New Sears has same problems as old one

Wall Street's faith in the retailer's chairman is wearing thin.

By Jonathan Berr Oct 9, 2012 11:48AM

Sears store in Milford, Connecticut Spencer Platt, Getty ImagesSears Holdings (SHLD), the beleaguered retailer owned by billionaire Edward Lampert, announced Tuesday that it expects to receive $446.5 million from an offering tied to the spin-off of Sears Hometown and Outlet Stores. The stock is set to begin trading under the SHOS ticker on  Friday. 


The "new" Sears is really dependent on the old one, and investors should avoid the stock.


According to SEC filings, Sears Holdings has agreed to provide Sears Hometown with Sears-branded products, including Kenmore appliances, Craftsman tools and DieHard batteries through a merchandise agreement that expires in 2018.


Sears Hometown may need to rely on Sears Holdings for merchandise beyond 2018. That may pose some problems in the coming years as Sears Holdings tries to sell its products through other outlets.


"Kenmore, Craftsman and DieHard branded products accounted for approximately 60% of our combined revenue during 2011," the company's S-1 filling says. "Recently, Sears Holdings has agreed to supply certain other retailers, including certain of our competitors, with a number of Craftsman and DieHard branded products that previously were only sold through affiliates of Sears Holdings. If Sears Holdings continues to supply other retailers, including our competitors, with Craftsman and DieHard branded products, or begins to supply other retailers with Kenmore products, our revenue may be adversely affected."


There are 1,238 Sears Hometown and Outlet stores, many of them independently owned, in all 50 states, along with Puerto Rico, Bermuda and Guam. Comparable-store sales, a key metric, were down 1.2% in the 12 weeks ended July 28, according to the company's 10-Q. Net income during that time almost doubled to $21.07 million, while net sales jumped 2.4% to $644.5 million.


Like Sears Holdings, Sears Hometown will be controlled by Lampert, who will not be shy about advising management on actions he believes it should take. Lampert will also look out for himself. As part of the spin-off, Sears Hometown will take out a $250 million credit line and will use $100 million of that money to pay Sears Holdings a cash dividend.


Wall Street has lost faith in Sears. The company, whose shares have nearly doubled this year in the hopes of better times or a Lampert buyout, is trading well above the average 52-week price target of $17.10. Splitting Sears up doesn't solve the retailer's biggest problem, which is that shoppers prefer to spend their money elsewhere.


Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter@jdberr.


 
Tags: SHLD
35Comments
Oct 9, 2012 2:52PM
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Sears is truly on the downside of its existence.  I have been a loyal customer of sears for over 40 years.  Even worked for them back in college for 5 years.  Recent dealings with Sears have been horrible.  The most recent is an order I placed for a grass trimmer that was selling for a very good price.  After waiting over a week I received a notice that the trimmer was shipped.  I then received an email saying it was returned by me.  Customer service was useless.  They said this was a third party vendor Sears uses and I would have to deal with them.  The vendor claimed that the item is no longer in stock and unavailable.  Further investigation on my part led me to find that this vendor has done this numerous times with other customers.  The item is still available through other retailers at a substantial mark-up from what I was supposed to be paying.  I told Sears I wanted the product and they should be responsible to find the product at the contracted and paid price.  They ignored me.  If this is how Sears is doing business today, they won't last another 10 years.  I myself will never do business with them again.  When I worked for Sears the customer was always right, even when they were dead wrong.  This built loyalty with the customer.  SInce it is obvious that Sears could care less about customer loyalty I feel only more that obligated to return the favor.
Oct 9, 2012 2:50PM
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They totally screwed over their loyal employees in the '80's and '90's. People don't forget !!!
Oct 9, 2012 3:10PM
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I have worked in retail for 45 years.  The problem with Sears is they are not merchandisers.  They are more concerned with real estate,accounting, operations, and stock value, not merchandise and presentation.  The merchandise is displayed without any thought to classifications, ie. tops, bottoms, related separates, dresses, etc. Additionally, the merchandise is not fashion forward, but just repeats itself season after season.  And finally, Sears is very disrespectful of its employees.  Sears is mean spirited and insulting to its workers and this attitude of managment rubs off on their employee. 
Oct 9, 2012 3:38PM
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I had a Kenmore Dryer that lasted 20 years before it died. I certainly feel like I got my moneys worth on that. Went to Sears and bought a replacement Kenmore Dryer and it's nothing like the old one! Cheaply made, rattles, squeaks, and I doubt it will last 5 years. Kenmore as my father knew it is GONE!
Oct 9, 2012 3:11PM
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The issue or problem is not "The Mexicans" as your racist statement makes. The issue is the lack of vision and common sense Mr. Lampert continues to show. While he may see himself as a financial wizard if he had any intelligence at all he would hire experienced retail executives and then allow them to do their jobs. Unfortunately due to his nature of being a control freak he just will not allow those talented people that he has hired or those with tenure in his kingdom to do what it takes to keep Sears and Kmart from sinking.

