 Investors have long speculated that the troubled retailer could sell
off its massive real estate holdings to generate extra cash. But
industry watchers say that will do little to solve Sears' main
problem: Rivals have been able to lure customers away from the chain
because of its drab stores and unexciting merchandise."The image
is atrocious. The stores are old and they're run-down. They don't
look like a nice place to visit," said Ron Friedman, a partner in
the retail and consumer products industry group of accounting firm
Marcum LLP in New York. "I don't think that the Sears we see today
can be around from a year today. It has to change."
As part of a plan to turn around the company, Sears Holdings
Corp., based in Hoffman Estates, Ill., said on Thursday that it will
spin off its smaller Hometown and Outlet stores as well as some
hardware stores in a deal expected to raise $400 million to $500
million.
In a separate deal, Sears will sell 11 stores to the real estate
company General Growth Properties for $270 million. The company, led
by billionaire investor Edward Lampert, also said it plans to cut
inventory by $580 million.
The plans follow news in December that the company would close at
least 100 to 120 stores to raise cash after a disastrous holiday
season in which revenue at stores open at least a year -- an
indicator of a retailer's health -- fell 5.2 percent in the eight
weeks that ended on Dec. 25.
"We're executing actions to unlock the value of our portfolio and
assets," said CEO Lou D'Ambrosio in a call with analysts.
Shares soared as much as 20 percent Thursday on the news, despite
that the company also reported a $2.4 billion loss for the fourth
quarter, which was much worse than Wall Street analysts had
expected.
The climb extended a rally the retailer has enjoyed since January
as it assured suppliers and investors that it can honor its
financial agreements.
Shares are up nearly 95 percent since the beginning of the year.
They were up $9.72 to $61.80 on Thursday.
Industry watchers weren't as impressed as Wall Street. They said
that Sears' biggest problem is that the company hasn't invested in
its stores.
Indeed, rivals like Wal-Mart typically spend between $6 and $8
per square foot on things such as updating cash registers, replacing
floor tiles and repainting stores, according to research firm
International Strategy & Investment Group. But over the past few
years, Sears spent on average between $1.50 and $2 per square foot.
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"We feel they're not doing enough to solve the problems for the
future," said Michael Cipriani, senior vice president of Rosenthal &
Rosenthal, which buys merchandise from suppliers and then collects
the money from the retailer once the goods are sold. "We think
they're going to continue to lose money."
In Thursday's announcement, Sears said it swung to a loss in the
fourth quarter, with adjusted earnings totaling 54 cents per share,
well below analyst expectations of 76 cents per share. Revenue fell
4 percent to $12.48 billion from $13 billion last year. Analysts
expected $12.44 billion.
During an interview with The Associated Press, D'Ambrosio
emphasized that it's important to distinguish between the retailer's
short-term operating performance and its balance sheet or liquidity.
The company does have cash.
He also said that he and the board are "wide-open for good ideas"
for investing in the stores. But D'Ambrosio said that how much Sears
invests in capital expenditures doesn't tell the whole story.
One should look at what Sears is doing to make the overall
shopping experience better, he said. In fact, D'Ambrosio said that
last year, Sears invested several hundred million in making the
customer experience better.
Among the things the company has done: roll out close to 15,000
iPad and ITouch devices to stores so that sales staff can research
products and help customers check out. The company also is working
on displaying merchandise better, including pairing up headphones
with teen clothes. Consumers will also see a new lineup of more
high-tech washing machines and other appliances, he said.
"Looking at just (capital expenditures) belies our investment in
the customer experience," he said. "We are going to win our game."
[Associated
Press; By ANNE D'INNOCENZIO and MAE ANDERSON, AP retail writers]
Copyright 2012 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
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