Good Ship Goodwill to the Rescue
I thought I had finally ended my coverage of Captain Lampert driving the Sears Titanic to the bottom of the briney deep. Well, think again. On its way to oblivion, Sears just keeps on giving me amazing little nuggets, which I am compelled to write about. I just read some interesting stuff from Prosper Insights and Analytics, a detail of which just blew me away. From their analysis of shoppers’ preferences for women’s apparel, Sears’ share has plummeted 53% from January, 2006 to January, 2016. And get this: it ranks them at 15th in the category, behind Goodwill! Yes, you read that right. Incredibly, women would rather shop at Goodwill for apparel than Sears. In my opinion, that’s one step closer to not even being able to give the stuff away.
And when one thinks about the fact that Sears still carries some respectable brands like Lands’ End, Michael Kors, Nike, Lee Jeans, Everlast, and some others, are those brands going to go down with the ship? What it does tell you is that Sears has become a place where people just do not want to go, an odorous Limburger cheese.
While Eddie “fast buck” (now you see it, now you don’t) Lampert calls what he’s doing, a “massive transformation,” it’s really a massive financial engineering feat. He continues to surprise us with one clever gimmick after another, all designed to keep squeezing cash out of the business and into his coffers, whether they be his REIT deals or other asset moves to “unlock value,” as he calls it.
Prosper has a couple other charts that provide a clear picture of Sears sinking. In all product categories, their shopper share has lost 40% in the last 10 years, including all apparel and shoes, sporting goods, linens/bedding, home improvement and electronics.
Having dropped less precipitously in share of shopper preference is the appliance category. Even though the category is also downward bound, the Kenmore brand is still the “go-to-first” for one in five shoppers. Of course, Lowe’s, Home Depot and Best Buy continue to hack away at Sears’ share. Lowe’s in particular has steadily stolen share over the past decade, when Sears led Lowe’s by 20%. Today, they’ve been cut down to 8%.
JCPenney recently announced that they were going to put their toe in the water by testing the viability of adding the appliance category. And if their appliance test markets prove successful, JCPenney may be another major competitor in the field. Naysayers abound who believe JCPenney is unlikely to succeed. In my opinion, so far everything the new CEO, Marvin Ellison, has done over the past year has been proven successful, as reflected in the 2015 financial results. Furthermore, Ellison hails from Home Depot with years of experience heading up stores, including appliances. Therefore, he most certainly understands how to manage that business. And why not go after a chunk of Sears’ declining share, particularly since JCPenney’s stores are most likely closer to Sears’ locations than the other competitors. They could win big.
The Future – What Future?
Lastly, are there any consumers at all, of any age, who want to shop in those aesthetically challenged, abysmal four walls? We of the grandparent class used to be whispered about as being the “Sears’ shopper.” Well, you couldn’t pay me, or most of my peers, to shop there. And, forget about the younger age groups. Ugh! might be the appropriate response. And look at the numbers to prove it.
Sears Could Have Been a Contender
A quarter of a century ago, in the late 1980s, when Sears was about to go under for the first time, had there been a strategic cell in any of their C-level brains, Sears would have shed all product categories other than home. They might even have managed to acquire Home Depot at the time, which was roughly a mere $1.5 billion size company. Can you imagine what a different path they might be on today?
Instead, they hired a new CEO, whose only major department store experience was that of Chief Financial Officer for Saks Fifth Avenue. How he could match anything about the Saks experience, including its luxury products and consumers, with any part of Sears is, and was, beyond my wildest imagination. It was the beginning of the end.
So rather than focusing on Sears’ one proven strength, appliances and the home, the new CEO hires a department store apparel guy and they literally doubled-down on apparel, hugely expanding the space for the women’s category.
What an audacious leap, followed by the CEO authoring a book titled: “The Softer Side of Sears.”
The book sold well. The Titanic, springing new leaks, sailed further into the storm, where Captain Eddie took the helm. Now, as it’s sinking, “fast buck” Eddie is tossing cash into his dinghy that he will hop into just before the ship goes under.
Gurgle, gurgle, gurgle.