In a financial sense, Sears Holdings has a lot of ground to make up.
The parent company of Sears and Kmart was whacked with a $316 million net loss for the first half of its fiscal year, compared with a $23 million loss in the same period last year. Sales and margins have been declining since the beginning of the fiscal year, while expenses have risen in both dollar terms and as a percentage of sales.
In a statement detailing Sears Holdings’ most recent financial results, Lou D’Ambrosio, the former IBM and Avaya executive who became president and CEO in February, said management was “not satisfied” with these results.
Sears Holdings has been in business since 2005, the year investor Edward Lampert, who had taken control of Kmart in 2003, acquired Sears and merged the two retailers. “Lampert got Sears when it was already in a weak position,” Greg Melich, analyst with International Strategy & Investment (ISI) Group, said in an interview with HFN. “They had competition in the mall after Walmart, Target, Bed Bath & Beyond and Best Buy began to go after it in the ’80s and ’90s. They’ve also been suffering from the trends away from both department stores and mall stores.”
Sears Holdings does have strengths with which it can build its future. “Sears stores still have close to a 30 percent market share in appliances,” Melich said. “In the rest of the hardlines categories—vacuums, slow cookers, drapes, sheets, towels—Sears and Kmart in the top five in market share. They’re shrinking, but they’re still in the top tier.”
D’Ambrosio, who was credited in a letter to shareholders from Lampert with improving Avaya’s operating performance while he was CEO from 2006 to 2008, could prove to be an asset as well. In a research note, analysts Gary Balter, Seth Sigman and Simeon Gutman of Credit Suisse described a “positive view” of the new Sears CEO.
D’Ambrosio has made three key executive moves since the beginning of August. Monica Woo, formerly of FreshDirect, has been brought on board as chief marketing officer. Edgar Huber, a former executive with Liz Claiborne and Juicy Couture, was named president and CEO of Lands’ End. Robert Schriesheim, a finance executive with Lawson Software and Hewitt Associates, has taken the role of chief financial officer.—David Gill