We knew Sears and Kmart weren’t doing well after their decision to shutter 150 stores across 40 states, but now parent company Sears Holding has issued a statement declaring they may not have enough money to continue operations through 2017. In a filing with the Securities and Exchange Commission, Sears Holding stated, “Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.”
In tandem with their announcement to close 150 stores back in January, Sears Holding also implemented a restructuring program meant to cut $1 billion in annual costs and reduce debt by $1.5 billion. Part of this initiative was the selling of their Craftsman tool brand to Stanley Black & Decker, but even that doesn’t seem to have kept the department stores afloat. To mitigate the financial loss Sears Holding is sustaining, it is focusing on its Home Services and Sears Auto Center, Kenmore brand appliances, and DieHard batteries and parts business. The company is optimistic that this plan will be enough to make up for last year’s $2.2 billion loss.
Competition with Walmart and Target has been hard on Sears and Kmart, which merged 13 years ago under the direction of Edward S. Lampert, the hedge fund manager responsible for the deal. Additionally, e-commerce giant Amazon has proven a much tougher adversary in the fight for shoppers’ dollars, and even a strong rewards program hasn’t helped Sears and Kmart stay on top. Since about a decade ago, Sears and Kmart stores have dropped from 3,800 to 1,430, with most of these stores failing in older, less popular malls and small towns.
While we hope Sears Holding can pull out of this retail slump, it wouldn’t be the first to fall to the might of e-commerce in this increasingly online world. A Pew Research Center study shows that 8 in 10 people are online shoppers, with 15% of them buying online on a weekly basis. Although the Pew study also shows that 64% of Americans prefer shopping in-store, it’s clear that preference isn’t translating to financial gains. More and more, the purchase cycle begins online, with about 50% of Americans regularly using online reviews as a reference before they buy. If retailers don’t start focusing more efforts on their online presence, more brands could end up in similar circumstances, especially as Walmart’s aggressive e-commerce acquisitions and Amazon’s massive inventory and content offerings dominate the market.
Be sure to check out our Sears and Kmart store pages for the top deals from each company and take advantage of their Shop Your Way Rewards points while these programs are still available! Let us know what you think on Facebook and Twitter @FatWallet.
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