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How Bad Is Sears Holdings' Debt Problem?
Dec. 30, 2016

Sears lines up more credit from its CEO
Dec. 29, 2016

Charleston Town Center anchor Sears to close
Dec. 28, 2016

Why Sears hasn't survived so far vs. Amazon, but JCPenney has
Dec. 26, 2016

After 20 Straight Quarterly Losses, Sears Holdings Is All but Dead
Dec. 23, 2016

J.C. Penney test deeper dive into appliances
Dec. 22, 2016

The first retail bankruptcy of 2017 could be...
Dec. 21, 2016

Retailers and their customers benefit from a robust enterprise network
Dec. 21, 2016

Sears Holdings Corp Surges to All-Time Low, Is Now Worst Performer
Dec. 20, 2016

Five Reasons Social Retailing Will Explode in 2017
Dec. 20, 2016

Sears Transformed America. It Deserves to Die With Dignity.
Dec. 16, 2016

How Amazon's Transportation Plans Could Impact Retailers
Dec. 15, 2016

Sears' N.C. call center closure results in 325 layoffs
Dec. 15, 2016

Sears and me: A debt that's impossible to repay
Dec. 14, 2016

Sears -- The Demise Of A Battleship
Dec. 12, 2016

WE APOLOGIZE!
Dec. 10, 2016

Sears.com removes certain products with Hindu deity image
Dec. 10, 2016

Sears Holdings' Survival Plan Involves Closures, Layoffs, Selling Brands
Dec. 9, 2016

Things getting worse at Sears as Q3 loss widens on sliding sales
Dec. 8, 2016

Commentary: Sears like Titanic, 'looks set to sink'
Dec. 8, 2016

Sears: After $750M Quarterly Loss, The Longest Unofficial Liquidation Sale In History Continues
Dec. 8, 2016

Lowe's looks to evolve with customer
Dec. 7, 2016

Investors just got another sign that Sears is doomed
Dec. 6, 2016

How Macy's and Sears may invite other retailers to take their spaces
Dec. 4, 2016

Sears is on the brink of catastrophe as stores closures loom and top execs flee the company
Dec. 3, 2016

Eddie Lampert proposes to buy further stake in Sears Hometown
Dec. 2, 2016

Mnuchin, Tapped for Treasury Secretary, Leaves CIT and Sears Boards
Dec. 2, 2016

Sears' service department is in shambles, customers claim
Nov. 29, 2016

Meet the folks killing brick and mortar
Nov. 26, 2016

Amazon's price advantage narrows in key holiday category
Nov. 23, 2016

Study: Middle-market retailers optimistic — especially about digital sales
Nov. 22, 2016

For Sears, Holidays Are Last Chance to Stay Intact
Nov. 22, 2016

Walmart Q3 earnings top forecasts but sales lag; online accelerates
Nov. 17, 2016

Innovative store platform allows Macerich malls to host hard-to-find and new retailers
Nov. 16, 2016

Off-price giant soars in Q3; raises outlook
Nov. 15, 2016

Activehours and Sears Holdings Bring On-Demand Pay to Shop Your Way® Members, and Sears and Kmart Associates
Nov. 14, 2016

Department store names soar on post-election good cheer
Nov. 14, 2016

J.C. Penney sales slide in Q3; cuts annual forecast
Nov. 11, 2016

The Dam Is About to Burst for Sears Holdings
Nov. 11, 2016

Holiday sales should increase, but profits will stay flat
Nov. 11, 2016

Commentary: J.C. Penney turnaround still on track despite weak Q3
Nov. 11, 2016

Don't get too excited about that Macy's real estate deal
Nov. 11, 2016

New York & Co. names Sears, Ann Taylor vet to head up marketing and online
Nov. 8, 2016

1 Big Difference Between Sears and Macy's, Inc.
Nov. 6, 2016

Sears' Edward Lampert Is the Most Hated CEO in America
Nov. 6, 2016

'Down-ballot' issues that could impact retailers and other businesses
Nov. 3, 2016

Is Sears Hometown Worth More Dead Than Alive?
Nov. 2, 2016

Sears in Oak Brook, elsewhere to be downsized
Nov. 2, 2016

Sears executive jumps ship for party supplies specialty retailer
Nov. 2, 2016

Black Friday's Secret: Same Deals Each Year
Nov. 2, 2016

Macy's unloads five stores
Nov. 1, 2016

Lowe's appoints new customer experience leader
Oct. 28, 2016

Amazon Takes Hit as Costs Surge
Oct. 28, 2016

Sears sweetens reward for MasterCard 'Shop Your Way' shoppers
Oct. 26, 2016

Moody's: Slow supply chains are department stores' Achilles heel
Oct. 25, 2016

Target's next limited edition collection to feature another big name
Oct. 20, 2016

Sears CEO thinks the company won't go belly up just yet
Oct. 20, 2016

ShopperTrak: Black Friday to reign supreme; new date for Super Saturday
Oct. 19, 2016

Can Sears Holdings Get Anyone to Buy Craftsman Now?
Oct. 17, 2016

Macy's Flagship Store Debuts New Apple Hub
Oct. 14, 2016

Commentary on September Sales
Oct. 14, 2016

Sears Saga to Continue for Some Time, as Company Faces "No Urgency" to Close Stores
Oct. 14, 2016

Sears names new CFO
Oct. 14, 2016

Sears lawsuit alleges store sales to benefit CEO
Oct. 13, 2016

The startup side of Sears: Retail giant's WallyHome sensor company grows rapidly after acquisition
Oct. 11, 2016

Sears' loyalty members get 'holiday bonus'
Oct. 11, 2016

More Good News for Retailers
Oct. 10, 2016

Wal-Mart Makes Risky Bet It Can Loosen Amazon's Grip Online
Oct. 7, 2016

Sears Holdings backtracks as Craftsman sale excitement fades
Oct. 7, 2016

Ailing Sears is a test of CEO Lampert's survival instinct
Oct. 7, 2016

Sears Holdings Still The Walking Dead
Oct. 6, 2016

J.C. Penney uses 'experiences' to 'reimagine retail'
Oct. 5, 2016

Sears exec joins Claire's
Oct. 5, 2016

Will Anyone Buy Craftsman?
Oct. 5, 2016

Target Goes After Millennials With Small, Focused Stores
Oct. 4, 2016

Sears's Craftsman Said to Get Interest From Black & Decker
Oct. 4, 2016

7 once-dominant retailers that are now on the verge of bankruptcy
Oct. 3, 2016

Are Consumers Ready to Buy Furniture Online?
Oct. 3, 2016

A Big-Box Retailer Thrives In a Non-Big-Box World
Oct. 3, 2016

Teen apparel retailer ousts longtime CEO; taps Target exec as head merchant
Oct. 3, 2016

Will Nordstrom Win When Target & Sears Failed in Canada?
Sept. 30, 2016

Retailers: Look not upon 'Millennial' as a segment, but as a lifestyle
Sept. 30, 2016

Some retailers choose turkey over Thanksgiving shopping
Sept. 29, 2016

Sears, Claire's at high risk in Fitch study of retail failures
Sept. 28, 2016

Sears could kill hundreds of American shopping malls
Sept. 28, 2016

Sears hitches a ride with Uber to make rewards plan more attractive
Sept. 28, 2016

Lands' End CEO Is Pushed Out After 19 Months
Sept. 27, 2016

The End Is Quickly Approaching for Sears Holdings Corp.
Sept. 21, 2016

Target pilots 'Perks' rewards program
Sept. 18, 2016

Why Sears Store Closings Could Be Good News for Seritage
Sept. 16, 2016

Dillard's Inc versus Sears Holdings Corporation Head to Head Compare
Sept. 15, 2016

Mall owners to departing anchor chains: See ya!
Sept. 15, 2016

Toys 'R' Us continues to narrow loss
Sept. 14, 2016

2016 Holiday Preview: Calendar shifts could benefit retailers
Sept. 14, 2016

Walmart is patenting 'mini-robot' technology that could have terrifying implications for workers
Sept. 13, 2016

'It was a ghost town': Shoppers reveal why they've abandoned Sears and Kmart
Sept. 11, 2016

Bankruptcy again for Kmart?
Sept. 11, 2016

Hostage By Hanjin: How to keep inventory moving when supply stops
Sept. 9, 2016

Can Sears Holdings Capture Millennial Shoppers?
Sept. 9, 2016

Macy's store closures haven't spooked Gap, PVH
Sept. 7, 2016

Sears Earnings Release And More Red Flags
Sept. 6, 2016

Johnson Controls and Tyco are now one
Sept. 6, 2016

Retailers Seek U.S. Help With Shipping Crisis
Sept. 2, 2016

Eddie Lampert Has to Step in and Save Sears Holdings Corp...Again
Sept. 1, 2016

Obamacare rate hikes rattle consumers, could threaten enrollment
Sept. 1, 2016

Decision by Sears to Sell Paint Won't Help the Troubled Retailer
Sept. 1, 2016

Sears to Begin Selling Paint in Stores Again
Aug. 30, 2016

Sears workers reveal why the company is bleeding cash
Aug. 28, 2016

Sears Holdings Corp (SHLD) Can't Stop Wetting the Bed
Aug. 26, 2016

Lampert's Lifeline Renews Debate Over Whether Sears Can Be Saved
Aug. 26, 2016

Sears to borrow $300 million from CEO Lampert as losses mount
Aug. 25, 2016

Sears moves to elevate apparel offerings with fashion-forward, in-store concept
Aug. 23, 2016

Sears Holdings Corp (SHLD) Is Hanging By a Thread
Aug. 23, 2016

Average retiree will see Social Security benefit decrease
Aug. 22, 2016

Department Store Rally: Bucking The Retail Trend In A Short Lived Respite?
Aug. 19, 2016

J.C. Penney announces major initiatives; sees half a billion in profit by 2017
Aug. 17, 2016

Some Retailers Profit Despite the Slump
Aug. 17, 2016

Sears Holdings: Setup For A Decline After The Recent Run-Up
Aug. 16, 2016

Retailers Suffer as Services Take Off
Aug. 13, 2016

J.C. Penney narrows loss as rebuilding progresses
Aug. 12, 2016

Healthy Consumer Spending Is No Comfort for Retailers
Aug. 11, 2016

Why Shutters are Coming Down at Macy's
Aug. 11, 2016

Moody's: This retail sector is on fire — even in physical space
Aug. 9, 2016

Report: Wal-Mart in talks to buy Amazon competitor, Jet.com
Aug. 3, 2016

Office Depot closing 300 more stores; to expand 'store of future' pilot
Aug. 3, 2016

Report: Retailers re-focus on investing in physical stores
Aug. 2, 2016

J.C. Penney Escalates Appliance War Vs. Sears
July 28, 2016

Amazon crushes earnings expectations
July 28, 2016

What have malls done for people lately? Lots.
July 28, 2016

NRF ups retail sales forecast
July 26, 2016

Five Things Keeping Retailers Up at Night
July 25, 2016

Veteran Walmart executive dies at 82
July 25, 2016

Kmart workers believe all the stores are going to be imminently shut down
July 24, 2016

Amazon looks Southwest for latest facility
July 22, 2016

Passing of the baton at J.C. Penney
July 22, 2016

Sears Is Fighting a Losing Battle Against J.C. Penney in Appliances
July 20, 2016

Target's Expansion into Cities May Mean More Smaller Stores
July 19, 2016

J.C. Penney Gets Aggressive in Appliance War With Sears
July 18, 2016

June retail sales get warmer
July 15, 2016

Study: Top retail brands include repeat performers
July 14, 2016

Sears Finds a New Way to Rake in Cash
July 14, 2016

Mall Owners Push Out Department Stores
July 11, 2016

Here's the Latest Way Walmart Is Taking on Amazon and eBay
July 5, 2016

Check Out the Weird Ways Sears Holdings Wants to Save Itself
July 4, 2016

Sears Holdings: Long-Term Underinvestment Creates Many Problems
July 3, 2016

All-Day Breakfast Saved McDonald's. What Would Save Sears?
July 2, 2016

Why Hudson's Bay, Macy's and Nordstrom Will Thrive Even As Many Stores Lose Productivity
June 30, 2016

Sears House Brands Are Tackling the Smart Home
June 24, 2016

Macy's Chief to Exit Amid Store Struggles
June 24, 2016

Good news for J.C. Penney
June 24, 2016

Macy's, JCPenney, And Sears: Where's The Differentiation?
June 22, 2016

Sears takes its Kenmore brand out of the kitchen with new line of TVs
June 21, 2016

Art Griesbaum Jr., Former Sears, Roebuck Executive Dies
June 20, 2016

Meet Alfie, Sears' voice-controlled shopping assistant
June 17, 2016

Retailers Need to Close Some Doors to Survive
June 17, 2016

Gene Joseph Stroner, Obituary
June 17, 2016

Wal-Mart Stores sets bullish sales target
June 17, 2016

Sears' obsession with Wall Street is killing the retailer for good
June 16, 2016

America's dying shopping malls have billions in debt coming due
June 16, 2016

Retail Sales Not Strong for All
June 14, 2016

Sears to Sell DieHard Branded Tires
June 14, 2016

Would Sears Holdings Corp. Have Anything of Value if Eddie Lampert Sells These Brands?
June 11, 2016

Which home improvement retailer is most satisfactory?
June 7, 2016

Thomas D. Neal, Former Sears, Roebuck Executive Dies
June 4, 2016

Walmart taking on Amazon with same-day delivery pilot
June 3, 2016

Wal-Mart looks to future at annual meeting
June 3, 2016

Seven Customers Retailers Should Know
June 3, 2016

Eddie Lampert Makes A Move That Could Be The Death Knell For Sears
June 3, 2016

May same-store sales fizzle
June 2, 2016

Seritage Growth Properties: The Sears Problem Is Getting Worse
June 1, 2016

Study: The price may not be right for retailers
June 1, 2016

How E-commerce is eroding retail earnings
May 31, 2016

J.C. Penney's Move Into Appliances Will Hurt Best Buy and Sears
May 28, 2016

Target Shutting Down Curbside Pickup Pilot Program Effective June 15
May 27, 2016

Sears to explore options for Kenmore, Craftsman, DieHard brands
May 26, 2016

Sears' woes mount; exploring partnerships for key brands
May 26, 2016

Sears is still fighting a four-alarm fire
May 25, 2016

Stores Make a Comeback: Becoming a Hub for an Array of Customer Services
May 24, 2016

Innovative retail concept combines offline and online at the mall
May 20, 2016

The Target boycott has reached a boiling point -- and sales may suffer as a result
May 15, 2016

Guess what? JC Penney is now ahead of the curve
May 13, 2016

Sears has lost shareholders much of their investment
May 13, 2016

Mixed bag for Penney: Sales fall, but profit tops forecasts
May 13, 2016

Nordstrom joins retail bloodbath
May 12, 2016

Sears planning smaller-format appliance stores
May 12, 2016

Sears Launches Ninth Annual Heroes at Home Program, Renovating Homes of Military Families Across the U.S.
May 10, 2016

J.C. Penney moving forward with big new initiatives
May 9, 2016

Comparing J.C. Penney And Sears Holdings
May 9, 2016

Yes, J.C. Penney Stock Could Double by 2019
May 7, 2016

Three Ways Gen Z Will Change Retail
May 6, 2016

The 'least engaging' retailers are...
May 6, 2016

Guess what old tradition Walmart is bringing back?
May 5, 2016

Agilence Announces Partnership with Sears Holdings
May 5, 2016

Sears hopes to lure store shoppers with Mom, online pickup
May 3, 2016

Closing 800 Department Stores? It's A Start
May 2, 2016

How Competition in Consumer-Facing Technology Threatens the Stability of Retail
May 2, 2016

Sports Authority Closing All Stores
Apr. 30, 2016

Three technologies that will shape retail — and one that won't
Apr. 29, 2016

Amazon surges in Q1; devices, cloud services fuel revenue growth
Apr. 28, 2016

J.C. Penney expanding its 10-year relationship with Sephora
Apr. 26, 2016

Lowe's Poised As Successor To The Sears Appliance Empire
Apr. 26, 2016

Sears announces another closing — but this one doesn't involve stores
Apr. 26, 2016

A new report signals disaster for American shopping malls
Apr. 26, 2016

Department Stores Need to Cull Hundreds of Sites, Study Says
Apr. 25, 2016

Sears to Close 78 Stores This Summer
Apr. 22, 2016

Macy's unseats Kohl's as....
Apr. 20, 2016

Nordstrom to eliminate 300 to 400 jobs
Apr. 19, 2016

Zacks: Sears Holdings Corp Receives Average Recommendation of "Strong Sell" from Analysts
Apr. 18, 2016

Traffic To J.C. Penney Website Soars As Company Recovers
Apr. 17, 2016

Red Flags For Sears Pensioners
Apr. 14, 2016

IBM: Retailers not meeting customer experience expectations
Apr. 11, 2016

Sears Taps Bill Gates's Fortune in Latest Borrowing
Apr. 9, 2016

Sears expands omnichannel service; hopes more people will seek out 'expert'
Apr. 7, 2016

Study: What's keeping retail execs up at night?
Apr. 6, 2016

Sears Canada makes COO position permanent
Apr. 5, 2016

This Company Is Best Positioned to Capitalize on Sears' Demise
Apr. 1, 2016

What Home Depot is doing right that the competition isn't
Apr. 1, 2016

J.C. Penney taps athletic wear trend with new line
Apr. 1, 2016

Sears Holdings: Just the Facts — Our Apparel Business
Apr. 1, 2016

Retail CEOs are most worried about...
Mar. 31, 2016

Sears Holdings Corp. Is Sitting on a Ticking Time Bomb
Mar. 31, 2016

Supplier survey bodes well for retail sales
Mar. 30, 2016

Study: Younger shoppers want stores
Mar. 29, 2016

Sears CEO Lampert buys some of company's debt
Mar. 29, 2016

Sears Holdings names new chief administrative officer
Mar. 28, 2016

Kohl's, Sears, Home Depot earn Energy Star honors
Mar. 28, 2016

Ex-Walmart, Sears exec joins Conn's board
Mar. 25, 2016

Why Sears Holdings, Diamond Resorts International, and BP Prudhoe Bay Slumped Today
Mar. 21, 2016

Sears Holdings Corp Attempts to Protect Assets
Mar. 21, 2016

Sears Canada 2.0: The re-engineering begins
Mar. 18, 2016

Three ways that Sears falls short of Penney
Mar. 18, 2016

Sears Holdings: Retail Operations Somehow Get Worse
Mar. 16, 2016

Is crunch time coming at Sears?
Mar. 12, 2016

Another retailer with growing online sales and declining profits
Mar. 10, 2016

Men's Wearhouse parent company to close 250 stores
Mar. 10, 2016

The Blowback For REITs If Sears Holdings Goes Belly-Up
Mar. 9, 2016

Walmart elevates merchants, marketers and operators
Mar. 8, 2016

Why J.C. Penney's CEO Isn't Closing More Stores
Mar. 6, 2016

Fitch: Sears' Quest for Loan Will Not Bolster Liquidity, Suggests Selling Stores Instead
Mar. 4, 2016

Amazon Wants to Be Big Retailer on Campus
Mar. 4, 2016

Retail Employment Up
Mar. 4, 2016

Target Pares Products On Its Shelves
Mar. 3, 2016

Kmart to Sell Liquidated Goods: How Long Before Sears Merch Appears?
Mar. 2, 2016

Target Corporation Names Arthur Valdez Executive Vice President, Chief Supply Chain and Logistics Officer
Mar. 1, 2016

More good news for J.C. Penney
Feb. 29, 2016

J.C. Penney Sales Rise Despite Industry Woes
Feb. 27, 2016

Wal-Mart's Turnaround Could Lift Shares 30%
Feb. 27, 2016

CEO: Sears doesn't get same treatment as tech upstarts
Feb. 27, 2016

Sears CEO All Talk, No Action
Feb. 26, 2016

Holiday Slump Spurs Retail Rethink
Feb. 26, 2016

Sears cuts headquarters staff after dismal quarter
Feb. 26, 2016

Sears Posts $580 Million Fourth-Quarter Loss as Retailer Shrinks
Feb. 26, 2016

Sears grows its loss, adds board members
Feb. 25, 2016

What retailer has the best online customer experience?
Feb. 23, 2016

Sales, profit drop at Dillard's in Q4
Feb. 23, 2016

Anchors Aweigh: Malls Lose More Department Store Tenants
Feb. 23, 2016

Kmart eyes 'brag-worthy deals' from bankrupt retailers
Feb. 21, 2016

A new 'bad news' strategy
Feb. 19, 2016

Walmart just signaled a terrifying new reality for American retail
Feb. 18, 2016

Men Are Shopping Like Women
Feb. 16, 2016

J.C. Penney gives two execs more private label, supply chain responsibilities
Feb. 16, 2016

As sales sag, department stores look to evolve
Feb. 14, 2016

Lampert becomes majority owner of Sears Hometown, Outlet stores
Feb. 12, 2016

Kohl's Eliminates Three Senior Leadership Positions
Feb. 12, 2016

And the nation's favorite fashion retailer is...
Feb. 12, 2016

Sears implosion costs hotshot CEO a fortune
Feb. 9, 2016

Sears Holding Corp: SHLD Remains Doomed on Awful Q4 Numbers
Feb. 9, 2016

Sears stock hits 13-year low on bad holidays, revved-up store closings
Feb. 9, 2016

Burberry sues J.C. Penney for selling knockoff jackets, scarves
Feb. 9, 2016

Sears Holdings to accelerate closure of unprofitable stores
Feb. 9, 2016

Expansion Strategies for Today's Risk-Averse Retailers
Feb. 3, 2016

Sears Is Running Out of Time
Jan. 26, 2016

Sears Holdings: Next in Line to See Activist Involvement?
Jan. 25, 2016

13 Stores Where You're Spending Less Money
Jan. 18, 2016

Hedge Fund Calls for Macy's Inc. to Tap Into Its Real Estate
Jan. 17, 2016

Wal-Mart Retreats As Retail's Woes Deepen
Jan. 16, 2016

Reasons to Cheer Retail Sales
Jan. 15, 2016

Sears to close more stores
Jan. 14, 2016

Holiday scorecard Part II: more winners and losers revealed
Jan. 12, 2016

Kohl's Weighs Next Steps, as Woes Mount
Jan. 11, 2016

Holiday Sales Rise, but Not All Retailers Are Cheery
Jan. 8, 2016

Sears: Auto Centers Reveal Big Picture Problems For Company
Jan. 6, 2016

What Retirees Should Do As Interest Rates Inch Up
Jan. 3, 2016


 

Breaking News

2016

How Bad Is Sears Holdings' Debt Problem?
By Daniel B. Kline
The Motley Fool
December 30, 2016

The company has staved off death by borrowing money, but how long can that last?

News that Sears Holdings had lined up a new credit facility sent shares of the company dramatically higher Thursday, Dec. 29. The company closed on Dec. 28 at $8.18 and rallied on the news of the new line of available borrowing to close the next day at $9, a 10% gain. The stock gained on the idea that the company behind Sears and Kmart had bought itself a little time even if the money it now has access to will not cover its 2017 debt-servicing needs.

How bad off is Sears Holdings?

Sears Holdings has been bleeding red ink. The company posted a loss of $748 million in its fiscal third quarter this year, up from a $454 million loss in Q3 2015. In addition, revenue dropped by $721 million in Q3. Some of that comes from the chain having fewer Sears and Kmart stores open; having fewer locations did not boost the remaining ones. Instead, comparable-store sales suffered a 7.4% decline, accounting for $304 million of the revenue drop.

Those are bad numbers and there's no reason to expect the company to reverse those fortunes in Q4. CEO Eddie Lampert, whose hedge fund loaned the company $300 million in August, has pushed the idea that the company can stabilize by closing unprofitable stores and focusing on its Shop Your Way digital platform. But little has happened to show that Lampert's vision will come true. Sears has already lost $1.61 billion through three quarters in 2016, after losing $7.1 billion over the four previous fiscal years.

How much does Sears Holdings need?

The new credit line Sears has lined up guarantees the company $200 million in credit. That line can be expanded by up to another $300 million if the company and the lender agree. The money is coming from affiliates of ESL Investments Inc. -- a firm run by Lampert, which is providing funding through Citigroup.

This money, which is actually just a promise of funds designed to convince vendors to keep supplying the company, represents only a small piece of what Sears Holdings needs to make it through the year. The chain must raise about $1.5 billion to make it though 2017 comfortably, according to Moody's Analyst Christina Boni, as reported by Bloomberg.

"As Sears Holdings has consistently shown, we will take actions to adjust our capital structure, generate liquidity and manage our business to enable us to execute on our transformation while meeting all of our financial obligations," said CFO Jason Hollar in a press release. "This new standby letter of credit facility further demonstrates that Sears Holdings has numerous options to finance our business strategy."

What does Sears Holdings do next?

While its CFO says Sears has numerous options to fund its turnaround, in reality the best move to pay its debt would be to sell off all or some of its Kenmore, Craftsman, and DieHard brands as well as its Home Services installation and repair businesses.

It's hard to know exactly how much those brands and services are worth, but Craftsman alone could fetch as much as $2 billion, according to an October Bloomberg article. At that time, there were reportedly multiple companies interested, with bids expected in November. That never materialized, which suggests that either the offers were not high enough or none were made.

Still, it's likely that Sears could sell off those brands and raise the money it needs to keep going, at least in the short term. The problem, of course, is that raising capital via one-time asset sales does not change the company's fundamental issue -- it does not have enough customers.

Sears Holdings, as it currently stands, still has assets and it can forestall its death, but that end still seems to be just a question of time. Lampert has insisted that closing stores and building out Shop Your Way offers his company a future, but nothing in Sears' financials suggest that to be true.

Daniel Kline has no position in any stocks mentioned. He will miss Sears where he sometimes buys pants. The Motley Fool has no position in any of the stocks mentioned.

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Sears lines up more credit from its CEO
By Marianne Wilson
Chain Store Age
December 29, 2016

Sears Holdings Corp. has received another lifeline courtesy of CEO Eddie Lampert.

The struggling retailer said it has received loan, called a secured letter of credit, for $200 million, with an option to expand the amount to as much as $500 million with the consent of lenders.

Affiliates of ESL Investments Inc., the hedge firm run by Lampert, is providing the funding through Citigroup Inc. Over the past two years, Lampert and his hedge fund have loaned Sears more than $800 million — not including this most recent cash infusion — to keep the chain in operation, according to Business Insider.

"As Sears Holdings has consistently shown, we will take actions to adjust our capital structure, generate liquidity and manage our business to enable us to execute on our transformation while meeting all of our financial obligations," stated Jason M. Hollar, CFO, Sears Holdings. "This new standby letter of credit facility further demonstrates that Sears Holdings has numerous options to finance our business strategy."

Sears reported dismal results for its most recent quarter, with its loss widening to $748 million from $454 million in the year-ago period. Sales plunged 13% to $5 billion. Same-store sales fell 7.4%.

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Charleston Town Center anchor Sears to close
By Max Garland
Charleston-Gazette-Mail
December 28, 2016

The Sears anchor store at the Charleston Town Center will close in mid-April, Sears spokesman Howard Riefs confirmed Wednesday. The Sears Auto Center will also be closing as part of the move.

"We have been strategically and aggressively evaluating our store space and productivity, and will be accelerating the closing of unprofitable stores as we have previously announced," Riefs said in a statement.

Liquidation sales for the department store chain will begin Jan. 6. Sears opened at the Town Center in 1983, when the mall first opened, and serves nearly 100,000 customers annually, according to the Sears web page for that location.

Riefs said store associates that are eligible will receive severance and have the opportunity to apply for open positions at area Sears or Kmart stores.

Sears stores, which serve a variety of products including clothing, home appliances, tools and equipment, are struggling across the country, with total revenue for Sears Holdings falling 13 percent to $5.03 billion since the third quarter of last year, according to the company’s most recent financial report.

Sales at Sears stores dropped 10 percent. Sears Holdings also has significant debts including an unfunded pension and post-retirement obligation of $2.1 billion.

Sears announced earlier this month it would be closing 64 Kmart stores after closing nearly 80 Sears and Kmart stores in July. More than 750 leases on Sears and Kmart stores expire in the next five years.

Kmart has two locations in Charleston.

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Why Sears hasn't survived so far vs. Amazon, but JCPenney has
By Rachel Uranga
ocregister.com
December 26, 2016

Susan Romero remembers how she welled with pride when her family bought its first washer and dryer in 1968. At Sears, of course.

"My whole kitchen, my whole house was furnished by Sears," said Romero, 74, who has shopped at the retailer for 50 years. "I go to other stores, but I always come back here. It's always full of what I need." Once an essential part of life for American consumers like Romero, the 123-year-old icon for a graying generation is sinking.

"It's so sad," Romero said, looking across the deserted aisles at a Burbank store.

The year's end inspires holiday-shopping nostalgia for its loyal customers, but it brings mostly gloom for once-mighty Sears, including an adjusted loss of $333 million for the third quarter that landed as Black Friday sales were being tallied.

The Illinois-based retailer announced this year that it would shutter 76 stores across the country. It's also considering selling off its most popular and enduring brands: Kenmore, Craftsman and DieHard.

Sears isn't alone; most of the chain's traditional mall-anchor peers are struggling, too, their customers wooed to discounters, young-skewing specialty merchants and online titan Amazon.

Across the mall, however, 114-year-old competitor J.C. Penney has logged a surprising, against-the-wind comeback.

Casting aside the trendy designs and one-price-fits-all strategy of former CEO Ron Johnson, JCP appears to have reconnected with its midlevel market after years in decline. Once at death's door, JCP is scrapping head-to-head with Sears for the admittedly shrinking midlevel, brick-and-mortar market with doorbusters and a strong connection between its websites and its mall stores.

It has even gambled by returning major appliances to the sales floor.

The company rushed to open up 500 new appliance showrooms by October, which it said helped raise sales 2 percent that month.

"We literally touched and rearranged one half of our stores to accomplish this reset," CEO Marvin Ellison told investors last month. "We felt it was important to enter this appliance business in a meaningful way going into key holiday selling periods."

The sales bump came on the heels of a three-year period that saw the chain close more than 80 stores.

Regardless of how they fare, some analysts see the fates of the two consumer stalwarts as tied, two legacy companies choosing divergent paths to an uncertain future.

"Sears and J.C. Penney have similar issues," said Ira Kalb, professor at USC Marshall School of Business. "The world of retailing has changed, and to date, neither has done a very good job of adjusting."

Sears' decline

Sears' first custom-built store in Glendale still has hints of brighter days.

A wide-rimmed stairwell leads up to showrooms built in 1935. The tall, old-fashioned, display-friendly windows that once wooed passers-by to peek inside have been covered up, and the aisles at the store were a ghost town during a weekday in late November.

"It's empty now," said Michael Morgan, a 65-year-old local historian.

"It used to be like Hollywood and Vine or Grand Central Station during Christmas time," said Morgan, who fondly recalls gathering there during Christmas in the 1950s, particularly the toy train that once ran along its roof.

Sears has been on a long free fall, closing hundreds of stores, firing thousands of employees and losing billions of dollars over the past decade.

Most analysts predict the company's demise and pin much of the blame on hedge-fund CEO Eddie Lampert, who as chairman of Kmart Holding Co. struck an $11 billion deal to create the Sears Holding Co. in 2004.

"The cultural identity of Sears was destroyed with the merger of Kmart," said Nick Vyas, head of USC's Center for Global Supply Chain Management and a former executive at Sears before Lampert took over. "It was an identity that the company had for 90-plus years.

"So, when it kicked in, it costs Sears customers," he said. "But you weren't talking about one time customers, you were talking about generations."

When billionaire investor Lampert took over the company, he thought he could turn around its sagging performance. He put hedge-fund managers in charge of the retail business and took a hands-on approach. He focused on slashing costs and moved away from Sears' emphasis on customer service.

But he failed. Sears has lost more than 90 percent of its value since 2007 and is mired in debt. To keep it above water, Lampert sold off its valuable real estate.

Fitch Ratings, one of the big three credit rating agencies, estimates Sears raised $4.7 billion from real estate transactions, but it still expects the company to burn through as much as $1.8 billion this year to keep operating.

"Sears used to be a cultural event," said Leon Nicholas, an analyst at Kantar Retail. "It was a place for the family to get together."

Brian Hanover, a Sears spokesman, repeated what has become Lampert's mantra, Sears Holdings "is committed to returning the company to profitability" and has a number of initiatives to increase revenues.

The brightest spot has been its Craftsman tools line, and the chain remains a leader in appliance sales, although J.C. Penney is attempting to chip into that market.

In May, Sears announced it would seek buyers for its Kenmore appliance and Craftsman tool brand, two of its most enduring products.

"It's a dire future for Sears on the horizon," Vyas said. "I am actually shocked they have survived this long."

JCP'S balancing act

J.C. Penney is expecting to turn a profit next year for the first time since 2010, in part because of Ellison, a former Home Depot executive.

Ellison, 56, took the helm in 2015 and focused the Texas-based company on presentation at the store, supply-chain efficiency and appeals to its frugal base.

The move was largely a reversal of the strategy forged by former CEO Johnson, who brought in upscale designers and distanced the company from its deep-discount culture.

Under Johnson, JCP eschewed its heavily marketed sales and loyalty perks for JCP credit-card customers. The change cost the company billions of dollars and nearly sunk it.

On a recent weekday, a new era was clear. Piped-in salsa music filled the young men's section at the Glendale Galleria store, Christmas-themed icicles hung from the ceiling and a group of teenagers rummaged through discounted Levi's jeans.

Upstairs, a modest appliance section attracted shoppers.

Ellison said last month, "We are well-positioned to drive further growth and profitability, win market share and increase our top line while remaining fiscally disciplined."

He has put a focus on the store's home section, expanded the Sephora makeup department and this year opened a new JCPenney in San Bernardino.

Lugging several J.C. Penney bags filled with shoes and jackets for her teenage son, Rose Flores, a 57-year-old from Downey, said her family has been coming to the store for generations.

"They have a whole floor of clothes," she beamed, adding that she got a 25 percent discount through her credit card.

"J.C. Penney is going to get back to its roots," Rajiv Lal, a Harvard professor and co-author of Retail Revolution: Will Your Brick and Mortar Store Survive? "But I don't know that they are as compelling as they used to be."

Unlike Sears, J.C. Penney is heavily focused on apparel. The company recently dusted off an old marketing model, offering deals for consumers to get their "Penney's worth." During the holiday shopping season, the company again has offered deep discounts, including offering early-morning Black Friday coupons worth up to $100 and a program matching lower prices at competitors' stores. The move toward thrifty consumers shopping for the family has helped lift its profile.

J.C. Penney's "stores within the store" – salons, the home section, jewelry and the Sephora makeup brand, most added to stores a decade ago – have all driven sales, not the chain's long-standing clothing lines.

Revenue, however, still pales compared with prerecession levels. And, after its early-year sales surge, the company recently reported weaker than expected third-quarter earnings.

"We believe CEO Marvin Ellison has JCP on the right path," analysts at New York-based Cowen and Co. concluded in their latest report. "However, it is still early in the long-term turnaround." The consumer shift away from department stores and the company's debt had them skeptical about JCP's future, as it does others

What next?

Even if the legacy companies enjoy a short-term holiday boost, Lal is skeptical the strategy will work for either store in the long run.

"There is too much similarity in department stores," Lal said. "They have lost their luster in the concept of today's retail market."

The old-school department-store model is under assault by specialty retailers such as fashion-forward H&M and Zara. At the same time, it is also being squeezed on the low and high end from such retailers as Nordstrom and Target.

More department stores could close in the coming years. An April report by real-estate research firm Green Street Advisors found that per-square-foot sales dropped 24 percent at mall department stores. To become profitable, the firm estimates that Sears would have to shed 300 stores and J.C. Penney 320.

And in more than 400 mall settings, Sears and JCP are direct competitors for a declining number of shoppers.

"In some ways, this is a generational thing," said Leon Nicholas, an analyst at Kantar Retail. "(Department stores) failed to respond to all the specialties."

And, as younger shoppers snag deals on their phones and frequent edgier specialty shops, many older shoppers would love to see the spark rekindled for their longtime retail favorites.

Especially this time of year.

"There is still a twinkle in my heart when I pass the building, because it's Sears," said historian Morgan. "And I always wish they would put the train back on top.

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After 20 Straight Quarterly Losses, Sears Holdings Is All but Dead
By Rich Duprey
The Motley Fool
December 23, 2016

Life is quickly leaving the body of this once venerable retailer.

After suffering its 20th consecutive quarterly decline, it's clear Sears Holdings is a zombie retailer that is dead but just doesn't know it yet. Because it does still have a relatively valuable real estate portfolio, it may be able to continue shambling along for some time, but it's clear to everyone except CEO Eddie Lampert that there is no hope that it will come back to life.

One foot in the grave

Sears' third-quarter earnings report was about as bad as you'd expect it to be. Revenue fell 12.5% to $5 billion as fewer Sears and Kmart stores are in operation, coupled with yet another quarter of falling same-store sales, widened losses to $748 million from $454 million last year. Although Lampert has tried to transform the retailer into a smaller, leaner, more digitally savvy business, it comes too late, and he probably brought too little dry powder to the battle to make a successful change.

Bankruptcy could be on the cards for Sears, both ratings agencies Fitch Ratings and Moody's have said they foresee Sears going out of business. And January is one of the most popular months for declaring bankruptcy, as companies are often flush with cash from the holiday season. However, with valuable assets such as Kenmore, Craftsman, and DieHard still in its portfolio, and a bevy of real estate it can still sell off, it's likely Sears will continue to exist for a while among the walking dead.

Ashes to ashes

Lampert, though, sounds as if he's still in the first stage of grief: denial. In the quarterly earnings announcement, the hedge-fund operator says he remains "fully committed to restoring profitability" to Sears and details actions such as closing retail locations, reducing square footage in stores it still operates, and no longer investing in categories that underperform for the company. Still under consideration are the sale, spinoff, or some other strategic arrangement with Kenmore, Craftsman, and DieHard (KCD) as well as Sears Home Services, and the real estate it still owns.

The problem is, all those actions will only serve to finance the retailer's day-to-day operations. It really has no cash left -- it reported just $258 million in the bank this quarter, down sharply from the summer of 2015, when it had more than $1.8 billion. Its access to financing is limited as well, and it needs to repeatedly turn to Lampert to keep it going, as it did in the second quarter, when he injected $300 million in short-term funding.

That move may have also been an effort to keep suppliers from bolting, as they've threatened to do on several occasions. The move was unsuccessful. Toymaker JAKKS Pacific said it stopped shipping inventory to a major retailer experiencing financial difficulties, which was widely read as being Sears, and Business Insider reported that a half-dozen of its clients have "significantly" reduced their shipments to Sears because they fear it is going bankrupt -- and one has halted shipments altogether.

That may be one of the reasons Sears Hometown & Outlet Stores suffered its own collapse, as revenues fell 10% on a 6% decline in comparable sales. In particular, it said apparel sales plunged 49% because of "the continuing impact of significantly reduced inventory availability from Sears Holdings, our sole source for this category." If Sears Holdings is having trouble getting inventory from its suppliers, it stands to reason it's going to be unable to supply anyone else.

Resurrecting the dead

Yet Lampert has proposed taking a bigger stake in Sears Hometown in exchange for having the retailer sell more KCD products in its stores. While making the products and appliances available to more consumers is a good idea, using Sears Hometown as the channel for that isn't likely to be a viable one, since consumers who are shopping at the Hometown stores are also probably shopping at Sears. It's not unreasonable to assume that they have the same customer base and the customers already made the decision not to buy.

It's clear there is just no way this story ends well for Sears. It faces falling sales, growing losses, a heavy pension burden, and a shrinking asset base that's losing value daily. That real estate, for example, might not be as valuable as believed, as retailers across the industry shrink their footprint.

Given enough time, the decay taking hold of Sears Holdings will one day soon cause it to succumb, unable to rise from the grave once more...

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J.C. Penney test deeper dive into appliances
By Maria Halkias
Chain Store Age
December 22, 2016

J.C. Penney is testing a category more typically associated with Home Depot or Lowe's than a department store: heating, ventilation and air-conditioning systems.

According to a report by Dallas Morning News, the test is being done in partnership with Trane, an HVAC company, and includes a display of the HVAC service near the major appliances at a few locations.

The move follows Penney's launch of an expanded appliance department in 500 of its stores this year. The initiative was spearheaded by CEO Marvin Ellison, who joined Penney from Home Depot.

A display for Trane at Penney's Collin Creek Mall store in Plano says the HVAC service is coming soon. It's located next to major appliances. Penney completed the rollout of kitchen and laundry appliance departments in 500 stores in October.

Other Penney stores are part of the HVAC test, but the company wouldn't say how many.

It's a "small number of stores,' said Penney spokeswoman Sarah Holland. "We're always exploring new ideas and partnerships that will entice customers to shop and spend more at J.C. Penney."

Trane is mostly sold to consumers by local heating and air conditioning distributors. Home Depot sells major brands including Carrier and Lennox.

Chief executive officer Marvin Ellison was at Home Depot before he came to Penney. A big focus of Ellison's has been to find ways to boost sales in home, which lost the most revenue during an attempt to reinvent the department store by former CEO Ron Johnson.

Besides bringing in refrigerators and washing machines, Ellison also has devoted more space to window coverings, a business that Penney had once dominated for years.

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The first retail bankruptcy of 2017 could be...
By Marianne Wilson
Chain Store Age
December 21, 2016

Limited Stores LLC is planning to file for Chapter 11 bankruptcy protection within weeks, Bloomberg reported, and will most likely liquidate its business.

The news comes not too long after the departure of two top executives from Limited, which operates about 240 stores nationwide. Diane Ellis stepped down as CEO in the fall to become the chief executive of Chicos FAS Inc. John Buell, Limited CFO was named interim CEO in her absence. But he left in December to become CFO at apparel retailer Altar'd State.

It's been a rough year for apparel retailers, particularly those that target younger consumers. Pacific Sun, Aeropostale, and American Apparel all filed Chapter 11 this year.

Also, earlier this month Limited started laying off employees at its headquarters in New Albany, Ohio.

Limited was spun off by L Brands Inc. in 2007 in a leveraged buyout by private-equity firm Sun Capital Partners Inc.

According to the Bloomberg report, The Limited will try to emerge as a going concern after bankruptcy.

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Retailers and their customers benefit from a robust enterprise network
By Regan Yeldell
Chain Store Age
December 21, 2016

Holiday shopping is no longer what it used to be.

The rise of online shopping and mobile has transformed the way in which consumers purchase gifts. It is no longer black and white for retailers either, as cutting-edge platform and technology adoption is a pre-requisite in order to remain competitive. And all factors are causing new challenges related to managing and supporting back-office and customer-facing systems, as well as meeting evolving customer expectations.

Although forecasting and data analysis helps to lessen the shock-factor of supply and demand fluctuations during the holidays, retailers can still run into trouble if they aren't careful. For example, many retailers were not prepared for the rapid shift to e-commerce sales circa 2004. Three years later, websites suffered with a dramatic increase in online traffic. In 2013, online spending grew an additional 14% from the previous year.

While technology has advanced, online retailers have also been combatting problems, such as too little inventory in warehouses but excess inventory on brick-and-mortar store shelves for more than a decade. One way retailers can mitigate risk this holiday season is to learn from the past and adopt a secure enterprise network.

Retailers that build the right digital network foundation are poised to be winners this year and next. Despite the RetailNext forecast predicting a 5% decline in sales at brick-and-mortar stores in December 2016, the truth is we don't know for certain how the rest of December will unfold, and it is no surprise that small shifts in consumer behavior can effect retailers a great deal.

At year's end, retailers will reflect on their overall preparedness during the 2016 holiday shopping season and strategize for 2017. As the chasm between online and in-store buying behavior grows, a strong network can deliver connectivity, efficiency and communication across the supply chain:

Connectivity: The coordination of mobile applications, point-of-sale (POS) systems and inventory management programs across multiple locations through a connected network is key. As brick-and-mortar stores grow in number and work to re-engage their consumer base, a smart working network is essential to coordinating the information that runs between each location to headquarters and the cloud. With real-time access to essential business data, including customer preferences and purchasing history, retailers analyzing big data can better accommodate even the most demanding 'Ebenezer Scrooge-like' customer.

Efficiency: Waiting in a long line, not receiving a gift on time, or worse, discovering that it was backordered until after Christmas can be very frustrating. A high performance network can scale, increase productivity and guarantee service uptimes during the busiest, most stressful (nay, most wonderful) time of the year. Brick-and-mortar stores get crowded during the holidays, and websites are more likely to crash with the influx of last-minute holiday shoppers. With a fine-tuned network infrastructure and managed services, retailers can focus more on customer service and less on technology issues.

Communication: There are many moving parts and teams involved in a solid holiday retail strategy: employees, customers and suppliers should (in theory) be able to communicate effectively during this busy time. If an item is out of stock online, customers have the expectation that they will be provided options to have items either shipped to their residence, or delivered to their local store for pick-up. Access to data through a reliable network ensures that inventory and information are both delivered quickly.

Having a solid distributed enterprise networking strategy is an essential ingredient for success during today's digital holiday season. Connecting all locations and employees to real-time information, systems and applications is key.

Whether serving customers online or in-store, retailers are able to manage "real-time inventory," secure POS systems and create a happy holiday shopping experience. With a reliable, secure enterprise network, retailers can ensure that they make it through the holidays joyfully and prosperously while providing top-notch customer service.

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Sears Holdings Corp Surges to All-Time Low, Is Now Worst Performer
By Ruchi Gupta
Press Telegraph
December 20, 2016

The stock of Sears Holdings Corp (NASDAQ:SHLD) reached all time low today, Dec, 20 and still has $9.26 target or 8.00% below today’s $10.07 share price. This indicates more downside for the $1.04 billion company.

This technical setup was reported by Barchart.com. If the $9.26 PT is reached, the company will be worth $83.20 million less.

Trading stocks at an all time low is not easy. Stock at an all time low usually experience even more downside due to very negative fundament. Even thought the pullback rate is high, shorting is not an easy job because the risk of being wrong is big and the risk-reward ratio is always worse than if trading lon only.

The stock increased 0.40% or $0.04 during the last trading session, hitting $10.07. About 1.08M shares traded hands or 20.29% up from the average. Sears Holdings Corp has declined 11.32% since May 17, 2016 and is downtrending. It has underperformed by 21.84% the S&P500.

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Five Reasons Social Retailing Will Explode in 2017
By Benjamin Bourinat
Chain Store Age
December 20, 2016

For a long time, social wasn't a closed-loop system. But with the shift of e-commerce to mobile-first, brands can now use the data and features of social media to create hyper-personalized connections that get users to buy. And as a result, retailers can better track in-channel purchases, as well as multi-touch attribution.

Yet, the failure of aggressively promotional formats, from 'Buy Now' buttons and pins to creepy, Big Brother-ish ads is a clear indication brands need to deliver content more contextually so users want to act on it.

Urged by conversion — the only metric that truly matters — five emerging trends will support the impact of social retailing on the bottom line:

1. Social as a shopping cart: People are no longer just browsing on social, they're shopping — cart shopping. Whether it's on Pinterest, Facebook or even Google, social users can find, categorize and save multiple items they can buy at their convenience. Until the users complete their purchase, retailers have the opportunity to grow these shopping lists by suggesting additional products that are matching behaviors and interests.

The proliferation of 'social carts' means more product bundling in the future and platforms like Facebook are already testing out formats that feature multiple products in a single ad, triggering content based on real-time inventory and making it possible for retailers to intelligently sell more throughout the social journey.

2. Social as your personal shopper: People grow more comfortable and fluent with messaging as a form of transaction every day, and with increasingly sophisticated notifications that are context-aware, predictive chatbots will start to function as our personal shoppers. Not only do apps like Facebook Messenger and WeChat provide advanced, faster access to inventory, but they also have integrated seamless payment layers that drive people to spend and allow retailers to track and interpret sales trends.

And as with any personal shopper, chatbots leverage visual and conversational analytics to build knowledge over time about any particular consumer to provide greater personalization. Soon they will even be able to pick up on emotional cues, enhancing customer service and achieving a real value exchange.

3. Social as a store: Social media are not only rivaling the Amazons and eBays of the world — they're clearly mirroring the physical experience itself. And the way retailers merchandise products on social will favor the immersive, to the intrusive. None of us likes to be pushed to choose a product we don't know, anywhere, and buyer uncertainty will be progressively resolved with virtual and augmented reality.

For instance, a social user who is shopping for home furnishings can project a virtual bed or lamp to see how the item would actually look and fit in their home. AR/VR will make it easier for people to visualize and explore their options. As for any brand experience, the success of social shopping will be determined by the discovery and customization factor.

4. Social as the offline bridge: With the advent of ads showing real-time pricing and product availability based on people's location, social will spur and help quantify brick-and-mortar visits and sales. Retailers can already match transaction data from their customer database or point-of-sale with Facebook or Pinterest campaigns.

Other social apps like Waze or Instagram are helping connect the path-to-purchase with nearby destination recommendations and search. A huge chunk of opportunities will arise from social "SEO," such as the bundling of shopping trips with friends through Snapchat and Vurb.

Likewise, 'snapcodes' and encrypted pieces of content will have people scan and redeem discounts and giveaways in-store. Furthermore, physical rewards in return for tagged social interaction will not only increase footfall but also UGC, amplifying brand messages. And once in-store, people will continue to reference what they've seen on social, pulling up saved images and pages while they shop.

5. Social as the universal data: Social that sparks intent isn't new. Social that helps map out and act on the physical journey is a game changer. Take Foursquare for instance. It aggregates location data from Snapchat, Uber, WeChat, Pinterest, Twitter, and even Apple, and can help retailers see the different places their audiences stop by while shopping.

Similarly, image recognition helps brands identify and connect with close-by social users posting about their products, or competitors. The blooming value of crowd-sourced, social data, as it relates to location, time of the day, and passion points will give retailers the ability to truly have a 360-view of their audiences — and drive the entire omnichannel experience from social media.

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Sears Transformed America. It Deserves to Die With Dignity.
By Megan McArdle
Bloomberg View
December 16, 2016

Listening to a Sears earnings call in 2016 is like realizing that the twinkling light you're admiring in the night sky is from a star that died 50 years ago.

Sears Holdings Corp. lost $748 million last quarter amid falling sales, an even worse performance than the dismal losses of the period a year earlier. There is no obvious reason that the business might improve. And yet executives are still discussing how important its shopper loyalty program is "to the future and growth of the company," as if the company were going to have growth, and shoppers and a future.

We can argue about whether the current problems date back to the Great Recession or to the 2005 merger with Kmart, in which some bright strategist decided that the solution to the problems of two struggling retailers with badly dated business models was to lash them together and hope that somehow these two rotted timbers could hold each other up. But this is a distraction, because in fact, the seeds of this decline were planted decades ago, during the last time Sears needed to reinvent itself, in the aftermath of World War II.

Sears was the Wal-Mart of its era, that era being the 1890s to the 1930s. The company used economies of scale to become the comprehensive retailer to the large segment of the population that lived in small towns with few retail options. Then, as now, smaller local retailers might resent it, but the "wishbook," aka the Sears Roebuck catalog selling spices and plows and player pianos and seemingly everything else, could be found in almost every farmhouse in America.

Eventually, the firm moved into brick-and-mortar retail. World War II left the company in trouble. With inventories and cash low because of wartime shortages, Sears embarked on an audacious expansion plan, building new stores and investing heavily in the automobile suburbs that were springing up everywhere. This decision by Sears helped create the retail landscape that many of us remember from our childhood: the massive suburban shopping mall, anchored by a giant Sears store.

That Sears store might not have a plow, but it could sell you tires for your car, a refrigerator for your kitchen, and makeup for your 16-year-old daughter's first dance. It was an impressive act of reinvention, at the kind of crisis point that often drives previous titans of industry out of business.

But however brilliant this move was at the time, it has heavy costs now. Retailers have a lot of assets: brand, human talent and of course their physical inventory. But ultimately every major brick-and-mortar retailer's biggest asset is geography -- as the real estate brokers like to say, "location, location, location." Geography saved Sears, for a time, but now its biggest asset is an albatross.

The malls that Sears anchored for decades now seem to be slowly dying. They, like Sears itself, are suffering from online competition. Companies in this situation are often urged to find a new business model, but when your core asset is prime locations that are no longer so prime, that's hard advice to follow.

Not that Sears hasn't tried. In its most recent earnings release, the company presented cheerily arranged facts and figures that aimed to soften, but could not hide, the fact that the company has not turned a profit in years. During the earnings call, the chief financial officer, Jason Hollar, spoke almost lovingly of all the stores they were planning to close: "As we reduce our overall store base, we believe we will inevitably end up with stores that are profitable, operate at a small loss, or have a clear path to profitability."

This rosy forecast is, of course, eminently evitable. It could be evited pretty darn quick. Closing stores can be the path back to profitability for fundamentally sound businesses that expanded too quickly, or into the wrong areas. But it is precisely Sears's basic competitive strengths that have been badly impaired by the changing retail landscape, so there's no obvious profitable core that the company can shrink back to.

In the meantime, the company is still hemorrhaging cash as it waits for those leases to expire. Selling off remaining brands like Kenmore and Craftsman may temporarily staunch the bleeding in its cash flow, but that's not a trick the company can repeat very often, and it makes the underlying business even less valuable.

It's looking increasingly likely that Sears is going to lose the race to close stores before the cost of running them chokes the company to death -- or that if somehow it does manage to close stores faster than it loses money, it will eventually discover that the equilibrium number of Sears locations is zero.

It's fashionable to bash "dinosaurs" that can't evolve to survive, but I won't. Sears revolutionized American retail not once but twice, and made a lot of Americans immeasurably better off. But Sears built a great business for an America that no longer exists: eyes on the burgeoning suburbs, lives centered on cars, aesthetics relentlessly bourgeois. That business required a lot of investment in both business expertise and real estate that the company could not change, or shed, as fast as America changed around it. And there's no shame in that. Even the brightest stars eventually burn out.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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How Amazon's Transportation Plans Could Impact Retailers
By John Haber
Chain Store Age
December 15, 2016

The pressure is on for retailers to not only meet customer expectations, but to exceed them as differentiation in the retail industry becomes paramount. Amazon has raised the bar for expectations with offers such as same-day delivery and free shipping, as well as spread its influence to become one of the world's biggest retailers.

As the battlefield moves into logistics, retailers continue to eye Amazon warily as it builds its international network. They are constructing a massive fulfillment facility network that allows two-day delivery service as well as a same-day option. The company is also growing its cross-border and fulfillment services. The result? Amazon is becoming a global logistics provider and could potentially rival the likes of DHL, FedEx and UPS.

In the United States, Amazon is expanding its footprint with more than two dozen new fulfillment facilities in 2016 and linking these to its sortation spaces, delivery partners and its own nascent airfreight and ground capabilities. Combined, these capabilities allow Amazon to deliver goods to customers quicker and more efficiently. In addition, Fulfillment by Amazon (FBA) continues to gain traction with small-to-medium size businesses that are looking to take advantage of such perks as Amazon Prime, preferential placement on Amazon's website, and the outsourcing of fulfillment and shipping.

The situation in Europe is similar as Amazon introduces faster delivery times. While U.S. logistics providers FedEx and UPS have refused to publicly acknowledge that Amazon is competing on their home turf, DHL in Europe has noted that Amazon is indeed a threat and British Royal Mail has confirmed that Amazon is affecting their business.

In Munich, Germany, has Amazon has 240 delivery vans operated by six sub-contractors, and according to German business newspaper Handelsblatt, Amazon has taken about a third of DHL's business in Munich. DHL's CEO has stated that Amazon is both one of their largest customers as well as competitors.

Meanwhile, as Amazon gains ground in both the US and European markets, Asia has become more problematic with Amazon rethinking its strategy. In 2004, Amazon entered the Chinese market by adding Chinese e-tailer, Joyo.com. At the time of the acquisition, an Amazon spokesperson said of its Chinese strategy, "Amazon will use the same template for running the Chinese operation that it has applied in other regions, making sure that it respects local customs and regulations regarding the products it sells in the region."

This strategy soon proved difficult as it struggled to improve upon its approximate 2% domestic market share (Chinese e-commerce behemoth, Alibaba, has a projected an 80% share of the domestic Chinese market).

With its new airfreight capabilities, Amazon has shifted gears once again, launching its cross-border capabilities between the United States and China. As a result it has reduced delivery times for U.S. Amazon Prime members from an average of eight days to five days on items such as USB cables, smartphone screen protectors, cosmetics and other small, flat products. This makes Amazon's delivery of small, inexpensive items from China much faster than the two weeks to 30 days it can take using marketplaces owned by Alibaba Group Holding Ltd., EBay Inc. and Wish.com.

China isn't the only geographic region where Amazon is looking to gain. It is rumored that the company will be expanding into Southeast Asia in early 2017 and will compete head-to-head with Alibaba for dominance in this growing market.

India is also a much sought after region for Amazon as it pumps billions of dollars into that domestic market. Competing with leading local online marketplaces Flipkart and Snapdeal, Amazon established a subsidiary, Amazon Transportation Services Private Limited, to deliver goods directly to customers and is taking market share from the two leading Indian online marketplaces.

As Amazon expands across the globe, enhancing its logistics capabilities as well as adding to the list of perks for its Amazon Prime members, retailers as well as logistics providers are taking note. Concede or fight back is the thought on many businesses' minds. Logistics providers are fighting back by improving their own networks while retailers are offering faster delivery services; but this begs the question, "at what cost is all of this being done?" For logistics providers such as DHL, FedEx and UPS, operations investments are a norm and are usually included in annual budgets. However, for retailers, the margins can be much tighter and the increasing logistics costs may be more difficult to recoup in retail sales.

Instead of trying to fight back, maybe it's time for retailers to consider Amazon as a logistics partner. Among the benefits are the ability for retailers to reduce costs if Amazon is managing both a retailers' fulfillment and transportation needs. Also, in terms of sourcing from Chinese suppliers, retailers can benefit by having their goods remain in one network without any handoffs to other logistics providers. In other words, Amazon is able to pick up goods from a Chinese supplier and either utilize its NVOCC license and arrange ocean freight, or use its airfreight capabilities to ship the goods straight into one of its US fulfillment facilities (and ultimately to the customers' front door or locker). It's not an easy decision, given Amazon's track record of cutting out the intermediary and going straight to the end customer.

Determining Amazon's impact on retailers will certainly vary from one retailer to the next. As with any strategic plan, one must do their homework and perform critical analytics. Welcome to the new retail industry dynamics.

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Sears' N.C. call center closure results in 325 layoffs
By Katie Arcieri
Triad Business Journal
December 15, 2016

Sears Holdings will begin laying off 325 workers at its call center facility at the Oak Hollow Mall in High Point in January 2017.

Sears had announced in October that it would close its services contract support call center, located at Oak Hollow Mall at 921 Eastchester Drive, by late February, but it had not specified how many people would be affected. Now a notice from the N.C. Commerce Department reveals the number of layoffs and that they will begin Jan. 2. The facility will permanently close in February, according to multiple media reports.

Sears will fire 89 telephone sales advisors, 142 total protection agreement advisors, 21 resolution specialists, 16 customer advocates, 13 data entry clerks and many other positions.

Sears had previously said eligible workers "will receive severance and have the opportunity to apply for open positions in the company."

Sears Holdings on Dec. 8 reported a net loss of $748 million for its third quarter 2016 compared to a net loss of $454 million for the 2015 year same quarter, according to the Business News Wire story.

Last year, Sears closed its Morrisville-based Home Services routing facility, impacting about 56 employees.

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Sears and me: A debt that's impossible to repay
By Douglas MacKinnon
Chicago Tribune
December 14, 2016

I was genuinely saddened to recently read that some financial experts believe Sears — a true icon in American retailing — is in real danger of going out of business.

I grew up in New England in abject poverty, with an older brother and a younger sister. By the time I was 17, we had — because of the massive dysfunction of our severely alcoholic parents — been evicted from 34 homes, many times ending up homeless.

Even when we were living in what passed for a home, we often had no electricity, no phone and, worst of all in the frigid New England winters, no heat.

But many times what we could count on in whatever town we found ourselves living in was a Sears. And slowly but surely whatever Sears was nearby became our home away from home.

At age 10, I was forced into becoming the unofficial head of our family. Soon after that, I remember leading my siblings from our dark and heatless home on a Saturday to the local Sears.

There, it is no exaggeration to say, we found heat, friendly smiles from the staff and a mental and physical lifeline.

Before we entered the store — this particular one being in Manchester, N.H. — I had coached my brother and sister to act like customers. If a staff member inquired about our parents — who were passed out at home — they were to say they were shopping in another section or in the restroom.

I thought I was being quite clever but, of course, now know that we did not fool anyone. The staff was not only observant, but kind.

That winter, every weekend and even a number of afternoons right after school, found the three of us at Sears in search of heat, light and distraction from the dysfunction at home.

Because we usually didn't have electricity, we never got to watch television at home. For that reason, we often could be found lingering in Sears' TV department watching the Saturday morning "Spiderman" show and other cartoons while desperately hoping not to get kicked out.

Again, little did I know at the time that the staff knew — based upon our tattered clothes and malnourished appearance — that we were children in desperate need of solace. More than that, they were determined to do something about it without making us feel ashamed or out of place.

As we nervously watched color television programs for the first time, various staff members would wander over and ask if we wanted to sit down and enjoy the program. Others would bring us sandwiches and the occasional soda, all the while insisting that there was no need to rush out of the store. "Stay as long as you want," they said.

Those small acts of kindness meant more to us than those Sears employees could have ever imagined. They gave three battered young minds a desperately needed break from family dysfunction. They gave us time and the space to partially recover.

Decades later, my wife and I stopped by a mall with a Sears. By reflex, I walked in and found the televisions. I told her my story.

To this day, if I find myself near a Sears, I head to the TVs. It's one recollection of my childhood that reminds me of true kindness and a sense of warmth.

Given some of the dire financial predictions now being reported about Sears, this Christmas season, I will do as much shopping there as possible.

It may not help, but in my heart, I believe I owe it to this great American retail store.

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Sears -- The Demise Of A Battleship
By Walter Loeb
Forbes
December 12, 2016

In 1984 I wrote a report about Sears Roebuck titled "The Battleship Has Turned Around." At the time there was a new chairman, Ed Telling. Many people had high hopes that he would right the company and provide a brighter future. As the new Sears spokesperson, Cheryl Tiegs, a stunning and well-known model, was going to help deliver more women shoppers. Since then, there have been a series of inept managers at the helm of Sears, all trying, with little success, to bring more customers into the stores.

The worst management I have seen running Sears is in place right now. CEO Ed Lampert was a very good portfolio manager at Goldman Sachs, but he is delusional thinking he can manage this company back to profitability. Currently, Mr. Lampert is wearing two hats: the chairman of Sears Holdings, plus the head of ESL Investment Company, which owns Sears Holding. That may actually be a conflict of interest, since he knows many facts about Sears long before other investors can act.

Eddie Lampert has promised that Sears will return to profitability. That looks like a long shot in light of the third quarter earnings report. The company recorded a net loss of $748 Million or $6.99 a share compared to a net loss of $454 Million or $4.26 a share last year. The year to date 2016 loss of $1.6 Billion, or $15.10 a share, already exceeds the full year 2015 loss of $1.1 Billion, or $10.59 a share.

Along the way, in order to stay afloat while sales and earnings have faltered, the company has sold some valuable properties, packaged some stores into a REIT (Seritage Growth Properties), and signed some leases with Irish retailer Primark. Now Mr. Lampert is considering the sale of its key iconic brands Die Hard, Kenmore, and Craftsman, as well as its home service business. This lame brained idea convinces me that soon nobody will have a reason to shop in Sears’ stores. These famous brands are exactly why many people still shop in Sears.

Along the way, in order to stay afloat while sales and earnings have faltered, the company has sold some valuable properties, packaged some stores into a REIT (Seritage Growth Properties), and signed some leases with Irish retailer Primark. Now Mr. Lampert is considering the sale of its key iconic brands Die Hard, Kenmore, and Craftsman, as well as its home service business. This lame brained idea convinces me that soon nobody will have a reason to shop in Sears’ stores. These famous brands are exactly why many people still shop in Sears.

According to management at the end of the third quarter there is about $174 million left under the $1.8 Billion credit facility. At the same time last year, the company had a comfortable $963 Million of available credit. Management indicated that other actions, including expense reduction and asset monetization, are in the works to generate liquidity.

It is sad that this company does not understand that the world has changed. Customers look for value and expect service. If one stands in a store and is ignored by sales associates and management, then one must assume the spirit of survival, and the pride of existence, have evaporated.

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WE APOLOGIZE!
By Ron Olbrysh, NARSE Chairman
December 10, 2016

Due to a digital printing problem, the graphic design on the first page of the winter issue of STRAIGHT TALK was not correctly printed on copies mailed to our subscribers.

Specifically, the Hour Glass graphic should have shown most of the sand in the lower portion of the Hour Glass with the caption "BANKRUPTCY."

You can view the correct Hour Glass graphic when you go to the Home Page on our website (www.narse.org) and click "Winter 2017 issue of STRAIGHT TALK" located in the upper right hand corner of the page.

We apologize for this error, and have instructed our printer to send the corrected first page to all of our subscribers.

Alumni Newsletter

On another matter, the Winter 2016 issue of Sears Holdings Alumni Newsletter stated:

"As more of our retirees have greater access to a computer and the Internet, and with printing costs continuing to increase, we are planning to transition the newsletter to our website online at www.searsholdingsalumni.com."

However, STRAIGHT TALK, which is a publication of NARSE, an independent retiree organization not associated with Sears Holdings, will continue to publish and print our newsletter twice a year. We are doing this to accommodate our numerous retirees who no longer have access to the Internet, or, because of age, no longer use the Internet.

We want to be responsive to all of our retirees, not just those who are computer savvy.

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Sears.com removes certain products with Hindu deity image
By Anna Marie Kukec
Daily Herald
December 10, 2016

Hoffman Estates-based Sears Holdings said Friday it will remove certain online products featuring the Hindu deity Ganesha, which a religious organization considered "highly inappropriate."

The Universal Society of Hinduism in Reno, Nevada, on Thursday sought an apology from Sears and the removal of bath mats, bedspreads and skateboards that featured the image of Ganesha.

The image was placed where people would be standing on it or sleeping on it, which is inappropriate, said Rajan Zed, president of the Universal Society of Hinduism, who has sought removal of similar products from other retailers.

"These items are sold by third-party sellers via the Sears Marketplace. Given the feedback we've received they are being removed," said Sears spokesman Brian Hanover.

Ganesha is highly revered in Hinduism and is meant to be portrayed in temples or at shrines in the home, Zed said. Worshipped as a god of wisdom and a remover of obstacles, Ganesha is invoked before the beginning of any major undertaking.

The group said some people saw the products on the Sears website and contacted the society, hoping to get the products removed. Zed said he contacted Sears on Thursday.

"Most of the time, these things are done just out of ignorance and are not done intentionally. But we have asked them to be removed," he said.

The Ganesha bath mat on Sears.com had two sizes and sold for $50.93 or $38.99. The Lord Ganesh bedcover sold for $14.58. The skateboards ranged from $121.99 to $188.59.

Similar products also are sold by other nationwide retailers, including Amazon, eBay, Wayfair and others. Zed said he contacted only Sears.

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Sears Holdings' Survival Plan Involves Closures, Layoffs, Selling Brands
By Daniel B. Kline
The Motley Fool
December 9, 2016

The company has lost nearly $9 billion over the last five years.

After another dismal quarter in which Sears Holdings lost considerably more money than it did a year ago, CEO Edward Lampert and CFO Jason Hollar insisted in the earnings release and subsequent conference call this week that the company -- which owns both Sears and Kmart -- has a path back to viability.

That would be easier to believe if there were actual signs of that happening. Instead, the retailer posted a loss of $748 million in its fiscal third quarter, up from a $454 million loss in Q3 2015. Revenue also fell by $721 million for the quarter, largely due to the company having fewer stores, but comparable-store sales suffered a 7.4% decline, accounting for $304 million of the drop.

The numbers are abysmal, but Lampert, whose hedge fund loaned the company $300 million in August, remains convinced that he can turn things around (or at least he's taking that position publicly).

That sounds a bit far-fetched for a company that has already lost $1.61 billion through three quarters in 2016, after losing $7.1 billion over the four previous fiscal years. Add in the fact that Sears Holdings has only $174 million available to borrow on its revolving credit facility and that it has $2.2 billion in long-term debt along with $618 million in short-term debt, and the CEO's optimism seems even more preposterous.

Sears Holdings has a turnaround plan

When you lose as much money as Sears Holdings has over the past few years, it's necessary to spend a significant amount of time in your earnings call and report convincing creditors, vendors, and shareholders that you have a future. Lampert did exactly that in his comments in the earnings press release.

"We remain fully committed to restoring profitability to our company and are taking actions such as reducing unprofitable stores, reducing space in stores we continue to operate ... reducing investments in underperforming categories and improving gross margin performance and managing expenses relative to sales in key categories. ... we understand the concerns related to our operating performance and are committed to transforming our company."

Hollar laid out more specific details during the company's earnings call. He reiterated Lampert's comments on closing stores, making others smaller, and spending less money across the board. He also explained how the company plans to meet its financial obligations. He cited the company's "portfolio of assets," along with "debt financing activities," and "expense reductions."

The first one means selling off Sears' house brands -- Craftsman, Diehard, Kenmore -- while finding tenants to lease closed stores. The second involves refinancing debt at better terms, and the third means cutting stores, people, and anything else that saves money.

"Our focus on generating positive EBITDA continues," the CFO said. "We do not intend to borrow money to fund continued operating losses, but rather to provide us with flexibility as we transition to an asset-light member-centric integrated retailer leveraging our Shop Your Way program."

What is Shop Your Way?

The company calls Shop Your Way "a free social shopping destination and rewards program offering millions of products, personalized services, and advice." That's a fancy way to say it's an app that lets people earn points that can be redeemed toward future purchases.

Hollar noted that "our Shop Your Way membership program engages tens of millions of members every year," and he said that the company has spent over $2 billion on it since its inception "in terms of points redeemed by members."

The CFO did not provide sales numbers for Shop Your Way, nor did the company in its earnings release. Instead, he cited a "large member base which is evidence of the potential of the platform and shows how important Shop Your Way is to the future and growth of the company."

What does the future look like?

Basically, based on what the CEO and CFO said, if Sears Holdings survives, it will be a shell of what it has been. The company will have fewer stores, likely many fewer, as well as fewer employees, and Sears will be missing its signature brands.

If everything Lampert and Hollar plan works out, the company will only operate its stores that currently make money and it will move much of its customer base to an as-yet-unproven app. To get there, it will likely be more or less stripped for parts in order to pay off its debts and even if that happens, there's no guarantee the brand survives or Shop Your Way -- which has potential but little in the way of actual results -- becomes a viable platform.

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Things getting worse at Sears as Q3 loss widens on sliding sales
By Marianne Wilson
Chain Store Age
December 8, 2016

Sears Holdings Corp.'s woes mounted in the third quarter, as the struggling retailer reported its 20th consecutive quarterly loss and another drop in same-store sales.

Although Sears CEO Eddie Lampert said Sears is "fully committed to restoring profitability," the retailer's disastrous quarterly performance caused some industry experts to say Sears' demise is now a matter of when, not if.

"In the near term, we expect Sears to stumble along and make further disposals to fund the business," said Neil Saunders, CEO of retail consulting firm Conlumino. "We also expect more store closures, not least because both Sears and Kmart have a bulk of leases expiring over the next five years. It is hard to put an exact timescale on Sears' demise. However, in our view, it is now firmly on a trajectory to failure."

Sears continues to maintain that it is the middle of a transformation to a membership-based retailer, reliant on a smaller base of stores and its Shop Your Way loyalty program.

"We remain fully committed to restoring profitability to our company, are taking actions such as reducing unprofitable stores, reducing space in stores we continue to operate (including through the Seritage lease arrangement), reducing investments in underperforming categories and improving gross margin performance and managing expenses relative to sales in key categories," Lampert stated.

For its fiscal third quarter, Sears reported a loss of $748 million, or $6.99 a share, compared with a loss of $454 million, or $4.26 a share, in the year-ago period. On an adjusted basis, the company posted a loss of $3.11 a share. Analysts had expected a loss of $4.06 a share on $4.95 billion in revenue.

Revenue fell to $5.0 billion from $5.8 billion last year, with the loss impacted by a decrease in stores in operation.

Same-store sales dropped 7.4%, with a 10% decrease at Sears stores and a 4.4% decrease at Kmart stores.

The company's gross margin fell to 19.1% from 21.9% in the year-ago period.

The company said it would continue to cut costs by seeking alternatives for its real estate portfolio, the Sears Home Services business and the unit housing Kenmore appliance, Craftsman tools and DieHard vehicle battery brands.

"We will continue to take actions to generate liquidity, adjust our overall capital structure, and manage our business while meeting all of our financial obligations," said Sears CFO Jason M. Hollar. "Actions may include additional expense reductions, financing transactions and asset monetization including exploring alternatives for our Kenmore, Craftsman and DieHard brands, our Sears Home Services business and our real estate portfolio."

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Commentary: Sears like Titanic, 'looks set to sink'
By Neil Saunders
Chain Store Age
December 8, 2016

In the movie Titanic there is a line where, realizing chaos is about to ensue, one character helpfully notes "it's starting to fall apart; we don't have much time". Such a sentiment could well be applied to Sears. The analogy with Titanic is also apt; not least because while Sears was once a titan of US retail, it now looks set to sink.

We do not make these claims lightly, but only on the back of the evidence available. Here are those facts:

First, the top line has been in decline for as long as anyone can remember. Comparable sales have been on the slide for just over eleven years. This quarter shows no sign of even the mildest of improvements: on the contrary, the trends have worsened with the weakest comparable performance so far this year.

Total revenues, which dipped by almost 14%, come off the back of a 20% decline in the prior year and a 13% decline in the year before that. Over an eleven year period Sears' sales have more than halved, dropping by almost $6.5 billion in dollar terms.

Second, contrary to the statement that Sears puts out every quarter — namely that it is committed to restoring the group to profitability — there is no evidence to suggest this is happening. While we agree that, in the light of changing shopping habits, it was right to downsize and reconfigure the business this should have resulted in a more streamlined and profitable entity. However, the opposite is true: the losses at Sears are widening.

This quarter it made a net loss of $748 million; in the same period last year it chalked up a loss of $454 million. Even at operating level the group is deeply in the red with a $624 loss this quarter and an eye watering $1.3 billion loss in the year to date.

Third, in order to fund these losses Sears is monetizing its assets — in other words it is selling off chunks of the business to fund day-to-day operations. Stores and real estate have been disposed of, and now it is starting to sell some of its brand assets. The problem with this approach is that the funds raised are not being used to develop or grow the firm, they are being used to prop up an ailing and failed business.

As the once largest retailer in the U.S., Sears admittedly has a very large cushion of assets to fall back on. However, each sale further weakens the balance sheet and leaves Sears much more at risk of becoming insolvent. Indeed, by our estimation the company's tangible net worth is now negative to the tune of several billion.

Fourth, if the company had a forward strategy to turn the business around then there may be some hope of a revival. However, this is severely lacking. Initiatives like the partnership with Citi to develop a Shop Your Way credit card and allowing riders on Uber to earn Shop Your Way points are all well and good, but Sears can't even get the basics right.

It is not hyperbole to say that most of its stores are a disgrace with no semblance of even the most basic shop keeping standards. Quite simply they are badly run, badly managed, and they are places that shoppers are abandoning in ever greater numbers. In our view, it is now too late to turn this around. The rot has well and truly set in and it is just not financially feasible to reverse it.

In the near term, we expect Sears to stumble along and make further disposals to fund the business. We also expect more store closures, not least because both Sears and Kmart have a bulk of leases expiring over the next five years. These closures, especially on the Sears Domestic side, will bring a glut of retail space onto the market and could, potentially, damage the prospects for some malls.

Others may fare better if they can replace the space, or at least part of the space, with more productive retailers. However, we see the former as the more likely outcome for most locations. More fortunately, Sears' demise will be to the benefit of other retailers like J.C. Penney — which is already stealing share with its new appliance business.

It is hard to put an exact timescale on Sears' demise. However, it is our view it is now firmly on a trajectory to failure. Sears may dispute this, just as in Titanic Mr. Ismay protested that "this ship can't sink." But as Mr. Andrews firmly reminded him: "I assure you, she can. And she will. It is a mathematical certainty."

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Sears: After $750M Quarterly Loss, The Longest Unofficial Liquidation Sale In History Continues
By Laura Heller
Forbes
December 8, 2016

The bleeding continues at Sears Holdings, which lost $748 million for the third quarter, it reported Thursday, compared to a loss of $454 million for the third quarter last year. Same store sales and gross margin also declined at Sears and Kmart stores.

Sears has been losing money for more than a decade and is burning through cash as it tries to find some footing.

And yet, the company insists a transformation is still in the works and points to new initiatives for its Shop Your Way rewards program, strategic partnerships and the sale of more assets. There's even an "awesome" new Kmart store.

In May, the retailer announced it was exploring opportunities for its proprietary brands including Kenmore, Craftsman and DieHard.

Sears will continue to sell assets in what has become the longest unofficial liquidation sale in history.

"We remain fully committed to restoring profitability to our company and are taking actions such as reducing unprofitable stores, reducing space in stores we continue to operate," said Sears Holdings Chairman and CEO, Eddie Lampert in a statement.

"While many observers have acknowledged the significant asset base of our company, we understand the concerns related to our operating performance and are committed to transforming our company through our Shop Your Way membership program and our integrated retail investments. At the same time, we will continue to explore options to recognize the inherent asset value in a manner that complements our transformation."

But many observers have also raised questions about Sears ability to survive in any form.

During a discussion Monday on CNBC's Power Lunch, there wasn't much positive to say about Sears. Store inventory is low (based on visits) and employees are demoralized as they witness more stores closed and categories exited.

The best thing Sears has going are the assets, which are being sold to fund operations.

One Power Lunch guest, Marcus Lemonis of CNBC's The Profit and chairman of Camping World, was careful not to accuse Sears' Lampert (as many have) of using the company as an ATM machine. But he does believe the only thing left for Sears is to liquidate.

Others that day, including FORBES contributor and former Sears executive Mark Cohen, accused current leadership of profiting from Sears downfall, Lemonis had a different option.

Lampert didn't acquire the majority shares of Sears and Kmart, negotiate their merger and create a holding company purely to profit from its dismantling. I share this belief that he truly believed the two would be stronger together and that his leadership would accomplish that.

But it's a belief that has long since been debunked.

"We will continue to take actions to generate liquidity, adjust our overall capital structure, and manage our business while meeting all of our financial obligations," said CFO Jason Hollar, in a pre-recorded call. "Actions may include additional expense reductions, financing transactions and asset monetization including exploring alternatives for our Kenmore, Craftsman and DieHard brands, our Sears Home Services business and our real estate portfolio." Sears Holdings long liquidation sale will continue.

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Lowe's looks to evolve with customer
By HBSDealer Staff
Chain Store Age
December 7, 2016

At analyst and investor conference, the retailer says it will expand its home improvement reach.

Lowe's CEO Robert Niblock kicked off his presentation at the chain's analyst and investor conference with the phrase: 'To help people love where they live.'

Niblock and other executives then proceeded to describe their plans to evolve as customers' expectations change. Niblock summed up the big picture: "We're focused on evolving our business to further drive trust and loyalty by empowering customers throughout their project journey,' he said.

As three key messages, the Lowe's CEO listed the following:

      • Expand home improvement reach;
      • Develop capabilities to anticipate and support customer needs; and
      • Generate profitable growth and substantial returns.

Serving more customers more efficiently will play a role in expanding its reach, Niblock said. Lowe's also described an effort to boost its pro business through improved inventory depth and an enhanced service offering, among other things.

The Mooresville, North Carolina-based home improvement giant told analysts it expects sales to increase 9% to 10% in the current fiscal year, including the 53rd week.

The 53rd week is expected to increase total sales by approximately 1.5%.

Comparable sales are expected to increase 3% to 4%, and the company expects to add approximately 40 home improvement and hardware stores.

Niblock pointed to a fundamentally solid macro-economic environment. He described GDP growth as healthy. And he sees home improvement spending benefiting from employment gains, rising incomes, home price appreciation and housing turnover.

