Sears spinoff ‘refreshes’ Arkansas outlet locations in effort to regain footing

As part of a nationwide effort to bolster the once venerable Sears, Roebuck & Company name, a spin-off of the department store giant unveiled a so-called “refresh” and rebranding of five Arkansas locations this past weekend, company officials told Talk Business & Politics.

Sears Hometown and Outlet Stores, which Sears Holding Corp. sold off in October 2012 for $446 million for much-needed cash, announced plans earlier this week to unveil a new product assortment, redesigned merchandising, upgraded new fixtures & signage, and completed a comprehensive employee training program at outlet stores in Cabot, Conway, Heber Springs, Mountain View and West Memphis.

“With the new technology and our highly trained staff, we are able to offer an enhanced shopping experience that is unmatched by any other retailer,” said Chris Ellis, district manager of Sears Hometown Stores in Arkansas. “This entirely new shopping experience will allow customers to find the products they want and need, still at the lowest prices possible, in the most convenient way possible.”

In the new store design, appliances will occupy more than half of the sales floor and include more brands with an improved presentation. The redesigned Arkansas stores will also focus its appliances on top name brands such as Whirlpool, Maytag, KitchenAid, Samsung and Kenmore.

The new floor plans at the Arkansas outlet stores also include the ability to showcase complete kitchen packages through the addition of three kitchen vignettes. This allows stores to display an entire four-piece kitchen from multiple brands in a small amount of floor space, making it easier for customers to choose products, company officials said.

STRUGGLING WITH LOSSES, PANNED BY WALL STREET
Since spinning off Sears Hometown and Outlet Stores three years ago, both Sears Holding Corp. and its closely-aligned appliance and outlet operations have struggled to get their footing in the highly competitive retail, consumer goods and appliance environment. Both publicly-traded entities compete against a varied range of rivals from retailers Walmart and Target to home improvement and appliance operators like Home Depot and Lowes.

On Friday, the smaller Sears Outlet reported a third quarter operating loss of $7.5 million as the publicly-traded, Chicago-based warehouse and outlet retailer closed 53 of its 1,172 stores across all 50 states, Puerto Rico and Bermuda. Net sales in the third quarter decreased $18 million, or 3.2%, to $547.1 million compared to a year ago.

At the same time, same-store sales for the Sears spinoff decreased of 1.6% in the three-month period ended Oct. 31 and the company’s merchandise margin rate declined “due to an increasingly competitive promotional environment.”

“Thus far in 2015, we have taken steps to better align operating costs with recent performance and to improve the quality and speed of execution of our plans by restructuring the executive team and reducing overall payroll and benefits costs at our support center and in our field organization,” said Will Powell, company president and CEO.

Meanwhile, the third quarter performance of the larger Sears Holding was even worse as the department store and retail giant has gone nearly four years since it last recorded a profit. The department store giant, which also owns Kmart, recorded a huge net loss of $454 million on Thursday as third quarter sale fell a whopping 20% from $7.2 billion to $5.8 billion.

For the period ended Oct. 31, Kmart and Sears’ comparable store sales fell 7.5% and 9.6%, respectively, with more than half of the drop-off coming from declines in apparel and consumer electronics.

“We remain focused on restoring Sears Holdings to profitability by concentrating on our best stores, rewarding our best members and pursuing our best categories through innovative solutions to product and service offerings,” said hedge fund manager Edward Lampert, chairman and CEO of the department store chain headquartered in the Chicago suburb of Hoffman Estates, Ill.

The other publicly-traded piece of the Sears triumvirate includes New York City-based Seritage Growth Properties, the real estate investment trust (REIT) with a portfolio of 42 million square feet of building space across 49 states and Puerto Rico.

Seritage’s aging real estate holdings include 224 former Sears and Kmart properties that are leased back to the retailers. Sears also has joint ventures with mall giant Simon Property Group and two other commercial real estate operators to lease back former Sears department store locations to mall owners.

None of the publicly-traded Sears companies have yet to gain fans on Wall Street, where several top analysts have recently handed out “strong sell” recommendations to investors. Just a week ago, Fitch Ratings affirmed the long-term credit rating of Sears Holdings and its various subsidiaries at CC credit rating – the eighth lowest level of the Wall Street rating firm’s 10-point scale.

“Fitch expects Sears’ EBITDA to be in the negative $600 million range in 2015 and potentially worse in 2016,” the New York-based ratings firm said of Sears default level credit status. “Fitch expects a revenue decline of around 20% in 2015 due to estimated domestic comparable store sales of negative 10% and ongoing store closings.”

Meanwhile, Sears Hometown’s stock has dropped 45% for the year. Seritage, Sears’ vast REIT that holds many of the department store chain’s urban retail locations, closed last week at $34.96 on the New York Stock Exchange, down nine cents.

DIGITAL TOOLS
Besides the upgrades to the Arkansas stores during the all-important Christmas shopping season, the companywide Sears Hometown redesign includes a national marketing and advertising campaign and a rebranding of dozens of stores across the U.S. with the slogan, “American’s Appliance Experts.”

Company officials said its Arkansas retail associates are also undergoing a comprehensive training program and brand-specific selling certification that incorporates digital tablets to help customers find the best product for their needs at the best possible price.

With the tablet, associates and customers can review product features and benefits as well as various models from the entire online database of Sears products – all while browsing models around the sales floor. Among major retailers, the Arkansas Sears Hometown Stores are leading the way for the integration of tablets into the sales process, company officials said.