Sears Holdings Corp. is about to report a profit for its fiscal year ending a few weeks from now, partly because the organization “continues to see signs of life at its Kmart chain.”
First reaction: misprint! It seems like a long time since I saw a sentence about Kmart that didn’t include the word “struggling.”
But no misprint. Kmart stores reported a 5.3 percent same-store sales gain in December, giving Sears Holdings an overall 0.4 percent increase. Since “increase” is not a commonly heard word in retailing these days – unless you’re referring to returns, layoffs, stockholder complaints or Walmart – that represents an amazing turnaround for Sears.
So, second reaction: why?? And how?? Well, Kmart is, as it always has been, about price. But what Kmart hasn’t been about, for a long time, is upgrading its stores. And Eddie Lampert, the holding company’s ceo, has made it clear that investing in the chains’ stores is like throwing bad money after worse money.
The Wall Street Journal recently characterized Lampert as disliking flying so much he rarely leaves his Connecticut offices, which would seem to make it difficult to run two huge retail chains based in Chicago. Especially difficult since Bruce Johnson, named interim retail ceo in 2008 to replace the ousted Aylwyn Lewis, is still “interim” – no great vote of confidence there.
The company just announced the hiring of James Haworth as executive vp and president of retail services, replacing Kevin Holt who will be “pursuing other opportunities.” Haworth had most recently been running an investment holding company doing business in China. But he was also a 20-year Walmart veteran, including chief operating officer.
Walmart background is almost always a good thing to bring on board, if Sears/Kmart doesn’t mind the irony of it.
It had long been said that the Sears Holdings balance sheet was dependent not so much on retail sales as on its immense real estate holdings. But we all know about the value of commercial real estate. (Kmart’s old headquarters complex in Troy, Mich., was sold recently to the elegant, upscale Somerset Collection mall directly across Big Beaver Road for $17.5 million. The seller, BlackRock Inc., had paid $41.5 million for it in 2005, the year Kmart vacated it.)
I know that Sears is putting a huge effort into its online presence, which makes sense – even if store designers hate to acknowledge it. But none of this explains Kmart’s sudden comp increases. Maybe this simply is one gift horse that needs to keep its mouth closed.