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.
Tags: MSHLDTGT
200Comments
Dec 1, 2011 1:11PM
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Why buy something that says you're stylish and a fame wh0r3 when there are so many things you can buy that just say you're stylish? 

Nobody in their right mind wants to wear cheap vietnamese clothes with a kardashian tag on them when they can buy clothes from a real designer for approximately the same price.
Dec 1, 2011 3:47PM
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Anyone who thinks the Kardashians have fans must be high. Everybody hates the Kardashians. Poor business decision, Sears.
Dec 1, 2011 3:43PM
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BOYCOTT SEARS...When I saw the commercials for their collection, I wrote the following to Sears and meant it (and to be clear, I have never seriously considered boycotting a store before):

"I was very disappointed to see Sears is now carrying a Kardashian collection. I have long made it a point to go out of my way to shop at K-Mart and Sears over other retailers. However, that will now change.

It is my firm belief that the Kardashians are both the epitome and even a perpetuator of one of the largest problems facing our society. The Kardashians are famous for no good reason (unless you consider having a famous lawyer father, a sex tape, or a 70’s icon that is used as a door-mat for a stepfather as a good reason), and they are successful because of that fame. They perpetuate to the youth of our society that you can be successful without any effort, or value. Now our country is faced with a growing segment of our society that seems to expect to be wildly successful just because they believe they are special, without putting in the work or effort to become successful. And when that success does not come, they expect someone else to take care of them.

 

This country is quickly loosing our work ethic and is replacing it with an entitlement mentality. The Kardashians are the poster children of that attitude. So, until Sears disassociates with the Kardashians, I will make it a point to NOT shop at Sears or K-Mart for AS LONG AS Sears
is associated with the Kardashians."

Dec 1, 2011 3:44PM
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I am so sick to death about hearing about the K's. The one that married recently as a publicity stunt has the morals of a Sewer Rat. Wake up people.
Dec 1, 2011 1:56PM
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Me and my wife saw this in Sears.

 

She said, "No way I'm paying $40 dollars for a shirt that spells collection with a K. I know its supposed to be trendy or whatever but it just looks really dumb... kind of like Kim."

 

I see her point. Plus the clothes didn't look very nice.

Dec 1, 2011 2:24PM
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My twenty-one year old daughter recently checked out their line, her exact words were "tacky, cheaply made, and overpriced."  Not worth her hard earned $.  

Dec 1, 2011 3:43PM
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First of all, Kim Kardashian is a joke.  I can't believe any retailer would want her name attached to them.  If Sears wants to bring in customer, they need to offer quality products at a fair price.  People will come. 
Dec 1, 2011 3:42PM
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I won't buy ANYTHING with these bimbos names on it. If people BOYCOTT these nasty, self centered people, then they will eventually go away. Sears made a big boo boo putting their hopes on the KarTRASHians.
Dec 1, 2011 5:10PM
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I was at a Sears store not long ago and noticed that some of the pieces of clothing had "Kardashian Kollection" written right in the middle of a not so bad looking shirt, which I thought was tacky.  Also, other pieces of clothing had their initials stamped on it for everybody to see, which is also tacky.  Don't these people "get it" at all that nobody wants to buy their high priced clothes which are supposed to be affordable but aren't affordable to the average consumer at all?  I noticed that one pair of dress pants cost a whopping $89.00!!!  This is what they think is affordable???  What planet are they living on?  Outrageous!  Sign the petition to get these people off TV because our little girls are looking up to older women who swear, party, have babies out of wedlock, and are just pure trash!!!!!

Dec 1, 2011 2:59PM
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The Kardashians main claim to fame is  mainly " Shame ",  not upscale fashion and they have only one talent, amongst them !!
Dec 1, 2011 4:48PM
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I think the mere fact that the Kardashian name is attached to Sears is detrimental to its health.  While physically attractive, the Kardashian sisters have shown themselves to be potty-mouthed, having children out of wedlock, and flaunting extravagance the majority of us can only dream about.  They are certainly not role models for young women, nor is promoting their name the way to promote what Sears has stood for all these years.

