Sears planning smaller-format appliance stores

CHICAGO - Sears Holdings' announcements about its stores have typically involved closures in recent years, with the company cutting more than half its Kmart and Sears locations since 2010.

But at Sears' annual meeting with shareholders Wednesday, Chairman and CEO Edward Lampert said the retailer is planning a new opening next week: a smaller-format store in Fort Collins, Colo., focused on appliances.

J.C. Penney announced this week it's introducing appliance showrooms this summer after a nearly 30-year absence.

The new Sears store will be much smaller than a typical Sears, at just 7,000 to 10,000 square feet, and will bring many of Sears' online services in-store, Lampert said. A typical Sears averages 138,000 square feet.

'We have and we will be trying a lot of things,” Lampert said, adding Sears will 'probably” add more of the focused, small-format stores in 2016.

Appliances have been a strong category for Sears, headquartered in suburban Chicago, and smaller stores are a way to keep a presence in communities where larger stores are closing, Lampert said.

Lampert appeared unconcerned about the competition from J.C. Penney.

'It's very easy to put boxes in a store and put a price on them,” he said. 'To be able to deliver, install and repair them, that becomes a lot more complicated.”

Sears tested a fitness-focused store in the Chicago area in 2012, but that location closed down, said spokesman Howard Riefs.

Over the past several years Sears has dramatically cut its store count, ending its 2015 fiscal year with 1,672 stores, less than half the number it had in 2010.

It's part of a drive to transform the struggling department store chain into a nimbler, membership-focused retailer.

Lampert said getting back to profitability is still the company's top priority this year. It's been cutting costs in part by closing stores and leasing back stores from a real estate investment trust, Seritage Growth Partners, to which it sold properties last year. The retailer also is working to strengthen its membership program, called Shop Your Way, as well as initiatives combining online services and physical stores, like in-store pickup of online purchases.

When a shareholder at the company's annual meeting asked Lampert to grade the company's execution, he acknowledged he 'wouldn't give us such a high grade.”

Lampert said the company was ahead of the curve on predicting and responding to changes challenging retailers today. The company's membership program has more than enough participants to have a 'much bigger company,” he said.

'We've built the platforms, we've built the capabilities, but we've fallen short on getting people engaged,” Lampert said.

Now they're focused on getting those customers to make more purchases, and a larger share of their purchases, at Sears, he said.

Sears has struggled for years to stem losses and find a way to turn itself back into a profitable retailer. Despite cost cuts, the retailer has seen five straight years of losses and nine years of sales declines. Greg Melich, an Evercore ISI analyst covering Sears, warned in a February report that the company is no longer 'viable as a retailer in its current form.”

Fourth-quarter 2015 sales dropped 7.2 percent in Kmart stores and 6.9 percent in Sears stores despite heavy promotions, and the retailer reported a $580 million fourth-quarter loss, compared with a loss of $159 million a year ago.