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Investors just got another sign that Sears is doomed
By Hayley Peterson
Business Insider
December 6, 2016

Investors just got another sign that Sears Holdings' third quarter results could be particularly dismal.

Lands' End, a brand that's sold primarily in Sears' stores, reported a 14.3% drop in same-store sales in the third quarter.

The company blamed slowing shopper traffic at Sears for the drop.

"We ended the quarter with 219 shops at Sears and have continued to see weak traffic trends within malls and more specifically within our Sears locations," Lands' End Chief Financial Officer Jim Gooch said on an earnings call.

That's a troubling sign for Sears, which reports third-quarter earnings on Thursday, because Lands' End has tended to outperform Sears in same-store sales since it was spun off from the department-store chain in 2014.

Lands' End's same-store sales fell 9.3% last year, compared to an 11.1% drop at Sears stores.

In another ominous indicator for Sears, the company just lost two of its top executives last week.

And Sears Hometown and Outlet Stores, which was spun off from Sears Holdings in 2012 but continues to sell Sears merchandise, also reported dismal quarterly results.

The company said last week that net losses in the third quarter widened from $5.5 million last year to $93.2 million this year.

The losses were driven in part by a 49% drop in apparel sales. The company blamed Sears Holdings for the precipitous drop in apparel sales, citing the "continuing impact of significantly reduced inventory availability from Sears Holdings, our sole source for this category."

"We do not expect inventory availability to improve and, as a consequence, we plan to continue to de-emphasize, and eventually exit, this category," Sears Hometown and Outlets said.

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How Macy's and Sears may invite other retailers to take their spaces
By Suzette Parmley
phillynews.com
December 4, 2016

Empty nesters often downsize into space better suited to their new needs.

So do ailing department stores that sit empty due to new competition and the rise of digital shopping.

Last month, Macy's Inc. announced it was forming a strategic alliance with Brookfield Asset Management to increase the value of its real estate portfolio. That portfolio is getting trimmed as falling traffic means fewer bricks-and- mortar stores.

Macy's -- like Sears -- is suddenly taking on more the role of landlord than department store. Both are looking to profit by inviting other retailers - and even new-concept department stores - into their old spaces.

"It's part of a long-term shift as the department store struggles to be more relevant," said Eric Rothman, portfolio manager at CenterSquare Investment Management in Plymouth Meeting. "They need to close stores in unprofitable locations, and a big part of their value is the real estate. They can sell, re-lease, or reinvigorate these properties to free up capital" with the aid of real estate firms.

Soon after Christmas, the parent of Macy's and Bloomingdale's is expected to identify the 100 Macy's stores that will close in early 2017 -- on top of 38 that closed earlier this year -- including the Macy's in the venerable Suburban Square center in Ardmore.

The Macy's stores at Plymouth Meeting and Moorestown Malls were identified earlier this year by top brokers as being on the endangered list after they were tapped by mall owner Pennsylvania Real Estate Investment Trust (PREIT) to begin the search for replacement tenants.

A PREIT spokeswoman said last week that the situation remains fluid, and that one of the two Macy's could remain open.

Macy's knows that much of its inventory sits on prime real estate and that it has to better manage its remaining stores.

Enter Brookfield, which has experience in managing assets in retail, office, multifamily, industrial, and hospitality.

Under the partnership, Brookfield has exclusive rights for up to 24 months to create a "predevelopment plan" for each of about 50 Macy's stores. The retailer can add stores and land to the deal.

"Partnering with Brookfield "is the best way to unlock the potential of those assets," said Terry J. Lundgren, Macy's Inc. chairman and CEO.

Jeff Green, who consults retailers on long-term strategy, said: "Macy's has begun to realize that, like Sears, the value of their company is in their owned real estate." So Macy's needs to "unlock" some value "by either subleasing portions of their store, or, more likely, selling the box and dirt it sits on to real estate investors."

This raises two key questions, Green said: Is Macy's still a retail company? And what will be the ultimate size and use of its "box"?

He said executives could shrink traditional Macy's selling spaces, or chunk them off and open its off-price Backstage format somewhere in the four-wall box. At the Macy's store at Oxford Valley Mall in Langhorne, Backstage now sits in the rear of the store's upper level.

Sears, another faded mall anchor, has also been in paring mode for the last few years. In July 2015, it created New York-based Seritage Growth Properties, an independent real estate investment trust (REIT) to better manage its remaining assets.

Seritage's growth strategy is based on taking space away from Sears. The trust bailed out Sears Holdings by buying 266 Sears and Kmart stores for $2.7 billion. Seritage gets 78 percent of its rent from Sears Holdings, which occupies all but 11 of the stores.

Sears pays Seritage rent of $4.31 per square foot on average, which is far below market rate.

Seritage aims to capture higher rates by slicing up Sears anchor stores into smaller spaces and re-leasing them.

Third-party tenants within malls pay an average of $11.23 per square foot, and newly signed third-party tenants pay $18.95.

Seritage has the right to "recapture," at no cost, up to 50 percent of the space now occupied by Sears in 224 properties. And it can recapture all of the space at 21 locations for a termination fee.

The former Sears at King of Prussia is now a Primark and Dick's Sporting Goods, while the Sears Auto Center will reopen soon as the sports-bar chain Yard House and Outback Steakhouse restaurants.

Mall owners like PREIT and developers call this "repurposing" the space.

Forming the REIT "is consistent with our plans to focus on our best stores, reward our best members, and pursue our best categories," said Sears Holdings spokesman Howard Riefs.

Playing a big role in Macy's transition is PREIT, which has been "replacing many Sears department stores throughout its portfolio with popular retailers across various segments," PREIT CEO Joseph Coradino said.

He cited Viewmont Mall, north of Scranton, where an old Sears will soon be replaced by a Dick's Sporting Goods/Field & Stream combo store that's under construction.

In 2012, Coradino said, PREIT malls had 27 Sears stores, and today, the firm has 11. He said that he expects PREIT to get back up to five Macy's stores from throughout its portfolio among the 100 anticipated to close nationally, and that demand for their spaces was "robust."

"Certainly, there's the possibility of new-to-market department stores," he said. "There's off-price retailers -- of the luxury as well as more traditional variety -- popular, big-box, and large-format stores, grocers, as well as lifestyle, dining, and entertainment offerings."

The sky's the limit, but what these stores won't be is a Macy's or Sears.

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Sears is on the brink of catastrophe as stores closures loom and top execs flee the company
By Hayley Peterson
Business Insider
December 3, 2016

The company is shutting down dozens of Kmart stores this month and two of its highest-ranking executives left this week in the midst of the key holiday shopping season.

This comes following speculation among Sears and Kmart employees, suppliers, and several banks that the retailer will soon go bankrupt — something Sears has repeatedly dismissed.

Jeff Balagna, formerly Sears' executive vice president, left the company Wednesday, "in order to focus on his other business interests and pursue other career opportunities," Sears said in an SEC filing dated November 23.

Balagna did not respond to a request for comment. Sears declined to comment beyond what was stated in the filing.

Sears President and Chief Member Officer Joelle Maher also left the company this week, Sears confirmed to Business Insider. The company declined to give a reason for her departure.

The timing of the departures — so close to Sears' upcoming third-quarter earnings report and in the middle of the holiday season — is "highly unusual," according to Mark Cohen, director of retail studies at Columbia Business School and the former CEO of Sears Canada.

Cohen, who was fired from Sears in 2004, is an outspoken critic of the company and its CEO Eddie Lampert. He speculated that the timing of the departures could be indicative of something "catastrophic" in its upcoming earnings report.

The company declined to comment on Cohen's remarks.

Sears will report its third quarter earnings on Thursday, and Wall Street is predicting a 14% revenue decline to $5 billion compared to the same period last year. Sears' sales have dropped from $41 billion in 2000 to $15 billion in 2015. Kmart, which merged with Sears in 2005, has seen its sales plunge from $37 billion to $10 billion in the same period.

Hometown a canary?

If business at Sears Hometown and Outlet stores is any indication of Sears Holding's performance in the most recent quarter, investors have reason to be concerned.

Sears Hometown and Outlet Stores, which was spun off from Sears Holdings in 2012 but continues to sell Sears merchandise, said this week that net losses in the third quarter widened from $5.5 million last year to $93.2 million this year.

The losses were driven in part by a 49% drop in apparel sales. The company blamed Sears Holdings for the precipitous drop in apparel sales, citing the "continuing impact of significantly reduced inventory availability from Sears Holdings, our sole source for this category."

"We do not expect inventory availability to improve and, as a consequence, we plan to continue to de-emphasize, and eventually exit, this category," Sears Hometown and Outlets said.

Sears could be tamping down on inventory because "business is terrible," according to Cohen. "They don’t have the money for the inventory and they're keeping the markdowns in their own stores," he said.

Suppliers retreat

The reduced inventory could also be the result of lower shipments from suppliers.

As Business Insider reported last month, at least half a dozen suppliers have "significantly" reduced product shipments to Sears over fears of a bankruptcy, according to Marc Wagman, executive vice president of trade credit and political risk at the insurance brokerage firm Arthur J. Gallagher & Co., which represents the Sears suppliers to insurers.

The companies' concern over Sears' financial health has "really accelerated in the last 6 to 12 months," Wagman told Business Insider.

According to a recent report by The Wall Street Journal, toy maker Jakks Pacific Inc. recently suspended sales of its products to Kmart, which is owned by Sears Holdings, due to worries about the company's financial health.

Suppliers have grown concerned after warnings from Sears store employees and a number of banks.

Fitch Ratings in October identified Sears as one of seven major retailers at risk of going bankrupt in the next 12 to 24 months and eventually liquidating.

In September, Moody's analysts downgraded Sears' liquidity rating, saying Sears and Kmart don't have enough money — or access to money — to stay in business.

The Moody's analysts said Sears is bleeding cash and will have to continue to rely on outside funding or the sale of assets, such as real estate, to sustain operations. Kmart in particular is at risk of shutting down, the analysts said.

Sears CEO Lampert responded in early October, saying "there have never been any plans to close the Kmart format."

But there's no denying that Sears is running low on cash.

The company said in August that its cash and equivalents have fallen to $276 million from $1.8 billion one year ago.

As a result, the retailer was forced to accept $300 million in financing from Sears CEO Eddie Lampert's hedge fund, ESL Investments, in the second quarter. Bankruptcy filing season

Historically, retailers tend to declare bankruptcies in January when their cash holdings and financial payables tend to be at their highest levels of the year. That has led some analysts and industry experts to believe the company could file as soon as next month.

But many analysts believe the company will stay afloat for some time to come.

Lampert has many levers to pull to keep the retailer alive, including more cash infusions from his hedge fund as well as the sale of assets like real estate and it's appliance and tool brands including Kenmore, Craftsman, and DieHard.

And the company says that it's still trying to turnaround business at its stores.

"We are absolutely focused on restoring Sears Holdings to profitability," Sears spokesman Howard Riefs told Business Insider in November. "We are an asset-rich enterprise with multiple resources at our disposal."

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Eddie Lampert proposes to buy further stake in Sears Hometown
By Jessica Kuruthukulangara
Reuters
December 2, 2016

Once the biggest U.S. retailer, the company has struggled to compete against Amazon.com Inc. as well as big brick-and-mortar chains such as Wal-Mart Stores Inc., which offer much lower prices.

Sears Holdings has lost more than $8 billion over the last five years and posted a quarterly profit just once in the last four years.

As of Dec. 2 Lampert is the biggest shareholder with a 57.3 percent stake in Sears Hometown, which was spun off from Sears Holdings in 2012.

Struggling retailer Sears Holdings Corp said Chief Executive Eddie Lampert proposed to buy a bigger stake in Sears Hometown and Outlet Stores Inc. if Sears Hometown entered into a partnership related to certain brands and its home services unit.

Sears Holdings has been exploring alternatives — including partnerships for its Kenmore, Craftsman and Diehard brands, and its Sears Home Services unit since May — as it looks to reinvigorate its ailing business.

In a filing with regulators, Sears said Lampert met with representatives of Sears Hometown on Thursday to seek their participation in the process.

Once the biggest U.S. retailer, the company has struggled to compete against Amazon.com Inc., as well as big brick-and-mortar chains such as Wal-Mart Stores Inc., which offer much lower prices.

Sears Holdings has lost more than $8 billion over the last five years and posted a quarterly profit just once in the last four years.

As of Dec. 2 Lampert is the biggest shareholder with a 57.3 percent stake in Sears Hometown, which was spun off from Sears Holdings in 2012.

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Mnuchin, Tapped for Treasury Secretary, Leaves CIT and Sears Boards
By Dow Jones Business News
December 2, 2016

Steven Mnuchin, Donald Trump's choice to be the next Treasury secretary, left the Board of CIT Group Inc. and Sears Holdings Corp. on Friday.

Mr. Mnuchin has been a director at the regional bank since August 2015 and Sears since 2005.

He joined CIT after it bought OneWest Bank NA's parent company for $3.4 billion. At the end of 2008, in the midst of the financial crisis, Mr. Mnuchin persuaded the FDIC to sell IndyMac Bank for about $1.5 billion to him and other investors. He became chairman and chief executive of the bank that was eventually renamed OneWest.

As of February, Mr. Mnuchin owned 2.47 million shares of CIT, according to company filings.

Mr. Mnuchin has said that at Treasury he would focus on rolling back parts of the landmark 2010 Dodd-Frank financial overhaul law enacted in the wake of the financial crisis. Regional banks in particular have been lobbying for relief from Dodd-Frank.

After decades as a financier specializing in niche lending like leasing airplanes, CIT has been working to remake itself-and improve shareholder returns by divesting assets and becoming a more traditional bank.

CIT shares, up 4% this year, were off 0.6% at $41.05 in early trading.

Sears has struggled, alongside other retailers, with declining sales as shoppers have continued to shift spending online and away from brick-and-mortar stores. Sears has also been stumbling recently through efforts to transform itself in a bid to return to profitability, focusing on assortment, sourcing, pricing and inventory management practices—sometimes at the expense of sales.

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Sears' service department is in shambles, customers claim
By Hayley Peterson
Business insider
November 29, 2016

Hundreds of Sears customers are claiming that the company's home services division is in shambles.

The department, which is responsible for home repairs, is failing to fix faulty or broken appliances in a timely manner or at all, leaving many people without hot water, heat, or functioning refrigerators for several weeks at a time, according to hundreds of customer reviews written over the last six months.

On top of the long waits for repairs, customers have complained about myriad chronic problems, including service technicians not showing up for scheduled appointments or arriving many hours late, and then failing to fix or diagnose problems.

Many people have also said it's nearly impossible to reach a customer service representative over the phone, and that calls to the service phone line are frequently and inexplicably disconnected.

"Our members' satisfaction is a top priority, and we are constantly innovating to improve the customer service experience," said Larry Costello, a Sears spokesman. He said most customers rate Sears Home Services "very favorably, giving us an average of 4.4 out of 5 stars based on their experiences."

Customers like MaryEllen Humphrey of Lake Ariel, Pennsylvania, say otherwise.

Humphrey told Business Insider she spent nearly $8,000 on a boiler and warranty package from Sears last year that stopped working this month, leaving Humphrey without heat in her home.

This was a grave problem for Humphrey — she has two young children, one of whom has a health condition that makes it dangerous for him to be in cold environments.

"My son is deaf and has severe lung issues (bronchopulmonary dysplasia) from being very premature and on a ventilator for six weeks," Humphrey said. "He is very prone to respiratory infections. Being in a cold environment is bad for him. I had to leave the house and stay with my cousin."

After 47 phone calls in two weeks with Sears' customer service department, as well as recurring issues with a Sears repair technician who said he was unable to fix the boiler, Humphrey said she still had no heat.

She was ultimately forced to hire an outside repair technician to fix the boiler. He was able to diagnose and repair the issue within 10 minutes, according to Humphrey.

Humphrey said the entire process was infuriating and that she will never again buy anything from Sears. She has encouraged others to avoid the company as well.

Humphrey isn't alone. Hundreds of other customers have told similar stories of multiple mysteriously dropped phone calls with the service department, lengthy waits for repairs, and "incompetent" service technicians on the Sears Home Services Facebook page. Within the last month, there have been more than 80 negative reviews of Sears' repair business and zero positive reviews.

"Do not — I repeat — do not use Sears Home Services for any of your repairs," ‎Stefanie Strike Breuer‎ wrote on Facebook on November 17. "I had to wait a month to get my washing machine 'repaired' and now it is worse than before."

Heather Hammann LaMarca says she also had to wait a month for repairs to a washing machine.

"What a disappointment Sears has become," she wrote on November 24. "Horrible customer service and terrible consumer experience. ... I have been a loyal Sears appliance purchaser for years, not anymore."

Jesse Petersen of Prescott, Arizona, told Business Insider that her refrigerator stopped working on November 21, several hours after a visit from a Sears' technician who was supposed to fix a problem with the machine's ice maker.

She says she called Sears Home Services to report the issue and that the company said it couldn't send anyone to her house to diagnose the problem for at least another 10 days.

In the meantime, she has had to purchase a minifridge.

"Sears could care less," she said. "It's horrible."

Costello said the company understands it's "extremely frustrating when a major household appliance is not functioning properly, which is why we make it easy for customers to contact us through a variety of channels, including 24/7 call center, live chat, social media, and more."

He also said that it's not uncommon in the repair business to require a couple of technician visits to fix appliance problems.

"Our goal is to solve our customers' issues on the first home visit, but that's not always possible because appliances are complicated and unique replacement parts may need to be ordered, a problem not unique to Sears," he said.

The service division is a vital business for Sears, bringing in an estimated $3 billion in revenue annually. Sears' annual revenue in 2015 was $25.1 billion.

Sears is the No. 1 provider of appliance services in the US, with more than 6,000 service technicians making nearly 7 million services calls each year, according to Costello.

But facing depleting cash reserves and plunging sales at its Sears and Kmart stores, the company is looking to possibly sell or license its home services division.

It's also making some changes to the repair business that could be affecting customer service.

For example, in October Sears ended Saturday service calls, meaning technicians are now available for repairs only on business days.

Costello said this was in response to low demand for service on weekends.

"Saturdays are our least busy day ... while Mondays are our busiest day for in-bound calls to schedule service," he said. "Shifting our capacity to Monday through Friday ensures that our full support organization is available to assist members and technicians, produces more efficient schedules for our technicians, and enables us to run more service calls on Mondays for our members."

The company is also shutting down some customer service call centers in the US, including one in West Des Moines, Iowa, that employed more than 100 people, which closed in June, and one in High Point, North Carolina, that apparently employs more than 350 people. The North Carolina call center will close in February 2017.

Costello says this won't affect customer service, however.

"The work performed at the location will be transitioned to other Sears facilities between now and the anticipated closure date," Costello said. "The closure of this location is part of our strategy to optimize our call center operations to align with our forecasted call volumes."

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Meet the folks killing brick and mortar
By Brigid Sweeney
Crain's Chicago Business
November 26, 2016

This year, e-commerce is gearing up for what promises to be its biggest holiday season yet. "Online shopping is now so convenient—it offers the same deals, often earlier than in stores, with better selection and with free shipping—consumers have every reason to shop online and none to go to stores," says Sucharita Mulpuru, chief retail strategist at industry group ShopTalk. Here are some locals, in their own words, who said no thanks to stores on Black Friday—and almost every other day.

THE DIRECT-TO-CONSUMER FASHIONISTA
Christine Hendrix, 27, Gold Coast
Advertising account manager, Pinterest; married

I used to walk home down Michigan Avenue every day, pop into the stores, keep track of all the sales. But a couple of years ago, I just got really sick of shopping in the physical Nordstroms, the Zaras. I felt like every gal in town.

At the time I was working for a digital agency, and Facebook was pitching new integration where retailers could Messenger customers shipping updates instead of sending an email. Everlane—which sells really beautiful, simple sweaters, shoes and basics online—was one of the first retailers to do it, so I checked them out. And the rest is history. I fell in love with the direct-to-consumer brands, the quality, the price points.

I go to New York for work a lot, and a lot of these brands like Everlane, M. Gemi and Cuyana have little showrooms or pop-ups there. I follow all these labels on social media. They'll post when they have new locations. I do like going into the showrooms, for example, to check out if any of the Everlane slides run a little wider, because the pair my sister gave me are a little narrow. I'm not big on ordering 10 sizes online and returning the ones that don't work. I also love AYR, which also has a showroom in New York. They have terrific high-quality denim.

THE AVOIDER
Joe Campagna, 43, Logan Square
Owner, Grant Merchant Services; married, expecting twin boys in December

The last site I purchased from was MLB.com. I needed to upgrade my Cubs hat to the World Series version, and I bought a few shirts for friends and clients. I could have gone out and bought them in person, but I don't want to deal with the humanity. I do my best to avoid brick and mortar.

I'd say I do 80 percent of my spending online, because it's easier and I can get the best price. I like that I can compare the best options—not just what the store I'm in carries. Right now I'm debating wireless headphones. I can also ask questions on social media and crowdsource local vendors or items from people I trust. And Amazon will give you a 50-pound box and give you $5, $6, $10 off to fill it; that beats going to Target any day.

The one place I will wholeheartedly shop in real life is Galt Baby. I can get the same stroller on Amazon, but at Galt, if it breaks, they'll fix it and give me a loaner; they install the car seats.

THE SUBSCRIPTION ADDICT
Joanna Ardell, 42, Oak Park
Married, two boys, ages 5 and 8

I'm a big Nordstrom.com shopper, because they do free shipping and returns, and I can shop for everyone: my kids, my mother-in-law, my husband. They do these huge rewards at the holidays, triple-point days. Last year I bought my son's first-grade teacher a beautiful Kate Spade necklace that wound up costing $17 with rewards. I don't shop Nordstrom Rack because the return policy isn't as lenient.

I'm also a big subscription-box person. I do it for myself: PopSugar, which is maybe a lip gloss and a coffee mug, and Rachel Zoe, which is a quarterly style box for $99. For my husband I get Bespoke Post; there are four options every month for $40 or $45. This month it was a nice pair of leather gloves or a really nice butcher knife. He loves it. I usually wind up giving away or re-gifting something that comes in the boxes, but there's usually at least one thing that we really like.

We have a lot of Legos, a lot of Pokemon in our house. I generally buy toys on Amazon, but I'll make the exception for Geppetto's, the local toy store. I want to give them business, and the pricing of Legos is pretty consistent across retail. I also don't mind paying a couple of extra dollars because they help you pick something out and wrap it for you.

THE DEAL SEEKER
Roshni Ricchett, 34, River Forest
Married, 4-year-old daughter and 21-month-old son

I've bought diapers in a store maybe five times. My most recent purchase was a Gorilla Playsets slide. The cheapest option was from a site that was slightly sketchy, so I went to WoodenPlayScapes.com—and they matched the price with a 10 percent discount.

Zulily has home goods and men's and women's, but originally it was just kids and new moms. It's not free shipping, but it's a flat rate—$7 or $8—and it's all you can order in 24 hours. It's very addictive. There's also Ali-Express—the Alibaba shopping portal. You can find these cute girls' dresses marked down on Zulily to $30 or $40—they're $13 on AliExpress.

We don't really use our formal dining room, so it becomes my mail center. I'm terrible with returns. I either buy a nice dress that I've tried on in person and I'm confident will fit, or I buy really, really cheap stuff—like Old Navy-on-sale prices, and if it doesn't work, I don't worry about it.

This summer was the first time I've stepped foot in a brick-and-mortar clothing store since I had kids. It was terrible. The vanity sizing is on crack. I would go into the fitting room with my son, he would crawl under the stall door and I'd have to race out topless to grab him.

THE AUTO-REFILLER
Sam Rosen, 31, Oak Park
Co-founder, One Design Company; married, 4-month-old daughter
My wife and I are huge Amazon Prime folk. They'll give you discounted pricing if you set refills at an automated interval. We have dog food, toothpaste and toothbrush heads, 30-packs of toilet paper, all sorts of stuff, on reorder. I get a better deal, and I can think about it less. I also appreciate that they let you know when they're going to send something, so you can delay or cancel the order if necessary.

The other day I wanted to buy a 360-degree camera for a marketing project for my business. I had the idea at 9:30 p.m. By 10:30, I decided what camera to order. And by 10 a.m. the camera is in my house. Not that long ago, I would have gone to Best Buy. But this is my reality now.

I do almost all of my shopping online except for clothing. I buy clothes maybe once or twice a year, and I like to do it in person. I bring my wife along so she can provide her explicit blessing, and I support local retailers. Penelope's (in Wicker Park) is my first go-to. For more expensive products, I'll go to a department store, take a look, try things on, take a picture of it and search for a better price online. But at Penelope's I'm happy to pay for the curation.

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Amazon's price advantage narrows in key holiday category
By Marianne Wilson
Chain Store Age
November 23, 2016

Watch out Amazon, Walmart may be giving you a run for the money in the holiday toy aisles.

Walmart is making big strides to challenge Amazon's dominance in pricing, promotion and assortment of toys and games this holiday season. That's according to Boomerang Commerce's annual "Boomerang Insights: Toy Category report," which found that Walmart has more than doubled its online product assortment between the first and third quarters of 2016 and is leveraging its recent Jet.com acquisition for competitive pricing.

Toys "R" Us is also pursuing a strategy of increased assortment, as well as offering exclusive product lines. Meanwhile, Target is eschewing assortment expansion in favor of special pricing promotions, according to the report.

Other key findings include:

   • Amazon is still, by far, the leading retailer for toys and games with over 5 million items in the category — compared with less than 100,000 for other retailers — and with a pricing strategy that optimizes based on external market and internal data signals.

   • Jet.com has the lowest prices, meeting or beating the usual leader Amazon by an average of 64% — up from 55% in 2015 — on its overlap of most popular items.

Walmart is a close second to Jet by pricing 55% of popular items the same or lower than Amazon, but this represents a 9% point decrease year-over-year.

Meanwhile, Target increased its price competitiveness with Amazon by 8 percentage points year-over-year to meet or beat Amazon's price on 42% of popular overlapping toys and games.

   • Walmart and Jet offer the most aggressive price discounts. Compared to list prices on Amazon, Walmart discounted 54% of popular items, followed by Jet with 47%, and Target with 41%. Concurrently, Target is seeking to win customers through promotions, such as 20% discounts for select toys, "buy two, get one free" games and its current "10 Days of Deals" campaign.

   • Walmart is becoming increasingly more competitive in assortment with a 66% overlap with Amazon's most popular items; this represents approximately 1.8 times the nearest competitor.

   • After Walmart, Toys "R" Us has the highest assortment overlap (40% with a sampling of Amazon's popular items, representing a 5 percent improvement over last year.

   • Although toys and games specialty retailers struggle to compete on price, their wide assortments within specific sub-categories like video games at GameStop and exclusive LEGO products at Toys "R" Us keep them relevant.

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Study: Middle-market retailers optimistic — especially about digital sales
By Marianne Wilson
Chain Store Age
November 22, 2016

As the holidays approach, this group of retailers is feeling very confident about its financial health.

Eighty-percent of middle-market retailers (revenue between $5 million and $2.9 billion) rated their overall financial condition as healthy or very healthy in the 8th annual CIT Retail Outlook. Sixty-percent expect an increase in total sales of more than 5% for the 2016 holiday season, compared to only 33% three years ago.

The online study was conducted among 310 financial decision makers within the retail industry by Harris Poll on behalf of CIT Group, a provider of commercial lending and leasing services.

Middle-market retailers are most optimistic about sales generated from their online (75%) and mobile (65%) offerings compared to other channels. Their expectations for growth in revenue from in-store (45% compared to 50% in 2015) and catalog/phone (28% compared to 42% in 2015) channels have been scaled back significantly since last year.

On the employee fronts 54% of middle market retailers expect to increase the number of staff devoted to Internet/mobile sales channels over the next year, down from 62% in 2015, while 52% say they will increase the number of hourly staff.

The ubiquitous influence of the web has made having an online presence the No. 1 strategic investment for 2016. More than seven in ten (73%) of omnichannel middle market retailers say that the biggest investment priority will be their online presence, followed by social media (57%) and digital marketing (50%).

Other key findings from the study include:

   • The competitive landscape: Fifty-three percent of middle market and large retailers agree fast fashion retailers are taking consumers away from U.S. middle market retailers and pose a threat to other categories of goods. Seven in 10(71%) middle market and large retailers feel that it is likely that one or more prominent retailers will disappear in the next one to three years.

   • Brick-and-mortar stores: Almost three in five (56%) large and middle market retailers are using their stores differently than they have in the past, with over four in five of those with both a physical and online presence (83%) agreeing that their company is using their physical stores in a way that complements their digital channel. Eighty-one percent of middle market retailers agree that providing a unique shopping experience is an innovative way to attract new customers to brick-and-mortar.

   • Web presence is price of entry: Middle market retailers are less likely to say revenue is growing from stores (45% compared to 59% in 2015) than websites (75% compared to 71% in 2015). Expected growth from mobile is also high at 65%, while phone/catalog growth is low at 28%. Half (51%) cite updating and replacing technology as the key way to connect their channels.

   • Mobile and social offer competitive advantages: Sixty-five percent of middle market retailers believe revenue is growing from mobile. The most common steps used to take advantage of mobile technology remain: creating mobile apps (51%), updating their website to meet consumer needs (50%) and increasing email campaigns (46%).

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For Sears, Holidays Are Last Chance to Stay Intact
By Douglas A. McIntryre
24/7 WallSt.com
November 22, 2016

There have been rumors Sears Holdings (NASDAQ: SHLD) will close its Kmart division. Sears has denied them as it continues to close scores of stores. Moody's has observed Sears cannot survive without outside capital. The situation is dire enough that poor holiday results will likely ruin the company, which was formed in 2005.

Eddie Lampert, who created Sears Holdings via a merger of Sears and Kmart, is the only financial lifeline the company has had recently. He has sold off brands and continues to try to leverage the company's real estate portfolio. However, the best measure of Sears is its stock price, which is down 72% in the last five years.

The company's recent results have been dismal:

"Net loss attributable to Holdings' shareholders of $395 million ($3.70 loss per diluted share) for the second quarter of 2016 compared to net income attributable to Holdings' shareholders of $208 million ($1.84 per diluted share) for the prior year second quarter. Adjusted for significant items, we would have reported a net loss attributable to Holdings' shareholders of $217 million ($2.03 loss per diluted share) for the second quarter of 2016 compared to a net loss attributable to Holdings' shareholders of $256 million ($2.40 loss per diluted share) in the prior year second quarter.

"Adjusted EBITDA of $(191) million in the second quarter of 2016, improved from $(226) million in the prior year second quarter. Kmart and Sears Domestic comparable store sales declined 3.3% and 7.0%, respectively, in the second quarter of 2016. During the second quarter of 2016, the Company generated cash proceeds of $176 million from the sale of real estate properties and other asset sales.

"We received an offer from ESL Investments, Inc. ("the ESL proposal") to provide $300 million of additional debt financing secured by a junior lien against our inventory, receivables and other working capital, which offer has been accepted."

All the financial engineering in the world won't save Sears. It is locked in competition with other desperate retailers like J.C. Penney, which also needs good holiday numbers. Worse, it has to pull customers from business leaders such as Wal-Mart and Amazon. That is not likely.

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Walmart Q3 earnings top forecasts but sales lag; online accelerates
By Marianne Wilson
Chain Store Age
November 17, 2016

Walmart on Thursday posted third-quarter earnings that managed to beat analysts' expectations even as net sales fell short.

The retailer also lifted the lower end of its full-year guidance and expressed confidence going into the holiday season.

Walmart's net income fell to $3.03 billion, or 98 cents per share, in the quarter ended Oct. 31, which was two cents more than the Wall Street consensus according to Bloomberg.

Total revenue inched up 0.7% to $118.2 billion, less than expected, hurt by declining food prices and unseasonably warm weather in many parts of the country. Walmart, along with many other retailers, has been challenged by food deflation for the past year.

Same-store sales rose 1.2%, shy of the forecast for 1.3%.

"While the growth figures on Walmart's top line may not be stellar, they nonetheless indicate that the world's largest retailer is still capable of eking out growth. They also stand in marked contrast to the more negative figures from rival mass merchant and department store retailers.

In short, in a time of change and flux in retail, Walmart is still more than holding its own," commented Neil Saunders, CEO of retail research and consulting firm Conlumino. "Looking ahead to the holiday period, we believe that Walmart has a sound strategy which involves, but goes way beyond, low prices. Initiatives around exclusive merchandise, entertainment in store, and improved customer service align with consumer demand and should serve the company well in its most important quarter."

Store traffic rose slightly, for the eight consecutive quarter of growth.

The brightest spot in Walmart's quarterly results occurred online, where sales increased 20.6% globally, helped by the chain's acquisition of pure player Jet.com. The digital business added 50 basis points to Walmart's third-quarter comparable sales, its biggest contribution to date.

We had a solid third quarter," stated CEO Doug McMillon "Our e-commerce growth accelerated, operations in the U.S. continued to strengthen and international delivered another solid performance. We are pleased that we can see real progress stemming from our strategic choices."

In September, Walmart completed its $3.3 billion acquisition of Jet.com. The retailer's results included the operating impact of Jet.com for half of the quarter, as well as the transaction costs related to its billion acquisition.

Walmart raised the lower end of its forecast for the year, now anticipating earnings of $4.20 to $4.35 a share. It earlier set the lower end at $4.15.

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Innovative store platform allows Macerich malls to host hard-to-find and new retailers
By Marianne Wilson
Chain Store Age
November 16, 2016

Macerich is rolling out a plug-and-play concept that allows it to bring new retailers to its centers in a most untraditional way.

The mall owner announced it is expanding its portfolio for WithMe, an interactive physical store platform that allows brands to set up limited-time shops in a most expedient way. WithMe offers brands a fully portable, pre-fabricated and high-tech retail environment that blend the best of online and offline shopping.

Utilizing the WithMe store platform, Macerich will open shops that deliver e-tail-to-retail and hard-to-find brands in six of its shopping centers, including Los Cerritos Center, Tysons Corner Center, The Oaks, The Shops at North Bridge, Washington Square and Santa Monica Place, where WithMe launched its first mall location with the West Coast debut of Century 21 Department Store in May 2016.

"The WithMe concept is designed to welcome retail's next big thing in a matter of days, and will be a tremendous way to add newness and excitement for shoppers, whether they find one or many of these engaging, high-tech 'stores without walls' in our common areas," said Eric Salo, executive VP and chief strategy officer, Macerich. "The interactive experience WithMe delivers to our common areas is a flexible and powerful platform that continues to differentiate our high-performing properties."

Ranging in size from 100 to 300 sq. ft., the upcoming WithMe shops in Macerich properties will provides a changing showcase for limited runs of new store concepts. The shops will utilize WithMe's state-of-the-art technology which includes such features as interactive tags, responsive display tables, directional audio and more.

Here's a rundown on some of the retailers that will be using the WithMe retail platform to set up shop:

• Lanai Collection is coming to the common areas at The Oaks and Tysons Corner Center, and just opened at the inline WithMe flagship at Santa Monica Place. These are the first-ever physical stores exclusively dedicated to the two-year-old concept that offers luxurious, casual menswear.

• Also at The Oaks will be the first-ever physical store for Ezekiel, a longtime Southern California clothing brand that has emerged via a community of surfers, skaters, musicians and artists. To date, Ezekiel clothing has been available online and at select specialty and department stores.

• The Tie Bar, a popular online destination for men's neckwear and other accessories, is coming to Tysons Corner Center.

• Design-minded Kappa Toys will offer its second-ever store filled with new and classic toys at Tysons Corner Center.

• International purveyor of artist-designed shoes, hard-to-find BucketFeet will open at The Shops at North Bridge in downtown Chicago.

• Sandilake, a purveyor of simple and modern screen-printed looks for kids, is coming to Washington Square.

• The new WithMe locations also will expand the reach of several sought-after brands, including the upscale activewear concept from Australia, Lorna Jane, at The Oaks, Tysons Corner Center and Washington Square; and Urban Outfitters at Los Cerritos Center.

• Also coming to Santa Monica Place in the WithMe common area platform is the retail presence of Wired Magazine.

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Off-price giant soars in Q3; raises outlook
By Marianne Wilson
Chain Store Age
November 15, 2016

The TJX Companies topped earnings and sales forecasts for its third quarter as deal-loving consumers flocked to its stores.

The off-price apparel and home goods retailer reported that net sales for its third quarter, ended Oct. 29, rose 7% to $8.3 billion, on top of a 5% increase last year.

Consolidated same-store sales rose 5%, over last year's 5% increase. At Marmaxx, a division includes Marshall's and T.J. Maxx, same-store sales rose 5% compared to estimates for a 3.4% increase. HomeGoods reported a 6% same-store sales gain, beating estimates for a 5% increase. T.J. Maxx Canada saw sales rise 8%, higher than estimates for a 5.6% gain.

TJX's net income for the third quarter was $550 million and diluted earnings per share were $.83.

Excluding the impact of a debt extinguishment charge and pension settlement charge, which combined reduced earnings per share by $.08, adjusted diluted earnings per share were $.91. This compares to diluted earnings per share of $.86 in the prior year.

The retailer lifted its full-year earnings outlook to $3.46 to $3.48 a share from a prior projection of $3.39 to $3.43 a share.

"We are extremely pleased that our strong momentum in customer traffic and sales continued in the third quarter," said Ernie Herrman, CEO and president, The TJX Companies." We are convinced that we are gaining consumer market share across all of our divisions."

Herrman said that company has numerous initiatives underway to drive customers to its stores this holiday season and keep them coming back.

"We are on our way to becoming a $40 billion-plus company," he said.

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Activehours and Sears Holdings Bring On-Demand Pay to Shop Your Way® Members, and Sears and Kmart Associates
PR Newswire
November 14, 2016

Activehours and Shop Your Way, a business unit of Sears Holdings, announced a strategic partnership today that integrates the Shop Your Way rewards program into the Activehours mobile application. The Activehours application allows people to access their pay when they earn it, rather than waiting for a paycheck...

"Activehours offers a unique benefit for our Shop Your Way members. This partnership allows us to make a difference in our members' financial lives by providing instant access to their pay the day they've earned it," said Terry Rolecek, president, Shop Your Way Financial Services for Sears Holdings. "By integrating the Shop Your Way program with Activehours, we provide our members with the convenience of purchasing products and services when they need them rather than having to wait for a paycheck which has already been earned."

As Shop Your Way members and associates within the Sears Holdings family of companies access their pay through Activehours, they will receive Shop Your Way points which may be redeemed online or in-store at Sears and Kmart. Existing Shop Your Way members can take advantage of this new benefit starting today by linking their accounts to the Activehours app at shopyourway.com/activehours/earn-at-activehours or activehours.com/shopyourway. Existing Activehours customers who sign up for a free Shop Your Way membership at activehours.com/shopyourway will automatically earn points on their next Activehours cash out.

"The Activehours app makes paychecks lightning fast, intelligent and now, they are even worth more," said Ram Palaniappan, founder of Activehours. "It's refreshing to strategically partner with a company such as Sears Holdings that understands the benefit of offering their associates and Shop Your Way members a service that allows them to receive wages in real-time. We're excited to welcome the tens of millions of Shop Your Way members to the Activehours community."

With Activehours, users get more power and flexibility in how and when they're paid. Additionally, employers benefit as employees report improved attendance and reduced stress. Activehours is currently working with people employed by more than 10,000 companies, including Sears Holdings.

About Activehours
Activehours is the new, faster way to get paid. Unlike the traditional two-week pay cycle, Activehours unlocks your pay by giving you the money you've already earned when you need it most -- any time, any day. With Activehours, you choose when to get paid for the hours you've already worked, finally giving you control over your finances. Founded in 2013, Activehours is driving consumer-empowered finance through mobile technology by breaking open more than $1 trillion held up in America's pay cycle…

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Department store names soar on post-election good cheer
By Clark Schultz
Seeking Alpha
November 14, 2016

Department store stocks are rallying right along with other mall names on a boost in confidence from investors and analysts that consumer spending will perk up and GOP tax policy will help lift profits across the sector.

Sears Holdings (SHLD +4.3%), J.C. Penney (JCP +3.8%), Kohl's (KSS +5.1%), Bon-Ton Stores (BONT +6.7%), Nordstrom (JWN +5.7%) and Dillard's (DDS +4.8%) are all solidly higher.

An interesting case is Macy's (M +5.2%) which drew the ire and Twitter hostility from Donald Trump during the primaries. Shares of Macy's are up 18% since the election as investors assume that the Trump-Macy's feud is a non-factor.

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J.C. Penney sales slide in Q3; cuts annual forecast
By Marianne Wilson
Chain Store Age
November 11, 2016

Weakness in apparel helped make for a disappointing third quarter for J.C. Penney Co. as the retailer cuts its forecast amid sliding sales.

On the positive side, Penney said sales trends improved in October, fueled by increasing momentum behind its new appliance business.

"We view our October sales results -- specifically our acceleration in the last two weeks of the month -- and the benefit from appliances as examples of what we expect for the balance of the fourth quarter," said Penney CEO Marvin Ellison, who added that "despite experiencing softness in apparel sales, we are continuing to improve the bottom line of our business."

Penney's same-store sales in the quarter fell 0.8%, missing analysts' forecast for a gain of 2.7%.

Net sales fell 1.4% to $2.86 billion, less than the $2.95 billion analysts had expected.

The company reported a net loss of $67 million, or 22 cents per share, compared to a net loss of $115 million, or 38 cents per share, in the year-ago period. Excluding items, Penney lost 21 cents per share, in line with analysts' forecasts.

Despite Penney's weak sales, some industry experts said the chain's turnaround is still on track. Neil Saunders, CEO of retail insights and consulting firm Conlumino, said he is encouraged by Penney's entry into appliances.

"This has given the company a new stream of growth, especially at a time when consumers are abandoning Sears in increasing numbers. From our store visits, the appliance offer is comprehensive and well executed and we believe it will bolster the sales line in the quarters ahead," Saunders said. "Home furnishings is another area that performed well, reflecting the refurbishment of many departments and the more inspirational ranges that JCP is now selling. Looking ahead we believe this will be another solid growth category in the months ahead."

For the full year, Penney cut its same-store sales estimate from a gain of 3% to 4% to a new range of 1% to 2%. It also now expects gross margins to be flat for the full year versus an earlier projection that had them improving by 10-30 basis points.

SG&A spending is still expected to decline, and EBITDA is still forecast at $1 billion. The retailer continues to expect adjusted EPS "to be positive" and free cash flow to "improve" compared with 2015.

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The Dam Is About to Burst for Sears Holdings
By Rich Duprey
Investopedia
November 11, 2016

The drip-drip-drip of speculation is turning into a deluge of reality as more suppliers reportedly are turning off the spigot of inventory to Sears Holdings due to fears the retailer is headed for bankruptcy.

What started with the supposition that JAKKS Pacific had stopped shipping toys to Sears' Kmart stores after the toymaker cryptically referenced the company on its earnings conference call last month has apparently become a rout. Insurance brokerage Arthur J. Gallagher & Co. told Business Insider that at least six of its clients had "significantly" reduced their shipments to Sears because of a belief that retailer won't survive as a going concern.

But it doesn't seem to have worked, and after the first crack in the dam appeared with Jakks Pacific, it didn't take long for others to appear. Now, the whole facade may be about to come crashing down. Sears Holdings has been on life support for some time, but this Christmas, its suppliers may finally pull the plug.

Rich Duprey has no position in any stocks mentioned.

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Holiday sales should increase, but profits will stay flat
By Marianne Wilson
Chain Store Age
November 11, 2016

Holiday retail sales should increase 2% to 4% over last year but retailers should not be expecting a similar profit boost.

That's the view of Purdue University retail management expert Richard Feinberg who expects retailers will lose pricing power due to online competition.

National holiday shopping revenue is expected to be close to $850 billion. But growing online sales will keep pressure on storefronts as internet sales are expected to have another a double-digit increase (10% to 15%) over last year Feinberg said approximately half of all consumers will use the internet, and specifically mobile devices, before deciding where to buy. About the same number of consumers will look for better prices online before buying in person.

Feinberg stressed the need for retailers to have a dynamic web presence.

"For the first time since Purdue has been tracking consumer sentiment and holiday shopping, more than 50% of shoppers prefer internet holiday shopping," he said. "Local retailers must communicate something special or a good deal when consumers find their business on the web. Retailers need a 'good deal' to attract consumers to their stores."

Another retail lure, Feinberg said, is free shipping. Purdue research shows 90% of consumers will actually spend more for a product if shipping is free.

Closer to home, retailers need to give consumers a reason to visit since the internet means the world is their mall. If retailers don't have a smooth and attractive internet presence they may be pushing consumers to outlets like Amazon.

"Driving consumers to the internet because a store is out of stock, doesn't have the right size, color, or merchandise, costs store-based retailers billions of dollars during the season," Feinberg said.

Feinberg on other holiday shopping trends:

* Facebook and Pinterest are significant in influencing consumers on what and where they purchase.

* Retailers need to pay attention to online review sites. In-store experience must be pleasant, leading to positive reviews.

* Retail loyalty clubs have become increasingly important in communication and capturing consumers.

* Black Friday is no longer king. The Saturday or Sunday just before Christmas have been the biggest shopping days the past five years.

For the past year gasoline prices have been a boost to retail spending. Gas prices have increased in recent weeks and could be an impediment to retail spending and could make the difference in overall holiday spending.

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Commentary: J.C. Penney turnaround still on track despite weak Q3
By Neil Saunders
Chain Store Age
November 11, 2016

Neil Saunders, CEO of retail insights and consulting firm Conlumino, comments on J.C. Penney's results for the third quarter in which sales came in under forecasts.

"After a good run of growth, J.C. Penney has faltered this quarter with both total and comparable sales slipping into negative territory. While the company is now overlapping some tougher prior year comparatives, this is nonetheless a disappointing outcome that takes the shine off some of the recent progress made under its recovery program.

That said, we do not believe that it entirely blows the turnaround plan off course, not least because the company continues to reduce its losses and has a pathway to profitability. Moreover, the comparable sales slip is fairly modest when compared to rival stores and clearly shows that JCP is outpacing the rest of the department store market.

The softness for the quarter has come from apparel where sales were down sharply. This is a challenging segment for most department store players and, in our view, it is a category where JCP has much more work to do in refining and developing its offer. Thankfully, JPC has been developing other levers it can pull to generate growth which have left it less exposed to clothing than some of its rivals.

One of the more recent developments has been JCP's foray into appliances. This has given the company a new stream of growth, especially at a time when consumers are abandoning Sears in increasing numbers. From our store visits, the appliance offer is comprehensive and well executed and we believe it will bolster the sales line in the quarters ahead.

Home furnishings is another area that performed well, reflecting the refurbishment of many departments and the more inspirational ranges that JCP is now selling. Looking ahead we believe this will be another solid growth category in the months ahead.

Along with the continued roll out of Sephora concessions, these category developments are positive inasmuch as they make JCP far less reliant on apparel. This offsets some of the vagaries and fluctuations of the fashion business and helps transform JCP into a proper department store destination which gives consumers many reasons to visit.

As we head into the holiday quarter, we have a slight concern around mall traffic which could impact on JCP's figures. This is largely something outside of the company's control and we believe that it is a factor in this quarter's weaker figures. Because of this JPC will have to work hard to pull in customers, if not in store then online. Generally we are encouraged by the company's holiday plans and believe that its "Joy Worth Giving" campaign strikes the right note and features some good deals and interesting products.

Although we think JCP will pick itself up after this latest stumble, we are now more cautious about the final quarter performance. As such, we think it will end the year with modest comparable sales growth of around 1.8%. This is flatter than previous company guidance but given the state of the department store sector it is not a bad outcome."

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Don't get too excited about that Macy's real estate deal
By Shelly Banjo
Crain's Chicago Business
November 11, 2016

Don't call it a comeback. Seriously, don't.

Shares of Macy's Inc. shot up by as much as 9 percent on Thursday, after the department-store chain said it had struck a deal with real-estate company Brookfield Asset Management to work on a plan to redevelop 50 of its 800 stores, or less than 1 percent of its store base. It also said that, as it set itself "up for a comeback," its sales declines for the full year wouldn't be as deep as it first expected. Hooray?

I get it. Investors were just happy Macy's was doing something—anything!—to wring some money from its real-estate holdings.

But this deal is nowhere close to where Macy's should already be when it comes to fulfilling its promises to meaningfully monetize its real estate, which could be worth as much as $21 billion—more than the entire enterprise value of its retail operations.

It's also worth noting that Macy's still hasn't delivered on the 100 closings it promised last summer—a promise that drove its stock up by 17 percent. Why hasn't it, at the very least, come out with a list of the stores it plans to close?

Starboard, the hedge fund that pushed Macy's to do something with its real estate, has already said it was frustrated with Macy's dragging its feet and has cut its stake in the company by 39 percent. Hedge fund manager David Einhorn has dumped the stock at a mega-loss after he gave up on it fulfilling its word. Even the Securities and Exchange Commission has asked Macy's to stop merely talking about making money from real estate if it isn't actually doing it.

Investors propping up the stock Thursday also ignored the fact that Macy's diluted third-quarter earnings came in at just 17 cents per share, nowhere near Wall Street's 41-cent estimate. Traffic dropped by 6 percent from a year earlier, and sales at established stores dropped by 3.3 percent from a year earlier, marking the seventh straight quarter of sales declines.

The declines are even more notable because, as Macy's laps year-ago losses and rids under-performing locations from its comparable store base—it closed 40 stores last year—it's supposed to be easier to show comparable sales growth, not harder.

The company's plans for rejuvenating growth during the all-important holiday-filled fourth quarter seemed to focus on reducing inventory, selling more stuff online, and jumping further into its lower-priced Backstage concept. It plans to put Backstage in 45 stores, which could cannibalize its full-price sales with lower-priced products. And if all else fails, Macy's CEO Terry Lundgren told CNBC Thursday he hopes the end of a brutal presidential election would usher in increased consumer spending.

Until there are real signs of consumer growth—or more concrete measures to monetize real-estate holdings—any confidence in a Macy's comeback still sounds like wishful thinking.

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New York & Co. names Sears, Ann Taylor vet to head up marketing and online
By Deena M. Amato-McCoy
Chain Store Age
November 8, 2016

New York & Company appointed Michelle Pearlman as executive VP, e-commerce and chief marketing officer.

Pearlman, a member of the company's board of directors since 2011, has resigned from her duties as a director to lead the company's omnichannel strategy. In her new role, she will be responsible for the apparel retailer's e-commerce business, as well as all marketing and visual aspects of the chain's integrated omnichannel strategy.

During her 20 year career, Pearlman has focused on retail, consumer, marketing, and e-commerce. She has held various leadership roles throughout her career, including senior VP, president of the jewelry business unit for Sears Holdings Corp., and executive VP with Ann Taylor.

Prior to Ann Taylor, Pearlman served as an associate principal with McKinsey & Co. where she focused on retail and consumer products.

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1 Big Difference Between Sears and Macy's, Inc.
By Adam Levine-Weinberg
Lincoln Journal Star, Motley Fool
November 6, 2016

At first glance, Macy's and Sears Holdings might seem very much alike. Both companies are mall-centric retailers that have faced persistent declines in comparable store sales recently and are closing lots of stores. Yet both also have valuable real estate assets that they have been monetizing at a steady pace. Today, some investors see Macy's and Sears as real estate investments just as much as they are retail investments.

Sears' retail business is slowly dying, but at least it owns a lot of real estate. Image source: The Motley Fool.

Yet there is one huge difference between Macy's and Sears. Sears is losing money -- and lots of it. Thus, virtually all of its real estate gains are needed to prop up the ailing retail business. By contrast, Macy's core business still generates lots of free cash flow.

Sears monetizes lots of assets, but to what end?

As I recently noted, Sears has raised $5.8 billion of cash by monetizing a variety of assets over the past four years. Most of that value has come from selling and spinning off various real estate assets.

Even after completing all of these transactions, Sears still owns hundreds of stores and has below-market leases for many others. It also owns other assets, such as the valuable Kenmore, Craftsman, and Die Hard brands.

The problem is that Sears' underlying retail business is failing. Over the past few years, it has reported negative free cash flow of around $1.5 billion per year on average. Sears' asset sales have barely been sufficient to cover its operating losses.

Sears hasn't given investors much reason to believe that it can return the retail business to profitability. As a result, when the company runs out of assets to sell, it is likely to collapse.

Macy's remains solidly profitable

Macy's has certainly faced earnings pressure since its sales started to slip in early 2015. For this fiscal year, Macy's currently expects to post earnings per share of $3.15-$3.40, down from adjusted EPS of $4.40 in fiscal 2014.

Nevertheless, Macy's continues to reliably churn out free cash flow. While free cash flow has declined from the peak reached a couple of years ago, it's already starting to recover as Macy's has been reducing its inventory to match recent sales trends. Macy's cost-cutting initiatives could allow free cash flow to rise further in 2017, even if demand remains soft.

As a result, while Sears needs to squeeze value out of its real estate just to stay in business, any real estate monetization opportunities for Macy's represent pure upside.

Lots of real estate value to be unlocked

Macy's has the most valuable real estate portfolio of any department-store company. Activist hedge fund Starboard Value estimates that Macy's real estate holdings may be worth $21 billion.

Macy's is in the early innings of a process that could allow it to monetize a lot of its underutilized properties. For example, in 2015, it sold the upper floors of its store in Brooklyn to a developer for $170 million in cash, plus $100 million to be used for a complete renovation of the remaining Macy's store.

Just last week, Macy's announced that it has sold five mall-based stores to General Growth Properties this year. Four of those sales occurred in Q3, bringing in proceeds of $46 million. Macy's will lease back one of the properties, while the others will be redeveloped. This could be the beginning of a long string of smaller real estate deals, given that Macy's plans to close about 100 stores in early 2017.

Macy's is also actively looking to monetize its "flagship real estate assets" in Manhattan, San Francisco, Chicago, and Minneapolis. A few months ago, the company revealed that it was negotiating to sell its men's store building in San Francisco, a property that is probably worth hundreds of millions of dollars.

Macy's is looking to monetize flagship properties such as its Manhattan store.

Macy's may also be close to selling its 1 million-square-foot-store building in downtown Minneapolis. Based on other recent real estate deals nearby, that store could fetch more than $100 million if it's sold outright. Deals for the even larger (and more valuable) Manhattan and Chicago flagships could follow in the next year or two.

With the core retail business still churning out lots of cash, Macy's can be patient in lining up the best deals possible to extract value from its real estate. As various real estate transactions come to fruition, Macy's will be able to return even more cash to shareholders (on top of its already-generous dividend) through share buybacks or a special dividend.

As for Sears, there may be more real estate sales in its future -- but shareholders aren't likely to see a dime. Any cash Sears raises will be needed to offset billions of dollars of losses in the retail business.

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Sears' Edward Lampert Is the Most Hated CEO in America
By Evan Comen
24/7 Wall St.
November 6, 2016

Two-thirds of all employees approve of their CEO, according to employee review website Glassdoor. However, not all CEOs are regarded so well, and some are rated quite poorly.

To identify the most hated CEOs, 24/7 Wall St. compiled CEO ratings and employee satisfaction reviews from Glassdoor — this is not a Glassdoor commissioned report. Eddie Lampert, CEO of Sears Holdings, is the worst rated CEO.

Sears Holdings controls Sears and Kmart, two of the nation's largest department stores. Only 23% of Kmart employees and 19% of Sears employees approve of Lampert, according to reviews on Glassdoor. Many complaints center around layoffs and stagnant wages, likely attributable to falling sales at the stores. The company's revenue has declined substantially in recent years, from $36.2 billion in fiscal 2013 to $25.1 billion in fiscal 2015.

Lampert is likely unpopular with company shareholders too. Over the past three years, under his watch, the company's stock price has plummeted by more than 80%.

Workers often complain in Glassdoor reviews about the out-of-touch upper management. One employee from the company's headquarters in Hoffman Estates, Illinois, wrote: "Corporate employees are in deep denial about how bad things are and seem content to get a check and babble on about 'transformation'." Critics of Lampert have also chided the CEO for promising "transformation", while by most financial measures, the company has consistently showed signs of continued decline.

Lampert has received a base salary of $1.00 in each of the past three years. Still, his total annual compensation, which comes mostly from stock awards, has been at least $4 million since 2013, peaking at $5.7 million in fiscal 2014.

The leader of one of America's most iconic brands, Lampert is largely held accountable for being unable to stop Sears' decline since he assumed the role of chairman in 2004 and CEO in 2013. Sears Holdings has closed or sold more than 850 Sears and Kmart locations since Lampert became CEO and has announced dozens of additional closings so far this year. The company has also slimmed its U.S. workforce by roughly 50,000 employees over the same period.

As the company's majority shareholder, Lampert can remove himself from the role of CEO. Some finance columnists have called for his removal since 2012. Earlier this year, however, the company announced Lampert will stay on as CEO through at least 2018.

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'Down-ballot' issues that could impact retailers and other businesses
By Joe Kefauver
Chain Store Age
November 3, 2016

Because of the tone and tenor of the presidential campaign, lots of folks might be surprised to learn there are many other significant races going on across the country. These so-called "down-ballot" elections for governors' offices, U.S. House and Senate seats, state legislatures and other offices may hold the real clues for what the next four years entail for employers, no matter who wins the White House. Believe it or not, there are substantive candidates actually discussing substantive kitchen table issues that impact families and communities.

For employers, there are two things worth noting down-ballot. First, while issues impacting the P&L like minimum wage, paid leave, and pay equity have played a less prominent role at the presidential level than anticipated, in many battleground states, they are front and center. The Fight for $15 campaign has made a concerted effort to affect electoral outcomes in Pennsylvania, Missouri, Wisconsin, Ohio, Arizona, New Hampshire, and North Carolina.

The movement is not only elevating the issues, its advocates are organizing significant Get Out The Vote (GOTV) efforts. Races up and down the ballot in those states will be decided by razor-thin margins and this type of concerted targeting may produce favorable results for their campaign.

The second, however, may be even more impactful. Polling suggests that in many regions across the country, the unique nature of the Trump campaign and the reaction in many quarters to his candidacy, may be causing a drag on other Republicans on the ticket.

In particular, candidates in the Midwest and New England, regardless of whether they are running for state or federal office, are clearly distancing themselves from Trump. With toss-up governors and/or Senate races in New Hampshire, Vermont, Pennsylvania, Ohio, Wisconsin and Indiana, lots of Republican candidates -- and voters -- are running for cover.

The result of these defections are that in many parts of the country, some anti-business candidates who were likely underdogs a year ago, will win some very close elections. Additionally, numerous proposals affecting entry-level employers are going to pass easily at the ballot. In the states of Maine, Washington, Arizona, Colorado and the cities of Berkeley, California, and Flagstaff, Arizona, voters will decide whether to raise the minimum wages in those states and cities as well as deciding on various proposals to eliminate the tip credit and enact paid leave laws. Despite the best effort of the affected employer community and their industry allies, every one of those proposals will become law.

The bottom line is no matter who wins the White House, the situation in Washington stays largely the same. Even if the Democrats are successful in taking back the U.S. Senate, passing large minimum wage increases and paid leave mandates will still face an uphill battle in Congress meaning the epicenter of activity on those issues will continue to be at the state and local level. From that perspective, every indication is that the next few years will look a lot like the last few years and the elected officials who control the collective destinies of employers can be found down the ballot. And the further down the ballot you go, according to the polls, the larger the Trump effect becomes.

Employers need to recognize that the national narrative around our brands and business models is not emanating from Washington -- it is coming from the city squares and town halls. Governors and mayors will impact the bottom line going forward more than president's and Congress. So when you go into the voting booth in a few weeks, don't forget to look down.

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Is Sears Hometown Worth More Dead Than Alive?
By Mitchell Mauer
Seeking Alpha
November 2, 2016

Most investors wouldn't touch Sears Hometown and Outlet Stores, Inc. SHOS) with a 10-foot pole. This is evident from the recent performance and current valuation of its stock price. After losing nearly half its value during the last year, SHOS is now selling well below its net current asset value. Although things look bleak, the fundamentals show a lot of upside with little downside for investors buying at current levels.

Sears Hometown and Outlet Stores, Inc.

Sears Hometown and Outlet Stores, Inc. spun off from its parent company -- Sears Holding Corporation -- in October 2012. The spin-off company consists of two segments: Hometown & Hardware and Outlets.

Hometown and Hardware sells household goods, lawn and garden equipment, and appliances through its Sears Hometown and Sears Hardware branded stores, as well as Sears Home Appliance Showrooms. The Outlets segment offers discounted home and hardware merchandise from retail locations and online stores.

All stores are independently owned and operated by franchisees. Although SHOS is legally a separate entity from SHLD, the success of Sears Hometown is tied to the success of its parent company -- with the latter supplying nearly 85% of the merchandise for the Hometown and Hardware stores.

Out-of-Favor

During the greater part of the 20th century, Sears was a powerhouse in the retail world throughout the United States. Over the last decade, it's been a different story. As shoppers are looking more and more to find deals online, it's an understatement to say that Sears has struggled to stay afloat.

These struggles led to the spin-off in 2012. Separating Sears Hometown from Sears Holdings was meant to give the franchise owners more autonomy, while adding hundreds of millions of dollars to the parent company's coffers.

Things haven't yet panned out as planned. According to a Bloomberg article from 2015, the spin-off has so far hurt franchise operators more than it has helped.

During the three year span from FY2013 to the end of FY2015, gross revenue decreased roughly 5.5% but operating income dropped nearly 170%. In FY2013, the company reported positive operating income of just over $60 million. By the end of FY2015, its operating income was negative $40 million.

It goes without saying that the drastic difference between the change in gross revenue and the change in operating income is due to expenses. While revenue fell 5.5%, cost of goods sold only fell by 4%. Additionally, operating expenses increased during this 3-year time period.

Looking at the declining revenue and drastic loss in operating income, it's easy to see why the stock has gone through a massive sell-off since its peak in mid-2013. However, a close look at the company's balance sheet suggests the market is likely overreacting.

Net Current Asset Value

According to the stock screening site, The Stock Market Blueprint, SHOS qualifies as a Benjamin Graham-style Net Current Asset Value stock. At $4.90/share, the stock's trading for only 41% of its net current asset value of $11.82. Not only is the market valuing SHOS as being worth more dead than alive, but it's doing so at a 60% margin of safety.

The net current asset value is the amount left over after subtracting a company's current assets from its total liabilities. Benjamin Graham started buying stocks selling for significantly less than their net current asset values in the 1930's. In the mid-1970's Graham claimed this approach was "unfailingly dependable and satisfactory in 30-odd years of managing moderate-sized investment funds."

Warren Buffett used this same strategy in the 1950's until his portfolio became too large to implement it. He called it the cigar-butt approach because "a cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the 'bargain purchase' will make that puff all profit." Buffett credits this approach for his success during his most profitable decade.

Disclosure: have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Sears in Oak Brook, elsewhere to be downsized
By Anna Marie Kukec
Daily Herald
November 2, 2016

Sears Holdings Corp. said its Oak Brook store is among a dozen stores nationwide set to be reduced by half with their auto centers eliminated or changed into just appliance stores by 2018.

The Sears store and its Sears Auto Center in Oakbrook Center, along with 11 others, were sold to the GGP-Seritage Growth Partners Joint Venture last year. Hoffman Estates-based Sears leases the store from the joint venture, a partnership with Chicago-based General Growth Properties, said Sears spokesman Howard Riefs.

"After the footprint is changed, the Sears store will remain on the entire lower level and continue to serve our (customers) by operating in a smaller, more efficient space that will include home appliances, mattresses, household goods, sporting goods, tools and a targeted assortment of apparel," Riefs said. He could not say what other departments, such as the Land's End shop, would be eliminated.

Until then, the store and auto center will continue to remain open and serve customers, including the crucial holiday shopping season.

In April 2015, Sears and General Growth Properties announced their joint venture involving about a dozen Sears Holdings properties located at General Growth malls. Besides Oak Brook, the others undergoing similar changes are in Bakersfield, California; Pembroke Pines, Florida; Natick, Massachusetts; Columbia, Maryland; Minnetonka, Minnesota; Albuquerque, New Mexico; Staten Island, New York; Norman, Oklahoma; and Frisco, Texas.

As part of the deal, General Growth contributed an unknown amount of money to the joint venture. The joint venture then leased back the existing Sears stores. The transaction was designed to allow Sears to get money for its properties and provide an opportunity for the joint venture to redevelopment and re-lease up to 50 percent of each property.

General Growth spokesman Kevin Berry said the company could not reveal yet what will be done with the space at the affected Sears stores.

Meanwhile, Sears reached an agreement with the joint venture where two other Sears stores and their adjacent Sears Auto Center will be closed "in the near future" and changed into appliance-only stores.

Those stores are in Lynnwood, Washington; and Paramus, New Jersey. They will be replaced with Sears' new appliance model that debuted in Fort Collins, Colorado, in June.

The retailer continues to re-evaluate its stores, properties and workforce as it struggles to stay afloat.

Earlier this year, Sears said it was closing 68 Kmart and 10 Sears stores, although none were in the Chicago suburban area. After that, Sears Holdings was expected to have about 1,500 stores left. It's been part of an ongoing mission to return to profitability.

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Sears executive jumps ship for party supplies specialty retailer
By Marianne Wilson
Chain Store Age
November 2, 2016

Party City has nabbed a 22-year retail veteran to head up its retail operations.

Party City Holdco Inc. announced that Ryan Vero has joined the company as executive VP of PCHI and president of Party City retail group. Vero, who will have full responsibility for all of Party City's North American retail operations, including some 900 brick-and-mortar stores and e-commerce, recently served as president, grocery and drugstore at Sears Holdings.

Prior to joining Sears, he spent 18 years at OfficeMax, most recently serving as its executive VP, chief merchandising and marketing officer.

In other changes, Gregg Melnick, president of PCHI, will be taking on new leadership responsibilities in several areas of our global business. Specifically he will assume overall responsibility to formulate, establish and execute the company's long-term global strategy in the areas of information technology and global supply and logistics.

In addition, he will also assume responsibility for international wholesale and non-North American retail operations, focusing on the development and execution of our long-term growth strategy and furthering the Amscan business across key international markets.

"While we have enjoyed great success over the past 20 years building ourselves to be a leading wholesaler and retailer in our industry, I am truly excited that these changes will go a long way to ensuring our continued growth and success in the years ahead," said James M. Harrison, CEO, Party City Holdco Inc.

Party City Holdco designs, manufactures, sources and distributes party goods, including paper and plastic tableware, metallic and latex balloons, Halloween and other costumes, accessories, novelties, gifts and stationery throughout the world. The company's retail operations include over 900 specialty party supply stores throughout North America operating under the names Party City and Halloween City.

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Black Friday's Secret: Same Deals Each Year
By Suzanne Kapner
The Wall Street Journal
November 2, 2016

Sale circulars from Target, Best Buy and Wal-Mart repeat products, prices from past holidays

Shoppers who missed out on $97 Beats headphones, a $99 Nikon camera and other Black Friday deals last year needn't worry. Chances are those same items will be on sale again this year—for the same price.

The front page of Target Corp.'s 2015 Black Friday circular was almost identical to the front page of its 2014 circular, displaying Beats headphones, a Nikon digital camera, DVDs and an Xbox gaming console. Only the gaming console changed price, dropping about $30 from one year to the next.

In fact, every Target Black Friday circular since 2008 has featured a Razor scooter, with the price fluctuating between $17 and $22, according to Brad's Deals, a website that tracks retail discounts.

For the past two years, Wal-Mart Stores Inc.'s Black Friday newspaper inserts have included a $49 Toshiba hard drive, a $19 Pyrex Bake-n-Store set and a $49.97 Brother sewing machine. The Black Friday circulars of Best Buy Co., Kohl's Corp., J.C. Penney Co. and Macy's Inc. also have con-tained items and prices that didn't vary much from year to year.

The retailers say they are catering to customer tastes. "Our Black Friday ads are intended to showcase the products our guests want," said Joshua Thomas, a Target spokesman. "There are some products and categories like toys and small appliances that tend to be popular year over year." But some executives also point to a desire to mitigate risks at a time when defending their turf against online rivals is paramount.

"Merchandising executives often look back at history and say, if something was successful, we ought to repeat it if I want more certainty," says Kohl's Chief Executive Kevin Mansell. "That doesn't necessarily translate to growth, though."

Playing it safe can turn off shoppers looking for a reason to brave the cold and crowds and make the early morning trek to stores on the day after Thanksgiving.

"It's as if they aren't putting any time or effort into the Black Friday circulars, and just expect people to come out and shop no matter what," said Ashlee Jackson, a 24-year-old Piscataway, N.J., resident, who scours the newspaper inserts of Target, Wal-Mart and Best Buy before heading to stores on Black Friday.

The day after Thanksgiving remains one of the busiest shopping days of the year, but it recently lost its top ranking as more shoppers migrate to the web and spread their purchases throughout November.

Even though it has been derided as a commercial spectacle marred by shopper stampedes, it remains a day when retailers are locked in a fight for market share that they are loath to cede. "Retailers regard Black Friday as a day when they have to protect their business," said Michael Appel, the founder of a retail consulting firm. "They will go with the tried and true, as opposed to stepping out and trying to be innovative. It's like replaying your greatest hits."

Despite the rise of online shopping, print circulars are still one of the most effective ways to get shoppers into stores, industry executives say. That is particularly true on Black Friday, "when customers go back to shopping in a more traditional way," said Tom Clarke, a managing director with the consulting firm AlixPartners.

Eighty percent of the products and 43% of the prices promoted on the front pages of the 2015 and 2014 Black Friday circulars of Best Buy, Macy's, Target, Wal-Mart, Kohl's and J.C. Penney were identical, according to price-tracking firm Market Track LLC.

Macy's has featured Rampage boots for $19.99 on the front page of its Black Friday circular for three years running. Also on the front page of its 2015, 2014 and 2013 circulars were $39.99 Charter Club women's cashmere sweaters and $19.99 men's Alfani and Club Room dress shirts or ties. "We have customer favorites back by popular demand," said a Macy's spokeswoman, adding that the retailer also features a broad assortment of "new gifting ideas."

Best Buy's 2015 and 2014 circulars showed a $779.99 11.6-inch MacBook Air, $224.99 Klipsch Reference dual 8-inch speakers and a $74.99 Amazon Fire TV.

"With hundreds of products and many factors that go into pricing, there may be times when products have the same price from year to year," a Best Buy spokesman said.

For shoppers, the regularity has an upside. They can make a battle plan for this year's Black Friday before the circulars are released. "You know there will be $10 sweaters at Kohl's and $39 cashmere at Macy's," said Rebecca Lehmann, the manager of content marketing for Brad's Deals. "It's going to be the same in 2016."

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Macy's unloads five stores
By Marianne Wilson
Chain Store Age
November 1, 2016

Macy's Inc. is living up to its promise to downsize.

The department store giant announced it has sold five stores to General Growth Properties for $46 million. All but one of the locations will be closed by spring 2017.

Macy's said it expects to realize a gain of $32 million from the deal in the third quarter of fiscal year 2016. The retailer said the sale is part of its plan, announced in August, to reallocate investments to the company's top performing stores, rethink its real estate investments and focus on its digital strategy. At that time, Macy's also announced it planned to close 100 stores nationwide.

The stores involved in the sale are in the following locations: Carolina Place in Pineville, North Carolina; Oakwood Mall in Eau Claire, Wisconsin; Quail Springs Mall in Oklahoma City, Oklahoma; Greenwood Mall in Bowling Green, Kentucky, and Tysons Galleria in McLean, Virginia. Macy's said it will keep operating the store at Tysons Galleria, leasing it back from General Growth.

Macy's currently operates about 880 stores in 45 states, the District of Columbia, Guam and Puerto Rico.

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Lowe's appoints new customer experience leader
By Deena M. Amato-McCoy
Chain Store Age
October 28, 2016

To bolster its omnichannel efforts, Lowe's promoted Michael McDermott to chief customer officer.

McDermott, who currently serves as Lowe's chief merchandising officer, will be responsible for creating experiences that best serve customers and differentiate Lowe's in an omnichannel environment. This includes leading strategies, customer insights, customer experience design and marketing.

He will also continue to oversee the company's full merchandising offering for all Lowe's U.S. stores and Lowes.com, as well as all global sourcing activities. He will report to Robert Niblock, Lowe's chairman, president and CEO.

McDermott will succeed Michael Jones, who is leaving to pursue new opportunities.

McDermott joined Lowes in 2013 as senior VP and general merchandising manager — building and maintenance, and was responsible for Lowe's lumber and building materials, millwork, hardware and tools and rough plumbing and electrical divisions. Prior to Lowes, he served as sales leader — appliances for General Electric, and was also a member of the company's corporate commercial council.

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Amazon Takes Hit as Costs Surge
By Laura Stevens
The Wall Street Journal
October 28, 2016

Results disappoint as retail giant invests heavily on warehouses, trimming delivery times.

Amazon.com Inc. posted its lowest quarterly profit in a year as it invested heavily to meet consumer demand for more orders delivered faster.

The online retail giant said Thursday that opening new warehouses and shipping items with shorter delivery times caused its costs to soar in the third quarter. The company predicts heavy investments will continue through the rest of the year. Amazon opened 23 warehouses worldwide to fill orders since July, after opening just three in the first half of the year.

Adding those warehouses "was a big undertaking," said Chief Financial Officer Brian Olsavsky on a media call Thursday. But he said it puts the retail giant in a good position to handle the flood of holiday orders in the fourth quarter.

The company's shares fell more than 6% in after-hours trading on concerns about the higher spending, as well as a holiday outlook that fell short of expectations.

The results show "Amazon is still in investment mode, and the Street should not necessarily expect linear growth in profitability," said Robert W. Baird & Co. analyst Colin Sebastian.

The company has been pushing its $99-a-year Prime membership program to broaden its base of loyal shoppers who often spend double their non-Prime counterparts on the site, analysts estimate. Prime promises free, fast shipping on millions of items on its site and access to video content and other perks. As the membership grows, Amazon is getting more items to the front door in as fast as anhour, increasing its shipping costs 43% in the third quarter to $3.9 billion.

"We acknowledge that's expensive," Mr. Olsavsky said. But "customers love it."

The retail giant has started laying the groundwork for its own shipping business to add more delivery capacity for the holidays, with the grander ambition of one day hauling and delivering packages for itself, other retailers and consumers, according to people familiar with the matter.

It is leasing 40 planes to carry goods and buying branded truck trailers, but the investments it is making to build its own logistics operations generally break even or save on costs, Mr. Olsavsky said.

Amazon accelerated its investments in its own transportation capabilities after the major delivery carriers during the 2013 holiday season failed to deliver all its orders in time.

Amazon also is shipping more units because it has expanded a program to handle third-party seller merchandise, Fulfillment by Amazon. The company has been adding warehouses in part to accommodate that increase.

The quarter marked Amazon's sixth consecutive of profit after seesawing in and out of the black since its stock market listing nearly 20 years ago, despite reporting robust sales increases.

In all, its earnings rose to $252 million in the third quarter, or 52 cents a share, from $79 million, or 17 cents a share, a year earlier. Analysts surveyed by Thomson Reuters expected earnings of 78 cents a share.

Sales of $32.7 billion were nearly eclipsed by operating expenses which climbed 29% to $32.1 billion. The investments caused Amazon's operating margin to come in at 1.8%, below the second quarter's 4.2%.

Other areas where Amazon significantly increased its spending include promoting its video content. It is also building out teams for its Amazon Web Services cloud-computing division, and its Echo speaker device and Alexa artificial- intelligence assistant, as well as investing in its operations in India.

AWS, which has become a major factor in Amazon's profitability, increased sales by 55% to $3.23 billion. Chief Executive Jeff Bezos has said he expects AWS, which rents computing power to a variety of startups, government agencies and other corporations, to reach $10 billion in sales this year, even amid competition from Microsoft Corp. and Alphabet Inc.

Amazon issued revenue guidance of $42 billion to $45.5 billion for the fourth quarter, when holiday sales— and its ability to deliver those orders on time—are critical to its success. Analysts were looking for $44.6 billion, according to Thomson Reuters.

Amazon reported a loss of $541 million for its international segment, steeper than its loss of $208 million a year ago. On the conference call with analysts, Mr. Olsavsky attributed that to spending on expansion, including in India, something that should continue into the fourth quarter.

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Sears sweetens reward for MasterCard 'Shop Your Way' shoppers
By Gina Acosta
Chain Store Age
October 26, 2016

Starting Nov. 1, more than 5 million Sears MasterCard holders whose cards are linked to the Shop Your Way program will earn more Shop Your Way points at Kmart and many of their favorite retailers.

These Sears MasterCard holders will automatically earn more Shop Your Way points on a complimentary basis through December 31, 2017, including:

    • 5% back in points on eligible purchases made at gas stations;
    • 3% back in points on eligible purchases at grocery stores and restaurants
    • 5% and 3% back on the first $10,000 of combined eligible purchases made on gas, groceries and restaurants and 1% thereafter
    • 2% back in points on eligible purchases made at Sears and Kmart; and
    • 1% back in points on all other eligible purchases.

Points can easily be redeemed on purchases ranging from everyday household consumables to larger items such as kitchen appliances sold by Sears and Kmart in store or online and on ShopYourWay.com.

There is no minimum redemption threshold and no need for certificates or gift cards — members can see their points online or on their Shop Your Way app and instantly redeem them towards their purchases in store or online. Points earned with the card are also combinable with other Shop Your Way point offers through Shop Your Way partners such as Uber, Liberty Mutual Insurance, Pure Talk, Groupon, Avis Budget Group and more. Visit shopyourway.com/partners to view current partner offers.

"By deepening our longstanding relationship with Citi through this important partnership, it enables us to deliver a best-in-class offer that rewards Shop Your Way members for activity in their daily lives," said Edward S. Lampert, chairman and CEO of Sears Holdings. "We are focused on making the card a core element of the Shop Your Way member offering as it supports the program's generous rewards, partnerships and experiences. Enhancing Shop Your Way benefits for Sears MasterCard holders is the latest step in the evolution of the Shop Your Way program and is another example of how we are transforming Sears Holdings to focus on serving our members in a wide variety of ways."

In addition to the enhanced Shop Your Way rewards benefits, the Sears MasterCard also provides a broad range of built-in, comprehensive benefits, including:

    • Special financing offers at Sears and Kmart
    • Exclusive cardholder savings events
    • EMV technology
    • Online account access
    • Zero liability on unauthorized purchases

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Moody's: Slow supply chains are department stores' Achilles heel
By Marianne Wilson
Chain Store Age
October 25, 2016

Relatively slow supply chains are hindering department stores' ability to compete effectively in today's retail market.

That's according to a new report by Moody's Investor Service, which finds department stores fighting to stay relevant in a world in which consumers have rapidly prioritized value and convenience as pricing becomes more transparent, and in which consumers are shifting to off-price retailers and online shopping. Aggregate operating income of department stores is expected to decline approximately 11% this year.

"Consumers today have access to a broad array of goods at the most competitive prices, which has spurred retailers across the industry to accelerate their efforts to compete more effectively," said Moody's VP Christina Boni. "Department stores have been the hardest hit, with relatively slow supply chains their biggest Achilles' heel."

Department stores suffer inventory backlogs when consumer demand suddenly shifts, according to the "Department Stores Battle to Stay Relevant" report. Big markdowns to clear merchandise at such major players as Macy's and Nordstrom have dampened consumers' willingness to pay full price for goods. The markdowns also underscore department stores' supply chain challenge.

"Unlike department stores, the off-price incumbents continue to achieve impressive results thanks to their ability to purchase high volumes of disparate goods closer to the time they're likely to be purchased," Moody's stated.

Online sales have become an essential source of growth for department store operators. Nordstrom and Neiman Marcus have made the most notable progress in this regard, according to the report, building out their technology platforms and fulfillment capabilities to increase their e-commerce penetration to nearly 20% and over 25% of total sales, respectively. By contrast, most regional department stores lag, at less than 10%.

In the face of increasing online sales, one of the industry's biggest challenges will be to maximize use of square footage. Moody's views department stores' physical locations as a competitive advantage in their efforts to increase online sales, since they facilitate product pick-up and returns. But as the long-term mix of online versus in-store purchases continues to unfold, operators may need to close some stores or reduce the size of existing ones.

