This year’s holiday season has been for most retailers the light at the end of the tunnel. After barely making it through the hardships of the recent economic environment and slow consumer demand, this holiday season was expected to bring in significant revenues. For some, things didn’t work out as planned. Take for instance, Sears, forced to close stores on account of poor holiday sales.
Sears has been having a hard time since 2005, when Kmart and Sears merged. The decline was strongly accentuated by the economic meltdown in 2008 and the slow economic growth and consumer demand of the last two years. This year’s holiday season was supposed to give the discount and department stores a breath of fresh air.
But, for Sears things did not worked out as planned, as the poor holiday sales have caused a 27 percent decline for its shares in market. As a result, executives have announced on Tuesday that Sears will be closing down 100 to 120 Sears and Kmart stores.
Holiday sales at Kmart were down 4.4 percent in the two months that ended Christmas Day. Sears’s sales at U.S. stores were down 6 percent. When 2,177 locations can’t top Wal-Mart’s and Target’s deals, nor can adjust to consumers not that focused on household appliances, it’s time to make a change.
CEO and President Lou D’Ambrosio explained that Sears has not “generated the results we were seeking during the holiday”. When coupled with how good the competition has it, then a decision to cut costs and reassess the business strategy is common sense. D’Ambrosio added:
“Given our performance and the difficult economic environment, especially for big-ticket items, we intend to implement a series of actions to reduce ongoing expenses, adjust our asset base” all to the final extent that will “accelerate the transformation of our business model”.
Although, Sears is mostly blaming the hardships posed by the economic environment, analyst Gary Balter from Credit Suisse Group AG, has a different take:
“They are not making investments in the stores; so customers are not coming. There is this philosophy that you don’t need to make as much of an investment in the stores if you have a brand”.
Retail analyst Brian Sozzi believes “they are letting Kmart and Sears die on the vine”, after neglecting “this business for so long”.