Sears is Its Own Worst Enemy
Amanda is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I don’t know about you, but I grew up with the Sears brand. I bought my first pair of desert boots, my footwear of choice throughout the '70s, through the Sears catalog -- ubiquitous in not only our home, but that of everyone I knew. We had a catalog pick-up office in the town center, and Sears stores were gaining ground as well. Kenmore was a hot brand in our neighborhood, as I recall.
By the late 1980s and early '90s, I started to notice a change in Sears. The biggest item of note was the quality of their customer service, which was never outstanding. It further deteriorated into downright nastiness, particularly if a customer had a complaint. They also started to charge for services not rendered: when we took our car there for a front end alignment the last time, my husband could tell no work had been done, though we had paid. When we complained, we were called every name in the book. We went out to the car, forcing the mechanic supervisor to acknowledge that they hadn’t touched the car. Silently, they refunded our money. We didn’t go back to Sears for 10 years.
More recently, Sears Holdings Corp. (NASDAQ: SHLD) has begun closing as many as 120 stores nationwide, trying to staunch the flow of cash out the door. Christmas sales were dismal and stores are looking scruffier each day. What happened to cause an American mainstay to topple as it did? Nearly every article I’ve read lately regarding Sears’ downfall mentions its poor management and customer service. Well, I can certainly identify with that.
When hedge fund manager Edward Lampert merged Sears with K-Mart in 2005 and became chair of the new company, he seemed to be turning the company around. By 2007, according to the Wall Street Journal, shares of the corporation were trading around $192 — a far cry from its $45 at this writing. TheStreet.com notes that Sears Holdings is deficient on factors of growth, stock performance and return on capital. Obviously, things have been getting worse instead of better since that chart-topping stock value of five years ago.
Most analysts agree that having Lampert at the helm has not done Sears any good. At first, it seemed as if the financier would be able to transfer his initial success with K-Mart to Sears, binding the two into a mammoth retail force. As time went on, though, key executives came and went, lending an air of instability not popular with investors. The company’s current spat with CIT over financing certainly isn’t helping in that area, either. Another issue revolves around the fact that Lampert has let Sears stores go to rack and ruin. Compared with the industry average of $7 per square foot spent to maintain sales space, Sears spends less than $2. The company is also losing market share in the clothing department to stores such as Kohl’s (NYSE: KSS), which has had much success marketing work clothes — once a mainstay of Sears.
While competitors like Kohl’s seem to be rebounding from lackluster holiday sales, Sears is still adrift. In fact, the only time the company’s stock showed any upward movement was when news of Lampert’s stock purchases shook things up, inciting rumors of a move to privatize. Absent any improvements in management style, however, the store closings appear to herald the end of an era, rather than a rebirth, for the once-mighty retail giant.
The Motley Fool has no positions in the stocks mentioned above. sunnyspot has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.