If you’ve read this BLOG for a while you know I am no fan of Sears. Since the merger of KMart and Sears the combined company has done nothing to change its competitiveness versus better managed companies like Target, Kohls and WalMart.
Today Sears stock jumped almost 13%. Oh my, should I reverse my position? After all, the company said (Marketwatch reported) it doubled fourth quarter profitability since a year ago when the companies merged. And revenues are up to $16Billion, from last year’s $5.95billion – wow! And Kmart stores eeked out a .9% same store sales increase during the holidays – the first such increase since 2001! Yeah!
Let’s see… Let’s read a bit more.. what else did they say? "Competitor’s are opening more stores and spending on promotions and marketing – which Sears Holdings isn’t" … Oh, let’s see, these results don’t compare today with combined results from a year ago… Revenues of the combined companies actually declined by 4.5%… well, well… For the year, same store sales at Sears fell 8.4%, while KMart same store sales dropped 1.2%…. oh, the solution — the management is "adjusting its apparel strategy to better meet customer demand" and therefore "expects declines will moderate"…
Those positive headlines, as they said in Oklahoma when I was young, is putting lipstick on a pig.
Sears is still Defending and Extending two completely broken Success Formulas. And the financial heads that put this deal together still haven’t internally Disrupted the operating practices, nor have they created effective White Space to develop a new, more competitive, solution (see previous BLOG on the failure of Sears Essentials). Without those two actions, these results are just financial reporting shenanigans – and those who invest in them deserve the risk they take.
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