Sears Means Serious Business – CWEB.com
Sears surprises Wall Street with a narrower than expected loss; shares jump up 25%
Sears is on the right track by closing stores to restructure its business model and reinvest. Sears said it has rung up $700 million in cost savings to-date. Part of the cost savings structure included closing 92 pharmacy locations in its K-Mart stores, and by closing 50 Sears Auto Locations that were underperforming. Sears took initiative to close 150 stores that were not profitable.
“Sears posted its first quarterly profit in almost two years, with net income attributable to Sears’ shareholders that were $244 million, or $2.28 per share, compared with a loss of $471 million, or $4.41 per share, a year earlier.” Quotes Lauren Thomas, financial writer for CNBC
By cost cutting efforts Sears should see positive revenue by holidays this year, and should continue to see profits and surprise Wall Street down the line. Like Walmart (NYSE:WMT); Sears has closed stores to increase profits. Walmart (NYSE:WMT) has boosted its online presence and competes directly with Amazon.
Sears has the opportunity here to increase its online presence and compete with Amazon. Sears may also have an advantage as it has also appealed to older customers loyal to the brand, baby boomers that have more disposable income to spend on items than millennials.
As noted in Twice magazine, Sears ranked number 3 on the Twice Top 50 Appliance Retailers rankings for 2017 with $3.8 billion in major appliance sales for the calendar year 2016, a 9.5% plunge from the prior year. Sears Holdings is looking to cash out its Kenmore, Craftsman, and DieHard private-label brands, which are its top brands. Retailers are always in competition on price. In order to make up for discounted prices, they sell extended warranties on their products. Extended warranties are not super cheap either, so there is a nice cushion back to the retailers.
Don’t count out Sears just yet. Retailers have to sell on volume and margins. Other segments of retail which Sears sells in their product line can be highly profitable from markups.
- Eyeglass Frame: 800-100 percent markup
- Diamonds and Fine Jewelry- 200 percent markup
- Designer Lingerie 1000 percent markup
- Designer Jeans 650 percent markup
- Cosmetics 80 percent markup
According to the Delloite report Global Powers of Retailing 2017, Sears currently ranks 30, which is above JC Penny, Nike, Overstock.com, Lowes Company, Wayfair, HSN to name a few.
Sears Holdings (SHLD) said it has rung up $700 million in cost savings to-date.
CEO Eddie Lampert states. “We recognize that we need to accelerate our efforts to improve our operational performance and are moving decisively with our $1.25 billion restructuring program.”
By Leslie Cohen
Managing Editor CWEB