Inside Wall Street: Kardashian can't save Sears

Superstar collections fail to bring in the crowds as the deparment store continues to struggle.

By Gene Marcial Dec 1, 2011 9:58AM

Image Source/Getty ImagesKim Kardashian became a world sensation almost overnight. The celebrity has her own reality show and millions of fans. So you would think the fashionably chic Kardashian Kollection would have been besieged by shoppers and sold out during the Black Friday rush. After all, practically all major retail stores, including Macy’s (M) and Target (TGT), were swamped by tens of thousands of eager shoppers.

 

But that wasn't the case at Sears (SHLD), where the Kardashian Kollection held sway and was among the elegant products displayed for sale. In fact, Sears was betting the Kardashian name and collection of fashion products would stir up consumer excitement.

 

Wrong. The products hardly brought in the gushing crowds that celebrity products usually attract. Kmart stores (a Sears unit) also introduced products named after another rising mega star, Sofia Vergara, of the TV show "Modern Family."


But "these initiatives have not been effective," said Marija Dabovic, a retail industry analyst investment research firm Value Line. The Kardashian Kollection consists of almost every product that women would want in the world of celebrity fashion, complete with winsome dresses, fashionable shoes and jewelry, and trendy handbags, intimates, belts and sunglasses.

 

Alas, the electric Kardashian name failed to deliver. There are no signs of a turnaround at Sears. "Sears Holdings has yet to see meaningful improvement," says Dabovic, as the company continues to be in the red, posting  losses in every quarter so far this year.

 

Shares of Sears are ranked unfavorably for timeliness, says the analyst, who suggests the stock will trail the broader market in the year ahead. Although the stock, now trading at $60 a share and helped by the market's hefty advance in recent days, has risen since August, it has been quite volatile, Dabovic says.

 

The stock's potential for a recovery through the middle of the decade, she adds, continues to be poor and below average. All told, the stock "fails to provide appeal to both momentum and long-term investors," the analyst says.

 

Dabovic sees Sears posting a loss of $1.35 a share in fiscal 2011 ending Jan. 30, on revenue of $42.6 billion, and a loss of 85 cents in fiscal 2012, on revenue of $42.7 billion, down from a profit of $2.07 a share in fiscal 2010 on sales of $42.3 billion.

 

One big problem at Sears is the downward pressure on operating margins. "We expect Sears' consolidated operating margins to be pressured annually by promotional activity and markdowns to keep inventory levels aligned with sales trends, costs related to free appliance delivery and online shipping offers," says Jason Asaeda, an analyst at Standard & Poor's. At the same time, the weak U.S. housing market is hurting demand for hard-line products.   

 

Little wonder that none of the major six analysts who follow Sears Holdings rate the stock a buy. Five are neutral, and one recommends dumping the stock.

 

It's also not surprising that Sears Holdings' large institutional investors have been quite unhappy. A lot of them have been selling shares. Even ESL Partners, which is controlled by Sears Holdings Chairman Edward Lampert and owns a majority interest, has been a seller.


As of September, ESL has sold 670 million shares,  but it still owns a 45% stake. Another big seller is Fairholme Capital Management, which unloaded 234 million shares as of September but still holds a 15.2% interest. And State Street Global sold 59 million shares, reducing its stake to 3.2%.

 

A widely known name with 2,201 locations, Sears is among the largest broad-line retailers in the U.S., operating 884 full-line stores and 1,370 specialty shops, as well as 1,304 branded Kmart discount stores. Sears Holdings' 94%-owned Canadian subsidiary operated 122 Sears-branded full-line stores and 373 specialty stores in Canada.

