Sears opens stores to gyms, groceries

The company may have better luck subleasing real estate at its locations than it does selling its wares.

By Jason Notte Nov 15, 2012 3:21PM

Sears store on in Milford, Connecticut Spencer Platt, Getty ImagesWhen someone is dying, it's universally considered bad form to go into their home with a measuring tape and plot out how you'd use their soon-to-be vacant space.


Unless that "someone" is Sears or Kmart, at which point Sears Holdings (SHLD) will invite you in and offer you a spare room until they're gone. 


Sears Holdings is subdividing existing, active and very much functional store space in an effort to sublease it. Grocery stores and health clubs have taken up extra Sears square footage, as has the apparel store Forever 21 -- which must be a real shot of confidence for the folks behind Sears' Land's End clothing line.


Sears Holdings isn't particularly ashamed of moonlighting as a real estate firm and gleefully lists its square footage on the company's "realty" site. In fact, property may be the most popular item either Sears or Kmart have offered in years.


The company kicked off 2012 by announcing plans to close 120 Sears and Kmart stores. In February, it decided to spin off Sears Hometown and Outlet stores and sell another 11 of its underperforming flagship stores to General Growth Properties (GGP). In May, it opted to partially spin off its Sears Canada shops.


Sears Holdings' revenue has fallen in each of the last four quarters and for the last five years overall. It posted its largest quarterly loss in a decade back in February and lost more than $130 million in the third quarter alone. The S&P 500 just gave it the boot, while the Dow Jones Industrial Average showed its ticker the door all the way back in 1999. Amazon (AMZN) has beaten Sears at its own catalog-style game, while Target (TGT), Wal-Mart (WMT) and even Kohl's (KSS) have helped drop Kmart store numbers by more than a third.


When Sears Holdings isn't subdividing, selling or outright closing its stores, it's maintaining them as retail mausoleums. When Americans walk into the same Kmart and Sears store they shopped at 20 to 30 years ago (assuming Sears Holdings hasn't disposed of it), they'll find it eerily unchanged. Martha Stewart's gone, but Kmart still sells Jaclyn Smith's clothing line despite the fact that the actress ended her run on Charlie's Angels more than 30 years ago. Even Smith's cameo in the last Lucy Liu/Cameron Diaz/Drew Barrymore Charlie's Angels film was nearly a decade ago.


Even the buildings have a certain bygone aesthetic, as Sears Holdings has been loathe to change so much as a doorknob on its facilities. Competitors like Target and Wal-Mart spend up to $8 per square foot painting, updating registers and replacing tiles, according to the International Strategy and investment Group. By comparison, Sears and K-Mart spend $1 to $2 per square foot updating facilities. If the roof's not leaking through the '80s drop ceiling, Sears and Kmart likely aren't fixing it.


If Sears Holdings isn't building stores, isn't sprucing up the ones it has and isn't updating its trademark stock, it must at least be protecting the value of its trademark brands, right? Not really. Just last year, it allowed Sears' coveted Craftsman line of tools to be sold at Costco and Ace Hardware. It's a cash grab, but then again so is just about every move Sears Holdings has made recently. Considering what hedge fund owner and Sears Holdings chief executive Eddie Lampert been telling his shareholders lately, that may be the point.


"Despite what some believed, increased marketing spend and increased inventory dollars do not automatically generate higher sales or higher profit," he wrote in February. "More marketing and inventory dollars are not required to generate higher sales or profits, especially in a company that already spends over $1.5 billion in marketing and has over $8 billion invested in inventory on a consolidated basis."


Basically, he and his shareholders aren't putting another dime into Sears or Kmart. If anything, they're wringing them out. Analysts and consultants keep throwing around the word "liquidation"  when describing Sears and Kmart's current state of affairs, and Sears Holdings has done little to disprove them.


Consumers who want to pay their last respects to Sears and Kmart -- even if they don't want to pay their increasingly uncompetitive prices -- may want to consider stopping by sooner rather than later. Just throw a quick nod to their live-in roommates at 24 Hour Fitness or Forever 21 on the way in.


