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)