Sears avoids oblivion -- for now

Beleaguered retailer catches a break.

By Jonathan Berr Feb 23, 2012 12:19PM

Image Source/Corbis/CorbisSears Holidings (SHLD) is planning to sell anything it can as the struggling retail chain tries to convince investors that it is not going to wither away into oblivion. The message got through to Wall Street loud and clear.

Shares of the 119-year-old retailer soared in early morning trading, gaining more than 20% and hitting $63.09. The stock had plunged 56% last year, but made up lost ground this year as investors speculated that controlling shareholder Edward Lampert would take Sears Holdings private. Sears Holdings, though, isn't out of the woods yet.

Under the leadership of Lampert, Sears Holdings has tried to convince shareholders that a turnaround was just a quarter or two away -- only to disappoint. But on Thursday, the company announced plans to sell 11 retail locations to General Growth Properties (GGP) for about $270 million. Sears Holdings will also separate 1,250 smaller-format Hometown and Outlet businesses through a rights offering that the company expects to raise between $400 million and $500 million. It is also shuttering 120 poorly performing stores.

While it's nice that Sears Holdings is shoring up its balance sheet, the moves don't address the company's fundamental problem, which is a lack of customers. Sears has watched helplessly for decades as rivals such as Wal-Mart (WMT) and Target (TGT) siphoned away its business. Its brand identity is muddled. Can anyone describe what it means to be a Sears customer? I am at a loss for words.

There is plenty of fat for the company to trim. Sears Holdings has what it describes as "one of the largest corporate real estate organizations in the world," which it should probably sell. It should also unload the preppy catalog company Land's End, which it acquired in 2002 for $1.9 billion. Three years after the deal closed, Land's End CEO Mindy Meads was fired following a clash with Sears management.

Investors are now watching the wrenching decline of a once-iconic brand. The Hoffman Estates, Ill. company reported Thursday a net loss in the fourth quarter of $2.4 billion, or $22.47 a share, versus net income of $374 million, or $3.43 a share. Bloomberg News says the loss was Sears' largest since 2002. Revenue, which has dropped for more than a dozen straight quarters, fell to $12.48 billion. On an adjusted basis, profit was 54 cents. Wall Street analysts were expecting a profit of 54 cents on revenue of $12.44 billion.

Jonathan Berr is long Target.

83Comments
Feb 23, 2012 6:55PM
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I agree that Sears has gone downhill in the service department. However, while it may not be all consumers, there are too many who look at the price only. This is why places like Walmart still thrive. Folks complain that employees aren't skilled enough (but you have to pay the skilled ones more), in the factory, a USA one, you have to pay them better as well. This requires a higher price tag on your items. Most buyers will go to the store with the lower price tag. Not all, but most. If you want better quality and better service, put your wallet where your mouth is and quit asking for cheaper prices. Quit asking Sears to sell you a Kenmore refrigerator for $500, including delivery (delivered by the guy you think should be making $15 per hour with benefits) and expect it to last 20 years!!! We as a whole are just as much to blame.
Feb 23, 2012 6:40PM
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SEARS needs to go back to their roots.  They sold items that were made in America, were of excellent  quality and priced well.  The stores themselves were inviting and clean.  Also sales people knew everything there was to know about the products they were selling.  They also asked the shoppers if they would like help. 
I haven't seen that in years.  I'd go back to Sears if that came back too.

