Sears' Cost Cutting Not Going So Well

The New York Times has an article that attempts to diagnose what’s wrong with Sears, and it mainly focuses on their (ill-advised?) cost cutting strategy.

Sears said a one-time gain of $101 million elevated its results for the period a year ago, and made this quarter’s numbers pale in comparison. The company also blamed factors outside its control, like warm weather, a weak housing market and stiff retail competition.

But frustrated analysts pointed to what they saw as a bigger problem inside Sears: an unwillingness to invest in aging Sears and Kmart stores, which has left the two chains unable to compete with chains like Wal-Mart, Target, Home Depot and Lowe’s.

“Taking too much cash out of the company and away from the consumer has caught up with Sears,” said Burt Flickinger, a retail consultant, who called Sears “a ticking time bomb.”

From the start, Mr. Lampert has cut or restricted spending in areas like marketing and information technology, which the retail industry considers indispensable, as he sought to create a leaner, more profitable business, analysts said.

But the result, Mr. Flickinger said, is ragged-looking stores with shelves at times bare of essential products, like ketchup and mustard during the height of the summer barbecue season.

We were not even aware that Sears sold condiments, but that’s probably because we haven’t been shopping at Sears much. Oh wait, they were talking about Kmart, weren’t they. Haven’t been into one of those either.

Sears Profit Plunges; Cost Cuts Get Blame
[NYT] (Thanks, Jenni!)
(Photo:Allan Ferguson)

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  1. phospholipid says:

    they probably sell those little jars of fancy mustard. a store full of product, and no condiments. how embarrassing.

  2. ChrisC1234 says:

    I know what’s wrong with Sears: Kmart.

    So Kmart couldn’t manage themselves, closed many stores, restructured under bankruptcy, after emerging from bankruptcy they bought Sears, and now continue to run both into the ground. Sounds like they’ve got a great plan going on… and it’s working great.

  3. UpsetPanda says:

    The reason why people who shop at Target don’t shop in Wal-Mart is the reason why people who shop at Wal-Mart don’t step foot in a K-Mart. When you leave, you feel like you need to shower for an hour and possibly enter a decontamination chamber.

  4. vladthepaler says:

    i got a bunch of really nice short-sleeved shirts at Sears a month or two ago, for less than 4 bucks each. If only all stores cut costs like Sears!

  5. Chase says:

    The Sears Grand near me sells food and even has a pharmacy. I haven’t been in there a while, and last I went was for a video game markdown hunt, but it’s somewhat depressing to see the Photography area all desolate and gloomy.

  6. mike1731 says:

    Look at the bright side… I have a older (like 5 year since last sold in the market) JVC Sirius radio for an older truck. About a month ago, I found the “boom box” accessory for it on sale on clearance at our local Sears mall outlet. Great price, was $150 five years ago, bought it for $20.

    But here’s the rub. Why would they have such old equipment in a stockroom so long after it was obsolete? To me, that says poor internal inventory controls loud and clear.

    As for the rest of Sears, their quality isn’t quite what it once was. In the tool section, they’ve gone to selling some cheaper tools under the Craftsman brand (think table saws) and it can be a challenge to get parts for some of these items. Meantime, Lowes and Home Depot sell similar quality or better tools, and you can get your project supplies at the same time. With many tool purchases being impulse buys, I think that’s a significant advantage.

    Meanwhile, there’s K-mart, the “dead man walking” of retail. My first job out of college in 1982 was as an assistant manager for K-mart, and even then you could see the storm clouds gathering. Very limited investment in IT resources, little or no investment in people, and stores that were crowded and dirty. Not to mention too much focus on hitting financial metrics — “only “X”% of sales for labor — and that percent dropped the older the store was. So, old store, longer term employees, and you have a pit of dispair. Meantime, no money to refresh / remodel significantly. Go into any K-mart today that was built in the 60’s, and chances are you’ll be looking at the same ceilings, shelving, and lighting the place was built with.

    Ok, the rant is over for now. Just sad to see, both companies were real leaders in their time. Management needs to realize they either need to reinvest, or shoot the beast as it’s dying a slow, painful, and ugly death.