The good news is that many department stores have cut back inventory, which has better positioned them for the upcoming holiday season, and even into 2017, according to the Moody's report. As they roll out or continue to implement new approaches to the business of selling, operating income is expected to grow more than 4% next year, as stores' sales pipelines and margins improve as a result of better inventory management.

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Target's next limited edition collection to feature another big name
By Marianne Wilson
Chain Store Age
October 20, 2016

Target Corp. is letting the cat out of the bag early with regards to its next limited edition apparel collection.

The retailer announced its limited-edition spring collaboration will be with popular designer Victoria Beckham. The collection will be available April 9, 2017, at all Target stores and Target.com, the collection. In addition, select pieces from the collection will be available for sale internationally via Victoriabeckham.com.

With more than 200 items and a price range from $6 to $70, the line will feature apparel and accessories for women, girls, toddler and baby. The collection is described as feminine and functional, and will feature soft pastels, bright pops of color and spring prints. The collaboration with Target marks the designer's first foray into childrenswear.

"Victoria Beckham is synonymous with impeccable style, and she's known around the globe for her distinct point of view as a designer," said Mark Tritton, executive VP and chief merchandising officer, Target. "It's been incredibly exciting to see how Victoria's brand has evolved over the years, and we are thrilled that Target's guests will be a part of that journey with this latest must-have collaboration."

As to Target announcing the collaboration so early out, Fortune speculated that it will allow Target to track the response on social media, which will help the retailer better gauge demand for the collection and adjust accordingly.

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Sears CEO thinks the company won't go belly up just yet
By Daniel Kline
The Motley Fool
October 20, 2016

There was a time when Sears dominated the retail space in the United States.

The company had a massively successful catalog and a number of house brands that had a reputation for quality. Sears may never have been a sexy or trendy place to shop, but it was a steady pillar of many communities, anchoring malls while giving middle-class people a reasonable place to shop.

Those days, however, have long since passed. The company's catalog shut down in 1993, made irrelevant first by the growth of Wal-Mart and now seemingly ridiculous in an internet-driven world. In fact, the early 1990s may have been the beginning of what has been a long slide for the chain.

Sears has been struggling to find a business model that works in a world dominated by rivals including Wal-Mart and Amazon.com. Sears merged with Kmart in 2004, creating Sears Holdings, and it has been steadily losing money while getting smaller.

It's a trend that, coupled with ongoing losses and the company having to borrow money from a hedge fund controlled by CEO Eddie Lampert, makes it reasonable to consider whether Sears and Kmart may be on their way out. Most specifically, many shoppers have seen Kmarts closing around the country, leading to questions about whether that brand has a future.

Lampert says it does and he has posted an impassioned message attempting to reassure consumers as the critical 2016 holiday season approaches.

What the CEO is saying

In a post on Sears Holdings' blog, Lampert laid out some of his strategy to revive both brands, pointing to a new partnership with Shop Your Way (an online shopping service owned by the company), Sears Auto Centers, and Uber as an example of how the company is being transformed. He also specifically addressed the rumors that Kmart would soon be shut down, calling them "frequent false and exaggerated claims."

"Recent reports have suggested that Kmart will cease its operations. I can tell you that there are no plans and there have never been any plans to close the Kmart format," he wrote. "In fact, we've been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innovations and Shop Your Way. To report or suggest otherwise is irresponsible and is likely intended to do harm to our company to the benefit of those who seek to gain advantage from posting these inaccurate reports."

Lampert noted that Kmart still has over 700 locations, with a "significant number" of them already achieving profitability. He explained that the company's goal is to improve the performance of unprofitable stores, but he did acknowledge that any locations that could not be improved would be closed.

"... we have been clear that we are intent on improving the performance of our unprofitable stores and, if we cannot, we will close them. Actions to improve our store productivity, including reducing inventory stored in the stockrooms, are designed to make our stores easier to operate and to eliminate unproductive inventory and processes," he wrote. "Decisions to close stores are never easy, but we recognize that the way people are shopping is changing significantly. This is why we have made major investments in our online and mobile platforms and this is why our focus on serving members through Shop Your Way is so important."

Not done yet

While there have been numerous media reports suggesting that Sears Holdings will close Kmart or shut down entirely, it's worth noting that the company still has considerable assets. That includes a large amount of real estate as well as house brands including Craftsman Tools, Kenmore appliance, and DieHard car products.

"We have a process under way to create value by positioning our Kenmore, Craftsman and DieHard businesses as well as our Sears Home Services business to benefit from broader distribution and partnerships that will allow them to grow beyond Sears Holdings," Lampert wrote. "We also possess a significant portfolio of real estate assets with an opportunity to create value through improving our retail productivity and by monetizing them in a variety of ways."

The CEO was clear that the company would be aggressive in closing locations where it can't make money, but he also made it clear the chain expects to continue to operate, even if its focus shifts.

"We expect to end up with a large chain of stores, some owned and some leased, but with a company focused on serving members broadly through Shop Your Way rather than exclusively or predominantly through our stores," he wrote. "Our stores remain extremely important to our future, but as part of an overall focus on serving our Shop Your Way members."

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ShopperTrak: Black Friday to reign supreme; new date for Super Saturday
By Marianne Wilson
Chain Store Age
October 19, 2016

Black Friday may have lost some of its allure in recent years, but it still comes out on top in a ranking of the busiest shopping days.

Black Friday, which falls on Nov. 25 this year, took the No. 1 spot in a ranking of the anticipated 10 busiest shopping days of 2016 by ShopperTrak, a Tyco Retail Solutions business unit. The second and third busiest shopping days are expected to be Monday, Dec. 26 and Friday, Dec. 23. (See end of article for the complete list.)

In a departure from recent past years, Super Saturday (the last Saturday before Christmas) is not expected to be a top ten busiest day because this year it falls directly on Christmas Eve. This shift will elevate the importance of Monday, Dec. 26 and Friday, Dec. 23, which are historically more significant shopping days when they either fall on a weekend or extend a weekend.

"This year, we are dubbing December 17 Super Saturday because we expect it to be the busiest Saturday of December," said Brian Field, senior director of advisory services at ShopperTrak. "However, it will be no match for Black Friday, which will be the busiest shopping day of the holiday season."

ShopperTrak found that operating on Thanksgiving Day impacts primarily the distribution of traffic, rather than the overall traffic count.

"Based on our findings, it's clear that Thanksgiving Day openings may risk more in operating costs than in expanding sales opportunities," Field said. Not to mention, opening on Thanksgiving has serious implications on staff morale.

Here is ShopperTrak's list of the predicted busiest shopping days of the upcoming season:

1. Friday, Nov. 25
2. Monday, Dec. 26
3. Friday, Dec. 23
4. Saturday, Dec. 17
5. Saturday, Dec. 10
6. Saturday, Nov. 26
7. Thursday, Dec. 22
8. Saturday, Dec. 3
9. Sunday, Dec. 18
10. Wednesday, Dec. 21

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Can Sears Holdings Get Anyone to Buy Craftsman Now?
By Rich Duprey
The Motley Fool
October 17, 2016

At this point, would anyone even want it?

It looks as though Sears Holdings chairman and CEO Eddie Lampert is going to have to go with Plan B for the Craftsman brand, after Stanley Black & Decker said it was buying the tool business of rival Newell Brands .

While Lampert has been stripping Sears of anything of value for years, by selling or spinning off businesses like Lands' End, Orchard Supply, and Sears Hometown & Outlet Stores, he may have missed the window of opportunity to shed the quality brands Sears does still own: Kenmore, Craftsman, and DieHard.

The spin cycle

Kenmore, for example, was once the top-selling brand of appliances. More than a decade ago it had an estimated 27% share of the market, but has since seen it dwindle to just 12.7%: Whirlpool and General Electric eclipsed the brand in popularity, and both Lowe's and Home Depot topped it to grab the No. 1 and No. 2 positions, respectively, as places to buy appliances.

So what was left for Lampert to do? A plan for brand extensions.

On the surface it seems like a good idea -- Sears' brands still hold significant mindshare, even if that's less than what it used to be. A smart extension could help revive interest in the core products, too.

Unfortunately, that doesn't seem to be what Lampert has in mind. Instead of taking Kenmore's well-known association with appliances and maybe slapping the name on a related product in the kitchen or laundry room, Sears has decided to venture into the living room with a Kenmore TV. Its plans for network-connected home refrigerators, washers, and dryers seem better thought out, if only just incremental.

Similarly, DieHard tires could work because of the brand's affinity with automobiles. But Bluetooth speakers and earbuds don't carry any natural association with DieHard, and besides, they're commoditized products anyway.

Along those lines, a wifi-enabled Craftsman garage-door opener doesn't seem to really move the needle; internet-connected Craftsman tool storage units make it look like the company's marketing department is reaching for something else they can put computer chips into.

A sale would've solved everything

All this is why rumors of the actual sale of the Craftsman brand sent Sears stock surging 20%. As the company has been spiraling downward for years, with losses widening and an inability to post a single quarter of comparable-sales growth in 11 years, unloading Craftsman tools would likely have infused the balance sheet with a lot of cash. It would be a one-time influx, but investors seem to be getting used to Lampert keeping Sears afloat with regular additions of nonrecurring sources of revenue.

Unfortunately, that isn't to be. Stanley said it was buying Newell's tool division for $1.95 billion, as the company continues its own reorganization efforts by shedding non-core businesses and acquiring new ones, like its recent purchases of Jarden and Elmer's.

Stanley itself has acquired a stable of tool brands over the years, and now owns everything from Black & Decker and Porter-Cable to DeWalt and Oldham, though most came with its 2010 purchase of Black & Decker.

The Craftsman brand would have been a neat, obvious fit for Stanley, but instead Stanley will be acquiring Newell's well-known tool brands Irwin and Lenox, which it expects will lead to earnings accretion of $0.15 per share in the first year and as much as $0.50 per share by the third year.

Yet that means Sears may have no one left to sell the Craftsman brand to, as Stanley will need to focus on integrating this big acquisition into its own operations. Though companies like Makita and Hitachi are possibilities because they also manufacture power tools, and even Snap-on could make use of Craftsman hand tools, Stanley Black & Decker was by far the biggest peer that would have the financial wherewithal to successfully buy the brand.

With Stanley likely out of the running now, Lampert will have to make adding more bells and whistles to Craftsman products into a sound business plan.

Rich Duprey has no position in any stocks mentioned.

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Macy's Flagship Store Debuts New Apple Hub
By NBC New York
October 14, 2016

It's the first U.S. department store to have a hub dedicated to the brand

Customers at Macy's flagship store in New York will be able to wander over from eyeliner to iPads.

Macy's launched an Apple shop Friday at its Herald Square store, the first U.S. department store with a hub devoted to the brand. The shop features a range of products including iPhones, iPads, MacBooks, and the new Nike-branded Apple watch. Staffed by Apple associates, it's on the main floor in the heart of the busy cosmetics and fragrance area.

"This is one of the most sought-after products," Terry Lundgren, the outgoing CEO of Macy's, told The Associated Press. "We really cater to women better than most retail stores do. I do think that we are going to end up creating a business that is more female-friendly."

Beyond the Apple shop, Macy's is also moving to highlight consumer tech at 180 stores. It's rolling out dedicated areas before the holiday season that will include Apple watches but also Fitbits and other "smart" watches. The Herald Square store will have this section as well.

The Apple partnership comes as Macy's is collaborating with other brands to create almost a mini-mall. Macy's and Luxottica Group have a partnership to open LensCrafters optical shops in as many as 500 stores over the next three years. That builds on its collaboration with the eyewear conglomerate's Sunglass Hut brand that has led to Sunglass shops in nearly 700 Macy's locations.

Macy's, once a stellar performer, is aiming to reverse six straight quarters of declines for a key sales measure. It's said it plans to close 100 stores next year and boost its online investments. Like many department stores, Macy's is wrestling with shoppers' shift in spending to home improvement and technology, and away from clothing. As more shoppers move online, it's also trying to create more excitement in the stores.

The partnership with Apple to open a shop, Lundgren said, is "something we've worked on for years."

He expects the Apple area to be the most densely staffed space. The area, near the main 34th Street entrance, has four light wood Apple tables displaying the products similar to those at standalone Apple stores and features bold graphics of the watches on the wall.

The flagship store usually attracts 35,000 to 40,000 customers per week, and about 75,000 during the holidays.

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Commentary on September Sales
Chain Store Age
October 14, 2016

Neil Saunders, CEO of Conlumino, a New York-based retail research agency and consulting firm, offers the following insights on September sales results.

In a sign that the consumer economy is picking up a bit of speed, total retail sales in September increased by 3.4% on an unadjusted year-over-year basis. This is above last month's uplift and is comfortably north of the average growth for the year so far. The trend will be of comfort to retailers as it demonstrates momentum as we move into the all-important holiday season, and also suggests consumers have not been deterred from spending by an increasingly acrimonious election campaign.

Under the total growth figure there are a number of interesting dynamics in play that provide some indication as to how the final months of the year may pan out.

The first of these comes from the foodservice number which, after a summer of relatively shallow growth, is now rising strongly. Some of this is down to the promotions restaurant players have pushed to stimulate spending, but it is also likely related to the gentle uplifts in consumer incomes which have boosted the amount households have to spend on more discretionary purchases.

The outcome for auto sales was also reasonable, although growth moderated somewhat from last month. While many consumers are now buying, or thinking of buying, new vehicles in time for the winter season, it is evident that dealers are having to work ever harder — with discounts, deals and promotions — to win their custom. This is good news for the shopper, but it has undoubtedly take the edge of growth.

Core retail performed reasonably over September, albeit with a slightly lower growth profile than August which was boosted by a solid back-to-school trading period. More modest food inflation also flattened growth as did the continued poor performance of electricals — which failed to be helped by Apple's new iPhones, something not aided by extremely poor availability across most of the United States.

In comparison, clothing growth strengthened thanks to fall weather kicking in across large parts of the country, in contrast to last year's relatively warm spell. That weather also aided home improvement spending as consumers start to prepare their properties for the winter.

As ever, the main loser was the department store segment where sales continue to plunge — a sign that they will likely be the main losers in the critical months ahead.

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Sears Saga to Continue for Some Time, as Company Faces "No Urgency" to Close Stores
By Diana Bell
National Real Estate Investor
October 14, 2016

Sears Corp. recently signaled its intent to exit leases on 17 unprofitable stores totaling 1.7 million sq. ft., and as part of an existing master lease agreement will pay its REIT spin-off, Seritage Growth Properties, rent though January 2017, plus a termination fee equal to an aggregate of one year's base rent. These stores are reportedly Kmart locations, following on a mid-September announcement that Sears subsidiary Kmart will be closing 64 stores. Taken within the context of rumors surrounding Sears Corp. in recent months, these newest closings seem to put the company one step closer to liquidation. So the question remains: as the value of Seritage's holdings grows, does Sears have a strategy to improve its retail operations?

In an Oct. 3 blog post, company CEO Eddie Lampert writes that such a strategy exists, and is being undertaken in part by focusing on a Shop Your Way membership program. Lampert also implies Sears will be able to use proceeds from store sales to shore up its retail division. Media outlets, however, have called the program "a bit convoluted," questioning if the retailer will even be around for the Shop Your Way holiday push it is planning.

"We are acting more aggressively and continuing to evaluate stores as leases expire and as other opportunities present themselves that improve the economics of Sears Holdings. We expect to end up with a large chain of stores, some owned and some leased, but with a company focused on serving members broadly through Shop Your Way rather than exclusively or predominantly through our stores. Our stores remain extremely important to our future, but as part of an overall focus on serving our Shop Your Way members. We are working to restore the company to profitability. Our significant asset base gives us the wherewithal to fund our business, but we don't intend to use our asset value to support losses," Lampert writes.

Retail industry insiders, however, aren't buying it.

"Capital from store sell-offs is not going back into making the brand a better retail destination," says Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City-based retail consulting and investment banking firm. "Their stores are falling apart and their customer service, pricing and selection are not competitive. They cannot compete in the battlefield for retail."

Davidowitz notes that when Lampert first invested in the chain, he bought Sears stock back at more than $150 per share. That stock is now worth approximately $20 per share. "Instead of improving stores, Lampert bought back stock," Davidowitz says. "Customers want great prices, great selection. Both got worse. You can't be in retail and function that way."

Today, Seritage Growth Properties, which launched last year, holds 266 former Sears and Kmart stores, including 31 in joint venture arrangements with mall REITs Macerich, General Growth Properties and Simon Properties Group. According to Greg Maloney, CEO, retail, Americas, at real estate services firm JLL, "These stores would work well being taken by other retailers in expansion modes, which are looking favorably at malls. This repurposing strategy gives Sears the ability to exit the market, if they so choose."

Maloney notes that Sears Holdings faces no urgent need to close stores, given that the rents the company pays are in many cases minimal. "Looking at the current market, Sears and Kmart know what markets they want to exit or enter and where their customers are," he says. "They are assessing stores to see which ones to close and when the right time is. There is no urgency. They are still making money in a lot of these stores compared to rent outlay. It's a good strategy to repurpose unproductive space; it becomes a win-win for customers and landlords."

The big question is how sustainable this strategy is in the long term? The answer could affect not just Sears, but other retailers who are in expansion mode and could be interested in picking up the company's vacated store spaces. Department store chain J.C. Penney is poised as a benefactor, according to Davidowitz, as its targets the same customers as Sears. Seritage is already actively re-leasing the stores, at much higher rents that Sears agreed to during the heyday of department stores and regional malls. Yard House, Nordstrom and Dick's Sporting Goods are among the chains that took up vacated Sears spaces in the last two years, according to The Street.

One factor that might help Sears in capitalizing on its closed stores is that many of its locations are in busy malls, according to Steven Marks, head of U.S. REITs at Fitch Ratings. Those spaces "can get re-leased at multiples of rent being paid, at significant positive leasing spreads."

What's more, regional malls REITs have an interest in investing in Sears and Kmart stores that are located inside or adjacent to their properties, as evidenced by the joint ventures with Macerich, General Growth and Simon. "They want a stake in the fate of these properties," Marks notes.

As a result, he expects that Sears Holdings' Seritage strategy will be a gradual one. "This story will get played out in multiple chapters. Whether they terminate leases is going to play out over a very long period of time," he notes.

Meanwhile, even if Sears continues to close stores, there is still enough demand for retail space to allow the market to absorb the vacant spaces with relative ease, Maloney says.

"Every time there is a retailer in financial trouble it is reported as a doomsday scenario. But we've made it through all retail closures, "he notes. "The market will absorb the space, and landlords will adjust it for the best use, especially as shopping centers become shopping destinations, the center of town, retail hubs."

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Sears names new CFO
By Will Racke
Chicago Business Journal
October 14, 2016

Sears Holdings is promoting a senior vice president of financial planning to the company's top finance job.

The Hoffman Estates, Illinois-based retailer announced that Jason Hollar has been named chief financial officer, effective immediately.

The move comes after Sears had said former CFO Robert A. Schriesheim would depart the company to focus on his other business interests and pursue other career opportunities.

Hollar joined Sears Holdings ( NASDAQ: SHLD) in October 2014 as senior vice president of finance, with responsibilities for overseeing financial planning and analysis, the business finance relationship with centralized finance, and procurement. He previously worked in top finance roles for Delphi Automotive and Lisle, Illinois-based Navistar.

"We are fortunate to have a deep bench of finance leadership as Sears Holdings continues to transform its business to an asset-light organization centered on its Shop Your Way program powered by our integrated retail innovations," said Sears Chairman and CEO Edward Lampert in a statement. "In his time with the company, Jason has been focused on driving efficiencies and creating value as our company undergoes rapid change."

Sears has struggled through a series of losses in recent years as consumers have shifted their business away from big-box retailers and malls to online shopping. Last month, Fitch Ratings identified Sears as an "at-risk" company for bankruptcy, given long-term challenges such as the rise of e-commerce, sagging mall traffic, and wavering brand popularity.

In its most recent financial disclosure, the retail pioneer reported a second-quarter adjusted loss of $217 million.

As the Chicago Business Journal previously reported, Lampert's hedge fund, ESL Investments Inc., is providing Sears with $300 million debt-financing loan that will be secured against Sears' inventory, receivables and other working capital. The loan comes on top of a $125 million loan that Lampert made to the company in April.

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Sears lawsuit alleges store sales to benefit CEO
By Robert Channick
Chicago Tribune
October 13, 2016

A shareholder class action lawsuit has been filed against Sears Holdings alleging the company's plan to sell its prime real estate holdings to a trust controlled by CEO Eddie Lampert would strip the struggling retailer of one of its last remaining valuable assets, leaving it a debt-laden, money-losing renter in its own stores.

The proposed $2.5 billion sale, the suit says, will benefit Lampert at the expense of shareholders and hasten the demise of Sears, once a quintessential American retailer.

"The proposed transaction is a financially and structurally unfair deal," the lawsuit says. "Sears and its stockholders would receive a severely inadequate cash payment that the defendant Lampert-controlled company may use to cover operating losses and debt obligations for another year or so, before stockholders are left holding the bag in an insolvency widely viewed as inevitable if the proposed transaction occurs."

The proposed transaction would sell 254 Sears stores to Seritage Growth Properties, a real estate investment trust created by Sears Holdings. Lampert, a hedge fund billionaire who owns 49 percent of Sears Holdings, would control both the Hoffman Estates-based retailer and the newly formed REIT. The transaction is expected to close this month, with Seritage leasing the stores back to Sears at a cost of $150 million to the retailer in the first year.

The lawsuit, filed late Friday in Delaware Chancery Court, names Lampert, Sears Holdings, Sears board members and Seritage as defendants. It seeks to stop the proposed transaction, saying the $2.5 billion purchase price is a "paltry" amount that in the face of ongoing operating losses makes imminent insolvency a likely outcome for Sears.

"The complaint contains numerous factual misstatements and is legally without merit," Chris Brathwaite, a Sears spokesman, said in a statement. "The company plans to contest it vigorously and believes the proposed real estate investment trust transaction will provide substantial benefits to Sears Holdings and its shareholders."

The suit was brought on behalf of Sears shareholder John Solak by Robbins Arroyo, a San Diego-based law firm.

Craig Johnson, president of Customer Growth Partners, a retail research and consulting firm, was not surprised that the proposed sale-leaseback transaction would concern existing Sears shareholders, given Lampert's controlling interest in both the buyer and seller. "Shareholders don't want to be played for chumps," Johnson said. "They're rightfully guarding their interests."

The retailer has seen its sales decline since Lampert combined Sears and Kmart in an $11 billion deal in 2005. The company reported losses of $1.7 billion last year, with revenue declining nearly 14 percent to $31.2 billion.

Sears Holdings closed 234 stores last year. At the end of its fiscal year Jan. 31, Sears Holdings operated 1,725 stores, including Sears, Kmart and Sears Auto Centers, 684 of them in properties it owns. That's down from 3,949 stores at the end of its 2010 fiscal year.

In recent years, the company has spun off assets including Orchard Supply Hardware and Sears Hometown and Outlet stores, as well as Wisconsin-based Lands End, one of the few bright spots in the Sears Holdings portfolio.

The proposed sale, announced April 1, would transfer some of the best-performing Sears and Kmart stores to the real estate trust, the lawsuit says. As part of the transaction, the REIT has the right to capture half of the store space in the properties to rent to other tenants, shrinking the footprint of Sears and Kmart stores. Consumer electronics may disappear from some stores as they get smaller.

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The startup side of Sears: Retail giant's WallyHome sensor company grows rapidly after acquisition
By Todd Bishop
GeekWire
October 11, 2016

One of the people who sometimes jumps into the Slack channel for the Seattle-based WallyHome sensor company is a colleague named Eddie — offering support and guidance from his office in the Miami area. That would be Edward S. Lampert, CEO of Sears Holdings Corp., which acquired WallyHome a year ago.

Lampert sees WallyHome and the Internet of Things "as a big opportunity," said Ryan Ciovacco, Sears president of Connected Living and WallyHome, in an interview this week. "He's given us a lot of autonomy to do what we need to do. Obviously he gives guidance, but he has allowed us to do a lot, and the rest of the company has followed suit in supporting us."

With that support from the top, WallyHome has grown rapidly — now employing about 60 people, up from six when the retail giant acquired the WallyHome sensor technology from Seattle startup SNUPI Technologies, a University of Washington spinoff company, in October 2015.

The big bet by Sears on WallyHome is especially notable and potentially significant given the current struggles of some of the company's traditional retail brands.

The existing WallyHome technology detects water leaks and alerts homeowners and building managers to problems caused by changes in moisture, temperature and humidity. But the company is working to expand the capabilities of the WallyHome system well beyond water and moisture. In the future, executives say, the base station will work with a variety of connected devices and sensors, from WallyHome and other companies.

As an initial step, WallyHome just released its first new product since the Sears acquisition: a WallyHome Starter Kit with a redesigned base station and sensor for $100. Individual sensors cost $35. That's a major departure from the pricing strategy for WallyHome under SNUPI, which sold a base station and six sensors for about $300.

New features of the system include the ability to detect open doors and windows.

Other new features include a digital speaker in the base station for leak notifications, and a battery backup in the WallyHome hub in case the power goes out. The sensors also include a local alarm, supplementing the text messages, mobile notifications from the WallyHome app, and automated phone calls that users can receive when the system detects something wrong.

The new base station uses industry standard connected-home radios, and "over time, it will become compatible with more and more connected home products," said Parag Garg, Wally Labs chief technology officer and chief product officer, and vice president of Sears Holdings.

"This is the shot across the bow," Garg said. "This is our start. But there's definitely a lot more that we're doing. We're being thoughtful about how we're doing it. It's not, for us, about demonstrating 50 compatibilities that customers may not find interesting right away. It's about making sure that we're solving for specific pain points and thinking those through."

In addition, the company is testing a possible paid service that would offer WallyHome users live assistance via phone, allowing a customer service agent to guide a user through the process of shutting off the water or otherwise mitigating a leak or other problem in the home. The agent could also dispatch a technician or contractor via Sears Home Services to fix the problem.

WallyHome is also working on integrations with some Sears home appliances, leveraging another of the company's traditional product lines.

"We want to own the health of the home," Ciovacco said. "The overall vision is really a full solution."

In pursuing its connected-home services strategy, Sears is competing against a wide variety of existing players, ranging from tech giants such as Amazon to startups and device manufacturers. Ciovacco and Garg both worked previously at Amazon, among other companies. Sears Home Services also established an engineering center in downtown Seattle last year.

WallyHome traces its roots to technology developed inside the University of Washington by professor Shwetak Patel. It spun out of the UW under the corporate umbrella of SNUPI Technologies, led by veteran entrepreneur Jeremy Jaech. Prior to the Sears acquisition of WallyHome, SNUPI laid off a significant portion of its staff and shelved the Wally sensors after it was unable to raise additional venture funding.

Under Sears, the company has been able to rehire some of those former SNUPI employees in its Seattle office, next to the University of Washington campus, where the bulk of the WallyHome team now works. WallyHome also has employees at Sears headquarters in Hoffman Estates, Ill., in downtown Chicago, and in India and Asia. The company also maintains ties to the UW through internships and other initiatives.

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Sears' loyalty members get 'holiday bonus'
By Deena M. Amato-McCoy
Chain Store Age
October 11, 2016

Sears is launching a new program designed to give its loyal shoppers the best shot at holiday promotions.

Members of the chain's Shop Your Way loyalty program will get a jump on their holiday shopping during this weekend's "Sears Days Lowest Prices of the Season Member Bonus Event." However, there is always a chance these items could be further discounted as the holiday season ramps up.

If any items bought in-store during the bonus event are discounted in the same store through Dec. 24, the retailer's "Sears Holiday Guarantee" program will automatically credit Shop Your Way members with the difference in points. All members are automatically eligible for the Sears Holiday Guarantee service.

"More people are starting their holiday shopping early, so we wanted to do something for those members to help them get a jump start on their gift lists," said Joelle Maher, president and chief member officer for Sears. "It's the perfect combination of beating the holiday rush and peace of mind knowing you're getting the best deals of the holiday season — guaranteed."

Shop Your Way, Sears' free social shopping destination and rewards program, offers millions of products, personalized services and advice, according to a company statement.

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More Good News for Retailers
By Marianne Wilson
Chain Store Age
October 10, 2016

Yet another holiday forecast brings more good cheer to retailers.

Consumers plan to spend an average of $636 on holiday-related expenses, up 3% from what they anticipated last year, according to The NPD Group's 2016 Holiday Purchase Intentions Survey. They are also less concerned this year about the economy spoiling their holiday fun. When asked how the state of the economy will influence holiday purchases in 2016, the 12% who said it will have a "significant impact" is down from recent years (14% in 2015, 19% in 2014).

"All signs point to a holiday retail season that will outperform last year's," said Marshal Cohen, chief industry analyst, The NPD Group. "The unvarying holiday spending intentions expressed by consumers are a sign that even this year's intense election cycle has done little to dampen consumer confidence going into the holiday season, which we forecast to grow moderately."

Consumers also plan on shopping more through online channels this year. On average, shoppers plan on doing 38% of their holiday shopping online (up from 33% last year). But in looking more specifically at where consumers plan to shop during the 2016 holiday season, growth is apparent across the marketplace, from online- only retailers to toy stores to specialty retailers in the beauty category and most other purchase channels in between, according to NPD.

"Consumer response is suggesting growth across retail channels, despite the growth and dominance of online shopping, which points to a sense of optimism," said Cohen. "The lack of stand-out, must-have products this holiday season is benefiting the categories that are delivering on basic consumer wants, but marketers need to find new ways to engage and excite holiday shoppers to drive significant growth."

Six in 10 consumers are looking forward to the holiday season, and nearly half say the simple act of going out shopping during the holidays puts them in the holiday spirit.

"Consumers are ready to spend this holiday season," Cohen said. However, more than ever before, how much they spend will be determined by their own perception of the products and promotions they are presented with, rather than the simple fact that the products and promotions are there."

In other survey findings:

• Early shoppers are more likely to say they comparison shop before they buy gifts (45% versus 30% of late shoppers) and that they plan on buying all their holiday gifts on sale 38% versus 21% of late shoppers).

• Late shoppers may not have time to pick up a little something for themselves — they're less likely than their early shopper counterparts to say that when they shop for others, they also shop for themselves (15% versus 26% of early shoppers).

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Wal-Mart Makes Risky Bet It Can Loosen Amazon's Grip Online
By Shannon Pettypiece
Bloomberg Technology
October 7, 2016

Wal-Mart Stores Inc.'s increasing reliance on e-commerce to fuel sales comes at a time when Amazon.com Inc. is tightening its grip on the American consumer, making it a risky gambit.

Wal-Mart told investors yesterday it would pull back on the number of new stores it was opening and instead invest some of that money into online operations. It's a key milestone: For the first time, the company expects e-commerce gains to contribute more toward its growth than expanding its brick-and-mortar footprint.

Analysts and investors are skeptical that Wal-Mart can pull it off. Consumers are rapidly getting ingrained in the habit of turning to Amazon for everything from toilet paper to a new dress. Among U.S. online consumers, 55 percent say they go to Amazon first when searching for a product and about half of American households have a $99-a-year Amazon Prime membership. U.S. shoppers spend 30 percent of their time online at Amazon.com's website, compared with 3 percent on Walmart.com.

"I get that you have to be in e-commerce, but you are chasing the 800-pound gorilla," said Brian Yarbrough, an analyst with Edward Jones & Co. "You aren't going to out-Amazon Amazon."

Cannibalizing Stores?

Yarbrough worries that Wal-Mart's growth online will mostly be coming from its existing customers -- and as a result will cannibalize its stores, which are more profitable and where customers are more likely to make an impulse buy. At the same time, Amazon has been increasing its reach into Wal-Mart's customer base. Forty-two percent of Amazon Prime members are also Wal-Mart shoppers, compared with just 20 percent in 2013, said John Blackledge, an analyst at Cowen & Co.

And there are no signs Amazon is slowing down. It is set to add 12 million Prime members this year, on top of the 10 million it added in 2015, Blackledge estimates. With at least 17 times as many items for sale as Walmart.com, Amazon is increasingly expanding its reach into areas once dominated by traditional retailers. This year, Amazon is set to sell more apparel than Wal-Mart, and by 2018 it will be the second-largest seller of consumables, such as cleaning suppliers, paper towels and diapers, Blackledge said.

Speedy Delivery

Then there is Amazon's ever-increasing delivery speed. While Wal-Mart is in the early stages of offering a membership program where customers can get free two-day shipping -- rather than waiting the standard five to seven days -- Amazon is offering free same-day delivery in 27 major cities. In some markets, the e-commerce company delivers millions of products within an hour.

"To compete, Wal-Mart would have to replicate the value proposition of Prime," Blackledge said. "If they could do that at scale, then they would have something, but Amazon has been singularly focused at this for 20 years."

None of that should be news to Wal-Mart Chief Executive Officer Doug McMillon. He knows the company has a lofty goal in front of it, but since paying about $3.3 billion for e-commerce startup Jet.com, McMillon seemed to have a bit more spring in his step when talking to investors about the company's online strategy.

Pieces in Place

"A lot of the foundational elements that we've been telling you for years that we needed to grow the e-commerce business are now in place," McMillon said. "It's time to invest more money. It's time to really get this going and start growing our e-commerce business in a different way."

That new way will be led by tech-industry darling Marc Lore, who founded Jet.com and joined Wal-Mart following the acquisition. McMillon sees him as key to the company's future. The CEO half-jokingly recalled walking down the street with Lore and instinctively stepping out in front of an oncoming car to protect him.

"If Marc can be Marc within this company, great things are going to happen," McMillon said.

Wal-Mart expects online sales to grow 20 percent to 30 percent over the next three years with the addition of Jet. That would be a major acceleration: Online sales grew 7 percent in the first quarter and 12 percent in the second. But even 20 percent growth on a base of about $13 billion does little to move the needle at a company with nearly $500 billion in annual revenue.

Costly Effort

In the meantime, the investments are taking a toll on Wal-Mart's bottom line. The company said profit would be flat next year in part because of the heavy spending online.

Wal-Mart shares fell 3.2 percent Thursday when the retailer's executives made their case to investors, and the stock was down an additional 1.2 percent on Friday.

The question is whether Wal-Mart can change the shopping behavior of the tens of millions of Americans already entrenched in Amazon. Is Wal-Mart the retail equivalent of Microsoft Corp.'s Bing, which tried and failed to convince Americans to break their habit of going to Google? Or can Wal-Mart -- with Jet.com -- be a disruptive force in the industry?

"If someone is locked into Prime, the chance of you bringing their business over is slim," Yarbrough said.

Store Pickup

Wal-Mart's main selling point has been its physical stores, which let shoppers buy items online and pick them up on the premises. That includes having employees deliver groceries to customers' cars in the parking lot. Wal-Mart has expanded its grocery pickup service from five test markets a year ago to more than 100 markets now. The service has the potential to drive regular traffic to Wal-Mart's website, where customers may think to pick up extra nongrocery items.

Jet.com may help give it an advantage on price. The startup has developed a system where customers pay less if they are ordering items from the same location or if they opt out of services, like the option to return the item. Lore also said using store pickup and sending items from the store could help cut shipping costs.

But adapting to the internet isn't really a choice -- it's an imperative. And that's something Wal-Mart founder Sam Walton would recognize, McMillon said on Thursday.

"The Internet and technology are changing the world, they are changing industries, and they're changing retail," he said. "Sometimes people ask me what would Sam think about what Wal-Mart is going today, and I don't know. But the one thing I know for sure is we would be changing and we'd be changing quickly."

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Sears Holdings backtracks as Craftsman sale excitement fades
By Clark Schultz
Seeking Alpha
October 7, 2016

Sears Holdings is lower as the excitement over a potential sale of the Craftsman brand fizzles out.

The math doesn't quite add up on Sears in a conventional way with Craftsman rumored to be valued at $2B and the current market cap of the company only at $1.17B.

It's also getting difficult for investors to ignore the question of bankruptcy. A couple of weeks ago Sears ended up on a list put together by Fitch Rating of retailers that could face a bankruptcy

"Brand degradation and competitive pressures to either price or experience can be real threats to the survival of struggling retailers," stated Fitch director Sharon Bonelli in a general way.

Naturally that contrasts with what Sears CEO Eddie Lampert wrote in a blog post a few days ago.

"While the retail environment generally has been challenging and we won't be able to restore profit immediately, we are focused on executing our plan and establishing a foundation from which Sears Holdings can grow for years to come."

SHLD -3.85% to $11.49.

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Ailing Sears is a test of CEO Lampert's survival instinct
By Robert Reed
Chicago Tribune
October 7, 2016

The holiday buying season is approaching and with it comes a package of questions about the fate of Sears, Kmart and company CEO Edward Lampert.

Financial and retail experts have long predicted catastrophe for this franchise, which has suffered from more reorganizations, store closings, deep cutbacks and fiscal pain than any business deserves. Sears hasn't found a long-term profitable core and critics argue that Lampert, a renowned hedge fund player who in 2013 became Sears Holdings Corp. CEO, should face the fact that his damaged retailer is a goner and get on with the funeral.

Yet this spreadsheet analysis may just be whistling in the dark because it doesn't account for one important human factor: Edward Lampert's unrelenting survival instinct.

A case in point: In 2003, staying alive was literally Lampert's objective after being kidnapped by four masked men while he was leaving his Connecticut office. The harrowing experience reportedly ended 39 hours later after Lampert convinced his kidnappers the police were on their trail and it was in their interest to let him go. The four, who apparently were dumb enough to order pizza with Lampert's credit card, were soon caught, convicted and sent to jail.

Business is not life and death but I expect Lampert's survival instinct has to be in overdrive these days as Sears Holdings deals with its latest multidimensional crisis.

There's plenty going on, much of it worrisome: A recent quarterly loss of $395 million; the summer closure of 68 Kmart and 10 Sears stores and more expected; and a multibillion-dollar debt load even as the company quickly burns through more cash, according to Moody's Investors Service.

A recent industry report says some toy vendors are nervous about shipping to Sears and Kmart because of its financial situation, which could make for a very unhappy holiday sales season. (A corporate spokesman says the company has a strong relationship with vendors and plans to offer "the hottest toys, games" in its stores.)

What's more, the retailer's merchandising efforts and online outreach aren't connecting with enough buyers, especially younger shoppers, argues Howard Davidowitz of the New York-based retail research and investment banking house that bears his name.

"Every time there's an obituary, they lose another customer," Davidowitz said.

Considering these circumstances, a more conventional corporate executive would be tempted to cut and run or, at the very least, humbly bow to the conventional wisdom that time is running out.

But that's not Lampert.

In his blog post on the Sears corporate website Monday, Lampert came out swinging by ridiculing recent reports that Kmart is going out of business as "false and exaggerated claims." In contrast, he talks about plans for making Kmart a "more fun, engaging place to shop".

Lampert, who declined to comment for this column, also boasts of customer prospects, saying the company's push into online retailing is on course, while adding that even if more stores are shuttered Sears Holdings remains among the country's biggest retail chains.

To address its financial issues, Sears already has unloaded the Lands' End clothing brand and spun off selected stores into a real estate investment trust.

A sale or licensing agreement of its respected Craftsman, Kenmore and DieHard brands may be in the wings. And the company is making moves to improve liquidity, including getting a $300 million credit line from ESL Partners, the hedge fund run by Lampert.

Of course, Lampert isn't being altruistic. Lampert and ESL own 50 percent of Sears Holdings stock, so what works for the company will benefit him.

Critics argue that his transformation plan is just a lot of hot air. Lampert is a gifted hedge fund manager but a weak store merchant, they contend.

Based on his tenure, there's a ring of truth to that harsh assessment.

Yet, I'd maintain that before Lampert came on the scene, Sears and Kmart weren't setting the world on fire. Sears had devolved into a giant cluster of confusing big beige department stores and Kmart was on brink of going out of business and holding its own blue-light special.

Moreover, Sears Holdings isn't the only old-school chain getting beat up by the likes of Amazon and other internet sites that have revolutionized how we buy stuff.

Right now, Sears Holdings is in for the fight of its life.

And that begs the question: Can Edward Lampert's uncanny survival instinct save his retail giant from perishing?

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Sears Holdings Still The Walking Dead
By Gary Bourgeault
Seeking Alpha
October 6, 2016

Sears Holdings continues to be on the defensive, as the news and rumors continue to fly in the face of the company not being able to gain traction after raising billions in capital through asset sales or loans over the last several years.

Some of the recent reports have ranged from the Kmart brand being shuttered, the Craftsman brand having suitors willing to pay as much as $2 billion for it, and Fitch saying the company will likely declare bankruptcy some time in the next 12 to 24 months.

On the Kmart rumor, Sears CEO says "there are no plans and there have never been any plans to close the Kmart format."

Maybe so. But unless there is an infusion of capital, which in the short term would be the sale of the Craftsman brand, I don't see how it matters whether or not there are plans in place or not for Kmart to close. That decision would easily be taken out of the hands of management and forced upon them.

Even if the capital is raised from asset sales, past performance points to it only allowing the company to remain on life support until continual weak results brink it to the brink of bankruptcy.

More capital can't safe the failing retailer

The problem with Sears hasn't been raising enough capital, as it's had enough over the last 10 years or so to provide plenty of opportunity to turn the company around if it had a meaningful plan in place, that if executed correctly, would have done so.

The fact it hasn't been able to find a winning strategy to do so only points to the reality it has nothing left in its quiver of arrows to shoot at the problem. Other than an occasional short-term boost from assets sales that give the appearance of gaining traction, Sears is a company investors should stay away from. It's not going to be able to turn things around, and that means bankruptcy is on the horizon.

As the news of a possible suitor for the Craftsman brand confirms, there are opportunities to make money in Sears, as the shares of the company soared almost 20 percent when the news of interest in Craftsman was released. Since then it has pulled back.

All of this isn't to say added liquidity won't help the company, only that past performance and the lack of a visible plan that has a chance of returning the company to growth mode, underscores it's only going to be a temporary fix, and with the loss of Craftsman, if it is sold, will probably hasten the demise of the company, even if it gives it a temporary, short-term reprieve.

Again, Sears has a retail problem, not a liquidity problem. If capital could solve its problems, it already would have done so.

Sears is The Walking Dead

Over the last 4 years or so, Sears has raised almost $5 billion by selling assets or obtaining financing. During that time the revenue for the company has plunged from $41 billion to $24 billion. There is nothing to suggest that won't continue on through this year or next.

Being a smaller company hasn't helped the bottom line either, as over the last 4 quarters it has lost $1.9 billion. For fiscal 2016, according to Fitch, it sees SHLD losing between $1.6 billion and $1.8 billion, following a loss of over $1 billion of EBITDA.

If approximately $5 billion isn't enough to boost the fortunes of the company, what will another $2 billion or so do, and even in the best-case scenario, where all its brands were to sell, it would probably raise somewhere around $5 billion - the same as the last 4 years. Other than underwriting its ongoing losses from a poor performance, it will do nothing to support the company over the long term.

It'll keep the company on life support by buying some time, but the extra time, if it occurs, is increasingly looking like it'll keep the patient artificially alive. After 10 disastrous years, my view is if there was a way to turn the giant retailer around, it would have already happened.

Since 2012, it hasn't enjoyed a full year of profitability, and for 9 years revenue in a row it has had revenue decline. Things aren't getting better for the company, they're getting far worse. More liquidity won't change that, other than giving some short-term opportunities to make some quick gains.

Craftsman, Kenmore and DieHard brands not as compelling as in the past

One thing that concerns me in regard to the brands Sears put up for sale in May, is even though they've been licensed since 2012, sales at the company have continued to decline. It's not clear why and how that would change if they were acquired by a competitor.

Sears to me is considered a retailer of a former generation, and as demographics change through deaths, there is obviously a clear lack of ability for Sears to attract a younger demographic. Maybe a more modern company could rebrand them, but it still means they may not attract the type of premium they would have even a decade ago. It's why even after about 5 months this is the first signs of interest in the brands.

If they were highly sought after, there would have been a number of buyers lined up and bidding on them.

The Craftsman bids are coming due at the end of October, and presumably at that time we'll see how it's being valued. Even so, there is no guarantee a sale will come of this. For the reasons already mentioned, it doesn't really matter.

Conclusion

Sears is dead in the water to me. It has raised billions in capital and continued to lose market share, revenue and earnings. The only future it has is one that temporarily supports the company if it's able to sell more assets to prolong the pain.

If Craftsman and others do end up being sold, my thought is it would make the situation worse for Sears, as it would lose a lot of revenue, even though it has been shrinking. What type of company would remain if these 3 brands are sold?

The problem for Sears is it has lost the ability to compete in today's retailing market, and there is nothing visible that points to it having a chance of changing that. It will continue to lose market share and become a shadow of the shrinking company it is today, whether or not it is able to temporarily gain more liquidity.

Sears has become a short-term play based upon the news cycle. No investor should think because it may raise capital from the brands it has on sale that it will be able to change its direction or future.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this

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J.C. Penney uses 'experiences' to 'reimagine retail'
By Deena M. Amato-McCoy
Chain Store Age
October 5, 2016

It is not easy for a 100-plus year-old retailer to reimagine its retail strategy, but J.C. Penney is doing just that.

To stay relevant in today's competitive marketplace, Penney is changing its focus and creating programs that address how its consumers shop in the digital revolution. The company's executive VP of omnichannel, Mike Amend, provided an insider's look at how Penney is transforming the customer experience in a presentation at Shop.org's "Retail's Digital Summit 2016" event last week in Dallas.

"The biggest barrier of change is being unwilling to change," said Amend. "Most companies are reluctant to change unless there is a disruptor or turmoil within the company."

Penney knows this roadblock too well as the company faced a downward spiral due to leadership changes, as well as unprecedented — and harmful — business models and marketing decisions, all of which contributed to continually sinking sales. Following leadership changes and a renewed focus on the shopper, Penney is now knee-deep in its recovery.

At the helm of this change is the chain's ability to empower consumers to research, navigate and shop their favorite brand in a different way. To set this plan in motion, Penney had to reach back into its roots.

"Our brand was built on delivering extreme value to customers," Amend explained. "This means we can no longer focus on pushing specific products to shoppers. Instead, we need to combine products and services, and deliver 'experiences' that meet our shoppers' needs."

This new mindset prompted the company to deliver a single sales presence versus siloed channels. To support the transition, the department store chain launched a buy online, pickup in-store (BOPUS) pilot.

The service, launched in less than nine weeks, was introduced in the first quarter of 2015. Almost six quarters later, the service is now available in approximately 775 stores, and has a 94% fulfillment success rate, Amend reported.

"We are expediting orders through our stores, and getting merchandise into our shoppers' hands faster and cheaper," he added.

Penney took a similar approach when it merged its channels to create a "prom experience."

"We want shoppers to know prom is not just about the dress, it's an experience," Amend said.

The experience begins online, where many young shoppers begin their journey exploring dresses, Amend explained, Penney's website now includes recommendations for accessories available in-store. Once the shopper enters the store to try on or pick up their gown, the retailer extends the prom experience with signage highlighting the services available at its in-store hair salons (across 800 stores) and Sephora makeup studios (available in 570 locations). Prom-goers can also take pre-prom photos at in-store portrait studios, and find ideas to save these memories at the chain's Pinterest page.

"Our focus is to grow business, increase convenience and leverage our digital capabilities to make our physical channel even better," Amend said.

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Sears exec joins Claire's
By Marianne Wilson
Chain Store Age
October 5, 2016

There is a new finance chief at Claire's Stores.

The retailer has appointed Scott Huckins as its executive VP and CFO, effective Oct. 5. He joins Claire's from Sears Holdings where he served as VP, treasurer and president for Sears Re, (a wholly owned captive reinsurance company) for the last four years. In that role, he had responsibility for global treasury, capital markets, credit, risk management and reinsurance for the company.

Prior to Sears, he served as VP, treasury, tax and investor relations for RSC Holdings, Inc. where he was responsible for global treasury, capital markets, and credit, tax and investor

"Scott is a great addition to the Claire's team. In addition to his extensive capital markets background, Scott fits wonderfully into the new Claire's culture that, together, we are creating, "said Ron Marshall, CEO.

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Will Anyone Buy Craftsman?
By Quinn Foley
Seeking Alpha
October 5, 2016

Sears Holdings shot up 17% on reports that the company is entertaining offers for its Craftsman business. SHLD announced in May that it would listen to offers for Craftsman and a number of its other brands to free up cash in an attempt to save what increasingly appears to be an unsaveable business. At this point, divestitures are the only way out for Sears.

The retailer has been too slow to adjust to changing industry conditions, losing share across brands and product categories. Same-store sales have declined every quarter for the past 11 years, and it's doubtful the company will ever return to profitability. In addition, the company faces major solvency issues with $3.5 billion in long-term debt and a $2 billion unfunded pension liability on the books.

While SHLD is unlikely to generate shareholder value out of Craftsman, a number of competitors might. Interested bidders include Stanley Black & Decker (SWK), Hong-Kong-based Techtronic Industries, Apex Tool Group, and Sweden-based Husqvarna AB. Analysts estimate the brand could go for as much as $2 billion.

Only one of these potential bidders is a serious candidate, in our view. To separate the contender(s) from the pretenders, we took into account the following factors: 1) the amount of synergies that the bidder could capture, 2) the bidder's growth model and strategy for future growth, 3) the bidder's financial health, and 4) any other motivations for an acquisition. This left us with only one true contender: Stanley Black & Decker.

In order to turn Craftsman around and extract value from this ailing business, the acquirer must possess the ability to generate meaningful synergies by integrating Craftsman. SWK can achieve higher synergies than the other bidders for a few reasons.

The company's leading scale means it can achieve greater cost savings through volume growth and fixed-cost leverage than the other bidders. It could further solidify its leadership position by integrating SWK, and this would give SKW more bargaining power over input costs. Unlike some of the other potential bidders, acquisitions have been a key component of the growth strategy for SWK. The company has spent more than $6.2 billion in acquisitions since 2012, and consolidating the tool industry remains a key strategic objective: management plans to spend 50% of FCF on acquisitions going forward.

SWK has a history of extracting cost synergies from acquisitions. Margins have steadily expanded (Figure 1), and ROIC has improved from 7.41% in 2011 to 10.83% TTM. The company plans to expand operating margin to 16% by 2018, but this will likely require additional acquisitions. The housing market is cooling off, and industry conditions have become more competitive. With organic growth slowing, a Craftsman acquisition might be just what SWK needs to meet its targets.

But SWK is by no means a sure shot to acquire Craftsman. The company's leverage ratios are deteriorating due to the amount of debt it has needed to take on to fund its acquisition-based growth model. Net debt accounts for roughly 23% of assets compared to 16% in 2011, and the cash position continues to get worse. Second, it is unlikely that SWK views Craftsman as a competitive threat, and this reduces the urgency with which the company might pursue Craftsman.

Conclusion

There is only one serious contender for Sears's Craftsman brand, and that is Stanley Black & Decker. SWK can extract more value out of Craftsman than the other bidders, and the company's growth model is largely based on acquisitions. Sears investors should keep their fingers crossed that the deal happens, as it is doubtful that Sears will be able to generate shareholder value through internal operations.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Target Goes After Millennials With Small, Focused Stores
By Khadeeja Safdar
The Wall Street Journal
October 4, 2016

Retailer opens shops in cities and college towns as sales slow at big-box suburban outlets

Target Corp. is the latest big-box store to try small boxes.

The chain is opening several smaller stores in urban areas and college towns from New York City to State College, Pa., as it battles declining traffic and sales at its nearly 1,800-strong fleet of largely suburban stores.

Near the University of Minnesota campus, Target opened a store less than 15% the size of an average store. It stocks a limited assortment of products geared toward college students, like miniature ironing boards and twin-size sheets. Ping-pong balls are near the beer. There are no children's toys or strollers.

"We could see hundreds of these," Chief Executive Brian Cornell said. "It could be a huge part of future growth outlook over time."

The retail chain recently reported its first decline in existing store sales in two years and its stock has lost 13% over the past year. Mr. Cornell is trying to reinvigorate sales and better appeal to younger shoppers who are increasingly buying essentials online. Amazon.com Inc., which targets citydwellers for its Prime membership, has recently increased efforts to attract college students.

But Target is attempting to succeed where others have struggled, a sign of the limited options for brick-and-mortar retailers competing with e-commerce. Wal-Mart Stores Inc. retreated from a similar experiment earlier this year, closing more than 100 of its smaller Wal-Mart Express locations to focus on its massive SuperCenters and grocery-store-style Neighborhood Market formats.

Unlike Wal-Mart, which opened its Express stores largely in suburban and rural locations, Target is focusing on densely populated urban areas and customizing the assortment in each store to cater to local tastes.

Target executives say the retailer is ready to move away from its traditional store model to enter new markets. "We had become really good at stamping out the same store in different markets," said Chief Operating Officer John Mulligan. "For these formats, we are rethinking everything."

The new stores—typically less than 50,000 square feet compared with the average Target store of 145,000 square feet—are in spaces once occupied by grocery stores and neighborhood retailers. Target also wants customers to use the new stores as pickup locations for online orders, "as opposed to getting that ugly sticker from UPS or FedEx that says 'oops I missed you,' " said Mr. Cornell.

One is slated to open in New York City's Tribeca neighborhood on Oct. 5 in a space once leased out to a Fairway Market grocery store that never opened. It will sell a larger selection of baby items to target the families living in the area. The store will also have a Chobani Cafe and feature a mural by a local artist.

Mr. Cornell said the new stores are expected to start moving the needle in the company's overall performance in 2017 and 2018. "It brings us into neighborhoods where we don't exist today and where there is demand for our brand," he said.

Some analysts say Target, which has a younger, wealthier consumer base, may have more success than Wal-Mart, while others say the strategy has limited growth potential.

"A store in downtown Manhattan is interesting, but is it scalable?" said Barclays analyst Matthew McClintock. "Wal-Mart couldn't make it work with a better logistical network. It makes you wonder how Target is going to succeed."

Target began trying out urban formats in 2012. The company opened 14 CityTarget and TargetExpress stores over three years and then later rebranded them as Target. As part of its deal last year to sell its pharmacies to CVS Health, it also announced plans with CVS to develop five to 10 small stores over a two-year period.

Mr. Cornell, who became CEO in 2014, has doubled down on "flexible-format" stores, with plans to increase the total number to about 60 by next year. The smallest one so far, near University of California, Berkeley's campus, is less than 10% the size of a typical Target store.

But downsizing can be challenging. With limited space in backrooms and on the floor, small stores require more frequent deliveries to keep items in stock. Big-box retailers also rely on a certain mix of everyday essentials and high-margin merchandise to turn a profit and draw customers to the edited selection. Wal-Mart, for example, carried fewer grocery items in its smallest format and often placed them in the same region as its Supercenters, giving shoppers less re ason to visit. Analysts also say Wal-Mart didn't sell enough high-margin products such as clothing to make the model as profitable as its larger stores.

"We believe the full-sized Neighborhood Markets are better for our customers and leverage our entire infrastructure more efficiently and effectively," said a Wal-Mart spokesman.

To maximize shelf space, Target has been selecting smaller package sizes and fewer brands for many of the same items offered in bulk at its larger stores. The company has also been tweaking the assortment in each store based on sales performance and customer feedback.

Anne Stanchfield, Target's executive in charge of merchandising for the new stores, said figuring out the right mix of merchandise is like a "giant game of Tetris."

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Sears's Craftsman Said to Get Interest From Black & Decker
By Aaron Kirchfeld, Ed Hammond & Lauren Coleman-Lochner
Bloomberg Markets
October 4, 2016

Sears Holdings Corp.'s sale of its Craftsman tool business has attracted bidders including Stanley Black & Decker Inc. and Hong Kong's Techtronic Industries Co., people with knowledge of the matter said.

Other companies such as U.S.-based Apex Tool Group and Sweden's Husqvarna AB have also explored possible offers for Craftsman, according to the people. Final bids, which may value the brand at about $2 billion, are due at the end of the month, said the people, who asked not to be identified because the information is private.

There's no guarantee that the potential suitors will decide to proceed with a formal proposal, the people said. Sears climbed 6.4 percent to $12.10 in New York trading on Tuesday.

The interest "does speak to the fact that this is a venerable brand," said Allison Ames, chief executive officer at Beanstalk, a brand-consulting firm. "There are not that many brands with the heritage and trust of a Craftsman in the home-improvement space," she said.

"Sears just was not in a position to properly invest in it," Ames said. "A company that is in the space can do a lot more with it."

Kenmore, DieHard

Sears announced plans in May to consider options for its Craftsman, Kenmore and DieHard brands as well as its Sears Home Services repair business, signaling the unprofitable retailer may again be turning to asset sales amid continued losses. The Hoffman Estates, Illinois-based company said at the time it hired Citigroup Inc. and LionTree Advisors and would "aggressively" evaluate all alternatives for the businesses.

Stanley Black & Decker, based in New Britain, Connecticut, traces its roots to 1843. It calls itself the world's largest tools and storage company and employs more than 52,000 people in 50 countries, according to its website.

Shares of Techtronic Industries have fallen 4.4 percent in Hong Kong trading this year, giving it a market value of about $7.1 billion. The company, known as TTI, makes Dirt Devil and Hoover vacuum cleaners as well as Milwaukee power tools, Stiletto hammers and Homelite chainsaws.

Representatives for Sears, TTI, Husqvana, Apex Tool and Stanley Black & Decker declined to comment.

The brands being reviewed by Sears -- Craftsman tools, Kenmore appliances, and DieHard auto batteries -- are staples found in many American households and key assets inside the company. Yet their sales have been slipping, even after Sears hired a licensing agent in 2012 to offer them outside of Sears and Kmart stores.

With Sears stores showing little sign of a revival, CEO Edward Lampert has been considering selling off parts of the company to bring in cash. Lampert -- a hedge fund manager who's also the retailer's chairman and largest shareholder -- already has hived off the Sears Hometown and Outlet Stores business and Lands' End clothing brand, while also selling off store locations and moving others into a real estate investment trust.

A sale in the $2 billion range "would be a win and a loss for the company," according to Noel Hebert, an analyst at Bloomberg Intelligence. Proceeds would help defray debt on its KCD subsidiary, which includes the brands, and free up some money for holiday.

"The negative is that it still doesn't fix the bigger challenges," he said. "And now you have disposed of one of your primary assets."

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7 once-dominant retailers that are now on the verge of bankruptcy
By Hayley Peterson
Business Insider
October 3, 2016

Seven major retailers are at high risk of going bankrupt within the next two years, according to a Fitch Ratings report.

The at-risk companies include: Sears Holdings, Claire's Stores, True Religion Apparel, Nine West Holdings, Rue21, 99 Cents Only Stores, and Nebraska Book Company.

If and when the companies named default, it's likely that they will be liquidated, the 114-page report said.

Retailers are almost three times as likely to be liquidated after filing for bankruptcy than companies in other industries, according to the study

For the report, Fitch Ratings analyzed 30 retail bankruptcies — half of which ended in liquidation.

In each case, researchers determined that the same key pressures were weighing on business: declining shopper traffic to malls; the rise of ecommerce; shifts in consumer spending away from apparel and accessories and more toward experiences like dining out and entertainment; and the rise of pricing competition from discount chains like dollar stores and Walmart.

"Most of the retailers at high risk of default are challenged by declining mall traffic, competition from online and other types of retailers, and/or a lack of a compelling product line," researchers wrote. "Highly leveraged capital structures may become unsustainable in the face of these challenges."

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Are Consumers Ready to Buy Furniture Online?
By Khadeeja Safdar
The Wall Street Journal
October 3, 2016

WAYFAIR INC. thinks it can be the Amazon of home furnishings.

The Boston-based company, which has no physical stores and minimal inventory, has become the largest online-only furniture retailer in the U.S. Its revenue jumped to $2.25 billion last year from $1.32 billion a year earlier.

Wayfair undercuts traditional retailers by providing faster and cheaper shipping options. Its website, sporting the tagline "a zillion things home," offers an almost bottomless range of products— more than seven million, from rugs to appliances—shipped directly from a network of more than 7,000 suppliers.

But the 14-year-old company has struggled to convince investors that it's here to stay at a time when Amazon has been entering new categories, such as apparel and handmade goods. Wayfair, which says it was profitable as a private company, has reported losses since going public in 2014 and making heavy investments in logistics and technology.

The Wall Street Journal spoke with Niraj Shah, the CEO and co-founder of Wayfair, about how the company plans to overcome these structural and competitive forces. Here are edited excerpts.

Looking to the home

WSJ: E-commerce hasn't penetrated the home category as deeply as other segments such as electronics. Is that because furniture is one of those things that people want to touch and feel before buying?

MR. SHAH: Furniture is going to be one of the more considered purchases. You started buying online by buying a book or a CD or a DVD. Eventually, you bought more and more complex items and more considered purchases. One of the last categories to get penetrated will be home. The second thing is that a lot of the early adoption of online shopping has been driven by younger audiences. Unlike music or apparel, you don't really buy home goods till you get into your 30s. You are starting to see online purchasers are now getting into the demographic where they are buying homeas a category.

WSJ: Are returns a problem for you? Have you done anything to minimize your return rate?

MR. SHAH: Returns are actually pretty low. They run around 5%. The reason they're low is partially because consumers do think about the purchase before they make it, but also we do a lot to help the customer understand what the item is. We collect up to 100 pieces of factual information on each item. We have over 1,000 fulltime Wayfair employees in customer service. We offer swatch samples and other things that give you a really good understanding of the item.

WSJ: Traditional brick-andmortar retailers are doing drop shipping, or shipping directly from manufacturers. Some have bought e-commerce players. Bed Bath & Beyond acquired One Kings Lane. With the right tools, isn't it possible for them to replicate your business model?

MR. SHAH: From an execution standpoint, we are pretty far along. Would it be impossible for someone to replicate what we have? I wouldn't say it's impossible, but it would take a lot of time and quite some resources past what they have today, even with these acquisitions.

The online surge

WSJ: Many pure-play online companies, such as Bonobos and Warby Parker, have moved into the brick-and-mortar space. Have you given any thought to showrooming or any in-store concepts?

MR. SHAH: There's obviously an audience for whom the brickand- mortar experience is reallyvaluable, but what we've seen is the biggest opportunity is the online audience. In commodity goods, you can see the size to which Amazon has gotten, and they are only now recently opening a bookstore or two as a test concept. If you're the leader in a large category, you actually don't need stores until you're quite sizable.

WSJ: What, if anything, will prevent Amazon from cannibalizing your business?

MR. SHAH: Amazon certainly has aspirations to do everything, and some categories fit them really well. Their distribution network is not optimized around large bulky goods or in-home delivery where you need to do setup and installation. Home is one of the categories that fit them the least, so the opportunity for a specialist to be the core go-to for consumers is a very likely reality.

WSJ: Do you have a path to profitability?

MR. SHAH: Wayfair was profitable for nine years. We grew it to about $500 million in sales just out of cash flow as a profitable enterprise.

As we look forward, we expect that we will be profitable again in the not-too-distant future, and the basic reason why is that today we have about a dozen investments we're making that add up to being significantly more than the aggregate operating losses we have.

The public arena

WSJ: By staying private, you wouldn't have had to report to shareholders and would have been able to keep finances private. Why did you choose to go public?

MR. SHAH: We decided that some of the benefits around liquidity and particularly the fact that all employees in the company are equity owners and that equity then has an open market—there are significant benefits to that for our company. It's easier to be longterm focused in a private setting than a public setting. In our case, we've chosen to stay very long-term focused in a public setting. I think the investors that we've spoken with appreciate that and understand that, so we're able to get some of the best of both worlds.

WSJ: Since its IPO, Wayfair's stock has seen wild fluctuations and large levels of short interest. Why?

MR. SHAH: If you are a category disrupter and you're aggressively growing and you're still far from your long-term profit model, you are going to have a fervent base of advocates who really understand the vision and really know how to measure success, and you're going to have a set of folks who are going to be skeptical and they much prefer the status quo. They tend to understand the models that were more of the past than necessarily of the future. Over time, the company's performance will prove out one camp or the other to be correct, and then the stock will then be valued accordingly.

Today Amazon is regarded widely as a success, but there was a long period of time when its stock had gone down. If you look at Netflix, you will see a similar pattern. When Google went public, there were a lot of naysayers. This is a pattern through history.

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A Big-Box Retailer Thrives In a Non-Big-Box World
By Paul Ziobro
The Wall Street Journal
October 3, 2016

HOME DEPOT INC. is riding the rebounding housing market through the turmoil battering retailers.

The Atlanta-based home-improvement chain has a simple explanation as to why it is sheltered from the broad malaise faced by others in retail. Rising home prices, which are near their pre-housing-bust peaks, mean more homeowners are feeling flush. So they're more willing to splurge on big projects, from installing decks to remodeling kitchens.

The trend has propped up Home Depot sales, which have risen at least 4% at existing locations in 15 of the past 16 quarters. And the retailer has outperformed its main rival, Lowe's Cos., during the rebound, too.

That gives Home Depot a little more breathing room to figure out a vexing problem in retail today: how to serve a shopper who increasingly does more shopping online and forgoes trips to big-box stores. While rarely opening new stores anymore, Home Depot is figuring out new uses for existing ones, such as shipping orders from stores and having customers pick up online orders there, as well as overhauling its supply chain to accommodate the new reality.

The Wall Street Journal asked Carol Tomé, Home Depot's chief financial officer, about these challenges. Here are edited excerpts of the talk.

Taking nothing for granted

WSJ: You've enjoyed the benefits of a rising housing market. How does that affect your mentality?

MS. TOMÉ: The first challenge is to ensure we don't get complacent. We have to allocate our capital appropriately, so we don't wake up one day, sadly, like some other retailers are waking up, saying, what happened? What happened to our customers? What happened to our business?

WSJ: Where are some of the places you're spending your money?

MS. TOMÉ: About 42% of online orders are being picked up in our stores, so we've had to allocate capital to build out storage inside of our stores to stage those products. Who would have thought a few years ago that's where we'd be allocating capital? But we have to, because that's where the customer is asking us to allocate capital.

WSJ: With digital sales growing so much faster, how do you make sure your stores don't fall behind?

MS. TOMÉ: We perform merchandising resets that cover about a third of each store annually. That could mean a change in our assortment or it could mean a change in how we display the product. All of this is designed to provide a better customer experience and drive sales. It can be a simple reset like resetting the spraypaint section so that when you take a can of paint, the next one drops into place in the display case, rather than standing the cans side by side. That's a better experience and actually drives productivity in our stores.

Or it could be the reset of a millwork or flooring showroom. If you shopped flooring in our stores, in some of our older stores, it's not the easiest experience. With our new flooring showrooms, we make it much easier for the customer to self-select. The displays are easier to shop off of, the signing is better. Oh, and by the way, sales are lifting. So it's a good experience, and it's driving sales.

WSJ: What investments are you making in digital?

MS. TOMÉ: We spend on technology that drives the interconnected retail experience. That's anything from a First phone [used by store associates for functions from walkie-talkie to inventory management] to building out a brand-new website that should be launched in mid-2017. We also have a new order-management system that allows us to track specialorders like custom kitchens on the way to the customer.

WSJ: Retail wages are rising. Do you have to find other places to cut to absorb that?

MS. TOMÉ: We have an activity-based model for determining employees' hours based on the activity inside the stores. As our transactions grow, so do our hours. And while there are pressures in certain parts of the country to increase wages, we can do that by driving productivity in other areas.

WSJ: Online sales tend to have lower margins because of associated shipping costs. How do you absorb that?

MS. TOMÉ: One way is to drive productivity through our supply chain. Specific to online, we recently opened three new direct fulfillment centers that are strategically located to deliver online orders to 90% of our customers in two business days or less, and we do so using economical ground parcel service. We're also working to drive productivity through lower transportation costs by leveraging our store distribution network for buy-online, ship-to-store orders.

Stores and pros

WSJ: Are there any new stores in Home Depot's future?

MS. TOMÉ: I can recall a time when we were opening a store every 48hours. That's no longer the case. We believe we've got the appropriate store footprint in the U.S., Canada and Mexico. There will be a few store openings. If there's a void, we'll fill that void. But there are very few voids.

WSJ: Last year, you bought Interline Brands, which supplies maintenance and repair products to customers like property managers, to grow your business with professionals. Why are you targeting that market?

MS. TOMÉ: They're 3% of our customer base but 40% of our sales. Anytime you have that ratio, you'regoing to focus on them. We also know the average spend by the pro is $6,200 a year. No pro makes a living spending $6,200 a year. So we aren't getting 100% of his or her wallet. So we should focus on that. We should be getting more sales from them. But we are not taking our eye off our do-it-yourself customer, which is also growing nicely.

WSJ: How much do you worry about Amazon.com?

MS. TOMÉ: We look at all competitors as the evil empire and look to compete against them all.

The good news is that we believe the addressable market that we compete in is $550 billion in the U.S. There's plenty of room for us to continue to grow because our market share is less than 20%.

We are also such a different business than so much of retail because we are a project-based business, so customers are usually buying a range of products, not just one. Yet when customers do need just one item, they often turn to us instead of Amazon because the need is urgent and we have close to 2,000 locations conveniently located to the homeowner to take care of your urgent need.

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Teen apparel retailer ousts longtime CEO; taps Target exec as head merchant
By Marianne Wilson
Chain Store Age
October 3, 2016

Rue 21 announced a series of leadership changes as it looks to reinvigorate its brand.

In a surprise announcement on Saturday, the retailer said it had appointed CFO Keith McDonough as interim CEO, succeeding Bob Fisch, who has served as president and chief executive of Rue 21 since 2001.

No reason was given for Fisch's ouster. But the company, which is private and operates 1,213 stores nationwide, has been criticized for being slow to respond to the online juggernaut and also not adapting quick enough to changing fashion trends among its core teen demographic. Rue 21 was named in a recent Fitch Ratings report as being one of seven retail chains at risk of defaulting within a year.

In other changes, Rue 21 ousted general merchandise manager Kim Reynolds, and appointed Nina Barjesteh as chief merchandising officer. Barjesteh, a 20 year retail and fashion industry veteran, joins Rue 21 from Target, where she served as the VP, general merchandise manager of the women's apparel division.

The company also announced a new position, chief customer officer, to be filled by Elizabeth Hodges, who spent the last nine years at Chico's FAS, most recently as senior VP of customer experience. Hodges previously held leadership positions with J.C. Penney, American Eagle and Lane Bryant.

"We thank Bob Fisch and Kim Reynolds for their 15 years of collaboration and passion in building rue21 into a leading teen specialty apparel retailer," said interim CEO McDonough. "We are very excited to have Nina Barjesteh and Liz Hodges join the rue21 leadership team. They both will play key roles as we further position our business for long-term growth."

Rue21 said it plans to open approximately 40 new stores and upgrade 100 existing stores in fiscal 2016, and launch several customer-focused initiatives, including a such as ship-to-store program. It also said e-commerce sales grew 90% in the first six months of the current fiscal year.

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Will Nordstrom Win When Target & Sears Failed in Canada?
By Zacks Equity Research
September 30, 2016

There seems to be something about Canada that is attracting retailers to the land. On reading the trends, we note that many U.S. retailers have made and are still making attempts to expand in that part of the world. What is it that's so alluring about Canada?

One reason could possibly be the proximity of the country's largest metro areas to the American border. Thanks to this advantage, the Canadians are well-versed with various U.S. retail names and their products, which clearly increase chances of their success in the country. This, clubbed with relatively less competition in Canada's retail market (compared to the U.S.), was reason enough for retailers to make an entry here and expand in the region.

Well, expanding successfully in Canada is definitely easier said than done. This becomes more evident from failed attempts by companies like Target Corp. and Sears Holdings Corporation, which tried all means to grasp footing in Canada but ultimately landed in a soup. While these companies had a tough time in the Niagara Falls country, Nordstrom Inc. has recently popped up on the forefront, smartly expanding its operations in the region.

What Weighed Upon TGT & SHLD?

Some reports suggest that Target's differentiated pricing and merchandise from its domestic country put Canadian customers off, whereas others highlighted that this Minneapolis-based departmental store retailer spoilt things in haste, by selecting wrong store locations and over-speeding the expansion process. On the other hand, Sears Holdings struggled with high labor costs, and had to shut down its Sears Canada division as part of cost-cutting and business revival efforts.

Where does Nordstrom Stand?

Nordstrom, which has been eyeing Canada for quite a while now, had first announced plans to expand in the country in 2012, and launched its first Canadian store in Sep 2014 - at CF Chinook Centre in Calgary. Standing in 2016, Nordstrom has so far introduced only four full-line stores in the country, with plans of opening two more through fiscal 2017. This highlights how this fashion specialty retailer is executing this strategy slowly, learning from the mistakes made by its fellow firms. In fact, Nordstrom's choice of location testifies to this yet again.

The company recently introduced a store in Toronto, at CF Toronto Eaton Centre, which ranks among the top 10 most productive malls across North America. This store, which also marked Nordstrom's second global flagship location, is likely to draw traffic, given its strategic location, products ranging through all kinds of prices and special services.

Apart from expanding full-line stores, Nordstrom is also on track to achieve its target of opening 15 Rack stores in Canada. Notably, the company envisions a $1 billion sales opportunity from its expansion in Canada by 2020. All said, we believe that not taking Canadian expansion as a cake-walk, and instead handling it tactfully should prove profitable for Nordstrom.

Some Other Players

While the aforementioned companies set examples of extending their footprint into Canada directly, some others went for prudent buyouts of existing Canadian ventures to gain exposure. The acquisition of Zale Corporation by leading jewelry retailer, Signet Jewelers Limited and Victoria's Secret owner, L Brands, Inc.'s takeover of the Canadian La Senza chain, bear evidence to this fact.

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Retailers: Look not upon 'Millennial' as a segment, but as a lifestyle
By Jim Stokas
Chain Store Age
September 30, 2016

There are few demographic segments that have generated as much discussion in the retail community as Millennials. A great deal of literal and virtual ink has been spilled discussing the importance of catering to this large and influential group of young adults. From their spending habits to their social and behavioral characteristics, addressing the priorities and preferences of Millennials is seen as critically important for any retailer that wants to remain competitive in today's marketplace.

What is remarkable is that there is a strong argument to be made that all of the attention Millennials have gotten is justified, and all of the breathless think pieces discussing their impact and influence are not hyperbole, but a reflection of an important and fundamental demographic evolution. Millennials might be a buzzword, but the buzz is justified.

From a retail perspective, the importance of connecting with and appealing to Millennials has not been overstated. In fact, some may say it is understated. The degree to which brands and businesses are adjusting their offerings, operations and messaging to appeal to Millennials is profound. We continue to see new examples of the commercial horsepower of Millennials in action, as certain segments and specific retailers have clearly been elevated by their ability to tap into this significant population of spenders and trendsetters.

Dallas-based restaurant and entertainment brand Dave & Buster's, for example, has always targeted
young adults, with their unique combination interactive games and dining. They have increased the brand's relevance among Millennials by introducing more high-profile digital games, emphasizing their amped-up sports viewing areas and adding new menu items that they describe as "visually impactful and innovative." All of these initiatives are tailored to appeal to Millennials looking for new experiences. New technology and customer convenience were also a theme in 2016, as Dave & Buster's rolled out their new RFID merchandise-including a wristband and a wearable lanyard-that guests can use to activate games.

And it's working. A January 2016 report published by Nation's Restaurant News revealed that Dave & Busters led the dining and entertainment segment with estimated sales-per-unit of $11.3 million in 2015.

Dave & Buster's is hardly the only brand offering Millennial-friendly entertainment. The proliferation of newly interactive and experiential entertainment concepts like PinStripes Bowling and iFly Indoor Skydiving is a testament to the fact that entertainment is becoming an increasingly popular and profitable retail segment.

Millennials not only want to be entertained, they also want to be physically active and healthy. Which is why creative new fitness concepts and sports and exercise brands are on the rise: from indoor climbing to engaging and interactive new cycling gyms. At the same time, established fitness brands are working to connect with Millennials by offering attractive deals and flexible and convenient hours. Planet Fitness, for example, has found success by not only offering a high-value gym concept at an appealingly low price point, but also by offering 24-hour access. The convenience and flexibility of the 24-hour model is aimed squarely at Millennial members.

Successfully appealing to Millennials requires more than just a gimmick or a promotion. It demands a holistic, top-down approach. Decision-makers need to think critically about every aspect of their operation, from their offerings to their operations, and from content to communications. Retailers need to recognize that this is a lifestyle, and that adapting to Millennial preferences and priorities permeates through their brands and businesses in ways both subtle and significant.

It can also be complicated and seemingly contradictory. For example, partly because so many Millennials came of age in an era where their parents were being cautious about spending in the midst of a sustained recessionary cycle, this is a group that values value. But it's also a group that is very brand-conscious and brand loyal. So, while discount concepts are well positioned, as the recent success of TJX brands demonstrates, retailers would do well to look beyond discounts and offer value-oriented name brands. Established brands like Whole Foods Market have been successful using their own labels as generic options, for example. Grocery is the hottest segment going right now, partly because many grocery brands are rolling out new value-oriented and prepared foods, as well as new in-store bars, cafe and dining elements.

Retailers need to be more active online to make sure they are connecting with this famously tech-savvy demographic. That means more than just having a website. It means building a legitimate omnichannel model with online and mobile components capable of handling transactions and communications. One option is to partner with or acquire an internet retailer and leverage their expertise and experience, as Walmart is attempting to do with Jet.com. Retailers also need to be strategic and thoughtful when it comes to communicating with Millennials, with a sophisticated and relevant social media presence, and promotions that resonate with Millennial expectations.

Retailers that dismiss the importance of Millennials or view Millennial-friendly concepts as a "fad" do so at their peril. This is a profound and long-term demographic shift, and savvy operators understand that these trends cannot be ignored. Retailers that can get Millennials to literally and figuratively "buy in" will likely find that — as with brands that successfully connected with Baby Boomers before them — they will be positioned for sustained and substantive long-term success.

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Some retailers choose turkey over Thanksgiving shopping
By Mary Perez
Sun Herald
September 29, 2016

It's still almost two months until Thanksgiving, but a growing list of national retailers say they will stay closed on the holiday itself and start their big sales on Black Friday.

Websites such as bfads.net, which are dedicated to posting Black Friday hours as soon as they are announced, say Gamestop, Home Depot, Nordstrom and Costco will be closed on Thanksgiving again this year to let their employees enjoy the holiday with their families instead of staffing the cash registers.

Other stores that will be closed on Thanksgiving Day, according to BlackFriday.com, are BJs, Fred's Pharmacy, Game Stop, Harbor Freight, Lowe's, Pier 1 Imports, Petco, PetSmart, Sam's Club, TJ Maxx, Tractor Supply Co. and Dillard's.

National retailers such as Kohl's, Target and Wal-Mart are expected to begin announcing their hours in about a week — but they have already released their lists of top toys for 2016.

Elmo is back, and this time he's a high-tech Love2Learn Elmo with an an app that helps young kids learn numbers, colors and letters.

Target is focusing on STEM toys (science, technology, engineering and math), even for young kids, with the Fisher-Price Think & Learn Code-A-Pillar. The store also is promoting perennial favorite toys such as Barbie, Hot Wheels and LEGOs, which parents and grandparents may once have had on their own Christmas lists.

Kohl's is teaming up with American Girl to carry the 2016 Girl of the Year products and new WellieWishers line.

For the little kids, Kmart puts Paw Patrol Zooming Marshall and Matchbox Stinky the Garbage Truck on the top toy list, along with something called the LEGO Star Wars: Carbon-Freezing Chamber.

Wal-Mart has children's categories — The Humanitarian would like Little Live Pets Puppy; The Dreamer would want the Barbie Rainbow Cove Princess Castle Playset; and The Thrill-Seeker would be delighted to unwrap the Pie Face Showdown Game.

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Sears, Claire's at high risk in Fitch study of retail failures
By Harvard Zhang and Lauren Coleman-Lochner
Chicago Tribune
September 29, 2016

Sears Holdings, Claire's Stores and Nine West Holdings are among seven chains at high risk of defaulting within a year as shoppers shift to online merchants and spend more on experiences, according to a Fitch Ratings study of retail bankruptcies.

The companies were named in a 114-page report Wednesday that found retailers wind up liquidated almost three times more often than other companies in bankruptcy because customer defections are making turnarounds harder to execute. Other chains at risk include True Religion Apparel, 99 Cents Only Stores, Nebraska Book and Rue21, Fitch said. Company representatives declined to comment or didn't immediately respond to messages.

