Sears in fi­nal run?

Re­tail gi­ant has “sub­stan­tial doubt” it will be able to stay open

The Denver Post - - BUSINESS - By Anne D’Innocenzio and Han­nah Weikel

S ears, a back-to-school shop­ping des­ti­na­tion for gen­er­a­tions of kids, has said that af­ter years of los­ing money that there is “sub­stan­tial doubt” it will be able to keep its doors open. But it also in­sisted that its ac­tions to turn around its busi­ness should help re­duce that risk.

It was still 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, which has stores in 30 Colorado cities, 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 13 per­cent Wed­nes­day.

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 best-known 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 said 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 decades-old play­book that 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.

The com­pany has lost $10.4 bil­lion since 2011, the last year that it made a profit. Ex­clud­ing charges that can be listed as one-time events, the loss is $4.57 bil­lion, says Ken Perkins, who heads the re­search firm Re­tail Met­rics LLC, but how the losses are stacked no longer seem 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.

“When I first got mar­ried at 19 or 20, we bought our first set of ket­tles from Sears,” said Darla Klem­mensen, who was shop­ping at the St. Paul store on Wed­nes­day. “We still have some of those.”

But the on­set of dis­coun­ters like Wal-Mart cre­ated chal­lenges for Sears that have only grown.

Sears faced even more com­pe­ti­tion from on­line sell­ers and ap­pli­ance re­tail­ers like Lowe’s and Home De­pot.

“They’ve been delu­sional about their abil­ity to turn around the busi­ness,” said Perkins.

John­son, though, be­lieves one av­enue for Sears could be re­turn­ing to its roots as a di­rect-to-con­sumer com­pany, only us­ing the in­ter­net ver­sus the old cat­a­log. He be­lieves the Sears name still stands for some­thing for the 40-plus cus­tomer.

“It has a lot of good mem­o­ries,” he said. “It stands for be­ing de­pend­able and re­li­able.”

The As­so­ci­ated Press

Shop­pers en­ter the Sears depart­ment store Wed­nes­day at the Tri-County Mall in Spring­dale, Ohio. Sears, which has 30 stores in Colorado, said it lost more than $2 bil­lion last year. John Minchillo,

Ruth Par­ring­ton, li­brar­ian in the art depart­ment of the Chicago Public Li­brary, stud­ies a 1902 Sears Roe­buck cat­a­log in the li­brary's col­lec­tion,

Stuffed an­i­mals draw the at­ten­tion of shop­pers in a Sears depart­ment store in down­town Chicago on Dec. 8, 1964. As­so­ci­ated Press file pho­tos

Jim Mone, The As­so­ci­ated Press

Jack Walsh, 85, and his 82-year-old wife, Mary Ann, visit a Sears store Wed­nes­day in St. Paul, Minn. They said they have shopped at Sears their en­tire lives, buy­ing items from cur­tains and win­dow treat­ments to tires and tools.

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