  7. mattshu says:

    “The company also blamed factors outside its control, like warm weather”

    Global warming is killing Sears!!!

  8. AD8BC says:

    @CaffeinatedSquint: The reason that people don’t shop at Target are their crappy commercials.

    I know nobody likes commercials (except maybe during the Super Bowl). But do you know anybody who actually can tolerate the Target commercials?

  9. TWinter says:

    @ad8bc: I absolutely love Target commercials!! I think theirs tend to be some of the absolute best commercials on TV. They are sort of like watching music videos and don’t feel like commercials at all.

  10. QuantumRiff says:

    My town doesn’t have a Sears, but we do have a KMart. Its nice to be able to buy Craftsman tools there now, but man, that place is disgusting. The parking lot is so run down you feel you need an alignment every time you drive into it, the ceiling tiles aren’t turning yellow, they are past that, turning brown. (honestly, how much does it cost to replace the tiles in a drop ceiling?) Half the lights in the store don’t work, making it even darker. The store was built in the 70’s, the isles are almost wide enough to get your shopping cart through. Oh, and they have a cafeteria in the store that sells the worst smelling food I have ever smelled. And that smell goes all throughout the store. So I run in, grab a wrench and set of screwdrivers, then leave quickly. (usually paying in cash, cause half their Card readers don’t work)

  11. CumaeanSibyl says:

    I’ve gotten some good bargains at K-Mart — their curtains are nice — but there are some serious problems.

    1) The food prices aren’t good enough to justify going there on a regular basis;

    2) The store apparel brand isn’t as cute as Target’s, or as cheap as Wal-Mart’s;

    3) They don’t carry a variety of adorable, semi-useful-but-unnecessary stuff like Target does;

    4) It’s always understaffed, under-cleaned, and disorganized.

    I still prefer it to Wal-Mart, because going into a Wal-Mart gives me a headache for some reason and anyway there isn’t one within ten miles of my house, but I don’t have much reason at all to shop there.

  12. Dibbler says:

    I was in a Kmart about 2 weeks ago and see that they still have the kiosk for the original xbox game system still up and running. The xbox has long ago died and the power button blinks red. They haven’t sold these for a couple years at most stores. They didn’t have anything for the new systems. It was like stepping back in time. It’s sad to see these idiots running Sears into the ground. I still shop at Sears more out of pity and just from them always being around as a kid. Sad.

  13. Landru says:

    If I’m fast forwarding on my DVR, I’ll rewind to watch the Target commercial. I totally love ‘em. Except that weird back to school one with the palm trees. What was that all about?

  14. Snarkysnake says:

    Compare & Contrast:

    Sears: Bankers hours. (Generally when the mall is open)
    Wal Mart: 24/7 (Supercenters)

    Sears: Selection of over 26 kinds of polyester in lurid colors and wino-flair cut.
    Wal Mart: Some natural fabrics,better than in the past.

    Sears: Large “White Goods” home appliances at uncompetitive prices from captive suppliers.

    Wal Mart :Cheap Coffeemakers and toasters with gift wrap still stuck to them from last christmas that the moron employees just keep sticking back on the shelf in the hope that some unlucky buyer will be killed on the way home with their junky purchase.

    Sears: Employees that gave up their methadone treatments because they were too demanding.

    WalMart: Gave up personal grooming because their pay is so low.

    Sears:Irrelevant in todays world (unless it is still 1974)

    WalMart: Irrelevant in tomorrows world if they don’t start acting like they give a shit.

    Sears: Low expectations.
    WalMart : Low Prices

  15. glass says:

    @vladthepaler:

    *corners*. you mean cut *corners*.

  16. stanfrombrooklyn says:

    Actually I believe – and this is from today’s WSJ front page – the problem with Sears and K-Mart is that a hedge fund bought them and then squeezed all the cash from them to turn around and invest in other business deals. These deals are completely unrelated to Sears or K-Mart. Some of these deals didn’t work out and in the meantime Sears and K-Mart were left hanging out to dry.

