4/17/2012 7:47 PM ET|
Why Sears is on its last legs
And Sears' customer-satisfaction level has been improving, says Claes Fornell, a University of Michigan business school professor who tracks these things. But that might be because the most dissatisfied customers have mostly left, which mathematically pushes up the average ratings of remaining customers who are polled, says Fornell. Still, it's a reversal.
Sears also recently announced it is hiring Leveraged Marketing of America to explore how to extend its popular Kenmore, Craftsman and DieHard brands to new products and new regions of the world.
Despite all these efforts, things don't look good for Sears, say analysts. A sluggish economy, a weak appliance market and high gasoline prices, combined with Sears' self-inflicted wounds, suggest sales will continue to shrink at least this year, if not beyond, they say. Wall Street analysts predict a 5% overall sales decline this year and a 2% decline next year, according to Thomson Financial.
Sin No. 5: A credit scare
Those weak sales trends have been worrying Sears' lenders. Back in December, Fitch Ratings downgraded Sears' debt, explaining that those weak sales, and the possibility that one measure of cash flow could turn negative this year, may force Sears to increase borrowing. Fitch also cited "competitive pressures, inconsistent merchandising execution, and the lack of clarity about the company's longer-term retail strategy." Then in January, a financial firm called CIT Group (CIT) said it would stop acting as an intermediary between Sears and its suppliers.
This was bad news, because small developments like these can quickly snowball, drying up credit for a retailer, says Davidowitz. Lampert reacted quickly. He announced the sale of 11 stores, the spinoff of Hometown and Outlet stores, and improvements in inventory management. Together, these steps should raise mroe than $1 billion. "Lambert's reaction the minute trouble started was magnificent," says Davidowitz. "No one has ever accused him of not knowing finance."
But it also may foreshadow what really may be in store for Sears, as those negative sales trends continue.
So what's the endgame?
Sales trends suggest Sears is dying. Current efforts could turn it around, but the recent track record isn't good, and a big part of the game plan remains store and asset sales to generate cash. Tellingly, a big part of the most recent conference call with investors covered this kind of financial wizardry, as opposed to the basic block and tackle of retail.
"I think it all comes apart. It dissembles," says Cohen, the former Sears Canada CEO. "(Lampert) will continue to sell off pieces and parts. There is no meaningful strategy to manage the business successfully in any conventional way."
That kind of scenario won't necessarily help shareholders. But another option might. Swinand, at Morningstar, thinks Lampert could eventually take Sears private to try to fix it up inside his hedge fund.
Such a move would mean a premium for shareholders as Lampert buys their stock.
The catch is, there's no telling how much the stock might sink between now and when this scenario plays out, if it does. So there's little point in buying Sears now, hoping the stock will jump in a take-under.
For shoppers, the hedge-fund manager's financial wizardry may mean your neighborhood Sears will disappear. They won't all go at once, but they're already going. Of course, retailers go away all the time.
But icons shouldn't.
At the time of publication, Michael Brush did not own shares of any company mentioned in this column.
Michael Brush is the editor of Brush Up on Stocks, an investment newsletter. Click here to find Brush's most recent articles and blog posts.
VIDEO ON MSN MONEY
I've been reading these comments being that I am a Sears employee currently. I've been an employee for 7 years. I was there before the merger with Kmart.We are not happy with no company leadership nor values. I try to give the best service I can for each and every customer that enters my area. I say hello as soon as see someone enter and thank them when they leave. True, working there is a very hostile work environment.For some of us, Sears is all we have for employment. I'm turning 40 this year and where i live, unemployment is through the roof. I apologize to everyone whom has had a bad experience. There's not a company on earth that can please everyone. i read that we employees don't know the products. Sears fires and hire so quickly because the demands for getting numbers is so intense. How is someone supposed to know the stuff if they are new? Plus, if you are asking a cashier about something, then obviously you are going to get a response you will not like. Floor people are the ones to ask.
Sears is dying and we employees know it. I presented ideas on how to change things and it was quickly dismissed. The people in the Sears Tower have no idea what goes on in the stores. But, they care less about the work staff than the consumer. You try to survive on a 14 hour work schedule making $6 plus commision with child support , utilities, and rent. Finally, Sears employees are also customers. So, we understand your points better than most because we get it from both sides of the fence.Consumers come rarely to shop,but we employees are there as our schedule permits. So, if you don't like sears, then I'm truly sorry to lose you as a customer. 130 years of being a retail icon are ending. Without Sears, there wouldn't be Discover card, Kenmore, Craftsman, Allstate insurance, the catalog, etc..What has Walmart provided society but a gateway for the chinese government to grow? I'm not here to defend Sears. I'm here to defend the workers who get beat up , day in and day out, to make $6 and try to make customers feel important when they visit. Instead of trying to be walmart, Sears needs to protect and defend the legacy of 130 years in business.
