Sears has reported that the company went in the red this past fiscal quarter, but will this already shrinking retailer have to close even more stores over the next few years? It seems quite possible.
A closer look at why Sears is struggling
Sears Holdings had a net loss of $395 million for the period that ended July 30, compared with a net income of $208 million during the second quarter of the previous year.
‘We continue to face a challenging competitive environment and while we continue to focus on our overall profitability, including managing expenses, we reported a net loss for the second quarter,” said Sears chairman and CEO Edward Lampert.
For Sears, a 7% drop in domestic same-store sales has contributed to the slide. There were declines in multiple categories, including several that Sears is known for: home appliances, apparel, electronics and tools.
At Kmart, which is also part of Sears Holdings, sales fell 3.3% during the second quarter.
The future of Sears
Going forward, Lampert said Sears will concentrate on its “best stores, best members and best categories” as it tries to restore profitability. The company, which closed dozens of Kmart and Sears locations earlier this year, indicated that there will be the option to shut down unprofitable stores as leases expire.
‘Our lease expirations in the 1,178 stores provide us with significant option value with minimal commitments since more than half of the leases expire in less than five years,’ said Sears CFO Rob Schriesheim.
Betting on ‘Shop Your Way’
A big component of Sears’ transformation plan includes the “Shop Your Way” platform. Members of the rewards program make up 75% of sales, the company said on an earnings call. Now, the retailer wants to get those customers to shop more and spend more.
More savings in store
Sears is certainly not the only struggling retailer. Kohl’s and Target both recently reported declining sales, and Macy’s plans to close 100 stores by early 2017 to focus on its better-performing locations. These are undoubtedly challenging times.
In the meantime, Clark has said traditional department stores will have to lower their prices to compete with growing online retailers and thriving discount chains, like T.J. Maxx and Ross.
You can expect to find great sales on clothing and housewares through the Christmas shopping season.