Sunday, June 3, 2018

Sears Takes the Shears, Sheds More Stores

The Department Store is falling on hard times.

Not just specific brands and companies, but the very concept of a brick and mortar place to shop and purchase goods--that is falling on hard times, too.

The ability to purchase items on the Internet--and for less--has overtaken driving to a local store.

What has made it harder for these business outlets to compete and stay in business?

The last casualty of the rapid changing economy?


Sears will close another 72 stores as sales shrink and losses grow, an announcement that has become a familiar refrain as the company retrenches.

As shared above, this is a growing problem for department stores across the country. I have spoken with Torrance City Councilmembers, and they fear the worse regarding the sales tax base generated by the Del Amo Mall.

They already know about the one Sears departments store, along with the automotive section, which are both facing hard times.

The beleaguered retailer, which operates Kmart and Sears stores, said it has identified about 100 stores that are no longer turning a profit, and the majority of those locations will be shuttered soon. Two stores are in California — a Sears at the Puente Hills Mall in City of Industry and a Kmart in Kern County.

Right now, two stores in California have landed on the chopping block. How many want to guess that the rest of the stores will shutter by the end of the year?

After this round of closures, the company will have about 800 stores, down from about 1,000 at the end of last year and far below the 2012 peak of 4,000 stores.

They’ve cut to the bone in the retail industry, Bloomberg reports.

Data from Challenger, Gray & Christmas show closings have led jobs cuts by reason so far this year with the outplacement firm tracking a total of 2,565 shuttered units.

Brick-and-mortar closings have been responsible for 35 percent of announced job cuts across all industries, up from 23.6 for the same period last year.

The problem lies on more than the shifting technology. The forced wage hikes in blue states, combined with the regulatory burdens, have forced retailers to cut costs everywhere, and in many cases they have to cut their operations completely.

Bankruptcies are also taking a more prominent role this year, accounting for 14.6 percent of job cuts versus less than 2 percent in the first five months of 2017, the Challenger data show.

In May alone, the number of planned job cuts across all industries slowed, falling to 31,515 — the lowest since last October, according to Challenger.

There's some good news, and I think that President Trump and the Republican Congress deserve thanks for that.

Sears also posted a quarterly loss of $424 million and said store closings already underway contributed to a drop of more than 30 percent in revenue. That marks the more than five years of straight quarterly sales drop, according to FactSet.

OUCH! Of course, department stores do not have to suffer like this. They can learn to change and adapt with the times. One report indicated that JC Penny did exactly that, and their profits improved. Grocery stores are adopting and adapting their app programs

Sales at established stores, a key gauge of a retailer’s health, tumbled nearly 12 percent, down 9.5 percent at Kmart stores and 13.4 percent at Sears.

Rob Riecker, Sears’ chief financial officer, said in a pre-recorded call that the company’s stores are “a critical component in our transformation.”

Critical in that they are about to be closed down? UGH

But to meet customer needs and improve financial results, Sears must close poorly performing stores and “focus on our best stores, including our newer smaller-store formats,” he said, according to a transcript of the call.

Smaller stores require less overhead. What will they showcase?

The latest closings underscore the deep-rooted problems at Sears, which was once a one-time powerhouse retailer that survived two world wars and the Great Depression but has been calving off pieces of itself as it burns through money.

A company does not have to "burn through money". What current financial practices are hurting the store at this time?

“The demise of Sears has felt like a prolonged, drip, drip, drip as evidenced by the string of quarterly sales numbers,” said Mark Hamrick, senior economic analyst. “Essentially, it has been injury by a thousand cuts, whether by failing to staff stores to provide customers with good experiences or by failing to stock better quality merchandise in its stores.”

Well, there you have it. Two key problems: bad service and bad goods. 

Chairman and CEO Edward Lampert, who combined Sears and Kmart in 2005 after helping to bring the latter out of bankruptcy, has long pledged to save the famed retailer, which started in the 1880s as a mail-order catalog business.

That's why the sudden crashing and burning of Sears is just shocking and sad all at once. How is it possible that a company which lasted for more than a century cannot find new, better, innovative ways to overcome the last tech and marketing fads and developments?

What kind of leadership is heading the company now? It seems to me that the thought processes are more invested in just hanging on barely rather than taking firm stances to cut the fat, trim the red tape, and get back to basics.

But the stores have remained an albatross. And Kenmore, the retailer’s renowned appliance brand, became the latest potential sale after ESL Investments, the company’s largest shareholder, headed by Lampert, said it might be interested in buying it.

Sears also has made deals with Amazon. The company announced recently that shoppers could buy any brand of tires on, have them shipped to a Sears Auto Center and then bring in their car to get them installed. Amazon began selling Sears’s Kenmore brand of ovens, washers and other appliances last year.

There is hope.

Shares of Sears Holdings Corp., based in Hoffman Estates, Illinois, fell 12 percent, or 40 cents, to $2.81 on Thursday.

Final Reflection

The decline of the corporate department store model may not end in tragedy. Some companies are learning to bring in the technology, merge with online store brands, and work around the excessive costs and regulations of certain state governments.

However, cities like Torrance and other Southern California locales will find more ghost-town department stores if residents and locally elected officials don't take a strong stance to stop the left-wing, anti-business madness of the current government leaders.

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