The market will not be denied.
It doesn’t care that Sears and its established Craftsman and Kenmore brands are woven into the fabric of many American families, that the Kmart chain founded in Garden City pioneered discount retailing, or that Macy’s department stores anchor many a mall across the United States.
The market is consumers, you and me, and the market is voting with its feet, wallet and digital device of choice. We’re leaving storied retailers scrambling for relevance, even survival, in a rapidly evolving digital environment where e-commerce makes individual shoppers king.
Stores? We don’t need no stinkin’ stores — or, apparently, the jobs they provide, the sales tax revenue they produce, the real estate taxes their parent companies pay. Just get FedEx to deliver that package to the front stoop by Friday.
The latest casualties are Sears Holdings Corp., with its eponymous store chain founded in 1893 and the Kmart mess it acquired roughly a dozen years ago. You remember Kmart: based in Troy until now-Sears Chairman Eddie Lampert engineered a complex deal that spirited the discounter and its employees to headquarters in suburban Chicago.
It isn’t working very well. In a filing this week with the Securities and Exchange Commission, Sears said its “historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.”
The admission and the accompanying flurry of news coverage prompted CFO Jason Hollar to take to a company blog to offer official perspective. He reminded investors that Sears’ auditors issued an “unqualified audit opinion” which “means we are a viable business that can meet its financial and other obligations for the foreseeable future.”
The market is not so sure. Shares in the retailer dropped more than 12 percent Wednesday to close at $7.98 as investors and analysts digested increasingly dire signals that Sears likely could be headed for Chapter 11 — a process that could liquidate Kmart entirely.
“They’re past the tipping point,” Ken Perkins, head of the research firm Retail Metrics LLC, told The Associated Press. “This is a symbolic acknowledgment of the end of Sears of what we know it to be.”
The retailer will inevitably get smaller, meaning its revenue will continue its inexorable decline as more stores are closed. And the ability to convert assets (namely brands and real estate) into cash will become more difficult as the assets dwindle and the efforts threaten to run afoul of existing pension agreements.
The irony: Sears arguably possessed the makings of a chain that should stand the test of time and market evolution. It owned brands like Craftsman, Kenmore, DieHard and Lands’ End that projected mass-market quality. And it pioneered a robust catalog business, logical precursor of digital commerce that could have been Amazon before there was Amazon.
But no. Sears and its sister brand, Kmart, spent way too long clinging to a past many of its customers long ago left behind. In the mid-1990s, I remember reporting on Kmart’s efforts to update its stores as rivals Target and Wal-Mart gobbled up the Troy-based retailer’s market share.
That was 20 years ago, a downward spiral marked by sullen sales people staffing tired stores in forgotten places popular a generation ago. Not anymore. Not as online shopping from wherever becomes a preferred method of personal commerce — and makes the likes of Sears and Kmart afterthoughts, if any at all.
The trend is accelerating across retail. In January, Sears Holdings said it would close 150 Sears and Kmart stores across the country. The wave claimed one Sears in Grand Rapids and 10 Kmarts across Michigan, including the founding store in Garden City opened by the S.S. Kresge Corp. on March 1, 1962.
Macy’s is closing 68 of its 730 stores nationwide this spring, including the anchor stores at the Westland and Eastland malls. J.C. Penney will shutter 138 stores over the next three months, six of them in Michigan.
Upscale retailers, and their wealthy customers, are not immune. The private equity owners of Neiman Marcus reportedly are mulling a sale to the owner of rival Saks Fifth Avenue, a potential tie-up that would make Canada’s Hudson’s Bay Co. a major player in American retail.
The trend is pitiless, powered as it is by technology and individual choice that wants what it wants when and where it wants it.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.