Sears Accelerates Belt-Tightening Amid Brutal Q4
Sears said it is considering additional store closures, layoffs, loans and asset sales to help stem mounting losses.
Last week, the company pre-announced an expected net loss of between $525 million and $625 million for its fiscal fourth quarter, compared with a year-ago net loss of $159 million.
Total revenue is expected to fall 9.9 percent, to $7.3 billion, and comp sales are projected to decline 7.1 percent, comprised of a 7.2 percent drop at Kmart and a 6.9 percent slip at Sears stores.
The company attributed the poor fourth-quarter performance to “historically warm weather and intense competition pressuring margins and driving comparable-store sales declines,” especially in its apparel and soft-lines categories.
To address the setbacks, the company is looking to cut upward of $650 million in costs. Efforts will include reducing fixed costs and improving inventory management, and speeding up the timetable for about 50 store closures that were scheduled for the next few months.
Other cost-saving measures under consideration include reducing local advertising, trimming store-level personnel, and shutting additional unprofitable stores as the company continues to move toward an “asset-light” multichannel retail model.
Sears will also look to sell off at least $300 million in real estate and business assets during the first half of the year, possibly including its Sears Auto Center operation, and may tap into its over $4 billion of credit lines to bolster liquidity.
For the full year, total revenue is expected to fall nearly 20 percent to $25.1 billion and total comps will decline 9.2 percent, including a 7.3 percent decrease at Kmart and an 11.1 percent drop at Sears.
As if to add insult to injury, the retailer said the sales declines and store closures will likely reduce the value of its Sears trade name by as much as $200 million.
Industry observers see Sears on a long, slow, one-way descent. As Credit Suisse analyst Gary Balter once noted, the company is “running out of arrows in the quiver,” and famously described its asset sales as a “slow dismemberment” of the business that, like the children’s game of Jenga, will leave too few pieces in place to support the structure.
More recently, Prosper Insights & Analytics director Pam Goodfellow observed in a Forbes blog that “Quite literally, Sears shoppers are a dying breed,” citing the disappearance of its core 55-and-older customer base.
Given Sears’ accelerating burn rate, that may prove to be a moot point.
Sharp: We’re Still Deciding On A Buyer
Financially ailing Sharp Electronics of Japan will make a decision on selling itself to either Innovation Network Corporation of Japan (INCJ) or Taiwan’s Hon Hai Precision Industry (Foxconn) in about a month, Sharp said.
Although Sharp is “actively negotiating” with the two companies, a spokesperson said, “despite reports, no final decision has been made, and no one company has favored status. The company expects to conclude these negotiations in approximately one month and will release any new information when it is available.”
Sharp announced earlier this month that its latest quarterly loss more than doubled from a year earlier.
Also this month, The Wall Street Journal reported that Foxconn chairman Terry Gou said the contract manufacturer, which assembles the iPhone, expects to complete a deal to buy Sharp by the end of February.
Last year, China-based Hisense announced the purchase of Sharp’s TV factory in Mexico and the rights to use the Sharp brand name on TVs in the Americas for an unspecified period. In the U.S., Sharp still markets microwaves and small appliances through its Mahwah, N.J., offices as well as B-to-B products such as displays for business and commercial applications.
More Jobs, Fatter Paychecks Will Push Retail Sales Up 3.1%: NRF
Job growth and higher wages are expected to drive a 3.1 percent increase in retail sales this year, the National Retail Federation (NRF) has forecasted, outpacing the 10-year average of 2.7 percent.
The trade association also projected direct sales to grow between 6 percent and 9 percent in 2016.
“Wage stagnation is easing, jobs are being created and consumer confidence remains steady,” noted NRF president/CEO Matthew Shay. “So despite the headwinds our economy faces from international developments — particularly in China — we think 2016 will be favorable for growth in the retail industry.”
Sharply lower gasoline prices are another spending incentive, added NRF chief economist Jack Kleinhenz, although retailers are competing with travel, dining, services, and saving and debt repayment for consumers’ discretionary dollars.
JCPenney Airs First New Appliance Spot
JCPenney is airing its first TV commercial heralding its return to white-goods.
The humorous spot depicts a washer on the fritz and a woman arguing with her Siri-like digital assistant when it insists that the nearest replacement is at JCPenney.
“The marketing is cleverly designed to introduce a new merchandise category that our loyal JCPenney customers have not associated with us in the past,” chief customer and marketing officer Mary Beth West told Ad Age.
The spot began airing in the three test markets of San Antonio, Texas, San Diego and Tampa, Fla., where appliance showrooms have been added to 22 stores.
The retailer is revisiting appliances after a 30-plus-year absence. CEO Marvin Ellison noted that the company’s customer base is 70-percent female, a key majap demographic, and that it plans to build “an emotional connection with the female shopper who already trusts JCPenney to furnish her home and wardrobe.”
The department stores will carry 90 to 150 different majap models from GE, GE/Hotpoint, LG and Samsung and will begin offering a broad assortment online this spring.
Super Bowl Photo Cooked After Apple CEO Takes Heat
Apple CEO Tim Cook created something of a digital dust-up last week by posting a blurry Super Bowl photo on Twitter.
The field shot, ostensibly taken with his iPhone just after the game, was dizzyingly out of focus, a quality not usually associated with Apple’s imaging eminence.
A battery of Twittersnark ensued, much of it accompanied by the #iPhoneFail hashtag, as followers suggested Cook was drunk; took the shot with a toaster; and should swap out his iPhone for a Galaxy.
Whether by dint of his PR department or otherwise, the photo was ultimately removed from his Twitter feed and replaced by a sharper image, garnering even more attention than the original post.
Conn’s Comps Slip In January
A late Super Bowl and its exit from gaming, imaging and select tablets led to a 2.3 percent decline in January comp sales at Conn’s.
The multiregional retailer was saved from deeper declines by its burgeoning furniture and mattress business, which posted a 12.3 percent increase in same-store sales last month, and a 15.2 percent gain for the November through January period.
President/CEO Norm Miller noted that the Super Bowl’s one-week calendar shift pulled sales into February, which contributed to a 15.7 percent decline in January CE comps. Home-office comps fell 11 percent, reflecting the absence of certain tablets, and appliance comps were essentially flat. Excluding the impact from gaming, imaging and tablets, CE comps would have decreased by 9.2 percent, home-office comps would have declined 3.6 percent, and total comps would have shown a 0.6 percent gain.