Sears facing a grim-looking future
Sears and Kmart may soon be a thing of the past.
Their parent company, Sears Holdings, announced to their investors last week that the company had serious concerns about its ability to continue operating.
Since 2006, Sears has closed all of their stores in Canada and only 1,400 of around 3,400 stores that were operating in the United States at that time are still open.
The company has not had an annual profit since 2010 and had a net income of negative $2 billion in 2016.
Total equity of Sears Holdings is valued at only $9.36 billion. Sears merged with Kmart in 2005 after the latter declared bankruptcy in 2002.
Both companies had large-scale success during the 19th and 20th centuries. Sears became an American icon for providing a wide array of goods to consumers through their Sears, Robuck & Co. catalog.
The company eventually transitioned into retail stores. Likewise, Kmart provided their consumers with cheap prices and flash sales during their “Blue Light Specials.”
However, both companies have faced stiff competition since the 1990s due to the rise of first Walmart and Home Depot and then later e-commerce platforms like eBay and Amazon.
Walmart and Home Depot provided cheaper options and increased choices for consumers.
Online retailers have fewer operating costs, which allow them to out- compete Sears and other retailers of such nature.
Chief Financial Officer Jason Hollar still expressed optimism for growth. Despite plans to close over 150 stores this year, Sears Holdings is currently undergoing a restructuring plan focused on downsizing.
They plan on closing stores and reducing jobs in an effort to return to profitability.
However, in recent years, the company has lacked investing in the brands of both Sears and Kmart. Both stores do not differentiate greatly from some of their competitors.
In reality, the statement by the company does not completely spell the end of the company, but it certainly does not provide confidence among the company’s investors. Sears has a chance to return to a point where they can be profitable.
However, the company will never be such an icon of America’s consumer culture.
The company has failed to compete against their competitors since the 1990s, and they are in absolutely no position to rebound back as a retail giant.
If Sears succeeds in returning its net income back to the positive, the company has a better chance at attracting more investors.
However, any bounce back for the Sears will most likely not happen for years. At the current rate, the company is on a trajectory to fold within a short period of time.
The company has been known to be in financial trouble for years, and many expected the company to close years ago.
Many companies that had operated thousands of locations across the countries have closed in the past two decades. Others are struggling to continue along.
If Sears folds, it is simply a fact of business. Companies that struggle will either close or be bought out by a more stable company. It is definitely not sad that the company may close. The company failed to differentiate itself from its competitors.
Sears will serve as a lesson to other companies. You can grow to become a business giant, but your company can always come crashing down, if you fail to out compete others.