Dec 1, 2011 3:38PM
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"My twenty-one year old daughter recently checked out their line, her exact words were "tacky, cheaply made, and overpriced." 

 

Actually, that pretty much describes the Kardashians as well.

Dec 1, 2011 4:30PM
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This is RIGHT ON!
"It is my firm belief that the Kardashians are both the epitome and even a perpetuator of one of the largest problems facing our society. The Kardashians are famous for no good reason (unless you consider having a famous lawyer father, a sex tape, or a 70’s icon that is used as a door-mat for a stepfather as a good reason), and they are successful because of that fame. They perpetuate to the youth of our society that you can be successful without any effort, or value. Now our country is faced with a growing segment of our society that seems to expect to be wildly successful just because they believe they are special, without putting in the work or effort to become successful. And when that success does not come, they expect someone else to take care of them.

 

This country is quickly loosing our work ethic and is replacing it with an entitlement mentality. The Kardashians are the poster children of that attitude. So, until Sears disassociates with the Kardashians, I will make it a point to NOT shop at Sears or K-Mart for AS LONG AS Sears
is associated with the Kardashians."
Dec 1, 2011 3:21PM
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The KK for Sears makes as much sense as Kanye West for Wrangler. The Kardashian "brand" is a huge turnoff to your average Sears shopper. Sear's target consumer hates everything about the Kardashians and what they stand for. They should have tried to get a Taylor Swift girls collection, or Paula Deen. It is a much better fit. 
Dec 1, 2011 3:09PM
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Let designers design, models model, actors act, and the Kardashians disappear...

 

Too much "branding" of a celebrity rather than letting them settle for that which made them.

Dec 1, 2011 2:23PM
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Sears for fashion?  Seriously?  Maybe tools, tires, a refrigerator, but not fashion.  I shop a lot and I NEVER shop at Sears for any wearing apparel.  They lost touch with the times about the time I left high school (the  mid-70's).  They need to take a look at Target or even JC Penney for low-price fashion marketing.  And if they think the Kardashian's will make Sears a fashion destination...well, I'll pass, thank you.  And obviously so will a lot of other women shoppers!
Dec 1, 2011 5:09PM
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The Kardashians cannot even save themselves let alone Sears.  I would not buy anything that is connected to that clan no matter what store  it was in.
Dec 1, 2011 3:46PM
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What was Sears thinking when they signed to deal with the Kardashian's anyway?  I just made it worse for them.  They should go with what they know and what people recognize them for:  their Craftsman name, their Kenmore name, their automotive products and their work apparel.  They should make their stores smaller, eliminate all clothing and shoes and make that "on line only" and focus on their strengths.  Sears, SEE IT BIG, KEEP IT SIMPLE.  You are way off track!  Start over!  Who's making these bad business decisions?  I would loose my job if I did something like that!
Dec 1, 2011 2:08PM
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First of all, I'm not stylish!  I'm traditional!  That is what Sears was known for for many, many years...having good prices on sensible things!

I have NO interest in KK or any other "celebrity" line of clothing, accesories or other items.

 

Put some decent items in the stores that were MADE IN THE USA and advertise that fact...then see what your business does!  You can sell the foreign made stuff in KMart!

 

Back last spring, when my DIL was looking for some reasonably priced clothes for GS (he was headed on a trip to Australia-winter there), she found everything she needed at Sears and well below other retailers prices.  Some of the items, like jeans, were the exact same brands...just cheaper prices!

Dec 1, 2011 5:10PM
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Think about it,  and remember - if O.J. had NOT murdered his wife Nicole Brown and friend Ron Goldman,
we wouldn't have had known Robert Kardashian, who reactivated his law license to assist his friend and golf buddy in mounting the O.J.'s defense as part of O.J.'s legal "Dream Team ,

hence elevating the Kardashian name to prominence outside of chic` Hollywood circles - thus spawning the "Kardashian" girls.

So, it took an actual DOUBLE murder to begat us Kim's "double bubbles." And, alas - we are all MUCH dumber because of it...how about that, huh?

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