Given that Lampert has said that for years now — its so-called transformation has been a multiyear project — and that Sears has been selling assets and closing stores, there’s a lot of skepticism over whether the turnaround plan is realistic. Is Lampert, Sears’ chairman and chief executive officer, kidding himself that he can turn things around or just spinning to buy time so he can monetize every asset available until there’s nothing left to sell?
As for the sentiment that the planned transformation of Sears is unrealistic, a company spokesman declined comment, but referred to Lampert’s May 11 blog on the Sears web site. That blog was posted after the annual shareholders’ meeting, and essentially said the company is “fighting like hell,” with Lampert noting that commentators have rushed to conclusions about the future of the retailer based on incomplete information, or information from biased sources.
In Friday’s blog post, in which the chairman said the company was closing another eight Sears stores and 35 Kmart locations, Lampert boasted that Sears has a “broad range of assets” and “tens of millions of active members” in its member-focused Shop Your Way program. He then went on to cite the company’s “powerful, trusted brands, such as Kenmore, Craftsman and DieHard,” not to mention its “leading Sears Home Services and Sears Auto Centers businesses.”
The problem is these are businesses the company has put on the market, with the exception of Craftsman, which was sold earlier this year. The deal does provide Sears the ability to continue selling the brand.
Lampert writes about making progress and how the company is “committed to take further action to unlock value from our assets” to fund its transformation. He also reiterated how the company is making progress on the restructuring program unveiled earlier this year, and that it is on track to achieve its $1.25 billion in annualized cost savings target.
Subsequent to the blog post, Sears said it has amended its existing second lien credit facility and last month closed on more than $200 million of real estate transactions.
Many credit analysts — most equity analysts have long since abandoned coverage of the company — have remained cautious about Sears’ ability to turn around operations, given its credit profile and cash burn rate. The company still has assets it can monetize, such as more real estate locations, but the truth is any other retailer with far fewer assets would have already been forced to close. Sears is forced to sell assets so it can keep the company afloat, but it hasn’t really done much to improve the actual operations of the business, nor make investments so the brick-and-mortar stores it wants to keep can be better and more exciting places to shop.
Sears’ first-quarter results for the period ended April 29 sound promising on the surface — it posted its first quarter of net profits in nearly two years, at $244 million, or $2.28 a diluted share, compared with a net loss of $471 million, or $4.41, a year ago. But that wasn’t due to any improvement in operations. Rather, the company only did better because it completed the sale of its Craftsman brand, one valued at $900 million, with an initial upfront cash payment of $525 million. On an adjusted basis, the results show that Sears widened its net loss to $230 million, or $2.15, compared with an adjusted net loss of $199 million, or $1.86, a year ago. Revenues fell 20.3 percent to $4.30 billion, and comparable-store sales fell 11.2 percent at Kmart and 12.4 percent at Sears Domestic locations.
With Friday’s additional store closures, the company would likely be operating closer to a little over 500 Kmart stores and under 650 Sears stores by year-end. But chances are the store count for both nameplates will change. Since January, Sears Holdings has had four rounds of store closings, bringing the total to date to around 310.
And while Sears is trying to rejigger appliance sales to compete with home chains and local discounters, not to mention the reentry of J.C. Penney Co. Inc. into the business last year, the opening so far of two category concept stores — Sears Appliances in Fort Collins, Colo., last year and Sears Appliances and Mattresses in Pharr, Tex., last month — are unlikely to be enough to help the bottom line.