Hoffman Estates, IL, July 2—Sears is expanding for the first time in two decades with plans to buy as many as 61 new stores, but analysts said the deal will do little to address a nagging problem--weak clothing sales.
Wednesday's $621 million deal to take over stores from Kmart Holding Corp. and Wal-Mart Stores Inc. means the retailer can speed up the roll-out of its highly touted Sears Grand superstores.
The stores, which are located away from the shopping malls that most Sears stores anchor, combine traditional Sears merchandise such as appliances and apparel with new categories including food, books and magazines, and sporting goods.
But with June sales trends weaker than expected, some analysts questioned whether simply adding stores was enough.
"I don't think they can sell apparel on the mall, off the mall or on the moon," said Erik Gordon, a marketing professor at Johns Hopkins University. "It's not the economy, stupid. It's the apparel."
Gordon said Sears is battling an image problem -- customers don't think of Sears as a fashion house. He said the retailer should "stop pretending" to sell fashion apparel and focus instead on categories such as work clothes that mesh with its strength in tools.
"It's like a McDonald's French restaurant," he said, referring to the hamburger chain. "If there was a French restaurant with Golden Arches in the front, even if they got the food right, who is going to give it a chance?"
Sears spokesman Ted McDougal said the retailer has made big strides in improving its clothing offerings, and fashion apparel will remain a key part of Sears' business.
McDougal pointed to Sears' 2002 purchase of catalog retailer Lands' End, and more recent deals to sell Gerber baby clothes, Structure brand men's apparel and a Jones Apparel Group Inc. women's clothing line called ALine.
Fashion apparel "is about a $6 billion business so it's certainly relevant to our customers. It's a matter of getting them into the store more frequently," he said.
He said Sears was well-prepared for the fall clothing season and would work hard to get seasonal merchandise in stores quicker. The retailer had weak sales this spring -- a time when other retailers reported robust demand -- in part because it was slow to switch from winter to spring styles.
Sears has said it is pleased with Lands' End sales, but poor overall clothing demand continues to drag on revenue.
"The Lands' End (purchase) was a good move ... but not sufficient to turn their apparel business," said Darrell Rigby, head of the retail practice at consulting firm Bain & Co.
The retailer, which has offered Lands' End merchandise in all of its 870 full-line stores since last fall, posted a 4.7 percent company-wide sales decline in May, partly because of the weak spring clothing demand.
Sears Chief Executive Alan Lacy said on Wednesday that June's sales trends were worse than expected. The retailer is expected to release its June sales results on July 8.
For now, Sears is counting on the new Sears Grand stores to revive sales growth. The retailer has said sales are 30 percent better than expected at the first two Sears Grand locations, and Wednesday's deal means it can open more stores faster.
"Sears Grand is a good store," Bain's Rigby said. "I think those stores can help to change customer perceptions about what Sears is."