Go into any Sears/Kmart anywhere in the U.S. and you will see the same mistakes over and over. Dirty, dingy stores with worn out and beaten staff members selling the same products other retailers sell for much higher prices. Stores operated by inexperienced Managers whose only talent is to follow Corporate directions to the letter or be faced with their employment being terminated 

The only good thing that will come out of Sears/Kmart failure will be Lampert's ego having to deal with the infamy of having destroyed two American Icons. The real loss will be the thousands of hard working dedicated employees who will join the millions of unemployed Americans.

Oct 9, 2012 3:29PM
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My sister purchased a washer from Sears last year, a couple of months later it needed repaired because of a no good part. The repairman said there was an issue with that particular washer, which of course Sears was aware of, and changed the part. Right after the warranty was up the exact same thing happened, she once again called Sears and they told her they were sorry but the warranty was up and she should have purchased a extended warranty. She explained that it hadn't been a year since they replaced the part, they said the part was only guaranteed for 30 days. The washer was on sale for less than $300.00 and the repair would be $350.00 plus labor! They are aware this washer is junk but keep on selling them. Their final offer was a 20% discount on a different washer which you can get anytime. Why in the world would they think she would want to buy another washer from them when the knowingly sell faulty products? And they wonder why they're going down the tubes!! They deserve it!!

 

Oct 9, 2012 2:43PM
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the sears in long beach ca has basically gone all mexican. the music in the store,

 the signs are in spanish and most of the salesclerks are mexican. if you even find

a clerk you can not understand them

Oct 9, 2012 3:01PM
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Haven't done business with Sears since 1989 - over a $0.75 battery clamp. Hope that 75 cents was worth it not to honor your warranty. Oh by the way Sears I have spent thousands and thousands of dollars on tools, appliances, car batteries, etc. since.
Oct 9, 2012 3:08PM
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Awww yes, since their items are all made in China now, I refuse to shop at Sears. My last lawn mower only lasted me a couple of years, had to buy a new one and it's not a Craftsman. When did Craftsman finally go to have their products made in China? What a shame I can't find any tools made in America any longer.
Oct 9, 2012 4:00PM
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Sounds like to me they are thinking about going down that road .. WAL MART(aka China-mart) has done.. as they say live better... RIGHT..

 Sears needs to stick with what is working.. and dump the stuff that is not.. Try to bring in better products.. even usa made.. products.. they would be better off in the long run..

Jmhop...

Oct 9, 2012 3:50PM
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I am a 4th generation shopper at Sears.  I own a Kenmore fridge, stove, dehumidifier, etc.  I own a ton of craftman tools.  My last couple of purchases have been a problem until I talked tp  the store manager at the Troy, MI store.  Though his subordinates were less than helpful and  frankly rude when I tried to explain why people are not shopping at sears any longer, he finally made things right.  He guaranteed his murchandise and I was happy. I too am disgruntled that all the items are made in china.  LISTEN CLOSELY CEO'S- CHINA MAKES JUNK!  I am tired of hearing about record profits and rich ceo's who are making their money at our behest.  Another thing, I was told it  doesn't matter how much I spend there he will treat all customers the same.  Hey buddy, tell that to the jerky who doesn't spend a small fortune there. I wasn't trying to be uppidy.  Just making a point. Return costumers should matter.
Oct 9, 2012 3:14PM
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We will not charge any more on the Sears Citi MC, They will not send you a bill ( happened 3 times to us on 2 different Accounts, so if you forget about it ( which we didn't) they can charge you the high finance charge plus $ 35.00 late fee!!! We heard from other people that this happened to them.So unless we pay by cash no more Sears for us!!! You won't get rich from us by collecting late fees  Edward Lampert but we know there are busy people out there which could forget they charged if no bill arrives!! So what is up Mr. Lampert with your Billing office??????

By the way our mailing address is ok we receive all the other junk from Sears!

