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Sears, Kmart to close stores after dismal holiday

Sally Herships Dec 27, 2011

Jeremy Hobson: In all your holiday shopping this year, did you go to Sears?

I’m guessing the answer is “no.” The company announced today because of weak holiday sales, it is going to close 120 Sears and Kmart stores.

So what went wrong? Sally Herships explains.

Sally Herships: To understand the problem with Sears and Kmart you need to think about the competition.

George Whalin is a retail consultant. He says Walmart and Target have made major changes in the last five years.

George Whalin:  They’re better laid out, they got better lighting, better signage, it’s just a better shopping environment.

But Sears is stuck. Whalin says the brand has done some silly things, like not spending money to improve its stores.

Whalin: And you just have to do that in this kind of environment if you don’t, you get left behind.

Instead, Sears and Kmart used extra cash to buy stock — their own.

Burt Flickinger is a retail consultant. He says the decision was made by the store’s owner – ESL investments , a hedge fund.

Burt Flickinger: The Wall Street people missed the detail of retail.

By buying its own stock, Flickinger says ESL hoped to create a shortage and drive up stock prices for current owners. Great, but what does that have to do with shoppers?

Flickinger: Shoppers don’t want to see a higher stock price, shoppers want to see a lower shelf price.

There is one area that Sears still excels at.

Paul Swinand: Sears is the largest seller of appliances in the United States.

Paul Swinand is a retail analyst with Morningstar.

Swinand: Their appliance businesses is one of the few businesses that is not copied by Target, Walmart and JC Penney. So those stores do not sell appliances.

But there aren’t as many new homeowners these days, so there’s less demand for big ticket items like washing machines.

In New York, I’m Sally Herships for Marketplace.

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