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

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.

SHARE:
TOPICS: E-Commerce, CXO
7

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.

sears 1

 

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:

sears 2
sears 3
sears 4

 

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

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Talkback

7 comments
Log in or register to join the discussion
  • Returns and Restock

    Are their return and restock practices still as draconian?
    Was a big reason I dropped them after I tried to return a tv (gift) a couple years back.

    Btw, wife did hit KMart (BigK) week before XMas and came away with a thoroughly "bleh!" opinion of them.
    rhonin
  • Not adjusting properly

    Some things just are not worth buying online and shipping. If i need a light bulb I want it now. I also like to try things like jeans and sneakers before I buy. Sears and Kmart just need to figure out how to stock stores with products people DO NOT buy online. Problem is, the store a huge and not meant to scale down. I think stores should be about 2/3 the size and optimized for local shopping. If everything were online, then they have no advantage over Amazon.
    Sean Foley
  • They just don't get it

    I used to buy nothing but Craftsman tools. They were, and still are high quality. But when you go into the store, paying for your purchase is a nightmare. The clerks can't operate the iPad (what a DUMB idea) to swipe your card, they can't use any other method, lines get long (for Sears anyway) and people get upset. Waiting to PAY is a bad omen. Sears is "Grandpa's" store and always will be. KMart is a joke. Dirty, nasty employees, and half-stocked shelves. I can't believe either store line will survive for long.
    ccs9623
    • I agree

      Kmart was a failing company. (I used to live across from the old behemoth of a Kmart headquarters in Troy, Michigan which is now a gigantic empty building) Sears is a failing company. I never understood how merging 2 failing companies that refused to update the insides of their stores was a good thing.
      Ray Cruz
  • Sears just doesn't care and it shows

    I wouldn't buy electronics at Sears, and haven't bought anything else there in years. They sell mostly junk at higher prices. Why anyone still buys Kenmore appliances is beyond me - Go somewhere else and buy the same thing with the actual manufacturer logo for less. They are just Whirlpool/Frigidaire/GE etc appliances with Kenmore logos stuck on. Their stores are poorly laid out and poorly stocked. You can see the merits of them hiring cheap part-time help - they have no engagement to the stores whatsoever, and you can't blame them. They push service contracts at you at the register and by phone, and they telemarket you once they have your information. I see them as a couple steps below Best Buy. They have doomed themselves.
    NotMSUser
  • Some Grandpa's upgraded.........Sear's didn't.

    Truely a tragic story of what not to do in business........I imagine some CEO ......with an attitude of ... " The PC & IT.....They're Just Passing Fads " . Most CEO's are barbarians .....and still get their 7 figure salaries, bonuses & perks ........even running a failing business. They'll ride the ride till the wheels fall off.

    This coupled with corporate officials will agree ............simply to be isolated with the excuse " that's what he or she told me to do ".

    For Sears and those others of your with secular attitudes and making you people scared to offer Ideas, different methods of infrastructure and doing that particular enitity .........because it wasn't your's first. I don't feel any remorse or sorrow for Your .......Move out the Way.

    My .......own saying is : " If your not the Lead Dog .......the Scenery Never Changes ". seems in order.
    Poppa Ace.
    PoppaAce
  • Montgomery Ward?

    Sears is headed there. They've acquired too many barnacles in the past century and their simplistic copying of IT aspects of successful companies will not get rid of them. Those PowerPoint presentations may not look nutty but they are just sad, a buzzword collection, because the barnacles are in charge of them.

    The best solution? Just stop wasting time and money on the "Me Too, But at a Higher Price" IT fiasco. Then cut the physical dwindling process short by selling off everything of Sears/Kmart. Count your huge profits from the real estate and store chain sales, fold your tents and go home.
    jjk308