 

Given near-term headwinds, S&P's Asaeda also sees Sears continuing to be in the red at least over the next two years. Considering that the retail store industry as a whole has outperformed the broader market by about 3% since September, the outlook is indeed bleak for Sears Holdings as signs of a turnaround continue to elude the giant retailer.
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200Comments
Jul 14, 2012 8:40PM
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I just stumbled upon this article and saw these negative comments. You all have a lot of judgement. If you don't like the television show, simply change the channel. If you used more energy to bring in more income for your family rather than try to boot someone off the air, you may have more of what you need and want. I'm commenting because the mindset has to change. If we want something to get better...we have to be better. Slack talking about other people is not a great character builder. If you did not understand the intended message you will probably have a few distasteful words for me...however, this would prove my point.
Dec 4, 2011 4:35PM
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KARDASHIAN  is known for her sex tape... which mother wants their daughter wears their stuff with her name on the front ??? do you know what kind of people would look at them ??? Sears can sell her porn in their store ,,, they have better luck..
Dec 4, 2011 4:22PM
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You can not bring bunch of idiots to   sale their made in china  cheap stuff to the 99%.... while they are in 1%  and. never ever shop at Sears.... There were so many letter sent to Sears regarding this brand which Sears  did not care,   LISTEN TO  PEOPLE .... If you get boob jobs from kin and the other ( short ) sister and lipo and hair extentintio n  and  make up you have three sisters with big butt and no talent. and no moral ..
Dec 4, 2011 4:18AM
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BOYCOTT THE KARDASHIANS
http://www.gopetition.com/petitions/no-more-kardashian.html

Dec 4, 2011 2:46AM
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Sears needs to start listening to everyone's complaints regarding this "collection, they really can't afford to keep losing customers. No only do they carry this crap, they have to further insults everyone with the larger then live pictures of the three, in some cases in lingerie. When I have complained to Sears they state the demand for this crap is large. In the little Sears outlet by me, it is always discounted down, but still way over priced. I could not believe the T-shirt that had their name across it. Why would anyone want to wear a shirt with someones name across the chest, little lone a name that is associated with disgust. They have no talent, no values, zero morals. They are driven by the all mighty dollar and will stop at nothing to gain it. They even refer to the mother as a "pimp" and a "bitch". They have also stated she would make them do anything as long as she gets 10%.
I remember Sears as a little girl, they seemed wholesome with family values, they none want what the Kardashians want money from any source. Please sign the petition lets gets them off of the TV and out of the lime light.

Dec 2, 2011 5:16PM
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In response to augie's comments, when is the show supposed to be going off the air?  I didn't see that one.
Dec 2, 2011 4:29PM
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In addition to the comments I made yesterday, I should have mentioned that the "not so bad looking shirt" that had "Kardashian Kollection" written right in the middle of the shirt were in big, bold capital letters.  I'm still wondering why in the heck would somebody do that to a piece of clothing?  You can't wear that to work, only out in public, which would attract some pretty strange looks from other people.  Also, I wonder if the Kardashians realize that the average working class female can barely afford to buy a pair of dress slacks for around $20 in Walmart in these bad economic times, and they want $89 for a pair of their dress pants?  There is a petition on the internet to stop the E! Entertainment Channel from filming and airing their show and so far, approximately 10,000+ people have signed this.  Yes, the entire Kardashian clan have been known to swear on camera, as well as drink and actually get paid to go clubbing just for their appearances; they openly talk about sex; Kourtney has already had one baby out of wedlock and is currently expecting.  I mean, I could go on and on about the trash they talk about, but I am concerned that this type of behavior is making our little girls who watch the show think all this is "A-OK" to do!  Please sign the petition!!!
Dec 2, 2011 7:43AM
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SEARS just dont get it. The MAJORITY of American women dont dress like TRAMPS..................... been boycotting SEARS since they mentioned carrying TRASH made by TRASH.
Dec 1, 2011 10:26PM
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When I was a kid it was great to go to Sears and check out everything, because they had everything and it was good stuff. I had confidence that the "Sears Best" products were the best. I have only shopped at Sears occasionally the past 10 to 15 years. I was shopping for a new fridge a couple of years ago and was in need of help from a sales person. The 1 lady that was working in appliances was on a personal phone call forever and just ignored me. Also craftsman tools are no longer a quality product. I'm old school and will pay more for quality goods and good service and avoid "made in China" whenever possible.
Dec 1, 2011 7:47PM
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In the 1960s, Sears was the "it" store. American-made Craftsman tools and Kenmore appliances were among the very best. My mom had a set of appliances that lasted 25 years. Sears had a mail-order option/function that was super. As a child, we moved from a big city with a complete, full service Sears to a very small town that had only a mail-order outlet. Even so, Sears was "the place to go".  Then they expanded the mail-order outlet to a full store and it was still great.

