Kmart, once a powerhouse in the discount retail business, had its origins in the "five-and-dime" world where Woolworth's was the place to go to buy relatively inexpensive merchandise at a reasonable price. Kmart Corp., now Sears Holdings, was originally known as the SS Kresge Company and operated Kresge dime stores around the country. No deep discounting. No mass merchandising. No worries about crowd control. Just moderate inventories of low-end stuff.
It seems, sadly, that Kmart has reverted to its origins:
Sears Isn't Decking the Halls, But Investors Are CheeryCutting payrolls. It appears Mr. Lampert (whose experience is in hedge fund management, ahem) is succeeding in getting his customer count down to coincide with his lack of customer service.
By AMY MERRICK, Staff Reporter of THE WALL STREET JOURNAL
For shoppers preparing for Christmas, Sears is touting sales on LCD TVs and digital cameras, and Kmart is offering big discounts on toys. But the retailers' chairman has been more Scrooge-like when it comes to spending on stores and employees.
While Wal-Mart Stores Inc. and other retailers gussy up their stores for the holiday sales season, Sears Holdings Corp. Chairman Edward S. Lampert has stuck to his strategy of cutting payrolls and other expenses, holding down capital spending and trying to reduce unprofitable sales since Kmart bought Sears early this year.
Critics have questioned Mr. Lampert's reluctance to put much money into his stores. But he is defiant. "We will not rely on a single grand strategy, but will respond to customer desires and market opportunities," he wrote yesterday in a letter filed with the Securities and Exchange Commission, his preferred method of public communication. (link requires subscription)
But both Sears and Kmart continued weak sales trends.Some will be surprised that Kmart sales, having hit rock bottom a few years ago, could sink any lower.
... Kmart's same-store sales, or sales at stores open at least a year, decreased 2.8%, with the biggest declines in home products and electronics. Kmart's apparel usiness did have positive same-store sales. The brand's gross margin rate declined because of increased markdowns.
But Wall Street analysts and investors, God love 'em, still hold Sears Holdings stock in high regard.
Net income for the quarter ended Oct. 29 dropped 89%, to $58 million, or 35 cents a share, compared with $552 million, or $5.45 a share, in the prior-year period.Which says as much about investors as it does about Lampert's strategy of having no employees - and no customers - in his stores.
Results were better than investors had expected and the retailer's stock price rose sharply. In 4 p.m. Nasdaq trading, Sears shares rose $6.26, or 5.36%, to $122.97.