  17. D.B. Cooper-Nichol says:

    I sold hardware at Sears summers in college (’93-94). Nice place to work and shop.

    I was in one the other day looking at appliances, and noticed that they had exactly the same computer/POS system. Same terminals, same displays, same scanners. No technological upgrades since the first Clinton administration.

    And yeah, the place was disgusting.

  18. chantastic says:

    I went to a Sears Essential on Black Friday to pick up some things for my apartment because I had someone visiting. I bought a few things, as well as one or two things that were on sale, then went to the registers.

    It was a disaster. Every third person had to stand around while price checks were done. Tags were misapplied all over the place. This includes me. I picked up 2 packs of steak knives because they were tagged at $5.99. of course the register did not have that price in it. I had to wait 10 minutes while the cash register lady tried in vain to have someone come over there, then I had to physically walk over there and show her the damn price tag! Then she tried to claim that did not apply to those knives, it was a mistake. Too bad, I say. Got $50 worth of knives for $12.

    I go there because it is closer than Wal-Mart or Target and has many staples similarly priced. But its usually empty when I go. No surprise this is not an isolated store.

  19. SaveMeJeebus says:

    Sears? Is that where you can buy mom jeans to cover up a gunt?

  20. SaraAB87 says:

    Kmart is the only store I know of where the employees still have to print out an override sheet listing every price change they have done throughout the day, but each one requires a managers override meaning managers running back and forth between registers all day long doing price changes (instead of doing, you know, manager’s stuff), 1 in every 2 customers needs a price change on an item.

    I am surprised they have electronic card readers and don’t require charge plates anymore..

    Yet they can certainly afford to install flat screens on the registers and self-serve registers that were yanked from our kmart within a year, but they cannot afford to upgrade their POS system, and they cannot afford to reduce the price of an item by 30 cents for a customer without manager’s approval.

    Oh and don’t even get me started on the fact that they have 2 registers open on black friday and thanksgiving with lines pouring out of each and managers running back and forth for price changes…

    At least when I go to Sears there is no line… because no one shops there!

  21. socalrob of the 24 and a half century says:

    @Snarkysnake:

    I think you have it correct. Sears has crappy products other than their large appliances. Kmart, while I haven’t set foot in one for a few years now is crap. Target was going up here in southern california along with walmart coming in and kmart just kept going down.

    Last thing I bought at Kmart was a fold out futon couch. The employee came up to me and my mother and insulted us and treated us like crap. We wanted to purchase it and take it home right then but he already assumed that we wanted it on lay-away and informed us where to go before we could say anything. We basically told him off and said to get it down so we could pay for it.

    I still have the couch but have never set foot in a kmart since. I do however go to target weekly just to walk around and have an Icee.

  22. robotprom says:

    I only buy from the clearance areas at Sears. I’ve gotten some incredible deals on everything from clothes to power tools.

    @mike1731: Their high end table saws are made by Orion, who also makes Steel City power tools, which are highly regarded. I got a hybrid table saw on clearance about a year ago and it’s well made, accurate and holds alignment. The blade that came with it was OEMed by Freud too.

  23. sagreer70 says:

    Sears actually has an awesome web site. I have ordered my appliances from there, and they show up at my door and get installed. I have not set foot into the stores, but in the past two years have spent upwards of $2,000 on their stuff.

    They might not always have the best price by a couple bucks, but they always have the best selection of appliances.

    K-Mart, however, sucks, and smells like cat feces. At least around here.

  24. saltmine says:

    This is the way the world ends

    This is the way the world ends

    This is the way the world ends

    Not with a bang, but with a whimper. -TS Eliot

  25. quail says:

    I knew someone who worked at Sears corporate in Chicago during the first year of the KMart buyout (merger my butt). They got rid of everyone with any history and thus salary with Sears. Then one of the cost cutting measures I heard about was to turn off the A/C at night in all of their stores in the summer time. My friend and I being from the south laughed at this foolish idea.

    Wish I knew how that played out. My friend left sears that year to enter investment banking. Wonder if it took more than a month before they realized that humidity levels in the stores would be unbearable and no one would enjoy the “Stickier Side of Sears”.

