The number to pay attention to at Sears

This is one retailer that doesn't like to spend much money making its stores appealing to customers.

By Kim Peterson Dec 28, 2011 4:09PM
It's obvious that Sears Holdings (SHLD) isn't running its Sears and Kmart stores well. But one number says a lot about how the company views its operations.

That number is the amount Sears spends each year updating its stores.

Retailers like to take good care of their stores. They'll refresh the color themes, upgrade the cash registers, replace carpets and redo the signage -- anything to make the overall shopping experience better. Target (TGT), for example, announced a $1 billion renovation program last year.

In general, retailers spend $6 to $8 per square foot a year on these updates, ISI analyst Greg Melich told The Wall Street Journal.

But Sears spends far less -- about $1.50 to $2 per square foot. "That is not even enough to keep up with depreciation and amortization," writes the Journal's Justin Lahart.

So Sears management is literally watching the stores fall apart -- and doing nothing about it. Is it any wonder, then, that sales have dropped to an estimated $42 billion this year from $53 billion five years earlier? Or that the company is closing more than 100 stores next year?

If management doesn't care much about stores, don't expect shoppers to either. We've heard from plenty of commenters on this site about the deplorable customer service and shopping conditions at Sears and Kmart stores. People don't want to visit crumbling stores that haven't changed in 10 years.

There's one more number that plays into this as well, and it shows where Sears has chosen to put its money instead. The company has poured $5.2 billion in the last five years into share buybacks, which keeps the share price up and consolidates control over the company into the hands of just a few.

Looking at these numbers, it seems pretty clear that management doesn't mind running the company into the ground -- as long as it can profit along the way.




Tags: SHLDTGT
36Comments
Dec 29, 2011 9:22AM
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worked for sears 30 years, from the early 60,s they went to hell when the focus went from customer service,employees, to the stock holder being #1, all companies need to make the customer #1 again,not the stock holders
Dec 28, 2011 9:39PM
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Well it's a holding company, that's what they do, sell off assets and collect anything they can until there isn't any more and then dumps the company.  There is one more thing, did anyone know  most store managers refuse to heat or cool the stores any longer?  One manager says it saves Eddie over a million a year, but that store manager has a space heater in winter and fans going in summer, while associates freeze or are sent home with heat exhaustion.  Sears needs to go back to Whirlpool made appliances and made in the USA tools, get your quality and customer satisfaction back.   
Dec 28, 2011 6:30PM
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Sears needs to sell only its best products - tools and appliances.  Forget the clothes which takes up 90% or more of a store's square footage and does not return sufficient revenue for that amount of devoted space.

Dec 28, 2011 6:44PM
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I agree. Sears didn't get great in the first place by simply selling shares. Short term gimmicks like buybacks and reverse splits don't create real value.

 

They have some good tool and appliance brands. Focus on what you are good at, the rest will follow.

Dec 28, 2011 10:52PM
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When sears did away with their catalog that was the first misstep. Then they lowered the quality of the products sold and no longer stood behind them, misstep 2. Then they became a Walmart , K-mart clone #3. Sears is done, it will be broken up and sold off piece by piece. Only top mngt. will come out of this set for life. All of their employees will be losers through no fault of their own. 
Dec 28, 2011 7:38PM
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Kmart, when they first opened up had more items to buy. Many items were cheaply priced and made. You get what you pay for. They also knew how to keep people in the store. Lunch counters, comfortable tv and appliance areas, etc. It seams to me that if they went back to the old way that made them great in the first place they would prosper again. Selling Sears tools would only be a plus.
Dec 29, 2011 1:13AM
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 Montgomery Wards went down this same route and look what happened to them. RIP Montgomery Wards.
Dec 28, 2011 10:11PM
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Get rid of " Kardasian " (sp) clothes and I might shop there again.

Plus , put in some shirts etc. that don't fade after being washed a couple times. ;(

Dec 28, 2011 11:35PM
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sears has sure went down hill over recent years.  the sears line of cloths has been junk for years.  walmart has better cloths than sears.  Lands end line is still OK, even though that line has gone down in quality and value. 
Dec 29, 2011 5:44AM
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During the past decade, every time I've walked into a Sears store it's empty of foot traffic, including holidays. Hint! Hint! The merger with Kmart was a blunder and was only intended to delay the inevitable.  Of course, IMHO
Dec 29, 2011 7:00AM
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I have dealt with Sears for many years and this past year was the final for me. Their customer service is the worst I have ever dealt with and they don't care about resolving any issues you might have. Spent tens of thousands of dollars over the years but they don't follow thru on their warranties and they make false promises that they never keep. I for one am glad that they are going under.  There are too many other companies ready to work for our business.

