Who Isn't Eating Sears' Lunch?
Searscontinues to be left behind as the competition moves in the right direction.
Sears Holdings' announcement that it will close between 100 and 120 locationsshould not really be a surprise. Since the combination of Sears and Kmart, management has focused on everything BUT the most important item: the customer. Stock buybacks and cost cutting have ruled while Target , Kohl's and Wal-Mart have focused on sprucing up stores and grabbing a larger share of the consumer wallet.
Same-stores sales for the quarter-to-date declined 5.2 percent. Hardest hit was Sears with a 6 percent decline. The culprit? Appliances and Consumer Electronics (CE responsible for more than half of the Sears domestic decline).
Does that really come as a surprise as Best Buy just told us they traded gross margin for sales during the Black Friday season?
The food chain may look something like this: Amazon eats Best Buy's lunch while Best Buy eats Sears' lunch. And don't forget Home Depot and Lowe's appliance category nipping at SHLD's heels as well.
While the Kmart chain was less bad (down 4.4 percent) it is falling prey to Wal-Mart. The behemoth not only added back thousands of products on the shelves this year, but it also brought layaway to its customers. Historically Kmart has benefited in fourth quarter with the layaway program, but that was in the absence of Wal-Mart offering an alternative. Game over for that small advantage.
While closing stores and managing inventory sounds like a plan, it does not solve the problem: the store experience. Based on the stock reaction today investors seem to agree. The moves may be too little, too late.
Stacey Widlitz is the President of SW Retail Advisors Inc. She has worked at UBS, SG Cowen, Fulcrum Partners and in 2005 was one of three analysts to launch the Research Department at Pali Capital, where she covered Retail and Home Video for 5 years.
