The venerable chain is leaking money, but is still scrambling for survival
NEW YORK – Sears, a back-to-school shopping destination for generations of kids and the place newlyweds went to choose appliances, has said that after years of losing money that there is "substantial doubt" it will be able to keep its doors open.
It's a dramatic acknowledgment from the chain that owns Sears and Kmart stores, which has long held fast to its stance that a turnaround is possible, even as many of its shoppers have moved on to Wal-Mart, Target or Amazon.
Sears has survived of late mainly with millions in loans funneled through the hedge fund of Chairman and Chief Executive Edward Lampert, but with sales fading it is burning through cash. Sears Holdings Corp. said late Tuesday it lost more than $2 billion last year, and its historical operating results indicated doubt about the future of the company that started in the 1880s as a mail-order catalog business.
At a largely empty Sears store in St. Paul, where the available parking far outstripped the number of cars in the lot, 85-year-old Jack Walsh and his 82-year-old wife, Mary Ann, said they have shopped at Sears their entire lives, buying items from curtains and window treatments to tires and tools.
"I bought my tools from Sears and I've still got them," Jack Walsh said.
The company known for DieHard batteries and Kenmore appliances has been selling assets, most recently its Craftsman tool brand. But it said pension agreements may prevent the sale of more businesses, potentially leading to a shortfall in funding.
"It's a sad story. This is the place that created the first direct-to-consumer retail, the first modern department store. It stood like the Colossus over the American retail landscape," said Craig Johnson, president of Customer Growth Partners, a retail consulting firm. "But it's been underinvested and bled dry."
Sears, like many department stores, has been thwarted by a new consumer that has ripped up the decades-old playbook that the industry has relied upon. A plethora of new online players have also revolutionized the market.
Sears has increased its presence online, but is having a hard time disguising its age. Its stores are in need of a major refresh as rivals like Wal-Mart and Target invest to revitalize stores. Sales at established Sears and Kmart locations dropped 10.3 percent in the final quarter of 2016.
The company has lost $10.4 billion since 2011, the last year that it made a profit. Excluding charges that can be listed as one-time events, the loss is $4.57 billion, said Ken Perkins, who leads the research firm Retail Metrics LLC, but how the losses are stacked no longer seem to matter.
"They're past the tipping point," Perkins said. "This is a symbolic acknowledgment of the end of Sears of what we know it to be."
For Sears to survive, Perkins believes it would need to do so as a company running maybe 200 stores. It now operates 1,430, a figure that has been vastly reduced in recent years. As for Kmart, Perkins does not see much of a future.
For decades, Sears was king of the American shopping landscape. The company began opening retail locations in 1925 and expanded swiftly in suburban malls from the 1950s to 1970s.
"When I first got married at 19 or 20, we bought our first set of kettles from Sears," said Darla Klemmensen, who was shopping at the St. Paul store on Wednesday. "We still have some of those."
Klemmensen said Sears has been part of her life since she was a child watching her grandmother order stockings and garters, and she remembers flipping through Sears catalogs as thick as her forearm, full of appliances, clothing and kitchen wares.
But the onset of discounters like Wal-Mart created challenges for Sears that have only grown. Sears faced even more competition from online sellers and appliance retailers like Lowe's and Home Depot. Its stores became its albatross, many of them looking shabby and outdated. The company, based northwest of Chicago in Hoffman Estates, Ill., lost $607 million in the most recent quarter and revenue fell.
"They've been delusional about their ability to turn around the business," said Perkins.
Johnson, though, believes one avenue for Sears could be returning to its roots as a direct-to-consumer company, only using the internet vs. the old catalog.
He believes the Sears name still stands for something for the 40-plus customer.
"It has a lot of good memories," he said. "It stands for being dependable and reliable."