    That’s the problem. They concentrate too much on the of saving of a few pennies. They don’t concentrate on the customer.

  26. G-Dog says:

    Why my family doesn’t shop at Sears. We can never find any employee help. The last time we bought anything from Sears was a TV in the summer of 2003, and once we spent 20 minutes finding somebody to give out money to, we had to wait an hour before the thing was wheeled out of their magical store room and to our car.

    I’d like to think we waited that long because employees were battling dragons in the back room.

  27. Rode2008 says:

    I worked at Sears (Home Electronics Dept.) last holiday season (part time). Odd company….. I felt like I was living in a Brady Bunch show while working (circa 70’s). It was odd to be pitching plasmas and LCDs amidst the environs of a time warp.

    Their big push was on us selling Extended Warranty (Master Protection Agreements) that generally were in the range of 30% + of the product’s price itself. We had to detail – transaction by transaction – all the times that the customer declined (most did decline). And we had to attend “rah rah” meetings weekly if we missed our numbers on those extended warranties. We had to do role plays amongst ourselves – talk about the blind (those who missed their numbers) leading the blind.

    I predict a very short future for the company. It’s demographic is dying off (literally). Who the hell buys from Sears when you can buy from so many other companies – they are a dinosaur in the retailing indusrty. Its customer base? It’s a demographic of aging late adopters who have been shoppping there during the heyday of Sears and come out of habit.

    Have you ever noticed their clothing? Most of their styles look like something from a deep discount merchandiser in Romania.

    And Land’s End -who the hell buys Land’s End stuff. It looks like something ROdney Dangerfield would be wearing in the movie Ground Hog Day.

  28. therealhomerjaysimpson says:

    I go to a Sears Hardware nearby, but not to an actual Sears store in eons.

    My late father was a diehard Craftsman tool supporter–after having a hammer for 30+ years, the handle broke. He took it to the local Sears, and they told him to go pick whichever replacement hammer he wanted off the shelf, no charge–they stood behind those tools. Whether they’d do the same today, who knows.

    K-mart…well, that’s a different story. Worked there through college and when job-searching after. I’m the kind of person who strives to do the best in whatever job I’m doing, like it or not, from being a bus boy in high school to slogging through retail to the corporate world. What I see in K-mart stores today is just sad. Overcrowded aisles, fixtures that look like they’re circa 1974…still…few employees and a general “who cares” attitude.

    I once worked on the rennovaton team for K-mart, going to another store as they got a remodeling. Remodeling and expanding the sales floor meant shrinking the stockroom–where we found managers hid all kinds of things they couldn’t sell. One manager had stashed away cartons of what had to be literally early 1980s-era feminine products, and this was a good decade later we were opening the boxes.

  29. bombaxstar says:

    Warmer weather? Do these assholes know how hot they keep it in the fucking stores? They’re insane.

    Lots of Sears bashing lately…?

    They/we? deserve it though.

    =]

  30. JOEY2 says:

    That Sears store(formerly a Kmart) in the picture, with that almost desolate parking lot, is located in one of the poorer neighborhoods of San Diego at a major intersection. It used to have a decent patronage back in the 90s and it was the only department chain-store for miles around.

    About 10 years ago, Wal-mart bought a large plot of land in the same neighborhood. The city funded about $14 million for development, Wal-mart funded $10 million. They built a new mall with a Wal-mart, Sam’s Club, Target, Staples, & Mervyns, Long’s Drugs, 24hr Fitness and a few other smaller stores.
    Sears/Kmart has held carnivals in the parking lot since it’s so empty all the time, complete with rides, and that can’t even bring people back to shop there.

  31. z1rdarryl says:

    Sears is still a good store
    They need better hours

    The Sears by me closes a 9 pm (THEY BEGIN THROWING
    OU OUT AT 8:30)
    The Target closed at 10 Pm
    And The Walmart closes at 11 Pm
    Most nights I dont have enough time after dinner to
    Make a trip to sears worth while.
    There Usually is just enough time for target.
    But with the later hours there is allways enough time for Walmart.