The credit-grading firm studied 30 recent retail bankruptcies that involved $10.5 billion of debt. Fifty percent didn't survive the process, compared with 17 percent across other industries, Fitch said. Grocery chains were an exception, with five of six emerging as operating businesses because they had strong locations, Fitch said.

Mall visits are "not as popular as something to do for a pastime, particularly among teens," analyst Sharon Bonelli, one of the report's co-authors, said in an interview. "They'd rather be on their phones and spending their disposable income on things like their electronics or restaurants, coffee shops." Most of the defaulters were companies that didn't have a unique model, selling branded goods that shoppers could get elsewhere, Bonelli said.

In this kind of scenario, a retailer loses its "reason to exist" and its chance to regain favor with customers, and thus loses its value as a going concern to a potential savior, the report said.

The average case took 11 months to settle, based on the time from petition date to plan confirmation, although in some cases the process dragged on for years, Fitch said. It took apparel chain Gottschalks Inc. 26 months, the longest of the 30 companies studied, according to Fitch.

First-lien lenders were often repaid in full with cash after retailers filed for bankruptcy protection thanks to over-collateralized asset-backed loans, according to the report. Unsecured lenders averaged recoveries of less than 25 percent.

Bennett Goodman, co-founder of Blackstone Group LP's credit arm GSO Capital Partners, told investors Tuesday that bankruptcies of all kinds are getting longer and more litigious and they are hurting recoveries.

"More value was destroyed the longer these companies remained in bankruptcy," Goodman said at the Private Debt Investor New York Forum. It's especially true "if we're talking about the second-lien or unsecured market," he said, where "recoveries are going to be a lot lower than the historical past. And that's primarily because there's just more senior debt ahead of them."

With assistance from Jodi Xu Klein and Emma Orr

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Sears could kill hundreds of American shopping malls
By Hayley Peterson
Business Insider
September 28, 2016

Sears' decline is threatening to kill off at least 200 shopping malls, according to a new report. The retailer has closed 22% of its stores in the last decade, and it's expected to shutter even more locations as it struggles to stay afloat following years of declining sales, Credit Suisse analysts wrote in a recent report.

When anchor stores like Sears shut down, shopping malls tend to suffer financially and eventually shut down.

That's because malls must find a replacement tenant for the massive retail space that the anchor store occupied, which is nearly impossible — especially in malls that are already financially strapped — when every major department store is reducing its retail footprint.

If Sears continues on its current trajectory of closing unprofitable stores, about 200 malls where it currently operates will be at risk of shutting down, worsening an ongoing trend of failing malls, according to the analysis by Credit Suisse.

The analysts came up with that number by looking at how many malls shut down after the now-closed department-store chain Montgomery Ward went out of business in 2001.

After Montgomery Ward declared bankruptcy (for the second time) in 2000 and closed its last 250 stores, roughly 33% of the shopping malls where it operated closed down, according to the Credit Suisse analysts.

By applying a similar metric to Sears, analysts estimated that about 30% of the malls — or 200 locations — where Sears operates will shut down if those stores are closed.

Sears-anchored malls will be at heightened risk of closing down — compared to malls anchored by higher-end stores like Macy's — because many of them are already financially strapped.

Credit Suisse defines about 184 shopping malls in the US as "least valuable property" — meaning those that are at risk of shutting down — and Sears anchors 110 of those locations. Overall, about 16% of Sears' total locations are in "least valuable property" malls.

Sears currently has 683 stores in operation, down from 873 in 2005.

The company's net sales fell 8.8% to $5.7 billion in the second quarter. Same-store sales plunged 7% at Sears stores and dropped 3.3% at Kmart stores.

Moody's analysts said in a research note earlier this month that the company doesn't have enough money — or access to money — to stay in business.

Sears said in August that its cash and equivalents have fallen to $276 million from $1.8 billion one year ago.

As a result, the retailer was forced to accept $300 million in financing from Sears CEO Eddie Lampert's hedge fund, ESL Investments, in the most recent quarter.

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Sears hitches a ride with Uber to make rewards plan more attractive
By Sruthi Ramakrishnan
Reuters
September 28, 2016

Sears Holdings Corp is partnering with ride-services company Uber Technologies Inc as the struggling retailer tries to make its rewards program more attractive to shoppers.

Sears is betting on its Shop Your Way loyalty plan, which offers points and tailored deals to members, as the company looks to revive sales. The program accounted for 75 percent of the company's sales through the first half of 2016.

Riders who link their Uber account to Sears' loyalty plan will receive up to $2 in loyalty points for every trip. The program, Rider Rewards, is currently available in Chicago and New York City, and will be rolled out nationally soon, the companies said.

While new drivers who sign up to drive with Uber through Shop Your Way will get up to $1,000 in points, existing Uber drivers in some cities including Chicago, New York City and San Francisco can also earn points by enrolling in the program.

Sears, which has not reported a profit in five years, has made the Shop Your Way program the focus of its revival strategy, even as it shrinks its store base to reduce costs.

"We are looking at more and more ways where we can reach out to top-tier brands and find more opportunities where our members can earn points," Leena Munjal, senior vice president of customer experience and integrated retail at Sears, told Reuters.

The company declined to disclose Shop Your Way's membership count, but said it is in "tens of millions".

Other Shop Your Way partners include daily deals website Groupon Inc, florist 1-800-FLOWERS.COM Inc and identity theft protection services provider LifeLock Inc.

Uber, founded in 2009, has grown in leaps and bounds to become the largest ride-hailing service in the United States.

Sears' 638 Auto Centers will also serve as one of Uber's preferred maintenance providers, offering exclusive discounts and points to Uber drivers, the companies said.

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Lands' End CEO Is Pushed Out After 19 Months
By Suzanne Kapner & Joann S. Lublin
The Wall Street Journal
September 27, 2016

Federica Marchionni was forced out as chief executive of Lands' End Inc., capping a tumultuous 19 months on the job in which she tried to fashion broad changes at the catalog retailer that roiled employees and turned off shoppers.

The former Ferrari and Dolce & Gabbana executive sought to inject more style into the maker of outdoorsy, casual clothes by adding slimmer-fits, stiletto heels and a new line of activewear. She overhauled the catalog, hired celebrity photographers and tapped a Vogue stylist for input. A photo shoot for the new activewear line took place recently in the Marshall Islands, a costly location in the Pacific Ocean, according to people familiar with the situation.

Despite those efforts, the 44-year-old CEO was never able to get Lands' End's employees to buy into her vision, according to people familiar with the situation. A point of contention was that she only spent about one week a month at the company's Dodgeville, Wis., headquarters, preferring instead to work out of an office in New York's garment district.

As losses piled up, the board became concerned that Ms. Marchionni was trying to make too many changes tooquickly, the people said. The company posted a loss of $7.7 million for the six months ended July 29, compared with a profit of $9.2 million a year ago. Sales fell 7.6% to $565 million over that period.

The departure leaves the company without a permanent CEO heading into the crucial holiday season. Ms. Marchionni, in a news release, said she and the board "agreed it is time for others to bring Lands' End into the future."

Most retail turnarounds take several years, but with the board focused on quarterly earnings, Ms. Marchionni, who took over in February 2015, wasn't given enough time to show whether her strategy was working, said a person familiar with the matter.

Lands' End has started a search for a successor. James Gooch, the company's chief operating officer and financial chief, and Joseph Boitano, its chief merchandising and design officer, will take over as co-interim CEOs.

The catalog retailer makes most of its money in the second half of the year, when cold-weather items are more in demand. But sales of coats and sweaters have gotten off to a slow start with unseasonably warm September weather, a fact that Steven Marotta, an analyst at C.L. King & Associ-ates, says "may have precipitated the CEO's departure."

Ms. Marchionni is the second CEO to leave the company since Lands' End was spun off in 2014 from Sears Holdings Corp., which acquired the business in 2002.

Earnings for the company's current quarter are expected to fall 68% from a year ago, according to Mr. Marotta and another analyst polled by FactSet. Lands' End doesn't provide financial targets.

Mr. Marotta applauded Ms. Marchionni's efforts and called her "an effective brand manager and operator." He said her progress was hampered by "the worst consumer soft goods market in eight years." Apparel retailers are suffering as consumers spend more of their disposable income on travel, entertainment and food. Chains such as Land's End that target Middle America have been particularly hard hit. They have been squeezed on the higher end by brands such as Michael Kors Holdings Ltd. and Coach Inc. On the lower end, fast-fashion retailers including H&M operator Hennes & Mauritz AB are churning out inexpensive, runway- inspired styles.

The company disclosed in a filing Monday that it was treating Ms. Marchionni's departure as termination without cause, meaning she is entitled to receive an exit package valued at about $1.9 million, according to the company's latest proxy filing. That figure represents two years' salary and other small payments such as $4,000 for outplacement services. If she had quit voluntarily, she wouldn't have been eligible for any departurepay. Analysts say Mr. Gooch, who was named to his post in January, has a good shot at becoming the next chief executive. He has experience running a public company, having served as the CEO of RadioShack Corp. until 2012. However, Mr. Gooch wasn't able to turn around the consumer electronics retailer during his 16-month tenure.

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The End Is Quickly Approaching for Sears Holdings Corp.
By Rich Duprey
The Motley Fool
September 21, 2016

The retailer's prospects for survival are diminishing as sales fall, losses widen, and costs mount.

Fears expressed by Kmart employees this summer that its new inventory management program of moving all merchandise out of the stock rooms and onto the sales floor meant parent Sears Holdings was preparing for a liquidation seem to be coming true.

Although Kmart's president dismissed the concerns, saying the retailer was merely preparing for a "WOW experience" for customers, Sears is now reportedly closing 64 Kmart stores within the next year, including 17 owned by real estate investment trust Seritage Growth Properties. The closures will be in addition to the 68 Kmart stores Sears announced it was closing in April when it also said it would be shutting 10 Sears locations. Coupled with the report chairman and CEO Eddie Lampert had to make yet another short-term loan to keep the company afloat and it's clear Sears end is coming into view.

The end is nigh

Ratings agency Moody's thinks so. It said Sears and Kmart lack the financial wherewithal to stay in business, and though it has significant assets, its debt burden is too high. Sears Holdings has some $3.5 billion in long-term debt and its unfunded pension liability exceeds $2 billion.

The retailer has suffered under the not-so-benign neglect of Lampert, who has ignored many of Sears problems until it was too late. While, lately, he has poured money into the company to make it a leaner operation that can compete digitally with its rivals, the vortex pulling it down is much too strong to evade.

Sears has proven unable to compete effectively against the likes of Wal-Mart or Target in the off-price wars and the impact Amazon.com had on its operations in e-commerce is even more pronounced than it is at other retailers. In its second quarter earnings report last month, Sears said net sales tumbled 9% from the year-ago period, largely because of the number of stores it was closing, but also because same store sales continued their decline, just as they have every quarter for the past 11 years. Comps were off 3.3% at Kmart and 7% at Sears.

Comparable sales are an important retail metric because they largely strip out any growth that might occur simply from opening new stores, so they are seen as a more organic measure of a business's health.

Net losses widened to $395 million, or $3.70 per share in the period, compared to a profit of $208 million, or $1.84 per share a year ago.

Neither a borrower nor a lender be

The lack of sales and mounting losses has forced Lampert to continuously lend the retailer money to keep it going and prevent suppliers from bolting and cutting off its lifeblood of goods. In addition to the $300 million Lampert's ESL Investments just loaned Sears, the hedge fund operator also loaned Sears $125 million earlier this year as part of a $500 million loan package, plus a $750 million term loan earlier this year, which followed a $400 million loan last year to make it through the holiday season. It might not be so lucky this year.

The swarm of bad news that hangs over the retailer could cause its suppliers to balk this time around and it will face increased costs due to the store closures.

In Sertiage Growth Properties filing with the SEC announcing the pending lease terminations, the REIT said Sears will continue to pay the rents on the stores until the closures occur in January, but then it will "pay Seritage a termination fee equal to one year of the aggregate annual base rent, plus estimated operating expenses."

While the closures will let the REIT benefit from leasing the spaces again to better tenants, it's a sign that Sears Holdings tenure and existence is hanging by the most tenuous of threads and it's merely a matter of time before it comes crashing down.

Rich Duprey has no position in any stocks mentioned.

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Target pilots 'Perks' rewards program
By Jennifer Van Grove
The San Diego Union Tribune
September 18, 2016

Target has introduced a way for in-store shoppers to rack up points from purchases through an experimental customer loyalty program.

Called "Cartwheel Perks," the program is now being offered to people in the San Diego, Denver, Houston and St. Louis markets. Perks rewards Target shoppers with 10 points for every dollar spent in stores and is part of the retailer's 3-year-old Cartwheel mobile app.

Downloaded more than 27 million times, Cartwheel is a deals-centric app that offers people hundreds of digital coupons that can be redeemed with a single mobile barcode scan at the register.

In a recently updated version of the app, users in test markets will find a Perks page that provides an overview of the new points-based program and lets them choose from different rewards — say a pair of sunglasses, workout gear or laundry detergent — when they accrue 5,000 points.

"We think of Cartwheel as a way of taking what, for many people, had been a process of clipping the paper coupon from a circular and bringing it the store, and integrating that experience into one digital, seamless app on your phone," said Eddie Baeb, a spokesperson for Target.

But now, he said, the idea is to simultaneously appeal to coupon-driven and rewards-motivated shoppers.

Pilot cities were selected based on whether they were a strong or weak market in terms of existing app usage, as well as other factors. San Diego was chosen, in part, because the region ranks among the top five nationwide for active Cartwheel users.

For now, the Cartwheel app and its associated Perks program are only available to in-store shoppers but the company said it is considering linking online purchases with points as well.

Though Target did not disclose its plan for rolling out Perks to other areas, the test represents a noticeable shift for Target, which has never offered a points-based rewards program outside of a small test in Raleigh-Durham. There, the company trialed a separate mobile application called Red Perks, but those users will eventually be transitioned to Cartwheel Perks.

Ultimately, the plan is to get the Cartwheel app, which collects valuable data on customers' buying preferences, into the hands of more people. The company would also like to personalize the offers its presents to every individual at some point.

Of course, there's also this: Baeb said Cartwheel has found outsized favor with millennials, a bunch not often associated with coupon-clipping and that has no qualms about shopping online. Encouraging loyalty among this crowd seems key to bolstering sales in an increasingly challenging retail market, one where Amazon owns the ever-expanding realm of e-commerce.

Amazon captured $83 billion in e-commerce sales between July 2015 and July 2016, while it's next closest rival, Wal-Mart, grabbed $13.6 billion during the same period, according to data from digital analytics firm eMarketer.

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Why Sears Store Closings Could Be Good News for Seritage
By Ben Levisohm
Barron's
September 16, 2016

RBC's Rich Moore and James Bambrick explain why Sears Holdings' decision to cancel the leases on 17 stores could be good news for Seritage Growth Properties (SRG), the real-estate investment trust spun out of the beleaguered department-store chain:

On September 16, Seritage announced that Sears Holdings (NASDAQ: SHLD) has exercised its right under the Master Lease to terminate 17 leases with Seritage. The 17 leases encompass 1.7 million square feet and account for ~$5.8 million, or 2.8% of Seritage's total annualized base rent. Pursuant to the Master Lease terms, which are described in detail below, Sears Holdings has given Seritage 90-120 days' notice that the tenant intends to vacate the 17 properties in January 2017.

Once Sears Holdings vacates the properties, Sears is required pay Seritage a termination fee equal to one year of rent, CAM, and taxes. All 17 of the stores are Kmarts with average rent under $4/SF. Importantly, very little of the lost space has to be re-leased in order to recoup the $5.8 million of Sears rent given that leasing spreads on the space are expected to be significant, in line with the spreads the company has achieved on the 30 projects currently in redevelopment.

Management indicated that the company has been in extensive discussion with Sears regarding potential lease terminations within the portfolio. As such, many of these 17 properties were already in the Seritage pipeline for potential redevelopment. Management of Seritage will not identify these assets individually until they are added to the redevelopment pipeline in order to protect the sensitivity surrounding potential store closures by Sears.

The announcements regarding individual store closings will likely come directly from Sears and are slated to begin today. This batch of 17 closures likely represents the extent of planned store closings by Sears in the near future. We would not expect additional announcements until after the 4Q16 holiday shopping season at the earliest, if indeed Sears plans additional closures.

Management noted that the termination of the leases on the 17 stores does not impact Seritage's plans for other redevelopments that are already on the drawing board. As for the 17 stores, management believes the fact that the company will recapture the entire store is an opportunity to broaden the scope of any potential redevelopment.

In particular, the large parking fields associated with the Kmart boxes suggest that there is room for both junior anchors and in-line space along with the potential for additional outparcels. In essence, the company could turn a Kmart and its parking field into a shopping center. Management further noted that the company is spending considerable time on some larger potential redevelopments that could provide returns of $150-$250 million or higher.

Shares of Sears Holdings have fallen 0.6% to $11.99, while Seritage Growth Properties has risen 0.7% to $47.13.

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Dillard's Inc versus Sears Holdings Corporation Head to Head Compare
By Capital Markets Laboratories
September 15, 2016

This is a head to head compare of Dillard's Inc and Sears Holdings Corporation. We will compare the two companies on revenue growth, earnings, revenue per employee, operating margins, free cash flow and valuation. The head to head compare assigns 100 points in total.

Before we dive into the analysis, we will look at the stock returns for each company over the last three months, six months and the last year. The stock returns do not impact the head to head compare scores which are focused on the fundamentals of each company, but ultimately stock returns are still a critical piece to a full analysis and compare.

Dillard's Inc has a substantially higher fundamental rating then Sears Holdings Corporation which has an impact on the head-to-head comparison. The CML Star Rating is an objective, quantifiable measure of a company's operating and financial condition. The rating is computed by measuring numerous elements of the company's current financial data and their associated changes over time.

Now, let's dive into the two companies to compare them.

Income Statement

First we turn to the income statement and compare revenue, earnings and revenue per employee for both companies. We note that simple revenue comparisons do not impact the rating.

Sears Holdings Corporation has substantially higher revenue in the last year than Dillard's Inc. Raw revenue comps do not affect the head to head rating.

DDS is showing a profit while SHLD has negative earnings over the last year. The difference between DDS's profits and SHLD's losses is huge.

DDS generates substantially larger revenue per employee ($221,000) than SHLD ($141,000).

Margins

Next we create some derived metrics to compare the the amount of revenue earned per dollar of expense and the amount of free cash flow earned per dollar of revenue. Margins are one of the fairest ways to compare companies since they remove some of the bias of large versus small numbers.

Dillard's Inc generates $1.02 in revenue for every $1 of expense, while Sears Holdings Corporation generates an operating loss of $0.94 in revenue per $1 of expense.

DDS generates $0.04 in levered free cash flow for every $1 of revenue, while SHLD generates a cash flow loss of $-0.07 per $1 of revenue.

Growth

Finally we compare the financial metrics related to growth: revenue growth rates and price to sales.

Both companies have shrinking revenue. Sears Holdings Corporation revenue is shrinking faster than Dillard's Inc, but not by a large amount.

For every $1 in revenue, the stock market prices in $0.30 in market cap for DDS and $0.05 in market cap for SHLD.

Dillard's Inc. defeats Sears Holdings Corporation: 91 to 9.

Legal: The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories ("The Company") does not engage in rendering any legal or professional services by placing these general informational materials on this website.

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Mall owners to departing anchor chains: See ya!
By Shelly Banjo
Crain's Chicago Business
September 15, 2016

America's second-largest mall operator has a message for department stores leaving its malls: See ya, wouldn't want to be ya.

News that Macy's plans to close 100 stores, or 14 percent of its fleet, sparked fear of other big chains such as Sears and J.C. Penney following suit. That could create a glut of vacant mall space, which might be bad news for malls that house such anchor chains.

General Growth Properties, however, said at a real-estate conference on Tuesday that it welcomed Macy's exit. In fact, it's advising Macy's about which malls it wants the chain to leave. Sounds like a strange thing for a mall operator with Macy's in about 70 percent of its malls to do, no?

Paying Up

General Growth is able to charge more in rent from its newer tenants than its older tenants.

In the traditional mall model, department-store anchors are the major drivers of traffic. That model is becoming obsolete, GGP explained. In fact, GGP said it can fare better when an anchor store like Macy's leaves.

One reason: Close to zero new malls are being built these days, constricting the supply of real estate. That leaves growing, healthy retailers hungry for good space.

Smaller stores in groups often drive just as much traffic to malls as old anchor chains do. And these stores often pay more rent than the old anchors, which typically pay below-market rents, based partly on the outdated premise they're the main traffic draw.

Smart mall owners are carving up the cavernous spaces that once housed massive anchor chains, filling them with two to five smaller, more productive retailers, such as Dick's Sporting Goods, H&M, and Container Store. They're also giving more space to non-traditional tenants -- upscale restaurants, fitness centers such as LA Fitness and Soulcycle and entertainment venues, including movie theaters and Dave & Buster's.

Alternative Retail

Off-price retailers such as T.J. Maxx and Nordstrom Rack, once relegated to strip centers, are now invited into malls. So are grocery stores, whose mall locations seem to be drawing steady traffic.

GGP has redeveloped more than 80 vacant department stores since 2011. At Oakbrook Center in the Chicago area, for example, GGP is putting in restaurants where a Sears once stood. It replaced a Bloomingdale's with Pirch, Aritzia, Boss, Lululemon and Tommy Bahama. And it took a floor of unproductive space from Neiman Marcus and put in a steakhouse and a bar.

The mall's sales per square foot—one measure of productivity—rose 36 percent between 2010 and 2015 in 2015. Its anchor-store productivity rose 17 percent in the same stretch.

Shopper traffic continues to decline at North American shopping centers.

Of course, such redevelopment isn't cheap, and mall owners often have to forgo up to nine months of rent in the process. GGP has spent $1.4 billion on redeveloping those 80 anchor stores. And an anchor store's exit can trigger lease clauses that let other tenants break their leases.

But GGP said having a plan for replacing anchor stores helps convince other tenants to stay put. It said its investments in anchor redevelopment have generated an 11 percent annual return. And nonanchor sales have been stronger than anchor sales; as of March 2016, on a rolling 12-month basis, nonanchor sales were up 4 percent compared with a 1.9 percent decline in anchor-store sales, GGP said.

The downfall of department stores leaves little choice for mall owners. To keep shoppers coming amid an ongoing plunge in retail traffic, mall operators have to think creatively about how to stay relevant. Sometimes that means thinking outside the department-store box.

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Toys 'R' Us continues to narrow loss
By Marianne Wilson
Chain Store Age
September 14, 2016

Things are looking up for Toys "R" Us.

The nation's largest specialty toy retailer posted a 20% increase in operating profit and reduced its net loss for the second-quarter amid reduced costs, including the expense of running its now-shuttered Times Square flagship.

In addition, the retailer announced it successfully reached an agreement to refinance all of its 2017 notes and a portion of its 2018 maturities.

For the period ended July 30, Toys "R" Us' net loss narrowed to $95 million from $99 million in the year-ago period. Operating earnings increased to $18 million in the quarter, up from $15 million last year.

Same-stores sales increased by 0.5%. International grew by 1.2%, driven by strength in the Canada and Asia Pacific markets. Domestic same store sales were flat with improvements in the seasonal and core toy categories, offset by decreases in the entertainment and baby categories. Domestic e-commerce sales were up 15%.

Consolidated net sales totaled $2.28 billion, down $11 million compared to the prior year. The company said the decrease was mainly attributable to domestic store closures, which included the chain's last FAO Schwarz store and its Times Square flagship.

"We are pleased with our successful refinancing activities which will further strengthen the company's financial foundation. This will enable us to continue to execute on our operational turnaround and compete in what continues to be a challenging retail environment," said Dave Brandon, chairman and CEO, Toys "R" Us. "As we enter the critical holiday season, we are focused on creating a world class shopping experience and ensuring that we consistently deliver the products our customers want, regardless of when and how they want to shop with us."

At the end of the second quarter, the company operated 875 Toys "R" Us and Babies "R" Us stores in the United States, Puerto Rico and Guam, 765 international stores and over 245 licensed stores in 37 countries.

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2016 Holiday Preview: Calendar shifts could benefit retailers
By Bill McCarthy
Chain Store Age
September 14, 2016

It's no secret that online shopping and changing consumer preferences continue to impact physical retail traffic. Despite the shifting landscape, retail sales remain largely intact and, more importantly, are expected to increase year-over-year this holiday season.

November and December (NRF weeks 40 — 48) are known as primetime for physical retailers. Sales generated during this period immediately impact a brands' bottom line, and they set the stage for either success or struggle in the first quarter of the following year.

In order to succeed this holiday, retailers should prepare for upcoming calendar nuances and thoughtfully approach their store operations.

Calendar Shifts

This year, Hanukkah begins 18 days later than it did in 2015 (i.e., Saturday, December 24, 2016, versus Sunday, December 6, 2015). This represents a significant opportunity to generate meaningful sales during the latter half of December — an opportunity not typically afforded to retailers.

To capitalize on the added window, it is essential for retailers to ensure product availability and reduce out-of-stock merchandise. And doing so requires a stringent watch over the supply chain and a heavy focus on inventory management.

Christmas falls on a Sunday this year, as opposed to a Friday in 2015. The added time will further enable shoppers with a penchant for pushing off their trips (not just men!) to engage in last-minute trips.

It could also serve to the advantage of physical retailers, as weekend shipping is often limited and more expensive. Brick-and-mortar retailers should plan their hours and staffing levels accordingly.

Staffing: More Than Bodies on the Floor

With the right store model, physical retailers can create an insatiable appetite for their products — all rooted in the in-store experience. Examples of this success include Apple, Warby Parker, and Lululemon. In order to do so, however, retailers need to recognize that staff members are not interchangeable and simply having a certain number of associates on the floor doesn't ensure that service will be adequate.

Associate levels and staff mix are particularly important during the holiday season since retailers depend heavily on the effectiveness of part-time and seasonal staff in order to generate revenue.

Store managers should leverage traffic data to understand their store's performance, recognize power hours, and optimize scheduling efforts.

Additional metrics such as shopper-to-associate ratio and sales per shopper illustrate service execution on a store-by-store basis and also allow managers to assess their staff's strengths and weaknesses. From there, mangers can re-tool schedules, alter task assignments and determine where re-training may be necessary.

Store Offerings Trump Web Stores

And don't forget the idea of "shoppertainment" — a technique through which mall and retail owners drive shoppers in store by offering unique, entertaining activities. This is especially relevant during the holidays and can significantly increase a retailer's traffic and sales. For example, some large-scale malls integrate water slides or roller coasters into the retail environment. And on a smaller scale, they re-create the North Pole and offer pictures with Santa.

During the holiday season, individual retailers should implement engaging, brand-specific activities that drive shoppers into their store. Offerings can range from in-store classes to fashion shows, product demos, and stores within a store. The key is to differentiate in a way that makes sense for your brand, budget and shopper. By weaving experiences into the store, physical retailers can drive differentiation from online, as well as their competition.

Ultimately, brick-and-mortar retailers need to spotlight their greatest assets — the physical store and retail associates — and implement tactics that drive revenue this holiday season and extend far beyond.

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Walmart is patenting 'mini-robot' technology that could have terrifying implications for workers
By Kate Taylor
Business Insider
September 13, 2016

Walmart just patented a system based on mini-robots that can control shopping carts, as well as complete a long list of duties once reserved for human employees.

Last week, Walmart was granted a patent for a new system that allows shopping carts to drive themselves, untouched by customers and employees. However, the system goes far beyond self-driving carts, with details on automated devices that can do much of the work a human employees would do.

According to the patent, "motorized transport units" are tools that attach to shopping carts, allowing the carts to drive freely around the store, be summoned to customers, and move safely into docks instead of clogging up parking lots. The system uses a combination of sensors, video cameras, a wireless network, and a central computer.

But, Walmart's plans are bigger than cleaning up carts more efficiently. These motorized units can also potentially move containers; scan, retrieve, and deliver products; check inventory; retrieve trash; and even connect with customers. And, the patent says that Walmart is not limiting what else the motorized units can be configured to do.

While the patent describes the motorized unit's role as enhancing a shopping experience and assisting customers or employees, the new tech could be bad news for Walmart employees.

Walmart has come under fire for a number of issues with staffing and employees in recent months.

More than 200 violent crimes have been committed so far this year at Walmart locations across the US, with Bloomberg arguing that the rise in crime is linked to the retailer understaffing stores. Cost-cutting policies that started in the early 2000s resulted in a drop in store quality, while the loss of greeters and the rise of self-checkout scanners made shoplifting and other illegal activities easier to engage in without employees noticing.

The patent's authors argue that the new, tech-heavy system could improve customers' in-store experience and solve problems that Walmart employees cannot.

"In a modern retail store environment, there is a need to improve the customer experience and/or convenience for the customer," reads the patent's background section, which notes issues including insufficient employees in peak hours, under-trained workers due to high-turnover rate, messy aisles, and theft.

"All of these issues can result in low customer satisfaction or reduced convenience to the customer," the patent continues. "With increasing competition from non-traditional shopping mechanisms, such as online shopping provided by e-commerce merchants and alternative store formats, it can be important for 'brick and mortar' retailers to focus on improving the overall customer experience and/or convenience."

Further, the benefits of a more-fully automated store are particularly appealing for retailers as labor costs rise, according to analysts.

Walmart did not respond to Business Insider's request to comment, and has not provided any information regarding if or when the new system would roll out in stores.

With robots that can drive shopping carts and preform a wide array of other employee duties, Walmart could cut the number of employees on payroll while also improving customer experience. Automation is already taking over the fast-food industry — and it looks like the budget retail business might be next.

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'It was a ghost town': Shoppers reveal why they've abandoned Sears and Kmart
By Hayley Peterson
Business Insider
September 11, 2016

Sears and Kmart, once America's leading retailers, are bleeding cash and shutting down stores as once-loyal shoppers abandon them in droves.

Sears' sales have dropped from $41 billion in 2000 to $15 billion in 2015.

Kmart, which merged with Sears in 2005, has seen its sales plunge from $37 billion to $10 billion in the same period.

In interviews with more than one dozen long-time customers of the two stores, people repeatedly cited the same reasons for taking their business elsewhere: lack of customer service, poor-quality products, a lengthy checkout process, and messy, "depressing" stores.

Here's what they told us.

'I have to beg them' to take my money

Several people claimed that they were unable to find any cashiers when trying to check out. Robert Hoke, 69, of Baltimore, Maryland, said he has been a loyal Sears customer for life.

"Sears was my go-to store for just about everything," he said. "Now I do my best to avoid going into the local store."

He said he's visited the store about six times in the last two years and only once made a purchase.

"It is really bad when you have to go through a frustrating ordeal just to get them to take your money," he said. "It's like I have to beg them to take it!"

Hoke said he went to Sears a couple months ago to buy a new lawn mower, but left and went to Home Depot when he couldn't find anyone to help him.

"It's not a mystery as to why Sears is bleeding cash," he said. "Actually the 'cash' is walking out the door unspent, or even worse, it has just stopped entering altogether. No bogus rewards program or selling cheap stuff for cheap pricing will stop that from happening."

Hoke isn't the only customer who has complained about understaffing.

"I have been in the store several times and there is no presence of sales associates, only a cashier," said Gary Herndon, who said he was a Sears employee of 40 years and a long-time shopper. "If someone needed help with a tractor or mower, they would mostly likely walk out and go to Lowe's because the store was so inadequately staffed."

Steve Hall of Baton Rouge, Louisiana, recently tried to buy a weed eater at Sears and said, "What I thought would take 15 minutes max turned into a 30-plus-minute ordeal."

"I could not find an available cashier," he said. "When someone showed up after 10 minutes, he had problems scanning the UPC code. He also had problems entering my gift cards... They didn't care whether or not I bought it. I will not go again."

Rick Arnold of Salt Lake City Utah also complained about the lack of available cashiers, as well as "outdated technology" and empty shelves.

"Sears was an icon. It was the place to go to buy just about anything," Arnold said. Now, if you're "lucky enough to find what you are looking for and then want a speedy checkout process you are faced with long checkout lines."

Arnold thinks Sears won't last much longer.

"The end is near," he said. "The store I grew up with will be just a memory. So sad."

'They are committing suicide'

Some customers claimed that the quality of Sears' products has declined over the years.

"When I walked into a Sears store 10 to 15 years ago I knew automatically that I would pay more for whatever I bought, but I was confident that it would be top quality," said Tilmon Strickland of Ada, Oklahoma. "But today, I don't buy anything from Sears. The appliances are very cheaply made and won't last."

Charles Tucker of Exeter, New Hampshire, said he and his father were lifetime Sears customers. He said he still has some of his Sears Craftsman tools from the 1960s, but newer tools don't last.

When Sears sent him a new credit card in the mail recently, he said, "I just cut it up. Sears put a lot of small retailers out of business one-hundred-plus years ago, now they are committing suicide."

In response to the customer complaints described in this story, Sears spokesman Brian Hanover said the company is constantly getting feedback from customers and that most of it is positive.

"We constantly solicit feedback from our tens of millions of members and customers, as well as provide a variety of ways for them to provide it unsolicited and authentically back to us," he said. "The feedback you described is not reflective of the vast majority of comments and scores we receive and does not depict a typical member experience."

He said customer satisfaction scores have improved for both Sears and Kmart year-over-year.

"Regardless, we appreciate this additional feedback and know there are instances when we can do better," he said. "We will continue to enhance our operations and provide our members with superior service while they shop their way."

'Heaven help you if somebody needs a price check'

Employee incentives to get customers signed up for the company's Shop Your Way rewards program and credit cards have also been a headache for customers.

"They have so many questions that the checkout person needs to ask each and every customer to try and sway them into some sort of loyalty program," shopper Samuel J. Ely said. "They want my phone number, address, email, etc. Even the card swiper wants all kinds of things."

He compared checking out at Sears to a crossing point for the Berlin Wall.

"The annoyance really starts the moment you get in the long line and have to wait for the other customers in front of you to go through Checkpoint Charlie," he said. "Heaven help you if somebody needs a price check."

The loyalty program also makes things confusing when trying to get a price on something, Ely claimed.

After purchasing a house, Ely said he went to Sears to buy all new appliances. He ended up leaving without buying anything, however, because he said it was too confusing to get a bottom-line price on the appliances with all the possible combinations of discounts and loyalty rewards that a salesperson was pitching to him. Ely left the Sears store and went to Lowe's instead, and said he spent $8,000 on his appliances there.

"Ever since then, I avoid

Herndon, the 40-year Sears employee, agreed that the Shop Your Way program is "a misery for both employees and customers."

"When a customer came to get checked out they were presented with: sign up for Shop Your Way rewards, get their email address, sell a maintenance agreement... or a repair agreement on smaller items, try to get them to open a charge account, ask them to call in a customer service survey — and by the time all of this was presented, many customers were angry and just wanted to pay for their purchase and get out."

'It was a ghost town'

Customers also complained that the stores are in total disarray. (Take for instance) the Tinley Park, Illinois (store).

During a recent trip, he said he saw two cashiers in the store and only one other shopper. He said the store has been using sheets and shower curtains for years to hide empty shelves and closed departments, and that many of the registers are broken and covered with cardboard.

He also noted the store appears to be renting out part of its parking lot to a local car dealer for car storage.

"Kmart overtook Sears as the nation's #1 retailer in sales. And I've watched with dismay as Kmart has fallen from grace to irrelevancy."

Shopper Jeff Magnet of Newton, Massachusetts, said he visited the Kmart store in Tulsa, Oklahoma a couple weeks ago and found a similarly depressing scene.

"It was like a haunted house," he said. "A real mess."

Another customer, Paul Martin, compared his local Sears — where he said he and his wife worked in the 1990s — to a "ghost town."

"Last time I was in the store where we once proudly worked, it was a ghost town," Martin said. "Very sad to see a once-great retail giant at its end."

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Bankruptcy again for Kmart?
By JC Reindl
Detroit Free Press
September 11, 2016

Kmart, the Detroit-born retail chain that helped define the big box discount store trend in the 20th Century, is now struggling to make it through even one more year.

Battered by competitors such as Walmart, Meijer and Amazon.com, Kmart's parent company, Sears Holdings, is facing plunging sales, deteriorating finances and according to some retail industry experts, the possibility of bankruptcy as early as 2017.

The suburban Chicago-based corporation has closed hundreds of unprofitable stores in the past decade in an effort to stop the losses, which have exceeded $8 billion since 2011. Once known for blue light specials, Kmart is now infamous for its red ink.

There were 51 Kmarts left in Michigan early this year, down from 86 in 2006, according to Sears Holdings' annual reports. Nationwide, the company started the year with 941 Kmart and 731 Sears locations. A decade earlier, there were 1,416 Kmarts and 2,427 Sears, including specialty Sears stores.

"If they continue on this path, obviously the ultimate closure of their physical stores seems almost inevitable," said Neil Stern, senior partner at McMillanDoolittle, a Chicago-based retail consulting firm.

Financial maneuvers by Sears Holdings and its hedge fund manager CEO, Edward Lampert, have been keeping Kmart and Sears stores alive, Stern said.

Sears Holdings reported a net loss of $866 million for the first half of this year and announced that Lampert's hedge fund ESL Investments lent the company another $300 million. Cash infusions can help calm the nerves of Sears and Kmart vendors worried about the company's liquidity.

"It's incredibly hard to run a retail company when every quarter you get less sales and less customers coming through the door," Stern said. "You can only cut costs for so long and sell assets."

But a Sears Holdings spokesman said the company is making progress in its journey back to profitability. The company has reported improved pretax earnings, reduced operating expenses and is concentrating on its best-performing stores, he said.

"We are an asset-rich enterprise with multiple resources at our disposal to fund our transformation, including $4.7 billion of inventory already paid for; a substantial, valuable real estate portfolio and leading proprietary brands such as Kenmore, Craftsman and Diehard," spokesman Howard Riefs said.

However, closely watched same-store sales fell 4.2% at Kmart in the first half of this year, reflecting a $187-million decline. The Kmart brand represents about 40% of Sears Holdings' revenues.

Founded in Detroit in 1899 as the S.S. Kresge Co., the retailer opened the first Kmart store in 1962 in Garden City and debuted Blue Light Specials the following year. Kresge moved its headquarters to Big Beaver Road in Troy in 1972 and later changed its corporate name to Kmart.

Kmart's bankruptcy in 2002 led to its merger with Sears and relocation of its headquarters out of Michigan to suburban Chicago. Today, the combined Kmart-Sears corporate entity is smaller than either Kmart or Sears had been prior to the 2005 merger.

Warning alarms sounded in a report this spring by CreditRiskMonitor.com that highlighted Sears Holdings' cash burn rate, declining same-store sales and "fast-diminishing odds of survival." The company has stayed afloat this long, the report said, with help from previous asset sales such as the spin-off of the Lands' End brand and a sale and lease-back deal last year involving 254 Kmart and Sears stores.

The report identified the company's remaining strengths as ownership of the Kenmore, Craftsman and Diehard brands as well as its real estate portfolio, even though most Kmart locations and a majority of Sears locations are leased. It concluded that a Chapter 11 bankruptcy is "quite probable" in 2017 because the company may be unable to fully service its financial obligations for the following year.

Stern, the retail consultant, said he couldn't predict when any bankruptcy might occur because that would depend on variables such as the company's debt structure, access to capital and future asset sales.

"They are kind of running out of assets to sell," he said. "What's left is the value of some of the brands that they have and the underlying value of the real estate."

Asked what, if anything, might have saved Kmart and Sears from their current predicament, Stern said that spending more on modernizing the stores might have helped. He did note how Sears Holdings invested in e-commerce capabilities, "but it hasn't made enough of a difference because the underling brand is suffering."

Van Conway, CEO of Birmingham-based management consulting firm Van Conway & Partners, said the retail corporation's current problems could have been predicted at the time of the Kmart-Sears merger.

"Why did anyone think that two bad companies would result in a good company? That never happens," Conway said.

"A bad company with a good company can cause a bad company," he added. "Two good companies will make a better company. But you can't fix a bad company by merging with a bad company. And of course that was the only play left."

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Hostage By Hanjin: How to keep inventory moving when supply stops
By Ian Goldman, Celerant Technology
Chain Store Age
September 9, 2016

The collapse of Hanjin Shipping, the seventh largest freight carrier in the world, has left $14 billion worth of cargo in limbo. Much of that is literally floating around in the ocean, unable to dock; the rest is sitting idle in ports waiting to be unloaded. For Samsung, that means $38 million worth of electronics and appliances are held hostage in the carrier-bankruptcy case. And HP has 500 containers filled with computers waiting to reach American soil.

While supply chain problems like this will ultimately be ironed out by manufacturers, creditors, and the court system, retailers (of all sizes) are the ones who stand to lose if they don't have inventory to sell. U.S. courts are expected to grant Hanjin bankruptcy protection, which will keep creditors from being able to seize its cargo -- but that doesn't mean Hanjin will be able to round up the necessary funds to get containers unloaded from its ships. That would severely impact retail supply chains in the U.S. and around the world. Retailers that aren't directly affected by Hanjin should still take note because slowing global demand and a capacity glut are eating carrier profits -- others could face the same fate as Hanjin.

The real danger of supply uncertainty

As retailers prepare for the holiday shopping season, the financial solvency of global cargo carriers is only one factor beyond their control that can impact supply availability. Weather events, geopolitical instability, labor issues, and a myriad of other unforeseen events can unexpectedly reduce the availability of any item -- or even stop it altogether. That is cause for concern to retailers that remember the chaos surrounding shortages of products like: Cabbage Patch Kids, Tickle Me Elmo and PlayStation 3.

The inability of suppliers to meet demand is only one half of the equation. The other is forecasting that demand accurately. The omnichannel environment has made developing accurate forecasts even trickier because macro-demand must be stratified between channel partners, e-commerce, and brick-and-mortar to plan inventory distribution. Knowing where and when consumers will ultimately convert as they enter and exit the shopping journey is a formidable task -- but retailers who get it wrong are punished swiftly as shoppers take their business to competitors.

Take control by optimizing fulfillment

The inability to accurately forecast demand on every discrete channel leads to inefficiencies in inventory management. That becomes even more wasteful during supply shortages when out-of-stocks become common problems. An excellent way to combat demand uncertainty is through fulfillment optimization. This is achieved when digital orders are routed to the distribution center best equipped to fulfill them through a fulfillment logic algorithm. By selecting from the best fulfillment center, retailers can react quickly to peaks and valleys in demand at any individual location or channel.

Automated fulfillment logic is an important best practice for any omnichannel retailer to employ during typical operations and it is often customized to account for different preferences among geographies or expected seasonal demand shifts. When supply emergencies erupt, like missed shipments caused by a bankrupt cargo carrier, the algorithm can be tweaked in a number of ways to minimize out-of-stocks. If the shortage is small or temporary, assigning fulfillment priority by order volume is a way to react to demand changes in real-time. During a severe shortage where out-of-stocks will be unavoidable, allocation limits can be set to distribute inventory to the most vital locations and customers.

Ship from any store

Maximizing the value of fulfillment logic is directly correlated with the volume of shipping centers in a network. That's why empowering every location, regardless of how many there are, to ship orders strengthens resiliency to inventory disruption. Retailers that can ship from any store can truly employ best store fulfillment where each order is routed to the location best suited to fill it. Which store is "best" is a matter decided by retailers to achieve specific goals. Many route orders based on geography so orders arrive at their destinations quickly, but during supply shortages this can be changed to fulfill based on inventory thresholds. Analyzing historic data from these fulfillment patterns provides useful intelligence that can be used to improve accuracy on forecasting future demand for the same and similar merchandise.

Another benefit of shipping from any store is that inventory risk is reduced. Instead of sitting idle in a warehouse waiting for an e-commerce order, inventory is stocked on store shelves. That exposes it to conversion from more channels because it can be purchased by a brick-and-mortar customer or sent out as a Web, phone or mail order item. This increases turnover rates and lowers the cost of holding inventory, enabling retailers to hold more merchandise without incurring additional cost. This buffer is useful for preventing sellouts when supply tightens.

Prioritize channel partners

Retailers that work with channel partners can assign each one a priority in their fulfillment algorithms. For example, retailers who sell on eBay may choose to assign it lower priority since consumers who purchase there tend to be less loyal. They may choose to do the same with Amazon, or even assign it a higher priority since the company penalizes partners that run out of stock. Prioritization can vary based on what makes sense for the retailer or how important each channel is to its business. The key is utilizing automated fulfillment to ensure the highest-valued customers are served and retained.

Maximizing fulfillment boosts service levels for consumers and efficiency for inventory during typical business cycles, and provides a competitive edge for omnichannel retailers. When outside factors squeeze supply, it allows retailers to optimize how inventory is fulfilled so sellouts are minimized and localized to the channels and locations where their impacts can be best contained. Bracing for uncertainty, like the Hanjin collapse, keeps the smartest retailers nimble and able to weather "supply storms" unscathed.

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Can Sears Holdings Capture Millennial Shoppers?
By Jamie Grill-Goodman
Retail Info Systems News
September 9, 2016

In the midst of declining sales, Sears Holdings seeks to transform to a more "asset-light, member-centric integrated retailer" and opens a revitalized Kmart store aimed at providing a new brick-and-mortar experience.

"We continue to face a challenging and competitive retail environment," said Rob Schriesheim, EVP & CFO, Sears Holdings Corporation, of the company's second quarter 2016 EBITDA loss of $191 million, an improvement of $35 million versus last year. Kmart and Sears Domestic comparable store sales declined 3.3% and 7.0% in the quarter.

As the company struggles to win over the buying power of millennials, Kmart unveiled a revitalized version of itself at its store in Des Plaines, Ill, in August. The refreshed store is part of an ongoing strategic marketing and rebranding initiative to provide enhanced, new and exclusive offerings to a new millennial audience.

Meanwhile, Schriesheim noted the company continues to make progress in its transformation to a more "asset-light, member-centric integrated retailer" leveraging its Shop Your Way platform. Sears Holdings is home to the Shop Your Way social shopping platform, offering members rewards for shopping at Sears and Kmart, as well as with other retail partners. Member sales penetration has grown from 58% to 75% since 2011.

"Going forward, our focus is on increasing our level of engagement with our members," said Schriesheim. "We will continue to apply our resources towards better understanding the wants and needs of our best members so that we can apply these insights towards increasing engagement and strengthening our relationships."

The Shop Your Way platform, which adds a variety of social and sharing features, on top of loyalty-related coupons and e-commerce, depends on member activity to generate social benefits and insights.

"Our reputation and brand will change when our members are more engaged with the Shop Your Way network," Schriesheim.

The new "Whole Lotta Awesome" Kmart store initiative is also based on customer insights and feedback.

"We are excited about the re-launch of the Des Plaines store because it exemplifies our dedication to our members and it's in our own backyard," says Alasdair James, president of Kmart. "We want our members to know we are listening to their feedback and bringing them new products, deals and experiences they'll love!"

Some highlights of the Des Plaines store include:

      • The "Happy to Help" Center — an improved customer service center, including a kid's shop where they can get toys, candy and more with their parent's Shop Your Way points — no money required       • The launch of the Kmart new Brand Guarantee — every member is guaranteed a minimum of $100 in coupons in their app, every day.

      • Shoparazzi — a free personal concierge service that, when provided a member's list, will do the shopping for them. And if Kmart doesn't carry the product, they will find it at another store and it will be waiting for the customer at checkout.

      • Enhanced aesthetics — including new signage and wider aisles. "In an effort to evolve the Kmart brand to better serve our members, we will continue these efforts to test and learn at our stores," said Kelly Cook, Kmart's CMO.

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Macy's store closures haven't spooked Gap, PVH
By Krystina Gustafson
CNBC.com
September 7, 2016

Macy's looming wave of store closures hasn't sent the broader retail industry running for cover. Instead, with 100 of the department store's locations on the chopping block, the CEO of one of Macy's most important vendors shook off what he predicts will have a "minimal" impact on his company's business.

During a presentation at Goldman Sachs' Annual Global Retailing Conference, PVH Chief Executive Manny Chirico said that while Macy's has not yet outlined which of its 675 stores it will close, they will be the least profitable and most cannibalizing locations.

And because PVH's Calvin Klein and Tommy Hilfiger brands are only stocked at roughly 500 of the retailer's top stores, its exposure to Macy's contraction is relatively limited, Chirico said. Macy's has said it expects the store closings to result in $1 billion in lost revenue.

"They cost us a fortune in gross margin dollars," Chirico said. "It's not that big [of] an issue for us."

Competitor Gap likewise didn't take the news too hard. Despite his company's similar skew toward mall-based stores, CEO Art Peck told attendees at the Goldman conference that he views Macy's closures as an opportunity to grab market share.

"That is demand that is going to get placed into other businesses," Peck said.

He added that Gap's brands have good co-tenancy clauses, meaning if a traffic-generating anchor store were to close in a center where they operate, it could lead to a break on rent.

The CEOs' comments come less than a month after J.C. Penney Chief Marvin Ellison told analysts that some of Macy's previous store closures have been a net positive for his company. Because the closings are "well-telegraphed," "there are specific things we can do to take market share," he said.

That is, of course, so long as the shopping center remains a viable place to do business. Sometimes, when an anchor tenant closes a store, it can be the nail in the coffin for a dying center. Retailers across the industry have been shuttering stores in a bid to boost their profitability.

Yet despite department stores' recent struggles, Chirico reaffirmed PVH's allegiance to these locations, which account for 80 percent of his company's wholesale business. He reiterated that he sees opportunity for margin expansion during the second half, thanks to tighter inventory levels.

Michael Kors CEO John Idol similarly pledged his brand's commitment to the major department stores. Despite the accessories label's recent decision to pull back its distribution to these stores — as well as sit out their promotional events — Idol said he understands why discounting got so out of hand there. "People are suffering from low mall traffic," he said. "They're trying to [remedy] that through additional promotions."

That doesn't mean, however, that Michael Kors needs to participate in those tactics.

Though Idol doesn't expect fall trends to show robust dollar or comparable-sales growth, inventories are in a much healthier position to drive gross margin improvement, he said. And come February, when the label starts pulling back on its promotional activity, Michael Kors will have additional opportunity to generate more profitable sales.

"If we lose market share in the U.S., that's OK," Idol said. "We want to get [our] integrity back."

Nordstrom, the only department store to present at the conference Wednesday, also acknowledged that it's keeping inventories lean as it tries to drive urgency with consumers. If shoppers know the handbag they want is only available in a limited quantity, they're more likely to buy it full price, rather than risk it selling out while they wait for a discount, CFO Mike Koppel said.

The department store will also continue partnering with brands that have limited distribution. "We continue to want to be differentiated," Koppel said.

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Sears Earnings Release And More Red Flags
Seeking Alpha, Dylan Street Capital
September 6, 2016

Summary

Sears changes to the wording of press releases should raise concerns.

Minority shareholders aren't protected by the Board b/c of potential conflicts of interests.

Sears is a case study for poor corporate governance.

When we first started writing on Seeking Alpha we had two primary goals: 1) to demonstrate our approach in hopes that others might learn something about how we think about investing, and 2) to try and increase the level of discussion on Seeking Alpha. Today's article is about giving readers an insight into number 1.

When we are looking at investment ideas, we spend a large amount of time reading the financials and reading transcripts of company presentations and earnings calls. We look for Red Flags. We have a long list of red flags that we look for when doing investments. One red flag we look for is small changes to the format of presentations or messages by the company. Often these changes can lead to asking the question of "Does this make sense?" Does the change or issue make sense from the perspective of a normal everyday person? So today we are presenting a small change in Sears' filings that just caused us to stop in our tracks and ask some important questions.

Dylan Street Capital Rule: Deviations from patterns violates human nature and thus, should be areas for investors to investigate further.

Humans tend to be creatures of habit. When trying to understand the financials of a company we attempt to look for patterns or deviations from these patterns. In the August 25, 2016, 8-K filed by Sears, we saw two deviations from previous filings that made us stop and ask some more questions.

    1. Sears is receiving proposals to borrow money? Hmm.... Seems unusual. &

    2. ESL is no longer affiliated with Eddie Lampert? Or at least disclosing it is no longer relevant.

Red Flag #1: Free money Sears.

The first issue we saw when reading the most recent 8-K was the wording regarding how Sears lined up new debt. The relevant language is presented here:

"We received an offer from ESL Investments, Inc. ("the ESL proposal") to provide $300 million of additional debt financing secured by a junior lien against our inventory, receivables and other working capital, which offer has been accepted." 8-K 8/25/2016.

We think this is so important for readers to stop and think about that language being used. Sears says that it received an offer to borrow money. How many companies receive an offer, out of the blue, to borrow more money? The language makes it seem like that Sears doesn't need, nor was seeking out a loan. But any casual reader of the Sears saga knows that they are constantly raising new sources of cash in attempts to "transform" their business.

So why does this raise a red flag for us? If you were to go through the 8-Ks that have been previously filed by Sears with regard to capital raises, the language it traditionally uses is something to the effect of SHLD has "obtained" a new loan. For example, look at the language from an 8-K provided in April 2016:

"On April 8, 2016, Sears Holdings Corporation (the "Company"), through Sears, Roebuck and Co., Sears Development Co., Innovel Solutions, Inc., Big Beaver of Florida Development, LLC and Kmart Corporation (collectively, "Borrowers"), entities wholly-owned and controlled, directly or indirectly by the Company, obtained a $500 million secured short-term loan facility (the "Loan Facility") from JPP, LLC, JPP II, LLC, and Cascade Investment, L.L.C. (collectively, the "Lenders")". 8-K 4/12/2016

As we went back through the 8-Ks, we could only find language that was similar to the April 8-K. It was never someone offering to lend the company money, but rather the company undergoing or obtaining new financing. As we thought about this red flag, it struck as weird for another reason. It struck as highly unusual for a highly indebted company to receive a proposal for new financing without the company starting the conversation first. But the wording sort of implies that Sears doesn't need or wasn't seeking financing when this proposal arrived.

Thus, we believe Sears is attempting to communicate to investors how great everything is going, and that they aren't strapped for cash. To be clear, this may be a minor point, but it raises funny questions about management's intentions and its desires to be open and transparent about the status of the business.

Red Flag #2: Who controls ESL?

The second red flag, or change comes from the same announcement we provided above. We will repost the section below.

"We received an offer from ESL Investments, Inc. ("the ESL proposal") to provide $300 million of additional debt financing secured by a junior lien against our inventory, receivables and other working capital, which offer has been accepted." 8-K 8/25/2016

And in another section of the same 8-K, we see the following description of the new financing:

"In August 2016, we received the ESL proposal to provide $300 million of additional debt financing secured by a junior lien against our inventory, receivables and other working capital, which offer has been accepted. Under the ESL proposal, the Company may, in its discretion, offer to third party investors the right to participate in up to an additional $200 million of debt financing on the same terms and conditions. The financing is subject to customary conditions and is expected to close in the next 7 to 10 business days. The terms of the debt financing were approved by the Related Party Transactions Subcommittee of the Board of Directors of the Company, with advice from Centerview Partners and Weil Gotshal & Manges, the Subcommittee's outside financial and legal advisors." 8-K 8/25/2016

As we read the announcement, we first stopped because the wording seemed odd as we mentioned before, and then we noticed that Sears did not include any language about ESL being controlled by Eddie Lampert, who is the CEO of Sears. We again went back though many previously filed 8-Ks and found that Sears traditionally has always included some sentence or descriptive language mentioning that ESL was controlled by Sears CEO Eddie Lampert. This is down to make sure that investors are aware of the potential for conflicts of interest. We will show you another example from the April 2016 8-K demonstrating this relevant language:

"Mr. Edward S. Lampert, the Company's Chief Executive Officer and Chairman, is the sole stockholder, chief executive officer and director of ESL Investments, Inc., which controls JPP, LLC. $250 million was funded under the Loan Facility on April 8, 2016, and, subject to the satisfaction of certain conditions, up to an additional $250 million may be drawn by the Company prior to July 7, 2017, the maturity date of the Loan Facility. The Company expects to use the proceeds of the Loan Facility for general corporate purposes." 8-K 4/12/2016

So to recap, we now have the company receiving an unsolicited loan from some mysteriously third party named ESL that isn't affiliated with Eddie Lampert, the CEO and Chairman of Sears. Again, this by itself doesn't make or break an investment thesis, but the question is why change the language? Why release several dozen press releases making it very clear to readers that there is a connection, and then all of a sudden switch to a new approach? It could be a simple mistake, or something more.

We think our readers should make that decision for themselves. Our primary point is that when reading the filings, investors should be reading them diligently enough to notice these types of changes to the language of the presentations, and stop and ask why?

Related Party Approvals?

Finally, we learned in this most recent 8-K that this transaction should be viewed as "above board" because it was approved by a subcommittee of the board of directors. We provide the relevant language below:

"The terms of the debt financing were approved by the Related Party Transactions Subcommittee of the Board of Directors of the Company, with advice from Centerview Partners and Weil Gotshal & Manges, the Subcommittee's outside financial and legal advisors."8-K 8/25/2016

Investors like to take comfort that in this modern day and age, their directors are doing more to protect the rights of the shareholders. And this may or may not be the case. So, we wanted to go back and see who was on this committee. And this is where we learned another interesting fact that we were previously unaware of. The information for this subcommittee can be found in the proxy statement filed 4/1/2016. On page 10, it says that for 2015, the members of the Related Party Transactions Subcommittee were the following: Ms. Ann Reese, Mr. William Knuckler, and Mr. Kunal Kamlani.

We would like to focus your attention onto Mr. Kamlani. We know that this subcommittee appears to vet deals with related parties such as Mr. Lampert. In this same proxy statement, we learn that, as of March 2016, Mr. Kamlani became President of ESL Investments. (Page 7) And as of March 2016, he was no longer considered to be an independent director and hasn't served on the audit committee since that time. But think about that.

One of the members of the subcommittee charged with vetting deals between insiders and Sears was then hired by the hedge fund run by the same CEO who was tasked with vetting. To us, this should raise some eyebrows. Investors should want to know that the board isn't self-interested and willing to simply rubber stamp the deals of the CEO, Eddie Lampert.

Next, Mr. Kamlani was replaced by Alesia Haas who previously worked for OneWest Bank. The same OneWest Bank where the current Sears board member Steven Mnuchin was CEO. Also, we should note that David Fawer worked at OneWest Bank, and is currently a Seritage board member, which is controlled by Eddie Lampert. Steven Mnuchin is chairman of the nominating and corporate governance committee of the board of directors. One of the responsibilities of this committee is to nominate members for the board of directors. Hmmmmm....

In such a large world, Sears has managed to create a very small network from which it seems to recruit from for important positions that operate as a check on any abuses of power by those in charge. And this is to the detriment of minority shareholders.

The issues we have raised are relatively minor in and of themselves, but they do raise red flags that should give potential investors some caution when thinking about holding or buying Sears stock.

Update: Prior to publication, Seeking Alpha asked us to reach out to management and give them an opportunity to respond. We sent Chris Brathwaite, V.P. Media Relations & Corporate Communications a brief email with a couple of questions. We haven't heard back from him, but will update our readers should we hear from him at some point.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Johnson Controls and Tyco are now one
By Marianne Wilson
Chain Store Age
September 6, 2016

Johnson Controls has completed its merger with Tyco.

By uniting Johnson Controls, a leading provider of building efficiency solutions with Tyco, a leading provider of fire and security solutions, the new company is positioned as a leader in products, technologies and integrated solutions for the buildings and energy sectors.

With $30 billion in revenue and 117,000 employees, the combination brings together best-in-class product, technology and service capabilities across controls, fire, security, HVAC and energy storage, to serve the full spectrum of end markets including large institutions, government, commercial buildings, retail, industrial, small business and residential.

"We are more than just two businesses that have come together -- we are now one team uniquely positioned to create value," said Alex Molinaroli, Johnson Controls chairman and CEO. "Our combined insights and world class technologies will help build even smarter, more secure and more sustainable environments that help our customers win and broadly move the world forward."

As previously announced, Johnson Controls' automotive business is still on schedule to spin off into an independent company, known as Adient, on Oct. 31, 2016.

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Retailers Seek U.S. Help With Shipping Crisis
By Paul Siobro & Costas Paris
The Wall Street Journal
September 2, 2016

Rates soar as Hanjin Shipping's bankruptcy filing strands goods, causes confusion at ports

U.S. retailers, bracing for a blow as they stock up for the crucial holiday sales season, asked the government to step in and help resolve a growing crisis caused by the near-collapse of South Korea's Hanjin Shipping Co., one of the world's largest container shipping companies.

"While the situation is still developing, the prospect of harm is significant and apparent," Sandra Kennedy, president of the Retail Industry Leaders Association, wrote in a letter to the Department of Commerce and the Federal Maritime Commission. Hanjin's recent bankruptcy filing "presents an enormous challenge to U.S. shippers," she said, and "could have a substantial impact on consumers and the economy at large."

The trade group is urging the U.S. to work with ports, cargo handlers and the South Korean government to resolve the widespread disruption in freight shipments caused by the Hanjin bankrupcy filing. A spokesman for the Retail Industry Leaders Association said they're hoping the South Korean government could help provide clarity and speed to the bankruptcy proceedings, which are being considered by courts there.

Hanjin handles about 7.8% of the trans-Pacific trade volume for the U.S. market, Ms. Kennedy's letter said. Since the shipping company filed for bankruptcy protection in a Seoul court Wednesday, terminal operators, ports, cargo handlers, truckers and others have refused to handle its cargo, for fear they won't get paid. That is causing turmoil at U.S. ports and beyond, said shippers, importers and freight forwarders.

U.S.-bound cargo has been delayed at the point of origin, and cargo-laden Hanjin ships are unable to get into U.S. ports. Already delivered cargo is sitting unhandled, clogging ports and occupying containers needed elsewhere.Several Hanjin ships have been seized by creditors or barred from shipping cargo from Busan, South Korea's main port, and vessels have been turned away from ports in the U.S., China, Canada, Spain and elsewhere.

Earlier in the week another Hanjin vessel was seized in Singapore.

Because Hanjin is part of an alliance of six shipping companies, the problems are even more widespread.

Freight brokers in Asia said about 540,000 containers are expected to face delivery delays that one of them said could range from a few days to more than a month.

Shipping rates soared as freight capacity shrank overnight. Cargo owners said rates from Busan, South Korea, to Los Angeles had risen to $2,300 a container by Thursday, up from $1,700 four days earlier. One U.S. importer said he was getting rate quotes of $2,000 a container, compared with $700 before the Hanjin news.

The turmoil can only aggravate problems for retailers grappling with the challenges and high costs of e-commerce and at a crucial time. Those most likely to be affected include Wal-Mart Stores Inc., Target Corp. , J.C. Penney Co. and clothing retailers.

A Home Depot Inc. spokesman said Hanjin isn't its only carrier so it doesn't expect a material impact. The company is working through contingency plans, he said.

A Target spokeswoman said the retailer is watching development closely and assessing the situation.

Marilee McInnis, a spokeswoman for Wal-Mart, said, "Right now, we are waiting to hear the final determination on bankruptcy proceedings and the implications to their current assets before we will be able to assess any impact."

The $25 billion U.S. toy industry has been sweating the Hanjin news, as it prepares for the holiday season, which accounts for half its annual sales.

Jeff Bergmann, managing director of the Toy Shippers Association, said his customers are fortunate that only about 20 containers are on Hanjin or affiliated vessels. They've been told their freight will be delivered to the ports, but from there, "nobody knows," Mr. Bergmann said.

Beyond that, the general concern is how long the turmoil will last. "The ripple effect could be tremendous," he said.

Jessica Dankert, senior director at the Retail Industry Leaders Association, said the congestion is coming during one of the worse possible times for retailers as they stock up before the critical holiday-shopping season. "These concerns would be trouble at any time, but this is a particularly bad time for it to happen."She saidretailers are considering contingency plans that include using other carriers and working to get their cargo released.

Reclaiming cargo won't be easy.

Cargo owners may have to wait for months to get their cargo off Hanjin ships, analysts said.

"In 2001, Cho Yang, a much smaller Korean carrier, went bust and it took six months before a mere 200 containers, handled by a single freight forwarder, could be taken off to ports," said Lars Jensen of Copenhagen-based SeaIntelligence Consulting. "This is at a much bigger scale so I would not be surprised if scores of boxes on stranded Hanjin vessels ever actually make it to their destination."

Another issue is the crews. Hanjin ships carry crews of 15 to 25 sailors, and with the vessels unable to call at ports, the sailors could be stranded at sea for weeks or longer.

"They have food and water for a couple of weeks," said Basil Karatzas of New York-based Karatzas Marine Advisors & Co. "Beyond that, things may become very difficult because suppliers will no longer extend credit to Hanjin and everything must be paid in cash."

Mr. Jensen said Hanjin quickly must file for bankruptcy protection in Europe and the U.S. to keep its ships moving. Hanjin has secured an injunction protecting its ships against seizure by creditors in Korea and is seeking a similar injunction for protection in ports abroad.

"They got the injunction in Korea, but most of their ships are out at sea or at foreign ports. Ship seizures will continue and increase around the world if there is no bankruptcy protection." Mr. Jensen said. "But sorting out such legal matters at various jurisdictions is complicated, as Hanjin has no control on how fast foreign courts will examine its case."

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Eddie Lampert Has to Step in and Save Sears Holdings Corp...Again
By Rich Duprey
The Motley Fool
September 1, 2016

The once-venerable retailer can't seem to make it through a quarter without getting some outside financial assistance.

Another day, another loan to keep Sears Holdings afloat. Following the report of yet another ballooning quarterly loss, CEO Eddie Lampert will lend the retailer $300 million through his hedge fund, ESL Investments, that will be secured by a junior lien against the retailer's inventory, receivables, and other working capital.

The countdown clock is ticking

Sears had a disastrous fiscal second quarter with net losses of $395 million, or $3.70 per share, compared to a profit of $208 million, or $1.84 per share in the year-ago period. Even after adjusting for significant items, losses totaled $217 million, or $2.03 per share. Mind you, those profits last year were the result of a significant infusion of one-time cash flows from creating the real estate investment trust Seritage Growth Properties and the sale proceeds from much of Sears' real estate, not any improvement in its business.

In the press release, CFO Rob Schriesheim said, "During the first half of 2016, we have demonstrated our ability to finance our transformation strategy with the levers available to us through our portfolio of assets and businesses." Unfortunately, Sears' abilities apparently don't extend to actually succeeding as a retailer -- it's all about Lampert's financial legerdemain to keep the ghost of the company going.

It was Lampert's ESL Investments that proposed Sears accept $300 million of additional debt financing, which also allows the company, at its discretion, to "offer to third party investors the right to participate in up to an additional $200 million of debt financing on the same terms and conditions."

Neither borrower nor lender be

Earlier this year, Lampert loaned Sears $125 million as part of a $500 million loan package that included financing from an investment firm that manages Bill Gates' fortune. And before that, it had secured a $750 million term loan, which itself followed a $400 million loan last year to make it through the holiday season.

And that's where the worry concerning the latest loan arises: Retailers are heading into the all-important holiday season, and Sears' shaky financial footing may once again cause suppliers to get cold feet. If the company is unable to secure inventory, then the few shoppers it does still attract will flee, causing it to spin faster down the drain.

Sears' second-quarter financials were driven by a 3.3% decline in comparable sales at Kmart due to lower sales in the pharmacy, grocery and household, and consumer electronics categories. At Sears, comps were down 7%, primarily due to decreases in home appliances, apparel, consumer electronics, footwear, lawn and garden, and tools.

That's important as Sears was once the unrivaled appliance leader. While its star in the sector faded long ago, the downward spiral has accelerated in recent periods as Home Depot and Lowe's take larger swaths of market share. Lowe's said appliances drove solid comps in the quarter and believes it gained more share in the space. And now, J.C. Penney is making a big push to introduce appliances at its stores in the back half of the year.

Considering this retailer's newfound strength, that should be worrisome for Sears, as should Best Buy's recovery as well. The consumer electronics chain reported near-1% comps growth as the industry suffered a better-than-3% loss, suggesting there's little that Sears has to offer consumers they can't find somewhere else.

Assets picked clean

Sears did say it's still exploring strategic alternatives with its Kenmore, Craftsman, and DieHard brands as well as its Sears Home Services business, and though nothing has come of these efforts, it has reportedly received "interest" in the brands. Should they go, the dismantling of a once-great retail icon will be virtually complete.

Lampert does own a sizable amount of Sears stock, and he has committed to turning the retailer into a leaner operation, investing large sums in digital channels, but it amounts to too little, too late. The loans Sears Holdings is now forced to accept on a regular basis just to make it through the next quarter indicate that the end isn't too far away.

Rich Duprey has no position in any stocks mentioned.

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Obamacare rate hikes rattle consumers, could threaten enrollment
By Jayne O'Donnell and Tony Leys
USA Today
September 1, 2016

Many of next year's premium rate increases on the Affordable Care Act exchanges threaten to surpass the high and wildly fluctuating rates that characterized the individual insurance market before the health law took effect, interviews with insurance regulators and records show.

With dramatic drops in insurance company participation on the exchanges for some states, decreased competition and other factors are leading to often jarring rate hikes. Some of the states that are facing what are likely among the biggest increases this year — Tennessee, Arizona and North Carolina — were among those the Urban Institute reported in May had the biggest increases last year.

"The reality is, it's all very justified, unfortunately," Iowa insurance commissioner Nick Gerhart said Thursday of the premium increases he approved this week of 19% to 43% for about 70,000 Iowans who buy their own policies.

Gerhart warned consumers in a rate hearing in July that if he rejected insurers' proposed premium increases for 2017, the carriers would likely decline to sell policies in the state. No carriers made an explicit threat to leave Iowa, but the implication was clear, he says: "It gives you less room to maneuver." Iowa law, he said, requires him to judge proposed premium increases on whether experts find them to be justified by carriers' projected costs

As other state insurance commissioners gradually sign off on insurers' rate requests — which should all be decided within a month — many consumers are learning what's in store for 2017.

Issues with the exchanges consumed a "disproportionate amount of attention" at the National Association of Insurance Commissioners' summer meeting, which ended Monday, said John Huff, the group's president.

The individual health insurance market is typically one of the smallest parts of commissioners' focus even with health insurance and they also have to deal with far more sweeping issues including property and casualty insurance and medical liability.

"Clearly, state and federal policymakers need to continue to work together (toward) a more stable risk pool, certainty on funding and more reasonable regulations," says Huff, who is also director of Missouri's insurance office. "Over six years after the law was passed, making substantive corrections to the law is past due and, consequently, the markets are suffering."

Insurers need enough healthy people in the "pool" of consumers enrolled in their plans to offset the financial risks in covering the sick ones who need costly care. A shortage of healthy consumers on the exchanges to date is often attributed to the high premiums and relatively low tax penalties so far for remaining uninsured.

Health and Human Service Department Secretary Sylvia Burwell said Thursday the insurance exchanges "can be made sustainable in the long term" though administrative actions by the agency, but legislative action could "speeds things up."

Insurance premiums are probably still lower than they would have been if the Congressional Budget Office's early high projections played out, Burwell said. She added that it's important to consider the Affordable Care Act's overall effect on Americans, including those who have employer-provided coverage rather than just the 11 million people enrolled in insurance through the exchanges.

But while that's some solace for people including breast cancer survivor Christine Frietchen of New York City, she just got a letter from Empire Blue Cross Blue Shield saying she faces a 22% rate increase for 2017. That will bring her premium to more than $630 a month for a silver-level plan that only covers in-network care and requires referrals for everything.

"No doubt, out-of-pocket maximums and co-pays will also increase as they say there will be 'changes' in the letter, but they don't specify what those will be," says Frietchen, who works for a nutritionist and author. "I'm certain the rate hike is the tip of the iceberg."

Many argue that premium costs — even when heavily subsidized by the government — are too high. The health law considers it affordable if insurance premiums cost 6% or less of income for those earning under 200% of the federal poverty limit, or about $40,000 for a family of three,

"That's really, really asking a lot," says John Holahan, a fellow at the Urban Institute's Health Policy Center. "The way it was designed, it was almost destined to not work.".

Holahan, co-author of the recent Urban Institute report, found the number of insurers, the level of 2015 premiums, and the types of insurers participating within the markets were the major factors influencing whether there were premium increases or decreases. The report concluded "there is no meaningful national average," and the wide variation state to state is tied directly varying levels of competition around the country.

In Tennessee, the insurance commissioner signed off on average rate increases of 59%, but Holahan says it's important to consider the proportion of population affected by rate increases. Urban areas often have strong competition and lower rates.

In middle Tennessee, where Lori Woodard-Hoyt does health care consulting that includes insurance assistance to doctors, she says many consumers are choosing to remain uninsured — especially considering the challenges many face finding in-network specialists in their rural areas. With high-deductible plans, others also can't afford to pay what they owe when go to the doctor.

In Delaware, Gavin Braithwaite and his wife Lou are facing a proposed 32.5% increase in their Highmark Blue Cross Blue Shield plan for 2017, which is especially painful as it comes on top of a more than 55% increase in 2016 and a nearly 24% hike in 2015.

"Already our retirement savings are being severely impacted," Gavin wrote to his state senators and other officials this week. "Where will this trend leave us in 2018 and beyond?"

Braithwaite says he wants to stay with the plan, which covers just his wife as he's on Medicare, because it's "a lot of aggravation" to change plans and possibly doctors and they have been with Highmark for nearly 10 years.

Gina Brodie of Tucson bought an individual policy for about a decade before the ACA and says she's fed up with increasing premiums. Brodie and her husband have been paying more than $900 a month for an gold-level plan they bought on Healthcare.gov even though she gave up trying to find a primary care doctor who would accept her insurance over the summer.

With all but two insurers expected to leave her county for 2017 and the state insurance commissioner questioning how much leverage he has given the departures, Brodie and others in her state are wondering how they will afford insurance and what it will be worth next year.

"It is quite infuriating to read about how all the insurance companies are losing money, when we rarely, if ever, have utilized our many insurance plans over the years," says Brodie, who has a form of chronic arthritis that she would like treated. "Those insurance companies have made nearly 100% profit on us, while we got either zero benefits or zero access to the system."

Frietchen, who is single and 46, says she'd likely be paying far more for private health insurance coverage, or "I would not have been able to take a job with a startup that I really love, but that's too small to offer a health care benefit."

"We're dealing with Obamacare version 1.0 here," says Frietchen. "I never expected it would be perfect right out of the gate, and I hope that our next president focuses on refinement, revision and review, rather than repeal."

Huff says the next few months will determine much about the reputations and priorities of insurers. Those who want policies that take effect January 1 need to sign up by Dec. 15.

"Consumers may not realize until December 15 that there's no one here in the market and may ask the question: 'Where were the insurers when consumers needed them?'" says Huff. "That's a potential reputational risk for health insurers."

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Decision by Sears to Sell Paint Won't Help the Troubled Retailer
By Kat McKerrow
MSN Money-The Street
September 1, 2016

Following last week's dismal fiscal second-quarter earnings release, Sears Holdings said this week that it will begin selling paint again after a four-year hiatus.

Although this makes sense from a business standpoint, is it simply too late for Sears to try again?

Everyone is aware that brick-and-mortar retailers are facing challenges like never before. Americans remain budget-conscious following the Great Recession, and when they do spend money, it is usually online.

Led by Amazon, ecommerce has quickly revolutionized how people around the world shop.

Instead of hopping in the car and driving to the mall, Americans can simply sit down at their laptops or even use their mobile phones and purchase whatever they need. And Amazon's Prime service offers free shipping as quickly as two hours, in some markets.

This has hit the department stores particularly hard. Once-popular retailers Macy's, Nordstrom and Sears have watched their sales shrink and their stocks plummet.

Even apparel sales, which many pundits once thought were out of ecommerce's reach, have shifted online. Case in point: Amazon is poised to overtake mall stalwart Macy's in clothing and accessories sales as early as next year.

Once a stock that investors bet their retirements on, Sears has simply become one of the most toxic stocks.

Last week, Sears reported results that showed yet another quarter of plunging profits. The company posted a loss of $395 million for the quarter, revenue tumbled 10% and same-store sales plunged.

Sears never should have stopped selling paint in the first place.

The home improvement industry has remained robust, with Home Depot and Lowe's snagging most of the market share. Any entry into do-it-yourself markets such as paint sales could be a plus for Sears.

However, it may be too late. Unless Sears becomes an all-out hardware super store, the clock is ticking on this company.

Sears faces a massive debt hurdle of $3.4 billion, with just $276 million in cash. And without drastic improvements made to bring large amounts of customers back, it looks prime for a default.

At this point, the best thing that the company could do would be to sell off its assets. It has already begun to do so, spinning off apparel brand Lands' End in 2014, as well as packaging and selling some of Sears' real estate as a real estate investment trust, Seritage Growth Properties.

Sears has already hired Citigroup to help it find strategic alternatives for a couple of its brands, but Citi better hurry up.

The entire brick-and-mortar retail industry is on shaky footing, but Sears is among the most uncertain stocks in the sector...

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Sears to Begin Selling Paint in Stores Again
By Tess Stynes
The Wall Street Journal
August 30, 2016

Retailer also plans to bring its Craftsman brand into the category amid stronger demand in the home-improvement market

Sears Holdings Corp. said it would begin selling paint again after a roughly four-year hiatus and bring its Craftsman brand into the paint category for the first time, as the struggling retailer aims to benefit from stronger demand in the home-improvement market.

The Hoffman Estates, Ill., retailer initially plans to stock shelves at 23 U.S. stores with paint brands including the Craftsman, Weatherbeater and Easy Living labels.

"We are confident the time is right to re-enter the category," which Sears stepped away from in 2012, said Dean Schwartz, a Sears tools, lawn and garden executive. After the initial rollout, the retailer plans to reintroduce paint to all of its retail locations.

The move comes as home-improvement retailer Home Depot Inc. recently raised its outlook for the year after posting strong second-quarter results. Rival Lowe's Cos. also received a boost from an improving housing market, though not to the same degree.

Sears, which also owns the Kmart discount chain, in May said that it was exploring increasing the availability of its Kenmore, Craftsman and DieHard wares outside of Sears and Kmart stores. In June, Sears unveiled plans to put its DieHard brand on automobile tires, the brands first major expansion in more than a decade.

The company has been trying to turn itself around by spending on new technologies and services to better equip as consumers buy more goods online. Sears efforts to return to profitability also have included cost-cutting and store closings. Like other retailers, Sears has faced challenges from a highly promotional environment.

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Sears workers reveal why the company is bleeding cash
By Hayley Peterson
Business Insider
August 28, 2016

The company's cash and equivalents have fallen to $276 million from $1.8 billion one year ago, Sears said Thursday.

The company's sales have been falling for years and it has been shutting down stores, selling real estate, and spinning off brands to stem the bleeding. Since 2007, Sears has closed half of its locations -- which include Sears and Kmart stores -- and eliminated more than 137,000 jobs.

Some employees have predicted that the rest of the company's physical stores will close within the next two years.

The stores are severely understaffed, with some operating on less than half of the employees they need, according to workers who spoke to Business Insider.

Not only are the stores firing people, but they are also cutting labour hours for the workers that remain, according to the employees. In some cases, stores are operating with just one or two cashiers and sometimes no cashiers at all, they said.

That's making it increasingly difficult to hire and retain experienced workers, according to a former Kmart employee of 41 years, who said that she was laid off in February. She told Business Insider that her store's employees hadn't seen raises in eight years.

She blames the company's CEO, Eddie Lampert, for the company's downfall.

"Lampert has taken this company and, with pompous arrogance, has destroyed it," she said. "Customer care is vital to a retail business. Lampert just couldn't understand that."

Workers also said that the stores are suffering structurally from a lack of investment.

An employee who currently works for a Sears in Ohio said that his store is rife with issues, from broken walls and escalators to frequent roof leaks. He said that the merchandise on the floor is often torn open, and no one will buy those items.

A former assistant manager of Kmart who left the company in 2012 after 12 years, said that the company really started going downhill after the introduction of Shop Your Way, a loyalty program that Sears introduced in 2009.

The program, which allows customers to earn points for purchases, was confusing and poorly executed, killed profits, slowed down customer service, and featured targeted advertising that was completely off base, the former manager said.

He said:

"Items scanned per minute decreased from 18 to five items per minute because the program was littered with exclusions and confusion. Several items didn't ring as advertised or generate the points as expected. This resulted in long lines and angry customers. Abandoned carts meant utilising payroll to return those items back to stock."