Oct 9, 2012 3:37PM
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Sears is playing fast and loose with it's credit card. Charging late fees when payment isn't late, then being "gracious" about removing the charges (35.00) but STILL COLLECTING THE INTERST FEE! do yourself a favor, get another card.
Oct 9, 2012 4:13PM
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Stopped shopping at Sears years ago because the quality had gone to crap and the employees treated you like you're unworthy of their time.  The one big thing I used to buy was tools because of the guarentee, but the last several times I brought tools back for replacement (I got rebuilt, not new) broke as soon as I used them.  I won't even step foot inside a Sears store for any reason!  Thought they would be out of business by now with the way they treat customers.
Oct 9, 2012 4:18PM
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ED LAMPERT RUINED THIS GREAT COMPANY. I will not buy another product from SEARS as long as he still runs and owns it..
Oct 9, 2012 4:13PM
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I worked for Sears for just 2 years as a full time electronics salesman.  We got a new Electronics and Appliances manager just 6 months after I started and though we loved the one that left (she was AMAZING at her job), the one they stuck us with knew next to nothing about electronics or appliances and was even worse at scheduling us.  He scheduled me on Easter Sunday when I asked for it off 2 weeks in advance so I could take my son on his first Easter egg hunt.  Now, there were 3 other guys that could have worked that day, none of them with kids.  We had ZERO customers that day and I spent most of the morning trying to track down the store manager so I could have the guy in appliances cover me while I went for an important milestone in my son's life.  2 hours and I could not find him.  Paged him, walked around asking people where he was, nowhere to be found.  Finally I just asked the guy in appliances to cover me (we hadn't had a single customer all day and he agreed and said he'd let the manager know what was going on if he decided to show up in our area.  I left, came back to an angry manager and the guy in appliances lying and saying that he didn't know where I went to.  Needless to say, less than a week later I was fired.  A family company?  Knowledgeable about their products?  Nope.  Sears is a farce and I'm glad to be gone from that hell hole.
Oct 9, 2012 4:14PM
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Sears manufactures nothing.  You would have to be a lawyer to learn who really makes what.  There is no real single brand maker anymore when it comes to appliances etc.  This goes for small appliances also.  One huge deception is Electrolux.  Remember the old cannister type vacuum.  Well the new Electrolux vacuum has nothing to do with the original vacuum cleaner company.  The brand name was sold years ago so all those commercials about Electrolux appliances are not the original company and the now branded electrolux vacuum is made buy Eureaka , or Hoover not 100% which one.  The current company making the original electrolux is Aerus.  It is insane. 
Oct 9, 2012 6:15PM
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The trickle down effect starts at the top?  Garbage at the top, years ago, has killed Sears.  Deceptive Sears practices hasn't helped much either has it?  Basically, Sears gutted itself and it's products.

The Sears name Craftsman used to mean something good all the way around for consumers.  Now, Sears slaps it on almost anything in order to sell a product.  The Craftsman name used to mean whatever used to have the name virtually was guaranteed forever and was guaranteed to be of exceptional quality.  Not anymore.  Shoddy substandard products and replacements are used as substitutes to the degree a person would be better off to keep going elsewhere.

Sears  Die hard and Kenmore brands are about the same.  Sears where top quality used to be a factor, now it means substandard product and services to most people.  Sometimes much lower standards than a similar national brand.

Kenmore for example used to mean top quality because Sears would have manufacturers use better standards and materials for a product.  Now it does almost the same thing in reverse.  Die hard used to mean top quality and would darned near last forever guaranteed.  Now, it means very little to nothing and many other brands are much better.

Sears needs better or more people skills.  Sears employees are generally plastic and bottom of the barrel when it comes to their experience in a field.   Why is that?  Most Sears customers are almost treated like prey instead of people too.   Why is that?   But, does that come as much of a surprise when Sears doesn't treat their employees any better?   Where does it all usually start?  Generally at the top?  Where does it end?  At the bottom of their chain with consumers who are fed up.  Many people have come up with their own brand to counter Sears brand of product.  It's called "Nevermore."

Sears has forgot one huge thing that basically turned them into what they are today.  People, all people, customers, employees and shareholders are people first.  They see others mistreated and figure they could be next?  In Sears case, it's not the money, but it is?  It's their own sad distorted  treatment of people that is haunting them into extinction. Sort of like today's politics?  Their own selfish lopsided greed has almost done them in from what I've seen.

Oct 9, 2012 4:13PM
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I worked for Sears in the 60's. I was paid an hourly wage plus a sales commission. I made decent money because the commission incentive was worth the extra effort, Sears had a

good retirement benefit package and health benefit package. These were changed in the 70's and with them went the quality selling effort. Sears has been known for its "loss leader" sales

where an item is posted as a sale special but if you move the shelf sale tag you will sitll find that
the sales price and regular price are the same, Sears was once known as the arms supplier

for sportsmen. When a certain "Prince" became one of the top managers, firearms and ammo were dropped. Too bad. Sears went liberal and soft. The same thing is going to happen with

WalMart. Too many items Made in China and they are not robust. I guess the infection of "building

in obsolence" is in all of their products and add to that, their better products are very expensive.

Oct 9, 2012 5:28PM
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Stick a fork in them they are done. Anyone that buys their stock is out of touch. Going the way of Monkey Wards.
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