Sears signals long-neglected stores may finally get updated
Sears Holdings Corp. Chief Executive Officer Edward Lampert, who has spent years putting money into online efforts rather than physical stores, said Thursday that the chain's aging fleet may finally be getting some upgrades.
After reporting the Hoffman Estates-based company's 11th straight quarterly loss, Lampert said Sears will make "material changes" to how it sells products in lagging categories like consumer electronics. That could include featuring brands in store-within-a-store concepts. Some Sears locations also will add a real-life version of Marketplace, its online site that links shoppers with thousands of product sellers.
Sears is "looking to transform businesses like our consumer-electronics business," he said on a conference call. It's an area "where we have underperformed for too long."
The changes won't necessarily cost more - Sears is looking to share costs with manufacturers, Lampert said. Still, the discussion is a departure from previous years, when the CEO brushed aside criticisms that he was spending too little to spruce up Sears and Kmart locations.
In the past, he has noted that other retailers spend money revamping their stores without seeing much benefit.
"Observers have mistakenly concluded that our issues were primarily related to underinvesting in our stores," Lampert wrote in a 2013 shareholders' letter. He said the company was being careful about not investing in poor-performing stores, saying it wanted to avoid "throwing good money after bad."
Dated Carpeting
Ron Boire, who came in as merchandising chief in 2012 before taking over Sears Canada last year, improved some of the merchandise displays. But the stores still don't look good, said Matt McGinley, an analyst at Evercore ISI in New York.
Sears critics have shared photos of poorly stocked shelves and unkempt aisles on social media. Stores are often drab, with dated carpeting and tile.
Lampert, who is also Sears's largest shareholder, has built his turnaround plan around selling off assets and shifting hundreds of stores to a real estate investment trust. The company said Thursday that its REIT effort, which could generate $2 billion, may be completed in May or June.
Even so, the condition of the stores still matters, McGinley said. They account for more than 90 percent of the company's sales, and Sears has been neglecting them, he said.
"They're spending nothing on the stores compared to their peers," McGinley said. That includes warehouse-style retailers such as Home Depot Inc., he said. The underspending hurts shoppers' perception of the brand - something that extends online, McGinley said.
Even today, Lampert said Sears was still focused on keeping its operations lean.
"As a company, we are primarily focused on profitability, not revenue," he said.