Does Sears Have the Will to Survive?

Sears Holdings (NASDAQ: SHLD  ) has been struggling to survive. With 23 quarters of negative earnings Sears has had to sell valuable assets such as Sears Hometown and Outlet Stores, hold a partial spin-off of Sears Canada, and now Lands' End is scheduled to be spun off. Even more shocking is that Sears is losing ground in its hardline business, which includes Craftsman, Kenmore, and Sears Auto, with approximately $2.4 billion less in sales in the first 3 quarters than during the comparable period in 2012. CEO Eddie Lampert is running out of cards, but I think there is one card that just might bring Sears back to life despite intensifying competition from Amazon.com (NASDAQ: AMZN  ) and Wal-Mart Stores (NYSE: WMT  ) .

A consumer revolution
A revolution occurred throughout the United States right before the turn of the 20th century that changed American consumerism forever, that revolution was the mail-order catalog. Imagine living in a small town in the Midwest where the only store that sold goods was the general store, where prices generally were high and the selection was low.

One day, a catalog arrived that offered almost every good imaginable, truly a 'Book of Wonders', and that book was the Sears catalog. From this catalog you could select any item you wanted, send for it, pay with credit, and the product would arrive in about six weeks with 'Satisfaction Guaranteed'. Amazing, right? Well, compared to today's standards maybe not so much, but back then, Sears opened up the door to mass consumerism.

No. 3 in online retail?
Online retail companies like Amazon (NASDAQ: AMZN  ) are not so different from the Sears Mail Order Catalog; they are truly the modern-day equivalent. A successful online retail company needs superior logistics, warehouse infrastructure across the country, and a means to effectively distribute products to the people.

The two largest online retailers are Amazon and Wal-Mart (NYSE: WMT  ) and both have renowned distribution systems; so does number three, Sears. Yes, I know Sears is not who you were expecting to be the third-largest online retailer in the United States, but the company has claimed this spot and it is fighting to not only stay alive, but undergo a complete revitalization.

Sears: Back to the roots
CEO Eddie Lampert has made a conscious decision to not focus on reinvesting in Sears Department stores like J.C. Penney has done. Instead, he has changed Sears' focus to online retail with the member-centric Shop Your Way program. It is paying off, as 70% of all Sears' sales used Shop Your Way so far this year.

Sears actually has approximately 100 million products available online at a number of websites under the Sears and Kmart banners. In addition, the company offers multiple transaction choices such as same-day shipping or pick up from one of the nearest Sears stores. That's what I call instant gratification. You won't be picking any items up from an Amazon Store anytime soon!

The Shop Your Way initiative has continued to gain traction as members are able to earn points, receive additional benefits, and buy key proprietary brands such as Kenmore, Craftsman, and DieHard. I believe Sears is going to continue to sell assets such as valuable mall-anchor stores and under-performing lines, all while using these sales to continue to grow online and become a marketplace to rival Amazon.

The Will of Fire
Richard Sears left the firm when his board decided to focus on department stores instead of the mail-order catalog. Now, ninety years later Sears is shifting away from department stores and toward the Sears Online Market Place. This firm, who fueled the American consumer revolution, is not ready to simply keel over and die; it is adapting, evolving, and fighting for its rich heritage to survive another generation.

Sears has a lot of work to do, this is undeniable; competition is fierce across the board and it is no longer the ultimate one-stop shop. In spite of this, the company is making smart decisions by spinning off Lands' End and potentially Sears Auto. Praise the company for making the difficult-but-smart choice; invest in Sears' revival, and you may be rewarded.

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Read/Post Comments (10) | Recommend This Article (3)

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  • Report this Comment On December 26, 2013, at 4:49 PM, mrpamidi wrote:

    Sears is dead, Lampert is in denial. The only way he has been making money since he took over is by selling assets (like real estate), closing stores, and divesting divisions. Pretty soon, Craftsman, Sears Auto, Land's End will all be gone and there will be a joint funeral for Kmart/Sears, both going the way of Monkey Ward, S. S. Kresge, Good Guys, Circuit City...

    Walmart drove the last nail in Sears's coffin years ago and, now, Home Depot, Lowe's, Best Buy, Amazon, and others are enjoying barbeques on Sears's gravestone!

  • Report this Comment On December 26, 2013, at 4:52 PM, ilovesumm wrote:

    Unfortunately sears has lost their way.

    They used to be a strong retail and mail order

    franchise but they are not anymore.

    Walmart and many other retailers have beat them locally , while amazon and the internet has crucified their catalog business.

