Sears' struggle to survive an opportunity for these retail rivals
Bankrupt retailer Sears – recently given a lifeline from current chairman and former CEO Eddie Lampert – faces a number of challenges as it seeks to return to profitability, which could provide a boost for competitors and a helping hand for some malls.
Not convinced the once-iconic retailer can make a successful turnaround, Moody’s Investors Services said it still believes the retailer faces the risk of having to shed more stores or even outright liquidation.
There are a number of retail rivals that could benefit from Sears’ prospective persistent shrinking footprint. Among them are Macy’s, J.C. Penney and Dillard’s – which Moody’s notes all have overlapping locations with Sears and therefore are primed to pick up would-be customers. Of those potential beneficiaries, Macy’s is the department store with the most potential upside, with more than one-quarter of its stores at a location where there is also a Sears. While J.C. Penney has the largest amount of overlap, it also has more locations that coexist in less successful malls.
The firm pointed to the liquidation of Bon-Ton, which provided a similar boost to sales at both Macy’s and Kohl’s, as a model for Sears’ situation.
Sears has already decreased store count by about 70 percent since January 2017.
When it comes to malls themselves, Moody’s said the potential for more Sears store closures could hurt lower tier locations. Successful malls, researchers note, will have an easier time finding tenants to occupy the vacant space.
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Earlier this month, Sears accepted a $5.2 billion bid from Lampert’s hedge fund ESL Investments, saving the department store from potential liquidation. The deal, which still requires approval from a bankruptcy court, is expected to keep about 400 stores open and maintain as many as 50,000 jobs.
As previously reported by FOX Business, the retailer faces a tough road ahead if Lampert’s deal is approved in court. Sears’ severely diminished store count presents a number of distinct challenges, including impacting its ability to attract a core customer, diminishing its ability to compete with rivals, amid other obstacles related to its reorganization process.