Sears Holdings tech-driven revamp may struggle as retail sales tank

Summary:For the full year, Sears Holdings will lose between $1.3 billion and $1.4 billion as it tries to transform into a tech-driven omnichannel retailer. The problem: Sears Holding is late to the game. Very late.

Sears Holdings' big transformation revolves around a tech-driven plan that melds physical shopping, digital access and membership points, but the company could run out of time as its retail sales plummet.

The retailer on Thursday outlined some dismal same store sales. For The quarter ended Jan. 6, Sears same store sales fell 9.2 percent and 5.7 percent at its Kmart unit. As a result, Sears Holdings is projecting a net loss of $250 million to $360 million, or $2.35 to $3.39 a share. Adjusted net loss will be between $2.01 a share and $2.98 a share.

Shares tanked in after hours trading. For the full year, Sears Holdings will lose between $1.3 billion and $1.4 billion, or $11.85 and $12.88 a share. In other words, Sears Holdings losses for the year will be as ugly as some of its stores. The good news is Sears Holdings has $1 billion in cash and a credit facility of $2.3 billion.

But the big question is whether Sears' big turnaround plan, which revolves around IT, will save the day.

Sears Holdings official line in a statement:

During the quarter, we continued to proactively transform our business to a member-centric integrated retailer leveraging our Shop Your Way™ ("SYW") program and platform. As previously stated, we are transitioning from a business that has historically focused on running a store network into a business that provides and delivers value by serving its members in the manner most convenient for them: whether in store, in home or through digital devices.

And member engagement was 69 percent of sales for the nine weeks ending Jan. 4, up from 58 percent from a year ago.

Here's the problem though. Sears is starving the interior of its stores to invest in other platforms. Can you really be an integrated retailer if the physical store experience needs work?

In a PowerPoint, Sears Holdings' plan doesn't look so nutty. Like other retailers, Sears wants to be high-tech, omnichannel, well priced and use online and mobile channels well. Here's the problem: Sears is late. Very late.

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The plan for Sears is to develop digital and social relationships with customers, use analytics to make targeted offers and expand its marketplace and delivery options. Sears wants to emulate Amazon in many respects. Good luck with that one.

Let's roll the master plan:

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Aside from the obvious implementation challenges from a technology perspective it's striking how Sears is just now trying to make a retail-meets-tech transformation after retailers such as Best Buy, Target and Wal-Mart are already on the other side of the mountain. The big risk here is that Sears lack of investment in physical stores will impact its digital and social relationships. It's not like customers are going to choose channels and mark the Sears Holdings' brands differently.

It's all one brand that happens to be really struggling now. Perhaps Sears should become a direct retailer and ditch its stores completely.

Topics: E-Commerce, CXO

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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