Sears & Kmart Plot A Comeback Despite The Economic Slump
Thursday, February 28, 2008PAUL KANGAS: Sears Holdings is blaming the sluggish economy for its third consecutive drop in quarterly profits. The parent of Sears and Kmart stores saw fourth quarter earnings plummet nearly 50 percent. Now, the company says it will turn up the heat on its turnaround plan. But as Diane Eastabrook reports, some industry watchers think the retailer is in danger of flaming out.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sears Holdings' hope for a turn around got derailed in the latest quarter by bloated inventories, weak sales and price markdowns at its Sears and Kmart stores. In the final quarter of fiscal 2007 which ended February 8, Sears Holdings earned $3.04 a share, $0.06 less than Wall Street estimated and more than $2 below the same period last year. Morningstar retail analyst Kim Picciola thinks the prospect for more profit declines are likely.
KIM PICCIOLA, RETAIL ANALYST, MORNINGSTAR: They have their work cut out for them. They really have to close the gap between where they are today and their competitors.
EASTABROOK: Still, Picciola thinks Sears Holdings has lucrative assets that it can leverage. It recently began selling Sears popular Craftsman tools and Kenmore appliances in Kmart stores. And today Chairman Edward Lampert says those brands might also be sold through other retailers. The company has also raised cash in the past by selling off real estate. Picciola says Sears could do that again, but it might be harder in today's tough economic environment.
PICCIOLA: The real estate market really was paying a nice premium to some of those assets in the last couple of years and we just don't see that to be the case in today's environment.
EASTABROOK: Industry watchers think the company's toughest challenge will be finding a top merchandiser to revamp the images of both Sears and Kmart. Lampert is currently in the market for a chief executive he hopes can do just that. But Will Ander, a senior partner at retail consultant McMillanDoolittle, thinks finding the right person will be difficult.
WILLARD ANDER, PARTNER, MCMILLANDOOLITTLE: There are some people out there I think, but I don't know if anybody would want to get on this ship. I mean this ship is definitely heading down.
EASTABROOK: One look at the company's stock chart reflects a firm struggling to survive. In announcing today's earnings, Lampert likened Sears Holdings to a football team still working on its game. But some analysts wonder if Sears can score before the clock runs out. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.
