Sears Struggles

This is why I think they shouldn't have sold their credit business.

Sears hasn't demonstrated much reason for them to be optimistic. It's losing market share in its appliance business, the retailer's biggest generator of sales and profits. Sears has long been the market leader in that category, but home-improvement retailers Lowe's (LOW ) and Home Depot (HD ) are cutting into that lead, thanks to more convenient locations and easier-to-shop stores. In this year's first quarter, according to research outfit Stevenson Co., Sears' appliance market share fell by 3.2 percentage points, to 38.6%, vs. the same period a year ago.

And despite the introduction of the Lands' End label in 400 of Sears' 870 outlets, same-store apparel sales overall are still down. In its second-quarter conference call, Sears said such sales were between 2 percentage points and 4 percentage points better at stores with Lands' End clothing. But with the scant information Sears has provided on Lands' End, it's hard to analyze whether the improvement is due largely to the higher prices being charged for the brand, notes Levenson. However, the conference call did make clear that the higher gross profit margin Sears is earning on Lands' End is being more than offset by the higher expenses associated with selling the brand.

I wouldn't be surprised if 5 years from now Sears is acquired by someone else, or in bankruptcy. Retailing is a tough business, and Sears hasn't found a way to differentiate itself from the rest of the pack.

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