For years, Sears ($SHLD) was the place to buy everything and anything. The Chicago-based retail giant, which started in 1886, had thousands of stores that sold electronics, tools, clothing, and whatever else one needed to live. Many of your favorite musicians even bought Sears-brand electric guitars in the ’60s and ’70s. If you look around in your parent’s basement, you’ll probably find something purchased from sears long ago.
In the last decade-plus, however, Sears has lost its status as the store and became just another retailer. The company’s sales decreased tremendously due to decreased foot traffic and online competitors like Amazon eating into their market share. Many Sears and Kmart stores have since closed around the country, putting thousands of workers out of jobs. The company’s own products also declined, as recent items in their Kenmore and Craftsman lines lacked the quality they were once known for. Sears’ stock suffered greatly, too, decreasing by 60% in the last year and over 96% in the last ten years.
But the company isn’t down for the count just yet. Edward S. Lampert, Sears Holdings’ CEO, recently released a plan to get the company back on track. While Sears shareholders and employees are all enthusiastic about the company’s ideas, others are not as convinced. Could this really get Sears back to being a major American store?
First, Sears will examine its existing real estate properties and sell what they can.
Sears stores are massive, as is the land they’re built on. Since sears recently closed a lot of stores on land they own, they could leverage said land and rake in a significant amount of cash. Macy’s, a company in a similar position, is doing the same thing with their empty stores. Also, if it makes more sense to sell the lot of a failing store than to keep it open, Sears would likely close said store and sell the land rights to the highest bidder.
Sears will also sell its existing brands.
The company recently sold their Craftsman tool brand to Stanley Black & Decker for $900 million. While some feel the Craftsman brand was undervalued in that sale, the company has plenty more of their own brands to sell, which would allow them to bring in more revenue.
Sears’ “Shop Your Way” rewards program is also key to bringing in repeat customers.
Millions of people are signed up for the “Shop Your Way” program. By retooling that program and leveraging the existing customer base, Sears could incentive repeat purchases and visits to both physical stores and their online storefront.
Sears investors reacted positively to this plan and the stock rapidly increased.
$SHLD went up by 25.63%, or $1.42, upon news that the company can possibly turn things around. The plan expects to save at least $1 billion a year and improve the company’s performance, which is music to investors’ ears. At the same time, the company still needs to take the money saved and pay their remaining debt and employee pensions. They still need to improve and modernize stores, make online shopping more appealing, and draw in customers who aren’t in their rewards program.
Should you invest in Sears? This plan could, in fact, work, but it’s also one of many that the company proposed over the years. Eventually, Sears will run out of real estate and brands to sell, which would put a quick stop to their “selling off assets” plan.
If you think this plan will work and want to get in on the possible gains, you might want to do the research on everything that’s happened to the company and everything preventing them from succeeding in the future. If you don’t think this plan is foolproof or want to wait and see if it slows Sears’ decline at all, you might want to wait a bit or invest elsewhere. After all, retail isn’t doing particularly hot right now, and Sears is one of the biggest retailers in America.