There is something missing from the reporting we've seen on the latest results from Sears Holdings. Virtually all the coverage online, in print and on broadcast media has talked about how the company has had to cut back in light of the recession. Some reports even include an analyst or two talking about how Sears is doing the right thing in finding ways to control costs.
Reading and listening to this stuff, we recently found ourselves channeling our long-departed, grocery store manager of a father. A voice with a deep Jersey City accent we don't possess, blurted out, "Are you fa real? Git atta here b'for I..." Fortunately, with young children in the next room, we were able to gain control of the invading spirit and not mutter what usually followed from dear old dad's lips so many years ago.
Sears, for those who haven't been paying attention, had been watching its sales go south pre-Edward Lampert. Since taking over the company, however, Mr. Lampert has turned in same-store sales declines with a systematic precision that would be awe-inspiring were it not so tragic.
Mr. Lampert has managed to stay ahead in the minds of investors and others expecting him to prove that he really is the next Warren Buffet by finding ways to cut costs at Sears or deliver revenues from investments not connected to selling goods.
His failure to invest in the store experience has become a self-fulfilling prophecy where fewer shoppers (each and almost every quarter) go to the chain's stores or website to purchase goods.
The path to failure has been amazingly straight and Mr. Lampert and company (AKA the execs who won't tell him that he has no merchant DNA in his body) have not strayed. That's why as sales continue to fall, Sears continues to cut one of the few ways it has to get more people in the store. The chain reduced ad expenditures by $107 million in Q1 '09 and $45 million in Q2 (some of the $45 mil comes from Sears Canada, Crain's reports). Last year, $94 million was lopped from the ad budget.
To demonstrate how committed Sears is to growing sales (not), W. Bruce Johnson, the company's interim CEO, said in a press release, "We continue to take actions to increase the efficiency of our operations. We have reduced our selling and general administrative expenses by approximately $1 billion over the past four quarters, including a reduction of $212 million this quarter."
Discussion Questions: What is the biggest impediment to Sears growing its sales? Will the chain ever be successful under Edward Lampert?