US retail icon Sears struggles to survive

A sign heralds deep discounts at a Sears store in Alexandria, Virginia. Sears has seen six years of plunging sales and profit losses.
A sign heralds deep discounts at a Sears store in Alexandria, Virginia. Sears has seen six years of plunging sales and profit losses.PHOTO: WASHINGTON POST

Firm's woes part of industry-wide pain with a record number of closures expected this year

WASHINGTON • Walk into a Sears these days, and you will see an icon of American retailing collapsing before your eyes.

On a recent visit to the Falls Church, Virginia, store, the floors in the refrigerator aisles were splotched with brown stains. Over by the exercise equipment, the walls were scuffed and had wires hanging out of them. There were empty shelves in the shoe department. And in the tools section. And the men's clothing area. The place is in decay - much like Sears' once-dominant business model, according to the Washington Post.

After six straight years of plunging sales and profit losses, the company is shuttering stores and selling off crown jewels like its Craftsman tools line.

Decades of missed opportunities have brought Sears to this. It lost its focus with ventures into Discover credit cards and Coldwell Banker real estate in an attempt to diversify. Then big boxes such as Home Depot and Best Buy chipped away at lucrative product niches.

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But maybe the biggest whiff: Executives knew as far back as the early 1990s that they had to wean Sears off its dependency on shopping malls - but its many forays into other store formats never quite worked. As e-commerce moves towards its golden age, Sears is an also-ran. Sears Holdings' stock price peaked in 2007 at US$195.18, when it was an empire with more lines of business. Today, its stock trades for less than US$10. Amazon.com, meanwhile, has cleared US$1,000 a share on Wednesday.

Other data, too, show a company in retreat. In 2006, Sears had 355,000 employees; today, it has 140,000. In this war of attrition, chief executive Edward S. Lampert has said: "We're fighting like hell."

Mr Lampert, a controversial hedge fund billionaire, has invested heavily in bolstering Sears' Internet business but has let the retail stores languish. He is now propping up the company with loans and other feats of financial engineering - moves that may soften his landing if the chain fails.

SIGN OF THE TIMES

The past year will be remembered as one of the most challenging periods for "brick and mortar" retailers - and our company was one of the many affected by these headwinds.

SEARS CHIEF EXECUTIVE EDWARD S. LAMPERT

The trouble at Sears "represents the loss of this long arc of retail history", said historian at University of Essex in Britain Vicki Howard , who has written a book about department stores. "It does seem quite dire. It does seem like we're at some kind of turning point."

Sears is hardly alone. Retailers have announced the closures of more than 2,000 stores this year alone. Big retail is on pace to see more bankruptcies this year than in any year since the Great Recession, according to research by the consultancy AlixPartners.

"The past year will be remembered as one of the most challenging periods for 'brick and mortar' retailers - and our company was one of the many affected by these headwinds," Mr Lampert wrote in a blog post last month.

Nine retailers have filed for bankruptcy in just the first three months of the year, according to data provided exclusively to CNBC from AlixPartners. That equals the number for all of last year, CNBC said.

The rising number of retail bankruptcies comes as consumers are making more purchases online, and shifting their spending towards travel and other experiences. Meanwhile, the supply of physical stores continues to outweigh shopper demand, putting pressure on the industry's profits.

The industry's pain is far from over, according to CNBC.

The number of retailers on Moody's distressed list is also at its highest level since the Great Recession, as several other chains that were targeted by private equity firms struggle to turn around their businesses. They include names like J. Crew and Claire's Stores.

"It's just kind of this perfect storm where things are coming together, and it's going to continue for awhile," managing director in the turnaround and restructuring practice at AlixPartners Deb Rieger-Paganis told CNBC.

A version of this article appeared in the print edition of The Sunday Times on June 04, 2017, with the headline 'US retail icon Sears struggles to survive'. Print Edition | Subscribe