Sunday, September 4, 2016

Bluefield KMart Was Doomed Years Ago

When word came in early May 2016 that our local KMart in Bluefield, WV would be closing in late August, you could practically hear a collective community sigh of relief.

People talked of the store as if it were a friend or family member that had been going through a long, inevitably fatal illness:

“Well, bless its heart, it had been suffering a long time. We’re so sad to hear of this, but at least the poor thing is out of its misery now.”

It doesn’t appear the misery and suffering at Sears Holdings’ remaining stores will be ending anytime soon; at least not until CEO Eddie Lampert finally tires of the shell game he’s been playing with shareholders since 2005 and concedes defeat. Lampert is even trying to sell the high-value, core brand names Sears is most famous for - Kenmore, DieHard and Craftsman.

In fact, more than a few analysts have suggested Lampert is quietly winding down the business in the world’s longest-ever out of court liquidation - as he draws a company salary and stands to profit on the loans his own hedge fund has made to the ailing retailer.

There had been clear indications over a year ago that things were rapidly headed south for Sears Holdings in our neck of the woods. Many KMart and Sears stores within a 100 mile radius of Bluefield began to close in rapid succession.

When the axe fell on the Sears at Mercer Mall in 2014, everyone knew it would be only a matter of time before KMart’s head was on the chopping block. The only surprise was that it took so long.

I shopped KMart. Or rather, I tried to shop KMart. It was difficult to be a loyal customer when the experience was usually so bad.

I would seldom find more than one register open; sometimes none would be open and I would have to be rung up at the customer service desk. Except for the store manager and a few department heads, the staff seemed to be an ever-changing cadre of puzzled new hires who didn’t stick around long enough to learn anything.

One of the cashiers told me quite freely that nearly all of the store’s employees were part time, and the turnover rate was atrocious because of low hours and lousy working conditions.

The very atmosphere was depressing. The music system was on the blink; I would assume a bad receiver or antenna since the music would fade in and out or just fall completely silent. Aisles were usually cluttered with things that had been dropped or fallen off the shelf - and they would still be there when I came back a week later.

The store simply looked tired, with burned out overhead lights, empty shelves, pallets of merchandise blocking aisles, and carts filled with broken-down cardboard boxes where someone had stocked an item and apparently just walked away when finished. Even the floor looked worn out; it hadn’t seen a good cleaning or a new coat of wax in years.

The Shop Your Way Rewards incentive was confusing and seldom saved you any money. There were often problems with their computer system not recognizing items that were supposed to be eligible. Cashiers were directed to sign up new Shop Your Way members no matter how long the line was (and the line was nearly always long at the one or two registers open).

I can’t count the number of times I observed frustrated shoppers set down their basket or walk away from their cart, and simply leave the store - something I personally had to do on several occasions, because the line was moving at such a glacial pace.

Shoppers couldn’t even be sure what hours the store actually kept, since these appeared to be in a constant state of flux. I saw the posted opening time bounce around between 8am, 9am and 10am on a seemingly random basis.

The store was in a prime, high-traffic, location just off a major state highway that saw thousands of cars pass by daily. Seldom, however, would there be more  than a dozen vehicles in the parking lot. How could a store fail so badly in a high-visibility building, with no competitors nearby, where it should have been thriving? Simple: by not offering a single thing that would make you want to shop there.

Meanwhile, CEO Lampert has loaned Sears Holdings hundreds of millions in cash through his hedge fund, as he continues to close stores, slash payroll and attempt to spin off Sears’  brands and real estate.

To top it all off, after five years with Sears Holdings, CFO Robert Schriesheim has stepped down to “pursue other career interests”. He is only the latest of several Sears Holdings executives who have recently run like hell for the exits.

Our Bluefield KMart had incurable problems and was doomed to fail. However, it’s not completely fair to blame the store’s staff and management. Could they have done anything differently, given the poor leadership coming from the corporate boardroom?

Back in November 2004, Lampert was asked how merging two fading retail chains would strengthen either one. His lengthy answer cited “synergies” (a buzzword I hate), economies of scale and cost savings. Wall Street was never truly convinced. More than eleven years later, the skepticism on Wall Street has turned to cynical laughter.

The question is no longer if Sears Holdings can survive, but when it will fail. As one analyst put it, Lampert is burning the furniture to heat the house, and at some point he’s going to run out of wood.

Added 9-19-16: It was announced today that 64 more Kmart stores are closing by the end of the year. Meanwhile, Moody's analysts say Sears Holdings doesn't have enough money to stay in business.

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