This week brought more bad news from Sears, with the company reporting weak holiday sales and announcing that it would close more than 100 stores and take a $1.8 billion charge.
Sears is a fading enterprise. Sales are down from $53.0 billion in fiscal year 2007 to $43.3 billion in 2011. The stock is trading today at about $33 dollars per share, down from over $180 dollars per share in 2007.
The decline isn’t likely to stop. Overall retail sales in the U.S. will probably muddle along and Sears will continue to lose share to tough competitors like Amazon, Target and Best Buy. Sears hasn’t invested in its stores, so the retail environment will continue to deteriorate. And the core problem remains: Sears doesn’t have a clear brand position in the market.
The only unknown is the endgame. What will happen to Sears and Kmart?
The company isn’t likely to be purchased because an acquisition depends on having a buyer. It isn’t clear who would want the company.
Liquidation is possible but this would be costly and challenging. And, with the soft commercial real estate market, disposing of the retail space would be difficult.
A repositioning is needed if the brands are to rebound, but this seems unlikely, too, because this would require significant investment. And a repositioning would probably involve a narrower focus, hurting short-term results.
Sears could spin-off its product brands, such as Kenmore and Craftsman. This move would make a lot of sense, but it wouldn’t fix the Sears and Kmart brands.
The most likely path seems to be more of the same: a gradual, slow decline leading to liquidation. The only question is how long it will all take.