 

Then Sears began to decline. I don't remember just when but it must have been the late 70s or 80s. It was during the same time that Sears wasn't just Sears anymore (maybe someone with a better memory recalls the specifics). They began this umbrella of offerings like investment company, insurance company, real estate company. Then, seemingly, they hired the brother of the guy who changed the Coke formula to run the whole shebang.

 

I took a college business course in 1991 and by then Sears was totally in the crapper. It was in the textbook under "how to fail in business" and 90% of the students had a Sears horror story (for example: one guy told how he bought 4 gallons of paint and had it special mixed from a color sample from the store's own display. The store person made a mistake in the mixing and the color was wrong. He had already paid when he opened the paint and found the mistake. Sears would not make it right. Ironically enough, as the man was leaving the store he stumbled and lo, and behold, the employee had not hammered shut one top on one paint can and paint went flying everywhere. Go Karma!) and a reason why they would never shop there again.

 

I have not so much as stepped foot inside a Sears store since the late 70s. I don't even consider Sears as an option. I don't read their newspaper inserts or pay attention to their tv ads. I go to the mall and never go to sears. I have never really thought about it until this post, but I went from a devoted customer to a devout non-customer after having several problems in the 70s. I'm not angry and don't even remember what problems I had that made my feelings change. I did discover years ago that I have no power to change the way things are, but I do have control over where I spend my money. Not spending my money with Sears is my way of appeasing myself for policies and practices I did (or do) not like. They didn't worry about keeping me as a customer when they had me, so I don't worry about their bottom line now. In this day and age, there is always some where else to shop. I don't see why I should give them a second (or third or sixth) chance to get a few of my dollars when they didn't take care of the business they had from me.

 

Until these posts, I didn't know they had a Kim K. line. I laughed out loud when I read it. Years ago, I didn't want Jaclyn Smith's name emblazoned across my backside, and I liked her. But Kim K.???? Geez, what's next? The Snookie for the Ambitious Up and Comer Line.

 

I apologize to those who would asked for tolerance, but I get so frustrated with what we USA folks seem to admire so much - like sports stars that have no sportsmanship, reality tv shows that reward nasty behavior, and people who are famous for absolutely nothing. Is that the real pulse of the US of A or it is media hype trying to make it so for big profits? I have the same negative feelings that many of you voiced about Kim K.  No, she never did anything to me and no, I don't know her, but she put herself out there and now she is grist for the mill. I was proud to see that Americans, in general, did not flock to her Kollection. It helps me identify media hype for dollars. 

Dec 1, 2011 7:47PM
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We were in Vegas on Saturday after Thanksgiving, and it was the first time in a long time that I went to Sears. I'd just buy tools there and pay my Discover when I had it and that is it. It is not a clothing store for most and you have to look at the customer type for this. You will not see may people there dressed in that type of clothing nor let alone buy it there. The K's had their real sell when they went with Babe after they started their stores. Those Bebe stores have quality control and won't sell just to sell. Look, color, quality, and exclusivity is how that store survives and that is Clothing 101. That is how you can justify the price. This stuff at Sears was completely poor in style and quality at a high price. Some of this stuff was made of cotton t-shirt material which is one of the cheapest materials you can buy. There is no way that anyone that frequents there would buy the stuff. It was a quick dollar to the K's and the ones that lost was Sears. Someone there is making very bad decisions and it may fall like most older stores of the past.
Dec 1, 2011 6:19PM
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Hey Sears heres an idea  If you must go reality at least try the Real Housewives of America for style ideas and hire someone who's in touch with style and not fresh out of design school or the friend of the friend of the friends neice or cousin.
Dec 1, 2011 6:17PM
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Kardashian has everything but high moral standards. Maybe Sears should have sold copies of her internet sex tapes to bring in customers. Kim Kardashian is the last person on earth you would want your children to use as a role model. Why in the world is Sears having any association with this lowlife personality? Oh well, you get what you pay for and sometimes  get more than you planned, as in notoriety and public revulsion.
Dec 1, 2011 6:14PM
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Sears and K-Mart should be and have always been in my mind a completely different shopping experience.  Their marketing strategy should also be completely different. 

