For Sears "All Roads Lead to Hell"

An interesting article that appeared in Canadian Newspaper yesterday after 2nd quarter results announced in U.S.

For Sears, 'all roads lead to hell'
The Globe and Mail

Article Comments (5) ASHLEY M. HEHER

CHICAGO — Associated Press
Last updated on Friday, Aug. 21, 2009 03:44PM EDT

Once a mainstay in American shopping culture, the parent of Sears and Kmart stores took another step backward yesterday, announcing a surprising second-quarter loss that dimmed hopes about the ailing merchant's future.

Although Sears Holdings Corp. (SHLD-Q66.021.021.57%) is paying down debt and has a $1.3-billion (U.S.) cash war chest - enough to give investors confidence in its financial footing for now - experts say it desperately needs to end years of declining sales if it wants to stay viable.

Led by chairman Edward Lampert and an interim CEO who has been at the helm for more than 18 months, Sears continues to struggle to attract shoppers who, even before the recession, were taking their wallets to competitors that offered more products at cheaper prices with more appealing store atmospheres.

Since acquiring control of Kmart out of bankruptcy in 2003 and adding Sears, Roebuck and Co. in 2005, Mr. Lampert has had the retailer spend billions buying back stock and trimming debt. A renowned and reclusive financier, he carefully guarded how much money the Hoffman Estates-based company spent updating its mostly aging store base.

And so, while investors eventually began viewing the retailer as a way to buy into Mr. Lampert's hedge-fund mystique, customers continued to abandon its brands.

"At some point, we need to see a rebound in the top line, and that's going to depend on consumers' willingness to shop at Kmart and Sears," said Morningstar analyst Kim Picciola. "I think they still haven't quite figured out what's going to draw consumers back into their stores."

It hasn't been for lack of trying. Sears has tried wooing shoppers by emphasizing its Kenmore, Craftsman and DieHard brands, along with offers of trendier clothing and housewares backed by celebrities, layaway deals, a series of online ventures and the ill-fated Sears Essentials stores, which sold merchandise from both stores but never resonated with shoppers.

This week, the company started a program mimicking old-fashioned Christmas club accounts to help shoppers save to buy presents.

Since the merger, the company's revenue has declined virtually every quarter. Meanwhile, sales in stores open at least a year have decreased every period.

The trends got worse during this year's second quarter, when the company lost $94-million, or 79 cents per share - its third loss in six quarters. Sales careened 10 per cent to $10.55-billion. That compares with a profit of $65-million, or 50 cents per share, a year ago when revenue was $11.76-billion.

Executives said results were dragged down by lower sales of clothing and home appliances along with one-time costs. Excluding one-time items, Sears lost $20-million, or 17 cents per share.

Despite the dismal performance, observers say Sears isn't in imminent danger of following now-defunct retailers Circuit City Stores Inc. and Linens N Things into bankruptcy.

Still, the company will most likely face difficult choices, especially about its real estate holdings, considered to be among Sears' most valuable assets. But even those have lost their lustre as commercial real estate values plummet.

"All roads lead to hell," said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates, who's been skeptical of Mr. Lampert's efforts for years. "It doesn't look to me like he has any good options, but he has to pick the best of the worst."

Among them, Mr. Davidowitz said, is keeping the company as is, a move tantamount to holding onto a shrinking asset. Other choices are selling and closing more stores, or selling off some of the company's assets like its popular brands or online ventures.

Sears Holdings (SHLD-Q)

Close: $65.00, down $8.76

Joined: 08 Jul 2003 Posts: 6309

What puzzles me is that OK it's a bad economy & the housing boom is over. Which theoretically means hardlines should be down.

But the thing that has been killing them his entire decade has been clothing. They buy Lands End fine and dandy but they only have it properly presented in less than 400 Sears. And they picked a line of clothing that is/was a bit on the pricey side.

Then there's ify clothing sales at Kmart. But at least Kmart SSS declines are 1/3 of what Sears are (Kmart sales down 3.9% compared to 12.5% at Sears).

Rather than try to creep up the prices at both Sears and Kmart if nothing else he should have kept a Kmart a discounter with a slow but steady introduction/addition of the Sears Brands. He has literally priced himself out the market in the name of immediate temporary results.

Nothing new.

Joined: 18 Jul 2004 Posts: 72

I thought it was a one way ticket when I purchased it!! LOL

Joined: 26 Jan 2007 Posts: 483

I like the Layaway. But I think it should have a dollar limit greater than 100 dollars.

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