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[11 comments]

Is Sears Holdings making real progress in transforming itself?

May 7, 2014

Once again Sears' CEO Edward Lampert has spoken and the message is pretty much the same. The company is in the process of transforming into a new type of retail entity that will achieve success in the future. Where others see an ongoing deconstruction of once proud retailers (Kmart and Sears), Mr. Lampert sees something else. What that is may not be clear to retail industry experts and pundits, but Mr. Lampert doesn't much care what others think.

Speaking at the company's annual shareholders meeting, Mr. Lampert said, "Looking back at what used to be doesn't give us a chance to transform."

The past probably isn't where Mr. Lampert wants Sears stakeholders to have their focus considering the company has had 38 straight quarters of declining sales. For those who do, he pointed to Apple and General Dynamics as companies that went through rough periods before achieving successful transformations.

One thing is clear — Sears Holdings' future will mean fewer stores. "You don't need 2,000 stores to be competitive in the U.S.," he said via The Wall Street Journal. Sears Holdings currently operates 1,152 Kmart stores and 778 Sears stores.

As in the past, Mr. Lampert spoke about pursuing a goal of becoming a fully integrated multichannel retailer, primarily through the company's Shop Your Way rewards program. Members of the program are the biggest driver of sales for the company and its greatest focus.

Part of that attention has included an expansion of Sears' online marketplace. Over the past two years, Sears has increased available products from 40 million items to about 120 million today. "We've been very focused on serving members, providing products they want and very focused on price," Mr. Lampert was quoted as saying by the Chicago Tribune.

FINANCIALS:     [NASDAQ:SHLD] [ ]

Discussion Questions:

Will closing stores make Sears and Kmart stronger retailers? Is integration of digital with brick and mortar environments the key to the chains' success going forward?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is it that Edward Lampert's pursuit of a fully integrated multichannel retail operation will make Sears Holdings successful?

Comments:

Mr. Lampert has had ten years to prove the validity of his vision. And that vision has changed every time the "last strategy" failed to achieve gains in profitability and market share. Meanwhile, a collapsing sales base in outmoded stores makes it very seriously to accept the latest messaging -- whatever it is.

The undermining of the Sears and Kmart brands through mismanagement is so thorough that it's naive to think an "online marketplace" can leverage those same damaged brands effectively. An online version of Sears runs a risk of irrelevance compared to stronger, better-managed competitors like Amazon and walmart.com. It's the same pathway that led to Sears's "also-ran" status today.

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Dick Seesel, Principal, Retailing In Focus LLC

Sears is where America used to shop. This latest move appears to be more rhetoric than substance. Sears is very late to the game with little in the way of differential advantage to either bricks & mortar or online retailers.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Sears may make it with the standalone specialty appliance stores, but as a major retailer the question is not will they, but when will they disappear from the marketplace?

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Mel Kleiman, President, Humetrics

While I am skeptical of Sears being able to pull off anything comparable to Apple's resurrection, I will give Eddie Lampert the benefit of the doubt despite "38 straight quarters of declining sales."

I agree that Sears doesn't need as many physical locations and that increases its cost structure. That being said, I also don't know how many is enough. Eliminating the underperforming stores makes sense from a macro perspective, although it causes a great deal of angst in the communities they are in, but Sears needed the surgery if it hopes to survive and regain its relevancy.

While I wouldn't bet against him, I am also not investing in his vision as there's been a good bit of shareholder angst in the last 5 years.

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Bill Davis, Director, MB&G Consulting

While integration of digital with brick and mortar seems the key to most chains' success going forward, does anyone else think that when Sears' CEO Lampert says "he doesn't much care what others think," he sounds like Penney's Ron Johnson-misread-his-customers redux?

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Naomi K. Shapiro, Market Communications Manager, Upstream Commerce

Every store that closes leaves behind dissatisfied customers; so many customers were dissatisfied in the given market area they had to close the store. Sears has dissatisfied so many customers over the years that I find it challenging to believe people will give them a second or third chance online. Maybe Lampert is thinking of profit over scale with these moves, but is their online segment even profitable now?

'storewanderer'

Closing the stores will help cut costs...oh really? So that should help.

Sears holds a major retail power torch in its hands, but they need to start waving it more...oh, what is that torch? Their product BRANDS. Craftsman is a trusted brand that other brands are working hard to catch. Kenmore means quality - but it is fading. Lastly, Sears could be in a whole new game if Ed flips the Sears catalog of old onto the web - which is what he is doing with the web store expansion.

Make the site simple, fun, fast, and easy to buy from - just like the catalog. Add the new feature called "folded corners" page markers. Remember how you used to fold the top corner of the page in the toy section or tools section to mark pages that had things on it that you HAD TO HAVE?

Ed can do it - especially if he lets real retailers run the ship!

Ed, do not kill my Craftsman tools!!!

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

I have admired Mr. Lampert for all of the concepts he has tried. Agree or disagree, he gets an A for taking the shot. He has also brought in some bright young talent, however, I don't know how successful he has been in retaining them.

Another thing in his favor is that he has kept his eye on the customers who continue to spend money with him.

With that said, yes, he is right! In today's shopping environment, one doesn't need 2000 stores to be successful, but I would question why one would also need to increase inventory from 40M items to 120M items over 2 years. This doesn't sound like just another long tail. Am I missing something?

I have been keeping my fingers crossed that Mr. Lampert would roll a 7 on one of his trials but alas, it hasn't been in the cards. Can he do it? Based on his tenacity, I would give him a gold star.

I'm not uncrossing my fingers just yet and that's my 2 cents....

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

Mr. Lampert's main points are spot-on and certainly not on the fringes. Retailers no longer need thousands of stores in order to be competitive, and having a store in every major market is no longer a prerequisite for being a major retailer (though if Walmart pulls off its mega-scale strategy, it may yet prove to be the exception). Marketplace expansion is something that several major retailers are aggressively pursuing (Walmart and Staples for example), and others, including Target, are seriously considering jumping in. I wrote about the potential in a RetailWire article.

Mr. Lampert is no merchant prince, but we've seen how those have been faring lately. I wouldn't count him out.

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Carol Spieckerman, President, newmarketbuilders

I spend my days traveling the country, having dinners with retail IT leaders. I have yet to meet even one who claims to understand Mr. Lampert's strategy. This is particularly distressing given the large number of talented people who work for the company. Let's hope he'll provide some clarity so the rest of the industry can understand.

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Cathy Hotka, Principal, Cathy Hotka & Associates

It is not a question of Sears Holdings closing stores, just how long will it take to reach zero. What was viewed as a Real Estate plan does not appear to be working. Walmart has done to Kmart what it did to every other discount mass merchant. Sears does not seem to know what it wants to be. By the time they have transformed the company, it will likely be 10 percent of what it was and maybe show a profit. Yet Amazon is the leader in digital and will likely add some brick and mortar.

What Sears Holdings wants to be may not match the consumer's needs by the time they get there. Younger shoppers are digitally oriented and older shoppers are brick & mortar oriented. Sears Holdings' merchandise is older shopper directed, so how does digital work for them?

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W. Frank Dell II, CMC, President, Dellmart & Company

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