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10Comments
Nov 16, 2012 11:22AM
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I used to work at kmart and i remember that you had to twist corporat's arm just to repair a leaking roof, and that was before the merger with sears. Looks like that has not changed. When you neglect your store, do you think that your costumers would want to come in and shop at a aging falling apart store?
Nov 16, 2012 7:40AM
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Licensing Craftsman out to Ace Hardware is a winning move if you know what you're doing, but look who we're talking about.  You can get the DogBone for less money at Ace than you can Sears.  Long run, this is fire sale and brand destruction.  If Sears knew what it was doing, Ace would be a means to serve areas where Sears does not have stores and offer those markets a reason to go to a Sears store. Instead, you have Ace cannibalizing Sears; you are now able to get Sears product without ever having the misfortune of having to set foot in a Sears store.  Stick the fork in Sears.

Nov 15, 2012 11:32PM
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Wow! That actually sounds like it could work for them.
Nov 15, 2012 8:57PM
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The real reason they are failing is their Customer Service sucks.  I bought an item this past Saturday, and they said it would arrive at my house by Tuesday. Then they sent me a notice saying that the ship date had changed.  They did not say what it had changed to so I called the Customer Service number, got some chick in either India or the Philippines, (not sure which, could barely understand her English, put me on hold twice, still could not tell me anything about the status of my order, said I would get an update within 24 hours via e-mail.  48 hours later, no e-mail update, so I sent them an e-mail to their customer service at sears.com, they had no information on my order, saying that I would get an update in 24 hours.  No update 36 hours later, so I emailed imran@customerservice.sears.com and was told again that they would be in touch within 24 hours.  Still no information on the status of my order from any one.  That is why they are failing.  The left hand has no clue as to what the right hand has done or is doing.
Nov 15, 2012 8:43PM
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JCP is going to go through the same thing.

And they deserve it, when huge corporations treat their workers like bitches the word gets around quickly.

A good portion of retail buyers are actually employees and spend their money on products where they work. When you treat people unfairly it comes back to you and that is what is going down.

I worked for JCP in maintenance for a private contractor for a long time, most of the managers are cool but a few were total bitches, male haters, and thought they were the president of the US.

They treated all contractors, vendors, and employees like ****. I watched 30 year employees lose their jobs because of a CEO that wasted 10's of millions. These employees were dedicated their entire working lives to JCP and fire and told they were not hitting their quota's so they were fired.

How About Lower The Price On You Products, treat your employees nicely, and acknowledge that the recession is the reason for drop in sales. 

The only thing that keeps me from wanting to see JCP completely fall is the friends I have still working there struggling and in paranoid,
Nov 15, 2012 7:51PM
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It’s a shame what’s happening to Sears. They did have some good brands and at one time was a good place to shop.  It’s ironic that Sears, which was once an innovator in retail is failing because they couldn’t keep up with the times.

 

They don’t have much time left to turn things around, but I’m not optimistic. They’ve had about four or five CEOs in as many years and it really don’t seem like senior management is really motivated to make it the great place it once was many years ago.

 

 

Unfortunately in a few years the articles about this place will be titled: R.I.P Sears.

Nov 15, 2012 6:48PM
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The Sears Flea Market has started.......All this maneuvering to stop the bleeding until the leases end in the leased Mall space arena......It will not renew the multi year leases and start closing stores one by one...BANK ON IT...!
Nov 15, 2012 6:04PM
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It's like scrapping an old car. The parts are worth more than the whole and Eddie plans to extract every dollar. 
Nov 15, 2012 4:03PM
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Very well worded article. During one of our sales meetings a few years ago in Atlanta, Ga. a member of the Sears senior management team stated "This was not the same Sears our grandparents shopped at". With that statement, us attending the meeting realized that the end was near. After 15+ years with Sears, the majority of our positions were eliminated. It will be interesting to see the list of store closings that will be out after the holidays. SEARS, WHERE AMERICA USED TO SHOP!
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