"Eddie has never clearly articulated a vision for Sears and where they're trying to go," said Kathy Gersch, a former vice president at Nordstrom Inc. and founding partner of consulting firm Kotter International. Sears "just keeps plowing along despite business declines and hasn't really clarified a strategy for how they plan to turn it around or which customers they're going to go after."
The company spent much of 2012 selling off assets and tightening inventory after reporting a $3.1 billion loss in fiscal 2011.
Last October it finished the spin-off of its Hometown, Orchard Hardware and Outlet chains, raising $346.5 million from the rights offering, plus a $100 million cash dividend from Sears Hometown. It also closed more than 100 Sears and Kmart stores across the country. The company has closed more than 300 stores since 2006—about 13 percent of the stores it then operated.
As a result, Sears' most recent earnings show improvement, though sales have now dropped for 24 consecutive quarters. For the quarter ended Feb. 2, the retailer lost $489 million, compared with a loss of $2.4 billion a year earlier. Sears' full-year loss narrowed to $930 million from $3.1 billion. But fiscal 2012 revenue fell to $39.9 billion from $41.6 billion in 2011.
"Results at Sears have stabilized, but the retailer still has a long way to go," Evan Mann, a senior high yield analyst at Gimme Credit, an independent research service on corporate bonds, wrote in a recent note. "Until we see more evidence of a longer term, sustainable turn-around in store performance, and less benefits from 'financial engineering,' we remain skeptical."
In a letter to investors posted on Sears' website in February, Mr. Lampert wrote that he will continue to use technology to improve performance. Technology was also the focus of last year's annual meeting.
"We expect to make further progress in 2013, and have a number of work streams designed to improve our productivity and lower our financial risk," he wrote. "Adapting our supply chain to buy what members want, when they want it, rather than accumulating inventory which depends upon promotional pricing to sell, is key…."
Much of this ability to better understand customer demand will come from Sears' growing loyalty program, called Shop Your Way rewards. The company has not publicly disclosed its size, but last year Mr. Lampert pegged membership in the "tens of millions." The company today said that members account for more than 60 percent of all Sears Holdings transactions and sales.
Benefits of loyalty
In his letter, Mr. Lampert wrote that Shop Your Way is not just a basic loyalty program, but "a comprehensive platform that transforms customer transactions into relationships and allows us to know our members better and to serve them better as well."
Members receive coupons, free shipping and other incentives, as well as access to Sears' shopyourway.com social shopping platform.
Sears has invested hundreds of millions of dollars to the Shop Your Way technology platform since launching the program in late 2009, according to Mr. Lampert. The company is focusing on connecting shoppers' in-store, online and mobile shopping habits into one, seamless "integrated retail" experience. This includes the growth of Sears Marketplace, which opens the retailer's website to third-party sellers, much the way Amazon.com operates.
Going forward, "we will continue to transform into a member-focused company with integrated retail playing a key role in helping deliver 'wow' experiences to our members," Mr. Lampert wrote.
But Ms. Gersch, the former Nordstrom executive, said technological improvements don't matter if Sears' brand message isn't clear.
"What does that mean?" she asks in response to the company's focus on membership increases. "What's their vision? Who's their customer? Who's shopping this marketplace?"
She, along with other company watchers, expect Mr. Lampert to sell off more assets, including its valuable Lands' End clothing, Craftsman tools, DieHard automobile batteries and Kenmore appliance brands.
"He's a finance guy," she said. "He's in it for the investment. He's not in it to save a particular brand."
And there may not be enough time or patience left to salvage the company, which has foundered since Mr. Lampert merged Sears and Kmart Corp. to create Sears Holdings in 2005.
"It's possible to resuscitate a brand, as we've seen with a J.Crew or, way back when, with a Burberry that needed to be turned around," Ms. Gersch said. "But it requires a lot of focus and intent over a period of time."
This report appeared in Crain's Chicago Business magazine, a sister publication of Tire Business.