mall in Whitehaven. Its annual report conceded for the first time that there is “substantial doubt” about its ability to keep going.
The admission is seen by many retail experts as a signal that Sears chief executive and hedge fund aficionado Eddie Lampert concedes his plans are running out of gas. They contend the combination of massive losses, shrinking market share and a tired brand concept may finally be a death knell for the Big Store, despite Lampert’s penchant for using a lot of financial razzle-dazzle to keep the company around.
Nevertheless, Sears is shrinking before our eyes. This year, it has scheduled the closing of 150 more stores, including 109 Kmarts — a cutback that comes on top of more than 200 store closings since 2015.
Sears’ internal problems aside, the reality is the U.S. has way too many stores, far more than other countries, and that capacity and its related costs will continue to be reduced in the coming years.
Among the chains falling on hard times and shuttering stores this year: American Apparel, Hhgregg, Abercrombie & Fitch and the Limited, which closed a store in the new Tanger outlet mall in Southaven.
The primary culprit continues to be the loss of customers to e-commerce.
During the last holiday shopping season, for example, e-commerce sales went up about 14 percent from the year before while traditional store sales gains hovered around the low single digits, according to U.S. Census and Commerce Department data.
A retail course correction calls for a massive closing of stores, with some experts estimating that in the years ahead up to 50 percent of current stores will go away.
The ramifications of such deep cutbacks will be sweeping.
Hundreds of malls will close or be reconstituted into other uses — health care centers, government offices, residential developments — or simply be torn down to make way for fresh developments. The stores and malls that remain will look and feel much different than now, predicts Morningstar’s Weishaar.
She notes that millennials are buying less apparel, the sales bedrock of many chains, and prefer more “experiential” purchases, which could mean going to a mall to check out fewer stores and instead connect with new types of multiplatform entertainment, exotic restaurants and other attractions.
Stores will become smaller in size and scope, offering fewer selections and thinner inventory. Many times, they will double as pickup or distribution outlets for online orders.
“There will always be stores because we still want to touch the fabrics and see styles,” she says. “But we don’t need the stores to be 10 miles away from each other.”
The Commercial Appeal contributed to this article.