He said that he and his family shopped at Walmart instead of Sears or Kmart to avoid the confusion of Shop Your Way.

"Imagine trying to keep an eye on two children and trying to understand a confusing SYWR [Shop Your Way] offer," he said. "We opted to avoid the confusion and shop Walmart -- where the tag or the sign told us what we would pay. No gimmicks."

The 41-year employee of Kmart who spoke to Business Insider had similar complaints about Shop Your Way.

She said:

"[Eddie Lampert's] ideas of reward cards to transform the company were a waste of time and money. If they didn't have a card, you were supposed to enroll them while you have 10 waiting in that one line to check out. Most people were so disgusted when they finally got to pay, they didn't want to apply. They just wanted to pay and go."

In response to the employee complaints, Sears spokesman Howard Riefs said that the company encourages workers to provide feedback.

"One of our cultural beliefs as a company is to embrace feedback," Riefs said. "We have a variety of ways that associates can give authentic feedback -- even anonymously -- and would encourage them to do so."

He also directed Business Insider to a Sears blog post published last year in which employees shared why they are proud to work for Sears and Kmart.

"I am very proud to be part of SHC [Sears Holding Co.]," said Jen Chamberlain, a Sears sales associate in Victor, New York. "From online and in-store shopping to home and car repair services integrating with Shop Your Way, it is truly a high standard of operation for any company."

Scott Ogden, an associate store manager in Miami, Florida, said, "I am proud to be part of the SHC team because we all work together on a daily basis to achieve the same common goals. SHC is comprised of great leaders and team members who strive every day to deliver their best results."

In addition to speaking with employees, Business Insider also reviewed a message board that workers said they use to communicate with Sears and Kmart employees at other stores.

In dozens of messages over the last several weeks, people claiming to work for Sears and Kmart complained about the stores' deterioration.

Several people claimed that the quality of the products that Sears and Kmart sell has declined, and that no one will buy clearance items regardless of how much they mark down the prices.

"Clearance is the standard operating procedure at our store," one person wrote on the message board. "We have at least half of our store on clearance. Too much stuff people don't want... and what they do buy they will usually return as defective. ...Not long until the end, it will come soon."

Another person claiming to work in Sears' automotive section wrote:

"Lately the majority of tire shipments consist of Patriot and Radar tires. These are simply cheap crappy tires. We have about 12 sets of Michelin tires left and a handful of Goodyear. Even shipments of their signature RoadHandler tires have slowed down. It's embarrassing when I have to face a customer and explain I just don't have much product to offer."

One person said that the stores have deteriorated so much that it's like caring for a "dead body."

"Our motto now is 'you can only do what you can do,'" the person wrote. "It's sad to watch what we worked for with pride for so many years to be slain in front of us and then we still have to care for the dead body."

Some stores are being inundated by shipments of merchandise several times a week, and they don't have enough employees to move the products from the trucks to the stock rooms, and then to store shelves in a timely manner.

"We have been getting shipments of things that we don't need -- it seems like they are just trying to empty out of the warehouses," one person wrote.

The understaffing appears to be a major issue for many stores.

"My store is down to a skeleton staff," one person wrote.

Another said that they have a 17-year-old in a managerial position.

They wrote:

"With new hires only lasting less than a month, experienced employees quitting for better paying and better working conditions we have hardly anyone with any experience to run the store. The worst is that we have a 17-year-old running the office and cash office. He has no experience in either but he is a warm body to fill the job. The end is coming soon, get out while you can."

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Sears Holdings Corp (SHLD) Can't Stop Wetting the Bed
By James Brumley
InvestorPlace
August 26, 2016

Investors grow tired of hearing about the great Sears "transformation" that never seems to materialize

Technically speaking, Sears Holdings Corp did relatively well last quarter. Unfortunately, the absolute results indicate that Sears stock is a difficult stock to own. That's because SHLD has yet to prove to anyone that it has a reasonable shot at ever being viable again.

For its fiscal second quarter, Sears booked an operating loss of $2.03 per share (a GAAP loss of $395 million) on $5.7 billion in sales. The per-share earnings figure compares favorably to last year's Q2 loss of $2.40 per share and total operating loss of $256 million, though the top line fell 8% from the prior year's Q2 revenue of $6.21 billion in revenue.

The second-quarter results also topped expectations. Analysts had collectively planned on SHLD reporting a loss $3.48 per share of Sears stock on revenue of $5.43 billion.

Same-store sales fell 3.3% for Kmart, and were 7% lower for Sears.

CEO Eddie Lampert commented:

"We continue to face a challenging competitive environment and while we continue to focus on our overall profitability, including managing expenses, we reported a net loss for the second quarter. We are encouraged by the year-over-year improvement in our Adjusted EBITDA and feel we are making progress in our transformation as we remain focused on our best stores, our best members and our best categories to drive our business and enhance the member experience."

The quarter extended the losses in Sears stock by about 4% in Thursday's premarket trade. It also extended a long, storied and well-documented deterioration of the company — partly because brick-and-mortar retailing is a losing ground to highly fragmented online shopping, and partly because SHLD has made a long string of arguably bad decisions.

The Man With the (Bad) Ideas

Most observers and Sears stock holders ultimately blame hedge fund manager and majority shareholder Eddie Lampert. He has proven to be a value-finding wiz and once hailed as the next Warren Buffett. However, his foray into retailing with the 2004 purchase of bankrupt Kmart and subsequent merger with Sears has been disastrous. The company is now into its 10th straight year of falling revenue, and hasn't turned a profit since 2010.

While the headwind of online competition is nothing to dismiss, Lampert has demonstrated a penchant for selling good real estate to prop up the struggling retailing operations. That's his alternative to finding someone to repair — or find someone to repair — what's actually going wrong inside its stores.

Since Lampert took the helm as CEO in 2013, he has closed hundreds of locations, selling the real estate to infuse cash into the coffers. He also has spun off a handful of Sears-owned companies like Lands' End, Inc. and Sears Hometown and Outlet Stores Inc to garner new funding for the transformation. Last quarter he shed another $176 million worth of real estate and other assets. But none of the cash was used in a way that reignited growth or rekindle the value of SHLD stock.

Sears' Turnaround Tactics

Still, the struggling retailer continues to try new things.

One of the boldest efforts yet materialized in June, with the company's debut of Kenmore-branded smart TVs and smart appliances. That was an attempt to leverage a familiar name associated with Sears' once-great home appliance business. SHLD did the same with DieHard, putting the moniker on tires sold by its auto service unit.

And there's little doubt that Sears is at least entertaining the idea of turning up the heat on its appliances business. In May it unveiled a new small-footprint appliance store concept that Sears hopes will be focused enough to compete in a crowded space.

Sears also has a highly respected e-commerce platform in place. The key fault is that nobody wants to buy what it's selling. With the right products and push, though, it could serve as a foundation for growth.

The question surrounding all these initiatives and weapons is time. Can Sears show signs of viability to the remaining owners (there are only a few left, but they each own a lot of SHLD stock) of Sears stock before the retailer runs out of money?

Last quarter didn't offer much encouragement on this front.

Why Sears Stock Still Is in Trouble

Take the highly touted EBITDA figure, for instance. On the surface, it appeared to be something of a victory. The press release explained that the EBITDA loss of only $191 million improved from the prior year's Q2 loss of $226 million.

But a closer look at the numbers reveals that as a percentage of sales, EBITDA isn't getting significantly better. Last quarter, the EBITDA loss totaled 3.3% of Sears' total revenue. In the same quarter a year ago, the EBITDA loss was 3.6% of sales. Revenue may need to approach zero before EBITDA turns positive.

Still, the company itself maintained a positive game face for owners of SHLD stock, particularly on the liquidity front. CFO Rob Schriesheim said:

"During the first half of 2016, we have demonstrated our ability to finance our transformation strategy with the levers available to us through our portfolio of assets and businesses. The sale of assets, combined with the previous closing of the $750 million Term Loan, together with the $500 million Secured Loan Facility, provided us with over $1.4 billion of financing during the first half of 2016. We have continued to demonstrate our flexibility in the third quarter of 2016 with the announcement of the recently received offer to provide $300 million of additional debt financing."

That additional debt financing offer of $300 million is access to much-needed access to cash, in that Sears ended the quarter with only $276 million in the bank (less than many of the recent quarterly GAAP losses).

Bottom Line

Just for the record, though, ESL Investments is Eddie Lampert's hedge fund. The beleaguered retailer may not be getting any decent conventional loan offers from unrelated parties … an idea underscored by the fact that SHLD continues to sell revenue-bearing pieces of itself to remain afloat.

The mischaracterized EBITDA and glossed-over detail about its loan offer are just more layers of evidence that Sears is struggling to face the ugly fact that whatever it's doing isn't working.

The 4% loss that Sears stock logged just after Thursday's earnings news was released says investors don't think it's working either.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Lampert's Lifeline Renews Debate Over Whether Sears Can Be Saved
By Lauren Coleman-Lochner
Bloomberg
August 26, 2016

It's Eddie to the rescue once again at Sears.

Hedge fund manager Edward Lampert has been all things to the iconic American company: the architect of its merger with Kmart, its chief executive officer and marketing guru, and its biggest shareholder. With his latest $300 million loan to the perennially money-losing retailer, he's also helping it survive.

The capital infusion announced Thursday will help provide funds for the all-important holiday season and reassure lenders and vendors nervous about more than $9 billion in losses since 2012. Sears Holdings Corp. has raised cash by selling and spinning off assets such as stores and its Lands' End clothing business. But those funds are merely offsetting the more than $6 billion the company's operations have consumed since 2012, according to Matt McGinley at Evercore ISI.

"This all comes down to cash burn," said McGinley, one of the only Wall Street analysts still covering the company.

Bloomberg Intelligence analyst Noel Hebert also points to signs indicating that suppliers are demanding faster payments, putting more strain on the company's cash.

"Just navigating holiday 2016 would be problematic" without Lampert's help, he said.

Sears representatives didn't respond to an e-mail seeking detailed comment on the company's plans.

Merger Dreams

Things were supposed to be different when Lampert merged Sears Roebuck & Co. and Kmart Holdings Corp. in 2005. Investors bet on the company's underlying real estate value, sending the shares above $100 at one point -- they trade at about $14 now -- and Lampert touted the potential of combining and streamlining two well-known brands. But sales never picked up, declining in every quarter but one since the merger, and the company tried various strategies and cycled through four CEOs until Lampert took the helm in 2013.

The big property windfall did come in 2015, when Sears spun off 235 stores into a real estate investment trust, a transaction that raised $2.7 billion. The merchant has also steadily reduced its store count through other sales and closures. It operated 1,592 units as of July 30, compared with almost 3,500 at the time of the merger.

Sears also says it's cut debt and expenses and still has ample liquidity and assets, including $5.9 billion in inventory and short-term financing capacity. In May, it announced that it would weigh options for its DieHard battery, Craftsman tool and Kenmore appliance brands.

Few Options

But choices are narrowing. And while reducing inventory is a good move to conserve cash, stores look barren and fewer goods also mean fewer potential sales, McGinley said. He estimates that stores hold only about 61 percent of the average inventory found in a big-box retailer, saying the company would have to spend as much as $4 billion to return to normal stock levels.

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Sears to borrow $300 million from CEO Lampert as losses mount
By Lauren Coleman-Lochner, Bloomberg
Chicago Tribune
August 25, 2016

Eddie Lampert, the hedge fund manager who runs Sears Holdings, is once again lining up financing for the money-losing retail chain.

Lampert's ESL Investments offered to lend Sears $300 million this month, and Sears accepted, the Hoffman Estates, Illinois-based company said in a statement Thursday. The loan is secured by a junior lien against Sears's inventory, receivables and other working capital.

The announcement follows another quarter of declining sales and red ink, renewing concerns about the once-mighty chain's future. Sears lost $395 million, or $3.70 a share, in the period, compared with profit of $208 million, or $1.84 a share, a year earlier. The year-ago results were bolstered by the company's $2.7 billion spinoff of properties into a real estate investment trust. Same-store sales dropped 5.2 percent.

Lampert, Sears chief executive officer and biggest shareholder, has been selling assets and closing stores to stem the company's continued cash burn. Sears also said in May that it would explore options for its Kenmore appliance, Craftsman tools and DieHard batteries brands. That would extend a string of transactions, including the spinoff of the Lands' End clothing unit and the bulk of its stake in Sears Canada.

"Right now, they're in a bit of a Catch-22 situation in that they need to reduce the inventory to generate cash, but the less inventory they have, the less likely they are to make a sale, which further reduces the cash," Matt McGinley, an analyst at Evercore ISI, said before the results were released.

Under ESL's proposal, Sears can seek other investors to lend it as much as another $200 million on the same terms, Sears said. The financing is expected to close in seven to 10 business days.

The terms were approved by the related-party transactions subcommittee of the board, with advice from Centerview Partners and Weil Gotshal & Manges, the subcommittee's financial and legal advisers, according to the company.

Sears fell 6.6 percent to close at $14.70 on Wednesday before the company reported its earnings. The stock has dropped 29 percent this year, compared with an 8.3 percent gain for the Russell 2000 Consumer Discretionary Index.

Lampert has pledged to build a leaner retailer focused on selling through multiple channels. He's invested heavily in the company's digital and loyalty programs in a bid to cope with slowing mall traffic. But same-store sales, a common measure of performance, haven't stabilized, declining in every quarter but one since Lampert merged Kmart with Sears in 2005. The company has closed hundreds of stores and sublet some others to retailers such as Dick's Sporting Goods Inc.

"The stores are incredibly large for what this has become, primarily because the sales per foot are so atrociously weak," McGinley said.

Sears has received interest from "a variety of potential partners" for Kenmore, Craftsman and DieHard brands, as well as the Sears Home Services business, the company said. "We intend to aggressively evaluate all of the potential alternatives available to these businesses," Sears said.

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Sears moves to elevate apparel offerings with fashion-forward, in-store concept
By Marianne Wilson
Chain Store Age
August 23, 2016

Sears is piloting a concept that could breathe new life into its apparel offerings.

In an unusual move for a retailer that has not invested much in the way of its physical assets recently, Sears is launching an in-store shop concept, called Showcase at Sears, which will feature some 10 European and Latin America apparel brands -- most available for the first time in the United States. The shops will feature men's, women's and children's apparel, along with women's shoes, intimates and handbags. Apparel styles will range from fast fashions to fitness to professional looks, with prices ranging from $10 to $175.

"We are creating an experience for our members unlike anything in the U.S. retail industry -- a fashion-forward, shop-in-shop apparel collection featuring established and popular international fashion brands," said David Pastrana, president of apparel, Sears Holdings. "Showcase at Sears gives our members access to fresh international trends, styles and fashions at an affordable price -- and only found at Sears."

The concept will initially launch in five New York-area stores this fall, including The Galleria at White Plains (White Plains, N.Y.), Green Acres Mall (Valley Stream, N.Y.) and Newport Centre Mall (Jersey City, N.J.). Sears is building 10,000 to 15,000-sq-ft. Showcase boutiques within the existing apparel footprint of each location that will be staffed by dedicated associates.

In developing the concept, Sears teamed with SGN Group, which works with established European fashion, cosmetic and jewelry brands that look to establish a U.S. presence.

"These brands, each so successful internationally, were eager to launch in America and the Showcase at Sears is the perfect platform for them to do so," said Sever Garcia, founder of SGN Group. "Sears is a trusted brand, woven into the fabric of American retail. When you combine the unique shopping experience they're building, the exclusive access to an incredible mix of fashion all in one location, at very affordable prices, it's a win-win-win for the participating brands, Sears and its members.”

The brands featured in Showcase at Sears include Mexico's Fiorentina, Demark's Jack & Jones, Spain's Punt Roma and Frances 3 Pommes.

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Sears Holdings Corp (SHLD) Is Hanging By a Thread
By James Brumley
Investor Place
August 23, 2016

Another quarterly SHLD report...probably another step toward the edge of the cliff

It wouldn't be hyperbole to say Sears Holdings Corp has been one of the most shocking disappointments of the last decade. Although the advent of e-commerce has inarguably made life tough on all brick-and- mortar retailers, the once-iconic retailer has not only been powerless to resist it, it has been fanning its own bearish flames. The result? Sears stock is down 90% from its 2007 peak, and still within striking distance of new multi-year lows.

It also wouldn't be hyperbole to say even the last of the faithful SHLD owners are getting fed up with a one-page business plan ... sell good assets to prop up initiatives that perpetually lose money.

This coming Thursday morning's Q2 report may finally be the one that prompts the last of the optimists and insiders to acknowledge what everybody else seems to already know. That is, Sears is broken beyond repair, and none of the fixes address the core retailing problem the company faces.

Sears Earnings Preview

Per the latest looks, Sears Holdings is expected to post a loss $3.48 per share on sales of $5.43 billion for its second fiscal quarter of 2016. Both are worse than the year-ago numbers, when the retailer reported a loss of $2.40 per share and $6.21 billion in sales.

If the top-line numbers roll in as weak as expected, they'll extend more than a decade-long streak of falling quarterly year-over-year revenue comparisons. The bottom line hasn't been any more impressive though, with any seeming year-over-year improvement mostly the result of one-time costs or benefits.

It has been a painful story for some onlookers to watch unfurl. Things have been lackluster ever since hedge fund manager Eddie Lampert bought K-Mart out of bankruptcy and then immediately merged it with a struggling-but-viable Sears in 2004. From the beginning, he had a hand in the management of the two different but linked retailers, without being able to relate to the typical K-Mart/Sears customer. But, when he named himself CEO in 2013, the implosion accelerated.

It may be too late to steer the struggling retailer, or Sears stock, out of the ditch.

Sears Stock: Three Things to Think About

While Sears stock has become something of a case study of what not to do in retailing, three factors are weighing on investors' minds more than any other are at this time.

1. EBITDA: In most of the last few quarters, Sears has touted that its EBITDA loss has been getting smaller. And, on an absolute basis, this is true. There's more to the story, however.

The reason the EBITDA loss has been shrinking stems from the fact that through the sale of the company's real estate and/or store closures, the entire operation is shrinking, thus shrinking Sears ability to book bigger EBITDA losses. As a percentage of total sales, the EBITDA loss is holding pretty steady at 2.3%.

2. Electronic, Tires and Appliances: As much as Sears has tried to improve its omnichannel presence by melding in-store and digital shopping (and has done a good job with it), it has not stopped the bleeding on all other fronts. If anything is going to save Sears now, it's going to be on the back of the company's entry and re-entry into new product categories.

One of those categories is a play on electronics, leveraging the explosion of the HDTV market and smart appliance market by branding them with the familiar Kenmore name. Sears unveiled this new line along with DieHard tires in June. It's too soon to judge the impact this strategy will have, but all eyes are on it because the company doesn't have much ammo left.

The re-entry into the appliance market is also a must-win game for Sears. In May, it unveiled a new small-footprint appliance store concept the company is hoping will be focused enough compete in the crowded space.

3. Liquidity: It's a perennial discussion, but deservedly so — does Sears have enough cash and credit to see the turnaround effort through (if it is indeed going to work)?

As of the end of the first quarter, Sears was down to $286 million in the bank and had just posted a $471 million loss. The recently completed second quarter will likely result in a similar loss, begging one key question ... how does Eddie Lampert plan on continuing to pay the bills.

Credit is one way. The company explained it had $265 million worth of credit available at the end of Q1, and could monetize up to $300 million worth of assets if need be. There's a very good chance the remainder of the credit facility has been tapped in the meantime though, and each time it sells an asset, the company crimps its ability to create much-needed profits.

Bottom Line for SHLD

For better or worse, most individual investors have long given up on SHLD, shedding their Sears stock out of sheer frustration. Most of them now simply keep tabs on SHLD stock out of the same mindset one has when they can't look away from a train wreck; the amount of devastation is amazing.

Whatever the response to the numbers this time around is, just bear in mind Lampert has been using the term "transformation" since 2008. So far, none of the transformation plans have worked even though they all sounded brilliant when first unveiled.

The company needs a win, badly.

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Average retiree will see Social Security benefit decrease
By Dan McGrath, co-founder of Jester Financial Technologies
CNBC
August 22, 2016

Those in retirement who are receiving Social Security benefits and are enrolled in Medicare may want to sit up and take notice of the latest Medicare Board of Trustees report released this month, as their Social Security benefit may be adversely affected.

The latest report from the Medicare Board of Trustees is calling for Medicare Part premiums to inflate by 22.3 percent, increasing the Part B premium to $149 per month from $121.80 per month in 2016.

At the same time, the Social Security Board of Trustees is also calling for a 0.2 percent cost-of-living adjustment (COLA) in 2017 for retirees who are receiving Social Security benefits.

For the average retiree who is collecting the average Social Security benefit of $1,335 per month, this COLA increase means their Social Security benefit will rise by $2.67 a month.

This may not sound like much, but this slight COLA increase may go a lot longer than anyone is noticing.

The issue for retirees is that their Medicare Part B premium is automatically deducted from any Social Security benefit they receive. And with this COLA and somewhat large Medicare Part B increase, their take-home income from Social Security will be decreased.

Thankfully, though, there is a federal regulation known as the Hold Harmless Act, which states that a retiree receiving Social Security benefits and also earning under the national average of income and enrolled in Medicare cannot see their Social Security benefit decreased by increases in Medicare Part B premiums.

This is exactly what happened this year for many retirees.

The real question that should be on everyone's mind is what retirees are going to do when they find out that their Social Security benefit was decreased by an expense that is required for them to bear in order to even be able to collect that benefit.

In 2016 the Medicare Part B premium was increased by 16.1 percent, to $121.80 per month, from $104.90 per month in 2015.

Social Security did not issue a COLA in 2015, so those retirees who qualified (about 70 percent of them) received protection under the Hold Harmless Act, and their Medicare Part B premium thankfully remained at $104.90 per month.

Now, with this recommendation of an increase of Medicare Part B premiums for 2017, if Social Security issues a 0.2 percent increase, these 70 percent of retirees will be protected by the Hold Harmless Act and thus their Medicare Part B premium will only inflate by 16.1 percent, to $121.80 per month.

Since those that were enrolled in Medicare prior to 2016 have already been held harmless in 2016 due to increases from 2015, these retirees will automatically have their Medicare Part B premiums set at the 2016 Part B premiums in 2017, which is $121.80 a month.

This means the average retiree receiving Social Security will actually see their benefit decrease by $14.23 a month.

For those average retirees, who enrolled this year for the first time in Medicare and received Social Security benefits in 2016, they will enjoy the luxury of having their Medicare Part B premiums only inflate by their Social Security COLA amount.

Thus, for the average retiree who enrolled in Medicare in 2016, his or her take-home Social Security benefit should remain the same as the previous year — but please keep in mind that these scenarios only happen if there is a 0.2 percent or greater COLA from Social Security.

According to the Medicare Board of Trustees, "If the Social Security COLA is actually zero percent for 2017, then the provisions of the Bipartisan Budget Act of 2015 would be triggered, and the 2017 Medicare Part B premium would increase without the hold-harmless provision effects."

This means that if there is no COLA for retirees, then — due to federal regulations — every retiree will see his or her Medicare Part B premiums increase to at least $149, as no retiree will be protected by the Hold Harmless Act, thus decreasing every retiree's Social Security benefit.

So for those who enrolled in Medicare prior to 2016 and who were already held harmless in 2016 from increases in Medicare premiums in 2015, they will see their Social Security benefits decrease by $41.43 a month if there is no COLA.

Those who enrolled in Medicare in 2016 also will see a decrease of $24.53 a month in Social Security benefits if there is no COLA of at least 0.2 percent. They, too, would be granted the protection of the Hold Harmless Act. But their Medicare Part B premium would be increased by 16.1 percent to meet the 2016 Part B premium of $121.80 per month, and their Social Security benefit would be decreased.

The outcome of these recommendations from the Medicare Board of Trustees hopefully shines a light on the importance of planning for health coverage in retirement. And the real question that should be on everyone's mind is what retirees are going to do when they find out that their Social Security benefit was decreased by an expense that is required for them to bear in order to even be able to collect that benefit.

With the fiduciary rule for financial advisors expected to be implemented sometime in 2017, the ramifications of these recommendations from the Medicare Board of Trustees could prove to be costly not just for retirees but for the entire financial industry, as well.

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Department Store Rally: Bucking The Retail Trend In A Short Lived Respite?
By Qineqt
Forbes
August 19, 2016

Last week, three major U.S. retailers, Nordstrom, Macy's and Kohl's, each reported upbeat second-quarter earnings, sparking optimism on Wall Street of a sooner-than-expected interest rate hike by the Fed.

The SPDR S&P Retail ETF spiked to a three-month high of $45.59 on August 11, the day the three retailers released quarterly earnings. Two months of solid jobs growth (labor market adding 547,000 workers in June and July) and supplementary gains in U.S. retail sales over that period perhaps made the positive earnings a bit predictable.

What was less predictable though was the latest data for July sales, released last Friday, that shows retail spending in the country landing flat over June versus an expectation of a 0.4% gain.

Notably, core retail sales which exclude spending on building materials, food, gasoline and autos, also remained flat for July against a 0.5% uptick registered in June. Beyond the triumph of second-quarter results, analysts—and perhaps department store retailers themselves—are wondering if they can indeed bank on a stable and growing retail spending environment in the country.

Taking Cues from Corporate Guidance

On paper at least, department store retailers seem to be bracing for a potentially rough ride. Macy's—which reported a sixth consecutive quarter of declining same-store sales—re-iterated somber full-year earnings guidance ranging from $3.15 to $3.40 per share.

Same-store sales are still seen slipping 3% to 4% for the year.

While the company said it expects a better fourth quarter, the optimism stems mostly from an easier year-over-year comparison as well as aggressive store closures. Macy's expects to reduce store count by closing around 100 poorly performing stores from its current total of 728.

Kohl's, which also beat Wall Street's earnings expectations for the second quarter, scaled back its full-year adjusted earnings guidance to a range of $3.8-$4 from a prior range of $4.05-$4.25.

Seattle-based Nordstrom was the standout performer after upgrading its full-year earnings outlook. Walking into the third quarter with "one of the best inventory positions" the company has had in recent years and other fruitful cost-cutting initiatives, the retailer is hoping to see its full-year earnings fall in the range of $2.6-$2.75 per share. Prior guidance had called for a range of $2.5-$2.7 per share.

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J.C. Penney announces major initiatives; sees half a billion in profit by 2017
By Marianne Wilson
Chain Store Age
August 17, 2016

J.C. Penney keeps getting more bullish.

The retailer on Thursday outlined an array of new initiatives as part of a three-plan to drive profit and accelerate growth. The company also detailed financial goals, and said it expects to reach nearly half a billion dollars in profit by 2019.

In a presentation at its 2016 analyst meeting, Penney said it will focus on beauty, special-size clothing and home goods, expanding its previously announced appliance showroom concept to 500 stores. It also plans to expand the number of Sephora stores inside Penney stores.

Penney is also seeking to boost its e-commerce and omnichannel experience, starting with a newly redesigned app that enables customers to locate items, apply coupons and access their JCPenney Rewards more easily. To efficiently fill online orders, Penney said it has made significant investments in state-of-the-art systems that support an enterprise-wide fulfillment strategy to minimize markdowns and improve customer service. It now has 250 stores capable of filling jcp.com orders with store inventory and shipping directly to customers.

"Since becoming CEO a year ago, the team and I have made considerable progress balancing the art and science of retail by improving our execution in omnichannel, marketing, store operations, supply chain and merchandising," said Marvin R. Ellison, chairman and CEO of J.C. Penney. "There is still much work to do, but I am confident that our focus on sales growth, new technology and expense management will continue to accelerate our turnaround and create shareholder value."

Here are more details about Penney's initiatives:

  • In 2017, the company will offer a standard home delivery turnaround of two business days or less to over 95% of the U.S. population.

  • An increase in private and exclusive brand penetration up to 70% of total merchandise sales by 2019. Penney plans to achieve this target by getting rid of labels that are "no longer relevant" and expanding popular existing brands to additional categories.

  • Increase its special sizes offering by leveraging in-house design and trend teams to deliver plus size, petite and big & tall apparel for various ages and diverse body types.

  • Pursue additional growth in beauty by expanding the number of in-store Sephora shops, accelerate the remodel of its salon concept, The Salon by InStyle.

  • Rejuvenate its center core and emphasize fine jewelry.

  • Emphasize home by rolling out major appliance showrooms to nearly 500 locations and jcp.com, testing Empire Today flooring in three markets and adding Signature Design by Ashley to furniture assortment in select stores and jcp.com.

On the financial side, Penney outlined the following targets for the 2017-2019 period:

  • Compounded annual comparable sales growth anticipated to be 3.0%;

  • Gross margin is expected to improve 75-100 basis points;

  • Additional SG&A expense leverage of 215-240 basis points;

  • Net income is expected to be between $450 and $500 million by 2019; and

  • Earnings per share of $1.40-$1.55 by 2019.

"Although we've sharpened our priorities for the next three years, our strategic framework remains the same," said Ellison. "The entire team -- from stores to supply chain to the home office -- is squarely focused on delivering an unparalleled omnichannel experience, powerful private brands and increased revenue per customer. Under this framework, we are taking market share, outpacing competitors and improving the long-term profitability of our business."

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Some Retailers Profit Despite the Slump
By Paul Ziobro
The Wall Street Journal
August 17, 2016

Not all retailers are in a funk. Americans are still visiting stores to pick out new kitchen cabinets or hunt down deals on designer clothes.

On Tuesday, home-improvement chain Home Depot Inc. reported a 4.7% jump in sales at established stores for its fiscal second quarter, while TJX Cos., the parent of T.J. Maxx and other off-price chains, posted a 4% increase at existing stores. Both companies are forecasting similar gains for the rest of the year.

Other chains are benefiting as competitors falter. Dick's Sporting Goods Inc. on Tuesday raised its profit forecast for the year, as the impact from closeout sales at its bankrupt competitor Sports Authority Inc. wasn't as bad as feared. "We are definitely seeing market share coming to us," said Chief Executive Ed Stack. Sales rose 2.8% at the chain's existing stores in the second quarter and are expected to rise up to 3% for the year.

The latest results show that the consumer, whether helped by rising wages or feeling flush because home values are rising to near peak levels, are willing to open their wallets."The fundamentals for consumers are good; they're just spending their money differently," said Carol Tome, Home Depot's finance chief.

TJX says its business model -- buying closeout goods and selling them at discounted prices -- is helping win over shoppers. "We are convinced that we are attracting new customers, driving more-frequent visits to our stores, and gaining market share," CEO Ernie Herrman told analysts on Tuesday. In addition to T.J. Maxx, the company operates the HomeGoods and Marshalls chains.

Home Depot and rival Lowe's Co.'s, which reports earnings Wednesday, are both helped by the rising housing market, which is spurring homeowners to take on pricey projects like renovating bathrooms or replacing roofs. On Tuesday, Home Depot said its number of transactions over $900 rose 8.1% in the second quarter ended July 31, and that the number of items purchased at a time grew because more-ambitious projects require more tools and parts.

"You're looking at 40, 50, 60, even 70 items in the basket," said CEO Craig Menear. Home Depot's profit for the quarter rose 9.3%, while revenue climbed 6.6% to $26.47 billion. For the full year, the Atlanta-based company expects same-store sales to increase 6.3%.

Executives at TJX said they expect sales at existing stores to rise 3% to 4% this year and plan to add hundreds of stores in North America in coming years. The Framingham, Mass., company's profit rose 2.3% to $562.2 million in the second quarter, while revenue rose 7% to $7.88 billion.

But TJX's shares took a hit from investors disappointed by its third-quarter forecast. The company said higher wages, investment projects and foreign-currency swings would pressure profits. Shares of TJX, which hit a record Monday, fell 5.8% to $77.97 in 4 p.m. trading Tuesday.

--Suzanne Kapner contributed to this article.

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Sears Holdings: Setup For A Decline After The Recent Run-Up
By Brad Kenagy
Seeking Alpha
August 16, 2016

Revenues for Sears have continued to decline because of store closings and less mall traffic. Just this past week, Macy's announced they would be closing 100 stores, which shows the state of the mall when arguably the best or one of the best mall companies is closing stores...Sears has had ten years in a row of declining sales and not just a small decline; it has been a massive 52% decline.

Declining margins

Even with Sears closing less profitable stores, one would think that margins and returns would stabilize or improve, however that has not been the case. Gross margins have decline for five straight quarters and given the current mall environment, I see no reason why margins would stabilize or increase going forward for Sears.

Balance sheet becoming weaker

One strategy that has been keeping Sears afloat is spinning off units like Lands End or asset sales of Sears and K-Mart stores to Seritage Growth Properties. This might be a viable strategy in the short-term to keep Sears afloat, however, in the intermediate to long-term, by doing this; all that will be left at Sears is a pile of liabilities...Sears has been disposing of assets at a faster pace than they are lowering their liabilities. The result of this trend continuing into the future will be a company left with few assets but substantial liabilities.

Technical Outlook

The technical outlook for Sears is particularly bearish given that Sears is set to report earnings next week on August 25th...

Sears has had a spectacular run off the lows that the stock made in late May. However, Sears is nearing a point where the rubber meets the road. The red line at $19 is a level of significant resistance for Sears because that is the level that acted as a floor for the whole second half of 2015 before it was breached in early 2016 and has since acted as a ceiling during 2016. With earnings next week, I believe the $19 level will continue to act as a ceiling, given that the underlying business is still declining and there are no signs of that slowing down.

Closing Thoughts

In closing, I believe investors should avoid Sears because the company has continued declining revenues, declining margins and the balance sheet is becoming weaker. For those investors that have the ability to short, I believe Sears is worthy of consideration for shorting. With earnings next week, I believe the $19 level will continue to act as a ceiling, given that the underlying business is still declining and there are no signs of that slowing down.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Retailers Suffer as Services Take Off
By Suzanne Kapner and Jeffrey Sparshott
The Wall Street Journal
August 13, 2016

U.S. retail sales barely budged in July according to data released Friday, capping a week of tepid earnings results from department stores and underlining a seismic shift in consumer spending.

Americans are still splashing out, but they are splurging less on goods such as apparel and electronics and more on entertainment, travel and health care.

Retail now represents only a slice of household outlays, with consumption of services making up about two-thirds of all personal expenditures. The monthly figures are closely watched as a gauge of consumer sentiment and broader U.S. economic health.

A fuller picture of consumer demand will emerge next week when some of the country's largest chains, including Wal- Mart Stores Inc. and Home Depot Inc., report their latest results. Investors expect slight sales gains at Wal-Mart, and stronger growth from the big-box home improvement chain.

How those results pan out will have implications for the wider economy. Consumers have been the main engine of tepid economic growth this year as steady job gains, rising wages and lower energy prices spur purchases.

According to the Commerce Department, sales at general merchandise retailers, department stores and electronics chains all fell in July, helping to depress overall retail sales, which were unchanged at a seasonally adjusted $457.73 billion last month.

That is despite a 1.1% rise in auto sales, and a 1.3% gain from non-store retailers, a category that includes online sellers like Amazon and catalogs.

While July's headline retail sales figure was soft, "we view the report as signaling a pause in a good pace of spending rather than a sign of retreat by households," said Michael Moran, chief economist at financial services firm Daiwa Capital Markets America.

Oxford Economics, a global forecasting firm, expects a 2.6% gain in gross domestic product this quarter over a year earlier. U.S. households have increased spending every quarter since the end of 2009.

Since 2000, there has been a significant rotation in U.S. spending away from goods and toward services. Craig Johnson, president of retail consulting firm Customer Growth Partners, estimates the shift represents about 5% of all consumer spending, or about $600 billion annually.

By his count, the lion's share is going toward non-discretionary items such as health care, housing, student debt and transportation. "Those are things that people have little control over but have to come out of somewhere," Mr. Johnson said.

Health care accounts for about 20% of total consumption today, up from 5% in 1960, according to IHS Global Insight economist Chris Christopher. He expects the figure to rise to 25% of consumption by 2025.

When it comes to discretionary spending, consumers are opening their wallets for travel and leisure activities. According to First Data Corp., which tracks sales at four million merchant locations across the country, travel expenditures rose 8.6% last month over a year earlier.

"Overall leisure demand is very strong, but business travel demand is slackening," said Douglas Quinby, vice president at Phocuswright, a research firm. He said that shift is driving strong passenger volumes for U.S. airlines and demand for vacation rentals, but weak or declining revenue for carriers.

More worrisome are broader consumer spending drops at sporting-goods stores, food and beverage stores, restaurants and bars in July.

McDonald's Corp., Starbucks Corp. and other food chains reported a pullback in customer visits in the latest quarter as the cost of groceries is down sharper relative to the cost of eating out. "There is tightening in disposable income, especially on the low end," said Wendy's Co. CEO Todd Penegor said.

Lower sales aren't always a reflection of a weaker economy. Retail numbers were dragged down by cheaper gasoline prices and the July pullback may be just a blip. Monthly figures can be volatile; last month's flatline follows a strong June and gauges of confidence show consumers remain fairly upbeat.

But broader conflicting economic trends could leave Federal Reserve officials with an uncertain view of the economy's longer-term trajectory.

The labor market has been adding jobs and wages are rising, boosting household balance sheets. But higher wages haven't spurred inflation pressures, leaving room for continued central-bank support. Overall economic growth has been muted, with gross domestic product advancing at a meager 1% rate in the first half of the year.

Business investment has been one of the biggest drags on the economy as companies, squeezed by narrowing profits, have curtailed spending on equipment and structures.

These economic crosscurrents have left the Federal Reserve standing still. The Fed raised rates in December for the first time since 2006, but many economists and investors doubt they will repeat that move before December due to the uncertain performance by businesses and consumers.

The stiff competition for consumer dollars is prompting some retailers to shrink, moves that have been cheered by investors worried by overcapacity. Macy's, which closed 41 stores earlier this year, said Thursday it would close another 100 locations by early next year. That would reduce its footprint from last year's prime shopping season by 18%.

It is an acknowledgment that some of the stores are worth more as real estate, given that the "redevelopment opportunity exceeds their value to us as a retail store," said the chain's chief financial officer, Karen Hoguet.

--Drew FitzGerald contributed to this article.

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J.C. Penney narrows loss as rebuilding progresses
By Marianne Wilson
Chain Store Age
August 12, 2016

J.C. Penney Co. continues to make progress in its turnaround efforts as its narrowed its second quarter loss and posted a gain in same-store sales even as Macy's and Kohl's posted declines.

The retailer also reaffirmed its full year forecast of a 3%- to 4% increase in same-store sales.

It's been a busy few months for Penney, which has been opening expanded appliance departments and testing in-store partnerships with Ashley Furniture and Empire Today.

"We are excited about the initiatives we have in place to drive incremental growth in the back half of the year with our appliance rollouts, new Sephora locations, center core refreshes, in-store .com fulfillment and our chain wide rollout of buy online, pick up in store same day," said Penney CEO Marvin R. Ellison.

Penney posted a net loss of $56 million for the quarter ended July 30, or 18 cents a share, compared with a loss of $117 million, or 38 cents a share, in the year-ago period.

Total sales rose 1.5% to $2.92 billion, slightly short of expectations. Same-store sales increased 2.2%.

The company's top-performing divisions were its in-store Sephora shops, home, footwear and handbags. Geographically, the Ohio Valley and Pacific were the best performing regions of the country.

Penney's SG&A expenses for the quarter decreased $48 million to $853 million, or 29.2 % of sales, representing a 210 basis point improvement from last year. The saves were primarily driven by lower corporate overhead, incentive compensation, store controllable costs and more efficient advertising spend.

"We are pleased with the sequential improvement we achieved throughout the second quarter, and our solid performance across all key metrics is encouraging," said Ellison. "We exceeded our profitability expectations, achieving an $85 million or 59 % increase in EBITDA to $229 million for the quarter."

Penny also announced an upcoming new store at Inland Center, in San Bernardino, California, and the relocation of its store in Salinas, California to a new space within Northridge Mall. The new store and relocation are both landlord funded projects, and are expected to be complete this fall.

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Healthy Consumer Spending Is No Comfort for Retailers
By Steven Russolillo
The Wall Street Journal
August 11, 2016

Consumers aren't afraid to spend these days, but as Friday's retail-sales report will likely show, they are also becoming more discerning about what, where and how they make their purchases

If there was any doubt as to why Wal-Mart Stores Inc. just inked the largest ever purchase of a U.S. e-commerce startup, look no further than the details in this week's retail-sales report.

Consumers aren't afraid to spend these days, but they are also becoming more discerning about what, where and how they make their purchases. They are buying more services and experiences as opposed to goods and clothing. And they are more likely to do so at Amazon.com Inc. and other online retailers than in traditional brick-and-mortar shops.

While this isn't a new development, the disparity between nonstore sales and those at stores has reached nearly unprecedented levels, a trend that is likely to be a saving grace for Friday's retail-sales data. Economists polled by The Wall Street Journal estimated sales rose a healthy 0.5% overall in July, which would mark the fourth consecutive monthly gain...

Sales at nonstore retailers—including Jet.com Inc., which Wal-Mart agreed to acquire for $3.3 billion, and Amazon—rose 10.6% in the first half of 2016 versus a year earlier. That included a 14% surge in June compared with a year before, the biggest monthly increase in 10 years.

Meanwhile, department-store sales fell about 4% through the first six months of the year, their poorest showing since the financial crisis. The disparity between store and nonstore sales was the greatest in 16 years, according to the Commerce Department.

Propensity to shop clearly isn't the issue. Consumer spending rose at a 4.2% rate in the second quarter, the best since late 2014. The personal-saving rate was 5.3% in June, matching the lowest since December 2013. And a recent survey by United Parcel Service Inc. found that for the first time, consumers said they made more purchases online than in stores.

Like Wal-Mart, other companies are trying to adapt to this new world. Macy's Inc. said Thursday it would close an additional 100 stores and focus more on e-commerce. Coach Inc. and Michael Kors Holdings Inc. are reducing how much they sell to department stores. Kohl's Corp. plans to test smaller-format stores.

These aren't your grandfather's retail sales.

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Why Shutters are Coming Down at Macy's
By Miriam Gottfried
The Wall Street Journal
August 11, 2016

Macy's move to close 100 stores isn't a magic bullet, but it is better than standing still

Macy's may not have found the solution for the woes of U.S. department stores, but it has moved beyond the hand-wringing phase into action.

The company said Thursday that it is closing about 100 stores, or 15% of its base, with most expected to close early next year and the remainder as leases expire. It is also "examining opportunities" for four downtown flagship stores across the country and is in negotiations over the sale of its men's store on San Francisco's Union Square.

The moves represent a dramatic shift for the retailer, which has for years been weighing potential strategies for monetizing its real estate. They are an important defensive step as it tries to prevent itself from being further squeezed between Amazon.com and discounters such as TJX Cos. Shares rose 18% Thursday afternoon. They remain down by 40% over the past year.

The urgency of the situation has become increasingly clear for Macy's as same-store sales have fallen for six consecutive quarters. Second-quarter results reported Thursday beat analysts' expectations, but same-store sales fell by 2.6%...

In addition to tougher competition from Amazon's push into clothing, Macy's and other department stores have effectively been competing against themselves as they expand online. Furthermore, variable shipping costs associated with online sales mean they tend to come with lower margins than in-store sales. The only way to combat the rise of e-commerce is to close physical locations, thereby eliminating costs and freeing up capital.

Macy's said Thursday that it plans to invest in improving its in-store shopping experience by adding vendors and new technology and better training staff. It also said it will continue to invest in its e-commerce platform.

Of course, closing stores means ceding market share, which some retailers have been reluctant to do. The news pushed up shares of competitors J.C. Penney, Nordstrom and others. But Macy's said the reduction in earnings before interest, taxes, depreciation and amortization will be offset by cost savings beyond those associated with store closings.

Macy's still needs to prove it can effectively target the right stores for closure. It said some of the locations slated to be shuttered sit on real estate worth more than the store itself. Still, moving forward is better than standing still.

Back in May when Macy's reported its worst quarterly sales since the recession, Chief Financial Officer Karen Hoguet said management was "scratching our heads" about why consumers weren't spending. Macy's big moves Thursday show it doesn't plan to wait around to find out.

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Moody's: This retail sector is on fire — even in physical space
By Marianne Wilson
Chain Store Age
August 9, 2016

The off-price retailer sector will continue to build momentum and outperform the apparel retail segment during the next five years.

That's according to a new report, "Off-Price Retailers Continue to Build Momentum on Value Appeal," by Moody's Investors Service. Off-price retailers are anticipated to experience apparel revenue growth of 6% - 8%, outperforming the broader apparel segment by a collective 4% in the timeframe.

"TJX Companies, Ross Stores and Burlington continue to outpace overall apparel, which are growing at a much slower pace. In contrast, the department store industry is losing share to off-price and other areas of apparel spending, as online competition increases and mall traffic continues to decelerate," noted Christina Boni, a VP and senior analyst at Moody's.

Moody's expects the off-price segment's market share in sales to grow to about 10% of apparel sales by 2018 from 8.8% in 2015, as new store development and healthy same-store sales gain more traction.

For the off-price retailers, the home category has been pivotal to fueling sales growth, as well as diversifying their portfolios, in an effort to meet customer demand. Moody's estimates the home category grew almost 13% relative to overall growth of 3% for the category.

The brick-and-mortar growth is also expected to fuel off-price sector growth as demand for its goods drives a healthy traffic pattern. Many other apparel retailers have slowed and or diminished their brick-and-mortar presence, as their online channels grow at a more rapid rate, albeit at an additional cost.

"The off-price model has proven that the customer will still shop physical locations when given the right value and store experience," added Boni.

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Report: Wal-Mart in talks to buy Amazon competitor, Jet.com
By Marianne Wilson
Chain Store Age
August 3, 2016

Wal-Mart Stores is in talks to buy start-up Jet.com, an online retailer that has styled itself as a challenger to Amazon, the Wall Street Journal reported.

The acquisition would give a big boost to Wal-Mart's digital efforts, as well as its efforts to compete with Amazon. At the company's annual shareholders meetings in June, Wal-Mart CEO Doug said the discounter planned to become more aggressive in growing its online business.

Jet.com, which recently celebrated its one-year anniversary, uses a proprietary algorithm to find the lowest possible price on each item from its network of retail partners, and offers free two-to-five day shipping for orders more than $35. Jet initially charged a $50 membership fee, but it eliminated the fee after only a few months.

The online start-up recently started testing a home delivery service for groceries.

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Office Depot closing 300 more stores; to expand 'store of future' pilot
By Marianne Wilson
RetailingToday
August 3, 2016

Just three months after its proposed acquisition by Staples ran into regulatory roadblocks, Office Depot unveiled its plans for the future as a standalone retailer.

In its second quarter financial filing, the chain announced it would close an additional 300 stores during the next three years, a move that is anticipated to help cut annual costs by some $250 million by the end of 2018. Office Depot is also planning to cut costs by reducing procurement and general and administrative costs.

The retailer said it intends to build on the early success of its "store of the future" format by expanding the pilot program to a total of 24 stores by the end of 2016, with 100 stores targeted for 2017. The format features a smaller 15,000 sq. ft. footprint and is designed to provide customers with an enhanced shopping experience including a curated assortment of products and expanded services.

Office Depot said it expects that many of the elements in its new format will be incorporated across the retail portfolio in the coming years, "which will create a more consistent and efficient retail operating model with enhanced sales per square foot."

For the quarter ended June 25, Office Depot revenue 6.5% to $3.22 billion, roughly in line with analysts' estimates.

The retailer reported net income of $210 million for the second quarter, largely due to the $250 million breakup fee it had received from Staples, compared with a loss of $58 million.

Office Depot also said it had initiated a quarterly dividend of 2.5 cents per share and would increase its stock buyback plan to $250 million from $100 million.

Office Depot, which has already closed 400 stores, ended the period with 1,513 stores in North America.

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Report: Retailers re-focus on investing in physical stores
By Katherine Boccaccio
Chain Store Age
August 2, 2016

After what has been described as a "digital spending spree," retailers are once again devoting CapEx to physical stores, this according to a report by Women's Wear Daily.

The WWD analysis of capital expenditure data showed that most of the major broadline retailers are once again spending on their physical stores with an emphasis on key flagship locations.

According to the report, retailers are not abandoning e-commerce or omnichannel, but rather are once again focusing efforts to make what is clearly a smaller brick-and-mortar store base more exciting and experiential.

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J.C. Penney Escalates Appliance War Vs. Sears
By Connor McMahon
Seeking Alpha
July 28, 2016

In recent weeks, two struggling retailers on-and-off Wall Street's chopping block escalated their appliance war to halt the ongoing hemorrhaging of current customers from American brick and mortar stores. J.C. Penney, based in Plano, Texas, for the first time since 1983, began selling appliances at a majority of stores (and online) after reporting positive results from the test markets this winter. Their major competitor Sears Holdings Corp, headquartered in Illinois, has long sold appliances under their Kenmore brand, whereas JCP phased out their private brand, Penncrest, over thirty years ago.

In May, Sears Holdings Corporation's CEO Edward Lampert announced the opening of appliance-only showrooms. Given that JCP made their announcement prior to Sears suggests that the new showrooms are a strategic defensive move to maintain their market-leading position in appliance sales. This comes in the wake of this summer's closure of 68 Kmart (also owned and operated by Sears) and 10 Sears stores. Sears recently accrued $1.2b in debt financing to provide resources for the brand's transformation.

"The decision to close stores is a difficult but necessary step as we take aggressive actions to strengthen our company, fund our transformation and restore Sears Holdings to profitability," explained Sears CEO/Chairman Lampert.

The closure of the Kmart and Sears stores may increase Sears' rate of sales per square foot, an important metric the American retail industry is currently over-extended in when compared to foreign markets. A recent report cited both JCP and Sears as having faced a severe decline in sales per square foot over the past decade. According to the report's analysis, to return to their 2006 rate of sales per square foot, JCP needs to close 31% of their stores, and Sears needs to close 43%.

JC Penney Corporation made the announcement this spring that they would once again be selling appliances, beginning this summer, both in-store and online. Omni-channel growth has been one CEO Marvin Ellison's three strategic transformation priorities throughout his short tenure, in addition to a focus on private label brands and revenue-per-customer. These priorities ultimately aim to mitigate JCP's biggest red flag financially: debt, which was incurred heavily under the reign of a recent CEO, Ron Johnson. Johnson was brought in from Apple and ousted in April of 2013 after what has been quoted as "the worst quarter in retail history" with a comp decrease of 32%.

As far as the specific details of the new JCP appliance offerings, customers will be able to choose from products by GE, LG, Samsung, and Hotpoint. To take advantage of the current price-sensitive climate, JCP offers 18/24 months financing, 20% off some products, plus free delivery/installation, in addition to a price-matching policy. To counter, Sears is offering 12-month financing, 30% off some products, and free delivery/installation on products above a specific price.

One of the expected advantages of the appliance introduction to JCP stores is the ripple effect in surrounding department sales, such as furniture, drapery, and other home décor. The downside risk to the introduction of appliances is the combination of increased store space needed for displays and the low velocity of unit sales, given the high ticket price...

Simultaneously with the appliance introduction by JCP is also a revamped furniture line partnership with privately held Ashley Furniture. Additionally, they're testing an introduction of in-store floor sales outsourced to Empire Today at select markets. Other initiatives include expanding the number of in-store Sephora (a privately held cosmetic firm) locations and the introduction of a plus-size women's clothing line.

Currently, JCP's home division accounts for 12% of annual sales, and was a top-three ranked division consistently throughout FY2015. The CEO has tasked the division with thirty-percent of firm sales growth over the next five years. JCP financial reports show the home division experienced an impressive 25% growth over FY2015. There are several forces driving this growth. Their home division drove 40% of e-commerce sales, compared to just 15% within stores. In the mid-2000's, JCP drapery was said to cover 1/3 of the windows in America. While Johnson attempted a radical transformation of the brand, the home division, then the second-largest at JCP, lost both significant market share and sales dollars.

Ellison joined JCP in 2014 after a Home Depot role, the experience of which is likely influencing his appliance initiatives. He was initially mentored by Mike Ullman, former CEO, who will retire in August, 2016, passing the Chairman role on to Ellison. Given Ellison's focus of private label brands, this calls into question whether or not to expect an eventual JCP private label appliance brand. In a highly-competitive retail environment, private label brands are prioritized over national brands due to the difference in gross margin.

Ellison told shareholders to expect additional upcoming changes as he continues his strategic transformation of JCP with an ultimate goal of $1.2B EBITDA by 2017. He still maintains that the firm is on track to achieve that goal, despite a recent slowdown across retail.

Although investors may view Ellison's bold strategic changes as possible risk to future growth, the changes comes as no surprise. The intensity at which Ellison is strategically transforming JCP is a tendency outside-appointed CEOs make, according to a 2010 study by Yan Zhang and Nandini Rajagopalan, published in the Strategic Management Journal.

If the JCP appliance introduction is able to steal major market share from Sears, this would be a major strategic blow to Sears' plans for return to profitability. Clearly, with Sears shuttering department and general merchandise stores, they see their only sustainable competitive advantage as the appliance market leader. One advantage Sears has over JCP is their owned private brand, Kenmore. Private brands are associated with higher rates of gross margin. As additional retailers continue to focus on private label brands, one cannot help but wonder if we'll soon be seeing a return a of a private label JCP appliance brand, particularly given Ellison's priorities, career background, and boldness with strategic changes.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Amazon crushes earnings expectations
By Marianne Wilson
Chain Store Age
July 28, 2016

Two weeks after its second annual Prime Day surpassed expectations, Amazon's winning streak continued as it posted its fifth straight quarter of profitability.

The online giant posted adjusted earnings per share of $1.78 for the quarter ended June 30, easily surpassing expectations for $1.11. Net income was $857 million, compared with $92 million in the year-ago period.

Amazon Web Services (AWS) was crucial to the company's second quarter profit performance, and accounted for more than half of its overall profits, reported mashable.com.

"While its (AWS) sales are a relatively small part of the company, the business now contributes more profits than its overall North America operations," the report said.

Amazon's net sales for the quarter also came in higher than expected, jumping 31% to $30.4 billion, up from $23.2 billion in the year-ago period.

Detailing its second quarter highlights, Amazon said its second annual Prime Day was the biggest sales day ever for Amazon, and was also a record day for Amazon devices globally. Compared to Prime Day 2015, worldwide orders grew by more than 60%.

In its quarterly release, Amazon also highlighted its recent activity in India.

"It's been a busy few months for Amazon around the world, and particularly in India — where we launched a new AWS Region, introduced Prime with unlimited free shipping, and announced that Prime Video is coming soon, offering Prime members in India exclusive access to Amazon Original Series and Movies — including original content featuring top Indian creators and talent," said Jeff Bezos, founder and CEO of Amazon.com.

Looking ahead to the third quarter, Amazon said it expects net sales between $31.0 billion and $33.5 billion, or to grow between 22% and 32% compared the year-ago period.

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What have malls done for people lately? Lots.
By Allan Haims, CEO, StepsAway
RetailingToday
July 28, 2016

Everyone remembers the malls of the Eighties, where teenagers congregated and where the latest names in fashion could be found in one amazingly convenient location. This phenomenon was once relevant and innovative, but innovation is fleeting by nature. How have malls changed the ways they connect with customers make the mall experience still worth their while?

The heartening response is, "in many ways." In-person shopping has transformed itself to compete with the Web by playing to its strength with new sets of benefits. From offering yoga classes in mall common areas and app-driven parking options to replacing outdated anchor stores with gyms or popular restaurants like The Cheesecake Factory, today's amplified brick-and-mortar experience is focused on catering to consumer preferences.

Changing the space

Westfield Labs is rethinking the way people traditionally use malls with a project called Bespoke, which allows some space in malls for co-working, events, and demonstrations. The idea is to allow traditional online companies the chance to try out brick-and-mortar in a safe space, and it looks promising. Westfield is also in the midst of transforming the food court of yesteryear and with a pilot for a web-based food ordering service that allows local residents and office workers to get delivery from the mall.

Added convenience for shoppers can be simpler than one might initially imagine. General Growth Properties includes in its app one of the most frequently called-upon services in the mall: the directory. It guides shoppers to stores with in-mall navigation and contains information about events as well as places to park before arrival and personalized parking reminders when onsite at the property.

The Internet at every shopper's fingertips, so malls have to up the ante to compete. Department stores like Nordstrom have included incentives like free shipping and free returns, positioning returns kiosks at the front of stores as an incentive to woo customers back to brick-and-mortar. In addition to being convenient, this increases the likelihood that consumers might purchase something while in the store.

Technology integration

Wi-Fi has quickly moved from being an amenity, when shoppers were wowed by free Wi-Fi access, to a utility. It's now a must-have and needs to be treated as such. Requiring shoppers to watch an ad before granting access to a Wi-Fi network is akin to making someone watch an ad before they flip on the light switch in a hotel room. Yes, some nominal amount of incremental revenue may be generated for the mall owner, but be aware that shoppers in the Age of Free consider it a negative experience.

Great examples arise, however, of technology-integrated shopping experiences. Rebecca Minkoff's "connected glass shopping wall" guides shoppers through their experience, allowing them to do everything from adjusting lighting to questioning sales associates — who are updated via RFID tags as to what's in the fitting rooms and can fetch similar items. In the digitally connected store, the shopper can see if a particular size or color is available on the premises, and if it is not, they can get the items shipped directly to their homes. Inspired brick-and-mortar retailers enhance customer engagement with integrated omnichannel strategies.

In the malls and centers, however, smart retailers gain an edge by constantly endeavoring to deliver personalized shopper experiences. Giving people the ability to shop for a Tesla in an in-mall showroom allows the brand to separate itself from competitors sequestered in traditional auto-showroom dealerships. Some outdoor malls are offering things that a consumer just can't get online — like outdoor cooking classes — making them, once again, a gathering place for the community.

While many mall developers are employing digital technology to gather information and become smarter about shoppers and their behavior, they also strive to use it to enhance the consumer experience. There is still much to learn about using loyalty programs as data-gathering devices. The question will be how to create real value for the consumer so they are willing to share their personal information and preferences.

Ultimately, incentives for sharing information combined with the ease of sharing it — possibly via social media — will help increase shoppers' motivational and comfort levels. As mobile devices continue to gain favor as vehicles for value exchange between retailer and consumer, the integration of mobile and omnichannel strategies should increasingly reduce the friction between those connections as well.

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NRF ups retail sales forecast
By Marianne Wilson
Chain Store Age
July 26, 2016

Retailers should be cheered by the latest forecast from the National Retail Federation.

With increases in consumer spending expected to remain solid during the remainder of the year, the NRF on Tuesday upped its forecast for retail sales in 2016 to 3.4%, from the 3.1% forecast earlier.

Online and other non-store sales, which are included in the overall figure, are expected to increase 7% to 10% year-over-year rather than the 6% to 9% forecast earlier.

"Economic indicators are showing positive trends for retail," said NRF president and CEO Matthew Shay, citing the improved housing market, job growth, higher wages and other factors that have boosted consumer spending.

Retail sales in the first half of 2016 performed at a solid pace, growing close to 4% on a year-over-year basis, according to NRF calculations, which exclude automobiles, gasoline stations and restaurants. NRF expects gross domestic product to grow between 1.9% and 2.4%.

"There are many factors that could prove to be hurdles but our overall outlook is optimistic," added NRF chief economist Jack Kleinhenz. "Uncertainty surrounding the presidential election could make consumers more cautious, and the combination of a rising dollar and global slowdown have impacted exports, but other factors like favorable weather patterns that will help move winter merchandise support our outlook."

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Five Things Keeping Retailers Up at Night
By Christa Hart
Chain Store Age
July 25, 2016

That sound of nervous pacing you hear every night at 3 a.m.? It's America's retail executives. They're feeling the pressures of a rapidly evolving sales landscape and trying to figure out how to stay one step ahead — or just keep up.

From demanding consumers who expect a bargain at every turn to new technologies, from an aggressive e-commerce marketplace to a U.S. economy that refuses to kick into gear with any consistency, the challenges retailers are facing demand a shift in thinking and strategy.

FTI surveyed 100 retail executives across the country to discover what their top concerns are going into the next 12 to 18 months. The results paint a picture of an industry in flux, but they also offer a blueprint of sorts for adapting to the new reality. Retailers who can make the transition stand the best chance for getting a good night's sleep.

1. Cybersecurity
Who can blame retailers for tossing and turning over cybersecurity concerns? The growing focus on the omnichannel experience — whereby customers can purchase online, through mobile or in-store — can expose personal data to a variety of attack points for hackers. Add in cloud-based data storage, plus a shift in fraud liability to stores that still haven't converted credit card readers from swipe to chip, and you've got the makings of a restless retailer. Consider this: In 2015 the number of reported cyber incidents in the retail sector skyrocketed by 154% over the previous year. That resulted in a 159% rise in financial losses. Finally, managing reputation and restoring customer confidence following a cyberattack can be a major challenge and a distraction for senior management teams.

2. The State of the U.S. economy
Even the Fed is losing sleep over the economy. After feeling confident enough last December to raise the base interest rate for the first time since 2006, Federal Reserve chairperson Janet Yellen hinted at more rate hikes in 2016. Now? Not so much. Though long-term growth prospects remain favorable, weak productivity (see item 3 below) and slower employment gains have caused the Fed to hold off on anticipated rate hikes to date.

Meanwhile, retailers are stuck on a rollercoaster of consumer spending inconsistencies — In April, retail sales had their largest gain since March 2015, but first quarter reports from major retailers, including Macy's and Nordstrom, largely fell short of expectations and disappointed investors.

3. Employee productivity
Retailers are watching the proposed Raise the Wage Act, which would see the federal minimum wage rise to $12 per hour by 2020, with a skeptical eye. On the one hand, the Act would impact their operational costs materially. On the other hand, a raise could result in increased productivity — most economists believe that higher wages normally lead to greater productivity (measured as goods and services produced per hour worked.) Yet that correlation has not been so hot recently.

Between 2011 and 2015, productivity inched up just .34% far below the 1.93% mark of 1990-2010. Further, productivity is expected to decline slightly in 2016. Economists disagree about the cause, but one thing is clear: it has some retailers jittery. Similarly, the full impact of Wal-Mart's experiment with higher wages for 1.2 million associates, including its effect on store productivity, is also being closely watched by industry insiders.

4. Competitive pricing/promotion pressure
Every brick-and-mortar retailer has seen it: The savvy customer standing in the aisles engaging in real-time comparison-shopping on their smartphone. (See item 1.) With empowerment like that, it's no surprise that storeowners feel the pressure of pricing — not just to appeal to customers, but to compete with the vendor down the street and with e-commerce sites too. Another cause of insomnia: the ability of some giant retailers to thrive on slim profit margins, like Walmart's 2.66%, or threadbare margins, like Amazon. Brick-and-mortar retailers who can collect, quantify, and utilize customer data and price dynamically can rest assured they're on the right track to competing.

5. Evolving consumer demographics
Keeping up with the wide range of shopping habits — and expectations and behaviors — of an increasingly segmented consumer base is a nightmare. The millennial generation, 75 million strong, is now the largest demographic group among the U.S. population. They set the trend for a new kind of shopping by relying on social media as a primary source for product information, aggressively hopping from site to site in search of the lowest prices, and clicking-to-buy with their smartphones more than other groups.

But millennials are a hard nut to crack for retailers given their sizable student debt burden combined with stagnant wages. They also tend to put off purchasing big-ticket items like houses and cars. Meanwhile, baby boomers hold 70% of the nation's wealth and four out of five retailers say that half of their sales come from this group. They're known for being brand loyalists. Marketing and merchandising to these two distinct groups — and those in between — is a neat trick sure to bring sweet dreams.

Christa Hart is a senior managing director at FTI Consulting and is based in New York. A member of FTI's retail & consumer products practice, Hart is focused on improving and growing financial performance in retail and direct selling companies.

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Veteran Walmart executive dies at 82
By Marianne Wilson
Chain Store Age
July 25, 2016

Influential and longtime Walmart executive Don Soderquist died after complications related to heart surgery. He was 82.

Soderquist joined Walmart in 1980 as executive VP of administration and logistics and was a driving force behind the company's growth. From 1988 to 1999, he served as vice chairman and COO. He retired in 2000 and remained on the Walmart board until 2002.

Soderquist was a key figure in Walmart's rise to the top of American retailing. During his tenure, the company said its revenue increased from $1 billion to more than $200 billion.

After retirement, Soderquist established The Soderquist Center for Leadership and Ethics in Northwest Arkansas to provide values-focused development training to future generations of leaders.

In 2005, he wrote the book "The Wal-Mart Way," to teach others how to apply the lessons that made Walmart successful to their own lives and careers. And to the end, he remained a key adviser to Walmart employees and executives, even doing a presentation in recent months at the retailer's Bentonville, Ark., headquarters, according to the Wall Street Journal. Soderquist was also involved in numerous charitable organizations and served on several corporate boards.

"Don epitomized the term servant leader," wrote Walmart president and CEO Doug McMillon wrote in a posting on the chain's website. "He was always thinking of others, provided great feedback and was encouraging to so many people. He had a deep passion for integrity, and it was Don who drafted our original core values. Don became known as the "Keeper of the Culture" after our founder, Sam Walton, passed away because he not only helped define our values — he lived out our culture and spoke passionately about it year after year."

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Kmart workers believe all the stores are going to be imminently shut down
By Hayley Peterson
Business Insider
July 24, 2016

Kmart employees believe the company is nearing bankruptcy and is in the process of shutting down all its stores.

The chain has closed one third of its stores in the last decade, and sales have been cut in half in the same time period.

Store-level employees who spoke to Business Insider said many of the remaining 941 Kmart stores now appear to be in the midst of liquidation.

Stores are being entered into numbered phases — such as Phase 1 and Phase 2 — employees said.

The company has told employees that the phases are part of a "P2P" or "path to profitability" strategy to make stores more profitable.

But employees say it's a liquidation plan, with each phase triggering different cost-cutting measures such as layoffs and labor-hour reductions.

The phases have also triggered stock room purges, meaning all merchandise in the stock rooms must be moved to the sales floor. If there's not enough room on the sales floor for the items, stores will add new overhead shelving.

Once the stock rooms are purged, stores typically have no more than nine months before they shut down, according to chatter on employee message boards.

Kmart parent company Sears Holdings denies claims that it's liquidating all its stores.

"Sears Holdings is highly focused on restoring profitability to the company, and

The stock-room clearances are meant to improve inventory management and keep employees on the sales floor, he said.

But Kmart employee Mandi Spoolman said the store where she works in Chesapeake, Virginia, is languishing.

"There are baskets upon baskets of returns," she said. "Freight still in boxes, pilling up because we have nowhere to put them. Racks of clothes just sitting in the back room."

An employee of a Port Charlotte, Florida store said his store "is like a flood zone."

"There are damaged walls and ceiling tiles missing," he said.

A 30-year Kmart worker in Poughkeepsie, New York, said her store is also suffering from structural issues. She asked not to be identified for fear of losing her job.

"Ceilings leak when it rains, floor is uneven and cracked... Our air conditioning and heating systems suck... freeze in winter, roast in the summer. Registers are outdated. They keep upgrading system with ancient technology which in turn causes system to crash every now and then. I've been there for 30 years and we have had one remodel in 1997. Fixtures are broken, dented, [and] rusted, which doesn't look nice when new layouts are instituted... The list goes on."

In addition to speaking with employees, Business Insider also reviewed an online message board that workers said they use to communicate with employees at other stores.

On the message board, there was a lot of recent chatter about stock room purges.

"Stock room getting cleaned out, putting stock on overheads — which before was a big NO... No hours for part timers, full timers are getting 40 [hours]," one person wrote.

Another wrote, "We cleaned out the stock room about 3 months ago... We let most of the full timers go around 4 months ago... We still have our 2 [assistant] managers but we haven't had a store manager in almost a year."

A third person added: "The same is happening at my store. We have cleaned out the stockroom everything has to go out. Nothing gets to go back it's all going on overheads now... I think that we might have until at least December."

Clearing out stock rooms is the first sign that a store will be shut down, according to several people on the message board.

If you go to the purging stock rooms then that means the store will be closing soon no matter what they tell you," one person wrote. "Could be a month, maybe six, but they are already in the process of planning for it to close once they put it all out on the sales floor."

One person claimed that even Kmart's most profitable stores are getting their stock rooms purged.

"Stores with that much sales volume having nothing in the stock room is as clear an indication as any that they do not plan for the

Sears referred to reports of Kmart's demise as "rumor and speculation."

"We are currently rolling out a phased project to refine our inventory replenishment process whereby deliveries are directed to Kmart store shelves instead of the stock rooms," Riefs, the Sears spokesman, said. "The goal is for our stores to operate more efficiently, deliver improved customer service by enabling our associates to spend more time on the sales floor assisting members and customers, and to drive increased margins. We are already receiving positive feedback from our associates on the changes (e.g., such as their job is now more simple and enjoyable), and we will continue to educate them on the strategy."

Several employees believe, however, that the company will declare bankruptcy by next summer.

"It is pretty obvious that the company is not going to be around much longer," one person wrote on the message board. "I have no doubts at all that SHLD [Sears Holdings] will cease to exist by 2020 at the very latest. I'm thinking mid-2017 is when the EKG will go flat with the announcement being made right after the 2016 holiday season."

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Amazon looks Southwest for latest facility
By Dan Berthiaume
Chain Store Age
July 22, 2016

Amazon.com is continuing its rapid pace of distribution infrastructure expansion with a planned new center in Houston.

The 855,000-sq.-ft. fulfillment center will employ more than 1,000 full-time workers. Employees will pick, pack and ship smaller customer items, such as books, electronics and toys.

Amazon currently employs more than 10,000 full-time hourly associates at its five operating Texas fulfillment centers. Elsewhere in the Lone Star State, Amazon currently operates fulfillment centers in Coppell, Haslet, Dallas, Fort Worth, and Schertz, with an upcoming facility in San Marcos currently under construction.

"With Houston's legacy as a pioneer in innovation and exploration, we are proud to become a member of the community with the announcement of a new fulfillment center in the region," said Akash Chauhan, Amazon's VP of North American operations. "We are excited to create more than 1,000 full-time jobs and to become a member of the business community."

Amazon has been actively unveiling additions to its supply chain infrastructure in recent months. In addition to the new facilities planned for Houston and San Marcos, the company has five new facilities planned in California and intends to open centers in Braselton, Georgia and Kansas City, Kansas, two fulfillment centers in Edwardsville, Illinois, as well as two new fulfillment centers in New Jersey, in Florence and Carteret.

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Passing of the baton at J.C. Penney
By Marianne Wilson
RetailingToday
July 22, 2016

Some three years after he returned to save J.C. Penney, industry veteran Myron E. (Mike) Ullman will retire from the company on Aug. 1.

Ullman is passing the reins of chairman of Penney's board of directors to current CEO Marvin R. Ellison. The succession is in accordance with a transition plan the company outlined in 2014.

"I am delighted that the board has appointed Marvin as chairman," Ullman said. “Over the past year and a half, he has proven himself to be the right leader for our company, as we have made significant progress in implementing the changes needed to rebuild J.C. Penney into a successful, modern retailer with a profitable and sustainable business. It's been a privilege to work closely with Marvin, and I am pleased to know that this company is in good hands for the future."

Ullman first led Penney from December 2004 to November 2011. He was succeeded by Ron Johnson, whose attempt to reinvent Penney resulted in a $985 million drop in profit during his tenure (from November 2011 to April 2013). Ullman returned as CEO to lead a turnaround effort.

"It is an honor to succeed Mike as the next Chairman of J.C. Penney," said Ellison. “Mike has demonstrated great leadership, twice as CEO, and for the past year as our executive chairman. For someone who started his retail career as a $4.35 per hour store security officer, it is a blessing and an honor to be named chairman of J.C. Penney?

Ellison, 51, has been CEO of Penney since August 1, 2015, and served as president and CEO-designee of the retailer from November 1, 2014 through July 2015.

From August 2008 through October 2014, he served as executive VP - U.S. stores of The Home Depot. From June 2002 to August 2008, he served in a variety of operational roles at The Home Depot. Prior to joining The Home Ellison spent 15 years at Target.

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Sears Is Fighting a Losing Battle Against J.C. Penney in Appliances
By Adam Levine-Weinberg
The Motley Fool
July 20, 2016

J.C. Penney is getting aggressive as it moves back into the appliance market -- which is bad news for already-ailing Sears.

Back in January, J.C. Penney announced plans to return to the appliance market after a three decade absence. Since beginning in February with a small-scale test in just three metro areas, it has steadily expanded its ambitions, intruding into one of the last remaining areas of strength for struggling retail giant Sears Holdings.

In May, J.C. Penney began selling appliances nationwide through its website. More recently, it has started opening appliance showrooms in more stores, as part of a broad rollout that will put appliance showrooms in nearly 500 J.C. Penney locations by the fall. Sears is trying to defend its market share in appliances through aggressive promotions, but it is fighting a losing battle.

A price war begins

Not surprisingly, J.C. Penney is offering substantial discounts to build customer awareness of its new appliance sections. The company has been offering discounts of up to 20% on name-brand appliances. That's fairly significant in a category where initial markups tend to be modest.

J.C. Penney is also matching competitors' prices, offering 0% financing for up to 24 months on purchases of at least $799 (when charged to a J.C. Penney credit card), and providing free delivery and installation for purchases of $299 or more.

Sears has responded with even more aggressive promotions. Recently, it has been advertising discounts of up to 40% on appliances, though the biggest savings at Sears seem to be reserved for its Kenmore private brand.

In all likelihood, J.C. Penney will pull back on discounting over the next few months, once it has gained a firm foothold in the appliance market. Still, with one more competitor in the appliance market, price competition is likely to remain elevated.

Sears can't afford this war

This appliance price war highlights how Sears' long string of sales declines and massive losses has made it a target for competitors. That's especially true for J.C. Penney, which has significant overlap with Sears both in terms of customers and store locations.

Sears has made no secret of its plans to close or downsize unprofitable stores. Therefore it is in J.C. Penney's interest to put more Sears locations in the red by being aggressive in the appliance market. J.C. Penney is hardly a healthy business, but it's not in immediate danger of going bankrupt. It can afford to forego some profit now to push a key competitor out of business.

Sears doesn't have any good way to respond to this onslaught. Having burned through more than $5 billion in the past three years, Sears can't afford to operate money-losing stores just to show that it won't be bullied.

Sears' only hope of staying afloat is to dramatically pare back its retail footprint in order to reduce its costs. Unfortunately, each time it closes a store, it cedes a little more market share to rivals like J.C. Penney, encouraging them to be even more aggressive.

Hurting Sears may be J.C. Penney's measure of success

J.C. Penney isn't likely to become a major player in appliances overnight, even with aggressive promotions. But given how poorly its home section has performed in recent years, J.C. Penney's new appliance showrooms don't have to produce much profit to do better than the sections they are replacing.

As a result, J.C. Penney can afford to run a marginally profitable appliance business for the time being, undermining one of Sears' few remaining profit centers. The more J.C. Penney damages its rival's profitability, the faster Sears is likely to close stores. In the long run, this will likely lead to Sears' utter demise -- and a huge windfall for J.C. Penney.

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Target's Expansion into Cities May Mean More Smaller Stores
By Lisa Fickenscher
New York Post
July 19, 2016

Target executives are starting to think small.

With 1,790 stores spread across the country and sales growth in each of the last two years at under 2 percent, the discounter is accelerating plans to roll out more petite, urban stores.

With 20 smaller stores already open, the Minneapolis-based chain expects to roll out 14 more this year — including one in the New York City neighborhood of Forest Hills, Queens, which will open on Wednesday.

The store is 21,000 square feet.

There will be only one large-format store opened in 2016.

As a result, the average size of a Target store fell last year — to 133,700 square feet — for probably the first time in its history.

The store in Forest Hills, along a busy commercial strip, opened in a space previously occupied by a Barnes & Noble.

Target is looking beyond its core customers in the burbs and scooping up attractive real estate abandoned by other struggling retailers like grocers, Barnes & Noble and OfficeMax, a Target rep said.

"We can get into great locations now that we have smaller prototypes," said Tony Roman, senior vice president of Target and head of the greater New York market area.

The store in Forest Hills, along a busy commercial strip, opened in a space previously occupied by a Barnes & Noble.

Target is looking beyond its core customers in the burbs and scooping up attractive real estate abandoned by other struggling retailers like grocers, Barnes & Noble and OfficeMax, a Target rep said.

"We can get into great locations now that we have smaller prototypes," said Tony Roman, senior vice president of Target and head of the greater New York market area.

The Forest Hills store, for example, will carry more kosher food to cater to the large Jewish population in the neighborhood as well as apparel meant to appeal to local sports fans.

In the fall, Target will open smaller stores in Tribeca in Manhattan, downtown Brooklyn, and Elmont, Queens, as well as elsewhere in Long Island and New Jersey.

Target's first-quarter 2016 sales decreased 5.4 percent, to $16.2 billion, from $17.1 billion last year, and same-store sales rose just 1.2 percent.

"Sales productivity levels are double those of traditional stores and the product mix is more attractive," said Morningstar analyst Ken Perkins in a research note. "We are optimistic about the growth prospects of Target's urban and flex stores."

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J.C. Penney Gets Aggressive in Appliance War With Sears
By Phil Wahba
Fortune
July 18, 2016

The retailers are going toe to toe over fridges.

Mall arch-rivals J.C. Penney and Sears are escalating the hostilities in their battle for consumer spending.

Over the weekend, Penney began expanding appliance sales to hundreds of stores, continuing the recent revival of its appliance business after a successful pilot that was first reported by Fortune in January.

The department store cut prices aggressively to make sure customers know it once again sells things like fridges and washing machines after a 33-year hiatus. Jefferies retail analyst Randal Konik said in a research note Monday that Penney was offering up to 20% off some appliances and special financing for 18 or 24 months. What's more, Penney was price-matching and offering free delivery and basic installation on all purchases over $299.

In turn, Sears, seeking to protect its precarious position as the #1 U.S. seller of appliances, met the challenge with its own deals. The retailer, whose parent company Sears Holdings has lost $8 billion over the last five fiscal years and has closed many stores as sales at Sears and Kmart keep plummeting, was offering 30% off appliances, special financing for a year and free delivery on orders over $399, Konik said.

Penney sold appliances from 1963 to 1983 under its own brand, Penncrest, before abandoning the category to double down on its apparel business. The retailer told Fortune in January it would start selling home appliances like refrigerators and washing machines made by General Electric, Hotpoint, LG and Samsung, in a few stores initially, then more broadly if customers took to it.

The return to appliances was the first major initiative by Marvin Ellison as CEO after he took the reins last summer. Ellison oversaw the appliance category during a 12-year stint at Home Depot before joining Penney as president in 2014. Ellison has said that one third of Penney's customers buy appliances at other stores in the malls it occupies.

And sensing blood in the water with Sears' on-going travails, he pounced on an area that generates about $4 billion a year for Sears. (J.C. Penney and Sears co-anchor about 450 malls.) Euromonitor International has estimated the U.S. home appliance industry had $29 billion in revenue in 2015, on the way to $38 billion by 2020.

The return to appliances was the first major initiative by Marvin Ellison as CEO after he took the reins last summer. Ellison oversaw the appliance category during a 12-year stint at Home Depot before joining Penney as president in 2014. Ellison has said that one third of Penney's customers buy appliances at other stores in the malls it occupies.

And sensing blood in the water with Sears' on-going travails, he pounced on an area that generates about $4 billion a year for Sears. (J.C. Penney and Sears co-anchor about 450 malls.) Euromonitor International has estimated the U.S. home appliance industry had $29 billion in revenue in 2015, on the way to $38 billion by 2020.

Another benefit of the appliance foray: Penney is hoping selling more big-ticket items will prompt a greater number of customers to sign up for store credit. Currently, some 36% of Penney's sales are completed on a store card, far below the 60% rate at Kohl's. That is depriving Penney of a lot of data on customer's shopping habits, which helps with marketing and inventory planning.

In Sears, Penney is going against a firmly entrenched incumbent in this area, even as customers have long since lost the habit of thinking of J.C. Penney for home appliances. And it's all the more challenging given the shaky traffic at many of the lower-grade malls Penney occupies.

