Sears; the Demise of a Retailing Icon.

In the 1950s and 60s, I recall Sears as the place to shop. In an era when mom and pop corner stores were being forced out by the new mass merchandisers, Sears stood head and shoulders above its two other mega store competitors, Wards and J.C. Penneys. Sears with its brand name appliances, tools, and clothing was a place to go when you had nothing else to do. It was the TV, the internet and the shopping malls that people use today to spend away their free time. Going to Sears was like going to a movie or a restaurant. It was the place America congregated and usually bought something before they left. Those days are not only long gone, but the current pace of Sears management not understanding retailing can cause consumers to wonder just how long a name they grew up with will remain in the American vernacular.

Analysts are stating that the central flaw with the Sears business model is that it is being controlled by Edward Lampert, a hedge fund manager who has no experience or idea on how to run a retail operation. A finance man, Lampert was able to hide Sears’ retail erosion for the last several years with heavy cost cutting measures and sales of some of Sears’ prime real estate. But now the cupboard of cutbacks and housecleaning are over and only a shell of a retail model is left to create earnings for shareholders. Sears other major holding, K-Mart, also has totally unacceptable numbers and is just another type of mass merchandiser with no retailing guidance.

Lampert and the rest of the Sears holdings board are quickly pointing to other factors for the retailer’s dismal numbers but they are all nothing but smoke used to cover up their own failures. They claim the housing market and credit crunch and even an unusually mild fall have dealt their stores heavy sales losses. Those excuses would work if such numbers were woven across the entire industry but they are not. For the most part, other mass merchandisers have shown solid steady gains in the last several years, no doubt some of that gain based on taking away formerly loyal Sears’ customers.

Conversations with relatives, who live in Chicago where Sears still has a viable presence, tell me they rarely shop at Sears. The cutbacks, including having enough employees to answer questions, help with advice, and allow a person to check out in a timely fashion, have been key reasons why they choose other mass retailers over the former giant.

In a classic case of finance people not understanding retail, Sears’ board of financial “geniuses" doesn’t grasp that employees are assets that can help a store and are not liabilities that need to be cut to better a bottom line. They also don’t understand that closing some stores that fell below their “profit guidelines" also eroded their market share further. People who found their local Sears store closed didn’t drive to the next nearest one. They went to another, closer, brand name store and after they found merchandise and prices and service to their liking, took Sears out of their purchasing plans for good.

Perhaps the most telling point to prove Sears management doesn’t understand the business is the recent move to purchase Restoration Hardware Inc.for $270 million dollars. The company deals in sales of lighting and plumbing fixtures as well as home furnishings. Since housing is spiraling ever deeper into a slump, how does the future of a company that deals in selling to new home owners help to bring Sears stock back around?

Credit-Suisse has advised investors to sell their stock and one of their chief analysts has stated he doubts Sears can make a comeback as a retailer. That will be a shame if that happens. The only thing that can save this old friend is to get rid of all the bean counters and hire people who understand retail. Maybe some of the thousands of employees fired in the last several years are available.