So deceptively easy, the retail business. Some say “location, location, location.” Others say it’s all about the best price. Still others say the key is the product: sell what people really desire.
Sears (SHLD), during its 121 years of existence, has at different times been a leader in each of these categories. Its brands were coveted by middle-class shoppers. Its real estate anchored malls and sat in the middle of major cities. Its prices were always competitive.
But that was before 2005, when hedge fund investor Eddie Lampert took over. Today, with the announcement that the $38 billion-in-revenues retailer is closing its flagship store on State Street in Chicago’s Loop — a location that most stores would salivate over — it’s becoming clear that none of these strategies can help. “The State Street store’s operational performance has been poor through much of its existence,” says the company in a statement. Retail consultant Robin Lewis sees more to it than that. “This is another deck chair,” he says. “He’s selling off the Titanic as it continues its slow decent to the bottom.”
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Brick-and-mortar retail is in big trouble; it’s not just Sears. The recent holiday season showed traffic down 6.5%, according to RetailNext. In part, of course, it’s the ease of the Internet. And with that comes the reality that without a compelling reason to visit a store — great service like Nordstrom (JWN) or fun workshops a la Home Depot (HD) or pleasing setups like Anthropologie or the sheer kinetic buzz of an Apple (AAPL) retail palace — people aren’t going to hoof it over there anymore. They don’t have to.
But Sears has failed on all accounts. There’s been no investment in physical plant for years. The sales force is unmotivated and depressed. Fun? Umm … The reality is that Sears Holdings (which also includes Kmart) revenues have declined every year since 2005. The company expects to lose between $1.3 billion and $1.4 billion in fiscal 2013, which ends on Feb. 2. (For more, see “Wall Street wears the pants at Sears and J.C. Penney” in the Fortune.com archive.)
So the company is closing its most prominent brand presence, in an area where competitors are posting growing sales. It’s fair to say that this won’t be the last one.