Inside Wall Street: Kardashian can't save Sears
Superstar collections fail to bring in the crowds as the deparment store continues to struggle.
Kim 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.
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.
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.
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.
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
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
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.
Remy Cointreau says it was 'adversely affected' by China's anti-extravagance policy.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.