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The long, sad decline of Sears Holdings Corp., and the two once formidable retailers that comprise it, the eponymous department store chain and discount store operator Kmart, continues unabated.
The long, sad decline of Sears Holdings Corp., and the two once formidable retailers that comprise it, the eponymous department store chain and discount store operator Kmart, continues unabated.
New signs of the company’s tenuous position emerged earlier this month when The Wall Street Journal reported that Sears has divested some of its top-performing outlets to generate cash. Citing former Sears Holdings employees and analysts, the newspaper said that about a dozen profitable Sears stores, including some in the United States and Canada, have been sold during the past 18 months.
The fact that Sears Holdings pruned its real estate portfolio is not, in and of itself, alarming. Big retailers commonly open and close stores as competitive conditions and the real estate market dictate. What’s distressing is the divestiture of strong locations in a store network where they are at a premium.
In so doing, Edward Lampert, the hedge-fund manager who brought Sears and Kmart together in 2005 and now serves as Sears Holdings’ chairman and chief executive officer, has once again chosen to eschew standard retail practice. As a general rule, chains close underperforming stores to strengthen their core, while Sears’ action will do the opposite. That raises a question that has dogged Sears Holdings from its creation: Is Lampert interested in Kmart and Sears for their potential as retailers or the value of the real estate and other assets that they possess?
Based on his eight-year track record, the latter appears to be the case. Store maintenance and enhancement efforts have been inadequate, with investments lagging far behind Sears Holdings’ major rivals; out-of-stocks have been all too common; and management hasn’t given the many consumers who over the years have drifted away to other retailers a compelling reason to reconsider chains that once were central to the shopping experience in America. Until Lampert changes his view of the company and those issues are aggressively addressed, Sears and Kmart will ebb in importance.
The only hope for the company, which in August reported that during the second quarter it lost $194 million as revenue fell $596 million, is to refocus on what’s best for consumers. Surely that does not include selling stores whose profitability reflected their success in meeting the needs of customers.
