As Jesus Martinez browsed the stocked and orderly aisles of the Sears store in Bowie, Maryland, Wednesday, there was no outward signs he might be participating in a death watch.
“I buy clothes, stuff for the house, vacuums,” the 26-year-old immigrant from El Salvador said. On this visit he was checking out gift ideas for his wife — comparing different purses — while also picking up merchandise he ordered online.
“Sometimes I go to Macy’s, but it’s a bit expensive. But Sears is the best.”
But whether there will be many more such trips has been put in serious doubt after the iconic American chain that once bestrode the U.S. retail landscape revealed there was “substantial doubt” about the 131-year-old company’s ability to continue as a going concern.
If present trends continue, Sears, which also owns the struggling Kmart chain, may be the latest retailer to fall victim to fast-changing consumer preferences, lower-cost, low-frills competitors like Wal-Mart and Costco and the existential threat posed by online retailers such as Amazon.
In January, Sears Holdings Corp. announced it would close 150 of its 1,405 stores in an effort to cut costs by $1 billion. It also sold off its hugely popular Craftsman tool brand to Stanley Black & Decker, and received $300 million in 2014 from CEO Edward Lampert’s hedge fund, ESL investment. Still, the company hasn’t turned a profit in five years, and has lost $10.4 billion since 2011.
The company’s stock, which was trading above $70 a share just five years ago, lost more than 12 percent of its value a day after Tuesday evening’s bombshell, closing at $7.98.
Some say Sears has the resources to survive, albeit in diminished form, and company officials sought to allay concerns Wednesday about blunt language cited in its SEC filings, where they admitted to “substantial doubt” about continuing operations. The company shot back at negative press, saying the honest disclosure was in line with federal disclosure guidelines.
“To clarify, the comments from our annual report quoted by the media are in line with regulatory standards that require management to assess and disclose potential risks the company could face within one year from the reported financial statements,” Chief Financial Officer Jason Hollar wrote on the company’s blog.
“As 2016 proved to be another challenging year for most ‘bricks and mortar’ retailers, our disclosures reflected these developments,” he continued. “While historical performance drives the disclosure, our financial plans and forecast do not reflect the continuation of that performance.”
Mr. Lampert said earlier this month that the new infusion of capital to Sears Holding “provided us the confidence to set a target of reducing our outstanding debt and pension obligations by a substantial amount in 2017.”
Tipping point?
But industry analysts say the brave talk may not be enough to turn the company around.
“Beforehand the assumption might have been that Sears couldn’t file or wouldn’t file for bankruptcy,” Joshua Friedman, legal analyst at Debtwire, told CNBC. “When your fears are confirmed to some degree, that’s often the signal to some people that the time’s right to get out.”
“They’re past the tipping point,” Ken Perkins, head of the research firm Retail Metrics LLC, told The Associated Press. “This is a symbolic acknowledgment of the end of Sears [as] what we know it to be.”
Some say Sears has itself partly to blame for its current woes.
“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,” Craig Johnson, president of Customer Growth Partners, a retail consulting firm, told the AP. “But it’s been underinvested and bled dry.”
Sears is not alone in its troubles among traditional retailers, as companies continue to struggle to make bricks-and-mortar investments profitable in an increasingly internet-connected world.
Rival chains such as J.C. Penney, Macy’s and even Wal-Mart have announced plans to shutter hundreds of stores in recent months.
“Closing stores is never an easy decision, but it is necessary to keep the company strong and positioned for the future,” Wal-Mart CEO Doug McMillon said in a company statement last year. “So we are committed to growing, but we are being disciplined about it.”
A half-dozen apparel companies announced at the end of 2016 they’d also be closing stores. They include Aeropostale — which went bankrupt last year — American Eagle, Chico’s, Finish Line, Men’s Warehouse, Payless Shoes and The Children’s Place.
But the failure of Sears marks at least a big cultural milestone as it does a business story. Its humble beginnings date back to 1886, when founder Richard Sears and soon-to-be-partner Alvah Roebuck started selling watches in Minnesota as the foundation of a retail empire that would eventually sweep the country. The first Sears catalog appeared in 1887, featuring watches and jewelry.
In the late 1890s Sears and Roebuck began a mail-order operation, focusing a large part on advertising to farmers and their families, sending out bulk catalogs with everything from wagons and stoves to clothing and home goods. Combating high prices at local rural markets, Sears adopted the advertising campaign “Shop at Sears and save.”
The formula thrived up until the late 1990s, when the campaign “Come see the softer side of Sears” promoted their lifestyle and apparel merchandise.
But critics of the store say it just can’t keep up with a plethora of options online, and that the stores are outdated and couldn’t compete with more nimble rivals on price.
Back in Maryland, loyal Sears customer Shezhad Masood, a 43-year-old father of three, said that no matter what the larger market trends, he’s happy with the quality of goods in the stores. “I love Sears,” he said, adding that his family can buy clothes and shoes for the kids and lawnmowers and tools for himself at the Sears Howard County location. But even Mr. Masood hints at the forces that have undermined Sears and its old-school peers.
“We try to look online first, but sometimes we go to the store,” he acknowledged. “Of course, it’s always more convenient online.”
• Laura Kelly can be reached at lkelly@washingtontimes.com.
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