Tough Second Quarter for Struggling Sears

Aug 18, 2012 2:19 AM  By

Second-quarter sales for struggling Sears Holdings Corp. dropped 6.6%, to $9.46 billion, down from $10.13 for the same period last year. Domestic same-store sales – a key metric that tracks stores open at least one year – declined 3.7% for the period ended July 28, 2012.

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Sears, which lost $3.1 billion last year, posted a net loss of $132 million for the quarter. To further illustrate the company’s recent woes in a greater light, consider that Sears has endured six consecutive years of sales declines at stores open at least one year.

Sears Holdings CEO and president Lou D’Ambrosio said in a press release the company has made progress against priorities outlined in its fourth-quarter financial results. Specifically, D’Ambrosio said Sears has improved its profit position, reduced expenses and expanded margin rate through more effective promotional design.

“We have also successfully lowered inventory, reduced debt from year end, and enhanced our liquidity,” D’Ambrosio added. “In addition, the Sears Hometown transaction remains on track to close in the third quarter. While we drive operational discipline, we are also investing in our customer experience, particularly through our ShopYourWay membership program and Integrated Retail.”

Neil Stern, retail analyst and senior partner for retail consultancy, said in an email that Sears has been struggling from a sales perspective for a long time, and certainly since ESL Investments assumed control in 2005.

What are some of Sears’ problems? Stern believes Sears stores are dated, the brand image of both Sears and Kmart are both unclear, and the market in core Sears categories has become more competitive.

Stern said the company’s fiscal problems have overshadowed “some really innovative things it has been doing in ecommerce and cross-channel retailing” such as being a leader in online orders/in-store pickup. “But if your core brands are not strong, it is hard to be strong elsewhere,” Stern added.

Sears needs to have compelling retail stores with reasons to shop there, Stern said, and that requires better merchandise, merchandising and a real point of view. “This requires investment in the store and the brand. Sears has opted for slow reinvention while J.C. Penney is opting for it the fast way.”

Under CEO Ron Johnson’s guidance, J.C. Penney has transformed its shopping experience this year which has produced less than stellar results to say the least.

Jim Tierney (jim.tierney@penton.com) is a senior writer for Multichannel Merchant. You can connect with him on Twitter (TierneyMCM) and LinkedIn, or call him at 203-358-4265.