Sears is opening a new store because nothing makes sense anymore


Sears

Sears ($SHLD) has seen better days. Once the country’s leading department store for pretty much everything, the retail chain is now a mere shell of itself. The company started closing of hundreds of stores in the last year. Their stock is also down by over 25% since the start of 2017, which isn’t all that different from how it performed in recent years.

To be fair, the entire retail industry is facing the same problems, if not worse. Malls and shops are closing up left and right. Entire chains are going bankrupt. Since most people shop at a few select places or only shop online, giants like Sears, Macy’s, and JCPenney no longer have a definite future.

Though Sears is dying and cutting their stores to 1,180 locations (down from 2,073 in 2012), they’re still chugging along. Even in the midst of closures and massive layoffs, the company is planning something no other company in their position would dare do: opening a new store.

Yes, the dying department store will soon open a new store, even as they close nearly two dozen more stores than planned. Not only will this new store be in the major (ish) market of Pharr, Texas, it will sell far less merchandise than any other Sears location. Like the company’s Colorado-based appliances store, the new Sears “test” location will sell appliances and mattresses in a 20,000 square foot storefront. Product selection will be further limited to only ten appliance brands, including Sears’ Kenmore brand.

According to the press release issued by the company, the Pharr location also allows for online order pickups from Sears and Kmart. This feature will help people who want to buy things other than mattresses and appliances receive products from the company’s online shops in a shorter period of time. At the same time, customers will have to go to the store instead of enjoying the convenience of home delivery.

Sears opening a new “experimental” store might sound like a terrible idea, especially as they close hundreds of other locations. Yet this store focuses on the company’s best-selling products in a smaller space. By paying less rent and only offering products that sell, the chain has a chance to refocus their sales approach. If this store works, other experimental locations like it could open elsewhere. There’s also the possibility that smaller Sears stores could reboot into appliance- and mattress-only stores, letting the company shift focus on things that sell and do away with products that don’t.

Would this help Sears’ stock? Not really. The retail market is still in a years-long decline, and a single store in a not-so-major market won’t turn them around. Investors responded positively to the new store opening (and the extra closures), and $SHLD is up 1.76% in the last three days. This is only a temporary bump, and investors will have to deal with the reality that is 200+ shuttered stores, massive layoffs, and decreased sales.

If the store succeeds and the company tries this approach elsewhere, investors might respond more favorable to Sears’ future. Until then, the company needs another plan to get them out of a years-long rut — and fast.

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