Sears Holdings (OTCMKTS:SHLWQ) may have once been where America shopped but no longer. Its catalogue days are long gone having extinguished in 1993. It sold its most iconic go-to brands. At its peak in 2006, the Sears Kmart conglomerate looked healthy with profits of $1.5 billion. By 2010 that had dwindled to almost zero and by 2016, it had lost over $10 billion.
Sears leadership did not take a lesson from other retailers who saw a slide, loss of consumer confidence and brand exhaustion. That’s why today it sits on the edge of a cliff holding on by an over confident investor whose eleventh-hour heroics, over the objection of many, has barely kept it from liquidation.
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Q2 hedge fund letters, conference, scoops etc
For perspective, when Sears and Kmart merged in 2005, the combined entity had 3500 stores. By the time Sears Holdings filed Chapter 11 in 2018 it was down to 700 stores, and today it has just over 400 stores. To think a comeback is possible belies the facts, history and state of retail in the era of Amazon, Walmart and Target.
It starts with brand illusion. In the case of Sears, the illusion is that the brand had staying power. Sears was once a destination for some of the most dependable products in the marketplace. Kenmore appliances, Craftsman tools and Diehard batteries. For the longest time Sears owned this space. Instead of re-investing and shoring up, supporting and empowering its tried-and-true brands, it abandoned that support believing the power of the past would alone sustain Sears. The truth is in the numbers and its steep and rapid decline shows that strategy to have failed.
With the groundwork of deconstruction in place, and consumers once loyal only to Sears gone, it had to form strategic vision. That however never seemed to come. While the brand sustains in name, lack of what used to be product support is long gone, and no clear path in a new direction yet established. In an era of stiff and successful competition, that is a most dangerous path to pursue.
Its competitors are obvious and in the years of Sears decline, consumers found new homes in Walmart, Target, Kohl’s, Lowe’s, Best Buy and Amazon just to name a few. Even J.C. Penny and Macy’s became a threat to the once almighty retail giant. The question was and still is, what makes Sears formidable against any of these brands? How is Sears unique and distinguishable? Perhaps most importantly, in a world of consumer loyalty, based largely on habit and customer satisfaction, is it realistic to expect the name Sears to bring them back?
Is Sears at a crossroad? The illusion of the power of the brand has clearly been lost. Its leadership has yet to put forth a vision with confidence that would entice consumer interest let alone generate consumer loyalty. Its path to success is unknown and while it knows who the competition is, that competition is so strong and powerful that it is questionable what if any path to success still exists for this once iconic brand.
Will Sears emerge from bankruptcy a better, stronger and more competitive brand? The facts, circumstances and 125-year-old story defy that it will be so. Re-thinking a brand is difficult enough, but when a decline is so sharp, a brand so damaged and the competitive landscape so fierce, the odds are not in its favor. Time will tell if this last gamble by Eddie Lambert pays off, but today it looks like an insurmountable hill to climb if it tries to do so alone.
About the Author
Scott Y. Stuart, Esq. is the Chief Executive Officer of the Chicago-based Turnaround Management Association, the premier corporate restructuring, corporate renewal and corporate health organization in the world comprising of nearly 10,000 members throughout its 52 worldwide chapters. To become a member or attend an event, please visit www.turnaround.org.