You’ve got to give Eddie Lampert — the hedge fund manager who’s also currently acting as the CEO of Sears Holdings (SHLD) — at least a little credit. Even with his company falling apart all around him, he’s still got enough confidence and swagger to accentuate the positive and chalk up the negative to something beyond his control.
Case in point: Lampert would be willing to spend more on the stores themselves … if only it weren’t for those pesky pension checks the company was forced to write every month to the folks who’ve earned those retirement benefits.
Judging by his comments after last quarter’s earnings, Lampert still doesn’t “get it.” He’s still talking about marketing metrics, real estate values and expenses; rarely do the words “merchandise” and “customers” come up in the post-earnings banter. But when it’s all said and done, the only thing that will save the company now is selling more merchandise to more customers. Everything else will fall into line after that.
The question is, after eight years of Eddie Lampert controlling ownership of the company and eight months as CEO, is Sears Holdings one iota closer to getting the right merchandise to the customer at the right price?
Probably not, for three very specific reasons:
#1: Technology Isn’t Always Helpful
Two years ago, Sears Holdings equipped the sales associates of nearly 450 Kmart and Sears stores with iPads as a measure to, as a company spokesperson put it, “enhance the relationship between customers and associates and improve the overall shopping experience … We wanted to make it a more personal experience.”
The intent is reasonable. Heck, the intent is admirable. But, if the technology doesn’t actually work, the net effect is miserable.
The buzz is, Sears’ iPads don’t always communicate effectively with the checkout system, and sometimes they don’t communicate at all when simply trying to retrieve information for a customer, making for long periods of awkward silence between a salesperson and a customer. As any veteran floor-salesman can attest, nothing gives a buyer a chance to back out of a potential sale like a little time to think about it.
#2: Customers Are Nowhere Near as Loyal as You Think
For the second quarter in a row, the company touted the success of its Shop Your Way membership-rewards program. This time around, 65% of Sears’ revenue was driven by the loyalty program’s members, up from 50% last quarter.
Eddie Lampert said of the Shop Your Way effort, “While the increase in Shop Your Way promotional activity and member redemptions resulted in a meaningful increase in our costs, it demonstrates that our members are deepening their engagement with our program, which will allow us to further accelerate our transformation.”
On the surface, it’s encouraging … but it’s a little misguided.