What's more, Sears is not standing back like a wallflower. Though the company recently suggested it may sell its Kenmore appliance brands or find some way to make more money, the retailer recently said it was testing a small-format chain of stores that focuses solely on appliances.

Still, Wall Street analysts are largely bullish that this initiative will help Penney.

"We think JCP is well positioned to take share as it continues rolling out major appliances to 500 stores by October," Jefferies' Konik said in his note.

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June retail sales get warmer
By Dan Berthiaume
RetailingToday
July 15, 2016

U.S. retailers ended spring with a small but notable improvement in financial performance.

According to new data from the U.S. Census Bureau, adjusted advance estimates of U.S. retail and food services sales for June were $457 billion. This represents an increase of 0.6% from the previous month, and 2.7% higher than June 2015.

Total sales for the April 2016 through June 2016 period were up 2.6% from the same period a year earlier. In addition, retail trade sales were up 0.7% from May 2016, and up 2.4% from the same month the previous year.

Strongly performing year-over-year categories included non-store retailers, who were up 14.2 percent (±1.2%) from June 2015, while health and personal care stores were up 8.4% from the previous year. Categories that lost ground compared to the same month in 2015 included gasoline stations (-9.6%), electronics and appliance stores (-4.7%), department stores (-3.7%), clothing and accessory stores (-0.9%) and general merchandise stores (-0.2%).

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Study: Top retail brands include repeat performers
By Dan Berthiaume
Chain Store Age
July 14, 2016

Results of the 2016 Harris Poll EquiTrend Retail Brands of the Year study show that some retail chains truly "get it" when it comes to engaging consumers.

Two retailers were named top brand in their respective categories for the fourth straight year. These are the Home Depot, which has been named hardware and home brand of the year. And Kohls.com, which has been named online department store brand of the year.

Other top brands in their respective categories include Macy's as department store of the year, Nordstrom as luxury department store of the year, T.J. Maxx as off-price retailer of the year, Best Buy Stores as electronics store of the year, DSW Shoes as discount shoe store of the year, and Cabela's as sporting goods store of the year.

The study also shows that compared to other award industries assessed, retail ranks high on the brand equity scale, placing third just behind the restaurant industry. Food was the top-ranked industry, with technology and travel rounding out the top five industries.

Within retail, hardware & home store was the top-ranked category. Following in order from second- to eighth-ranked were department store, electronics store, off-price, sporting goods, luxury department store, online department store, and discount shoes.

"The Harris Poll shows that most retail categories have above-average brand equity scores," said Joan Sinopoli, VP of brand solutions at Nielsen, which owns The Harris Poll. "Hardware and home has the strongest equity rating, and baby boomers and GenX shoppers — consumers who are investing in home improvements and moving up from starter homes — are driving that. To maintain their strong brand equity, hardware and home retailers will need to understand the increasing number of millennials entering the market—consumers who are more likely to make their rentals into longer-term nests, or who are able to satisfy their pent-up need to become first-time home buyers."

Other notable figures from Nielsen and Harris Poll include:

      • Seventy percent of U.S. consumers made an apparel purchase in the past six months, and most of those purchases have been made at a physical store location.

      • Online sales are expected to grow 12% by 2020, higher than all other retail channels.

More than 97,000 U.S. consumers assessed more than 200 retail brands for the study. A brand's equity is determined by a calculation of familiarity, quality and purchase consideration.

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Sears Finds a New Way to Rake in Cash
By Lisa Fickenscher
New York Post
July 14, 2016

Sears Chief Executive Eddie Lampert has finally figured out how to make money off his retail chain — and it has nothing to do with getting more fannies into stores.

The hedge fund mogul, who owns Sears and Kmart, is turning a profit in a little-known company offshoot that delivers and installs appliances for its store and a handful of rivals.

Innovel Solutions, which was called Sears Logistics until Lampert renamed it two years ago, is actually growing and doing something very strange for a Sears asset: It's not losing money.

The 1,100-truck delivery service has signed up Costco as a customer — so when a shopper at the wholesale club orders a washer or refrigerator and has it delivered, a Sears Holdings-operated truck and driver drops it off, though the buyer doesn't know it.

The driver and truck are simply labeled Innovel Solutions. The company's website makes no mention of its Sears connection.

Sears has lost money for five straight years and has seen sales decline every year since 2006. Lampert, failing at running a retail chain, has tried to monetize parts of the company like its valuable real estate assets, its iconic Kenmore, Craftsman and Diehard brands — and now its 77-year-old delivery division.

"We are in a burning building right now, but we are good at delivering and installing stuff, which is a revenue opportunity," Brandon Cates, an Innovel vice president, said at the D3 retail conference in Brooklyn on Thursday.

Innovel has seven customers including Costco, with another 15 in the pipeline, he said, and has grown 238 percent since 2014.

"No one who works at a Costco wants a Sears guy delivering their stuff to their customers, so we rebranded the company," said Cates, a former counterterrorism consultant who joined Innovel 18 months ago.

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Mall Owners Push Out Department Stores
By Suzanne Kapner
The Wall Street Journal
July 11, 2016

Fast-fashion chains, restaurants, specialty stores do a better job of driving mall sales and drawing shoppers

At the Florida Mall in Orlando, Nordstrom was torn down and replaced with a Dick's Sporting Goods store and a crayon-based family attraction called the Crayola Experience.

The Saks Fifth Avenue was demolished, too, to make way for a dining pavilion with 23 restaurants. And Lord & Taylor was carved into space for American Girl, H&M, Forever 21 and Zara.

Once the linchpin of American shopping malls, department stores are being displaced by newer types of retailers that do a better job of driving shoppers to the centers and lifting overall mall sales.

Landlords are nudging out the once-coveted big box chains in favor of sporting-goods retailers, fast-fashion chains, supermarkets, gyms, restaurants, movies theaters and other types of entertainment as they seek to keep their properties relevant in an age increasingly dominated by online shopping.

The Saks Fifth Avenue was demolished, too, to make way for a dining pavilion with 23 restaurants. And Lord & Taylor was carved into space for American Girl, H&M, Forever 21 and Zara.

Once the linchpin of American shopping malls, department stores are being displaced by newer types of retailers that do a better job of driving shoppers to the centers and lifting overall mall sales.

Landlords are nudging out the once-coveted big box chains in favor of sporting-goods retailers, fast-fashion chains, supermarkets, gyms, restaurants, movies theaters and other types of entertainment as they seek to keep their properties relevant in an age increasingly dominated by online shopping.

CBL subdivided a former 182,000-square-foot Sears store at the CoolSprings Galleria in Franklin, Tenn., into smaller sections that now house American Girl, H&M and the Cheesecake Factory.

Simon Property Group Inc., which counts the Florida Mall among its properties, has replaced 50 department stores over the past 15 years, or about 11% of all the department stores at its centers, with tenants that include Primark, Target Corp. and Forever 21 Inc.

Department stores choose to close their mall stores for various reasons. In the case of the Florida Mall, for instance, it was Nordstrom's decision to leave, according to a company spokesman. But in other cases, mall owners are actively buying out department store leases, real estate executives said.

"The dependence of malls on department stores isn't what it was 25 years ago," said Sandeep Mathrani, CEO of another big mall owner General Growth Properties Inc.

Since 2011, General Growth has taken back space from 65 department stores, or about 15% of its anchors, and filled the locations with new occupants that include H&M Hennes & Mauritz AB, 24 Hour Fitness, Wegmans Food Markets Inc., Dave & Buster's and other restaurants.

Malls were once so reliant on department stores that some of the earliest shopping centers were built by the retailers. A predecessor of Dayton-Hudson Corp., which operated department stores before selling them and changing its name to Target Corp., is credited with building the first enclosed shopping mall in the suburbs of Minneapolis in 1956.

Mall development was often contingent on securing department stores as anchors in the hopes their prestige would attract other tenants and, eventually, shoppers. As a result, department stores either owned their mall stores outright, or paid little rent, real-estate executives said.

But as storied chains such as Bonwit Teller & Co. went out of business and others such as the May Department Stores Co. were acquired by rivals, the pool shrank.

At their peak in the 1980s, there were 56 department store nameplates, Mr. Mathrani reckons. Today, the number has dwindled to roughly a dozen.

The remaining chains have closed hundreds of stores in recent years, as they grapple with online competition from Amazon.com Inc. and changing consumer tastes that have made department stores seem antiquated.

At General Growth malls, department store sales fell 1.9% for the 12 months through March, compared with a 4% increase at the specialty stores that line its malls. From 2005 to 2015 the disparity was even starker, with department stores sales dropping 10% compared with a 33% rise in specialty store sales.

Mall department stores aren't dead, however. At 229 malls that real-estate tracking company CoStar Group Inc. examined over the past decade, one department store brand replaced another in 46% of anchor space that turned over.

But the remainder of that space, or nearly 54%, went to non-department store occupants such as food, home furnishings and sporting goods.

Redeveloping anchor space comes at a cost to landlords, but holds the promise of hefty returns as department stores paying as little as $2 a square foot in rent are replaced by new anchors paying $15 to $20 a square foot, real-estate executives said. If the space is carved into smaller parcels for specialty retailers, rent can approach $100 a square foot.

At the same time, the new, more productive tenants help lift sales at the overall mall by pulling in more shoppers, the executives said.

CBL spent $32.8 million on its share of the redevelopment of CoolSprings, which it owns with pension fund TIAA-CREF, according to a presentation it prepared for investors. The mall's sales per square foot rose 15% to $543 in 2015, the year the remodeled Sears space opened, from the year before.

Dick's Sporting Goods Inc. has been snapping up space formerly occupied by department stores. "Penney, Kohl's, Sears, Macy's, a few of them have announced store closings, there's going to be real estate out there," Dick's CEO Ed Stack told analysts in May.

Department stores aren't closing locations fast enough, according to research firm Green Street Advisors, which estimates that the chains would need to shutter roughly 800 stores, or about a fifth of mall anchor space, to regain the sales per square foot they had a decade ago.

Many department stores have long-term leases with multiple renewal options at below-market rents, which enables marginal stores to continue to operate for years.

For instance, more than half of Sears Holdings Corp. 's leases expire in less than five years, but it has renewal options for the next quarter-century, according to its financial filings.

Sears Holdings pays $4.29 a square foot in rent on stores that are part of the Seritage Growth Properties real estate investment trust it set up last year, according to John Kernan, an analyst with Cowen & Co., and a Seritage investor presentation. That compares with other Seritage tenants that pay $12 to $24 a square foot.

"Landlords have tried to be more active in buying back space," said DJ Busch, a senior Green Street analyst, "but there is a big gap in what they are willing to pay and what department stores are asking."

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Here's the Latest Way Walmart Is Taking on Amazon and eBay
By Phil Wahba
Fortune
July 5, 2016

Bet you didn't know you could buy a $400 Michael Kors handbag at Walmart. Or more specifically, at walmart.com.

While Walmart is best known as a general merchandise discount giant, the retailer is in the midst of a big push to significantly beef up its online marketplace. On that marketplace, integrated into walmart.com, Walmart sells a wide and growing selection of merchandise from third parties that Walmart doesn't carry in-store or take possession of–like, say, Kors luxury bags or vintage Montreal Expos cuff links.

Walmart.com is the 2nd-most-visited e-commerce site in the U.S., with 88 million unique visitors per month, according to comScore. The site currently offers 11 million different kinds of items. (That compares to about 150,000 kinds of items in a typical Walmart Supercenter, and about 260 million on Amazon.)

But as the world's largest retailer seeks to win shoppers away from Amazon.com and eBay, it plans to add 1 million items per month to that assortment for the foreseeable future, primarily to the marketplace, which it first launched in 2009. Walmart recently finished a major overhaul of its web site that will allow it to handle more variety, provide more information on each item and better support third-party sellers.

Walmart and its rivals benefit from online marketplaces in multiple ways. For one thing, margins are typically higher: third-party sellers pay the retailer a commission on sales made on its website, while Walmart doesn't have to assume the costs of warehousing and shipping. Having a marketplace also bolsters Walmart.com as more of a one-stop shop for online customers. What's more, eMarketer has forecast that total e-commerce sales will reach $684 billion in 2020, or double what they were last year.

The marketplace push comes at a time when growth in Walmart's $13 billion e-commerce business is slowing and the company is under pressure from investors to speed it back up again. In the first fiscal quarter of this year, online sales rose 7%. But it was Walmart's fifth straight such period of decelerating increases, and well below the industry-wide rate of 15.1% in the first quarter, let alone Amazon's 20-plus percent gains, which Walmart was matching until recently. Vastly expanding the marketplace is a key tool for re-igniting that growth, company executives say.

"It's important that customers, when they come to walmart.com or use our app, find what they're looking for, so we need to have a broader assortment," Walmart CEO Doug McMillon told reporters at a briefing in Rogers, Ark., last month. McMillon said at Walmart's annual shareholder meeting that the company had been waiting to "aggressively market" the site until all the tech building blocks were in place.

U.S. e-commerce sales to keep soaring for years

And marketplaces by Amazon, eBay, Walmart and Etsy among others will fuel that growth.

In the meantime, the company has been making progress. ChannelAdvisor, which provides tech to marketplace operators including Walmart, estimates Walmart is now #3 among marketplaces, but growing more quickly than Amazon or eBay, albeit from a much smaller base.

While Walmart doesn't disclose how many third-party sellers operate on its marketplace right now, it is estimated to be in the hundreds. The retailer says it added 100 new sellers in May and 150 in June and expects to add hundreds more by the holiday season, in a marked acceleration. (The Kors bag is being offered by a company that buys overstock lots and resells them online.)

In 2011, Walmart hired a former longtime eBay executive, Jeremy King, to bring the retailer up to speed. His first year was spent effectively rebooting Walmart's tech, much of which was the same the company was using in 1999. King, whose title is chief technology officer of Walmart Global eCommerce, had to rebuild the marketplace's architecture and framework. (That was part of a major redevelopment of its e-commerce platform, begun five years ago and called Pangea.)

"The ramp-up has been shocking," King told Fortune in a recent interview in his office at Walmart.com's offices in Sunnyvale, Calif. The tech supporting the marketplace had to be updated, he explained, to optimize pricing, classification (to be sure a bike helmet is not categorized as a hockey helmet, for example), and payment to the vendor, not to mention loading data about a seller's items into 350 fields of information on the Walmart site.

Though King wouldn't say whether Walmart had concrete plans to eventually make marketplace items available for services like in-store pickup of online orders, as it does for its own assortment, it's clear Walmart's 4,000-some stores could give the company a big advantage over its main marketplace rivals, Amazon.com and eBay.

Rivals hold big leads

For all of Walmart's heft, it's not a slam dunk that it can start to eat into those companies' enormous market leads.

"I just don't know why it's taken this long" to overhaul the marketplace initiative, says Sucharita Mulpura, an analyst with Forrester Research. At the same time, she says, there's little downside for Walmart. "It's very lucrative from a margin standpoint." She and other experts say that Walmart has absolutely no need to match Amazon's assortment size (much of which is made up of so-called long-tail items, or items in extremely limited supply like out-of-print books), but that its current 10 million was still well below optimal. Walmart's CEO for global e-commerce, Neil Ashe, admitted in June that the company doesn't yet know what the "saturation point" will be.

Running a marketplace is no guarantee of success for a brick-and-mortar retailer. Best Buy this year closed down its marketplace business after five years. Experts said that it made little sense for the electronics retailer to get involved in selling a massive assortment of merchandise beyond its own category. Meanwhile, Target has never bothered setting one up as it focused on building up its main e-commerce business.

Still, with Walmart struggling to keep pace with Amazon, let alone bridge the gap with a rival whose online sales in the U.S. were six times greater last year, it's easy to see the benefit of the marketplace.

Indeed, according to a blog posted in May by ChannelAdvisor, some 48% of the value of merchandise sold on Amazon.com came from third-party sellers in the first quarter, a new high. Unit growth in its marketplace was 36%.

It's clear that Walmart would stand to lose a lot more if it remained inert.

"If you're a general merchandise retailer, you don't want someone coming to your site for a product and not finding it because you may never see that consumer again," said ChannelAdvisor CEO David Spitz.

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Check Out the Weird Ways Sears Holdings Wants to Save Itself
By Rich Duprey
The Motley Fool
July 4, 2016

The retailer wants to put its most popular brand names on all manner of new products, but not all of these brand extensions feel natural.

What the heck is Sears Holdings thinking? We knew Chairman Eddie Lampert was considering how best to extract value from the retailer's remaining brands -- Kenmore, Craftsman, and DieHard -- but most of the ideas seemed to center around spinning them off, selling them, or at the very least putting them in stores other than Sears or Kmart. This new plan seems ... different.

It's true those brands do still retain a store of value, even if they've been diminished over the years because of Lampert's penchant for ignoring the nuts and bolts of his retail operation in favor of financial gimmicks, but this latest attempt to cash in on the consumer goodwill that still attaches to them looks like the result of having thrown a bunch of ideas at a whiteboard and choosing those that stuck.

What's in a name?

Sears announced it will be using brand extensions of Kenmore, Craftsman, and DieHard to infuse them with growth. By itself that's not a bad idea; many companies use brand extensions to incrementally increase revenues, but such moves really do need to be aligned with how consumers view the brand.

For example, Harley-Davidson has run with its outlaw biker reputation and produced a series of ancillary revenue streams, such as an apparel line featuring leather jackets, shirts, jeans, and more. Its partnership with Ford to produce a limited-edition F-150 pickup truck is another example of a smart blending of two iconic American brands that complemented each other's strengths. Last year, Harley-Davidson generated $1.2 billion from parts and accessories, or 17% of the nearly $6.5 billion in sales it made in total, and that's including its financial services division.

But sometimes companies go off the rails in imagining just how far afield their brands can go. Colgate-Palmolive, for example, had a short-lived experiment in frozen dinners, but it had trouble getting consumers to think of its brand in connection with something other than toothpaste, while the maker of Bic ballpoint pens and lighters tried an underwear line. Harley-Davidson also got caught up in the moment when it offered cake decorating kits. (Nothing says "The Wild One" like exposing your inner Martha Stewart)

Sears Holdings seems to be taking cues from both groups. Soon you'll be able to buy Kenmore TVs, Craftsman internet-connected tool storage units, and DieHard Bluetooth speakers and earbuds, as well as tires. Some of these seem like good ideas; others, not so much.

Literally, the kitchen sink

Kenmore, of course, is a leading brand of appliances. From dishwashers and stoves to refrigerators and clothes dryers, the brand is synonymous with our kitchens and laundry rooms. Although the leap to the living room doesn't seem much of a stretch, it does require consumers to think about the brand in a whole new way. It also means Sears is entering a space that is thick with competition, and Kenmore isn't bringing anything new or different other than its name.

Moreover, because the Kenmore brand has fallen in the estimation of consumers over the years, this move may not bolster its reputation as hoped. More than a decade ago, Kenmore held the top spot in appliances with an estimated 27% share of the market, but under Lampert's tutelage, its share has crumbled to just 12.7%.

Better thought out brand extensions, however, include connected home products like refrigerators, washers, and dryers.

The Craftsman wifi enabled garage door opener seems more of an incremental change rather than a radical new product, and is part of Lampert's larger effort to emphasize the connected home. But people have been buying Craftsman-branded garage door openers for years, so this is akin to adding a few bells and whistles to an existing product, much like the tool storage unit that you can lock and unlock with your smartphone.

The DieHard brand extensions are the real mixed bag here. Because car batteries have an obvious affiliation with automobiles, DieHard tires seem like a good extension, and a survey of consumers about the brands they liked best found DieHard tires ranked third (even though they don't exist). Tapping into that latent demand is a smart move.

But Bluetooth speakers and earbuds don't necessarily ring any bells when it comes to the DieHard name. They're a commodity and there's nothing distinguishing about them. They're likely not going to hurt the brand, but they're not going to help either.

Head back to the whiteboard

There are definitely things Sears can do in this vein that will further enhance the reputation and sales of the various brands, and this may be a better option than spinning them off as Lampert has previously done. It would seem a little more care and thought could go into the best extensions for the products rather than just slapping the brands on every item in the connected house.

Rich Duprey has no position in any stocks mentioned.

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Sears Holdings: Long-Term Underinvestment Creates Many Problems
By Elephant Analytics
Seeking Alpha
July 3, 2016

Summary

Sears has spent very little on capital expenditures compared to other department stores. It also has reduced advertising spending significantly.

Thus, shoppers are less likely to go to Sears in the first place, and if they do go, they may be put off by the store look.

Under-investment made sense if the goal was to quickly exit retail, but this has been going on for many years. Any upfront savings are overwhelmed by continued business losses.

Sears' brands have been affected by the loss of store traffic and are quickly falling down the sales charts.

The brands need to find additional points of distribution outside Sears to retain value.

Sears Holdings' comparable store sales have been in a constant decline for many years and there is not much to suggest that it will get better. Although department store retail is a challenging industry, Sears has essentially given up on trying to retain its customers. Under-investing in stores and slashing advertising is not a strategy that will generally result in good sales performance, but that is what Sears has done.

Lack Of Store Investment

Sears has not spent much money on capital expenditures over the last handful of years. In 2015, Sears spent a combined $211 million on Kmart and Sears Domestic capital expenditures. This includes investments in online and mobile shopping capabilities, the Shop Your Way platform and IT infrastructure, so the actual amount spent on store maintenance may be quite minimal.

In any case, total capital expenditures for Sears Holdings was only 0.8% of revenue in 2015. This compares to 2.5% for J.C. Penney and 4.1% for Macy's. The results of this lack of investment can be seen in pictures that demonstrate the shape of Sears stores.

Diminishing Advertising

Sears has also attempted to save money in recent years by cutting back advertising. It spent $2 billion on advertising back in 2010 (albeit with a larger store base). This was reduced to $850 million in 2015. While there was probably some savings to be had by cutting advertising spend that proved to be less effective, the 58% decrease in advertising spend since 2010 appears to indicate that Sears has given up on its retail business. For comparison, J.C. Penney spent nearly as much ($792 million) on advertising in 2015, despite being half the size of Sears Holdings (based on revenue) and trimming its less efficient advertising spend as well.

Effect On Brands

The lack of investment in the stores combined with decreased advertising has had a profound effect on what was once Sears' strongest area. Sears was once known as the leader in appliances, but now has fallen to number three, with a 19.5% market share or an estimated $5.4 billion in major appliance sales in 2015. This is down from a 23.5% market share and an estimated $6.3 billion in major appliance sales in 2014.

Instead of trying to improve the value of its brands by getting more people into the stores, Sears is attempting to expand its brands into other categories. Thus, we are looking at Kenmore TVs and DieHard tires. There have been some questions about whether the DieHard name makes much sense for tires, but it at least has name recognition for people who may consider purchasing tires at Sears. In any case, the brand expansion is likely to have a limited impact that is overwhelmed by the continued impact of declining store traffic.

Sears' brands would probably have a decent amount of value if they had broad distribution. For example, GE Appliances was sold to Haier recently for close to 1x revenues, although that sale also included the manufacturing capabilities and workforce of GE Appliances. Sears' brands are manufactured by third parties and also are mostly sold in Sears only.

Conclusion

It is hard to envision Sears managing to even stabilize its retail business as long as it continues to under-invest in stores and slash its advertising budget. This strategy does make a certain amount of sense if the goal is to sell the real estate and close down most/all of Sears' retail operations. However, for that to be effective the retail shutdown should be done fairly quickly, before the lack of investment significantly damages the business and results in business losses.

Instead, Sears has under-invested in its business for many years and is continuing to limp along. Thus, the under-investment strategy appears quite shortsighted. Whatever savings were achieved are now dwarfed by Sears' business losses and the damage done to its brands.

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All-Day Breakfast Saved McDonald's. What Would Save Sears?
By Panos Mourdoukoutas
Forbes
July 2, 2016

Here's what would save Sears: sell the right stuff to the right people with the right salespeople.

McDonald's and Sears are in different businesses. McDonald's Corporation manages and franchises McDonald's restaurants in the United States and around the world. Sears Holdings Corporation operates as a retailer in the United States. It is organized in two segments, Kmart and Sears Domestic.

But the two companies share a common source of competitive advantage: location. Their outlets occupy prime real estate locations. This means that they can always attract traffic to their stores, provided that they sell the right stuff to the right people.

McDonald's has managed to do just that several times over in its corporate history. It has adjusted its business model to address emerging fast food trends—as shaped by demographic, economic and local factors, and by competition around the world.

McDonald's rode the baby boomer trend in the 1960s, supplying a fast and inexpensive menu. In the 1970s and the 80s, the company rode the globalization trend by transferring the American way of life to many countries around the world.

In the 1990s and early 2000s, McDonald's augmented the "fast" and "convenient" elements of its business model with the "healthy" and "more natural" element, by adding salads, fruits, and carrot sticks to the menu. In recent years, McDonald's has continued to expand its product portfolio by offering high quality coffee, healthy drinks, and all-day breakfast to fend off competition from Starbucks and local cafeterias.

Sears, by contrast, has failed to adjust its business model to address the emerging trends in the retail industry—as shaped by demographic and technological changes, and by competition. As one of my readers of a previous piece put it: "Sears is missing the same thing as Penney's. I believe this establishment to be antiquated business models. The world is a different place now. Growing up, Sears was part of American life. If I go there now, it's as a last resort."

Another reader is more specific. "I worked part time for Sears about 18 years ago and our neighborhood store was "booming" with customers. Now it is a ghost store and always empty. Some of the same sales personnel are still in major appliances. But the quality of merchandise is not the same and it looks more and more like a Walmart since the merger with KMart."

Wait, there's more. Sears ventured outside its "core" retail business into financial and real estate services...by purchasing the Dean Witter Reynolds securities firm and the Coldwell Banker real estate operation.

"For more than 40 years Sears has had a nasty habit of throwing good money after bad," observes a third reader. "Pork bellies? Corn futures? What on Earth did that have to do with running a retailer? I was there in the 1980's when billions of dollars were wasted when a poorly conceived remodel project called "the store of the future" was executed, only to be scrapped 3 years after completion. Julius Rosenwald & General Robert E. Wood must be spinning in their graves!"

Worse, Sears' failure to adjust its business model to emerging retail trends offered an opening for competitors — like Macy's Inc., Wal-Mart Stores and Home Depot Inc. — to invade the Sears market.

The bottom line: Sears should either sell the right stuff to the right people to turn sales around as McDonald's did, or level its stores and lease the spaces as parking lots. That would a better use of its prime real estate locations.

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Why Hudson's Bay, Macy's and Nordstrom Will Thrive Even As Many Stores Lose Productivity
By Walter Loeb
Forbes
June 30, 2016

I believe that sustainable growth of retail companies is dependent on creative and innovative leadership with a viable vision that generates excitement fostering future growth. Few companies have this vision. Rather, most retailers are bent on beating last year's sales figures and they hope that their bottom line will reflect profitable growth. That may no longer be a viable plan.

Every major retailer has shown spectacular growth in on-line sales, while at the same time producing a disturbing disappointment in sales from stores. Nordstrom's online sales are now at 25% of total and Neiman Marcus' is at 30%. This is a reflection of sound marketing and a realistic appraisal of how their customers want to shop. It also seems to be costing a lot of profit dollars because profit margins for on-line sales are lower. An internet purchase may be a sale item, or a special online promotion, and are usually delivered cost free thereby dragging down margins. I do not expect this to change since the competition including Amazon, Alibaba , and even start up Jet, is fierce. At the same time, the productivity of full line stores tends to sink rapidly as traffic falls off and same store sales fall leading to serious questions as to the viability of many stores.

Even with the challenges there are still retailers headed by talented merchants that I think will generate excitement. I point to three companies that possess this talent.

Hudson's Bay Company

This Toronto, Canada based company has exciting growth plans both in the United States and Europe. The company is run by CEO Jerry Storch, 59, who is an excellent seasoned merchant. The opportunities are exciting for expansion of Hudson's Bay in Europe. This year there will be a new division in Holland when the company opens its first store in Amsterdam. Twenty Hudson Bay Company stores are planned over the next 24 months. While some of them will be Off 5th stores, the majority will be Hudson's Bay stores. The Off 5th division has had rapid growth in the United States. There are now 100 units and at the end of the year there will be about 120 units.

Following several acquisitions, a major consolidation is underway, with many of the back office functions running out of Toronto or Cologne, Germany. The centralization will ensure excellent back office controls and an ability to quickly react to new fashion trends. The company's attention to technology will also add to better customer service.

Macy's

The major change that will occur at Macy's is that current Chairman and CEO Terry Lundgren, a great merchant, will hand over the reins to his long identified successor President Jeff Gennette, 55. The seamless transition from one CEO to another is a lesson for all retailing. Jeff is about 10 years younger than Terry and he promises to make shopping more exciting. I think the customer will soon find Bull Fairs (invented by Walmart), toy fairs, more flower shows, more parades and other exciting events. Maybe Jeff will bring back fashion shows that would attract some sophisticated clientele versus the mostly promotionally oriented consumers visiting stores today. Jeff will have been President, and CEO-in-waiting, for three years when he assumes control of the company next year. He is a merchant that I can count on.

Nordstrom

This Seattle based company has a strong franchise in major U.S. cities. It is run by three Nordstrom brothers who are all merchants at heart. The company has pursued a successful international expansion into Canada opening stores in Calgary (2014), Ottawa (2015), and Vancouver (2015). Two additional stores will open this fall in Toronto followed by one additional unit there in fall 2017.

The company has created excitement with new Top Shop shops inside a number of full line stores and is testing whether showing Tesla electric cars (at The Grove in Los Angeles) creates customer interest. Similarly, Nordstrom often features pop-up shops that highlight innovative merchandising ideas and give consumers new reasons to visit the store. The expansion of the successful The Rack off price stores will continue with 215 units operating by the end of this year. Expansion into Canada by The Rack will start in 2018 when about 20 The Rack units are slated to open in rapid sucession.

All three companies continue to create excitement and news via merchandising. As merchants try to move their companies forward in innovative ways, they, and consumers, will look for new fashions, creative ideas, and excellent service — either in person, on the Internet or by phone. This is why merchants are so important—they bring the newness to retail that keep customers coming back and wanting more. Merchandising is the life-blood of retailing.

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Sears House Brands Are Tackling the Smart Home
By Daniel Kline
Investopedia
June 24, 2016

Sears has been exploring ways to further exploit its house brands as it struggles to find a path forward.

While the company has suffered from declining sales in recent years and has seen its rival J.C. Penneymove back into the appliance business -- one of the few areas where Sears remains strong -- it does still own some well-known and well-regarded brands. Now the company plans to leverage that strength by adding Kenmore-branded televisions, DieHard tires, and five new products for the connected home under the Kenmore and Craftsman labels,

"The addition of Kenmore, Craftsman and DieHard connected products further improves our Connected Solutions offering," said Ryan Ciovacco, Sears' president of consumer electronics and connected living in a press release. "By integrating some of these products with our Sears Home Services business, the nation's largest provider of home services, our members now have access to a one-stop shop for trusted connected home brands."

What are the new connected products?

The company plans to launch a connected Kenmore refrigerator that sends notifications about things like how long its door is open or power outages, which could lead to food spoiling. It is also launching a connected set of Kenmore washers and dryers that will remind users when their laundry is done. In addition, Sears plans a Kenmore Smart thermostat, and a Craftsman Smart Control DC Belt Drive Garage Door Opener that can be monitored and controlled remotely.

Finally, the company also plans a Craftsman Pro Series Connected Tool Storage unit with Bluetooth Connected Smart Lock technology. That will enable users to automatically lock and unlock the storage units from their smartphones, eliminating the need for keys, and making it easier to give friends and family access as needed.

This is a smart play

Consumers have not widely embraced smart homes yet; Sears might be the company to sell the concept to them, especially when products branded under the company's familiar house lines. That should give Sears an edge over J.C, Penney, which is selling appliances, but does not have house brands with the long history of quality the Sears products are known for.

Kenmore, Diehard, and Craftsman give Sears a differentiator that J.C. Penney cannot match. If its new products are simple enough, they could take some of the fear out of joining the smart home revolution for many people, which would be a win for Sears and its shareholders.

Daniel Kline has no position in any stocks mentioned.

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Macy's Chief to Exit Amid Store Struggles
By Suzanne Kapner and Joann S. Lublin
The Wall Street Journal
June 24, 2016

Retailer has grappled with changing shopper trends; Lundgren to step down next year

Macy's Inc. longtime leader Terry Lundgren will step down as chief executive at a time when the company he built into the biggest U.S. department store chain is facing an onslaught of competition from upstarts and struggling to adapt to changing consumer demands.

Mr. Gennette began his career at the retailer in 1983 as an executive trainee and has climbed the ranks over three decades, much like his predecessor. Mr. Lundgren, who will turn 65 next year, will remain chairman.

Macy's directors accelerated the timing for announcing Mr. Gennette's ascent to give him the freedom to begin reshaping Macy's now, according to a person familiar with the company. "He is going to make the radical changes" before he officially takes the helm, this person said, adding that Mr. Gennette "has a tough job" ahead of him.

Shares of Macy's, which rose 1.7% to $33.38 on Thursday, have lost roughly half of their value in the past 12 months. The decline attracted activist investor Starboard Value LP, which last year pressured the company to explore options for its vast real-estate holdings.

In his 13 years as CEO, Mr. Lundgren repeatedly defied critics who said the department-store model was dead. In 2005, he orchestrated the merger of the two biggest chains, Federated Department Stores Inc. and the May Department Stores Co., creating a national player that generated $27 billion in revenue last year.

Macy's was one of the brands owned by Federated and the whole company was renamed Macy's in 2007 as Mr. Lundgren eliminated regional brands like Burdines, Filene's and Marshall Field's.

Mr. Lundgren pioneered the idea of tailoring store merchandise to local tastes, a strategy that competitors have copied. And he presided over a massive renovation of the flagship New York store, which enabled it to attract high-end brands like Louis Vuitton to the Herald Square location.

"He steered Macy's through the most transformative and disruptive period in recent history," said Arnold Aronson, a former Saks Fifth Avenue CEO who is now a consultant.

But the forces reshaping retailing may have surpassed even Mr. Lundgren's ability to outrun them. Macy's, like other traditional department stores, is fending off fierce competition from online rivals like Amazon.com Inc., fast- fashion retailers such as H&M Hennes & Mauritz AB, and even its suppliers such as Coach Inc. or Michael Kors Holdings Ltd., which have built their own store networks.

In an interview, Mr. Lundgren said he planned to stick around as chairman for as long as he can help with the transition. "I told the board, I'm ready to go when you want me to go," he said. "But having been CEO for 13 years puts me in a unique position to be helpful."

Macy's results have been disappointing. In the first quarter, it reported its worst quarterly sales since the recession, setting off fresh fears about the health of the U.S. retail sector and raising concerns as to whether the chain is losing market share.

Executives at the retailer have complained that consumer spending has shifted from handbags and apparel to experiences and electronics, areas where it has little exposure. To address the changes, Mr. Lundgren has pushed into off-price retailing to try to compete with the likes of TJX Cos.' brands TJ Maxx and Marshalls. Last year, it also acquired beauty and skin-care chain Bluemercury Inc., a move to try to reach customers beyond the mall.

Finding a lasting solution to the shifting shopping habits will now fall on Mr. Gennette, a San Diego native and graduate of Stanford University, who was anointed heir-apparent in March 2014 after being chief merchandising officer for five years.

Mr. Gennette said Thursday that Macy's plans to simplify its pricing to better communicate the value it offers shoppers; do a better job of curating its merchandise to contrast with the often overwhelming choices found at online retailers; and create a "friction-free" shopping experience in which customers can more easily find their color or size, or get the help they need. "We are used to winning and we will win again, " Mr. Gennette said in an interview.

Mr. Gennette is steeped in Macy's with a 33-year career. He briefly left the company to serve as a store manager for FAO Schwarz. But he returned and held merchandise positions for Macy's men's and children's businesses, and eventually took executive responsibility for various regions.

Some Macy's directors initially had been unsure whether the CEO-to-be could identify the sweeping steps needed to get back on track, given his long Macy's tenure and similar background to Mr. Lundgren, the person familiar with the matter said. But the full board ultimately decided Mr. Gennette "has the courage" to make the big shifts needed, this person said.

Mr. Gennette has filled holes in his management experience since being elevated to president. He led analyst meetings, dealt regularly with Macy's finance chief, attended board meetings, and learned more about marketing, the person familiar with the situation said.

The company said earlier this year it would close about 40 stores, cutting thousands of jobs. Macy's employed about 157,900 full-time and part-time workers as of Jan. 30. After deciding against a spinoff of its properties, it has also hired advisers to explore strategic options for its flagship stores and real-estate portfolio.

Mr. Lundgren, who started his career in 1975 at a Bullock's store in Los Angeles, became interested in fashion as a teenager growing up in California. He honed his look, which consisted of Sperry topsiders and Farah slacks. In 1972, he was Bachelor No. 2 on "The Dating Game." He won the date. As CEO, he was known for wearing impeccable suits and never having a hair out of place. He even designed the dress his wife wore to their 2005 wedding.

But people who know him say he is more than a merchant prince. "Terry was one of the top CEOs in recent history," said Mr. Aronson, the former Saks chief. "He will leave his stamp on the retail industry for many years to come."

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Good news for J.C. Penney
By Marianne Wilson
Chain Store Age
June 24, 2016

J.C. Penney announced a positive development on the financial front.

The department store retailer announced it has successfully completed refinancing its $2.25 billion five-year senior secured term loans, which should generate about $24 million in interest expense savings.

"We proactively pursued a refinancing due to favorable market conditions and the ability to further enhance our financial flexibility and liquidity position," said CEO Marvin Ellison. "This reflects the improved performance of our company and the market's confidence in the company's strategic goal of achieving $1.2 billion in EBITDA by 2017."

In a blog on barrons.com, Jeff Van Sinderen, senior analyst, B. Riley & Co., described the refinance, which was completed on schedule, as one in a series of events that reflect the progress Penney is making in reducing debt and interest expense.

'The sales-lease-back of headquarters real estate is the next major transaction that we expect to see closed (sometime this summer), and that should keep the company on track to pay down another $400 million to $500 million in debt this fiscal year," he wrote. "With numerous initiatives soon to kick-in (Sephora roll-out, center-core appliances, plus size, flooring/furniture pilots, etc.), JCPenney seems set up for a positive 2Q."

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Macy's, JCPenney, And Sears: Where's The Differentiation?
By Greg Petro
Forbes/Investing
June 22, 2016

You can't save your way to greatness.

Although most of us can agree with this statement, this is exactly the position department stores find themselves in. Why? According to Green Street Advisors, in order to get back to pre-recession levels of sales per square foot, 25% of all department stores would need to close.

That means 320 Penney's stores, 300 Sears stores, 70 Macy's stores, 60 Dillard's stores, 40 Bon-Ton stores and 30 Nordstrom stores.

Compounding the problem, brands such as Coach and Michael Kors have threatened to pull out of department stores or significantly scale back the number of products they sell through them. Driving this behavior is the ongoing heavy discounting departments stores are offering in an effort to boost waning traffic.

Although some level of discounting and cost cutting is necessary in this challenging climate, it must be balanced with a strategy to differentiate yourself from the competition, which brings new customers and helps grow business.

And yet, in the face of these challenges, we still see the same response we've seen before: store redesigns, celebrity appearances, adding restaurants, coffee shops and beauty shops, and just about anything else that they feel will draw the consumer back through the doors. Finally, according to CNBC, 70% of merchandise sold at department stores can be found on Amazon.

This lack of product differentiation is the single biggest challenge department stores face.

The problem that department stores have is simple: "Why go?"

So, what about the product? Why isn't the product the primary focus in addressing this growing problem?

Differentiation Makes The Difference

The best opportunity department stores have is to create products that set them apart, to give customers a reason to go. They can do this by developing great products with their private brands.

So, why don't they develop great private branded product to differentiate themselves and give consumers a reason to go to their stores and not another?

For years, retailers have developed private brand programs, but it is hard. There are a lot of hits and misses, a lot of guess work and a lot of risk.

Here are three steps department stores can take to impact their bottom line and ensure private brands will resonate with all of their customers, including millennials.

Test your ideas, designs and products

In the rush to promote private brands, it's easy to forget what the millennials have taught us. It's not about selling what we have, it's about selling what the customer wants that makes the difference.

When done properly, product testing should become an ongoing conversation. And when it is incorporated into the new product decision-making process, the dialogue needs to begin early in the product development cycle. This ensures that you can capture, analyze and act on the data you receive to make consumer-driven decisions on which new products to move forward with and which ones to avoid.

Today's consumer is saying, "Engage with me about what I value, and then deliver it." Rebecca Minkoff does this well.

This process is all about being proactive and constantly innovating to capture the changing attitudes and preferences of customers. The more you listen and respond, the clearer the voice of the customer will resonate.

Price it right the first time

Not only can product testing help you in the design and selection of the right new products, it can be a tremendous guide to how best to price your private brand products.

Pricing for private brands is hard. Whether you are setting pricing strategy for a name brand or the private brand, it is critical that you make data-driven decisions, not emotional decisions. In other words, don't guess — do the math and use the analytics. Analysis has shown that 11% of products can carry a higher price. Not everything needs to be discounted.

This process is all about being proactive and constantly innovating to capture the changing attitudes and preferences of customers. The more you listen and respond, the clearer the voice of the customer will resonate.

Price it right the first time

Not only can product testing help you in the design and selection of the right new products, it can be a tremendous guide to how best to price your private brand products.

Pricing for private brands is hard. Whether you are setting pricing strategy for a name brand or the private brand, it is critical that you make data-driven decisions, not emotional decisions. In other words, don't guess — do the math and use the analytics. Analysis has shown that 11% of products can carry a higher price. Not everything needs to be discounted.

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Sears takes its Kenmore brand out of the kitchen with new line of TVs
By Kristofer Wouk
Digital Trends
June 21, 2016

Sears might be a company some associate with the older model of paper catalogs and big retail stores, but earlier this year the company showed it is looking toward the future with the launch of a new line of connected home products across its Kenmore, Craftsman, and DieHard brands. It turns out those weren't the only plans the company had for its in-house brands.

On Tuesday, Sears unveiled a number of new products across those lines, including a new line of Kenmore-branded TVs. These aren't the most feature-packed TVs on the market, but they include the core set of features that most consumers expect in a modern TV, and are available in both HD and 4K UHD models. This seems to be the latest move in Sears' plan to offer products for every aspect of your life.

"You can adjust the temperature of your home from your office with a Kenmore thermostat, before returning home to watch your Kenmore TV," Tom Park, president of Sears' Kenmore, Craftsman, and DieHard brands, said in a statement. "We're unleashing the power of these iconic brands by entering into these new categories and introducing connected-home solutions that provide peace of mind — saving time, energy and money."

The 4K UHD line is branded as Kenmore Elite UHDTV, and features a dynamic back light and Smooth Motion 120 for added clarity in fast-moving scenes, plus Dolby Digital Plus audio. The TVs are available in 50-inch, 55-inch, and 65-inch varieties, selling for $750, $900, and $1,500, respectively.

The HD TV line is simply branded Kenmore HDTV, and is even more barebones than the UHD line, with the main feature Sears touts in the press release being its five picture modes: standard, dynamic, game, movie, and user. The TVs are available in 32-inch, 40-inch, and 50-inch variants, selling for $200, $300, and $400 respectively.

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Art Griesbaum Jr., Former Sears, Roebuck Executive Dies
Excerpts from an article by Joan Giangrasse Kates
Chicago Tribune
June 20, 2016

Art Griesbaum, 94, a Purple Heart and Silver Star recipient who retired from Sears, Roebuck in 1979 as National Merchandise Manager of Department 609 (Hardware), died of natural causes on June 5 at Burgess Square, an assisted living facility in Westmont, Illinois.

"Art was a great guy and extremely well-versed in business," said Chuck Cebuhar, a retired vice president of home electronics at Sears. "But he was also a kind man who understood what it took to keep our customers happy and coming back."

Griesbaum grew up on a farm in southern Illinois and was the first in his family to attend college, earing an accounting degree from St. Louis University in Missouri. He joined the Navy and served as a lieutenant during World War II in the Pacific theater.

His son Mark said that his dad wrote about his ship being blitzed by kamikaze pilots and the terror he felt as he tried to save as many lives as possible. There were 34 killed and 21 injured.

Among his fallen shipmates was a young man from Chicago. Soon after his discharge from the Navy in 1946, he traveled to visit his good friend's family in Chicago.

"He wanted his friend's parents to know what a brave man their son was and how much he admired and respected him," his son said.

At the end of their conversation, the shipmate's father, and executive with Sears, Roebuck and Co., suggested Griesbaum apply for a job at the Sears store in St. Louis and offered his personal recommendation. Griesbaum was hired and entered the company's training program, the start of a 33-year career with Sears.

After finishing his training program with Sears, he became the customer service manager at its St. Louis store. In 1949, he was transferred to the company's headquarters in Chicago and assigned to merchandise inspection, quality control and factory service.

In 1953 he was assigned to the Hardware Department, becoming assistant buyer of carpenters and precision hand tools. He was promoted to buyer of this line in 1956 and became buyer of mechanics' hand tools in 1960.

Griesbaum helped introduce "ratchet" socket tool technology to the entire industry in the early 1960s through his partnership with manufacturers in the U.S. and Japan.

Subsequently, he was promoted to National Merchandise Manager of the paint and wallpaper division. While there he developed the "Great American Home Like Yours" campaign with Sears' advertising partner J. Walter Thompson, and the interior paint brand Easy Living and exterior brand Weatherbeater.

In the mid-1970s, Griesbaum was promoted to National Merchandise Manager of the Hardware division, Sears' largest revenue-generating department.

Griesbaum's wife of 68 years, Marilyn, died in 1015. He was also preceded in death by a son, David. Other survivors include a daughter, Linda Tyrrell, eight grandchildren and six great-grandchildren.

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Meet Alfie, Sears' voice-controlled shopping assistant
By Lauren Zumbach
Chicago Tribune
June 17, 2016

Sears Holdings, based in suburban Chicago, appears to have introduced a "voice-controlled intelligent shopper" that bears more than a passing resemblance to Amazon's Echo Dot smart speaker and its Alexa virtual assistant — albeit without the speaker and more limited features.

The Kenmore-branded device, dubbed Alfie, is being sold on Kmart and Sears websites and the retailer's Shop Your Way membership program website.

At $49.99, it's considerably cheaper than Amazon's Echo Dot at $89.99, or the Echo, which has a larger speaker and sells for $179.99.

But Alfie doesn't yet appear able to help with the range of tasks Alexa can handle.

Sears says Alfie will listen to requests and recommend products based on the user's preferences, purchase history and any specified budget. It can also search for a gift if users describe the occasion and recipient. Perishable grocery delivery is available in some areas.

Unlike with the Echo and Echo Dot, which can be addressed solely by voice, users need to push a "talk" button to start recording a request on Alfie. A button lights up when it finds a match and is ready to respond, which can take up to 10 minutes, according to a product website.

Users can also text with Alfie through an app that shows conversation history and images of suggested items, reviews and shipping options, and lets shoppers add items to a list for later.

It's not clear how much of Alfie is artificial intelligence and how much humans are helping fill users' shopping carts.

The product website says Alfie is "backed by real human intelligence, not just computer processing."

From the information on Sears' website, it also appears Alfie can only help with shopping. Amazon's Echo products are also speakers, and in addition to ordering a range of products from Amazon, the company's virtual assistant, Alexa, can control music and smart home devices, answer questions and order you an Uber or a Domino's pizza.

Google announced a speaker and virtual assistant last month, called Google Home, that the company says will be able to answer questions and control music and connected home devices.

Sears is also getting into the connected home market, but the company couldn't immediately be reached for comment on whether Alfie is part of those plans. The company behind iconic appliance brand Kenmore, Craftsman tools and DieHard automotive batteries announced 75 new products yesterday, but Alfie wasn't mentioned in news releases.

Sears is introducing a range of smart-home products, including a Kenmore refrigerator that notifies owners about power outages or doors left open, and a Kenmore smart thermostat that can be adjusted remotely by smartphone and monitors energy use. The company also said it will begin selling the first Kenmore televisions and DieHard tires.

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Retailers Need to Close Some Doors to Survive
By Miriam Gottfried
The Wall Street Journal
June 17, 2016

Stores aren't being closed fast enough even though sales have slumped

U.S. retailers are staring into the abyss. And they aren't doing one of the few things within their power to avert disaster, or at least not quickly enough.

This year has been brutal for department stores and mall retailers. Sales tumbled as more consumers shopped at Amazon.com and continued to shift their spending toward services and away from physical goods. There appears to be no end in sight when it comes to both trends, which leaves most bricks-and-mortar retailers all but powerless to stop the customer exodus from their stores. Even the retailers' own e-commerce sales, which are growing as a percent of total revenue, come at lower margins than their in-store sales.

Having a lot of physical stores has become a burden. And closing stores is one of the few ways retailers can stem the bleeding. Some, including Gap, Ralph Lauren and Macy's, have already announced closures for this year. Still, for many, even a seemingly significant round of closures may not go far enough.

Storing Up Trouble

Before the financial crisis, a mall retail concept with 300 stores had a great runway for growth, and 400 to 500 stores was a good target, said Simeon Siegel of Nomura. Now, the right number is probably somewhere around 200. Yet Gap, for one, still had 862 stores in North America for its namesake brand as of the end of the first quarter. So why aren't retailers moving more quickly to ditch the weight of bricks and mortar?

Getting out of leases, most of which are five to 10 years long, can be costly. But it can be better to take the hit now rather than passively waiting for leases to run out

Retailers are also resistant to spending money to close a profitable or break-even store, even when sales and margins are falling. They should ask themselves if they would open another location with similar economics today, said Paul Lejuez of Citigroup in a research note.

Mr. Lejuez has another theory on why retail executives aren't closing stores: Their compensation structures don't incentivize them to do so. The most common incentive metrics for management teams among the 49 retailers Citigroup covers are adjusted operating income and top-line growth or sales. Shuttering stores would naturally cut into these.

The final reason may be more of a psychological one. To run a business, managers must believe in the potential and purpose of that business. Acknowledging a business is shrinking doesn't always fit with that mind-set. A retailer also wants to believe it is the strong one and won't have to be the one to cede market share. That can prevent companies from cutting deeply enough.

Granted, cutting stores isn't a panacea. At Abercrombie & Fitch, for example, the store count for its eponymous brand fell to 244 at the end of 2015 from 316 at the beginning of 2011. That hasn't jump-started the company's sagging sales or brought its margins back to historical levels. But the lower inventory investment freed up capital for use in dividends, share buybacks and store remodels.

Investors should hope retailers start to recognize the windows that can open by closing doors.

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Gene Joseph Stroner, Obituary
Chicago Tribune
June 17, 2016

Gene Joseph Stroner, age 83, of Hilton Head Island, passed away on Sunday, June 5th, 2016 after a debilitating series of strokes. Gene was born and raised in Chicago, attended Wheaton High School and Illinois Wesleyan University. He was a member of Theta Chi Fraternity.

After serving two years in Korea, Gene returned to Chicago, married Joyce Lois Walker and began an illustrious 33 year career with Sears Roebuck and Company reaching the executive position of Vice President.

Retirement brought Gene and Joyce to Hilton Head Island where they enjoyed traveling, photography, tennis, family and friends. Gene traveled to over 100 countries during his lifetime, meeting Pope John Paul II, and making a trek up the Himalayan Mountains with Sir Edmund Hillary.

Gene was an accomplished photographer and his numerous photos of the people and places he visited are showcased throughout their home. A true "history buff", Gene and Joyce have visited every grave site of all deceased US Presidents. They traveled extensively with family and friends to six of the seven continents

Gene is survived by his wife of 60 years, Joyce, brother Alan Irvin Stroner, sister-in-law Sandra, son Gary Michael, daughter-in- law Laura, daughter Kristan Gene, son-in-law Richard Sawyer, son Kevin Walker, 7 grandchildren.

Gene was known to his children and grandchildren as "Shakes", because he was such a "mover and a shaker". His quick wit and joking ways will be missed by all who knew him.

An open reception celebrating Gene will be held on Sunday, July 10th, from 2:00pm 5:00 pm at the Long Cove Club, 399 Long Cove Drive, Hilton Head Island, South Carolina, 29928. A second celebration will be held in the Chicago area on Saturday, September 17th from 1:00pm 4:00 pm at the Deer Path Inn, 255 E. Illinois Road, Lake Forest, Illinois, 60045. In lieu of flowers, the family prefers that memorial contributions be made to the Veterans Association, or The Wounded Warrior Foundation.

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Wal-Mart Stores sets bullish sales target
By Marianne Wilson
Chain Store Age
June 17, 2016

Wal-Mart Stores sent out a message to naysayers who say the chain's best days are behind it.

Speaking at the Consumer Goods Forum conference in Cape Town, South Africa, Wal-Mart CEO Doug McMillion said the retailer expects to add $45 billion to $60 billion of new sales during the next three years.

"So sometimes people say Walmart is not really a growth company any more," said McMillion, according to a Reuters report. "I want to say: 'Well, if we layer on $50 to $60 billion, would that count, in three years?"

A company presentation shown on screen at the event projected a sales increase of $45 billion to $60 billion in the next three years.

For its most recently completed fiscal year, Wal-Mart reported $482.13 billion in total revenues.

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Sears' obsession with Wall Street is killing the retailer for good
By Hayley Peterson
Business Insider
June 16, 2016

Sears has survived two world wars and the Great Depression. But after a decade under the control of a former Goldman Sachs executive turned hedge fund manager, the 130-year-old retailer is imploding.

Sales have fallen by half since 2007, and the company is burning through cash, closing stores, and slashing jobs in an attempt to stanch the bleeding. Even after it raised $3 billion by spinning off assets last year, it ended 2015 with less cash than it started with.

The man in charge of Sears, Edward S. Lampert, has blamed the company's decline on shifts in consumer spending, the rise of e-commerce, and unseasonably warm winter weather. And while other retailers are also struggling, analysts take the demise of Sears, which owns Kmart, as a matter of when, not if.

What sets Sears apart from other suffering retailers is something that's not as easy to understand: Lampert's obsession with putting shareholders before everyone else, which has been attributed to his dual role as the company's chief executive and its largest investor. But in that position, Lampert has suffered along with other investors.

When Sears was flush with cash, it took the form of billions of dollars of share repurchases, even if it meant the stores suffered years of underinvestment. Repurchases, or buybacks, are common among cash-rich companies, but also derided in some corners as a waste of a company's resources as they only serve to create the appearance of improving earnings.

In the early days, Lampert was unapologetic about this. According to an executive at the company then, Lampert was genuine in his belief that Sears could be run differently than other retailers and that the shares were being acquired at a bargain price.

"Unless we believe we will receive an adequate return on investment," he wrote in a 2007 letter to investors, "we will not spend money on capital expenditures to build new stores or upgrade our existing base simply because our competitors do. If share repurchases or acquisitions appear to be more productive, then we will allocate capital to those options appropriately."

And for years Lampert concluded that share buybacks were the best use of the company's money. They continued even through the financial crisis, and totaled $5.8 billion between 2005 and 2010, sometimes at prices as high as $170 per share. Sears' earnings in the same period were $3.8 billion.

Now that Sears is short on cash and faces mounting debt, Lampert has turned from buybacks to dismantling what was once America's largest and most successful retailer, says David Tawil, president of New York-based Maglan Capital. Tawil has spent his career working in corporate restructuring and bankruptcy proceedings. Sears spun off its Lands' End brand to investors in 2014 and is exploring "alternatives" that could include sales of Kenmore appliances and Craftsman tools.

"Eddie has orchestrated for himself, and for the benefit of shareholders, the most protracted liquidation in history," Tawil said in an interview with Business Insider.

A Sears spokesman, Howard Riefs, said the spinoffs were meant to create shareholder value and to fund Sears' turnaround.

We believe separating businesses from Sears Holdings would allow them to pursue their own strategic opportunities, optimize their capital structures and allocate capital in a more focused manner while enabling Sears Holdings to focus on its own business and provide additional flexibility to execute our transformation. Since 2012, we have generated $8.9 billion of liquidity from a combination of asset monetization and financing activities within the framework of sustainable shareholder value creation. These transactions have provided liquidity to help fund our transformation, and enabled us to focus on our best stores, best members and best categories.

Our critics are entitled to their opinions, however we think they're missing some very key points when it comes to our business. Sears Holdings is highly focused on restoring profitability to the company. We continue to make progress as we transform from a traditional, store-network based retail business model to a more asset-light, member-centric integrated retailer.


Wall Street superstar

Lampert got his start at Goldman Sachs, working in the New York-based bank's risk-arbitrage department. He left the bank after four years and in 1988 started a hedge fund, ESL Investments, at 26 years old.

For a time he was a Wall Street superstar. BusinessWeek compared him with Warren Buffett. That's because Lampert had an incredible track record as an investor. ESL Investments generated annualized returns of more than 20% per year for 20 years, marking one of the strongest long-term investment records in history, according to a 2013 Wall Street Journal article.

Through ESL, Lampert gained control of Kmart in 2003 and he combined it with Sears in 2005 to create Sears Holdings in an $11.5 billion deal. ESL, long one of Sears' largest shareholders, now owns about half of the company.

It was soon after he took the reins at Sears, first as chairman, that Lampert began the share buybacks. In his annual letters to Sears shareholders, Lampert defends buybacks as a way to provide "liquidity" (or a buyer) for shareholders who are looking to sell, and increase ownership of the company for investors who hold on.

But to critics, they are simply a financial maneuver to drive up per-share earnings and create the illusion that a company is doing better than it really is.

With the buybacks came cuts in spending on the retailer's stores, as well as reduced promotions and advertising, despite Lampert's promises to revive the company.

Lampert "had a perspective that the retail industry as a whole was too sales-oriented and not enough profit-oriented," one former high-level Sears executive told Business Insider. The executive asked not to be identified discussing private matters.

"He wanted to demonstrate to the world that you could reduce advertising and inventory investment - and yes, sales would fall to some new normal - but you would have a more profitable business," the former executive said.

At the time, Lampert believed in the long-term success of Sears, according to the executive. When he was buying the stock at $170, more than $150 per share above where it is today, he thought it was a better capital investment than store upgrades, because it was his theory that the stock would never be cheaper. Lampert had high hopes for himself and for Sears.

"I want to be known as a great businessman," he said in 2006, shortly after the Sears acquisition. His greatest fear, he said, was that he wouldn't live long enough to complete all his goals.

"He was completely confident that he was going to be the next Warren Buffett," the former executive told Business Insider. "He felt that he had created a long-term winner in Sears and it would be his Berkshire Hathaway."

That is not how it has worked. The focus on investors, and the decision to spend on buybacks while cutting back on stores, has meant the company has been unable to keep up with shoppers.

"The retail industry is predicated on serving the customer, valuing the customer, listening to the customer, and ultimately giving the customer what she wants - and it's the employees who deliver this. Anything less is a recipe for terminal illness, if not suicide," says Robin Lewis, a 40-year retail consultant and CEO of industry publication The Robin Report. "Clearly, in the case of Sears, Eddie Lampert has turned a completely blind eye to this truism, and has been bleeding the company to a long and slow but well-managed death for the sole benefit of major investors and himself."

Under Lampert, Sears failed to invest in major capital improvements, such as store maintenance or new store concepts. Fortune recounted a 2005 strategy session between Lampert and the top two-dozen executives of the company:

Once their presentations started, Lampert also began poking holes in virtually every idea.

'What's the benefit of that?' he asked again and again. 'What's the value?' He shot down a modest $2 million proposal to improve lighting in the stores. 'Why invest in that?' He skewered a plan to sell DVDs at a discounted price to better compete with Target and Wal-Mart. 'It doesn't matter what Target and Wal-Mart do,' he declared.


As Lampert slashed spending in-store improvements, "the stores began going down," a 41-year Kmart store employee who was laid off in February told Business Insider.

When Lampert took over, company executives visited stores and told workers they were no longer allowed to discuss any problems the stores were having, according to the employee.

"When they quit asking and started telling you how it should be run according to corporate standards, the stores began to go down," the employee said. "There is no morale in any of the stores."

An employee of a Sears store in Elyria, Ohio, told Business Insider that his store is falling apart.

"The walls and floors in my store are all beat to hell...the roof leaks, the escalator and the elevator break down frequently, but 'Fast Eddie' doesn't want to spend money on the stores," the employee said.

Sears spokesman Howard Riefs denied that employees are discouraged from giving feedback.

"One of our cultural beliefs as a company is to embrace feedback," Riefs said. "We have a variety of ways that associates can give authentic feedback - even anonymously, so we would disagree with that suggestion."

Lampert has defended his decision to spend billions on share buybacks and other financial maneuverings over store reinvestments.

"I was criticized for not investing enough in the stores," Lampert said in 2013. "My point of view is we couldn't invest in everything."

Investors bought into his strategy, at first. In 2006, Sears' stock rose roughly 45%, to $156.

Then quarterly sales started declining in early 2007, and the stock followed suit.

Many Sears executives were expecting Lampert to eventually refocus on investing in stores and advertising. When that didn't happen, some employees began to grow concerned.

"There was a feeling of, 'OK, now we have to invest and compete,' through some combination of advertising and promotion," the former Sears executive said. "But it became clear that he either didn't know how or didn't want to spend the money."

At that point executives began leaving the company. "He had an enormous amount of turnover at all management levels," Tawil said. Since March 2007, Sears' shares have dropped 90%. Over the same period, sales have been cut in half, from $50.7 billion in 2007 to $25.1 billion in 2015.

To raise money, the company started selling its real estate and spinning off brands like Sears Hometown and Outlet stores. So far, Sears' most iconic brands, like Kenmore and Craftsman, have been spared. But even those may now be sold, the company said in May.

In one of its biggest real-estate transactions to date, Sears launched and spun off a real-estate investment trust, Seritage Realty Trust, to execute sale/lease-back agreements for 266 Sears and Kmart stores. The deal helped Sears raise about $2.7 billion, most of which was quickly burned through to pay off debt.

Meanwhile, Sears has been cutting costs by closing hundreds of stores and laying off hundreds of thousands of employees. In 2007, Sears had 3,418 stores and 315,000 employees in the US. The company now has 1,672 stores and 178,000 employees.

Lampert's strategy of underinvesting in stores and selling off assets "starved capital and management resources from the retail business, leaving it unable to respond and adapt to the needs of the evolving consumer and marketplace," Lewis said.

The stores are now shells of what they once were.

"The majority of stores now border on disgraceful and show a complete lack of retail standards and proper store management," said Neil Saunders, the CEO of retail consulting firm Conlumino. "The impression is of a retailer that has completely given up, and this is something consumers notice."

But there was one party that was benefiting at least for some time from this strategy: shareholders.

"All of this adds up to a big cash-in on any leftover financial value—that's being squeezed out of declining consumer value—for Eddie and his investors, who are the only ones that count," Lewis said.

Bruce Berkowitz of Fairholme Capital Management told The New York Times in 2013 that Lampert's spinoffs had helped deliver about $10 a share in assets to Sears shareholders, even as the stock price was tanking. At the time, Fairholme owned about 20% of Sears shares.

But not all Lampert's investors bought into the strategy. Many investors fled his hedge fund, ESL Investments, between 2007 and 2013, according to The Times.

"Investors are heading for the exits, discouraged by the declining fortunes of Mr. Lampert's signature stake in Sears Holdings," The Times wrote in 2013.

The fund managed more than $15 billion near its peak in 2006. Last year, the total was less than $3 billion, according to a company filing. A spokesperson for ESL declined to comment.

At this point, it seems as if Lampert has all but given up on trying to turn sales trends around at Sears, and instead he's trying to extract every last bit of value out of the business through financial maneuvers.

In the most recent quarter, Sears' sales dropped 8.3% to $5.39 billion. Kmart same-store sales dropped 5%. In announcing earnings, the company revealed that its chief financial officer, Robert Schriesheim, would be leaving Sears to "pursue other career opportunities."

Lampert said the retailer had a rough start to the year because of warmer than expected winter weather.

The weather conditions had a cascading effect on many retailers, leading to reduced spending and heavy discounting on winter clothing and related items," he wrote in a letter to shareholders in February.

Lampert also said the retailer has been unfairly criticized.

"Because of Sears and Kmart's longstanding history and cultural impact, we are targeted for criticism when our results are poor," he wrote.

But analysts say a turnaround is impossible at this point and that Sears' has lost its most loyal customers.

The department store has traditionally attracted female shoppers age 55 and older, but that demographic is now choosing to shop elsewhere, according to a study by Prosper Insights & Analytics. Most women would now rather shop at Goodwill than at Sears, the survey found.

In women's clothing alone, the share of shoppers who prefer Sears dropped 53% from January 2006 to January 2016, according to the same survey. Sears has also lost considerable ground in categories such as sporting goods, linens and bedding, home improvement, and electronics.

Perhaps most concerning is Sears' losses in home-appliance sales, which has traditionally been one of the company's strongest categories and biggest opportunities for growth.

"This was one of the main areas contributing to the decline - in spite of the fact that across retail as a whole this category grew strongly over the first part of this year," Saunders wrote in a note to clients in May. "That Sears is unable to make gains in categories which are growing, and in which it has a more established presence, highlights its main issue: it has fallen out of favor with American shoppers who continue to abandon the chain at a fairly alarming rate."

It's a "dire" situation for Sears, according to Goodfellow. As older shoppers left Sears, the company failed to attract new, younger customers.

The end for Sears is now "very, very near," according to Lewis. That Sears still exists is "a tribute...to Lampert's genius at extracting value while keeping the patient alive."

Said Tawil:

"Normally businesses like this fail and get sold off in pieces in bankruptcy," Tawil said. "This has been the greatest out-of-court liquidation in the history of our nation."

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America's dying shopping malls have billions in debt coming due
Crain's Chicago Business
June 16, 2016

Suburban Detroit's Lakeside Mall, with mid-range stores such as Sears, Bath & Body Works and Kay Jewelers, is one of the hundreds of retail centers across the U.S. being buffeted by the rise of e-commerce. After a $144 million loan on the property came due this month, owner General Growth Properties Inc. didn't make the payment.

The default by the second-biggest U.S. mall owner may be a harbinger of trouble nationwide as a wave of debt from the last decade's borrowing binge comes due for shopping centers. About $47.5 billion of loans backed by retail properties are set to mature over the next 18 months, data from Bank of America Merrill Lynch show. That's coinciding with a tighter market for commercial-mortgage backed securities, where many such properties are financed.

For some mall owners, negotiating loan extensions or refinancing may be difficult. Lenders are tightening their purse strings as unease surrounding the future of shopping centers grows, with bleak earnings forecasts from retailers including Macy's Inc. and Nordstrom Inc., and bankruptcy filings by chains such as Aeropostale Inc. and Sports Authority Inc. Older malls in small cities and towns are being hit hardest, squeezed by competition from both the Internet and newer, glitzier malls that draw wealthy shoppers.

"For many years, people thought the retail business in the U.S. was a bit overbuilt," said Tad Philipp, an analyst at Moody's Investors Service. "The advent of online shopping is kind of accelerating the separation of winners and losers."

Landlords that can't refinance debt may either walk away from the property or negotiate for an extension of the due date. It can be hard to save a failing mall, leading to high losses for lenders on soured loans, Philipp said.

FITCH WARNING

General Growth already extended the mortgage on the Lakeside Mall once before, in 2010. It was part of the Chicago-based company's plan to emerge from the biggest real estate bankruptcy in U.S. history after piling on $27 billion in debt. Fitch Ratings flagged the property as potentially problematic in August, citing declining occupancy.

The mall—anchored by JC Penney, Sears, Macy's and Lord & Taylor stores—was built in 1976 and last renovated 15 years ago, according to data compiled by Bloomberg. Occupancy was 79 percent as of December. The loan has been transferred to C-III Asset Management, a special servicer that handles troubled commercial mortgages on behalf of bondholders, and General Growth failed to pay the mortgage that was due June 1, Bloomberg data show. In February, Chief Financial Officer Michael Berman said the company expected to address their 2016 maturities "successfully."

Representatives for General Growth and C-III declined to comment on the loan.

The 1.5 million-square-foot (139,000-square-meter) mall in Sterling Heights, Michigan, isn't typical of General Growth's holdings, which include some of the world's premier shopping destinations, such as Honolulu's Ala Moana Center and Las Vegas's Fashion Show. General Growth spun off most of its weaker malls into a separate company in 2012, and has been looking to dispose of assets that don't fit into its strategy of owning the best properties in top markets.

RISKIEST MALLS

It's getting more difficult to find takers for lower-tier malls, according to Green Street Advisors LLC. The pool of buyers is shallow and funding is elusive, the real estate research firm wrote in a note to clients last week.

"The criteria to get financing is getting a little bit more stringent and cutting off the lifelines for some of these malls," DJ Busch, a senior analyst at Green Street, said in an interview.

General Growth already extended the mortgage on the Lakeside Mall once before, in 2010. It was part of the Chicago-based company's plan to emerge from the biggest real estate bankruptcy in U.S. history after piling on $27 billion in debt. Fitch Ratings flagged the property as potentially problematic in August, citing declining occupancy.

The mall—anchored by JC Penney, Sears, Macy's and Lord & Taylor stores—was built in 1976 and last renovated 15 years ago, according to data compiled by Bloomberg. Occupancy was 79 percent as of December. The loan has been transferred to C-III Asset Management, a special servicer that handles troubled commercial mortgages on behalf of bondholders, and General Growth failed to pay the mortgage that was due June 1, Bloomberg data show. In February, Chief Financial Officer Michael Berman said the company expected to address their 2016 maturities "successfully."

Representatives for General Growth and C-III declined to comment on the loan.

The 1.5 million-square-foot (139,000-square-meter) mall in Sterling Heights, Michigan, isn't typical of General Growth's holdings, which include some of the world's premier shopping destinations, such as Honolulu's Ala Moana Center and Las Vegas's Fashion Show. General Growth spun off most of its weaker malls into a separate company in 2012, and has been looking to dispose of assets that don't fit into its strategy of owning the best properties in top markets.

RISKIEST MALLS

It's getting more difficult to find takers for lower-tier malls, according to Green Street Advisors LLC. The pool of buyers is shallow and funding is elusive, the real estate research firm wrote in a note to clients last week.

"The criteria to get financing is getting a little bit more stringent and cutting off the lifelines for some of these malls," DJ Busch, a senior analyst at Green Street, said in an interview.

Green Street estimates that several hundred malls could shut down over the next decade, with properties reliant on Macy's, JC Penney and Sears at the most risk. Sales at department stores, once the engines that powered shopping centers across the U.S., have declined almost 20 percent since 2006, according to the firm. About 800 department stores would need to shut down to restore balance between sales and profitability, Green Street said in an April report.

Insurance companies and banks that are eager to issue loans on high-end shopping complexes aren't as willing to take a chance on a shaky mall. That pushes borrowers toward Wall Street firms that underwrite loans to sell to investors as CMBS.

CMBS lending, which stalled earlier this year with the volatility in global markets, remains subdued in the face of new regulations taking effect in December. Wall Street banks have sold about $18.5 billion of CMBS deals this year, a 30 percent drop from the same period in 2015, according to Deutsche Bank AG. That's making borrowing more expensive and choking off funding just as loans from the boom years of 2006 and 2007 come due.

"You're definitely seeing some problems as the loans reach their maturity," said Roger Lehman, a debt analyst at Credit Suisse Group AG.

Walking away from a poorly performing mall is often the best thing a landlord can do for its balance sheet, according to Green Street's Busch. If the debt is greater than the value of the property, it might not make sense to invest in a costly redevelopment, he said.

"It takes a lot of hope and a lot of capital to reinvent a mall that's already somewhat uncompetitive in its market," Busch said.

GLIMCHER MALLS

WP Glimcher Inc. plans to hand over five of its malls to lenders, four of which have mortgages coming due in the next 12 months, the company said in a June 8 presentation. Chief Executive Officer Michael Glimcher last month said that it had multiple offers from lenders to refinance one of the loans, a $87.3 million mortgage on the Mesa Mall in Grand Junction, Colorado, which was due June 1.

A representative for Columbus, Ohio-based Glimcher declined to comment on its financing plans.

Late payments are creeping upward on CMBS loans backed by all property types. More than $1 billion of mortgages tied to shopping malls, office buildings and hotels soured in May, up from $884 million in April, Wells Fargo & Co. data show.

That figure will probably increase as more loans issued in the run-up to the 2008 crash fail to refinance under the tougher underwriting guidelines in place today, according to Rich Moore, an analyst with RBC Capital Markets.

"In 2006 or 2007, everything was beautiful," Moore said. In the current environment, "if you got to a bank and you want to refinance junk, the bank says no."

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Retail Sales Not Strong for All
By Steven Russolillo
The Wall Street Journal
June 14, 2016

American consumers appear to be feeling pretty good about themselves. If only the average retailer could say the same thing.

U.S. consumer spending recently rose at its fastest pace in nearly seven years. The uptick makes sense. The labor market is still adding jobs, wage and salary income are on the rise, and sentiment is fairly upbeat.

While the headline figures aren't expected to be as good as last month's report, the data should show healthy consumer spending and the growing bifurcation between struggling brick-and-mortar retailers and thriving internet outlets.

Economists polled by The Wall Street Journal expect retail sales to have risen by 0.3% in May from a month earlier. While that would be down from 1.3% growth in April, it would exceed the 0.2% average growth over the past 12 months.

One reason behind the optimism is a recent drop in the saving rate. That suggests Americans might be willing to spend a little more of their take-home pay. The personal-saving rate -- money not spent as a share of after-tax income -- fell to 5.4% in April, the lowest in 2016 and down from 5.9% in March.

Polling firm Gallup also showed overall spending remained strong in May. It surveys adults daily on how much they spent the day before, excluding bills or major purchases. Americans' daily self-reports of spending averaged $93 in May, similar to the average $95 spent in April and indicative of healthy spending levels, according to Gallup.

What's more, Tuesday's data should show the glaring divide between retail's winners and losers. For instance, internet and catalog sales in the 12 months through April grew more than three times as fast as overall sales, up 10.2%. That is in large part thanks to Amazon.com Inc.'s success.

Meanwhile, department-store sales fell 1.7% in the same period. Struggling retailers Macy's Inc., Kohl's Corp. and Nordstrom Inc. are among a number of victims of sagging mall traffic.

The upshot: Consumers' increasingly loose purse strings aren't showering gold everywhere.

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Sears to Sell DieHard Branded Tires
By Jeff Bennett
The Wall Street Journal
June 14, 2016

Silver Touring All-Season tires will be sold at the retailer's 650 automotive service centers starting in July

Sears Holdings Corp. is putting its DieHard brand on passenger-car tires, marking the well-known battery brand's first major expansion in the automotive market in more than a decade.

DieHard Silver Touring All-Season tires will be sold at the retailer's 650 automotive service centers starting late next month, although most stores won't be fully stocked until August. Prices will range between $63 and $149.

The Hoffman Estates, Ill., company declined to identify which tire maker will produce the product, saying it intends to partner with different manufacturers as it expands to include tires for pickup trucks and sport-utility vehicles.

DieHard was first introduced as a battery brand in 1967 and has seen expansion to include items such as jumper cables and work boots.

Tom Park, president of the DieHard, Kenmore and Craftsman brands, said the company surveyed 500 people late last year asking them to rank the top 15 tire brands. The DieHard name was thrown in to see how it would fare. It finished third, he said.

"We have millions of customers who are already familiar with the DieHard name," Mr. Park said. "We are banking on that brand equity."

The brand expansion comes as Sears struggles for a way to regain its financial footing. The retailer, controlled by billionaire hedge-fund manager Edward Lampert, continues losing money as more consumers shop elsewhere. Earlier this year, the company dropped hints that it was looking for ways to expand all of its brands, including Kenmore and Craftsman.

Sears officials declined to say whether this is the start of efforts to expand its Kenmore and Craftsman brands beyond Sears and Kmart. Executives are looking for ways to generate more revenue by selling its well-known brands in other stores.

The DieHard tire brand will be positioned between Sears's lower-end Guardsman and higher-end RoadHandler tires. Sears auto centers sell a total of 15 different tire brands including Goodyear Tire & Rubber Co. The retailer declined to identify which companies are producing the tires for it.

The industry is highly competitive with big players dominating the market through advertising. However, consumers also are more open to making their purchases based on recommendations they are given at the store, analysts said.

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Would Sears Holdings Corp. Have Anything of Value if Eddie Lampert Sells These Brands?
By Rich Duprey
The Motley Fool
June 11, 2016

A plan to tap into the value remaining in top-flight brands may be all the retailer has left.

The Great Dismantling appears to be entering its final stages as Sears Holdings Corp. contemplates ways to possibly get rid of its last remaining noteworthy brands. CEO Eddie Lampert has shed almost everything of value from the retailer, so its plan to evaluate ways the Kenmore, Craftsman, and DieHard brands can live beyond the confines of Sears and Kmart stores is not surprising.

A bleak picture getting bleaker

Sears turned in yet another dismal earnings report last month, with revenue falling 8% on a 6.1% drop in comparable-store sales. As a result, operating losses for the quarter doubled to $368 million, or $4.41 per share, with the retailer attributing the worsening financial picture to poor performance in home appliances, apparel, consumer electronics, footwear, and Sears Auto Centers. Oh, is that all?

In the quarterly press release, Sears said it will "aggressively evaluate" a host of potential alternatives for Kenmore, Craftsman, DieHard, and the Sears Home Services business.

If Lampert gets rid of Kenmore, Craftsman, and DieHard -- or KCD, as it refers to them -- would there be any reason for anyone to bother shopping at Sears or Kmart anymore?

The plan may not be to just sell or spinoff the brands as it has done with Land's End, Orchard Supply, and Sears Hometown & Outlet Stores, though that remains a distinct possibility. Rather it seems the first option may be to make them available to consumers through other outlets, where people are already shopping. After all, Sears notes its "iconic" brands are beloved by U.S. consumers and it might "realize significant growth by further expanding the presence of these brands outside of Sears and Kmart."

Making the best of a bad situation

And it's probably not wrong about that. Although Lampert has caused considerable harm to the value and reputation of the retailer by presiding over the dismantling of its operations over the years, the KCD brands do still hold some cachet with consumers, although they, too, are greatly diminished.

For example, more than a decade ago, Kenmore held the top spot in appliances with an estimated 27% share of the market. Sears itself was the go-to retailer for appliances, selling an estimated 37% of all white goods sold. But under Lampert's watch, Kenmore's share has withered to 12.7%, putting it third behind General Electric and Whirlpool Corp., according to the Stevenson Company's TraQline, which did not do the earlier estimates. DieHard had but a 6% share in car batteries in mid-2015, down from over 7% four years earlier. Craftsman is perhaps doing best, drawing 28.5% of consumer dollars, but that's also down from around 33% in that same time frame. Getting the brands into other retail outlets might save their reputations before they're completely destroyed.

By doing so, Sears and its investors may still reap some of the benefits, though Lands' End is a telling reminder of what happened when an otherwise sturdy brand remained too long under Lampert's tutelage. The retailer continues to see its sales fall, which mostly is a result of its continued association with and presence in Sears stores.

Last quarter, Lands' End reported revenues were down almost 9% as its retail segment plunged 10.4% primarily because of falling sales at its remaining store-in-store boutiques at Sears. Still, it also suffered a greater than 8% drop in online and catalog sales. When Sears acquired Lands' End in 2002, it paid $1.9 billion; now on its own since 2014, it has a market value of only $518 million. It may be too late for KCD as well, no matter which way it goes.

Whirlpool reported in its own first-quarter earnings results at the end of April, revealing that its sales in North America were up 5% (excluding currency impacts). GE agreed to sell its appliance business to Chinese white-goods maker Haier for $5.4 billion, but it still enjoyed an 8% increase in first-quarter appliance sales.

Maybe it should have stuck to the plan

This isn't the first time Sears has explored the potential of KCD spinoffs. For example, it began selling Craftsman tools at Costco in 2011 and at Ace Hardware in 2010. It also arranged to sell DieHard batteries at mass-merchandise retailer Meijer as well as at Ace.

While Sears has been reluctant to expand distribution of its brands too far beyond the confines of its stores, for fear of eating into their sales, apparently it realizes it's become a do-or-die situation. Consumers aren't shopping at Sears or Kmart anyway, so it may as well try to reap some of the benefit from their shopping habits.