Sears was the store for young couples starting out, because it was easy to get credit there. It helped a lot of families establish credit. The prices were reasonable and the Sears branded products were reliable.
Sometimes companies just lose their way. It happens when outside managers are brought in who had success as cola managers or in some other unrelated business. There is no incentive for low level managers to excel, because the top jobs will go to outsiders. The fault lies with the company directors, who have zero experience in the business.
Sears used to get a lot of our family's money. Almost all of our tools, appliances and equipment were purchased there. And then like everybody else, they started shipping their jobs overseas, and the quality went downhill.
The first time I noticed it was when a friend of mine and I were stripping down his Cadillac 500 engine. He pulled out his brand new set of Craftsman socket wrenches, and attempted to loosen an exhaust manifold bolt with a 1/2" drive wrench. It broke on the first turn. He switched to his slightly smaller 3/8" drive, thinking the other wrench might just be defective, and that one broke on the first turn. He then got into his toolbox and pulled out an OLD ('50s or '60s) Craftsman 1/4" drive socket wrench that his father had given to him; and wouldn't you know it, we finished stripping down the majority of that engine with that tiny little quality made American product.
I could go on and on about the crappy made snowblowers and lawnmowers, and horrible customer service that they are churning out nowadays, but everybody else seems to be doing a good job of that already.
We all need to start demanding that these companies start bringing these jobs back home. This country was prosperous once, and it was because we manufactured our own goods (we even EXPORTED!!! Can you believe that?!) But we can't just build these things here, we need to give a damn about what we're building. People need to start caring about the effort they put into things again, and they need to re-learn about the true pride of accomplishment in creating quality goods.
And these little pukes behind the service counters need to get off their iphones and start learning about the products they are selling. 'Nuff said.
I worked at Sears over 30 years ago. Back then, a customer could walk into a store and get personal help for as long as he/she needed it... no employee looking at a watch, acting bored, talking with another employee... just flat-out good customer service. We were told our customers paid our salaries, and we sure as heck took that to heart. We really liked helping our customers, seeing them enjoy their shopping time with us, and getting to know them as friends.
I bought a lot of furniture back then, and I still have most of it. Heavy wood, it has really lasted throught the years. I can't find anyone who sells furniture like that now. No one. I also bought some of the most beautiful, well-made clothing then, too. Excellent quality. That was Sears' best selling point... the finest quality. "Satisfaction guaranteed or your money back."
Those in charge of Sears now might as well be conducting business down at the city dump. AND I hate how citibank took over the Sears credit card. The interest rates are sky-high, and if everything isn't followed to the letter, you can be hit with exorbitant rates and fees. I always pay about 5 times the minimum payment, yet, since I made one out-of-town payment one day early and didn't realize I preceded the billing cycle's end by that one day, I was slapped with a non-payment fee, some other kind of fee, and a threat of being turned over to collections. I had the credit card for 35 years!!! Never late, ever, and they treat me like this!
I was going to cut the card up and mail it back, telling them to stick it where the sun doesn't shine, but I figured they would get me on some kind of harrassment thing. So... I am going to use it once a year, to charge the smallest thing I can find. Then, I am going to turn right around and return the item. The card will show activity, but they won't be getting a dime from this old lady. I won't mind seeing the last of the "new" Sears. The sooner, the better.
And now Lampert is buying a $40 million dollar mansion off the coast of FL, he has no care about anyone but himself. He won't listen to complaints, there was one lady on a forum who bravely went to Chicago to one of the annual meetings and she pointed out everything that was wrong and what needed to be done. That lady had worked for Sears for a long time, a lot of good it did her, I admire her for being so brave to confront the top man of the company. Sadly, Lampbert did as he always does, pay no heed to those who are dealing with the customers; because money and being called a so called 'genius' has put him at the head of a company he has no business being in. The lady is no longer working for Sears, because you can't talk to someone who won't listen and make needed changes. Sears is over with and hedge funders are nothing but thieves; taking away the lives of those who really do work hard to take care of customers. Because no will stop them of what use is it?
Someday, it will all catch up and it's not going to be pretty.
As a (thankfully) former Sears manager I was told to make sure that none of my employees reviews were more than meets expectations, this way they got a low raise if any. Sears is notorious for telling employees they are giving them something good while taking something else away. Sears employees live at poverty level if that.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The Nasdaq Composite (+0.5%) and S&P 500 (+0.2%) posted modest gains on Thursday, but not before enduring a morning dip into the red, which took place in reaction to reports indicating Russia has commenced military exercises on the Ukrainian border.
The news from Europe knocked the key indices from their early highs, while giving a boost to safe-haven assets like gold futures (+0.5% to $1290.80/ozt), Treasuries (10-yr yield -1 bps to 2.69%), and the Japanese yen (102.30 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|