Sears has ‘substantial doubt’ it can survive

Staff/wire report

YOUNGSTOWN

Sears, a back-to-school shopping destination for generations of kids and the place newlyweds went to choose appliances, has said that after years of losing money that there is “substantial doubt” it will be able to keep its doors open.

It’s a dramatic acknowledgment from the chain that owns Sears and Kmart stores, which has long held fast to its stance that a turnaround is possible, even as many of its shoppers have moved on to Wal-Mart, Target or Amazon.

Sears has survived of late mainly with millions in loans funneled through the hedge fund of chairman and CEO Edward Lampert, but with sales fading it is burning through cash. Sears Holdings Corp. said late Tuesday it lost more than $2 billion last year, and its historical operating results indicated doubt about the future of the company that started in the 1880s as a mail-order catalog business.

Locally, the Kmart in Boardman closed in 2016 after nearly 48 years in business. A week after the company announced that it would close the Boardman location, it announced that the Warren Kmart would close. The Warren Kmart had been in business since November 1980. A Kmart location at 4475 Mahoning Ave. in Austintown remains open, and a Super Kmart on Route 46 in Howland also remains open. The Sears locations at Eastwood Mall Complex in Niles and Southern Park Mall in Boardman remain open. The New Castle Sears location closed last year, but the Kmart New Castle location remains open.

“We have been watching the situation with Sears for about a decade now,” said Joe Bell, spokesman for Cafaro Co., which owns the Eastwood Mall Complex and other shopping malls. “Everyone knows they’ve had serious financial problems for some time. We hope that they are able to turn around. They have been really taking some drastic measures to do that.”

The company known for DieHard batteries and Kenmore appliances has been selling assets, most recently its Craftsman tool brand. But it says pension agreements may prevent the sale of more businesses, potentially leading to a shortfall in funding.

“It’s a sad story. This is the place that created the first direct-to-consumer retail, the first modern department store. It stood like the Colossus over the American retail landscape,” said Craig Johnson, president of Customer Growth Partners, a retail consulting firm. “But it’s been underinvested and bled dry.”

Company shares, which hit an all-time low last month, tumbled more than 13 percent Wednesday. Sears tried to soothe investors’ fears, saying in a post on its site that it remains focused on “executing our transformation plan” and that news reports miss the full disclosure that it’s highlighting actions to reduce risks.

Lampert combined Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. He pledged to return Sears to greatness, leveraging its best-known brands and its vast holdings of land, and more recently planned to entice customers with its loyalty program. The company, which employs 140,000 people, announced in January said it would close 108 additional Kmart and 42 more Sears locations, and unveiled yet another restructuring plan in February aimed at cutting costs and reconfiguring debts to give itself more breathing room.

Sears, like many department stores, has been thwarted by a new consumer that has ripped up the decades-old playbook that the industry has relied upon. A plethora of new online players have also revolutionized the market.

Sears has upped its presence online, but is having a hard time disguising its age. Its stores are in need of a major refresh as rivals such as Wal-Mart and Target invest heavily to revitalize stores. Sales at established Sears and Kmart locations dropped 10.3 percent in the final quarter of 2016.

Industry analysts have placed the staggering sums of money that Sears is losing beside the limited number of assets it has left to sell, and believe the storied retailer may have reached the point of no return.

The company has lost $10.4 billion since 2011, the last year that it made a profit. Excluding charges that can be listed as one-time events, the loss is $4.57 billion, says Ken Perkins, who heads the research firm Retail Metrics LLC, but how the losses are stacked no longer seem to matter.

“They’re past the tipping point,” Perkins said. “This is a symbolic acknowledgement of the end of Sears of what we know it to be.”