    They are selling an inferior product at a higher price and are stuck in rut .

    I am in a rural community that had a sears depot , their compensation is so low i refused to keep them.

    They moved it to another town because no one wanted them .

    If they don't fix something quick , they will close .

  • Report this Comment On December 26, 2013, at 7:56 PM, Karaokebill06 wrote:

    As an ex-sears employee (forced to retire) I believe the biggest problem with Sears )besides mis-management) is greed, For years,Sears management would NOT admit Walmart was "in their league" as far as consumer goods go and felt they could always count on "customer loyalty" to float their boat. What a shock it must be to realize customers will go where the dollar will buy more and customer loyalty was a sham! Of course,Walmart will follow the trend and raise prices,screw the customers and the Walmart employee's, grab all the money they can(at the corporate level) and then fold...as Sears is currently doing!

  • Report this Comment On December 27, 2013, at 9:48 AM, cookoochris wrote:

    their customer service really went down the hill...interest rates on their credit cards are 26.99%..our local sears store has changed hands 4 times in 14 years..bye,bye sears..

  • Report this Comment On December 27, 2013, at 10:29 AM, cer001 wrote:

    I recently started at SHC and must say the notice of death is a bit premature. I understand the bitterness of past employees and such but there are a lot of smart young hard working people today at Sears changing the company. The Sears Catalog will resurrect itself and Amazon, Walmart should take note. However if you insist on having a bbq over our gravesite we have a sale next weekend on bbq ranges and if your smart use shop your way and order online :)

  • Report this Comment On December 27, 2013, at 11:45 AM, oldgregg wrote:

    Sears Holdings WILL NOT survive! End of story. Sad to say. Eddie Lampert I spent 10 years at the Kmart H.Q. in Troy, from 1996-2007 and when Eddie came on board, the was even worse than Chuck Conaway. cer001, Walmart and Amazon take note? Sears catalog will resurrect itself? Wow, I forgot it had even existed. There's absolutely no reason for SHC to exist. They alienate the customers at the store level, at both Kmart and Sears stores. Eddie, when he came on board, was more about catering to the uppity ups in the Hamptons, that he blew a head gasket when he saw that we had off brand flat screen t.v.'s in the Kmart stores there. There's no doubt he's a great hedge fund manager, otherwise, he wouldn't have made himself a billionaire by 40. But at running a retail company, HE SUCKS!!! He has done nothing, but to drag out the death of both of these venerable brands. It's 100% true, the only way they've made money, is by closing stores and selling off assets. He's hand picked and fired so many CEO's, it's mind boggling. He went after Sears Canada and they tried to fight him off; rightfully so, but where unsuccessful and now he's selling off a big chunk. The company might be changing(yet again!) but in what direction? I told people, the stores would all go away, like they should and Sears would be an online only company and Kmart would go away. Remember, when Eddie took over and bought Sears with Kmart stock(yes, you read that right) his investors wanted him to sell everything off. The stock ran up to over $170 and now it's under $50. I wonder what happened to the superstructure of the store in South America we were building, that was 85% complete and then left to rot during the bankruptcy, just like the stores in the Caribbean and that were supposed to be built? Grandiose plans. SHC is a ship full of pin holes and ever so slowly sinking. The tragedy is, Eddie doesn't care, that the stores aren't stocked, or are dirty and outdated; fact is, nobody knows what his real care is. That's the damn shame of it all. He was going to be the saving grace. But it's all been for naught, that's the damn truth.

  • Report this Comment On December 27, 2013, at 12:55 PM, Vitabrits wrote:

    All I hear is the sucking sound of a Kenmore vacuum with poor suction.

  • Report this Comment On December 28, 2013, at 1:35 AM, Afterberth wrote:

    Remove Eddie Lampert and Sears may stand a chance to survive. He's out of touch. He needs to buy an island and live on it with no contact with society. He's a has been.

  • Report this Comment On December 28, 2013, at 1:13 PM, Jonhhy wrote:

    "Richard Sears left the firm when his board decided to focus on department stores instead of the mail-order catalog". Sears was never a department store. Sears was a mass merchandiser like Montgomery Wards and JC Penney. There's a big difference between department store and mass merchandiser. JC Penney lost their way trying to become a department store in the 80's. They eliminated their hard lines like tools, appliances and automotive. They have never recovered.

  • Report this Comment On December 28, 2013, at 6:11 PM, MSFInvestments wrote:

    Is Sears Holdings REALLY losing money. Here is just one of their subsidiaries, www.seritage.com.

    Lahiem

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