A Fashion Faux Pas Looming for Sears Holdings

The rollout of new fast-fashion boutique heralds new problems for the old-line retailer.

Mar 30, 2014 at 10:00AM

Another day, another idea on the whiteboard checked off at Sears Holding (NASDAQ:SHLD).

In hopes of staunching the hemorrhage of sales and customers, the declining old-line retailer continuously throws ideas at the wall to see what sticks. From clothing lines for in-the-moment celebrities like Kim Kardashian, Nicki Minaj, and Adam Levine, to rent-to-own programs, cash-for-gold pawnbroker services, and Christmas sales at back-to-school time, Sears tries every trick in the book to reverse the decline, but nothing seems to work. 

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Even when it does manage to connect, such as its clever ship-to-store advertising campaign or the relaunch of its layaway program that had retailers including Wal-Mart, T.J. Maxx, Toys R Us, and Burlington Coat Factory scrambling to copy it, the bleeding never stops. Now its latest effort is the launch of Now + Here, a new store-in-store boutique that seeks to cash in on the fast-fashion trend successfully exploited by retailers like H&M, Century 21, and Forever 21.

According to Sears' chief marketing officer for apparel, "Fast fashion for Sears means an accelerated timeline for trends at an affordable price." Coming as it does a week after it announced the spinoff of its Lands' End division, Sears has decided to jettison the last vestige of any classic, upscale apparel and embrace the latest disposable fashion trend in an effort to transform itself into a member-focused retailer leveraging its online store and Shop Your Way service.

As its name suggests, fast fashion takes fresh-off-the-runway looks and transforms them into mass-market versions at much lower cost. Unfortunately for Sears, it will be a day late and a dollar short.

Fast fashion is becoming the go-to niche for retailers worried about sliding revenues and the encroachment made by their trendier rivals. Several weeks ago, Abercrombie & Fitch (NYSE:ANF) announced it was repositioning its Hollister unit as a fast-fashion brand and lululemon athletica unveiled a new "&Go" brand targeting women who are "out the door at daybreak and moving until midnight." Others like Zara and bebe (NASDAQ:BEBE) have already mastered the niche and are far more nimble than Sears can hope to be at turning its inventory over.

While it's only opening boutiques within its stores and partnering with Seventeen magazine to create a juniors/teen label, it is also a completely new way of running an apparel business, one that relies both on flawless, super-efficient logistics and on attracting fickle teens to shop at your store. Although Sears has no experience at either, convincing teens its stores are cool, hip places to shop could be the biggest hurdle of all.

In another ominous note, Sears declared it will be rolling the program out nationally rather than testing in certain markets whether it has the ability to handle the fast turnover. That brings to mind the failed efforts of J.C. Penney (NYSE:JCP) to eliminate doorbuster sales companywide rather than try out everyday low pricing in select stores to see how consumers responded. We know the disastrous results Penney got, and we can surmise that Sears will fail miserably as well.

Sears Holdings may have been able to check off another box on its list of things to do, but investors will likely suffer a fast backlash as this fashion faux pas unveils itself.

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Not every retailer needs the fashion police called on it. To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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