Sears and Abercrombie fighting to survive this holiday season
The past few years have not been kind to traditional retailers, and malls have been hit especially hard. Online sales have taken a portion of their business, and how to win it back has not been an easily solved problem. Malls have been hurt likely because the incentive to leave the house, find a parking spot, and deal with crowds has diminished when nearly every item available can be purchased online and delivered to you.
The coming year does not appear to offer any respite, and a new report from Fitch Ratingssuggests that a shift has occurred in how people spend money. To succeed, a physical retailer must offer an “omnichannel” model that serves customers across physical and digital stores.
“Spending focus on services and experiences appears here to stay, so the dividing line between best-in-class retailers and market share donors is increasingly going to be determined by which retailers can cater to the evolving landscape,” said Fitch’s David Silverman. “Those that find success have invested in the omni-channel model and have differentiated their products and customer service to draw customers in.”
Fitch expects that retail sales in the United States will grow 3% to 4% in 2017, but only 1% of that will be in-store, with the rest happening online. The credit rating service also predicts that a number of mall staples will be “challenged to maintain share, liquidity and positive comps,” which could make it hard for them to survive the year.
Sears Holdings is on the ropes
While some companies on this list may surprise you, Sears Holdings (NASDAQ:SHLD), which operates both Sears and Kmart stores, has been on life support for quite a while. The chain, which often serves as a mall anchor store, has already lost $1.61 billion through three quarters in 2016, after losing $7.1 billion over the four previous fiscal years. The Fitch press release puts Sears in the “challenged” category.
While the company talked about plans for a turnaround during its most recent earnings call, there have been no signs that one will actually occur. The struggling retailer posted a loss of $748 million in its fiscal Q3, up from a $454 million loss in the same period in 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.
Sears Holdings’ survival plan involves selling off its still valuable Craftsman, Diehard, and Kenmore brands, closing more stores, and driving customers to the as-yet-unproven Shop Your Way app. That’s a plan where even if it survives, the chain will be much smaller, spelling bad news for the malls it used to anchor.
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