It looks like the end is nigh

It's looks like Sears Holdings is slowly swirling around the drain, a zombie retailer that refuses to believe it is dead. Lampert's neglect of his stores in favor of trying to transform the retailer into an e-commerce leader has only hastened its demise. It couldn't compete against bricks-and-mortar retailers, but thought it had the chops to take on Amazon.com.

Maybe Sears' future is really one of being a brand licensor, which allows someone else to do the hard work of selling its products while it gets paid for the brand names. Whatever it is, though, it's clear it won't be as a retailer: Separating the relative exclusivity of Kenmore, Craftsman, and DieHard from Sears Holdings will mean there is nothing of value left at its stores, for consumers or investors, that they can't find elsewhere.

Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com and Costco Wholesale. The Motley Fool owns shares of General Electric Company.

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Which home improvement retailer is most satisfactory?
By Dan Berthiaume
Chain Store Age
June 7, 2016

When it comes to customer experience, home improvement shoppers have established a long-term favorite.

Ace Hardware ranks highest in customer satisfaction with home improvement retailers for a 10th consecutive year, according to the J.D. Power 2016 Home Improvement Retailer Satisfaction Study. The study measures customer satisfaction with home improvement retailers by examining merchandise; price; sales and promotions; staff and service; and store facility. Satisfaction is measured on a 1,000-point scale.

Ace Hardware scored 810 in overall customer satisfaction. Menard's followed Ace in second place overall with a score of 803. Lowe's placed third with a score of 799. Overall customer satisfaction with home improvement retailers is 795, up from 788 in 2015.

In addition, Ace scored 855 in staff and service, compared to an 811 average. Strong attribute ratings for availability of sales staff and knowledge of sales staff drove the exceptionally high score in this factor.

"Given the impressive list of retailers with which we compete, in no way do we take our tenth consecutive J.D. Power award for granted," said John Venhuizen, Ace Hardware president and CEO. "My grateful and sincere thanks goes to the consumers who have honored us with this award, the Ace team who never ceases to amaze me and most importantly, our frontline, red-vested heroes who so passionately serve our customers."

The study also found that customer satisfaction drops significantly from 850 to 782 when the initial greeting takes more than two minutes. Similarly, overall satisfaction declines significantly when a customer waits more than two minutes to have their question answered, compared with waiting less than two minutes (763 compared to 845, respectively).

Satisfaction among the 46% of customers who ask for help from a store employee is 14 index points higher than among those who do not ask for help (805 compared to 791, respectively). The majority (74%) of customers indicate that the staff understood the questions being asked, which is critical as satisfaction falls 97 points from 811 to 714 when a store employee isn't able to respond.

Customers also want the retailer to provide advice, which is where the study shows home improvement retailers as a whole fall short. Only 42% of customers indicate that the staff provided advice. However, among those customers, satisfaction is 830, compared with a much lower score of 765 when no advice was provided.

"The retailer's staff is most critical to differentiating the experience provided to customers, especially when it comes to the timeliness of greeting customers, answering their questions or providing advice," said Greg Truex, senior director of the at-home practice at J.D. Power. "Retailers that train their employees to engage with customers proactively and assist them are more likely to provide them with a satisfying experience during these moments of truth."

Notable loyalty findings of the study include:

      • Among delighted customers (overall satisfaction scores of 901 and above), 76% say they "definitely will" repurchase from the retailer, compared with the study average of 39%.

      • Seventy-seven percent of delighted home improvement retailer customers say they "definitely will" recommend the retailer to others, compared with the study average of 40%.

      • The average number of positive recommendations per delighted customer is 4.7, compared with the study average of 2.8.

The 2016 Home Improvement Retailer Satisfaction Study is based on responses from 2,995 customers who purchased home improvement-related products from a home improvement retailer within the previous 12 months. The study was fielded in January and February 2016.

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Thomas D. Neal, Former Sears, Roebuck Executive Dies

June 4, 2016

Thomas D. Neal, 90, of Naples, Florida, died May 21, 2016. He was born in Indianapolis, Indiana. He graduated from the University of Illinois in 1948, the same year he started to work for Sears, Roebuck and Co. as a trainee in Indianapolis.

Tom's 39 year career with Sears eventually led to his becoming Executive Vice President of the Southern Territory and his membership on the board of the Sears Merchandise Group. As reported by Donald R. Katz in his book, "The Big Store," Neal was a long-time friend of Chairman Ed Telling, and was a "particularly kind and gentle man...and well liked" on the 68th floor (the senior executive floor in the Sears Tower).

He retired from Sears, Roebuck in 1986 and became an official resident of Naples.

Tom was a veteran of World War II and was recalled to active duty during the Korean War conflict as Gunnery Officer of the USS Sarasota.

He was an avid golfer and at various times he was on the Board of Directors and Golf Chairman of Imperial Golf Club and Royal Poinciana in Naples, as well as Highlands Falls Country Club in Highlands, North Carolina.

He was preceded in death by his first wife, Phyllis Huls Neal from Jasper, Indiana and his second wife, Alicia Daley Neal from Woburn, Massachusetts.

Tom is survived by his four children, Steve Neal (Jacki) of Del Mar, California, Karen Menke (Errol) of Tampa, Florida, Henry Neal, (Terri) of Alpharetta, Georgia, and Jennifer Neal of Liburn, Georgia; and his nine grandchildren and six great grandchildren.

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Walmart taking on Amazon with same-day delivery pilot
By Dan Berthiaume
RetailingToday
June 3, 2016

Walmart is teaming up with a few third-party partners — including two names very familiar to consumers — to take on its biggest rival in the competitive in the area of online delivery.

As part of its growing efforts to compete with Amazon, the discount titan will launch pilots of grocery deliveries using the Uber and Lyft ride-hailing services from Walmart stores in Denver and one other unidentified market by mid-June. Walmart also revealed it has been running a pilot of "last mile" grocery and general merchandise deliveries with Deliv in Miami-area Sam's Club stores since March.

Walmart has been piloting its own same-day grocery and general merchandise delivery service in the Denver and San Jose markets, and also offers curbside grocery pickup in many areas. However, these pilots show a renewed emphasis on effectively offering the type of same-day delivery convenience for which Amazon is famous.

Unlike the Amazon same-day delivery model, which relies upon Prime Now membership, the Walmart and Sam's Club pilots do not require any additional membership fee. Instead, customers pay a $7-$10 delivery fee at time of purchase when they select "same-day delivery" at checkout.

In all the pilots, customers are notified of the third-party service being used to deliver their items, and no fee will be charged by the driver. Personal Walmart shoppers prepare the orders, which are then fulfilled by the delivery service.

In an interview with Chain Store Age, Daphne Carmeli, founder and CEO of Deliv, offered her company's perspective on the Sam's Club pilot.

"We got a call from Walmart and are pretty excited to be working with the biggest retailer in the world," said Carmeli. "It's amazing the effect the 'A-word,' Amazon, is having on the e-commerce landscape. They have created a customer expectation of same-day delivery. It's the new standard. If you're selling physical goods to customers you've got to figure out a way to get them to customers as quickly as possible."

Sam's Club customers select same-day delivery and a time window, and then make payment, through the Sam's Club site or app. They never directly interact with Deliv online, although they do get access to a visual map that will show them where their driver is and estimated time of delivery.

Carmeli outlined what she sees as the differences between delivery specialists like her company and transportation providers such as Uber and Lyft.

"We lay down the pipes for pickup and delivery," said Carmeli. "Moving people and packages is very different. We might send one driver for 20 deliveries. An on-demand service like Uber or Lyft will send 20 drivers for 20 deliveries. It's a different logistical problem than scheduled delivery."

Walmart has offered its own versions of everything from Amazon Prime Day to Amazon Prime to free cloud hosting to shipping drones. This latest effort is another sign Walmart is not going to simply accept Amazon's dominance of the e-commerce space.

While Walmart may never match Amazon's assortment, it has the decided advantage of thousands of stores that can serve as highly localized fulfillment centers. If the discounter can make the economics and logistics of same-day delivery from stores work with a little outside help, it will be one battle in the Amazon war it can win.

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Wal-Mart looks to future at annual meeting
By Marianne Wilson
RetailingToday
June 3, 2016

The CEO of Wal-Mart Stores called on associates to reimagine the chain's future at the company's 46th annual shareholders meeting.

"We have the opportunity to reimagine retail again," said president and CEO Doug McMillon.

The meeting, as always, was part business and part entertainment. Held in the Bud Walton arena on the University of Arkansas campus, it was attended by 14,000 people and hosted by comedian and television personality James Corden. It also featured pop-star Nick Jonas and several other musicians.

The meeting was held as the chain's efforts to improve its store and online business seem to be bearing fruit. Wal-Mart recently reported its seventh consecutive quarter of increased same-store sales at its U.S. locations. Traffic counts rose for the sixth straight quarter.

McMillon reinforced his call to reimagine retail by announcing that the chain is working with Uber and other partners to test same-day deliveries to customers. He also took to Facebook Live to connect directly with Walmart associates around the world to thank them for their service.

He went on to recap the progress Walmart has made in creating a seamless shopping experience for customers, and noted that in the United States, Walmart associates are more engaged, merchandise assortment is improving, and inventory flow is better. Also, online grocery pickup has rolled out in nearly 40 markets.

Additionally, the company announced that Walmart Pay will be rolled out in every store by the end of June to make the checkout experience faster and easier.

McMillon outlined three steps for the retailer's reinvention: supporting and engaging Walmart associates, serving customers and serving communities.

"As the world becomes more digital, it will be the humanity of Walmart that differentiates us and wins with customers," he said. "Our investments in education and training, store structure, wages, hours and sales floor technology are to support you and enable you to serve your customers and members. Every associate has a role to play."

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Seven Customers Retailers Should Know
By Peter Moloney
Chain Store Age
June 3, 2016

Retailers are fighting to engage customers and keep them from going elsewhere. And smart retail marketers know that nurturing existing customers to increase lifetime value is the fastest, highest-ROI route to near-term revenue growth.

The more accurate your predictions -- which individual customers will buy and when, how much they will spend and what products they will buy -- the more effectively your product recommendations and offers in emails and ecommerce sites will stimulate more buying. Segmenting customers by value potential and risk is also a key step to improve targeting of messages, discounts, and incentives appropriate to each customer's lifecycle stage.

Building from the ground up by scoring each customer individually, you should be able to group customers into loyalty segments representing their lifecycle stage. Marketing to customers according to their stage often makes the difference between success or failure for marketing campaigns.

Here are the seven customer lifecycle stages retailers should look for:

1. Loyalists
High value, low-risk customers. These are the best of the best customers who buy most frequently, most broadly, and spend the most. These customers are usually the best targets for cross-sell items, as they have brand loyalty and numerous transactions.

Also, since many loyalists will make a purchase whether they are marketed to or not, large discounts are not necessary to move these customers. A strategy that some of our subscribers use is to offer a discount only to loyalists if they include a cross-sell item in their purchase, thus increasing their total basket size.

2. Nurturers
Low risk, mid to low-value customers. This group, and underperformers, are usually the most interesting groups of customers. Nurturers are buying consistently and periodically, since they have a low risk score. But they are not high value customers, in that the dollars they spend are low or they may not buy very broadly across categories, or as consistently. Either they are buying at capacity, in which case they will stay where they are, or they are buying other products from competitors. A little investigation and some targeted programs could increase the dollars per order for these customers and increase their value.

3. Underperformers
High value, mid to high-risk customers. These are customers that used to be better customers, but recently have fallen off their expected pattern, either by buying less per order, or buying less frequently, or both. There are many valuable customers in this segment, and reversing their behavior is essential to increasing revenue. Fortunately, these customers typically have an established purchasing history, so making relevant product offers is easy to do. However, these customers may need some additional incentive to get back on track, so deeper discounts are often recommended.

4. Faders
Low value, mid to high-risk customers. These are customers that never really established a significant buying pattern or no longer have one. They make sporadic purchases of low dollar amounts, and they typically buy very narrowly across categories. Other metrics, such as expected value, can be used to determine which customers in this group are worth the cost and effort to save vs. which ones are not profitable in the long run. Deep discounts and rich offers are usually required to move these customers, but may not be cost effective.

5. Win-Backs
High risk customers. These are customers that have not made a purchase in a long time and have a high likelihood of defecting. These customers can almost be considered as acquisitions because of the effort involved in regaining their business. Ordering these customers by Value Rank can give a starting point for a campaign. The advantage of these customers over new acquisitions is that they have some purchasing history, and relevant product offers are possible.

6. One- and Two-Time Buyers
These are customers that have made at most two purchases, where a purchase is defined as a unique transaction date with positive revenue. These customers may not yet have a clear loyalty segment, and may be separately targeted from other customers in re-sell or cross-sell campaigns. Most companies have a significant number of one and two time buyers and motivating them to a third purchase significantly increases the likelihood of future purchases and significant lifetime value. By analyzing the patterns of one and two-time buyers, along with those that went on to make further purchases, loyalty builders enables more effective product recommendations to this group.

7. Inactive Customers
An analysis of the transaction data can be used to determine the most appropriate cut-off point, in terms of number of days since a purchase, to designate a customer as “Inactive.” Inactive customers are generally expensive to pursue, although some customers who formerly were high value at some point before going inactive might be worth the effort.

Peter Moloney is CEO of Loyalty Builders, whose marketing lift service offers a simple, cloud-based predictive analytics service enabling marketers to get revenue lift from more relevant communications to their customers. (@LoyaltyBuilders)

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Eddie Lampert Makes A Move That Could Be The Death Knell For Sears
By Walter Loeb
Forbes
June 3, 2016

Sears Holdings reported yet another horrible quarter Thursday, and the picture will likely only worsen as each new quarter rolls around. Key departments saw sharp sales declines, highlighting how serious the situation at Sears Holdings has become. Seeking a tourniquet to stop the bleeding, financial advisors have been hired to identify ways to wring more value out of the Kenmore, Craftsman, and Die Hard brands. To top it all off, referring to CEO Eddie Lampert as "an unconventional thinker," after 5 years with Sears Holdings, CFO Robert Schriesheim is stepping down to pursue other career interests, raising further concerns about the company's outlook.

First quarter 2016 saw a loss of $471 million compared to a loss of $303 million or ($4.41) versus ($2.85) per diluted share in last year's first quarter. Revenues decreased a whopping $488 million in the quarter leaving the company with sales of $5.4 billion versus $5.9 billion, down 8.3%. Comparable sales plunged 5% at Kmart and 7.1% at Sears domestic stores, a decline of 6.1% for the combined companies. There were decreases in key departments such as home appliances, apparel, consumer electronics, footwear and Sears Auto Centers, an alarming sign for future growth.

It is true that many other retailers have seen sales shrink in the first quarter but no others with the severity of Sears Holding. A close analysis of the earnings report makes it clear that Sears is bragging about its valuable assets. I am of the opinion that if the valuable assets are not pulling their weight this retailer is close to gasping its last breath.

CEO Lampert sees great value in some of Sears Holding brands; brands that have made Sears famous. This includes Kenmore, Craftsman and Die Hard (now banded together by some Sears wag as "KCD"), and Sears Home Services (SHS). SHS includes in-home services (protection agreements), Parts Direct, delivery, installation, repair, and home improvement. Sears has hired Citigroup Global markets and LionTree Advisors, to evaluate future partnerships or other transactions that could expand the brands' distribution. In other words, the iconic brands are for sale. Eddie Lampert is right; his company has a lot of assets. However, the exclusive brands — Kenmore, Craftsman and Die Hard — made Sears a destination retailer. These brands have long stood for high quality products the consumer can trust. Mr. Lampert is giving that up in order to keep the company afloat.

I believe it will be the death knell for Sears Holdings if these brands become broadly available at other stores. One of the key reasons to shop at a Sears or Kmart, the exclusive brands, would no longer exist. The merchandise would be available at other national chains. I think companies like Home Depot (which already sells some Craftsman tools) or Lowe's or J.C. Penney or even Ace Hardware would be well advised to consider these brands as part of their growth strategy.

J.C. Penney may be giving serious consideration to how it could own or work with KCD. The department store chain would certainly benefit from owning these brands as it pursues opening hundreds of appliance and other home departments in the years ahead.

I worry about two groups that still rely on Sears Holding. One is the 200,000 associates whose lives are at stake as Eddie Lampert sells more of the assets. There is little doubt, additional stores will have to be closed. I also worry about many of the malls that currently house Sears stores and question their future viability. As I see doors closing, some of the malls will have empty spaces that will be hard to rent. It will hurt the small specialty stores that cluster around the entrance of Sears and the other major anchor tenants such as Macy's, Nordstrom, Dillard's, J.C. Penney or Belk's. Closing more Sears and Kmart stores will hurt retailing at a time when retailers need all the help they can get to motivate more in-store shopping.

There has been a shift by the consumer. Today's consumer no longer shops the way she once did — she now looks for specific items — and forgoes long shopping sprees by shopping on the Internet. This modern consumer does not need to shop at Sears or Kmart or at any other stores that she does not trust.

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May same-store sales fizzle
By Dan Berthiaume
Chain Store Age
June 2, 2016

With a couple of exceptions, May same-store sales figures reported by several major apparel, specialty and discount chains were less than impressive.

First the good news. Bath & Body Works reported a 3% same-store sales lift for May 2016 compared to the same month a year earlier. Same-store sales at Costco Wholesale Corp. and L Brands were flat, which may not sound that encouraging but was better than most other retailers reporting figures for the month.

Here is a roundup of other chains reporting negative same-store sales growth for the month.

      • The Buckle: -11%
      • Cato Corp.: -2%
      • Gap Global: -3%
      • Banana Republic Global: -11%
      • Old Navy Global -7%
      • Fred's -0.4%
      • Victoria's Secret -1%
      • Zumiez Inc. -7.6%

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Seritage Growth Properties: The Sears Problem Is Getting Worse
By Reuben Gregg Bewer
Seeking Alpha
June 1, 2016

There's little question about the long-term future for Seritage Growth Properties. However, how the real estate investment trust, or REIT, gets there is a different story. And that makes this REIT a very risky bet that's only appropriate for aggressive investors. In fact, recent developments out of its largest tenant, Sears Holdings, shows just how precarious the road ahead could be.

The crystal ball

Cutting to the chase, the long-term outcome for Seritage, which was spun off from Sears Holdings so its former parent could raise much needed cash, is that it diversifies away from the Sears and K-Mart brands. But the REIT is a long way from that outcome today. To give you a sense of the distance it has to go, of the 235 properties it owns outright, 224 contain a Sears or K-Mart, two struggling brands that have been in decline for years. It has another 31 properties in which it is a 50% owner which are basically leased to Sears Holdings, too.

That said, Seritage has a big name supporter in Warren Buffett, who bought shares for his own account. And the company's partners in the collection of properties it only owns half of is a who's who of retail REIT giants, including Simon Property Group, Macerich, and General Growth Properties. These facts are a statement to the potential in the REIT's portfolio.

And there is huge potential, but it won't be realized with Sears or K-Mart. The value in Seritage will begin to shine through as these two brands start to fade away and other, stronger retailers take their places. That's the long-term future, which is in all honesty already starting to take shape, but very slowly. For example, 12 of the REIT's properties do not contain a Sears or K-Mart - a small number, but it's a start. And of all the properties leased to Sears Holdings, 126 contain another tenant, too. That's another positive step toward the future.

Some of the names currently taking the place of Sears and K-Mart include Nordstrom Rack, Fresh Market, REI, and Hobby Lobby, among others. One of the nice things is that the list of replacements is far more varied, providing important diversification that is lacking today. To be honest, the names matter but perhaps not as much as the move away from Sears Holdings. Indeed, there will be winners and losers in every diversified tenant portfolio, but having a few losers mixed into a broader collection isn't a big problem. Having, effectively, two tenants that are both struggling... That's a big problem.

You can't get there from here

So how does Seritage get to a better tenant roster from here? Looking at it from a big picture there are only a couple of ways. The easy way is that Sears and K-Mart continue their slow decline and vacate Seritage properties in an orderly fashion. The hard way is that Sears Holdings runs out of cash, goes bankrupt, and Seritage ends up with a lot of empty properties all at once. The second outcome could push Seritage into a life and death situation as it will still have to pay its own bills even if Sears and K-Mart stop paying theirs.

Which is why investors should be concerned about what's been going on at Sears Holdings. For example, the company's chief financial officer has announced plans to step down. The typical reasons for the change were laid out, like more time with the family and exploring other opportunities. But when a CFO leaves a struggling company, the reason is more likely to be about getting out before it gets really bad.

That, in and of itself, is troubling. But it gets really concerning when you pair it with the fact that Sears Holdings is seriously considering "options," like selling its Kenmore, Craftsman, and DieHard brands. It's also looking at "options" for its Sears Home Services repair operation. These are crown jewel assets and it's hard to believe that a company that was once as iconic and influential as Sears has been pushed to the point where it has no choice but to consider "options" for these core properties.

Which speaks to the bigger issue. Sears spun off Seritage to raise cash for a turnaround. And now it's looking to do something with Kenmore, Craftsman, and DieHard to raise even more cash. The sales numbers show the story clearly enough, but these moves suggest a company that's becoming desperate. If that leads to bankruptcy, Seritage has a potentially big problem to work through. My guess is that a Sears Holdings bankruptcy would lead to enough vacant properties at Seritage that, at the very least, a dividend cut would be in the cards.

Buffett's game

So, there's value in Seritage but getting to the point where it's realized could be a hard slog. If you look at Buffett's investment in the REIT and think it's worth sticking around, you should step back and ask yourself if you can play Buffett's game. Not many people can.

Buffett is so wealthy that his commitment in Seritage could go sour and it wouldn't matter all that much to his life. That gives him the ability to sit through even the most trying times, allowing him the ability to wait out the potentially hard times ahead for Seritage. If you have that kind of money, great! If you don't, Seritage isn't worth the risk. There's a very real possibility of loss here.

Then there's the temperament issue. Buffett doesn't mind owning stocks struggling through difficult periods. If you can't handle that kind of stress, you could very easily sell at the worst possible time. And, of course, miss out on the potential upside of this turnaround situation.

In the end, I think Seritage will work out and the inherent value in the property portfolio will shine through. However, I believe that getting to that point in a smooth and orderly fashion is looking increasingly unlikely. Which means that Seritage is a REIT appropriate only for aggressive investors.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Study: The price may not be right for retailers
By Dan Berthiaume
Chain Store Age
June 1, 2016

Retailers are not feeling confident that their pricing strategies are satisfying consumers.

A new report on pricing conducted by RSR Research and sponsored by retail consulting and analytics firm Precima, "Pricing 2016: Life Becomes Unmanageable," reveals retailers are worrying that consumers do not believe they are priced competitively enough.

For example, only 35% of U.S. retailers believe their company has a strategy in place to manage prices and promotions effectively across all channels, while 50% believe increased price sensitivity of consumers is a business challenge. Another 48% believe the largest challenge is pricing aggressiveness from competitors.

Forty-one percent of retailers cite not enough IT resources available as being a barrier to implementing effective pricing practices, followed closely by lack of price, competitor, and purchase data at 38%. And while personalized pricing is the goal for many retailers, 41% of respondents feel that internal challenges indicate nothing drastic is likely to occur near-term due to concerns over negative consumer reactions.

"Back in 2012, we began expressing serious concerns about both strategies and tactics, but retailers seemed convinced they could win the race to the bottom on price or at least, by participating in the race, they could stay in the game," said Paula Rosenblum, partner at RSR. "Fast forward to 2016, and retailers are now starting to feel the negative impacts of their past pricing decisions. Consumers may be sensitive about price, but no retailer, not even the lowest-priced retailer, can win on price forever."

Other notable findings include:

      • Less than half of retailers feel their company pricing strategies are building customer loyalty and only 23% feel the pricing strategies are effective at driving bottom line results.

      • Retailers are looking to replace early competitive price intelligence solutions and plan to invest in new capabilities around promotion optimization, markdown planning, and inventory management.

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How E-commerce is eroding retail earnings
Chain Store Age
May 31, 2016

A new report from HRC Advisory finds that retailers' online sales are eroding in-store sales and taking a big bite out of retail profitability. Chain Store Age editor Marianne Wilson spoke with Antony Karabus, CEO, HRC Advisory, about the study and its implications for retailers.

What did you find most surprising in the study findings?
The pace of the transition to the online channel from brick-and-mortar was surprising, as well as the reality that a significant percent of the online sales are coming at the expense of what would otherwise have been growth of the brick-and-mortar channel. The resultant implications on retailers' economic models are more significant than was anticipated previously.

How exactly is this shift impacting retailers' operating earnings?
We found that operating earnings as a percent of sales has declined by up to 25%, due to the shift from in-store to online sales, combined with e-commerce and omnichannel investments and the high cost of fulfilling e-commerce transactions.

The substantial capital and operating costs of creating online and omnichannel capabilities – which includes supply chain upgrades, digital marketing and IT – along with managing online orders and a high level of online returns, are generating incremental SG&A costs of two to three percentage points of sales. And when you combine this with real estate and store wage inflation and declining in-store sales productivity, numerous retailers have realized a meaningful one to two percentage point reduction in physical store profit contribution performance.

There are a number of ways retailers can strategically mitigate and ultimately offset the negative impact of e-commerce on their operating earnings and return to their historically higher brick-and-mortar performance. For one, there is an opportunity to improve inventory productivity by fulfilling online sales from stores where the inventory would otherwise have been stranded and eventually marked down.

How are online returns affecting profitability?
Physical in-store returns are more easily handled with much lower cost implications, as they are simply put back into stock after being steamed or cleaned. With online returns, costs are much higher.

In addition to the significant cost of servicing and fulfilling the online order, unwanted e-commerce orders are often returned to stores late or in unsalable condition, and often need to be returned to a fulfillment center for assessment, remediation and steaming. There are then additional costs incurred to find the best place for the item to be re-sold, which will potentially then be at a markdown.

How can retailers with both brick-and-mortar and online operations grow profitability and compete with players like Amazon in today's digital environment?
First and foremost, traditional retailers need to play their own game, focusing on their own strengths with their unique and local assets, rather than trying to chase Amazon. Brick-and-mortar retailers have a huge often-unexploited local asset advantage, which is the ability to provide customers what they love most – the opportunity to touch and feel the product and truly experience the brand in a physical store.

Retailers need to re-examine the cost structures of their physical stores and infrastructure and become more efficient omnichannel operators to staunch the losses from extremely high online fulfillment costs.

Those who can effectively engage customers and meet their heightened expectations wherever, whenever and however they shop, while offering complete visibility of inventory availability, can be lucrative in reducing markdowns and improving inventory productivity.

The study cites "today's new variable cost-oriented online model." What does that mean?
All retailers need to recalibrate and fine-tune their economic business models to reflect today's new variable cost-oriented online model. In the pure brick-and-mortar era, retail cost infrastructure was largely fixed.

All retail sales took place in the physical stores, so once the fixed costs were covered, the gross margin on additional sales were all profit. Now that an increasing percentage of those sales are being transferred to the online channel, where the cost structure is almost entirely variable (meaning individual online order picking/packaging and shipping to the customer and back, in case of a return), the gross profit from an online order is minimal after all the incremental variable costs are covered.

Furthermore, this minimal profit needs to cover the additional technology and fulfillment center fixed costs, which is no small feat. At the same time, there is less gross margin from store sales to cover the physical store cost infrastructure now.

Are retailers acting too hastily with regards to store closings?
No. On the contrary, I would argue that retailers may have started dealing with the issue to late.

When the stores were originally committed to being opened, the e-commerce era had barely begun, and the impact of the sales transfer to online and pure play e-commerce retailers like Amazon had not yet been conceived.

I believe retailers today should be fine-tuning their store fleets and re-purposing weaker locations and outlets to provide additional fulfillment assets, thereby increasing their productivity and lowering fixed costs. Real estate strategies have become much more complex. They require leadership and direction from the CEO/CFO level.

The survey notes that a lot of retailers have engaged in price matching. What impact does that have on earnings?
Pure play online retailers, which are not judged by the same profit standards as traditional ones, have been offering all kinds of inducements to acquire customers. This has not created a level playing field as pure players don't have the same fixed cost infrastructure that traditional retailers have, and they don't offer customers the same advantage of local assets (physical stores).

Unfortunately, too many retailers offered "blanket price matching" in order to avoid losing the sale, which created loss of margin. I believe much of this price matching was not necessary and was the result of hastily implemented policies. In order to protect earnings, retailers should fine-tune their individual price matching strategies to reduce the negative impact on margins without losing the sale.

What are the biggest takeaways for retailers from this study?
It's important to recognize that the "Amazon effect" is not cyclical but rather structural and is here to stay. Therefore, the size of the overall "retail pie" available to the traditional retailers is not going to grow at the same rate as in past years.

Accordingly, the most important take-away is for retailers to do more conservative financial forecasts bottom up for each channel. They will have to make tough choices in evaluating their cost infrastructure, store fleet and capital plans and find the most cost-effective omnichannel capabilities that are right for their customers. This is imperative if they want to protect, and maybe even enhance, their profitability.

Wal-Mart's latest response to counteract Amazon is the "Shipping Pass" that takes aim directly at Amazon Prime and offers free three day shipping for half the cost of Amazon Prime. While this will help, Amazon Prime offers benefits beyond just free two day shipping.

Last but not least, all retailers need to recognize that they have unique advantages versus Amazon and they need to leverage these advantages to stay competitive in today's retail environment.

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J.C. Penney's Move Into Appliances Will Hurt Best Buy and Sears
By Adam Levine-Weinburg
Motley Fool
May 28, 2016

Best Buy and Sears are facing unwelcome competition from J.C. Penney in an important product category.

Earlier this year, J.C. Penney said that it would test selling appliances in three markets beginning in February. The test was extremely successful, adding several percentage points to J.C. Penney's comp sales growth in those stores, bringing in new customers, and spurring lots of credit card sign-ups.

As a result, J.C. Penney recently announced that it will roll out appliance sales more broadly. The company has already started to sell appliances online and will add appliance showrooms to nearly 500 stores -- about half of its total store count -- by the fall.

This push into the appliance market could take a toll on two of the biggest appliance sellers in the U.S.: Sears Holdings and Best Buy.

Breaking into the concentrated appliance market

The U.S. appliance market is dominated by a small number of retailers today. Five retailers -- Sears, Lowe's, Home Depot, Best Buy, and Sears spinoff Sears Hometown & Outlet Stores -- account for about $20 billion in annual appliance sales: roughly two-thirds of the market.

Among that set of retailers, the home improvement retailers probably have less to lose from J.C. Penney's entry into the appliance market. First, they aren't facing the same kind of secular sales pressure as Sears and Best Buy. Second, J.C. Penney's focus on selling appliances to women likely gives it more target demographic overlap with Sears and (to a lesser extent) Best Buy.

Extrapolating out from the early sales in its three test markets, J.C. Penney could quickly reach $400 million in annual appliance sales. As consumer awareness increases, appliances could easily become a billion-dollar business for J.C. Penney in the next few years.

That would still make it a much smaller player in the market than Sears or Best Buy. But Sears and Best Buy can ill afford any increase in competition for appliance sales.

Sears needs appliances to stay relevant

Sears has been gradually losing share in the appliance market.

Appliance sales have risen significantly in the last few years as the improving economy has driven an increase in homebuilding and home renovations. While Sears has lost its dominant position in the U.S. appliance industry over the past decade, appliances have remained one of its stronger business lines.

By contrast, the bulk of Sears' business has become increasingly irrelevant. Revenue has been eroding steadily for many years now and the company is consistently unprofitable. To make matters worse, Sears' comparable store sales declines have accelerated recently.

Sears and J.C. Penney are the two biggest mall-based, mid-market department stores. Thus, it stands to reason that J.C. Penney could steal a lot of customers from Sears as it ramps up appliance sales. That would put yet another nail in Sears' coffin.

Appliances have been a bright spot for Best Buy

While Sears was the traditional appliance market powerhouse, Best Buy is an up-and-coming challenger. In recent years, it has profited from a combination of strong underlying growth in appliance demand and market share gains.

Appliances are still a relatively small part of Best Buy's business, representing 9% of its domestic sales last quarter. However, that's up from just 5% of the domestic sales mix five years ago. This growth in appliance sales has helped Best Buy offset weaker sales trends in other categories.

Best Buy is likely to continue facing stiff headwinds in its core markets in the coming years. The mobile market has become saturated, PC and printer sales are steadily declining, and TV prices are falling rapidly. It's not clear that consumer electronics growth categories will be able to offset these declines any time soon.

Strong appliance sales growth has thus been a key lever supporting Best Buy's sales and earnings lately. Competition from J.C. Penney could reverse some of those gains -- while J.C. Penney's promotional strategy could also threaten Best Buy's profit margin.

J.C. Penney may never become one of the top five appliance retailers in the U.S. But even with a smaller share of the market, it could do a lot of damage to both Sears Holdings and Best Buy.

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Target Shutting Down Curbside Pickup Pilot Program Effective June 15
By Mary Beth Quirk
Consumerist
May 27, 2016

If you were hoping that Target's curbside pickup would eventually reach your city, your hopes are for naught: Target tells Consumerist the pilot program will be discontinued effective June 15.

After Consumerist received word that the program – which kicked off in October 2014 with partner Curbside, and was being tested in 121 stores in the San Francisco Bay Area, New York, New Jersey, Chicago, Philadelphia, and Los Angeles – would be shut down, we reached out to Target headquarters.

The company confirmed what we'd heard, saying in an emailed statement that it had "learned a lot" from the pilot, but "as we've shared for months now, at this time Target is focused on making sure we deliver and execute on retail fundamentals."

That includes devoting more of its resources toward "enhancing" its "core of digital-stores offerings such as Cartwheel, Order Pickup and shipping online orders from stores."

"The pilot with Curbside will be discontinued in mid-June as part of those efforts," Target says.

Because we're feeling nostalgic, here's a (very brief) timeline of events that led up to the program going kaput:

August 2014: Target and Curbside launched their pilot program at stores in the San Francisco Bay area. (Warning: auto-play video at that link)

October 2015: Target and Curbside expanded their partnership to an additional 100 stores, bringing the service to select stores in the San Francisco Bay Area, New York, New Jersey, Chicago, Philadelphia, and Los Angeles.

May 17, 2016: Target digital chief Jason Goldberger told Re/Code that customers shouldn't expect to see an increase in partnerships with startups like Curbside and Instacart.

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Sears to explore options for Kenmore, Craftsman, DieHard brands
Crain's Chicago Business
May 26, 2016

Sears Holdings Corp., the unprofitable department-store company controlled by hedge fund manager Edward Lampert, plans to consider options for its Kenmore, Craftsman and DieHard brands as well as its Sears Home Services repair business.

The retailer reported a wider first-quarter loss after efforts to win back customers failed to boost sales. The net loss expanded to $471 million, or $4.41 a share, from $303 million, or $2.85, a year earlier, the Hoffman Estates-based company said in a statement yesterday. Chief Financial Officer Robert Schriesheim plans to leave the company, Sears said.

"Our iconic KCD brands are beloved by the American consumer and we believe that we can realize significant growth by further expanding the presence of these brands outside of Sears and Kmart," the company said. The home-services business also "has greater potential than what we have delivered in the past."

Lampert -- Sears's chairman, chief executive officer and largest shareholder -- has built up the company's digital and loyalty programs in a quest to turn the business around after five years of losses. He has raised cash by selling and spinning off assets and said he envisions a leaner retailer with fewer and smaller stores.

Yet 11 years after Lampert merged Kmart and Sears Roebuck & Co., both chains continue to lose money and shoppers. Lampert told shareholders at the company's annual meeting earlier this month that his goal is to return to profitability this year, though he declined to forecast that the company would meet that target. Turning around Sears isn't easy, he said, likening it to efforts to close the U.S. military's prison camp at Guantanamo Bay, Cuba.

"Our Sears Domestic and Kmart apparel businesses continue to be negatively impacted by a heavily promotional competitive environment," Lampert said in the statement. "We continue to focus on improving the overall performance of these businesses through changes to our assortment, sourcing, pricing and inventory management practices.

"Our single biggest concern with Sears remains its unsustainable rate of free cash flow burn," Evercore ISI analysts Greg Melich and Matt McGinley said after the company released its 2015 annual report in March. Evercore ISI had dubbed the retailer "most likely not viable" earlier this year.

Even the spinoff of a chunk of Sears's vast real estate holdings, long an enticement to investors, hasn't boosted the stock. Sears, which once fetched a triple-digit price, closed at $12.52 on Wednesday.

Sears retained Citigroup Global Markets and LionTree Advisors to advise on the search for alternatives for the brands and the home-services business. "There can be no assurance that we will complete one or more transactions, but we intend to aggressively evaluate all of the potential alternatives available to these businesses," Sears said.

Schriesheim will leave to focus on his other business interests and pursue other career opportunities, Sears said. He agreed to stay in the job until a replacement is hired.

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Sears' woes mount; exploring partnerships for key brands
By Marianne Wilson
Chain Store Age
May 26, 2016

As Sears Holdings Corp. continues to struggle to turn its business around, the chain announced it is exploring ways to expand distribution of its key brands outside its own stores. The troubled retailer also announced its CFO is leaving.

Sears lost $471 million in its first quarter, ended April 30, compared with $303 million in the year-ago period. Loss per share came to $4.41, or $1.86 adjusted for certain items. Analysts estimated a loss of $3.20 per share.

Total revenue fell from $5.88 billion to $5.39 billion, which was still better than analysts expected. Part of the decline was due to the fact that there were fewer Sears and Kmart stores in the quarter as the retailer continues to shutter locations.

Same-store sales fell 6.1, falling 5% at Kmart stores and 7.1% at Sears locations.

"Our operating performance still remains well below our goals," stated chairman and CEO Eddie Lampert. "Our Sears Domestic and Kmart apparel businesses continue to be negatively impacted by a heavily promotional competitive environment."

Sears said it plans to consider options for its Kenmore, Craftsman and DieHard brands along with its Sears Home Services repair business. It has hired Citigroup Inc. and LionTree Advisors to assist in its efforts, and intends to "aggressively evaluate" all of the potential alternatives.

"Our iconic KCD (Kenmore, Craftsman and DieHard) brands are beloved by the American consumer and we believe that we can realize significant growth by further expanding the presence of these brands outside of Sears and Kmart," the retailer stated. "Similarly, our SHS business, which is the nation's leading provider of in-home services has greater potential than what we have delivered in the past."

The retailer also announced that its CFO, Robert Schriesheim, plans to leave the company to focus on "other business interests and pursue other career opportunities."

According to a report by thestreet.com, Schriesheim has been the architect of Sears' creative cash-raising efforts, including spinning off real estate to securing more debt by pledging valuable store assets

Schriesheim has agreed to stay with Sears until a replacement is found. He will also continue as an adviser to Sears through Jan. 31, 2017.

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Sears is still fighting a four-alarm fire
By Jim Brumley
InvestorPlace
May 25, 2016

Few investors actually own it anymore. Instead, most investors simply check in on the Sears Holdings Corp (SHLD) saga from time to time out of sheer morbid curiosity, wondering how bad things have become since the last check-in. The usual assessment is that things have continued to get worse.

Is there any chance Thursday morning's quarterly earnings news could indicate the four-alarm fire has finally been contained and that the stock is finally investment-worthy again?

Sure, there's always that chance. It's just not likely. See, while the once-iconic retailer tends to talk a big game, very little ever actually changes about the company's operation.

Clarification: Very little changes for the better. The fading retailer is still managing to find new ways to move in the wrong direction.

Earnings Preview

As of the latest look, Sears Holding is expected to post a $3.20 per share loss on revenue of $5.26 billion. That loss would be a slight improvement on the $3.48 loss per share of Sears stock the company booked in the same quarter a year ago, though that top line would be 10.6% worse than the comparable quarter from last year.

The outlook simply calls for an extension of what has become an eight-year implosion of the company; Thursday morning's report will begin the ninth year of misery. Analysts are looking for a loss of $15.07 per share of SHLD this year — nearly twice last year's — and an 11.5% slide on revenue.

Part of that headwind stems from a combination of store closures. Another part of it, however, is an ordinary failure to attract paying customers. In the previous quarter, same-store sales slumped 6.9%, making it the worst of the worst retailers in the all-important holiday quarter.

In light of a string of disappointing first-quarter reports and subpar Q2 outlooks from other retailers, it's difficult to think we'll see any measure of success from proven perennial loser Sears this time around either.

The statement from CEO Eddie Lampert will be optimistic, of course. But, it's a speech that's become all too familiar to owners of SHLD stock; the ballyhooed "transformation" has yet to take hold.

Three Things to Consider for Sears Stock

While shrinking sales and a stark lack of profits are the retailer's glaring problems, they're nothing new. The most recent hot buttons that will dictate the rhetoric — and the foreseeable future — for SHLD stock are:

1. Liquidity

The $1.13 billion Sears has lost over the course of the last four quarters is, sadly, the norm now. And with no end in sight for the losses, SHLD shareholders are rightfully starting to ask how much longer the company can stay afloat. It only has $238 million in the bank right now, but could have very easily lost more than that amount last quarter.

Sears does have a line of credit it could tap into. As of the end of the first quarter, it had access to another $316 million worth of credit left to use. Again though, that amount is in line with the average quarterly loss the company has been booking of late.

SHLD has also announced it will be closing more stores in 2016, which theoretically puts cash in the company coffers. It can be a lengthy and costly process though. It also undermines any hope that Sears' can use those stores' revenue to contribute much-needed cash flow.

One red flag: CEO and largest SHLD investor Eddie Lampert recently bought some of the company's recent $750 million loan. It's not unusual to sell debt. It is unusual that the CEO, and largest shareholder, once again has to prop the retailer up with money not provided by third parties.

2. Bruce Berkowitz

For years now, Lampert has largely been left alone and left unchecked to drive Sears into the ground. He was, after all, the largest shareholder and arguably had the most to lose. Lampert isn't the only major shareholder though. Bruce Berkowitz, through his hedge fund Fairholme Capital, now owns more than 25% of Sears, and in February made sure he took a seat on the board of directors.

It's the first time in years anyone besides Lampert has taken such an active interest, leaving one to wonder if Berkowitz is finally going to force Lampert into creating results or stepping aside.

3. Appliance Stores

Last but not least, though most Sears stores sold appliances anyway, a new company initiative is tinkering with the idea of opening smaller stores that only sell appliances. Only one is open now, as a test pilot. But look for more if it goes well.

It's a semi-creative response; at least with big-ticket and big-box items like refrigerators and ovens, Sears doesn't have to contend with online competition quite as much. Lampert has yet to prove he can be a successful retailer though. Shareholders should worry that he'll forge ahead with the idea regardless of whether the pilot has proven the model works.

Bottom Line for Sears' Stock

Sadly for owners of Sears stock, last quarter's results are apt to be a "more of the same" situation, with more store closures planned as a means of drumming up some much-needed cash. It has yet to be a winning formula though, crimping sales that could be converted into income.

If Sears is to survive, it has to start doing the obvious: start selling more merchandise, which means it needs to draw more customers, excite them about the selections, and get them to open their wallets. It's admittedly easier said than done, but after three years at the helm, Lampert should know how to do it by now, or know he can't get it done.

The outlook remains grim.

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Stores Make a Comeback: Becoming a Hub for an Array of Customer Services
By Jay Hentschel
RetailingToday
May 24, 2016

The store is making a comeback. Even online pure plays are laying down bricks and mortar, setting up "shop-in-shop" stores and large flagships to keep pace in the multichannel world.

And within this channel, physical stores are enhancing their digital capabilities. For example, Nordstrom allows shoppers to text with personal stylists and even purchase a suggested item by simply texting "buy." They can also enjoy curb-side pickup via text while the H&M store in New York's Times Square allows customers to pay for items in their dressing room.

Propelling these trends is the fact that stores provide the physical proximity to the customer that the Internet cannot. Online shopping, however, provides constant access to the customer that stores cannot. To ensure competitiveness, both need to rapidly address their respective blind spots — and be more like each other.

There's more to the store

Stores are back, but in a different way and with a new format, feel and function. Retailers are shaping the multichannel landscape to sustain competitiveness and maximize profitability by rethinking this evolved role of the store. Recent research by Accenture reveals that webrooming and showrooming are prevalent among U.S. shoppers, with 69% and 65% likely to participate in each respectively.

Stores are becoming an interactive place where retailers can tout their wares and deliver an elevated customer experience. Warby Parker has embraced the showroom experience, using its new brick-and-mortar stores to allow customers to try on frames and then have them made to their prescription and shipped to their home. The interactive experience at their flagship store in SoHo is library-inspired with rolling ladders for reaching glasses in high places, as well as a photo booth for customers to check out their new looks.

Luxury fashion retailer Rebecca Minkoff has taken its in-store experience to a new level, furnishing its fitting rooms with customizable lighting, scanners to check item information, and an option to contact a sales associate or check out through a mobile device. On the showroom floor, a mirrored display lets shoppers view videos from the runway and browse through clothing and accessories. Burberry's London flagship store epitomizes the immersive, multimedia customer experience. Shoppers can design their own customized trench coat, view 3D hologram runway shows and ask an iPad-equipped salesperson to look up details of an item.

The store as a distribution center

For some retailers, the store is becoming part of the chain's wider distribution network and serving as a distribution and pick-up center. Walmart began testing this model in 2014, when it opened a warehouse that carries 10,000 items and offers same-day or scheduled grocery pickup and curb-side service. While the warehouse facility is much smaller than a typical Walmart store, it meets customer needs by providing a new level of convenience.

In fact, Accenture research found that 36% of shoppers would wait for a store to open the next day to pick up what they ordered, but only 32% of shoppers are willing to wait more than five days for their goods to be delivered. Retailers are re-evaluating their physical store network along with their distribution network to identify ways to improve and meet customers' increasingly higher expectations. By consolidating stores and capturing savings, retailers can reinvest in digital capabilities to enhance their online presence.

The store as a multichannel hub

As retailers bring new, engaging, digital experiences to their stores, they must also consider what role their stores play alongside ecommerce and mobile to create multichannel engagement. It is not as simple as achieving the right balance of "bricks and clicks."

Retailers must deliver a seamless experience across all channels — and the store can be the place to bring it all together. Associates equipped with digital devices can display product information on their smartphone and guide a shopper right to that item in the store. By being connected across channels, shoppers who purchase an item online can have the option of returning it to a brick-and-mortar store — even texting return information and conveniently dropping off the item at a drive-thru window.

The best of both worlds

Rethinking the physical store is critical to competitiveness, but it isn't the entire seamless retail story. Success will come when retailers design a seamless, integrated strategy that is aligned with a new operating model. In so doing, retailers can reap the best of both the digital and bricks-and-mortar worlds. Stores offer proximity to customers.

Being closer to customers allows retailers to get packages out more quickly and economically. China-based e-commerce giant Alibaba invested $692 million into a department store operator, Intime Retail, to expand its physical footprint and take advantage of the growth opportunities that stores present.

Delivering seamless goes beyond simply opening a showroom or connecting a distribution outlet with an online channel. Stores and distribution must operate as one. Digital opens up opportunities for retailers to meet customers' desire for an integrated, seamless shopping experience.

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Innovative retail concept combines offline and online at the mall
By Marianne Wilson
Retailing Today
May 20, 2016

Off-price retailer Century 21 will make its West Coast debut in a most unusual way — taking over a high-tech, high-touch "smart" store for six weeks.

WithMe, an interactive store format that features limited runs of traditional and pure-play retail brands, will open its first in-line mall location on May 26, a nearly 8,000-sq.-ft., two-level futuristic-looking flagship, at Macerich's Santa Monica Place, Santa Monica, California. Its first outing will be taken over by Century 21, which has curated an exclusive merchandise mix for the contemporary, relaxed Southern California lifestyle. When Century 21 finishes its six-week run, a new brand will take its place in the WithMe space.

The Santa Monica store will feature WithMe's signature technology, including an immersive, floor-to-ceiling smart display, called the "Pixel Wall," crafted from 900 individual screens that move independently to form shelves and hanging racks. Glass-top digital displays and interactive fixtures will offer product highlights and video content about brands. A virtual reality showcase and a large social media wall, will help keep shoppers engaged. Utilizing a table, guests can shop an "endless aisle" and scan items to find more options, request items to try on, build a cart and check out.

"With its incredible technology that creates personalized, online and offline shopping experiences, plus an ever-changing array of brand activations, WithMe will be a signature draw for our mall shoppers," said Eric Salo, executive VP and chief strategy officer, Macerich.

The fitting rooms are also cutting edge, with interactive mirror displays that allow customers to make purchases or request alternate products without leaving their rooms. RFID tags on all products give shoppers ready information at their fingertips.

"We were looking to expand into premier shopping centers that consumers know and love, and where traditional and pure-play brands want to be, in the country's best markets," said Jonathan Jenkins, founder and CEO of WithMe. "All of this defines Macerich and its properties. We're also tremendously excited to be working with a retail icon like Century 21 for our launch at Santa Monica Place. Our technology provides the perfect platform for this legendary brand to expand into new markets and create experiences their customers will love."

WithMe at Santa Monica Place will offer customers several different modes of delivery. They can to take their merchandise with them at the time of purchase, or opt for same-day delivery to their homes, offices or hotels powered by Deliv. They can also choose to have the goods delivered to the location of their choice within two days.

Macerich and WithMe plan to expand the concept, in both large and small common-area formats, to other top-performing Macerich properties in the near future. WithMe currently is building modular common-area designs that range in size from 100 sq. ft. - 1,000 sq. ft. to accommodate a wide range of retail activations at Macerich centers in markets including New York, Washington, D.C., Los Angeles, San Francisco and Chicago.

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The Target boycott has reached a boiling point -- and sales may suffer as a result
By Hayley Peterson
Business Insider
May 15, 2016

Target is facing a nationwide backlash for its support of transgender rights.

More than 1.2 million people have signed a pledge to boycott the retailer after it announced last month that it would welcome transgender customers to use any bathroom or fitting room that matches their gender identity.

Critics have been holding protests and demonstrations at stores across the country, and they are showing no signs of dying down.

Many are demanding access to bathrooms of the opposite sex to support claims that "perverts" can now prey on children and women as a result of the policy.

The boycotters' goal is to force Target to reverse its policy, or at least make the retailer suffer for it by spending their money elsewhere.

But Target CEO Brian Cornell dug in his heels on the issue this week, saying Target won't reverse its stance.

"We took a stance and we are going to continue to embrace our belief of diversity and inclusion," Cornell said on CNBC.

So what does that mean for Target's business?

Sales may drop for at least short period, according to YouGov BrandIndex, a firm that measures consumer perceptions of major brands on a daily basis.

Before the boycott, 42% of consumers considered buying from Target the next time they shop at a department store. In the last couple weeks, that share has fallen to 36%, according to YouGov data provided to Business Insider.

Consumer perception of the brand has also dropped sharply. It's at its lowest point in two years.

Despite the drop, Target is still in "positive" perception territory. In other words, there are still more people who think positively about Target than negatively.

"There's a very large group out there that supports Target's decision," says crisis management expert Kevin Dinino, CEO of San Diego-based KCD PR.

He pointed out that nearly 80 million people shop at Target's stores every month, so "at worst, we are talking about a group of 1.2 million shoppers — or 1.5% of Target's customers — who are disenfranchised."

Investors also don't seem too concerned about a long-term sales impact.

Target's share price has lost 9% of its value in the last month, but it's up 3% so far this year.

In the past, even the most widespread calls for company boycotts have tended to blow over within a matter of weeks to months.

Chick-fil-A, for example, faced a nationwide boycott in 2012 after Dan Cathy, the son of the late Chick-fil-A founder S. Truett Cathy, set off a fury among gay rights supporters when he told the Baptist Press in 2012 that the company was "guilty as charged" for backing "the biblical definition of a family." Following Cathy's remarks, reports emerged detailing Chick-fil-A's many charitable donations to anti-gay marriage organizations.

Despite the backlash, Chick-fil-A's sales soared 14% in 2012.

Ultimately, access to goods will outweigh moral outrage for many consumers, says Larry Chiagouris, a professor of marketing at Pace University's Lubin School of Business in New York.

"The boycott is not going to last very long," Chiagouris told Business Insider. "There is a big difference between signing a petition compared to not taking advantage of a big sale at target. People will always take advantage of the sale."

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Guess what? JC Penney is now ahead of the curve
By Krystina Gustafson
CNBC
May 13, 2016

To all you department store critics who argue these "dinosaurs" are all the same, boring shops that give you no reason to get off the couch: J.C. Penney hears you loud and clear.

On a call with analysts following its mixed first-quarter results, which sent the company's shares lower, CEO Marvin Ellison outlined how the retailer is positioning itself to connect with a new era of shoppers, whom many argue are no longer interested in visiting department stores.

That strategy includes lessening the company's dependence on weather-sensitive categories such as apparel, and beefing up its offerings in areas that can't easily be replicated online or duplicated by others in the space. Namely, Penney is expanding its Sephora shop-in-shops, accelerating its InStyle beauty salon rollout, and pushing forward with its tiptoe into appliances.

Beauty products are a key initiative for driving store traffic because cosmetics can't be tested online, not to mention that it's impossible for a computer to give you a hair cut. Beauty items also require frequent replenishment. As for appliances, Ellison argues consumers don't care what the thermometer reads when it comes time to purchase a new stove or refrigerator, which will help protect the company from wild weather-related swings.

Penney's changes come as sales at department stores dropped off 3 percent during the first four months of 2016, as consumers choose to spend a greater share of their wallet on home improvement, beauty and experiences. Meanwhile, Sears — the longtime department store leader in appliances — continues to bleed sales. "We're listening. We're addressing those customer needs," Ellison told analysts.

Last year, women's apparel accounted for 25 percent of J.C. Penney's sales, with men's apparel and accessories chipping in 22 percent, and children's apparel 10 percent. Home, a category that has been a particular focus for Penney's management, only accounted for 12 percent. Back in the mid-2000s, before the company's failed reinvention strategy, home accounted for more than 20 percent of Penney's business.

One of the biggest bets is its decision to move forward with its appliance test. The retailer began piloting this concept earlier this year with 22 locations, and plans to roll it out to roughly half of its 1,000-plus stores later this year.

During its testing phase, Ellison said, more than one-third of the category's shoppers were new to the store, and the average transaction was more than $1,200. That helped lift comparable sales in the pilot locations, Ellison said.

The push into appliances also comes as Sears' revenue continues to nosedive. However, the Penney's competitor is not throwing in the towel. Despite Sears' cratering revenues, appliances have remained a key selling point for its shoppers. Earlier this week, Sears said that it will test a new free-standing appliance shop, in Fort Collins, Colorado, starting next week.

Penney's also plans to improve its home offerings by expanding its exposure to window treatments, a category in which it led before its failed turnaround efforts.

Despite Penney's ambitions and relatively solid first-quarter performance to its peers, some analysts noted that the company's comparable sales decline of 0.4 percent — its first such decline since third quarter 2013 — and gross margin contraction were disappointing.

"Considering J.C. Penney's comparisons, it's pretty weak," Citi analyst Paul Lejuez told investors. "The company did a good job of managing (slashing) expenses, and overall EPS and EBITDA came in a little bit better than expected. But for a turnaround story like J.C. Penney, the top-line and gross margin are most important."

Last year, the department store made strides, eking out 3 percent revenue gain, which sent its sales to $12.6 billion. That's well shy of the $19.9 billion it pulled in eight years prior.

Penney nonetheless maintained its forecast for EBITDA of $1 billion this year, and a comparable sales increase of 3 to 4 percent. Ellison cited the company's new initiatives, an improvement in sales trends around Mother's Day and the relatively small sales contribution of the first quarter as the reasons for his confidence.

Despite Penney's disappointing results, it still performed better than its peers. Macy's, Nordstrom, Kohl's and Dillard's all reported their worst same-store sales growth since the Great Recession.

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Sears has lost shareholders much of their investment
By Joe Cahill
Crain's Chicago Business
May 13, 2016

Measured by the share price of Sears Holdings, Edward Lampert's time atop the bedraggled retailer has been a long, painful exercise in value destruction.

Since he combined Sears Roebuck with Kmart in March 2005, Sears Holdings stock has lost roughly 90 percent of its value, dropping to an all-time low of $11.53 a share yesterday. The Standard & Poor's 500 Index has risen 75 percent over that same span.

But Sears Holdings doesn't tell the whole story. Since 2011, Lampert has carved out five investment vehicles from Sears. He spun off department store chain Sears Canada, hardware retailer Orchard Supply, hard-goods chain Sears Hometown & Outlet Stores, apparel company Lands' End and real estate investment trust Seritage Growth Properties. In some cases, Sears gave shares in the new company to shareholders in a direct spinoff; in others the shareholders got rights to buy stock in the newly independent company.

Any assessment of Lampert's record as a value creator at Hoffman Estates-based Sears should include the stock performance of these companies. So how did they do? Not so hot. Only one stock has gained value since separating from Sears, while three others have posted double-digit declines. That final spinoff? It went bust.

The big winner is Seritage, which was spun off last July in a distribution of rights to buy into the REIT at $29.58 per share. Seritage stock was recently trading above $52 per share, a 77 percent leap that handily beat a meager 0.3 percent rise in the S&P over Seritage's lifetime. Seritage used proceeds of the rights offering, along with some borrowing, to acquire 266 stores from Sears. The company's strategy is based on reclaiming mall anchor space from Sears and breaking it up into smaller spaces that can be leased at higher rates to other retailers.

DOWN, DOWN, DOWN AND OUT

The upside is less clear for Lands' End, spun off by Sears in April 2014. Like many midrange retailers, Lands' End is looking for its place in an industry upended by online competition and shifting consumer tastes. The clothing company lost $19.5 million last year—due to a writedown of its brand name—as revenue fell 8.7 percent to $1.4 billion. Lands' End shares have slid 33.8 percent since the spinoff, compared with an 11.3 percent increase for the S&P 500.

Sears investors who exercised their rights to acquire stock in Sears Hometown have suffered even more. Battered by big chains such as Lowe's and Home Depot, Sears Hometown lost $27.3 million on $2.3 billion in sales last year. At $6.57 recently, the stock was trading 56 percent below the $15 exercise price of rights issued to Sears shareholders when Lampert cut the retailer loose. The S&P 500 has climbed nearly 50 percent since the September 2012 spinoff.

Department store chain Sears Canada, ejected in two tranches in 2012 and 2014, has done worse. Shares are down 69.1 percent since the November 2012 spinoff, and trade 62.6 percent below the $9.50 exercise price of rights issued in October 2014. The broader market is up 50 percent since November 2012 and 10.8 percent since October 2014.

Worst of all is Orchard Supply, which went bankrupt just 18 months after it was spun off from Sears in December 2011.

The total value of all these transactions to various shareholders depends on several variables, including when they bought into Sears, how many Sears shares they owned at the time of each spinoff, whether they exercised all subscription rights and how many shares of each company they still hold. But one thing is clear: Investors who stuck with Sears throughout Lampert's tenure would have done better with an S&P 500 Index Fund.

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Mixed bag for Penney: Sales fall, but profit tops forecasts
RetailingToday
May 13, 2016

J.C. Penney continued a pattern set by Macy's, Kohl's and Nordstrom and reported dismal first quarter sales as traffic declined.

Penney's sales for the quarter fell to 1.6% to $2.81 billion, below analysts' forecasts of $2.92 billion, from $2.86 billion in the year-ago quarter, as traffic declined and cool weather dampened demand for apparel. Same-store sales slipped 0.4%.

But while the chain's sales were worse than expected, it was able to limit the damage to its bottom line, helped by cost controls and improvements in the company's clearance selling margin. The New York Post reported on May 5th that Penney had taken "drastic cost-cutting steps" in an attempt to protect its bottom line," including banning markdowns and reducing employees hours.

Penney's loss for the quarter narrowed to $68 million, or 22 cents a share, down from $150 million, or 49 cents a share, in the year ago period. On an adjusted basis, the loss was 32 cents. Analysts had expected an adjusted loss of 38 cents a share.

"Although our business was not immune to the issues facing other retailers, I am pleased that we were able to deliver our second consecutive quarter of positive operating profit," said CEO Marvin R. Ellison." In addition, the teams did an excellent job of proactively managing the business throughout the quarter to ensure we remained a fiscally disciplined organization. As a result, we exceeded our profitability expectations, achieving a 63 % increase in EBITDA to $176 million for the quarter."

The company's top performing divisions for the quarter were Men's, Sephora, footwear and handbags were Geographically, the North East and Ohio Valley were the best performing regions of the country.

Penney also reiterated its full-year earnings guidance, but lowered its profit margin outlook. It also backed its same stores sales guidance for growth of 3% to 4% this year, citing, among other things, the ongoing strong performance of its Sephora business and upcoming rollout of appliance showrooms in nearly 500 of its stores.

"One quarter wasn't enough to pull down the whole year," Ellison said on the company's earnings call. "With new initiatives kicking in we have tangle things we feel great about that will give us incremental sales growth in the second half of the year."

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Nordstrom joins retail bloodbath
By Marianne Wilson
RetailingToday
May 12, 2016

Even luxury department stores got no love from shoppers in the first quarter.

Following a pattern set by Macy's and Kohl's, Nordstrom reported dismal results for the first quarter, including a steep drop in profit, with the only positive sign being the company's off-price division. The retailer lowered its full-year outlook.

Nordstrom posted net income of $46 million in the quarter ended April 30, down from $128 million in the year-ago period, amid lower than expected sales and higher markdowns.

Total company net sales increased 2.5% to $3.2 billion. Same-store sales decreased 1.7%.

Full-price net sales, which consist of U.S. full-line stores and Nordstrom.com, combined with Canada and Trunk Club, fell 2.2%. Same-store sales were down 4.3%. In the full-price sector, the top performing category was beauty, and the Midwest was the top-performing geographic region.

The retailer's off-price division, however, was another, much more positive story. Off-price net sales, which consist of Nordstrom Rack stores and Nordstromrack.com/HauteLook, rose 11.8% and comparable sales increased 4.6%.

"Our first quarter results were impacted by lower than expected sales," said Blake Nordstrom, co-president, Nordstrom. "In response we have made further adjustments to our inventory and expense plans. "As the pace of change in retail continues to accelerate, we remain committed to serving customers by taking steps that will continue to meet their expectations while driving profitable growth."

Nordstrom cut its outlook for 2016 sales growth to 2.5- to 4.5%, from its previous guidance of 3.5- to 5.5%.

It expects same-store sales in a range of a 1% decrease to 1 percent%, down from a previous outlook of flat to 2% increase.

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Sears planning smaller-format appliance stores
By Lauren Zumbach
Chicago Tribune
May 12, 2016

Sears Holdings announced a new appliance-focused store opening next week, unexpected news from a retailer that's been aggressively closing stores.

At Hoffman Estates-based Sears' annual meeting with shareholders Wednesday, Chairman and CEO Edward Lampert said the retailer is planning a smaller-format appliance store in Fort Collins, Colo.

J.C. Penney announced this week it's introducing appliance showrooms this summer after a nearly 30-year absence.

The new Sears store will be much smaller than a typical Sears, at just 7,000 to 10,000 square feet, and will bring many of Sears' online services in-store, Lampert said. A typical Sears averages 138,000 square feet.

"We have and we will be trying a lot of things," Lampert said, adding Sears will "probably" add more of the focused, small-format stores in 2016.

Appliances have been a strong category for Sears, and smaller stores are a way to keep a presence in communities where larger stores are closing, Lampert said.

Lampert appeared unconcerned about the competition from J.C. Penney.

"It's very easy to put boxes in a store and put a price on them," he said. "To be able to deliver, install and repair them, that becomes a lot more complicated."

Sears tested a fitness-focused store in Northbrook in 2012, but that location closed down, said spokesman Howard Riefs.

Over the past several years, Sears has dramatically cut its store count, ending its 2015 fiscal year with 1,672 stores.

It's part of a drive to transform the struggling department store chain into a nimbler, membership-focused retailer.

Despite cost cuts, the retailer has seen five straight years of losses and nine years of sales declines. Fourth-quarter 2015 sales dropped 7.2 percent in Kmart stores and 6.9 percent in Sears stores despite heavy promotions, and the retailer reported a $580 million fourth-quarter loss, compared with a loss of $159 million a year ago.

That sale let Sears shrink its footprint more rapidly and focus on changes the company is banking on to drive its turnaround: its membership, called Shop Your Way, and programs combining online services and physical stores, like curbside pickup of online purchases.

When a shareholder at the company's annual meeting asked Lampert to grade the company's execution, he acknowledged he "wouldn't give us such a high grade."

Lampert said the company was ahead of the curve on predicting and responding to changes challenging retailers today, but seeing the payoff takes time.

"We've built the platforms, we've built the capabilities, but we've fallen short on getting people engaged," Lampert said.

The company's membership program has more than enough participants to have a "much bigger company," he said.

Now they're focused on getting those customers to make more frequent purchases, and a larger share of their purchases, at Sears in exchange for a better value and experience, he said.

Sears is working to expand the network of partners where members can earn and use the rewards they've earned and increasing the number of reward points it issues, Lampert said.

"What we're trying to do is identify our best members...and see if we can go deeper with them. It's more frequency, and better spend, in return for a better value and better experience," he said.

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Sears Launches Ninth Annual Heroes at Home Program, Renovating Homes of Military Families Across the U.S.
PRNewswire
May 10, 2016

Campaign encourages Shop Your Way® Members, Customers to Support Veterans In Need

HOFFMAN ESTATES, Ill. -- Sears has launched its ninth annual Heroes at Home campaign with Rebuilding Together, a leading national nonprofit in safe and healthy housing, to raise funds and assist military families facing hardship. This year the program will enable critical repairs, improvements or modifications to the largest VFW Post in Colorado and single-family military family homes across the United States of decorated veterans of World War II, Korean War, Vietnam War, Persian Gulf War, Operation Iraqi Freedom and more.

Heroes at Home, which has raised nearly $20 million over the past eight years via donations from Shop Your Way members, customers and Sears associates, has funded more than 1,600 home rebuilds.

"When we meet these veterans and their families during rebuild projects they overwhelm us with their incredible spirit and appreciation," said Joelle Maher, president and chief member officer at Sears. "Though many served long ago, it's clear the spirit of service has stayed with them for a lifetime. That's why supporting America's veterans has long been a part of Sears' DNA and we're so proud of the dedication and support our members and associates show in giving back to those who have given so much."

According to the National Coalition for Homeless Veterans, about 1.4 million veterans are considered at risk of homelessness due to poverty, lack of support networks, and dismal living conditions in overcrowded or substandard housing.

This spring, dozens of military family homes will be rebuilt thanks to the Heroes at Home program. Among these projects is the Lowry Post 501 in Aurora, Colorado, which is the largest VFW Post in the state with an active membership of 340 veterans. The post serves veterans' communities throughout the Denver area offering advocacy and advice to disabled veterans or those who have suffered adverse medical conditions as a result of their service. Through a Heroes at Home grant, Lowry Post 501 will receive a new fence, many interior drywall and accessibility modifications, and a new mural on the building's exterior. Now through July 30, Sears is calling upon Shop Your Way members and customers nationwide to donate at their local Sears store or online via a link at sears.com/heroesathome. All funds raised go to Rebuilding Together. "At Rebuilding Together, we believe that everyone deserves to live in a safe and healthy home, especially our veterans and their families," said Caroline Blakely, President and CEO of Rebuilding Together. "The need is dire, and with partners like Sears we are able to bridge the gap in services available to veterans, providing critical repairs and modifications that ensure our veterans can live in safe, sustainable and accessible homes."

Other examples of the nationwide Heroes at Home projects that Rebuilding Together will complete this spring include:
      • Chicago – Repairing leaks in the basement and roof of the house of a Vietnam veteran's widow whose family's tradition of service to America includes a son who also served in the Navy for seven years and a grandson currently stationed in Alaska with the Air Force.
      • Baltimore – Updating the home with new appliances, repairing the electrical outlets throughout the home and installing handrails for an Army veteran.
      • Baton Rouge, Louisiana – Repairing the home of a Navy veteran who is a double amputee (legs) and single parent caring for his special needs child. A tree recently fell on a portion of his roof, causing severe structural damage.
      • Miami – Numerous repairs, accessibility additions and pest abatement for the home of a 93 year-old World War II Army veteran and his wife of 68 years, who have lived in the house for 49 years.

Companies within the Sears Holdings family employ more than 25,000 veterans and more than 1,500 active members of the Reserve and National Guard.

About Rebuilding Together

Rebuilding Together is a leading national nonprofit in safe and healthy housing with more than 40 years of experience. Together, with our corporate and community partners, we transform the lives of low-income homeowners by improving the safety and health of their homes and revitalizing our communities. Rebuilding Together's local affiliates and nearly 100,000 volunteers complete about 10,000 rebuild projects nationwide each year. Learn more and get involved at rebuildingtogether.org.

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J.C. Penney moving forward with big new initiatives
By Marianne Wilson
Chain Store Age
May 9, 2016

The likes of Lowe's, Home Depot, and Best Buy have a new competitor to deal with—J.C. Penny.

"The department store retailer on Monday announced a major expansion into home appliances, as well as two new tests in the home area, one involving Ashley Furniture, and the other national carpet and flooring company Empire Today.

And in a rebuttal to some reports, Penney said it exceeded its earnings before interest, taxes, depreciation and amortization (EBITDA) expectations for the first quarter.

Penney said it will add an appliance showroom online and to nearly 500 of its stores, starting in early July. The rollout comes on the heels of a successful pilot with stores in three markets this past winter. The showroom will feature kitchen and laundry appliances from Samsung, LG, GE Appliances and Hotpoint, with 100 plus appliances on display.

"Since launching major appliances in 22 stores last February, the response has been outstanding," said Marvin R. Ellison, CEO, J.C. Penney. "The pilot confirmed that we should not limit our business to apparel and soft home in order to achieve significant revenue growth."

In addition, the chain plans to allocate an additional 25% of floor space to window coverings, including curtains, blinds and shades in about 500 stores, and test a new furniture line, Signature Design by Ashley ( from Ashley Furniture) in select locations. About 20 stores will be involved in the test, which will sell merchandise that is shipped directly to the customer by Ashley, according to reports.

In a venture with Empire Today, Penney will test an in-store flooring shop concept in stores in the Tampa, Fla., and Washington D.C., markets beginning this summer. Empire will occupy between 750 and 1,000 sq. ft. inside Penney's home department, and oversee responsibility for marketing, customer service and environment.

"The current housing market presents a lucrative opportunity to diversify our Home assortment and strategically align with consumer spending patterns," Ellison said. "By combining our soft home and window coverings merchandise with the industry`s leading brands for appliances, furniture and flooring, JCPenney will become a destination for home design and redecorating, allowing us to weather-proof our business during seasonal periods of the year."

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Comparing J.C. Penney And Sears Holdings
By Seattle Contributor
Seeking Alpha
May 9, 2016

Times change. And the retail sector holds no prisoners. Both J.C. Penney and Sears Holdings have struggled over the years as the landscape for retail mass merchandisers has evolved. Both have seen major and unsuccessful transformations that have devastated shareholders. The transition of all brick-and-mortar retailers has been brutal and swift.

While recent news stories show JCP beating Macy's and Dillard's with their recent comparable sales numbers, that is only a small victory. Companies such as Amazon have dominated the online sales channels, and most retailers have been slow to adapt, with changes only taking place in the last two years. Mega malls and strip shopping centers are no longer the draws for weekend foot traffic that had malls looking for ways to expand their parking lots. The appeal of shopping at home in your underwear is just too great. And most importantly, can both J.C. Penney and Sears Holdings survive? If not, which one will? Or will they both cease to exist?

Online Sales

As online sales change how customers' shopping patterns, both JCP and Sears Holdings have been slow to react. Sears broke out some data pertaining to the company's online sales in its 2015 annual report. While most retailers include online sales data in their annual reports, neither JCP or Sears did so. The only data that was found was from Sears Holdings was:

"Domestic comparable store sales amounts include sales from sears.com and kmart.com shipped directly to customers. These online sales resulted in a negative impact to our domestic comparable store sales results of approximately 10 basis points for 2015 and a benefit of 120 basis points for 2014."

That quote raises one simple and obvious question: How were those numbers computed?

It was both surprising and somewhat bothersome that there was no other information in the annual reports regarding what the online sales were for either company, nor what the trend is.

A Head-to-Head Comparison

Ugly. That is the only word that can be used to describe what has happened to these once-great powerhouses of retail.

Store Base

Sears has seen its store base drop by 58%, and its sales have fallen by over 39% since 2011. JCP has fared better, but not by much, with its store base dropping by over 7% and sales dropping by over 26% since 2011. At first glance, JCP would be the clear winner. But alas, all is not what it appears on the surface.

Debt

JCP destroyed its balance sheet by racking up a monstrous 38.06% debt-to-sales ratio. While that is down from 46.46% two years ago, it still leaves a bad taste in the mouths of investors. Sears, on the other hand, has used some fancy strategies to control its debt. The sales-to-debt ratio never exceeded 10% in the past five years and is currently at 7.84%.

EBITDA

Once again we are witnessing two companies going in opposite directions. Sears Holdings is witnessing a huge reversal in its EBITDA trend over the past few years. It has swung from a positive $626 million in 2012 to a negative $836 million in 2015. In contrast, J.C. Penney has swung from a negative $610 million in 2013 to a positive $715 million in 2015.

Sales Per Store

Sales per store have remained relatively flat over the past four years at both companies, despite some interim swings.

Analyst Expectations

On Friday, May 6, 2015, JCP stock was down 7.50% to $8.26 as reports surfaced of cost-cutting measures taking place. While most of the cost-cutting measures are seen as a positive move, the rumors surrounding these cuts were associated with an unexpected April slowdown in its sales. As soon as Wall Street starting giving the company some respect, it disappointed the "new JCP" converts. So what do analysts think now? Going into this week's earnings on May 13th, there have been no repercussions of last Friday's announcement. Earnings projections are still substantially better than what they were a few months ago. But stay tuned, as that may change.

Sears Holdings, on the other hand, cannot get ANY respect from the analysts. Estimates continue to get lowered, and there seems to be no reversal of expectations in the future.

Short Interest

As I have stated in previous articles, short sellers on Wall Street always seem to operate with a herd mentality. When they smell blood, they circle the wagons and go in for the kill. When it comes to both J.C. Penney and Sears Holdings, they have dug their fox holes, are firmly entrenched, and are not budging. Short interest data shows huge positions, with no covering taking place in either stock despite the precipitous drops in both...

This is by no means a guarantee of the failure of both companies, but it cannot be seen as a ringing endorsement either. Sears Holdings, with 72% of its float being short, is clearly the company expected to be out of business first. Sears' management is viewed as lacking any foresight in their retail endeavors. Selling Lands End and Sears Canada were indications that the asset sales were seen as the best method of infusing cash into a struggling company. With those moves now in the rear-view mirror, and real estate asset sales also behind it, Sears has few options left to support its balance sheet going forward. This is a paramount concern given the deterioration of its EBITDA. J.C. Penney, on the other hand, seems to have its EBITDA under control and has thus far escaped the need to sell off large blocks of assets to raise cash in recent years.

Conclusion

So, what does it all mean? If it had not been for the unexpected negative news surrounding the company on Friday, I would have said that JCP is clearly the superior stock. That now needs to be reassessed after its earnings come out later this week. With that being said, absent any major deviation from what is expected by the analysts, in a head-to-head comparison we still begrudgingly give the nod to J.C. Penney.

Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Yes, J.C. Penney Stock Could Double by 2019
By Adam Levine-Weinburg
The Motley Fool
May 7, 2016

J.C. Penney stock has huge upside over the next few years if the company continues to deliver steady sales growth, solid cost control, and significant debt reduction.

Last weekend, Barron's quoted Hodges Capital portfolio manager Chris Terry as saying that J.C. Penney stock could rise 50%-100% in the next three years -- moving as high as $20. While J.C. Penney stock rallied on Monday morning, it has given up all of those gains in the past few days -- and then some.

Clearly, most investors are still skeptical of J.C. Penney's turnaround progress. However, if the company can continue to hold down expenses while posting steady 3%-5% comp sales growth over the next few years, J.C. Penney stock could certainly double.

J.C. Penney is regaining share

Just a few years ago, J.C. Penney was in a tailspin and looked like it would never recover. Sales plunged from $17.3 billion in 2011 to $11.9 billion in 2013.

However, since then, J.C. Penney has managed to post steady comparable store sales growth in a tough retail environment. This performance allowed it to boost sales to $12.6 billion by 2015, despite reducing its store count from 1,094 to 1,021 over the past two years.

Meanwhile, Sears Holdings -- a key rival in the affordable-department-store space -- has continued its inexorable decline. Domestic comparable-store sales have been falling at Sears for more than a decade, punctuated by a 9.2% drop last year.

For years, Sears has been steadily shrinking its store base to cut costs. This trend will continue for the foreseeable future, as Sears' plan for returning to profitability relies on closing and downsizing even more stores.

While Sears is the most vivid example of the difficulties facing major retailers recently, most department-store chains -- even the strongest ones -- reported stagnant or declining comp sales in 2015. J.C. Penney was one of the few exceptions.

Maintaining sales momentum

Obviously, J.C. Penney will need to keep growing its sales and gaining market share for its turnaround to succeed. It has several promising initiatives in place to drive sales growth in the next few years, which I have described previously. These include rolling out new Sephora boutiques, remodeling the "center core" sections in many stores, rebranding its salons, and testing appliance sales in certain markets.

J.C. Penney is also focusing on serving its core customer base better, whereas a few years ago it was trying to transform itself to attract a completely different customer. For example, it recently announced the launch of a new plus-size fashion brand for millennial women called Boutique+.

In addition to these "self-help" efforts to drive sales growth, J.C. Penney should also benefit from the retrenchment of competing department-store chains over the next few years. As rivals such as Sears continue to close or downsize stores, J.C. Penney is well positioned to siphon off some of their customers.

J.C. Penney doesn't need massive sales gains to drive strong earnings growth. If the company grows sales just 3.5% annually through 2020 while keeping operating expenses flat, its annual operating income could rise by $850 million.

Debt will become a lot more manageable

Many skeptics -- while admitting that J.C. Penney's sales trajectory has improved -- point to its debt load as a big anchor that will drag J.C. Penney stock down. A couple of years ago, I would have agreed with that assessment.

However, J.C. Penney has already started to get its debt under control. Just in the past two years, J.C. Penney has reduced its total debt from $5.6 billion to $4.8 billion, as it has produced modestly positive free cash flow and the company's improving financial performance has allowed it to carry less cash.

A few months ago, J.C. Penney CFO Ed Record stated that the company plans to reduce its debt load by another $400 million to $500 million this year, assuming it can sell and lease back its headquarters.

J.C. Penney will be able to continue paying down debt in future years using its free cash flow. The company expects to surpass last year's $131 million in free cash flow in 2016, and if its sales growth initiatives pay off, free cash flow should continue to grow steadily in the years ahead.

By the end of 2019, J.C. Penney may be able to reduce its debt to around $3 billion to $3.5 billion while lowering the interest rate on much of its remaining debt. Thus, interest expense savings represents another big lever for earnings growth. At the same time, the lower debt load will make J.C. Penney stock less risky, which should boost its earnings multiple.

If J.C. Penney can increase its operating income by $850 million and cut its debt load by about $1.5 billion over the next three or four years, there's a very good chance its stock will double. To reach those goals, it just needs to maintain its recent sales momentum while keeping costs in check.

Adam Levine-Weinburg owns shares of J.C. Penney Company, The Motley Fool has no position in any of the stocks mentioned.

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Three Ways Gen Z Will Change Retail
By Dan Berthiaume
RetailingToday
May 6, 2016

Everyone is talking about the huge impact millennials are having on retail. Also known as Gen Y, they are usually considered to occupy the 18-to-35 age demographic. But what about Gen Z, the younger siblings (or even children) of millennials?

Based on what we've seen so far, here are three ways Gen Z will change retail in the next few years.

Video Killed the Retail Star
Gen Z engages with what they see as a truly seamless physical-virtual environment via video. Consider this recent Chain Store Age commentary from Jill Standish, senior managing director of retailer for Accenture Consulting.

"Gen Z get their inspiration from YouTube," Standish said. "How do you leverage that? Video will become a means of buying goods, rather than an influencer as it still mostly is today." Some retailers have already begun offering shoppable videos, and YouTube now offers transactional functionality direct from its video platform. In the future, however, retailers will need to more fully integrate video into stores, mobile apps, and all other customer touchpoints, including the POS.

