Retail

Sears Becomes Old JC Penney

Douglas A. McIntyre

Published: December 4, 2015 6:35 am

Last Updated: January 13, 2020 4:29 pm

Sears Holdings Corp. (NASDAQ: SHLD) now has become J.C. Penney Co. Inc. (NYSE: JCP) in 2012, when its revenue fell 25% from 2011. Same-store sales dropped by roughly the same amount, and J.C. Penney teetered toward extinction. Sears just announced same-stores sales at Kmart dropped 7.5% last quarter. Sears Domestic same-store sales fell 9.6%. Revenue for the entire company plunged from $7.2 billion to $5.75 billion, a 20% drop. Sears Holdings lost $453 million. The company is disappearing.

The overall brick-and-mortar environment is worse now than in 2012. ShopperTrak reported physical store sales fell 10.4% over the four-day Thanksgiving weekend to $20.3 billion. Kmart and Sears operate in a retail world in which same-store sales have to rise for a national retailer to come close to gaining ground.

Traditional retailers have become desperate, which means they will go to risky lengths to hold holiday sales levels from last year. Most have given up chasing growth. Even the largest retailers, which include big-box Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT) and department stores like Macy’s Inc. (NYSE: M), have forecast grim holidays. Large niche retailers like electronics company Best Buy Co. Inc. (NYSE: BBY) won’t do any better. Sears operates in a world in which sharp discounts are among its hardest challenges.

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Amazon.com Inc. (NASDAQ: AMZN) is at the top of the list of traditional retailer challenges. It has forecast revenue increases as high as 20% to $35 billion. Old-line retailers have no chance to approach this number. Their e-commerce businesses are too small. They cannot make up for the hole made by battered store sales.

Sears has been criticized more than most struggling large retailers. CEO and majority shareholder Eddie Lampert has not updated the inside of Sears and Kmart stores. He has not, or cannot, match the promotion and marketing budgets of many rivals. All he has to offer is free shipping, which has become a standard marketing tool throughout the industry. When Sears Holdings released results, he said:

We remain focused on restoring Sears Holdings to profitability by concentrating on our best stores, rewarding our best members and pursuing our best categories through innovative solutions to product and service offerings. Through deliberate strategic actions, notably with respect to our promotional design and marketing spend, we have made meaningful progress in our transformation and reported a fifth consecutive quarter of improved year-over-year results …

It is hard to find anyone who believes that. While J.C. Penney barely escaped a collapse, retail has changed since then, as e-commerce has taken over. Sears cannot be turned around.

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