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Staying on Top

December 27, 2011

The AP reports that Sears/K-Mart is responding to declining sales during the Holiday season by planning a shut-down of underperforming stores.  Go read the whole thing, so the AP doesn’t side with the rest of the world on SOPA.

The company’s revenue at stores open at least a year fell 5.2 percent to date for the quarter at both Sears and Kmart, the company said Tuesday. That includes the critical holiday shopping period.

Sears Holdings said the declining sales, ongoing pressure on profit margins and rising expenses pulled its adjusted earnings lower. The company predicts fourth-quarter adjusted earnings will be less than half the $933 million it reporter for the same quarter last year.

Ouch.  Half is bad… I actually wandered into Sears a couple times in Q4.  Even the “busy” store was pretty dead.  I think they had about six sales, all before Thanksgiving, and they probably gutted their profits after that trying to get business.  In the meanwhile, the K-Mart stores near me are pretty obvious  by their empty parking lots.  While I admit that I can usually find something I want in K-Mart, it’s usually because I went there as a last resort.  So if there are others like me, well, half is likely expected.

But the big problem, analysts say, is Sears hasn’t invested in remodeling, leaving its stores uninviting.

“There’s no reason to go to Sears,” said New York-based independent retail analyst Brian Sozzi, “It offers a depressing shopping experience and uncompetitive prices.”

Actually, I think Sears also has a problem with offering way too much.  In the halcyon days when you could shop out of the catalog and order anything from a pair of jeans to an engine that would run your sawmill — all for delivery — Sears rocked.  Now the massive amount of inventory required to supply everything in a just-in-time fashion means that Sears has to hold a couple of everything locally.  That’s a lot of square footage wasted on stuff people won’t always buy, and more square footage used to store it until people eventually buy it.

In the meantime, Wal-Mart and Target have nearly perfected warehousing and transportation so that they don’t have to have massive storage onsite.  In a world where you have to be all things to all people, Sears can’t keep up where others focus on certain specialties.

For reference, the other store that’s looking pretty peaked these days is Best Buy, which has similar high-priced items, but at least not the inventory problems.  Either way, Sears is in a world of hurt, and it’s only going to be creative thinking that gets it righted.  I’m not so sure closing some stores and hoping that people go to the ones left open is all that creative.

2 Comments leave one →
  1. December 29, 2011 10:06 pm

    It’s about time. The only reason we went to Sears was for appliances, and even that was an utterly depressing experience. Home Depot is much more fun, especially now that we have kids. We can take them to the store with us, put in a large cart with two toy steering wheels and show them something exiting, like large bolts.

    • December 30, 2011 11:29 am

      My pilgramages to Home Depot are about once a week, mostly to drool. But when we were rebuilding our little cabin in the woods, I think I kept the store afloat for two years, and my dog liked that half the employees carried dog treats.

      I like Sears as a store, though I can ususally find most things either easier or less expensive elsewhere. Appliances and tools are the main draw. Lands End, not so much.

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