 

The Kardashian's name should have never been displayed in a Sears Department Store, and I would have thought twice before I used their "Appeal" in a K-Mart as well.

 

Despite what many Marketing people want to believe, a name is only a name.  There must be a positive demand for the name first and although Kardashian is recognized, the only demand it creates is in the porn section of the video store.  A huge marketing blunder. 

 

This once great American department store can be salvaged, but they need a new marketing strategy and a new line of quality products without the hype of a so called "Celebrity" to rely on for sales.   

Dec 1, 2011 6:08PM
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I know at least seven people who are boycotting Sears specifically becuase of their association with the Kardashians, and I suspect there are thousands more.  Most decent people hesitate to be associated with the bile this trash spews on our nation's impressionable young ladies.
Dec 1, 2011 6:06PM
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Sears has done some amazing things very wrong in recent history. The K-mart / Sears merger was a good Idea. They had an opportunity to cross brand Kenmore / Craftsman / Jaclyn Smith. Yes I am a consultant for the retail industry. The Kardasian line of product was complete garbage, Very over priced and very poor quality. I blame both Sears and the Kardasians for this mess. If you compare that to say Jessica Simpson there is a Huge difference. I just bought a pair of LEATHER Boots for my wife from Victoria Secrets for 99$ you can't even buy leather boots from Sears. There are several things that Sears / Kmart can do to change this direction or they are going to end up like Mervyns.

!- Better differences between K-Mart and Sears. Cross Branding is ok on a limited basis.

Change the lay-out of the stores. 1st floor women/ kids/ means. 2nd floor-Designer fashions that is reasonable! Jaclyn Smith/ Chaps/ and in house promotional line ( Merano at Target) sell space and have collections a much better accessories selections to add margin.

3rd floor- Major appliances set up in vignettes. I know that Sears is primarily a replacement driven focus, the stuff still looks better in a Kitchen setting. Expand the offerings in small appliance and do the same as your second floor by allowing Brands to show case their product. Why put toasters on the bottom floor and Stoves on the top floor.

Really improve your customer service. Nothing is more frustrating than to speak to a clerk that knows less than I do!

This offer is free; the next one will cost you!

Good luck Sears

DB

Dec 1, 2011 6:05PM
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I am so embarassed for the Mktg Dir and Sears for being so cheap and not really thinking about their stock or customers. This Kardashian line is the most cheap and tacky I have ever seen anywhere.  I bet they would not even where this crap.  The materials are cheap as well as some designs.  Do you care that little about your shoppers.  Be as proud of the designers you use as you do with your appliances. Start using polls in your stores as to what your shoppers would like to see and cough up the money to produce.  Your shoppers are the cars you drive and the houses you live in.I would not even wear this on my motorcycle. You really missed the mark with this one.  Love your store but this line is more for Kmart division not your major dept store

With much love

Dec 1, 2011 6:05PM
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Sears is still in the 19th century; it's depressing to go into one of their stores.  Why did they consider the creepy K's to buoy up their sales?  Who cares about those botoxed bimbos, let alone buy their clothing line.  They should have done their homework better than that.  I say bring back Bullocks, Buffums and the Broadway!
Dec 1, 2011 6:01PM
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Jenna Jameson, Now that would've worked. No fat a.s butt sticking out and over puffed lips!!!!
Dec 1, 2011 6:01PM
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Since I was a kid, many years ago (40+), Sears clothes have been out of style, cheaply made and completely "off" in their look.  They used to be a good tool/appliance store, but even those are going on the cheap now (is Craftsman really known for quality any more?).  I bought kitchen appliances there, but NOT the Sears brands, and would no more buy clothes there than at the Salvation Army (I'm sure you can get the same things in each place).  Why the K's would even consider putting their crap in Sears in the first place only shows how out of touch with real "reality" they are.  I'm sure  none of them has ever stepped foot in a Sears, and would never consider even buying underwear there!  I think the marketing twit who steered Sears into this deal should be fired, and maybe they should consider hiring somebody over 19 to see if they can plug some of the huge holes in this leaky boat called Sears.
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