Attendees of the Sears Holdings (NASDAQ:SHLD) shareholder meeting today in Hoffman Estates, Illinois, were treated to a history of both Kmart and Sears. Chairman and CEO Eddie Lampert took a trip down memory lane, highlighting both Sears and Kmart's financial predicaments before they merged in 2005, and today.
In 2001, Kmart lost $1 billion and filed for bankruptcy. Two years later it had moved back into the black before merging with Sears. Together as Sears Holdings, they posted $36 billion in revenue last year.
"This is not a small company, it has a substantial member base that will allow us to transform," said Lampert. "We are transforming our business model to position ourselves for success in the new retail landscape."
And it's this member base that the retailer is squarely focused on with the Shop Your Way rewards program. The company is transitioning from a product centric to member centric model. From being based on transactions with customers to building relationships with members while integrating online benefits and marketplace sellers into the existing business model.
But there's also a disconnect between plan and profit.
"If what (we're) doing is working and makes sense, why is it not showing up in the financial performance?" queried Lampert. "Well, it's a double edged sword, because what's causing us to transform is also one of the reasons for (poor) financial performance."
Sears posted a net loss of $1.4 billion for its most recently completed fiscal year.
So where's the transformation? Lampert likened the process to a patient after major surgery. Sometimes, that patient looks worse before getting better but that patient is, in fact, recovering.
Sears' efforts to create omnichannel retail initiatives include click and collect, complete with curbside delivery, RFID inventory programs and digital shelf displays.
Lampert offered little in the way of new programs or new promises to revitalize Sears. "The financial results are disconnected from what we're seeing," he admitted. But for Lampert and Sears, the plan is the plan.
In addressing one shareholder and now-former customer about a product delivery failure, Lampert replied that there is much to be fixed and some shoppers may be left behind while others will benefit from the Shop Your Way program. In other words, it's Shop Your Way or the highway.
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