Feb 23, 2012 6:00PM
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Sears really started to go  downhill when it ended its catalog sales, the thing it was best known for.  Also the quality of Kenmore and Craftsman also deteriorated.  I have owned many Kenmore appliances and Craftsman snow blowers, lawn mowers and power saws over the years.  But the ones that I bought most recently were junk---snow blower and riding mower worked for only a year before breaking down--and have been breaking down ever since.  And the last Kenmore washer didn't last long, either.  Never could understand the rationale of buying K-Mart and Lands End.  Just two more nails in the coffin.
Feb 23, 2012 7:49PM
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When it is all about the price then people will shop somewhere else,like walmart , homedepot .dollar store etc. When they got rid of all the skilled sales people that actually helped customers,then why would anyone continue to shop there. At a time when I worked for them we were empowered to do what ever it took to make our customers happy. After the buy out they were all about being just another cheap self serve store . They didn't relize it was the relation ship with the customer that the SALES STAFF had that kept the customers LOYAL to SEARS . If a customer wants to be assisted by some 7$ an hour stoop  that could givea crap about what the customer buys then they can  & do go elsewhere .But when its getting the right product to what that customer really wants its called customer satisfaction and creating a customer for LIFE!
Feb 23, 2012 6:13PM
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I took my mother to Sears the other day to buy a Fridge, Stove and Dish Washer.  The customer service was awful.  My mom has been shopping at Sears since the 1940's and after she paid for the items which took over 1 1/2 hours with all their percentage discounts, delivery and setup charges being added up, she told me she would never go back there.  Sad in a way but many stores have no idea that their customers are their bread and butter.
Feb 23, 2012 8:02PM
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I used to buy all kinds of things from Sears. As time went on, I stopped buy everything but Craftsman tools. Craftsman tools were the only tools I would buy. Then Sears turned their back on America and now Craftsman tools are no longer made in the USA, they are now Chinese made. I will never buy a Sears Craftsman tool again as long as they aren't American made. I hope they go out of business!
Feb 23, 2012 7:54PM
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I am 81 yrs old and have long shopped at Sears, Target, Wal-Mart and KMart.  I do not care for Wal-Mart at all. Cheap merchandise, poor service...if you can get any at all.  Sears does not have the customer service they used to have and there is never a salesperson to assist you and their prices are too high for most people. Target is great...good service and good merchandise, prices are pretty good.  KMart is my favorite and has been for years.  Good merchandise and good  prices, great service.  Stores, all of them, need to cater to all of the people, not just the ones with lots of money.  I live on a small pension now and have to shop where I can get the best products for my money.  KMart is that store and I hope even if Sears is forced to close more of their stores, they will not close the Kmart's.  Maybe Sears should consider returning the catalog business.  In this day of the Internet, many people are shopping on line.  I know I do because I am disabled and no longer able to drive.  They might consider it.
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Sears created their own problems through the years. Appliances are expensive as well as clothing. Tools are the only thing I buy there now. Sears had a good credit card program until it tied into Mastercard. Interest rates almost doubled while penalties for being late increased even for any card holder was paid ahead previously. I paid mine off and closed the account. Sears needs to change the way they do business just like JC Penney has done.
Feb 23, 2012 5:57PM
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Sears would survive better if they provided better employee training and taught employees to answer questions with knowledge, not bull crap.  My home used to be filled with Kenmore appliances, now we have one Kenmore freezer and we dont go back due to ill informed employees who cant help you they just want to make a sale.

 

Sears would do better to become better than Walmart with employees who know something about home improvement, decorating, appliances, etc. 

 

Sears slogan is "Sears Sucks", adapt with the times and put things in place that will give you the edge over Walmart and Target.  I dont like shopping either one but, for all the misinformation and pricing discrepancies at Sears, I wont shop Sears.  And their Craftsman tool warranty only works if they want it to.  The Craftsman tool warranty is a bait and switch tactic and they do not honor the warranty of free replacement unless you get the right person.

Feb 23, 2012 6:32PM
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My local Sears looks like more like a low end discount place,than a real department store. The displays are terrible.The whole store looks like a mess,except for the tool dept.. All the money they pay people to run the business,and look how it winds up.
Feb 23, 2012 7:45PM
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Sears, like other retailers with store credit cards blew it when they sold their credit to an outside source. Used to be, sears had a card with interest rates low enough you could pay it down, then shop at sears again. They had a minimum payment process that was accumulative allowing some breathing space for those tight times when cash was scarce.

