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Will Sears Live To See Holiday 2018? Featured

  • Written by  Glenn Taylor
Will Sears Live To See Holiday 2018?

While department stores such as Macy’s, Kohl’s, JCPenney and Nordstrom all generated promising holiday sales numbers, Sears had an abysmal November and December: same store sales dropped 16% to 17%. These figures are the latest indication that Sears and Kmart are on their last legs: the retailers shuttered 358 stores in 2017, and 103 more closures are expected for 2018.

Is there anything Sears can do to engineer a comeback? Retail analysts don’t have much confidence in such an alternative, with many believing that the ship to recovery sailed long ago.

Paula Rosenblum, Managing Partner at Retail Systems Research (RSR), noted in commentary provided to Retail TouchPoints that Sears “is already dead and Eddie Lampert is feasting on the carcass.” David Weiss, a Partner at McMillan Doolittle, said “bankruptcy seems inevitable.”

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Sears is lining up funding to keep itself alive yet again, raising $100 million in new financing and pursuing an additional $200 million from other lenders. But previous cash influxes have done little to improve the retailer’s offerings or its competitive position. Additionally, it doesn’t appear the next round of investments are designed to improve the retail side of the business or the customer experience; instead they are more focused on closing the gap of the company’s more than $1 billion of debt.

Identity Crisis Has Plagued Sears For Years

The challenges facing Sears go beyond an unbalanced balance sheet, however. The retailer needs to craft an identity based on the products and services it offers, and that’s something the company has struggled with for a long time.

“There were strengths within the business years ago,” Weiss said in an interview with Retail TouchPoints. “The appliance business was strong. Home Services was a nice add-on, and brands such as Kenmore and Die Hard were well recognized and respected. But everything around those was neglected or not innovated. When you think about their position, what does Sears stand for? It’s extremely hard to say what that is, and it’s been hard to say what that is for not just 10 years, but probably 20.”

Neglecting The Store: A Massive Mistake

Despite being criticized for its outdated store models and lack of labor as it underwent years of sales declines, Sears did a poor job reinvesting in its physical stores. Sears has instead opted to invest in e-Commerce site improvements and its Shop Your Way loyalty program, both of which have arguably suffered due to the stores’ shortcomings.

“There has been no change in their retail strategy that I could see over the last five years,” Weiss said. “Their assortments and promotions are demonstrated at this point not to be compelling. Staffing has been low, inventory has been missing from stores. There has been no growth attributable to Shop Your Way, with participation staying at approximately 70% since 2014.”

While it is often a valiant (and necessary) effort to beef up digital channels and loyalty, retailers can’t afford to neglect the channel where nearly 90% of their consumers still shop.

“Everybody else has done this — Target just announced it would invest $7 billion into remodeling their stores,” said Lee Peterson, Executive VP of Brand, Strategy and Design at WD Partners in an interview with Retail TouchPoints. “That’s the route. Sears never did that. They have much older stores, much more complicated floor plans, older footprints and older neighborhoods. To not touch those stores was mistake #1. If they would have thought about it and not been carried away with the e-Commerce moment, Sears should have taken any funding that they had to fix the stores.”

Cost Cuts Run Too Little, Too Late

Sears has relied on monumental cost cuts to stay afloat, with the company eyeing another $200 million in cuts unrelated to store closings. In 2017, the retailer cut approximately $1.25 billion in costs related to organizational structure, store closures and category reduction. 

“If you look back to four or five years ago, Sears has lost 50% of its revenue since then,” said Weiss. “It’s inconsequential. It’s a financial strategy and not a retail strategy. The cost cutting is relatable in some way to the shrinking store base, but there’s no talk about reallocation of resources to something that would even stabilize revenue, let alone grow.”

In hindsight, if any major cuts and store closures should have been made, they should have occurred years ago as consumer preferences continued to shift away from shopping in a single channel.

“A classic error in retail is when you don’t know you have to make cutbacks,” Peterson said. “The long-term impact is tragic. If somebody’s feeding you some kind of ‘sunshine’ story: ‘We’re going to pull out of this. E-Commerce is going to increase 20%. Some of these stores are really doing well’, you’re not looking at that realistically. If you’re not moving fast, making hard decisions on cuts, then it’s going to catch up to you and that’s essentially what happened to Sears. They did not move hard and fast enough a long time ago. 15 years ago, they should have probably closed half their stores.”

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