Sears Holdings has endured its 24th straight quarter of sales declines, with comparable store sales at Sears and Kmart continuing to decline at a rapid pace — by 15.3% in Q3.
The company generated total revenues of approximately $3.7 billion during Q3, well under the $5.0 billion in sales duringQ3 2016, with store closures contributing to over half of the decline. But Searsalso narrowed its eye-popping losses, from $748 million to $558 million, in line with company goals to cut annual costs by $1.25 billion in 2017.
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Sears finally appears to recognize that its store formats have been a part of the problem, and that there need to be significant changesmade to drive traffic. The retailer has closed approximately 330 stores this year, but is opening smaller-format concept stores in select locationsthat are focused on some of its stronger categories, including mattresses and appliances. The new stores don’t sell clothing, eliminating a category that failed to stand out against any department store, specialty retailer or online competitor.
Sears is even opening DieHard Auto Centers in Texas and Michigan to provide oil changes, tire replacement and vehicle repairs.In leveraging its popular automotive battery brand, Sears can start fresh instead of using its own brand name, which may prevent people from entering the auto center.
Target and Nordstrom are two recent examples of major retailers adopting the small-format concept, which meets consumers’ desire for convenience and caters to more mobile-friendly shoppers. With less square footage, retailers must tighten up their inventory to make the stores successful, all while serving as a stop for omnichannel fulfillment, whether through buy online/pickup in-store or online returns.
With Sears continuing to lose money on its massive, largely unprofitable store network,going small now may be a tad too late, but it is still a necessary move if the retailer wants to operate in 2018 and beyond.