Community Organizers
Gen Z consumers trust each other much more than they trust brands or retailers. This means that third-party online marketplaces which connect individual buyers and sellers will become much more important in the near future.

However, established digital retail platforms should not sit back and wait for the Gen Z revenues to roll in. A perfect example of the type of retailing community preferred by the next generation of consumers is Sneakmart.

Founded by a 17-year-old "sneakerhead" entrepreneur Anthony Debrantt, Sneakmart lets online and mobile consumers buy, sell and trade new and used sneakers. However, Sneakmart serves as more than just a storefront. The platform also lets users share information and content.

"While the platform functions as a marketplace, our long-term vision is to create a social experience that encourages sneaker lovers to interact with one another and contribute content, stories and more," stated Debrantt.

Being a successful "retailer" will have less to do with having any actual physical inventory or infrastructure and more with building a community that connects consumers with the products they want and each other. Traditional retailers will need to tap into this developing shopper zeitgeist by either launching or participating in these communities.

Departing Department Stores
It's no secret that department stores have been having a tough go of it recently, with many major chains reporting disappointing fiscal performance or even shuttering stores. The attitudes of Gen Z suggest these developments are an omen of things to come.

Although some department stores offer in-store video experiences and others operate well-developed social networks, the model simply does not lend itself to Gen Z sensibilities. Department stores offer too broad a range of merchandise to create a true sense of community around a specific interest or product. And the need to satisfy a wide range of shoppers limits how "cool" the store experience can truly be.

By attempting to satisfy everybody, department stores may find themselves satisfying nobody. Long-term survival may require scaling back on assortment and offering smaller brick-and-mortar storefronts that rely more on digital and video components and less on physical space and merchandise to connect consumers with products.

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The 'least engaging' retailers are...
By Marianne Wilson
RetailingToday
May 6, 2016

Five retail chains rank among the top 10 brands doing a poor job when it comes to emotional engagement, a measure of how well brands meet consumer expectations, according to an annual survey.

American Apparel, Aeropostale, Sears, Sports Authority and Whole Foods Market are among the Top 10 least-engaging brands in Brand Keys' 2016 Customer Loyalty Engagement Index survey. (A list of the top 10 brands is at the end of article.) The listing, now in its 21st year, ranks brands based on customer input in the automotive, technology, retail, food and beverage categories.

"The fundamental reason these brands were rated so low for consumer engagement is because they were unable to meet the very high – and ever-growing – emotional expectations consumers bring to the marketplace," said Robert Passikoff, president of Brand Keys. "These are the critical values consumers use to compare brand options when they shop. If you do poorly, consumer displeasure not only shows up on the list but harshly in the real-world marketplace. And shortly thereafter on profit-loss statements." It is the first time Whole Foods has showed up the list. The grocer had a rough year, accused of price rigging of their own brand, along with high degrees of corporate hubris, BrandKeys noted.

American Apparel and Aéropostale have both suffered badly at the hands of online and corporate management. Sports Authority, once America's largest sporting-goods chain, entered into bankruptcy protection in March.

For the 2016 survey, 42,792 consumers, 18 to 65 years of age, from the nine US Census Regions, self-selected the categories in which they are consumers, and the brands for which they were customers. Seventy (70%) percent were interviewed by phone, 25% percent via face-to-face interviews (to include cellphone-only households), and 5% online. This year the survey examined 72 categories and 635 brands.

The 10 brands with the lowest emotional engagement strength according to the survey are:

1. Volkswagen
2. Blackberry
3. American Apparel
4. Cosi
5. Aéropostale
6. Sears
7. kobo
8. Budweiser
9. Sports Authority
10. Whole Foods

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Guess what old tradition Walmart is bringing back?
By Marianne Wilson
Chain Store Age
May 5, 2016

The employees who once greeted shoppers with a friendly "Welcome to Walmart" are making a comeback.

Walmart is reviving and updating its door-greeter program in an effort to improve customer service and also deter shoplifting.

The greeters were the invention of company founder Sam Walton, who saw them as a way to put a friendly face on the chain's large stores. But in recent years, most of the employees who served as greeters were moved to other parts of the store.

The move to revive the program comes after a pilot program last year in which the chain deployed greeters and also introduced the new role of customer host. Outfitted with bright yellow vest, the hosts not only welcomes customers and makes them feel comfortable, but also check receipts and assists with returns.

The reaction was positive, Walmart said, with customers saying they liked being able to easily spot someone to go to for help and advice. Based on the successful pilot, Walmart will start rolling out the new program to all its U.S. stores by mid-summer.

Stores will feature either a standard greeter or a customer host, with about two-thirds of the locations having a greeter and one-third having a host, a Walmart spokesperson told Chain Store Age.

"We know a one-size-fits-all-approach to our door coverage won't work for our more than 5,000 stores," stated Mark Ibbotson, executive VP-central operations, Walmart U.S.A, in a posting on the company's website. "To help ensure each store has the coverage it needs, we're using data on safety, security and shrink risks to guide us on how best to staff our entrances. Where our data tells us the risk is higher, we'll add the new customer host."

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Agilence Announces Partnership with Sears Holdings
By Agilence, Inc.
May 5, 2016

Agilence Inc., the leading provider of SaaS-based data analytics solutions is proud to announce its newest partnership with Sears Holdings Corporation's Asset & Profit Protection unit. SHC APP will utilize the Retail 20/20 platform as its next generation analytics platform to enable the Company to identify fraud, process, and operational anomalies.

"We were looking for a solution that went beyond traditional asset protection / loss prevention solutions, one that could improve our analytical posture from day one," said VP & Chief Security Officer Scott Glenn.

"At Agilence we strive to build applications that provide actionable insights and prescriptive alerts, which free users to focus on solving problems and generating profits," said Russ Hawkins, President & CEO, Agilence, Inc. "We are very happy to add Sears Holdings Corporation to the Agilence community, and our team is looking forward to a productive long term partnership."

About Agilence, Inc.

Agilence (www.agilenceinc.com) is the industry leader in data analytics and reporting solutions for retail and food & beverage organizations. Agilence develops 20/20 Data Analytics™, a family of highly flexible and powerful cloud-based reporting solutions. 20/20 provides organizations with a complete view of their business, empowering them to quickly identify and prevent loss, solve operational problems, and improve sales across the enterprise. Agilence, Inc. is headquartered in Mount Laurel, NJ. To learn more about Agilence, please email sales@agilenceinc.com or call 856-366-1200.

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Sears hopes to lure store shoppers with Mom, online pickup
By Dan Berthiaume
RetailingToday
May 3, 2016

Sears Holdings has been having issues attracting shoppers to stores, as evidenced by the recent decision to close 78 brick-and-mortar locations.

However, the department store retailer is not giving up on efforts to drive store traffic. Sears is combining the eternal appeal of Mom and its strong history of omnichannel customer service to give shoppers a good reason to visit their local store.

Sears is launching a major sale on apparel, jewelry, home products and other popular Mother's Day gifts and announced that any Shop Your Way loyalty program member who shops online and uses in-vehicle pickup between May 3-7 will automatically be registered to win a $5,000 gift card from the retailer

The in-vehicle pickup service, supported by the Sears mobile app, lets customers digitally shop and complete transactions. They then receive an email when their purchase is ready at their local Sears store and will have an associate bring it to their car and verify payment within five minutes of arrival.

Sears has long been a leader in digital retail innovation. The company was an early provider of buy online pick up in store functionality back in 2001. Around 2005, Sears introduced its "Ready in Five" guarantee that ensures customers will not have to wait more than five minutes in-store to pick up an online purchase. In 2009, the retailer purchased Israeli social media engine Delver, which was the origin of its Shop Your Way social platform.

More recently, in 2014 Sears began offering the in-vehicle product pickup and return service, as well as an online "Reserve It" service that lets online shoppers select apparel products to be set aside at a local store for try-on.

Despite these numerous innovations, Sears still struggles with sales and profitability. According to the retailer, 60% of its online sales involve a store, so offering more omnichannel services that blend physical and digital channels makes sense. And Mothers' Day is a great individual selling event.

But the industry should watch Sears closely to see just how effective seamless customer experience is in improving store traffic for a retailer that appears to be having problems in areas such as marketing and merchandising.

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Closing 800 Department Stores? It's A Start
By George Anderson
Forbes
May 2, 2016

What will it take to get department store chains, including J.C. Penney, Macy's and Sears, performing at sales per square foot levels not seen in a decade or more? The answer, according to new research from Green Street Advisors, is store closures — and a lot of them.

Around 800 stores in U.S. malls, roughly one-fifth of total anchor space, would need to be shuttered for the chains to reach the same level of sales productivity achieved in 2006. (Green Street, it should be noted, does not see a particularly rosy future for malls either with estimates that over 15 percent will either be closed or repurposed over the next decade.)

Green Street, as reported by The Wall Street Journal, estimates that sales at department stores averaged about $165 a square foot in 2015, about 24 percent lower than in 2006. Over the same period, department stores reduced their collective footprint around seven percent.

Sears Holdings, which recently announced it was closing an additional 10 Sears locations, would need to shutter 300 locations to get back to its 2006 per square foot levels, according to the real estate research firm.

In an online discussion last week, many of the industry insiders of the RetailWire BrainTrust agreed that closing stores might be a good start to fixing the woes of big department stores.

"There's gold in that real estate," said Peter Charness, SVP America, Global CMO, TXT Group. "All of retail needs a rethink of the role/size/location and cost of their stores. There will be a painful transition for many as they make physical locations more compelling to shop, more convenient to pick up at and more cost effective to ship from."

"The only way to succeed for department store chains (and any business for that matter) is to sell more product at fair prices and pay less for the costs of running the business," said Naomi Shapiro of Upstream Commerce. "Cutting back on the amount of merchandise and the resultant need for less space makes sense, although it's hard to bite that bullet."

But most BrainTrust panelists saw a lot more that needed doing.

"Of course store productivity is important, but reducing the denominator is only a partial answer," said Mohamed Amer, global head of strategic communications, Consumer Industries at SAP. "You can also boost the numerator through assortment, layout changes and more empowered associates. And are online sales being considered? Are store metrics misleading in an age of omni-shopping and digitization? Old paradigms are slow to die but their KPIs never do."

"Closing alone won't fix the rotten customer experience at almost all department stores," said Bob Phibbs, president and CEO of The Retail Doctor. "Not until someone at the C-level owns the customer experience (human to human — not smartphone to cloud, by the way)."

"[Department stores] are just are too hard to shop," said Paula Rosenblum, managing partner at RSR Research. "Contracts with merchandise vendors prohibit re-designing the selling space into something more relevant to today's shoppers. They are, at the moment, exactly what they are called — stores laid out by department. But that's not how people shop anymore. They tend to shop by lifestyle. Curated assortments are a far better solution."

"I don't know how department stores will make this transition, I just know it is imperative," said Ms. Rosenblum.

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How Competition in Consumer-Facing Technology Threatens the Stability of Retail
By Ronen Lazar
RetailingToday
May 2, 2016

Competition in providing the most innovative, unique, and up-to-date services and features to consumers is escalating with the rise and expansion of omnicommerce, a strategy that delivers a seamless customer experience through all available shopping channels. Brands are building in-house development teams or partnering with start-ups and other companies to extend their reach while catering to their customers' demands of convenience, personalization, and on-trend technology.

The resulting features range from product locating mobile apps such as Target's Cartwheel in-store deal-finding extension, digital and virtual shopping experiences such as Ikea's augmented reality catalogue and StubHub's VR 3-D ticket seat preview, and shipping and return processes such as Amazon's two-hour shipping and Zappos' free, simple return option.

Each company is trying to out-do its competition by innovating faster and being the most on- trend, not just with retail but with advertising as well. For example, Burberry partnered with Snapchat, arguably one of the most highly used social media messaging applications, to be the first brand to create a 24-hour "Discover" channel promoting their new men's fragrance.

Their campaign is not only a "first," but it also addresses and incorporates everything their target market asks for and expects. It can be argued that they are "winning" in this brand competition – but only until someone else comes up with the next trendy idea that makes new news tomorrow.

And more and more companies are joining in this competition as omnicommerce becomes the norm. However, these new features are offering services that are disrupting the way the retail industry has functioned up until now.

The new technology creates serious demands on time, data flow and storage, all while requiring the accuracy and flexibility to handle technology updates and changes to the infrastructure. For example, Nordstrom allows customers to find products in store, buy online, pick-up in store, return in store or online, and a multitude of other forms of product discovery and movement.

Yet this flexibility offered to the customer requires a backend infrastructure that can handle the complexities of product tracking, inventory count, and fulfillment processing. Traditional processes such as the straight "ship from distribution center to customer" and "buy in store, return in store" are now being replaced with more complex inventory movement systems and customer tracking abilities.

The new omnicommerce features also provide highly personalized experiences to customers and rely on tracking customer behaviors and real-time data to create unique customer profiles. Easy and error-free communication from system to system, backend to front, is required to achieve this goal, especially in regards to stock levels, shipping and fulfillment, and order history, all important parts of the supply chain.

And while some innovators have built technology to robustly and efficiently handle these changes, not all backend infrastructures are up to speed. This is true not only for specific brands but across the retail industry as a whole. Given that supply chain and brand functioning rely on the "well-oiled machine," if one part breaks, the whole retail process is at risk.

Some companies have patched up their backend infrastructure to integrate with the new frontend technology, but most existing backend systems cannot be built out in a way that allows them to fully perform at the level necessary to deliver to customer expectations. For now the patches work well enough, and most companies are content to stay focused in the present rather than to look forward to what will happen when the volume of commerce and their customer base expands beyond the capabilities of their backend systems.

Not all retailers and brands are equipped to handle the promises being made and the expectations being created by this emerging omnichannel technology. Not only is the physical functionality of retail (the supply chain and product movement) being threatened, but also the customer satisfaction promise is as well, as the expectations and demands are set high and will only increase.

Creating backend systems that can fully support and adapt to new and ever-changing frontend technology is now the necessary next step to long-term customer satisfaction and overall business success.

Ronen Lazar is the co-founder and CEO of INTURN, a global B2B online software platform innovating the way brands and retailers buy and sell excess inventory.

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Sports Authority Closing All Stores
By Laura Heller
Forbes
Apr. 30, 2016

Say goodbye to Sports Authority. The sporting goods retailer will liquidate all stores and wind down operations in the coming months. It's the final chapter in its quest to reorganize under Chapter 11 bankruptcy protection.

Sports Authority notified the U.S. Bankruptcy Court that the company would be able to reorganize and would pursue a sale instead.

That means all 450 stores will close.

Sports Authority filed for Chapter 11 in March, saying at the time it would close 140 stores and two distribution centers.

But the retailer is saddled with more than $1.1 billion in debt and won't be able to reorganize.

Sporting goods brands have been increasingly under pressure and consolidation within this category will likely increase. There is also talk that Bass Pro Shops is interested in buying Cabela's.

Sports Authority hasn't updated its website to reflect this news, but consumers can expect sales and discounts to accelerate.

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Three technologies that will shape retail — and one that won't
By Dan Berthiaume
Chain Store Age
Apr. 29, 2016

While several highly publicized emerging technologies are poised to have a major effect on retail by 2026, another touted bleeding-edge solution may fall short of expectations.

Hyperconnectivity, wearables, and augmented reality (AR) will all play a major role in the evolution of retail during the next 10 years, according to a new Ovum study commissioned by performance marketing technology company Criteo. As for the highly touted 3D printing, the study, "The Future of E-commerce — The Road to 2026," finds it will only have limited impact on the development of retail.

Following is a summary of how the study predicts each technology will intersect with retail between now and 2026.

Hyperconnectivity: By 2026, the Internet of Things (IoT) will be a routine part of consumers' daily lives. The study predicts that by 2020, there will be 660 million machine-to-machine (M2M) connections, which will make retail more efficient and effective. Connected retail display cabinets and smart product tags will be commonplace, enabling retailers to track demand and report on stock levels in real time, which in turn will improve supply chain effectiveness.

M2M connections will also enrich consumer engagement in retail, such as via connected indoor and outdoor digital signage equipped with sensors. Content and advertising feeds streamed to connected displays will be adapted in real time to anticipate and target the needs of consumers based on local conditions, such as the location of the screen, the time of day and the weather.

In addition, connected driverless cars with built-in GPS and video screens supporting streamed content could become an important marketing platform for brands and retailers. Connected appliances in smart homes could also become common, and Amazon is already exploring the opportunities with Dash buttons and its Echo voice device.

Wearables: Although the ecosystem is still emerging, the number of wearable devices coming to market is increasing. Ovum expects the installed base for wearable devices to reach 650 million by 2020, However, the study does not foresee wearables becoming a mass-market mobile commerce platform in the manner of smartphones. This is because of the inherent constraints in the form factors and capabilities of wearables, such as tiny screens, although as the technology matures, wearables will become smarter. In the mobile payments space, the study predicts a viable role for smart watches in tap-and-go mobile proximity payments.

Augmented Reality (AR): Going forward, the study predicts that augmented reality (AR) rather than virtual reality (VR) will have the greatest impact on the retail experience. AR describes normal views of reality that have been enhanced by digitally generated information or graphics superimposed on that view. This is in contrast to VR, which describes fully immersive digital environments.

AR has the ability to blur the boundaries between online and in-store shopping. For example, AR will allow consumers to virtually try on clothes and jewelry. This could significantly help lower returns on products that do not fit one's body or personal space, such as clothes and home furnishings

AR apps will also allow consumers to view products in their homes, which can then be purchased on the spot from their mobile devices.

The study further predicts that AR will also be widely used to enhance the in-store experience, particularly for concept and showroom stores.

3D Printing: According to Ovum, 3D printing will grow in retail, but only if it can provide genuine benefits, quality outputs and speed at a reasonable cost. However, even if 3D printing does manage to deliver on all these parameters, it is still only expected to have a limited role in mainstream retailing.

Ovum expects 3D printing to have the most impact on retailers of highly personalized products, such as gifts. It could also be used for spare parts in more complex products, such as cars and motorbikes. For more simple items, such as home improvement goods like screws and hammers, the cost is already so low that the benefit of production via 3D printing would be minimal. The report does see a stronger role for community-run 3D fabrication shops.

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Amazon surges in Q1; devices, cloud services fuel revenue growth
By Dan Berthiaume
RetailingToday
Apr. 28, 2016

Amazon.com Inc. swung from loss to profit and significantly boosted net sales during a first quarter that topped analysts expectations.

The world's largest online retailer reported better-than-expected net income of $513 million, compared to a net loss of $57 million in the first quarter of fiscal 2015.

Net sales also topped forecasts, rising 28% to $29.1 billion from $22.7 billion. Strong sales of Amazon devices, including Echo and Fire tablets, helped drive revenue. So did the company's cloud services business, Amazon Web Services, whose sales jumped 63.9% to $2.57 billion. The unit is Amazon's fastest growing business.

"Amazon devices are the top selling products on Amazon, and customers purchased more than twice as many Fire tablets than first quarter last year," said Jeff Bezos, founder and CEO of Amazon.com. "Echo too is off to an incredible start, and we can't yet manage to keep it in stock despite all efforts. We're building premium products at non-premium prices, and we're thrilled so many customers are responding to our approach."

On the profit side, operating expenses did not keep pace with sales growth and there was a significant increase in stock-based and other compensation, all of which helped create net income. Operating income was $1.1 billion in the first quarter, compared with $255 million a year earlier.

Looking ahead, net sales are expected to be between $28 billion and $30.5 billion in the second quarter, growing between 21% and 32% compared with second quarter 2015.

In addition, eMarketer and Slice Intelligence released some interesting data about certain areas of Amazon's performance. According to eMarketer, Amazon captured $79.3 billion in U.S. e-commerce sales during the last 12 months, growing 13% from the previous 12 months. Its next-closest rival, Walmart, trailed far behind in ecommerce sales, taking in just $13.5 billion in the last 12 months.

Walmart can take some solace in the fact its e-commerce growth rate of 15% was slightly better than Amazon's.

Meanwhile, Slice Intelligence analysis indicates Alexa products account for 26% of Amazon device unit sales and 41% of dollar sales, beating the Kindle by seven percentage points. Echo accounts for 89% of Alexa device sales.

Relative to the overall online shopping population, those that buy Echo devices are slightly concentrated between 36 and 66, affluent (35% have annual household income above $100,000), and male (70%).

Echo buyers are heavy Amazon purchasers across all categories, but a purchase of an Echo device was followed by a 7% increase in spend per person on CPG items. Slice terms this an early, but promising sign for Amazon.

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J.C. Penney expanding its 10-year relationship with Sephora
RetailingToday
Apr. 26, 2016

The number of Sephora shops inside J.C. Penney stores is about to increase.

The department store retailer announced it will open 60 additional Sephora shops in Penney stores, including a flagship set to open in November.

At 3,000-sq.-ft., the flagship will be one of the largest Sephora stores inside a Penney store to date. Located in the newly relocated Penney at Northridge Mall, Salinas, California, it will feature a larger assortment of emerging brands, merchandise displays and expanded room for service. The average size of Sephora inside Penney is 2,000 sq. ft.

Nearly half of the 60 new Sephora shops will open on April 29, with the majority to be open by June 17, presenting an opportunity to capture greater market share before the key back-to-school and holiday shopping periods, the company said.

When Sephora made its debut inside Penney in 2006, it was a revolutionary concept, noted Angela Swanner, senior VP for Sephora inside J.C. Penney.

"J.C. Penney was one of the first department store retailers to forgo the traditional beauty counter and work with a global beauty brand to build a dynamic Sephora shop inside its stores," she said. "Ten years and nearly 600 locations later, Sephora inside J.C. Penney has become a leading beauty destination that will continue to be a growth driver in 2016 and beyond."

The Sephora-Penney partnership extends online, with the beauty brand having a significant online presence on Penney's e-commerce site.

"Our 10-year collaboration with J.C. Penney has been an incredible partnership that has yielded both business growth and unmatched exposure in numerous markets across the United States," said Satish Malhotra, executive VP for Sephora inside J.C. Penney, Canada and Latin America.

Sephora currently has over 1,780 locations in 29 countries, including 370 in North America and 546 in-store shops inside Penney stores.

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Lowe's Poised As Successor To The Sears Appliance Empire
By Pam Goodfellow
Forbes
Apr. 26, 2016

With speculation about the future of Sears Holdings running rampant among analysts and amid news of additional store closures, one has to wonder which retailers might step up with shoppers should a Sears shutdown become a reality. Earlier in the year, I detailed the highs and lows for Sears, according to insights from Prosper's consumer survey of more than 6,000 U.S. adults 18+.

One positive that remained for Sears was its first place position in appliances; however, while Sears currently leads in this category, the once dominant department store's share is undoubtedly slipping with shoppers. With some of retail's biggest boxes, including Home Depot and Best Buy, vying for the appliance crown, recent analysis reveals that Lowe's Cos appears to be best positioned to succeed Sears' reign.

According to Prosper's shopper preference share for appliances (resulting from a quarterly unaided, write-in question posed to consumers), Sears and Lowe's are the dominant players in this category, with 20.9% and 14.3% share respectively, while Best Buy (10.9%) and Home Depot (9.1%) jockey for third and fourth positions. Walmart is a distant fifth (6.7%). A closer look at our consumer trends, though, shows that the gap between Sears and Lowe's has been steadily decreasing in the latter's favor, narrowing to a single digit point spread over the past year.

Compared to their respective five year averages, Lowe's, Home Depot, and Best Buy are currently well-positioned with shoppers overall, while Sears and Walmart are facing declines. Our insights indicate that Gen X and Boomers have an affinity for Lowe's in particular, while the Millennial generation has been slower to warm up to the home improvement giant (which currently ranks fourth among these younger consumers, ahead of Home Depot, but behind Sears, Walmart, and Best Buy).

That said, though, Lowe's is gaining ground among Millennial shoppers; in March, nearly one in ten (9.2%) indicated they would shop there first for appliances, a 20% gain over the five year average. The caveat for Lowe's, however, is that Best Buy and Home Depot are also strengthening their positions with these young shoppers as Sears and Walmart are fading.

So why is Lowe's poised to be the Sears appliance successor over its big box rivals? Besides an already strong second place ranking among consumers in general, shoppers seem to view the retailer in a more favorable light than its competitors according to the Net Promoter Score®* metric of loyalty and retailer affinity.

Among appliance shoppers overall, Lowe's currently maintains the highest Score of the top five retailers, a rating that is more than double competitor Home Depot and nearly quadruple that of Best Buy. Interestingly, Sears maintains the second highest NPS® among shoppers — well, the old dog is still top dog in this category — while Walmart is plagued with a negative Score.

The NPS discrepancy becomes even more apparent among Millennial shoppers. Among this very vocal /social / sharing generation (on the precipice of becoming the next wave of big spenders), Lowe's was the only appliance retailer in the top five to receive a strong NPS; Sears barely broke even, while Home Depot and Best Buy suffered negative Scores — that kind of impression among shoppers isn't likely to foster long-term loyalty.

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Sears announces another closing — but this one doesn't involve stores
By Marianne Wilson
RetailingToday
Apr. 26, 2016

Sears Holdings will shutter its apparel design office in New York City.

The struggling retailer will shutter the 154-employee office in July, reported the New York Post, which cited a Department of Labor filing.

Sears will move approximately 40 positions to an existing site in San Francisco, with the remainder positions to be cut, according to the report.

"Their apparel business has been so irrelevant for so long," said Evercore ISI analyst Matt McGinley in the Post article. "Increasingly, people don't feel the need to go to Sears to buy their refrigerator and underwear in the same store."

Last week, Sears announced it would close 78 unprofitable stores this summer, including 68 Kmart and 10 namesake stores.

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A new report signals disaster for American shopping malls
By Hayley Peterson
Business Insider
Apr. 26, 2016

Shopping malls are losing some of their most valuable tenants — department stores — at an alarming rate.

Retailers like Sears, JCPenney, and Macy's have been closing hundreds of locations over the last several years, leaving dead or dying shopping malls in their wake as they try to remain profitable amid the growing threat of e-commerce.

But these closures are just the tip of the iceberg, according to a new report from real-estate research firm Green Street Advisors.

Department stores need to close as many as 800 more locations — or one-fifth of all anchor space in US malls — to return to the levels of productivity they saw 10 years ago, according to the report, which was first cited by The Wall Street Journal.

Sears would have to close about 300 stores (or nearly half of its existing locations), JCPenney would have to close 320 stores (31% of its current fleet), Nordstrom would have to close 30 stores (25% of its fleet), and Macy's would have to close 70 stores (9% of its total) to generate the kind of sales per square foot they saw in 2006.

The closures could force hundreds more shopping malls in the US to shut down, according to Green Street.

Department stores, known as mall anchors, have traditionally been major traffic drivers for shopping malls.

But their sales have been declining industry-wide for nearly a decade. Overall, departments stores' average productivity — or sales per square foot — has dropped 24% to $165 per square foot since 2006, according to the report.

Once anchors shut down, mall owners can have a difficult time finding retailers large enough to replace them.

Sears would have to close about 300 stores (or nearly half of its existing locations), JCPenney would have to close 320 stores (31% of its current fleet), Nordstrom would have to close 30 stores (25% of its fleet), and Macy's would have to close 70 stores (9% of its total) to generate the kind of sales per square foot they saw in 2006.

The closures could force hundreds more shopping malls in the US to shut down, according to Green Street.

Department stores, known as mall anchors, have traditionally been major traffic drivers for shopping malls.

But their sales have been declining industry-wide for nearly a decade. Overall, departments stores' average productivity — or sales per square foot — has dropped 24% to $165 per square foot since 2006, according to the report.

Once anchors shut down, mall owners can have a difficult time finding retailers large enough to replace them.

One month earlier, JCPenney said that it would close seven stores, bringing its total count to about 1,000, and Macy's said it would close 40 stores, bringing its total count to about 770.

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Department Stores Need to Cull Hundreds of Sites, Study Says
By Suzanne Kapner
Wall Street Journal
Apr. 25, 2016

Research firm estimates that restoring 2006 productivity would require closing fifth of anchor space in U.S. malls.

Department stores need to close hundreds of locations if they want to regain the productivity they had a decade ago, according to new research from Green Street Advisors.

The real-estate research firm estimates that the closures could include roughly 800 department stores, or about a fifth of all anchor space in U.S. malls.

Sears Holdings Corp. alone would need to close 300, or 43% of its Sears stores to regain the sales per square foot it had in 2006, adjusted for inflation, according to Green Street.

"Department stores used to be a great catchall for different brands, but today many of the brands have stores of their own, and shoppers can also find them online," said DJ Busch, a senior Green Street analyst.

Sears and other retailers including Macy's Inc. and J.C. Penney Co. have closed hundreds of stores in recent years as business has shifted to discounters or online merchants like Amazon.com Inc. But the closures haven't been enough to offset a drop in sales, Green Street said.

Sales at the nation's department stores averaged $165 a square foot last year, a 24% drop since 2006, according to company disclosures and Green Street estimates. Over the same period, the stores reduced their physical footprint by 7% in aggregate.

Some chains have moved faster to cull their fleets than others. On Thursday, Sears said it would close 78 stores, including 68 Kmart's, this summer, part of a plan announced in February to "accelerate the closing of unprofitable stores." But Penney has only closed seven stores this year out of a base of more than 1,000.

Green Street estimates that Penney would need to close a total of 320 locations, or 31% of its stores to return to its 2006 productivity levels, while Nordstrom Inc. would need to shutter 30 stores, or a quarter of its footprint. By comparison, Macy's, which closed 40 stores last year, would only need to eliminate a further 70 locations, or 9% of its base, Green Street estimates.

While declining to comment on the specifics of Green Street's report, the chains have indicated that mass store closings aren't the right strategy.

"There's a misperception out there that when we close a store, that business transfers online," Ed Record, Penney's chief financial officer, told analysts in November. "When we close a store, particularly in a small market, we see our dot-com business go down."

A spokesman for Nordstrom said that all of its stores are profitable, and closing stores "is not our normal practice."

In addition to closing unproductive locations, Macy's has been trying to get more shoppers in the door by adding Bluemercury beauty shops and Backstage discount stores to its department stores.

It may be unrealistic to expect that department stores could ever return to historical levels of sales or profits given the changing dynamics of retailing. Many retailers say they make less money selling goods online than they do in their physical stores. And with the Internet making it easier for consumers to comparison shop, discounts have become the norm.

Department stores occupy about two-thirds of mall anchor space, and even though they are being replaced by restaurants, grocery stores, and big box retailers such as Dick's Sporting Goods Inc., there aren't always enough new tenants to go around, said Green Street's Mr. Busch.

The store glut has important implications for the country's weaker malls, which rely on their anchors to drive foot traffic. "If department stores were to move forward and aggressively streamline their physical presence it could result in several hundred malls no longer being relevant retail destinations," he said.

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Sears to Close 78 Stores This Summer
Newsmax (The Associated Press)
Apr. 22, 2016

Sears Holdings Corp. will close another 78 stores — 68 Kmart units, and 10 Sears stores — as it looks to restore profitability.

That accounts for about 5 percent of its store base, which is nearly 1,700 stores.

The ailing company, based in Hoffman Estates, Illinois, had said in February that it would accelerate the closing of unprofitable stores following a "challenging" holiday season. The move announced Thursday is expected to generate a "meaningful level" of cash from the liquidation of store inventories and from the sale or sublease of some of the related real estate, it said Thursday.

All 10 Sears stores and nearly all the Kmart stores will close in late July. Two Kmart stores will close in mid-September.

"The decision to close stores is a difficult but necessary step as we take aggressive actions to strengthen our company, fund our transformation and restore Sears Holdings to profitability," said Edward S. Lampert, chairman and CEO of Sears Holdings in a statement. "We're focusing on our best members, our best categories, and our best stores as we work to accelerate our transformation."

The closings follow a comprehensive review of the company's locations that took into account store performance and the timing of lease expirations.

Sears Holdings has struggled for years with weakening sales, unable to keep up with companies that sell appliances, like Home Depot, or general merchandise, like Wal-Mart, or everything, as is the case with Amazon.com. The company has been selling assets to raise cash. In 2011, it operated 4,000 stores. Sears is also shifting away from its focus on running a store network into a member-focused business. Loyal shoppers receive incentives to buy. But those moves haven't gained much traction with shoppers.

In the fourth quarter, which includes the holiday shopping season, revenue at stores opened at least a year fell 6.9 percent at Sears, and 7.2 percent at Kmart. That's a key indicator of a retailer's health because it excludes the volatility from stores that recently opened or closed. The company saw its fourth-quarter loss widen to $580 million, from a $159 million loss a year ago.

Sears declined to say how many workers will be affected from the store closures, but it said that an overwhelming majority of the jobs are part-time positions. Eligible associates will receive severance and will have the chance to apply for open positions at area Sears or Kmart stores.

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Macy's unseats Kohl's as....
By Marianne Wilson
RetailingToday
Apr. 20, 2016

Macy's ranked as the department store of the year in the Harris Poll's 28th annual EquiTrend Study, which recognizes the strongest brands based on consumer response.

In coming out on top, Macy's unseated Kohl's, which has held the honor since 2012. Macy's also showed one of the largest brand equity increases (+7%) over a three-year period.

"Consumers form impressions of brands long before they ever use them, based on their perceptions and what they may know from trusted sources," said Joan Sinopoli, VP of brand solutions at Nielsen, which owns The Harris Poll. "This high-level equity is the gateway to eventual purchase; it also helps to protect brands from the consequences of an occasional misstep."

Nordstrom reclaimed the Luxury Department Store Brand of the Year title from Lord & Taylor.

Other retailers taking Brand of the Year honors by ranking first in their respective categories included:

   • Discount shoe stores: DSW Shoes (third consecutive year);
   • Electronics store: Best Buy;
   • Hardware & home store: The Home Depot (fourth consecutive year);
   • Off-Price Retailer: TJ Maxx (first time as Brand of the Year);
   • Sporting Goods Store: Cabela's (reclaiming honor from Dick's Sporting Goods); and
   • Coffee and quick serve restaurant: Dunkin' Donuts.

The Harris Poll survey measures brands' health based on three factors: familiarity, quality and purchase consideration. This year, more than 97,000 U.S. consumers assessed more than 3,800 brands across nearly 500 categories.

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Nordstrom to eliminate 300 to 400 jobs
By Marianne Wilson
RetailingToday
Apr. 19, 2016

Nordstrom announced it will phase out 350 to 400 jobs, primarily in its corporate center and regional support teams, through the end of the second quarter.

The retailer described the reductions as changes in its operating model in order to "continually evolve with the expectations of its customers, ensure it is best positioned to respond to the current business environment, and meet long-term growth plans."

The changes are estimated to generate savings of approximately $60 million in fiscal 2016.

In an effort to minimize impacts on current employees, the company said it will first look at such options as closing unfilled open positions. Employees whose roles are eliminated will receive separation pay and benefits.

The job cuts come amid a slowdown in sales that has impacted a host of retailers recently, and follow job cuts by Walmart and Macy's. It also comes as retailers continue to struggle to integrate their online and physical channels.

In announcing the job phase out, Nordstrom noted that its technology group is focused on strengthening its ability to deliver on e-commerce and digital initiatives, and proactively addressing opportunities to improve supply chain and marketing effectiveness.

"We will never change our commitment to serving customers, but recognize how they want to be served has been changing at an increasingly rapid pace," said Blake Nordstrom, co-president, Nordstrom, Inc. "Meeting our customers' expectations means we must continually evolve with them."

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Zacks: Sears Holdings Corp Receives Average Recommendation of "Strong Sell" from Analysts
By Tyrone Williams
Daily Political
Apr. 18, 2016

Sears Holdings Corp (NASDAQ:SHLD) has received a consensus broker rating score of 5.00 (Strong Sell) from the one analysts that provide coverage for the company, Zacks Investment Research reports. One analyst has rated the stock with a strong sell rating.

Zacks has also given Sears Holdings Corp an industry rank of 181 out of 265 based on the ratings given to related companies.

Shares of Sears Holdings Corp opened at 16.54 on Thursday (April 14, 2016). The stock's 50 day moving average is $15.95 and its 200-day moving average is $19.38. Sears Holdings Corp has a one year low of $14.05 and a one year high of $44.72. The stock's market capitalization is $1.76 billion.

Sears Holdings Corp (NASDAQ:SHLD) last released its quarterly earnings data on Thursday, February 25th. The company reported ($1.70) earnings per share for the quarter, missing the Thomson Reuters' consensus estimate of ($1.36) by $0.34. The firm earned $7.30 billion during the quarter, compared to analyst estimates of $7.26 billion. During the same quarter in the previous year, the business earned ($0.34) EPS. Sears Holdings Corp's quarterly revenue was down 9.8% compared to the same quarter last year. On average, equities research analysts expect that Sears Holdings Corp will post ($15.07) EPS for the current year.

In other news, CEO Edward S. Lampert bought 57,261 shares of the business's stock in a transaction on Monday, April 11th. The shares were purchased at an average price of $14.34 per share, for a total transaction of $821,122.74. The purchase was disclosed in a legal filing with the SEC, which is accessible through this link. Also, Director Fairholme Capital Management L sold 25,400 shares of the business's stock in a transaction that occurred on Wednesday, April 6th. The shares were sold at an average price of $14.47, for a total value of $367,538.00. The disclosure for this sale can be found here.

Separately, Evercore ISI reiterated a "sell" rating on shares of Sears Holdings Corp in a report on Tuesday, February 9th.

Sears Holdings Corporation is an integrated retailer and a holding company of Kmart Holding Corporation and Sears, Roebuck and Co (Sears). The Company operates through two business segments: Kmart and Sears Domestic.

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Traffic To J.C. Penney Website Soars As Company Recovers
By 24/7 Wall St.
Apr. 17, 2016

J.C. Penney is in the midst of a recovery which seemed impossible two years ago. Part of the improvement is a surge in traffic to jcpenney.com which rose 31% to 11.6 million unique visitors in March compared to the same month the year before, according to research firm Compete.

Penney's earning and same-store sales have stepped up in recent months, against a period during which revenue dropped nearly 20% in 2012. The dramatic drop in Penney's fortunes shows up in annual revenue numbers. Fiscal year 2012 revenue was $17.3 billion. By fiscal 2014, revenue dropped to $11.9 billion. In the most recent fiscal, revenue reached $12.7 billion.

When Penney announced results for its most recent fiscal, it disclosed that same-store sales compared to the same period the year before were up 4.5%. Management said: "For the fourth quarter, which included a successful holiday season, JCPenney reported net sales of $4.0 billion compared to $3.9 billion in the fourth quarter of 2014." A rebound, albeit a small one

The battle for retail market share has turned sharply online. Growth in visits to a retailer's site may be more important than same store sales. While J.C. Penney competes with retailers like the Sears division of Sears Holdings (NYSE: SHLD), bricks and mortar fortunes have reached a permanent decline

Amazon (NASDAQ: AMZN) is the primary enemy of all online retailers. One primary measure of its power is its 142 million unique visitors in March, which crushes the traffic to all other retail sites.

But, J.C. Penney's online presence is on the move in the right director. A large number of other retailers are in retreat by the same measure.

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Red Flags For Sears Pensioners
By Dylan Street Capital
Seeking Alpha
Apr. 14, 2016

REMIC properties appear to be located at B & C mall locations.

Pensioners should ask for an independent valuation study into the properties.

Sears isn't doing enough to protect the pension deficits.

This will probably be the most positive article we write on behalf of Sears Holdings. Unfortunately, it comes at the expense of the pensioners of Sears. The Pension Benefit Guaranty Corporation ("PBGC") entered into a five-year pension plan protection agreement with Sears. The idea was to create a security interest in the REMIC issued securities and the associated properties in the event that Sears went bankruptcy. The REMIC properties along with the interest in the KCD notes could be used to satisfy the pension liabilities of Sears' pension fund. On March 24, 2016, Sears filed the agreement with the PBGC...

After going through the list we were surprised at the lack of quality of properties connected to the REMIC notes. We also know that in 2003, Sears issued $1.3 billion of REMIC securities. Also, as of January 30, 2016, the net book value of the securitized real estate assets was approximately $600 million. The list contains 127 properties, none of which are located in California. Note that in the far right column Sears provides the value of each property, but the value is redacted.

Now we will walk you through some of the more interesting properties on the list.

Store #2115, Waycross, Georgia:

The location of the Sears store is provided in the chart above and reads 2215 Memorial Drive Suite 400. When you go to the Sears store locator website, you will not be able to find this location as this store appears to be a closed. In fact, the announcement of this store closing took place back in 2010. See this article. The building still appears to be available for rent. We have been unsuccessfully in finding any indication that anyone has moved into the location since Sears left. We don't know how much value Sears has placed on this location as it relates to the REMIC securities, but would you want to own an abandoned building that has sat empty for almost 6 years? It doesn't seem like it would be too valuable.

Store #8745, Tucker, Georgia:

The location of the Sears store is provided in the chart above and reads 4650 Hugh Howell Road. This appears to be another closed Sears location, as it doesn't show up on the Sears store locator. What is interesting about this location is that it doesn't even appear to be a Sears store. In fact, it is a Sears distribution center. When you search Google for 4650 Hugh Howell Road Tucker Georgia, you will see several advertisements from property firms offering to sell or lease this location...

Per this Loopnet report Sears was asking $7.5 million for this location in 2011. But it hasn't sold. So again we ask how valuable is this location to the pensioners of Sears? Also of interest is the fact that Sears is attempting to sell or lease an additional location (or the actually store location) right next door to this location. That address is 4750 Hugh Howell Road.

So, the pensioners have an industrial location competing for buyers and lessors right next door to an empty Sears location looking for buyers or lessors.

Store #1680, Indianapolis, Indiana:

The location of the Sears store is provided in the chart above and reads 10202 E. Washington Street. This appears to be yet another closed Sears location as it doesn't appear in the Store Locator. In appears, this location was closed in December 2014. Source. This location is located at the Washington Square Mall. According to this article this mall was owned by Simon Property Group until they turned it over to lenders who were owed $27 million. Simon's willingness to abandoned the property has to raise some concerns as to the value of this location.

Store # 2290, Michigan City, Indiana:

The location of the Sears store is not provided in the chart above, but we believe that the address is 3901 S. Franklin Street. This location is not a closed Sears store. This Sears is located at Marquette Mall whose owners appear to have been attempting to sell the mall for over a year for$11.5 million dollars. The article referenced above notes that JC Penny shuttered it store at the mall in July of 2015.

Store #1874, Burlington, New Jersey:

The address of the Sears location provided in the chart appears to be wrong and sends you to the Sears Auto Center. Sears' website shows the address as 2501 Mt. Holly Road.

This is the only address that points to a Sears Auto Center directly. It could be the correct address for the store location as well, but we aren't certain. Anyways, this isn't the reason we decided to include it in this article. But rather a look at Moonbeam Capital's website who is the owner of the Burlington Mall where this Sears is located shows a very vacant mall. Moonbeam is trying to revitalize the location, so that can be a good thing, but as this flyer shows, the majority of the mall is already empty. Thus, there is major competition for re-leasing any Sears space, should Sears decide to close this location.

Store #2197 Texas City, Texas:

The address for this Sears location is 10000 Emmett F. Lowry Expy. This location is attached the Mall of The Mainland. This location is interesting for several reasons. The mall was shut in 2014, leaving only the major tenants operating. In 2012, a bank attempted to sell the site and surrounding parcels of land for $15.4 million...It should be noted that a local real estate developer is attempting to turn around the mall with new developments. So maybe this location is more of a work in progress.

Store #1337 Plano, Texas:

The address for this Sears location is 851 N. Central Expressway. This location is attached to the Collin Creek Mall. What is interesting is that Rouse Properties gave up ownership of the mall in 2015 in satisfaction of debt outstanding. The appraised value of the mall at the time was only $57.6 million. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

CBL Properties:

CBL & Associates Properties is a publicly traded REIT. After briefly reviewing each property we were able to determine that Sears locations at CBL owned malls represented the largest group of properties. CBL offers a unique way for us to look at the Sears properties because CBL provides a lot of information regarding the malls. CBL organizes the malls by tiers: Tier 1 are those malls whose sales per square feet are greater than or equal to $375, Tier 2 are those malls whose sales per square feet are between $300 and $375, Tier 3 are those malls whose sales per square feet are less than $300...The Sears locations are located primarily at malls that are categorized as Tier 2.

Next, CBL has one final category of malls which are called "Non-core/Lender Malls." On page 25 of the CBL's most recent 10-K we can see the definition of Non-core/Lender Malls which reads as follows,

Non-core Malls - Malls where we have determined that the current format of the Property no longer represents the best use of the Property and we are in the process of evaluating alternative strategies for the Property, which may include major redevelopment or an alternative retail or non-retail format, or after evaluating alternative strategies for the Property, we have determined that the Property no longer meets our criteria for long-term investment.

There are two Sears locations located at these Non-Core/Lender Malls...

It would seem that these locations would have limited value to the Sears pensioners as it appears these malls are in such bad shape that CBL isn't relying on them for future performance.

Finally, there are two mall locations that were apart of malls once owned by CBL. Store #1221 Chapel Hills Mall, and Store #2855 Citadel Mall. On page 65 of CBL's 10-K we can see that these malls were turned over to the lenders for debts outstanding. Again these locations appear to be in bad financial shape as to warrant an examination into the valuation assigned to them by Sears.

General Thoughts:

After reviewing the properties, it appears to us that majority of these properties are located at B and C malls. For example, Store #2760 is attached to the NorthPark Mall. The NorthPark Mall is owned by Macerich. The sales per sq. feet ($307.00) at this mall is the 3rd lowest sales per square feet in the entire Macerich portfolio.

Because the values of the properties are redacted we do not know how Sears is valuing these particular locations. We also do not know how much value in total is being assigned to the properties. Our goal was to highlight some of the stores with glaring issues about their potential valuations. It is hard to imagine that many of the stores listed above have any real significant value (not including some of the higher end CBL properties). We also believe that the PBGC has an obligation to the Sears pensioners to take a deeper look at the assigned values of these properties, along with the other properties securing the notes to ensure that they are sufficient to satisfy the claims of the pension fund should it become necessary to do so.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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IBM: Retailers not meeting customer experience expectations
By Dan Berthiaume
Chain Store Age
Apr. 11, 2016

Retailers have a way to go in satisfying their customers in several key areas.

The IBM 2016 Global Customer Experience Index (CEI) evaluated 550 brick-and-mortar and pure-play retailers spanning eight different retail segments in 23 countries across the globe. This study revealed that the industry achieved an overall performance score of 40%, a failing grade, when measured against customer satisfaction criteria.

Specifically, the index measured customer satisfaction in the areas of consistency, content, context, and convenience. Consistency had the highest score, with 49% consumer satisfaction. Retailers are generally more effective at providing visibility into online product availability than in-store product availability, although retailers scored relatively poorly in both.

Fifty-two percent of retailers provide online product availability in three or more channels, and only 38% provide store-level product availability in three or more channels.

Retailers are also missing the mark on delivering engaging content, with a satisfaction score in this category of 42%. Content is especially falling short when delivered via mobile. Most retailers included in the index offer basic in-store mobile services, but miss an opportunity to support customers' in-store decision making.

While 80% of retailers offer in-store mobile services for smartphones, 55% do not offer additional product information via a digital device while in the store. Furthermore, 71% do not offer product comparisons on their websites.

In the area of convenience, retailers only earned a 32% satisfaction score. Fifty-five percent of retailers allow customers to "click and collect," or buy online and pick up locally from a store. However, the index finds the experience often takes more than 48 hours to complete. Only 27% of these retailers provided an in-store collection experience ranked as "good" or "very good."

Also, retailers are failing at delivering offerings that fit into specific contexts. Context produced the lowest satisfaction score of any of the four customer experience areas analyzed by the index -30%. While retailers are now encouraging customers to provide more personal information, IBM data shows few are leveraging the available data to recognize and acknowledge customer preferences and turn these insights into actions.

In fact, retailers scored lowest on these contextual criteria, and only 17% of retailers surveyed provide personalized name, product content and marketing messages in at least one digital touchpoint.

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Sears Taps Bill Gates's Fortune in Latest Borrowing
By Suzanne Kapner
Wall Street Journal
Apr. 9, 2016

Eddie Lampert's hedge fund and Cascade Investment among backers of $500 million in financing

Hedge-fund manager Edward Lampert continues to pump money into Sears Holdings Corp., but for its latest financing the retailer also has tapped another billionaire's fortune.

The company on Friday said it raised $500 million in financing backed by mortgages on 13 properties. The backers include affiliates of Mr. Lampert's hedge fund, ESL Investments Inc., and Cascade Investment LLC, the investment firm that manages most of Microsoft Corp. co-founder Bill Gates's wealth.

A spokesman for Mr. Lampert declined to comment, as did a Cascade spokesman.

Sears, which is mired in a sales slump, has been pursuing fresh financing after ending January with $238 million in cash and cash equivalents. The retailer said last month it had priced a $750 million loan, which was expected to close Friday. Mr. Lampert's fund acquired a portion of that loan, according to Reuters.

The financial support underscores the deep and unusual relationship between Sears and Mr. Lampert, who took over the company in 2005 and merged it with Kmart. He is chairman and chief executive of the company and his fund controls nearly 55% of the shares outstanding.

The company has posted five straight years of losses amid sliding sales. The company lost $1.13 billion in the fiscal year ended Jan. 30, following on a $1.68 billion loss a year earlier. Sales in the latest year fell 19% to $25 billion.

Sears shares rose 0.8% to $14.45 on Friday, but the stock is down 66% over the past 12 months.

The company, which is based in Hoffman Estates, Ill., is also trying to raise an additional $300 million through asset sales or other means. Taken together, the funds would provide Sears with $1.5 billion in liquidity.

Monica Aggarwal, a Fitch Ratings analyst, estimates that after the loans raised Friday, Sears would still need an additional $1 billion to $1.25 billion to fund operations this year.

A Sears spokesman said the company has sufficient financial resources. He noted that at the end of the fourth quarter, the company had $4.2 billion in liquidity and assets that could be converted into cash, including available borrowing capacity and inventory. He said the company has a wide range of financing options available under its credit facility.

Mr. Lampert has long been a Sears lender. In the past he has bought its commercial paper, but those loans were unsecured. Then in September 2014, he provided $400 million in short-term financing backed by 25 Sears properties. The loan was initially due in just over three months, but was extended and paid off in June 2015.

He has also helped prop up the company by buying shares in entities it has spun off, including a portfolio of real estate that in addition with other transactions raised $2.7 billion last year. Those stores are now owned by Seritage Growth Properties.

Sears has immediate access to $250 million of the $500 million loan announced Friday, which matures in July 2017. If it draws down additional amounts, the company will have to provide eight additional properties as further collateral.

Sears hired Eastdil Secured to syndicate the loan. The ESL affiliates and Cascade each kicked in $125 million, and have committed to providing any portion of the loan that isn't syndicated to other lenders.

ESL and Cascade have invested alongside each other before, namely in AutoNation Inc., where ESL has maintained a large stake for years.

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Sears expands omnichannel service; hopes more people will seek out 'expert'
By Dan Berthiaume
Chain Store Age
Apr. 7, 2016

Sears Holding Corp. is making a timely expansion to its seamless "Meet With An Expert" service as it looks to engage with shoppers this spring.

Sears has extended its "Meet With An Expert" service introduced last fall to its lawn and garden department. The free service allows online shoppers to schedule in-store appointments with experts in specific product areas.

The retailer timed its latest iteration of "Meet With An Expert" to coincide with its "Spring It On Black Friday" event April 22-23, which will offer Black Friday-level pricing on outdoor equipment and other home goods.

"From finding the right type of mower to a more powerful trimmer to the perfect-sized shed and more, "Meet With An Expert" takes the guesswork out of shopping for lawn and garden products," said Joelle Maher, president and chief member officer for Sears.

The service initially launched in fall 2015, with appliances. After meeting with an expert, a shopping recap can be emailed to the customer with links to products in which they expressed an interest to help close the sale. Because the path to purchase for big-ticket, high-consideration products like appliances typically begins online, Sears wanted to create an option for online shoppers to have continuity of their experience in a physical store.

Sears has long been a leader in digital retail innovation. The company was an early provider of buy online pick up in store functionality back in 2001. Around 2005, Sears introduced its "Ready in Five" guarantee that ensures customers will not have to wait more than five minutes in-store to pick up an online purchase. In 2009, the retailer purchased Israeli social media engine Delver, which was the origin of its "Shop Your Way" social platform.

More recently, in 2014 Sears began offering in-vehicle product pickup and return service, as well as an online "Reserve It" service that lets online shoppers select apparel products to be set aside at a local store for try-on.

Despite these numerous innovations, Sears still struggles with sales and profitability. According to the retailer, 60% of its online sales involve a store, so offering more omnichannel services that blend physical and digital channels makes sense. But the industry should watch Sears closely to see just how effective seamless customer experience is for a retailer that appears to be having problems in areas such as marketing and merchandising.

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Study: What's keeping retail execs up at night?
By Dan Berthiaume
RetailingToday
Apr. 6, 2016

Increased security risks tops the list of a new survey of 300 top global retail executives on the topics keeping them up at night.

According to "Finding Retail Growth: A View from the Corner Office," sponsored by Demandware and conducted by Economist Intelligence Unit, retail leaders view increased security risks, the rise of globally competitive online marketplaces, shifts in consumer taste and increased globalization as the four most significant challenges impacting the industry.

Among the characteristics that executives view as most important to differentiating themselves in the face of these challenges, 60% pointed to "product excellence," while 53% cited "seamless service," such as offering high-quality customer services and a unified experience across channels. Executives noted that differentiation has become more complex and difficult given rapid changes in customer behavior and transformation in technology.

Most respondents showed confidence in their ability to succeed in this disruptive landscape. Among those who see "fast fashion" as a key trend, for example, 76% said they were ready to compete in that space. And 70% of respondents expressed similar confidence in their ability to handle mass customization.

In particular, respondents identified as belonging to "high-performing" retailers see trends as opportunities compared to their lower-performing counterparts. High performers, the data suggest, are particularly focused on growth rather than on simple survival.

For example, 69% of high performers see globalization as an opportunity, while only 43% of lower performers do so. Likewise, 52% of high performers view the rise of the global marketplace as an opportunity, while only 35% of the lower performers see opportunity there.

Also, the high performing segment more often focuses on three top growth initiatives: geographic expansion, strategic partnerships and new stores and formats. They also arefsar more likely to indicate an intention to increase tech spending (82%) than among lower performers (56%).

"This data tell us that the democratization of retail — with seemingly unlimited consumer access and control — has triggered the next wave of growth for those that adapt and change," said Rob Garf, VP of industry insights at Demandware. "Retailers can no longer rely on more store locations and larger footprints for growth — they must embrace the reality of reaching customers wherever, whenever and however they demand."

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Sears Canada makes COO position permanent
By Mike Troy
RetailingToday
Apr. 5, 2016

Sears Canada is again calling on Becky Penrice to lead an important aspect of its nearly 300 store operation.

Penrice was named executive VP and COO after serving in that role in an interim capacity for little over a two months. Penrice has worn several hats at Sears Canada since joining the company on Dec. 1, 2013 after holding supply chain and human resources roles role at Hudson's Bay Company.

Initially hired as senior VP of human resources at Sears Canada, within six months Penrice was given added responsibility for information technology while retaining HR responsibilities. On Feb. 1, Penrice was named interim COO.

"Becky has consistently and effectively provided strong leadership at Sears Canada," said Brandon G. Stranzl, executive chairman of Sears Canada. "She has driven results for many cross-functional strategies at Sears Canada, including our re-engineering initiatives in IT, store operations, loyalty and marketing operations, logistics, and general business processes across our merchandising and other operations."

Stranzl credited Penrice with an ability to break down barriers and bring out the best in people to drive performance. He also noted that her leadership role evolved organically.

"The respect she has earned from our people will enable her to continue to lead Sears Canada in her new role as we re-engineer the business," Stranzl said.

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This Company Is Best Positioned to Capitalize on Sears' Demise
The Motley Fool
Apr. 1, 2016

J.C. Penney is taking steps to grab sales from Sears.

Retail is a competitive industry. No one knows that better than Sears Holdings, whose management has presided over a stunning implosion of value. A generation ago, Sears was the No. 1 retailer in the U.S. Today, it's on the brink of bankruptcy after years of falling sales and massive operating losses.

Both revenue and share price have collapsed over the past decade. Part of that decline is owed to spinning off business like Lands End, Sears Canada, and Sears Hometown and Outlet, but a significant portion is thanks to store closures and several years of comparable sales declines. The figure fell by 9.2% last year, signaling that Sears' consumer appeal is worsening. The company also closed 53 stores out of 1,725 last year.

As Sears unravels, it is shedding billions of dollars in sales, leaving that money up for grabs for its retail rivals. Still, with $25 billion in sales, the company remains a force in retail, ranking just behind No. 1 department store chain Macy's, with $28 billion in revenue last year.

When opportunity knocks

No one in the retail industry is better positioned to take advantage of Sears' misfortune than J.C. Penney. Both retailers target the same customer -- middle-income Americans -- and the two often even occupy the same malls. As of 2014, nearly half of the 1,050 malls across the country counted both Sears and J.C. Penney as anchors. As Sears' stores become less appealing to customers, many of them are likely to check out the Penney's on the other side of the mall.

J.C. Penney has spotted this opportunity and recently entered a segment that's been one of Sears' last remaining strengths: appliances. Sears' has been gradually losing its leadership in appliances, a retail category it helped pioneer with popular brands like Kenmore. Sears claimed about a quarter of market share in appliances as of September, down from 33% a decade earlier, but home improvement giants Lowe's and Home Depot ( are fast gaining on it.

Smelling an opportunity, J.C. Penney recently threw its hat into the ring with a pilot program testing appliance sales at 22 stores. It's the first time the company has sold dishwashers, stoves, and other such contraptions in 30 years. The decision was in part driven by data as management noticed that an increasing number of customers were searching for appliances on its website. In fact, it was the most searched-for item that the company didn't carry. The pilot program launched February 1.

With just $12.6 billion in revenue last year, the opportunity for Penney's in appliances -- and grabbing some of Sears' sales -- is much greater than for Lowe's or Home Depot, whose annual sales are several times that figure. Sears posted over $10 billion in sales in its hardlines segment last year, which includes appliances. For J.C. Penney to take even a small portion of that would have a meaningful impact on its bottom line.

Turning the tables

At one point, it was Macy's who was benefiting from J.C. Penney's collapse. In 2012, as Penney's saw comparable sales plummet by 25%, Macy's grew earnings per share 20%, and its stock surged...The two stocks have tended to move opposite one another, and Macy's acknowledged that it gained traffic from Penney's woes.

It's clear, then, that one department's store chain's performance affects another in this highly competitive industry. J.C. Penney now has a golden opportunity to take sales from a struggling Sears. Look for the company to expand its appliance program and to target other weaknesses in its decaying rival.

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What Home Depot is doing right that the competition isn't
By Nicholas Rossoliol
The Motley Fool
Apr. 1, 2016

Over the last couple of years, Home Depot (NYSE: HD) stock has been beating the broader stock market. Helped by a recovering housing market and families spending money on their homes again, home improvement stores in general have seen a surge in business in the last two years. Home Depot, though, has also been outperforming its biggest competitor Lowe's (NYSE: LOW).

What has the big orange home improvement superstore been doing right that the competition is missing out on?

Let's first see what has led to Home Depot's outperformance. Helped by a boost in household spending, Home Depot saw an almost 6.5% increase in revenue over 2014, as well as a 10.5% increase in profit.

What was the reason for these increases in revenue and profit? The company saw strong comparable-store sales growth, especially in the U.S., with an increase of 7.1% over 2014. Lowe's posted an increase as well but lagged behind at only 5.1% U.S. comparable-stores sales growth. Lowe's also saw revenue and profit get hit by its exit from its Australian joint venture in 2015.

Home Depot attributed the strong increase across the board to its online business. The company has been dedicated to integrating its online store with its physical stores over the last few years. How has it been able to do this?

Home Depot's logistical supremacy

It's easy for any business to invest in an online shopping experience and pay for advertising to get Internet traffic flowing to it. In fact, if you go to both Home Depot and Lowe's websites or mobile sites, the two competing online stores look and feel very similar. So, what has set Home Depot's online capabilities apart from the competition?

The first differentiator is that Home Depot has the biggest full-service home improvement store presence in the U.S. As of the end of 2015, the company had 2,274 stores, compared with 1,857 for Lowe's. With more physical stores, customers looking for an in-store experience or a pick-up-in-store online order option are more likely to choose a store that's close to them.

The second is that the company has invested heavily in supply chain and logistics technology. Back in 2012, Home Depot purchased a data analysis and pricing company to help make merchandise decisions and product price reduction decisions. Over the last two years, the home improvement store has also rolled out tools for its associates to be able to locate items in stores more quickly, introduced new customer ordering options like in-store scheduled pick-up, and integrated third-party company installers into the company's communication system to enhance responsiveness to customers.

In 2015, Home Depot also announced that a new supply chain synchronization system it had been piloting would be extended to new markets to increase sales efficiency and increase product delivery times.

As a result of these initiatives, Home Depot has returned superior results for shareholders.

Home Depot is far outpacing its biggest competitor Lowe's in all categories. At nearly 8%, Home Depot's bottom-line profit margin is nearly double the margin Lowe's has been able to manage. Both at the operating level and on the bottom line, Home Depot has been more efficient.

Home Depot has also been demonstrating good management of company assets -- physical stores as well as its online capabilities -- and investors' dollars as shown in its return on assets (how well a management team is utilizing company assets to generate profit) and return on equity (profit returned to shareholders in relation to the amount shareholders have invested) ratios.

It's obvious Home Depot's focus on integrating its physical stores with its online presence and all related business activities has been paying off. Despite consumers shopping more online, the country's largest home improvement store has demonstrated its ability to adapt to and thrive in today's new marketplace.

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J.C. Penney taps athletic wear trend with new line
By Gina Acosta
RetailingToday
Apr. 1, 2016

J.C. Penney is teaming up with WWE to launch a new line of performance apparel for men and women.

Tapout, a global fitness and training brand recently re-launched by WWE and Authentic Brands Group, is now available in nearly 300 J.C. Penney stores and at jcp.com, with plans to launch a women's collection this summer.

"From working out to hanging out, Tapout offers a stylish collection of performance sportswear that's versatile enough to wear in and out of the gym," said James Starke, senior vice president of men's apparel at JCPenney. "Tapout has a strong fan base and JCPenney is excited to add this brand to our great assortment of high quality activewear for young men."

The Tapout performance apparel collection for men at J.C. Penney includes a range of training and compression tees, tank tops, pants and shorts featuring Tapout's new, contemporary branding. Prices range from $12.99 for graphic tees to $32.99 for compression shorts. The line ensures comfort and performance with the use of stretch and moisture-managing fabrics that allow optimal function. The Tapout women's line will boast similar performance features, offering sports bras, tank tops, tees, shorts and capris.

A fully integrated marketing program will support the launch of Tapout. As the official fitness and training partner of WWE, Tapout is promoted across WWE's global platforms including TV programming, WWE Network, pay-per-view broadcasts, live events, digital and social media. WWE Superstars and Divas wear Tapout apparel during their fitness and training activities and WWE Superstar John Cena serves as a Tapout brand ambassador.

"Fitness is my life, and it is important for me to use the high quality and comfortable performance apparel that Tapout offers," said John Cena. "The Tapout brand stands for motivation, discipline and determination, three core values that are key to my active lifestyle."

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Sears Holdings: Just the Facts — Our Apparel Business
By David Pastrana, President, Apparel for Sears Holdings
Apr. 1, 2016

Earlier this week, an industry trade magazine alleged that we're not "engaged" in our apparel business. Nothing can be further from the truth.

Effectively managing and improving the operating performance of our apparel business is one of Sears Holdings' top priorities in 2016, as our Chairman and CEO Eddie Lampert recently referenced. Our apparel business has a substantial impact on the company's overall profitability and is one of the keys to our efforts to generate positive Adjusted EBITDA in the near future.

Specifically, we are dedicated to having the right product assortment for our members, the right sourcing strategy and a deep, experienced set of leaders in place to positively impact this business.

Product Assortment: Our members and customers' tastes change quickly and we need to better match their shopping behaviors and interest in fresh assortment by focusing on several key brands from Kmart and Sears. As part of this shift, will continue to reduce the number of overall brands and product categories while working to elevate the product. We are proud of our members' response to the new styles of various brands, such as:

  • At Sears: The popular Simply Styled and Simply Emma brands offer fantastic fabrics and price points such as camis ($3.99), cotton t-shirts ($5.99) and leggings ($7.99). Members are also attracted to the latest styles from Metaphor (particularly midi skirts and dresses), Canyon River Blues and Everlast.

  • At Kmart: Attention, Jaclyn Smith, Adam Levine and Nicki Minaj offer great value and stylish designs that continue to be well received by our members.

Product Sourcing: It's vital that we offer our members and customers the right fashion at the right time at the right price. We will continue to become less reliant on partner brands, and more focused on getting stylish apparel to our members and customers through greater control over our supply chain. By leveraging better sourcing and a direct business approach, we anticipate that that the resulting cost improvements will have a direct result on margins and the price that the member pays.

Leadership: We have a strong leadership team in place to support the apparel business' transformation. These are leaders with significant merchandising, design, sourcing and operational experience at companies such as Abercrombie & Fitch, American Eagle, Hollister Co., Inditex, New Look, Primark and Victoria's Secret. Additionally, we have leaders with successful, hands-on experience in turning around businesses such as KIABI and Pimkie.

We are starting to see traction in the changes we are making in the apparel business and we look forward to the year ahead.

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Retail CEOs are most worried about...
By Marianne Wilson
Chain Store Age
Mar. 31, 2016

When it comes to what keeps retail CEOs up at night, put exchange rate volatility and over-regulation at the top of the list.

That's according to PwC's 19th Annual Global CEO Survey, which explores top business concerns of retail and consumer product CEOs.

Of the many different political, social and economic risks businesses face, those that concern retail sector CEOs the most are over- regulation (37% are extremely concerned), exchange rate volatility (36%), an increasing tax burden (33%), and social instability (29%).

By contrast, the issues that worry them the least are access to affordable capital (20% are not concerned about this at all), unemployment (14%), and the Eurozone debt crisis (14%), according to the survey.

Surprisingly, given some of the other findings from the sector, 20% of retail CEOs are not concerned at all about climate change, although 34% do cite it as a significant concern.

Key concerns for consumer goods CEOs include exchange rate volatility, the increasing tax burden and the availability of key skills.

Here are some other findings from the report:

  • Seventy-seven percent of retail CEOs say they are concerned about the impact of shifts in consumer spending and behavior.

  • Eighty-five percent of retail CEOs say they are expected to address wider stakeholder concerns than ever before.

  • Technologies that got strong ratings for their ability to connect retailers and consumer goods companies to their publics were data and analytics (70% retail, 64% consumer goods) and customer relationship management systems (71% retail, 69% consumer goods).

  • Seventy-four percent of retail CEOs rate technology advances as one of the top three global trends likely to transform wider stakeholder expectations of their business.

  • Seventy percent of retail CEOs rated data and analytics as likely to generate strong returns for engaging with stakeholders.

The PwC report is based on a survey of more than 210 retail and consumer product CEOs in 61 countries.

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Sears Holdings Corp. Is Sitting on a Ticking Time Bomb
By Rich Duprey
The Motley Fool
Mar. 31, 2016

The retailer's retirees could be facing a nightmare.

It's pretty much a given that Sears Holdings is in dire straits. Sales are falling, losses are widening, and even the one analyst left covering the retailer thinks the likelihood it goes bankrupt is pretty high. But it doesn't appear many are aware of the ticking time bomb Sears is sitting on that's just waiting to explode and hasten the end.

A not-so-comfortable retirement

Sears has a massively underfunded pension plan that will either drive the retailer to the brink or result in retirees receiving dramatically reduced payouts. It may have just signed a five-year agreement with the federal Pension Benefit Guaranty Corp to "protect" those pensions, but having accumulated $8.3 billion in net losses since 2011, it suggests the potential for a complete implosion is very real.

Sears says the fair value of its pension plan assets total almost $3.2 billion, but it acknowledges its pension obligations amount to nearly $5.3 billion, leaving it with a huge, $2.1 billion deficit. As bad as that sounds, the situation's actually worse, because Sears is using imaginary numbers to make the situation appear better than what it is. Even though the accounting is perfectly legal, and many companies also deploy the same tactics, the bill is coming due, and it won't be pretty.

The problem arises from Sears' use of unrealistic assumptions, which lets them set aside less for pension obligations while lowering the hit it takes to earnings.

Pension accounting involves two numbers: the rate of return a company earns on its investments, and the discount rate, which it uses to discount future obligations back to a present value. Changing one or the other (or both) allows management to massage the results more to its liking.

Rate my performance

As it has for at least the past three years, Sears thinks its pension managers can earn a 7% return on their investments. With historical stock market returns being about 10%, Sears estimates seem conservative except that around three quarters of the historical averages come from dividends and inflation, with earnings growth being the smallest contributor. Historical bond returns are much lower than that.

Sears' pension plan portfolio is dominated by fixed-income investments that make up 63% of the total assets, with equities largely comprising the remaining 37%, a wholly appropriate balance for a pension plan. This year, it intends to have fixed-income investments account for 65% of the total.

What's unreasonable is to think Sears can make a 7% return. While it did exceed that amount in 2013, generating returns of about 10.5%, its non-equity investments were below 60% at the time, and the stock market had a huge year that year, surging 30%. Last year the market was down 2%, and Sears' pension lost more than 7% on its investments.

Don't discount the danger

The second part of the equation is the discount rate, and Sears uses a 3.7% rate to discount its future obligations. That's better than the 4.6% rate it used in 2013, and certainly more appropriate than the near-5% rate from 2011, but even though the retailer has lowered its expectations, it too, is still too high. In a world where 10- and 30-Year Treasuries go for 1.9% and 2.7%, respectively, Sears' near-4% rate still seems ambitious.

But there's a good reason for it having an abundance of confidence in the abilities of its pension manager: A one percentage point decrease in the discount rate would cause its pension obligations to balloon by $600 million. With it having all of $141 million in cash and equivalents at the end of January, and nearly $2.2 billion worth of pension obligations to pay in the coming years, a 27% increase in obligations could be devastating.

Stepping on a landmine

Of course, Sears isn't the only one wearing rose-colored glasses when it comes to pension accounting. It's a massive problem all across all of corporate America, and it's getting worse. Global consulting company Mercer says there's a massive $487 billion funding deficit in the pension plans sponsored by S&P 1500 companies, and an $83 billion drop since just the end of last year. It estimates the aggregate value of all pension plan assets of those companies was $1.74 trillion, compared with estimated aggregate liabilities of $2.22 trillion.

While Mercer notes the Federal Reserve's zero-interest rate policies have applied downward pressure on the discount rate, IBM recently bucked the trend and admitted it raised its discount rate to 4% precisely because it lowered by $100 million its pension costs and expenses.

Sears' pension plan has some 200,000 people in it from before 2006, when it was frozen, who are at risk of seeing their benefits reduced if Sears cancels the plan and the PBGC takes over.

Over the years, chairman and CEO Eddie Lampert has stripped the company bare of some of its most valuable assets. Absent real-world numbers, its pension and those of many other corporations amount to little more than cookie-jar accounting systems executives can dip into to obtain the results they want.

Companies can allow these deficits to grow only so far before they have to expense them on the income statement, and even if Sears doesn't have the biggest corporate pension deficit, it's arguably one of the most distressed businesses already teetering on the edge.

While Sears has used some of the proceeds from Lampert's various financial maneuvers to reduce its pension obligation burden, it's only because of overly optimistic assumptions that the situation -- and its balance sheet -- doesn't look worse than it is.

With a failing business and a reliance upon recurring one-time cash infusions through asset sales and refinancings, this is a ticking time bomb that can go off at any moment.

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Supplier survey bodes well for retail sales
By Marianne Wilson
RetalingToday
Mar. 30, 2016

If the major suppliers of soft goods such as clothing and accessories to retail stores are a bellwether of the economy, then the coming months are looking to provide a jolt as 75% of these suppliers expect retail sales to significantly outpace the gross domestic product for the spring and summer shopping season.

That's one of the major findings of a new survey conducted by Capital Business Credit.

According to the Global Retail Manufacturers and Importers Survey, the vast majority of those surveyed believe that 2016 will either be better (45.5%) than or the same (38.6%) as 2015. How much better? Seventy-five percent believe that retail sales will grow by 4% or more, outpacing core GDP growth.

"While retail sales for January and February were lower than initially anticipated, this hasn't seemed to deter retail suppliers' confidence or business activity," said Andrew Tananbaum, executive chairman, CBC. "In fact, nearly 90% of importers and suppliers are reporting reorders for the spring/summer shopping season.”

Retailers have become increasingly reticent to stock shelves if they do not believe products will sell or consumers will buy, according to Tananbaum, and the reorders mean that the major retail chains and individual stores are optimistic.

When it comes to orders that retailers are placing, the majority stated they have increased or stayed the same (78%). Approximately half (49.1% ) indicated that they have increased.

Of those that stated orders have increased, one third indicated that orders increased between seven and ten percent, while 28.8% said that orders increased by more than 10%.

The Impact of the Chinese Yuan

Given that so many U.S. retail goods are produced in China, the devaluation of the yuan has been an important factor for importers and retailers to increase profitability while keeping prices low.

Half of respondents are considering increasing their Chinese production due to the strong dollar vs. the yuan.

A third (37%) believe that margins may increase due to the lower cost to produce goods in China, however the majority (56.7%) do not think this will translate into lower consumer prices.

On the flip side, 71% believe that the strong U.S. dollar will impact foreign spending domestically.

"While the overall recovery from the great recession of 2008 has been sluggish, the low costs of goods produced in China has allowed the U.S. consumer to stretch their spending dollars and allowed retailers to keep costs down," Tananbaum concluded. "In our opinion, this is the first time since the recession that manufacturers, importers and other participants in the retail goods supply chain will have the opportunity to recover some of the margins they lost over the past decade."

CBC surveyed approximately 30 retail importers and manufacturers that supply approximately $800 million in goods at retail outlets throughout the United States. These wholesalers sell to all segments of the retail supply chain with the exception of the juniors market.

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Study: Younger shoppers want stores
By Marianne Wilson
RetailingToday
Mar. 29, 2016

Gen Z and Millennials are big on physical stores—even more so than their older counterparts.

That's one of the findings of a new research study by insights firm iModerate in which 74% of all respondents said it is important for brands to have a physical location rather than solely selling online. Interestingly, 80% of Gen Zers and 82% of Millennials respondents said it is important, compared to 69% of Gen Xers and 65% of Boomers.

One of the biggest lures for in-store shopping is the assurance that comes from seeing, feeling and trying on merchandise, particularly items such as clothing, shoes and cosmetics, according to the study. This is especially true for first-time buying experiences.

"One of brick-and-mortar's greatest advantages over other channels is that there's an opportunity for shoppers to interact with products, and that gives them the confidence they need to make a purchase," said iModerate CMO Adam Rossow. "Retailers can take even small steps to capitalize on these exploratory shopping habits, such as creating close-up experiences with new styles, providing samples and demos, and ensuring there are ample mirrors and fitting rooms."

Big Box Stores: The study noted that while big-box chains are likely affected by e-commerce more than other types of stores because they sell commodity products, they still appeal to busy shoppers who want quick, one-stop-shopping.

iModerate identified three factors that can tip the scales in either direction for big-box shoppers, and lead to different perceptions of the same brand:

    • Personnel – Big-box stores are often well staffed, but consumers complain that sales associates lack product knowledge.
    • Convenience – Although they carry a wide array of products, consumers find inconsistency with selection, layout, maintenance and management within each store, causing them to spend more time shopping than they'd like.
    • Layout – Larger stores with wider aisles allow for easier navigation, but these cavernous spaces can feel cluttered and dirty when not well maintained.

"When it comes to big-box stores, providing a consistent brand experience across every store is essential," said Rossow. "Retailers should identify the locations that best uphold their brand promise, figure out what consumers love about them, and implement those best practices across all of their locations to the best of their ability."

The study also revealed that each generation is looking to get something different from their store visits:

    • Gen Z – Seeks the reassurance found through the sensorial. Stores like Forever 21 enable them to try on various sizes and styles that are difficult to perfect online, and brands such as Sephora offer samples and demos.
    • Millennials – Seek efficiency and quality. Many are launching careers and have young families so they need to shop frequently, and favor big-box stores for their ability to quickly find everything they need in one place.
    • Gen X – Seeks an escape and discoveries.
    • Boomers – Seek comfort and space. They also value low music, light scents and seating.

iModerate conducted the survey with 844 consumers who ranged in age from 15 to over 65, and who shop in a store or online at least monthly.

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Sears CEO Lampert buys some of company's debt
Crains's Chicago Business
Mar. 29, 2016

Sears Holdings Corp Chief Executive Eddie Lampert has acquired a portion of the company's new $750 million loan in his latest bet on the parent of Sears department stores and Kmart discount shops, people familiar with the matter said.

The loan helps Sears pay down some of its older debt at a time when shoppers are moving away from malls in favor of Internet shopping and the company, which has lost more than $8 billion over the last five years, sees its sales plummet.

Lampert, whose net worth is pegged by Forbes at $2.4 billion, is buying the debt through his hedge fund ESL Investments, the people said last week. He is picking up a couple of hundred million dollars of the new term loan arranged by Bank of America Corp (BAC.N), one of the people added.

Besides Lampert, buyout firm TPG Capital LP also helped fund the term loan, according to the people. The loan, backed by Sears' inventory and receivables, pays an interest rate more than four times higher than the average for the same type of loan to a retail company, according to Thomson Reuters LPC data.

The collateral backing the loan is such that Lampert and the other investors in it would be paid in full in the event of a liquidation, the people said.

The sources asked not to be identified because details of the loan's syndications are not public. Lampert declined to comment through a spokesman last week, and a TPG representative also declined to comment last week.

Sears said in a statement on Monday that it has sufficient financial resources and liquid assets to fund its transformation and meet all of its financial obligations.

The term loan is expected to close on April 8, at which point Sears will receive the proceeds from it.

The new term loan buys Lampert time to either turn around the business or continue to sell off its most valuable assets, said David Tawil, president at hedge fund Maglan Capital.

"Lampert has successfully spun out other pieces of the overall conglomerate over time, and that has gone to shareholders, either through a dividend or spinning out the stock," Tawil said. "That's still a possibility for some of the assets of the company."

Sears has said it is considering selling its Sears Auto Center business, and is also looking into other asset sales. Lampert and his affiliates also own about 50 percent of the outstanding shares of the company's common stock.

Sears had about $3 billion in borrowings as of Jan. 30. Its shares have dropped more than 60 percent in the last 12 months. The company now has a market capitalization of $1.6 billion.

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Sears Holdings names new chief administrative officer
By Gina Acosta
RetailingToday
Mar. 28, 2016

Sears Holdings has named an expert in digital transformation to fill the newly created role of chief administrative officer.

The company has named James P. Andrew to fill the new position, which will be responsible for the company's corporate support functions, including financial planning and analysis, business finance, procurement, legal, and human resources.

"Jim is a proven executive with deep expertise leading business performance improvement, corporate strategy and delivering on key objectives," said Edward S. Lampert, Sears Holdings' chairman and CEO. "His range and depth of experiences managing corporate transformations and capability development makes him a strong fit for Sears Holdings as we pursue our member-focused transformation."

Andrew comes to Sears Holdings from Royal Philips N.V., where as an executive vice president and the chief strategy and innovation officer he played a central role in the multi-year transformation of Philips' performance, productivity and capability development. He was responsible for the company's business and market growth strategies and annual planning. Andrew also led the company's digital transformation and a major repositioning of Philips' portfolio, among many other accomplishments.

Prior to Philips, Andrew spent 25 years with the Boston Consulting Group (BCG), where he most recently served as a senior partner and managing director. At BCG he consulted with Fortune 250 companies across a wide range of industries on business performance improvement, corporate strategy, portfolio composition and shareholder value creation and growth. Andrew also established BCG's Innovation Practice, and served as its global leader for many years, providing organizations with support on product development, speed, innovation strategy, portfolio management and resource allocation.

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Kohl's, Sears, Home Depot earn Energy Star honors
By Gina Acosta
RetailingToday
Mar. 28, 2016

Sears,