Sears looks to private brands, loyalty program as it heads to Q2

Sears may have had a challenging start in 2017, but the embattled retailer saw a glimmer of hope following first-quarter financial results.

Chairman and CEO Eddie Lampert said in a statement that the company remains determined to regain a solid financial footing, but recognizes that efforts to improve operational performance must be accelerated. The company’s same-store sales fell 12.4% at Sears and 11.2% at Kmart. Sears reported weakness in home appliances, apparel and lawn and garden items, while Kmart reported declines in grocery and household items, pharmacy, apparel and home. Revenue also dropped, but it wasn’t all grim news.

The retailer had its first quarterly profit since 2015, attributed in part to the sale of its Craftsman brand. Sears completed the sale of the private brand to Stanley Black & Decker for a net present value of more than $900 million in cash. The company received an initial upfront cash payment of $525 million, which was subject to closing cost and an adjustment for working capital.

Sears is also restructuring by consolidating leadership of retail operations for Sears and Kmart, and eliminating certain senior management roles. The company also conducted a comprehensive review of its value chain to identify broader opportunities for competitively priced products that drive cost savings. The company believes these measures contributed to a significant reduction in operating expenses and plans to take necessary steps to rationalize its cost base so it can offset continued revenue pressures in a difficult retail environment.

It’s a strategy the company hopes will allow it to become a more competitive, efficient and agile retailer.

Sears also plans to evaluate strategic options to unlock value from its Kenmore and DieHard private brands, as well as its Sears Home Services and Sears Auto Center businesses through partnerships, joint ventures or other means. Sears was named 2017 Partner of the Year by Energy Star, and received a sustained excellence award for its long-term commitment to protecting the environment through the achievements of its energy efficiency initiatives. Its Kenmore brand partnered with the Energy Star program to introduce new certified products across multiple categories in 2016, earning the brand numerous Best Buy designations from a leading consumer publication. Sears’ recently sold Craftsman brand also nabbed one gold and two bronze Edison awards for innovation earlier this month.

The company also reiterated plans to continue to work toward providing a more rewarding member experience to its Shop Your Way ecosystem. A key development in the last quarter was the official launch of its new Sears MasterCard with Shop Your Way, which was developed in partnership with Citi. The new MasterCard offers 5% back-end points on eligible purchases made at gas stations, 3% back-end points on eligible purchases at grocery stores and restaurants, 2% back-end points on eligible purchases made in Sears and Kmart and 1% back-end points on all other eligible purchases. The company plans to leverage the new credit card to bolster its Shop Your Way platform and make it more competitive, taking steps to grow membership via targeted marketing and member engagement initiatives.

 

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