 Now, you can't pay the card down meaning you can't buy from sears.

 

 Sears customers, many of them are mired in paying off high interest credit cards, which translates into fewer customers.

 

 The old retail establishment understood that customers must have cash or credit. Sears Credit cards are a vampire - they suck money that would be spent on merchandise into the maw of a credit vacuum.

 

And the greatest advertizing gimmick ever? The catalog? Drooled over by kids and adults? They killed it off.

 

If someone set out to actually kill the sears brand, they could not have worked up a better whammy on purpose.

 

Too bad. I loved my catalog, loved Sears. But like Montgomery Wards, the people in charge forgot the root of any business -the customer.

Feb 23, 2012 6:26PM
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I agree with the catalog comment.  I stopped shopping at Sears when they discontinued their catalog.

I do walk through the local store at the mall, sometimes, just to check sales.  The store reminds me of old people.  I mean it is outdated.  They just don't seem to have a handle on current fashions.

Feb 23, 2012 6:28PM
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Many of the stores are a disaster as far as organization of their merchandise.  The bathrooms are filthy and the store is not clean.  I have been at a Sears store in Houston when the cleaning woman came into the bathroom to "clean".   She used the toilet brush on the SEAT after using it in the toilet and then used it to clean the sink, faucet handles, and other areas in the bathroom.  So very filthy!! Doesn't anyone at Sears teach those people how to clean and DISINFECT??
Feb 23, 2012 7:48PM
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I worked for Sears for 20 years and have tried to post the Truth about what has happened to the company, only to have My Post Blocked.

Mr Lampert must have a deal with MSN to block anything negative !

 

Feb 23, 2012 6:16PM
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Sears, needs to sell More USA products at a lower price or a order match price program to gain consumer confidence with America and US territories. This company is bin around for a log time and it could use a face lift. Give the consumer what they want. Times are bad now and they need to be more competitive with there products. Customer first everything else will fall in place. Just my two cents. 
Feb 23, 2012 6:00PM
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the interest they charge is astronomical,why use there sears card?

 

Feb 23, 2012 8:03PM
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I love clothes and have actually found some cute, well made brands at Sears and Kmart (i.e. Apostrophe, Attention and UK Style).  However, neither store is inviting.  They are typically messy, disorganized and cluttered.  The Kmart parking lots need repair and better lighting (I don't shop there at night).  Sears has a long turnaround for items (the same stuff stays on the racks for months) and their prices just aren't competitive with similar stores like Target.  For example, a UK Style dress that has been out since September is still $24.99.  That is not a "good deal" or a "sale" in my mind.  We are going into spring and that dress should be marked down much further.  And if Sears thought they would attract more customers with their Kardashian line, they can forget it.  Some of the items are cute enough but I can't stand the Kardashians and wouldn't spend a dime on anything with their name attached.  If Sears wants to know how to increase customer traffic, ASK THE CUSTOMER!  We truly do know best (or at least what we want/like/need).
Feb 23, 2012 7:45PM
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Walmart  is a threat to the Galactic Empire!
 They are nothing more then a China outlet store!
 China needs to be dealt with! in high tax's on there imports


Feb 23, 2012 6:56PM
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BRING BACK THE CATALOG!!! WE USED IT FOR YEARS..NOW SHOPPING ONLINE IS GREAT..WOULD BE NICE TO GO THRU THEIR CATALOG AND BE ABLE TO GO ONLINE AND ORDER..WE ORDER ONLINE A LOT, AND WITH SOME CATALOGS.I REMEMBER MY GRANDPARENTS SHOPPING AT SEARS ALL THE TIME.THEY NEED TO BE CUSTOMER ORIENTATED AGAIN..
Feb 23, 2012 8:55PM
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When Sears stopped the lifetime guarantee on there tools they lost my faith in there product. Now you see made in China and no tool from China is worth buying.
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