Sadie Keljikian, Express Trade Capital
Sears has struggled for quite some time, but it seems that the retailer still has a few tricks up its sleeve.
Like many brick and mortar retailers, Sears has struggled against the drop in brick and mortar retail for more than a decade, most notably since the company merged with Kmart in 2005. After several attempts at staving off bankruptcy, including a $300 million financing contribution from Founder/CEO Eddie Lampert’s hedge fund, Sears has made an aggressive move to trim the fat from the national corporation. Although holiday retail sales were neither encouraging nor terribly underwhelming across the board, Sears saw their difficulties mount with a 10.3% drop in comparable-store sales in Q4 of 2016.
Sears may have been prompted to take more drastic action by the notably underwhelming winter holiday season, even by the recently fallen standards of Sears/Kmart sales. The company has announced that it plans to “streamline operations” in 2017 and reduce costs by at least $1 billion annually.
Sears has announced plans to cut costs by gathering some of its stores into a real estate investment trust, imposing sale prices on certain items, and additional raised debt from Lampert’s ESL Investments. So far, Sears has sold five full-line stores and two Sears Auto Centers for $72.5 million since the new year and engaged Eastdil Secured LLC to raise at least $1 billion in real estate sales. The initial effect of the retailer’s efforts certainly show, with stocks up 30% in early trading Friday morning, but some sources doubt that Sears can cut costs and boost sales enough to last long-term.
Jim Cramer of CNBC’s “Squawk on the Street” commented on Friday morning: “There’s always rabbits out of the hat with Sears. It’s always Eddie Lampert coming out and saying. ‘Listen, you bet against us, you’re making a mistake.’ It always lasts for as long as it takes to be able to see the next same-store sales numbers.”
Cramer’s point is that Sears has shown a remarkable ability to tread water through financially trying times, but usually doesn’t come up with a plan that will sustain the business long-term. He went on to say that the survival tactics won’t have any lasting effect if people still aren’t shopping at Sears.
Many of Sears Holdings Corp’s plans to keep stores open are a bit vague at present, so it is difficult to say whether the business will continue to focus on surviving, rather than implementing plans to thrive. Although Sears and Kmart have failed to turn a profit in more than a year, their actions in the last month may indicate a new willingness to succeed by whatever means necessary.
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