Sears Holdings Acknowledges It’s on Its Way to Extinction
In Sears Holdings latest annual report which was just filed, they acknowledged what so many have been saying for years: the company’s future is very much in doubt. The public acknowledgement from Sears that “substantial doubt exists related to the company’s ability to continue as a going concern” should surprise no one who has been following their woeful performance for years. The bigger question: How have they survived this long?
As with many retailers who have lost relevance to the consumer, Sears, once the largest and most powerful retailer in the world, will end its life, as T.S. Eliot said, “not with a bang but a whimper”.
Year after year of dreadful sales performance has led to comparable store sales declining for nearly a decade. You would have to go back to 2007 to find the last quarter with a comparable store increase. And, since that time, the store base has shrunk from 3,800 units to just over 1,400 combined Sears and Kmart stores today. Along the way, the company has attempted to spin off or shed operating units (i.e., Lands’ End, Orchard Supply, Sears Canada, Sears Hometown, etc.), license brands such as Craftsman, monetize the real estate assets and try and transform its business with a “member” and on-line focus.
While all of these activities are notable, and perhaps even clever ways to financially maneuver the company towards a more viable path, absent in these activities was any noticeable effort to transform the main asset—the Sears and Kmart stores that were the lifeblood of the company for over a century. Years and years of deferred capital expenditures have led to tired stores that no longer have appeal to consumers, particularly the next generation of shoppers attracted to more specialized offerings or the appeal of on-line competition. Sears lost out to its direct competitors as well as the explosive growth of e-commerce. But, while all retailers have seen their sales slow, Sears continues to post industry worst comp store numbers and ongoing losses from continuing operations.
What’s next? Hard to say. The company is not imminently closing its doors or declaring bankruptcy, but an admission of “substantial doubt” about its future will make ongoing operations much more difficult. Suppliers will be reluctant to ship products without timely payment and credit will be harder to secure. And, as long as sales continue their slide, things will likely get worse before they get better.
It is easy to wax nostalgic about Sears and its monumental role in the history of American retail. What’s sad is its inability to change with the times and keep its relevance with the American consumer.
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