Sears Switching To Connected CE Focus

TV to become part of larger IoE effort
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Sears is in the process of transforming its CE business from one largely focused on TVs to a category built around connected solutions.

Updated! Hoffman Estates, Ill. — The days of TV-centric showrooms are apparently numbered at Sears and Kmart.

The retailer said it is in the process of transforming its CE business from one largely focused on TVs to a category built around connected solutions.

Sears stressed that it remains committed to TV, and that the remerchandising effort should not imply otherwise.

Rather, TV, along with other smart or connected devices like tablets and Bluetooth speakers and headphones, will be become part of a broader connected-solutions platform for the chains.

In a statement issued to TWICE, Ryan Ciovacco, Sears' president of connected solutions and consumer electronics, said, “We are shifting the focus of our electronics business away from simply selling traditional electronics products into one that leverages both the industry growth area of smart technology and Sears’ existing capabilities in fitness, appliances, electronics and home services.”

He continued, “This repositioning of electronics into connected solutions will focus on innovative products and target busy families and people on the go, providing them with an opportunity to discover how smart technology can improve their life.”

The move comes amid continuing CE comp-sale declines for both sister chains, and follows the rollout earlier this year of prototype connected-home shops within several Sears stores.

The shops carry a tightly edited selection of smart, connected-home and personal-automation devices across the CE, fitness, automotive, home and mobile categories.

Ciovacco said Sears will roll out smart and wearable products to about 200 Sears stores this quarter, and has created a connected solutions "Holiday Hot List" online.

Brands include Belkin, D-Link, Fitbit, Jawbone and Insteon, he said.

In a research note, Credit Suisse retail analyst Gary Balter lauded Sears chairman/CEO Edward Lampert for addressing a large, money-losing category, but described the reduced exposure to big-screen TVs as a positive for Best Buy, which is the sales leader in that business.

The switch to an even more complex category like connected devices would require an investment in staffing, Balter surmised, although sales support was in short supply during recent store visits, he noted.

Word of the CE transformation first came in a federal filing in which the ailing retail icon updated its third-quarter earnings estimates. The company is now forecasting a net loss of between $590 million and $630 million for the three months, ended Nov. 1, compared with a $497 million net loss in the prior-year period.

Comp sales were essentially flat for the quarter, up 0.5 percent at Kmart and down 0.7 percent at Sears. Comps at both chains were impacted by declines in CE, although Sears’ decreases were partially offset by gains in majaps and mattresses.

Excluding CE, comp sales would have increased 1.2 percent at Kmart and 1 percent at Sears, the company said.

Meanwhile, on the store front, Sears continues to shed real estate. The company said in the filing that it sold its Sears store in Cupertino, Calif., last month — reportedly one of the remaining jewels in the crown — for $102.5 million, and will vacate the location within a year.

Sears closed its flagship State Street Chicago store in April, and has subleased its prime King of Prussia Mall store in Pennsylvania to Dick’s Sporting Goods and the Primark apparel chain.

The company has also reportedly targeted 132 stores and facilities for closure, and in the filing indicated it is considering selling 200 to 300 locations to a real estate investment trust (REIT) that it would form, and then lease back the properties from the new entity.

Sears said the sale would further enhance its liquidity by generating “substantial proceeds.”

The company has also raised cash through a $400 million loan from ESL Investments, Lampert’s privately held hedge fund; has generated $380 million through a Sears Canada rights offering; and is looking to raise up to $625 million through a separate Sears Holdings offering of unsecured notes and stock warrants.

Observers believe the company’s recent cash quest is aimed at calming nervous suppliers as the retailer enters the critical holiday selling season.

In his research note, Credit Suisse’s Balter credited Lampert for monetizing the company’s assets, but added: “We still seem to be missing the bridge that takes us from these large losses to profitability as a retailer.”

Sears is expected to release its full results on Dec. 4.

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