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Is Sears Losing Its Brand Loyalty as Sales Continue to Slide?

It’s been a difficult year, fiscally speaking, for Sears Holdings Corporation, and its poor numbers continue to shadow the venerable company and threaten its brand loyalty. Eddie Lampert, Sears Holdings Corp.’s Chairman and CEO, took matters into his own hands on Monday after rumors swirled about the end of Kmart.

In a blog titled, “Committed to our Members, Kmart and our Transformation,” Lampert addressed some key issues.

“Last week, we announced a partnership between Shop Your Way®, Sears Auto Centers, and Uber,” Lampert wrote. “This is another example of how we are transforming Sears Holdings to focus on serving our Shop Your Way members in a wide variety of ways. You should expect additional partnerships over time emphasizing our Shop Your Way business and demonstrating ways that we will bring value to our members’ lives every day.”

These partnerships are ways for Sears, which has not reported a profit in five years, to reach out to top-tier brands and find more opportunities for Shop Your Way loyalty program members to earn points. Another tactic Sears wants to leverage to earn more customer loyalty is by creating a more engaging in-store environment.

“I also wanted to comment on the frequent false and exaggerated claims surrounding our Kmart business,” Lampert added. “Recent reports have suggested that Kmart will cease its operations. I can tell you that there are no plans and there have never been any plans to close the Kmart format. In fact, we’ve been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innovations and Shop Your Way. To report or suggest otherwise is irresponsible and is likely intended to do harm to our company to the benefit of those who seek to gain advantage from posting these inaccurate reports.”

In its fiscal second quarter, Sears incurred a net loss of $395 million;

Kmart and Sears Domestic comparable store sales declined 3.3% and 7.0%, respectively,

Revenue decreased approximately $548 million, to $5.7 billion

The decrease in revenue was primarily driven by a 5.2% decline in comparable store sales during the quarter, which accounted for $240 million of the revenue decline, and by having fewer Kmart and Sears Full-line stores in operation, which accounted for $199 million of the decline.

Member sales penetration for the Sears’ Shop Your Way loyalty program has grown from 58% to 75% since 2011
Lampert said Sears is working toward restoring the company to profitability.

“First, Kmart continues to operate over 700 stores,” Lampert wrote in his blog. “Second, a significant number of these stores are profitable and have been profitable for many years. Third, we have been clear that we are intent on improving the performance of our unprofitable stores and, if we cannot, we will close them. Actions to improve our store productivity, including reducing inventory stored in the stockrooms, are designed to make our stores easier to operate and to eliminate unproductive inventory and processes. Decisions to close stores are never easy, but we recognize that the way people are shopping is changing significantly. This is why we have made major investments in our online and mobile platforms and this is why our focus on serving members through Shop Your Way is so important.”

What’s more, Lampert wrote, Sears officials are acting “more aggressively and continuing to evaluate stores as leases expire and as other opportunities present themselves that improve the economics of Sears Holdings. We expect to end up with a large chain of stores, some owned and some leased, but with a company focused on serving members broadly through Shop Your Way, rather than exclusively or predominantly through our stores. Our stores remain extremely important to our future, but as part of an overall focus on serving our Shop Your Way members.”

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