Article 1 https://www.thestreet.com/investing/sears-is-not-in-the-same-league-as-walmart-and-target-14586088
Oh, Eddie Lampert.
Sears (SHLD - Get Report) chairman and CEO Eddie Lampert told investors at its annual meeting Wednesday that he is "fighting like hell" to transform the company. That "fight" is way too little, way too late, say analysts and industry observers.
"Given the financials [of Sears], this isn't really a business that is worth saving," Neil Saunders, managing director of GlobalRetail Data, told TheStreet. "It would require too much investment to turn it around, and the gains - if they came at all - would not justify the expense."
Lampert also said that Sears Holdings Corp. (SHLD - Get Report) , which owns Sears and Kmart, outpaces Walmart Inc. (WMT - Get Report) or Target Corp. (TGT - Get Report) in that it has used internal "incubation" to drive growth, rather than making acquisitions, according to CNBC. The problem with that statement: Sears couldn't make acquisitions even if it wanted to because it's nearly insolvent and the company isn't growing.
Since Lampert grouped the three retailers, TheStreet decided to compare how the three stack up in three categories.
1. Stores
In 2006, almost two years after Sears merged with Kmart, Sears had 2,000 Sears and 1,400 Kmart stores, according to Bloomberg data. Today, the number stands at about 1,000 combined. Many of the remaining stores are rundown and dirty with scant inventory on shelves and racks, according to observations by TheStreet and industry watchers.
Meanwhile, Target has invested in its stores by renovating them and opening new ones, including a small-format location at New York's Herald Square in 2017 not far from a Kmart. The discounter has plans to open many more stores in the years ahead. Currently, Target has 1,829 stores, all in the U.S.
Although Walmart closed 63 Sam's Club stores this year, its stable of stores stands at 11,700 spanning 28 countries, 4,761 of which are in the U.S.
Sears CEO Eddie Lampert doesn't have much to smile about when it comes to Sears.
Sears CEO Eddie Lampert doesn't have much to smile about when it comes to Sears.
2. Profits
Sears' gross profit margins for 2017 fell to 21.1% from 21.2% in 2016, primarily as the company liquidated inventory at closed stores to raise cash. Sears' gross profit margins back in the 2009 calendar year were 27.6%, according to Bloomberg data.
While that year-over-year change may seem insignificant, for Sears it is especially harmful, said Saunders, because sales volumes are down for the unprofitable company. "When you put the two dynamics of selling less and that which you're selling is less profitable," he added, "it damages the bottom line."
From 2017 to 2016, Walmart's gross profit margins were 24.7% and 24.9%, respectively. Though down, Walmart is still earning way more than Sears on the merchandise it sells.
Target's gross profit margins were higher overall than Sears' last year, though they dropped to 28.9% from 29.3% in 2016. The company attributed the dip to higher costs to deliver purchases made online to customers.
3. Cash
For Sears, its cash and equivalents of $182 million at fourth-quarter end is dwarfed by its $10.985 billion in total liabilities, which includes short-term and long-term debt to lenders, lease obligations, payments owed to suppliers, tax liabilities and pension debts. The company doesn't pay down its debt because it needs the cash generated from selling assets to cover day-to-day operations, said Saunders.
"Sears is very good with asset management," added Saunders, "but they are not a sustainable business and have great difficulty managing the balance sheet."
For Walmart, it's a totally different picture. The cash-generative Walmart, which thrives on large-volume sales of low margin products, reported cash and equivalents of $6.9 billion in 2017, compared with $8.7 billion in 2016. For Target, its cash and equivalents balance increased to $2.6 billion from $2.5 billion in 2016.
Walmart and Target use extra cash to grow their businesses, the opposite of the hanging-by-a-thread Sears.
Lampert may want to find a different comparison for next year's annual meeting, if there is one.
Article 2
https://www.forbes.com/sites/stevendennis/2018/05/10/amazon-continues-to-benefit-from-sears-woes/#24adf60b4350
Having spent 12 years of my career at Sears, I find it particularly sad to see the once-storied retailer sink slowly into oblivion in what I frequently refer to as the world's slowest liquidation sale. Equally troubling is the continued efforts by Eddie Lampert, chairman and CEO of Sears Holdings SHLD +9.55%, to suggest a transformation is still possible. As I have written before — and there is no nice way to say this — you'd have to be either gullible or stupid to believe that anything resembling a turnaround is in the cards.
So from a "Can Sears be saved?" point of view, despite the short-term pop in the stock price, there is nothing remotely hopeful in yesterday's announcement that Amazon.com AMZN -0.27% will start selling Sears' tires. As with last year's similar Kenmore deal, Sears may slightly delay the inevitable, but Amazon is likely the real winner.
Having held the title of vice president for corporate strategy at Sears at one point, I know that its private brands (and the services that surround them) once represented the core of Sears' consumer and shareholder value. Set the wayback machine to 15 years or so ago, and brands like Kenmore, Craftsman and DieHard collectively were worth many multiples of what Sears Holdings in its entirety is worth today. Starting in the mid-1990s, as Sears lost market share to category killers such as Home Depot, Lowe's and Best Buy, the value of these proprietary brands began a pronounced and prolonged descent.
Since Lampert has owned and run Sears, it has only gotten worse, as nothing of any consequence has been done to reverse the retailer's overall fortunes. Simply put, the value of these brands continues to decline as Sears shrinks.
At this point, almost anything that expands distribution and generates cash is probably worth doing. Opportunities to have struck a grander bargain with those omnichannel brands with the best distribution power, market share and growth potential — which my team aggressively explored in 2003 — have long since passed. These retailers frankly don't need anything material from Sears anymore.
For Amazon, however, this makes good sense. First, Amazon does not have a significant position in the tire category. Second, as with the Kenmore deal, Amazon gets access to a well-known brand and related services at what is likely to be at or near fire-sale prices. Third, we already know that Amazon is starting to push an aggressive private-brand strategy, and this gives it a decent jump-start in a sizable segment. And while selling Sears' house brands is not exclusive right now, for all intents and purposes, it may be in the not too distant future as Sears continues to close stores and struggles with its own e-commerce offerings. Lastly, given its scale and scope, Amazon can well afford to do some experimentation.
Importantly, this particular deal is different from the Kenmore partnership in that it drives sorely needed traffic to more than 400 Sears' Auto Centers. However, the likelihood that this traffic is material, particularly as Sears continues to shrink its fleet, is relatively small. Still, clearly every little bit helps, particularly when Sears is faced with so few viable alternatives.
From an Amazon perspective, even if Sears Auto Centers shrink considerably — or go away entirely — it has started to build category knowledge and insight to inform future bricks-and-clicks partnerships and/or the opening of its own physical stores.
As Sears' market position continues to deteriorate, moves such as these smack more of desperation than the renaissance that Lampert et al. would like us to believe. Don't be fooled. While it turns out there are still a few worthwhile assets within the Sears portfolio, the cupboard is growing increasingly bare.
Tick tock.