How The Great Fall Of Sears Came About
Once the king of retail in America, Sears has failed to change with the times and has fallen prey to Wal-mart and Amazon.
TradeZero Ocean Place Cable Beach, Unit #1 Nassau, Bahamas
In the world of stock trading and investing, experience will tell you that nothing is constant. The once mighty industry leaders could now be struggling for survival. So when you make decisions to buy and keep the stock with you for the long term, you need to look to the future and position the stock in a decade or so. Once America’s largest retailer, Sears Roebuck & Co ($SHLD) is a pale shadow of what it once was back in 1989. Its decline has been gradual, but now it could have reached a critical point. In March 2017 Sears expressed a sense of uncertainty regarding its future. This public declaration of helplessness expectedly sent its stock sinking, experiencing the worst decline ever in over two years. The Journey of the Great Slide Back when sales had begun to stagnate in the mid-90s, Sears did not seem to respond much in terms of changing its business strategy. Its greatest competition came from Wal-mart ($WMT) that was expanding significantly and posting greater revenue. But Sears saw a partner in one of its competitors that once reaped in huge profits back in the late 80s and early 90s, beaten only by Sears itself, Kmart. With the rising threat of Wal-mart, Sears chose to merge with Kmart in the early 2000s. Kmart was in a worse situation than Sears and had filed for bankruptcy in 2002. It was rescued by ESL Investments, the firm run by Eddie S. Lampert, the hedge fund billionaire. But that rescue would turn out to be a kind of suffocation following the Sears and Kmart merger since Lampert choked the merged retail company’s resources, doing little to keep the stores alive. The trafficat the physical stores kept shrinking and shrinking as chunks of the business kept getting sold just to stay alive, including the famous toolkit brand Craftsman that was sold for around $900 million to Stanley Black & Decker. Once the Market Influencer and Leader Back in 1900, Sears had changed the face of retail in America even more than Amazon ($AMZN) has done now. It provided much of the American population, which was then living in towns and rural areas, with greater choice and lower prices. It significantly improved the standard of living of the American public. But over 100 years later, after Lampert took over, no one even thinks of Sears when it comes to shopping. It’s true that ecommerce giants such as Amazon have taken shopping away from the physical stores to the smartphones and desktops, but physical retail giants such as Wal-mart have been able to survive and succeed too albeit with adapted strategy. Sears’ latest admittance of doubt and uncertainty is probably one of the final episodes in the journey towards the end. A study by Fitch Ratings has listed Sears as a company having high failure risk. According to S&P Global Market Intelligence, Sears has the greatest defaulting vulnerability in the coming year. Can Sears Recover? However, Sears still believes it is making improvements to change with the times. It has explained its expression of helplessness as a reflection of its historical financial performance. But it says its plans will eventually pull it out of that poor performance. It claims to have made crucial steps in linking its physical stores with its digital initiatives. It is focusing on ensuring shopping is easier and more pleasant. For this it plans measures such as enabling customers to purchase stuff online and then pick them up later from the physical store. Such integration of channels, whereby online and mobile platforms work along with the physical store, is what Sears is working at. It remains to be seen if it finally works out, for Sears’ sake.
www.tradezero.co
+1.954.944.3885