Long-Term Trends at Sears

For the entire retail industry, with very few exceptions, the results for the combined March and April period were weak. If you compare the comp-store change for the two-month period with the previous six-, nine- and 12-month trends, the outcome is not encouraging. It is difficult to determine if these weak results are an indication of a turn in the retail trend or just an aberration driven by some very difficult weather conditions. To view the complete Trending Report, go to www.gordmangroup.com.

Rather than speculating about the situation like reporters and guest experts on a cable news show, I thought it would be more interesting to look at a recent major announcement regarding two of the country’s largest retailers.

At the annual meeting of Sears Holdings Corp., new positioning (advertising) campaigns were presented for both Sears and Kmart. Chairman Edward Lampert said, “A company without positioning is like a ship without a rudder.” While I generally agree with Mr. Lampert, today’s successful retailers have taken a customer-relevant position and turned it into a sweet spot through total and perfect execution. Think about Target, Costco, Nordstrom, Best Buy and many others. Kmart and Sears continue to struggle to find a customer-relevant position. While the long-term charts on this page show Kmart’s trend slightly improving, the Sears trend continues in decline. It is interesting to note that over the time of the data presented, a comparable Kmart store has lost 27% of its volume and a Sears store 24%. In the same time frame, a comparable Target store has increased 24% and a Wal-Mart store 25%. A recent walk through a number of Kmart and Sears stores indicates that they are also having trouble with execution. If the positioning campaigns are successful and bring in new customers, will these stores live up to the expectations created by the ads?

The question that has yet to be answered is, “Have Kmart and Sears created sweet spots for each of these businesses that will drive sustained, profitable growth in a competitive retail environment?”

Annual Comp-Store Sales ChangeSource: Annual reports*U.S. Wal-Mart Stores only**2003 is a weighted average—Kmart’s comp-store sales for 2003 were divided into 2 buckets—39 weeks ending Jan. 28, 2004 –9.5%, and 13 weeks ending April 30, 2003 –3.2%, therefore a weighted average was calculated by using 22.2% * –3.2% for Q1, and using 77.8% * –9.5% for the remainder of the year.

Fiscal Year	2006	2005	2004	2003**	2002	2001
Kmart	–0.6%	–1.2%	–11.0%	–8.1%	–10.1%	–0.1%
Target	4.8%	5.6%	5.3%	2.9%	1.1%	2.7%
Wal-Mart*	1.9%	3.0%	2.9%	3.9%	5.7%	5.9%

Robert Gordman is the president of The Gordman Group, Denver, and is the author of “The Must-Have Customer—7 Steps to Winning the Customer You Haven’t Got.”