Sears swings to loss in Q1
Sears Holdings posted a net loss of $279 million in the first quarter, compared to earnings of $189 million in the same quarter last year.
Revenue from merchandise sales and services declined 8.8% to $8.45 billion.
"Our recent financial performance has not been acceptable, although we have seen some positive momentum as sales per member increased and our online business grew 20% in the quarter," said Eddie Lampert, Sears Holdings’ Chairman and Chief Executive Officer. "During the quarter, we have accelerated our activity to transform Sears Holdings into a leading Integrated Retailer that fosters relationships with members through our SHOP YOUR WAY platform. We launched new mobile capabilities, like Member Assist, which allows our members to communicate directly with our consultative store sales staff remotely in a manner most convenient for our members. We believe that if we leverage technology to provide our members with the easiest, most seamless shopping experience possible, we will be successful."
Domestic comparable store sales declined 3.6% in the first quarter. Sears Canada’s comps declined 2.6% in the quarter.
The comp-store decline at Sears Domestic of 2.4% predominately was driven by weather related declines in the lawn & garden category. Excluding lawn & garden, comparable store sales would have increased 0.3%. This slight increase was due to increases in the apparel and home categories, which were partially offset by declines in the consumer electronics and tools categories, the company reported.
Amid the bleak report, there was some good news on the digital front. The company said online business on sears.com and kmart.com increased 20% over the prior year first quarter.
Part of the reason for the total sales decline was the effect of having fewer Kmart and Sears Full line stores in operation, plus the separation of the Sears Hometown and Outlet businesses, which occurred in the third quarter of 2012.
Made in the USA
WOLF applauds “Made in the USA,” the special section HCN published in March. As a company sourcing American-made cabinets, decking and railing, WOLF gained insight from both HCN’s original survey and the experiences of other “Made in the USA” brands.
I took note of two points in particular: First, the overwhelming majority — more than 85% — of both manufacturers and retailers agreed that retailers can do a better job of promoting U.S.-made products. And second, that “Made in the USA” manufacturers have a “relatively inflated” expectation of consumer willingness to pay more for their products.
WOLF has very recent experience overcoming these challenges. Over the past three years, WOLF has developed and brought to market a range of domestically manufactured products. Our “Made in the USA” lines — WOLF Classic Cabinets, WOLF Decking, and WOLF Railing — have all rapidly built reputations for quality, and sales have exceeded very aggressive internal goals.
Our industry would benefit from an ongoing conversation about the twin issues of promotion and price as they relate to “Made in the USA” products. I’d like to push that conversation forward by sharing the perspective WOLF has gained over the past few years.
Beyond quality and jobs — benefits for customers
We all understand that we need to do more to promote U.S.-manufactured products, but WOLF believes everyone along the supply chain bears some responsibility for this — not just retailers. Part of this involves telling a richer story. Yes, our products typically offer higher quality and greater durability. And yes, we create American jobs. But there are other advantages for builders and homeowners:
• Closeness to the market: WOLF develops products by listening to the market. We have leveraged decades-long relationships with independent dealers, who have helped us identify underserved niches in the market. While retailers should do what they can to promote U.S.-made products, the onus is also on brands like WOLF to develop products that appeal to the marketplace.
• Greater control: U.S. manufacturers exert far greater control over design and production than our overseas counterparts. That control over raw materials, components, equipment, and labor results in higher quality — and in the ability to make continuous improvements to both products and processes.
• Better service: Makers of U.S. products have a key advantage: a far more efficient supply chain. We should do more to promote our faster, more accurate delivery of products, which builders clearly value. Broadly speaking, U.S. manufacturers also have better customer service after the sale, with policies and U.S.-based staff in place to resolve problems.
• New opportunities: WOLF constantly seeks feedback from our dealers and from contractors, which enables us to explore development of new products that retailers actually want — and can sell. Even better, savvy U.S. manufacturers — because they don’t have to wait for sluggish overseas partners, shipping time, and more — can bring a new color or style to market in weeks or months, instead of years.
Everyone agrees we can do a better job of touting the benefits of domestically produced building material. But that means manufacturers should help retailers tell the whole story and bring retailers in as partners in the research and development process.
Paying a “Made in the USA” premium?
According to the National Association of Home Builders/Wells Fargo Housing Market Index, “the biggest concern that builders have this year is how much they’re going to have to pay for building materials.” And yet, in the HCN survey, a sizable 45% of “Made in the USA” manufacturers agreed or strongly agreed that customers were willing to pay more for their products than for foreign-made counterparts.
Those competing viewpoints put unnecessary pressure on retailers. In fact, at WOLF, we’re convinced the old reflexive notion that American manufacturers simply can’t compete with low cost overseas competitors is fast giving way to a new reality that suggests they can. Manufacturers are already figuring out how to close the price gap with offshore brands, while at the same time widening the quality gap between American products and their inferior offshore counterparts.
In fact, many “Made in the USA” manufacturers, including WOLF, already have identified ways — again, because of our tight control over design, production and delivery — to bring efficiency to the process that drives down cost.
Clearly, “Made in the USA” offers value to everyone along the supply chain, including customers. In the coming years, we can all amplify that value — and grow sales — if manufacturers can work in partnership with distributors and retailers to explain the range of advantages to customers and bring new products to market that satisfy specific needs.
Tom Wolf is chairman and CEO of WOLF. In continuous operation since 1843, WOLF is the largest supplier of kitchen cabinets in the U.S. and a leading provider of building products. Over the past three years, Tom Wolf has orchestrated a dramatic turnaround, establishing WOLF as sourcing company that offers American-made, WOLF-branded products and other high-quality product lines exclusively through independent dealers. The move has fueled sales growth and doubled the company’s service area, which now covers 28 states. He is currently a candidate for the Democratic Party nomination for governor of Pennsylvania.