Dec 29, 2011 9:12AM
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Sears can polish up their stores, but when the merchandise is cheaply made and the company motto is get as much out of the customer as you can regardless of ethics, no amount of prettying up the store will help.  This company has foundational problems with the way they do business, how they treat their customers, and the quality of their overall goods and services.  Until that is addressed, they should save their money for their creditors so they don't get hosed when they file for bankruptcy.
Dec 29, 2011 8:56AM
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It's amazing to me that sears has lasted as long as they have.

The people in high places gain the wealth and the ones doing

the work die in poverty. There are workers who have great ideas

as to ways for making the company better. No one listens as you

can see. I say good riddance. Sears has the ugliest clothes in

retail history and Kmart is a high class second hand thrift store.

Dec 29, 2011 12:17AM
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Try to get parts for your lawn mower or any other product they sell. You can not get them in your home town store you have to go on line to buy a belt for your lawn mower,.And they will not take cash . Credit cards only !! Wonder why I quit shopping there ??
Dec 29, 2011 5:04AM
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I stopped shopping at Sears years ago when the clothes and shoes I bought there literally fell apart.  I now only shop for bargains in the home goods areas such as blankets and throw rugs and even small appliances at times.  Their selection has dwindled and their prices have gone up, and quality has gone down.  Too many competitors out there who offer better quality and prices.  I rarely actually buy anything there anymore - just check out prices and selection.

As for K-Mart, the local store has an awful smell.  No matter how many times they rearrange it or try to clean it up it still smells.  It appears that the worst smell comes from the furniture area - not sure yet why.  For Christmas they even tried to sell us a tablet that was obviously returned with smudges of fingerprints all over it - and upon closer examination appeared to have been dropped.  We inquired if they would reduce the price because of the condition of the item - just to see what they would say.  The manager was standing nearby, and totally ignored us - and even called our sales person away to talk about something completely unrelated to the sale.  Eventually we were told by the sales person that they could not reduce the price at all - which was even higher than a brand new-mint condition Kindle Fire (which they did not sell either).  Needless to say, we went elsewhere and bought a brand new tablet at a much cheaper price.
Dec 29, 2011 6:08AM
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Sears had a small store along the I-25 corridor in Castle Rock, CO that was very visible from the freeway but very hard to get to from the exit. Then they moved the store from the visible location to another side street that has no visibility or signage and very limited parking. Now they are relocating to Parker, CO. It seems that the geniuses who locate Sears stores are doing no research or evaluation of demographics and retailing factors. 
Then I see Craftsman tools all over the shelves of their competitors like ACE Hardware. How can you compete by sharing your brands with your competition? Why not just set up stores-within-stores like Paul's TV has done with Furniture Row and share space rather than trying to be independent? Sears has cheapened what is left of their reputation by merging with Kmart and now they are prostituting their brands to anyone. Even Costco is selling Craftsman tools for less than the Sears stores. A cordless tool set with batteries sells for $99 at Costco when the batteries alone are $50@ at Sears. Lincoln Welders did the same at farm stores and drove their dealers out of business by flooding the market with discount units. Is the era of retailing about over?
Dec 29, 2011 1:36AM
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Sears Holding should figure out what they make money on, update that, sell the rest at clearance prices and reduce the square footage of their stores to match what merchandise they have left to sell. For years they have tried to sell everything to a dwindling customer base who shop at other retailers.  Why in the world are they still in the electronics business, didn't Circuit City teach them anything? Do what you do best and don't try to be all things to all customers, you can't afford to do that anymore. Now get on with it and move quickly!
Dec 29, 2011 12:29PM
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Sears decline has nothing to do with the appearance of its stores.  They were bland 30 years ago and they're bland today.  Sears' downfall is due, plain and simple, to a marked decline in the quality of its products and the quality of its service.  You used to be able to go into the hardware section of a Sears store and find a knowledgable person with experience in the trades who could easily find the right tool or part for the job at hand.  Now these same departments are populated by brain dead hipsters who know about as much about tools  as I know about the Twilight saga.  My mom had a Sears washer that lasted 30 years.  When I bought one 10 years ago, it lasted 3 years.  Their stuff is crap, their staff are underpaid slackers, and their web site is about a decade out of date.  And K-Mart....have you been in one lately?  Looks like a third world yard sale.  So long Sears....it (was) good to know ya'.
Dec 29, 2011 10:40AM
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I quit trading at sears 25 years ago after the Topeka Ks. sears store talked my wife into putting new shock absorbers on her car two months after I had put new ones on myself.
Dec 29, 2011 5:15AM
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Sears has always been a dump....I worked there 48 years ago and they are still stuckthere and still suck. It should close and rebrand and remodel its self before it dies....Kmart and Sears both.....Lands End should be absorbed into both as an exclusive label. ....Time to shape up or ship out.
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