  32. SaraAB87 says:

    The kmart employees are lifers here, they will probably be working there till the day they die, its interesting because I worked there several years ago and its still the same people working there other than the young temp help. All the other stores here its constantly different employees. I will also not be buying any gifts at kmart this year due to their no returns on ANYTHING for any reason without a reciept, even if you got 2 of them as a gift and they have legitimate kmart price tags on them. While I worked there I also caught them marking UP clearance items that had been on clearance for probably the whole year, heres a thought, if people didn’t want it at the cheaper price they are not going to buy it at a more expensive price!

  33. smbfl says:

    I’m normally a Target person myself but I grew up with KMart and wish I could still shop there today.

    Kmart and WalMart have a store right across the street from each other very close to me. The WalMart is open 24hrs, is newly remodeled and all in all a pretty nice store if it weren’t for the customers there. KMart sits across the street with an empty parking lot looking like it did when they first put it up and opened it for business. We went in the other day for Christmas shopping after not having been there for a year. I honestly don’t know how they keep it open. Floors were ten different colors of tile all with an inch of yellowing flakey wax. The ceilings were so disgusting looking I can’t even describe them and the shelves, complete with the 1970 yellowed plastic fronts, were bare except for a few scattered items that looked as if they were featured in Better Mobile Homes and Gardens back in the 70’s.

    They need to give it up and put that poor compnay out of its misery.

  34. f3rg says:

    Out local K-Mart closed 3 or 4 years ago, so we no longer have one, but those I’ve been to recently have scared the cr@p out of me. I occasionally go to St. Louis to visit the in-laws, and they have a couple K-Marts within driving distance, much closer than any Wal-Marts. However, they’re completely crowded with people who look like they’re just there to shoplift. In fact, one of them has a local cop stationed there just because it became such a problem. And the inside of the other store reminds me of an Aldi, with bare–and sometimes bent or broken–shelves, and even juice stains on the old tiles. I’ve since began driving the extra couple miles to go to Target, instead.

    Feeling like you might get shot, or walking around with your shoe sticking to the floor because of spilled stuff everywhere is not the type of environment that makes you want to shop… OR RETURN to ever again.

    Our local Sears is much better taken care of because it’s in a mall. However, the typical customer seems to be rural folks in flannel shirts and John Deere hats looking to get a good bargain on some out-of-style Lee jeans, while feeling like they’re shopping in a high-class mall store. And don’t get me started on the TV salesmen; you can’t even walk down the aisle next to them without being pestered to buy something.

  35. Shawna says:

    I had read the article about how Sears and KMart aren’t doing well, and I was somewhat surprised… but then I went to two local KMarts over the weekend – oh, I’m sorry, the “Big K”. Anyways, the first KMart was closing – and all the shelves were pretty much empty (which makes sense). So I went to the other KMart that’s closer to me, which isn’t closing, and oh my goodness… I haven’t been in such a hell-hole in a long time. The toy shelves were overloaded with toys – not in any particular order. It looked like they were closing as well and were trying to put everything they had out – and not in the right places. I felt like I was at an overstocked thrift store, except everything was full price. My sister really wanted to leave without buying anything, since the store creeped her out so much.
    I can’t imagine it staying open much longer since the walmart looks like a luxary store compared to KMart.

  36. mmcnary says:

    My problem with K-Mart is that every time I go into one with a list, I walk out out without everything on the list. They just can’t seem to keep their stock levels up.

    The main problem with Wal-Mart is that when I walk in there with a list, I walk out with things that are not ON the list…

  37. vickiq82 says:

    I have been working for Sears a lil over a year now. I don’t understand why they ship so much merchandise to the stores and what we do have isn’t selling. About 3 weeks after recieving the goods it goes clearance. What’s the problem? First, the company needs to lower the prices to were the customers can afford them. Second, sell cloths that the customers really want. Like name brand cloths in the juniors department, womens, and mens. These owners need to get up to date and think about what the customers want and need. To own a business you have to sacrifice your money and get what customers want. STOP BEING SO FREAKIN CHEAP!!!!!