NEW YORK — Sears said Thursday that it’s unloading some of its profit-busting stores, but the retailer fell short of revealing how it plans to woo shoppers back into its remaining ones.
Investors have long speculated that the troubled retailer could sell off its massive real estate holdings to generate extra cash. But industry watchers say that will do little to solve Sears’ main problem: Rivals have been able to lure customers away from the chain because of its drab stores and unexciting merchandise.
“The image is atrocious. The stores are old and they’re run down. They don’t look like a nice place to visit,” said Ron Friedman, a partner in the retail and consumer products industry group of accounting firm Marcum, LLP in New York. “I don’t think that the Sears we see today can be around from a year today. It has to change.”
As part of a plan to turnaround the company, Sears, based in Hoffman Estates, Ill., said on Thursday that it will spin off its smaller Hometown and Outlet stores as well as some hardware stores in a deal expected to raise $400 million to $500 million.
In a separate deal, Sears will sell 11 stores to the real estate company General Growth Properties for $270 million. The company also said it plans to cut inventory by $580 million.
The plans follow news in December that the company would close at least 100 to 120 stores to raise cash after a disastrous holiday season in which revenue at stores open at least a year — an indicator of a retailer’s health — fell 5.2 percent in the eight weeks ended on Dec. 25.
“We’re executing actions to unlock the value of our portfolio and assets,” said CEO Lou D’Ambrosio in a call with analysts.
Shares soared as much as 20 percent Thursday on the news, despite that the company also reported a $2.4 billion loss for the fourth quarter that was much worse than what Wall Street analysts had expected.
The climb extended a rally the retailer has enjoyed since January as its assured suppliers investors that it can honor its financial agreements.
Shares are up nearly 95 percent since the beginning of the year. They were up $9.72 to $61.80 on Thursday.
Industry watchers weren’t as impressed as Wall Street. They said that Sears’ biggest problem is that the company hasn’t invested in its stores.
Indeed, rivals like Wal-Mart typically spend between $6 and $8 per square foot on things such as updating cash registers, replacing floor tiles and repainting stores, according to research firm International Strategy & Investment Group. But over the past few years, Sears spent on average between $1.50 and $2.00 per square foot.
“We feel they’re not doing enough to solve the problems for the future,” said Michael Cipriani, senior vice president of Rosenthal & Rosenthal, which buys merchandise from suppliers and then collects the money from the retailer once the goods are sold. “We think they’re going to continue to lose money.”
In Thursday’s announcement, Sears said it swung to a loss in the fourth quarter, with adjusted earnings totaling 54 cents per share, well below analyst expectations of 76 cents per share. Revenue fell 4 percent to $12.48 billion from $13 billion last year. Analysts expected $12.44 billion.
During an interview with The Associated Press, D’Ambrosio emphasized that it’s important to distinguish between the retailer’s short-term operating performance and its balance sheet or liquidity. The company does have cash.
He also said that he and the board are “wide open for good ideas” for investing in the stores. But D’Ambrosio said that how much Sears invests in capital expenditures doesn’t tell the whole story.
One should look at what Sears is doing to make the overall shopping experience better, he said. In fact, D’Ambrosio said the last year, Sears invested several hundred million in making the customer experience better.
Among the things the company has done: roll out close to 15,000 iPad and ITouch devices to stores so that sales staff can research products and can help customers check out. The company also is working on better displaying merchandise, including pairing up headphones with teen clothes. Consumers will also see a new lineup of more high-tech washing machines and other appliances, he said.
“Looking at just (capital expenditures) belies our investment in the customer experience,” he said. “We are going to win our game.”
The Augusta store in my opinion is a good example of a drab, unpleasant place to visit. I was appalled the last time I visited there and it is unlikely I’ll return for anything other than a ratchet or socket.
Yes, that store either needs to go or be totally renovated. They also need managers with a better sense of which merchandise to offer for such a small store.
Yet another example of our economy on the rise, according to the liberals! Valerie Jarrett stated yesterday that unemployment is good, that those checks will be spent and stimulate the economy–what a stupid statement!
I just called Sears last Monday about returning a defective product they sold. They would not honor the manufacturers warrantee. Think I’ll shop there again? Honestly I am shocked that Sears is still in business at all. Decades ago they cheapened their mechanics tools and the guarantee that went with them. Since then they got rid of all their department managers so there is no one to discuss a problem with. Then they started selling “name brands” other than their own but charged more for the same product than the competition just down the street. Good bye Sears!
Sear’s problems are simple. When the economy started to ‘tank’ they paniced and ‘let go’ all of their Department Manager’s and the long term sales staff, those folk’s who really knew Sears product’s. Once they left, Sears was left with the inevitable, that being that no one was around that was product knowledgable. Once customer’s couldn’t find anyone in the store that could answer even the simplest product question, and let their warranty guarantee’s ‘go’, the writing was on the wall, at least for the bigger stores. Add to that the increasingly frustrating inability of Sears Service to locate and quote a reasonable price for a Sears product part and it’s not a wonder that company’s like Northern Tool and Harbour Freight are literally stomping Sears into the dirt. The local Houlton Outlet at least tries, when you can get some who can see beyond the manual’s and really knows their product’s, to help out. That I will give them credit for. I hope they’re one of the Outlet’s that survive’s. The rest of the store’s I’ve seen are little better than shell’s just waiting to be put out of their misery.
An American icon that will soon be history.
Sears can’t do anything to get me back into their stores. I purchased a snow blower from them and it has been pure junk.They keep sending some one to fix it but the repairs are always sub par. I finally took it to someone local to fix it and now it runs. Goodbye Sears!