Sears ups cost-cutting efforts as sales continue to fall

Sears Holdings Corp. (NASDAQ: SHLD) declared another monotonous quarter of performance, with revenue dropping to $6.1 billion Q4 2016, a drop of 16% year-over-year (YoY). Revenue for the full year was comparably grim, decreasing 12% to $22.1 billion. Sears accredited the decrease in revenue to store closures and falling in-store sales. Store closures added $596 million to the revenue decline for Q4 as equivalent store sales dropped 10% YoY in Q4, making up $555 million of the revenue decline.

The company is highlighting cost cutting over any plan to improve sales. It recently executed a string of cost-cutting measures, including a reformation plan to save $1 billion, which will demand closing 150 stores by the end of Q1 2017. Additionally, the company recently sold its Craftsman tools brand. Of its strategic initiatives declared for 2017, only one fixated on enhancing sales, which it plans to employ data analytics to maximize inventory in its stores. This initiative is geared towards assuring stocked inventory matches best-selling or in-demand products. Sears’ unproductive digital efforts probably mean the company will continue to decrease. While other retailers are investing deeply in digital and omnichannel strategies to remain on par with Amazon, Sears has been unwilling to transpose itself. The company’s most digital, and modern, effort has been its partnership with Uber, through which loyalty members can earn $2 worth of points every time they take a trip with the ride-hailing service.

The retailer also combined its loyalty program into Activehours, which is an app that pays people for the hours they’ve worked before their paycheck is released. When app users cash out, they earn loyalty points from Sears. This could boost in-store sales as customers redeem their points, but it is unlikely the company will be able to set a comeback with its loyalty program alone. Sears should follow competitors like JC Penney and Macy’s, which have profited from their omnichannel and digital services. E-commerce has been on the increase in the last several years, thanks in significant part to titans in the industry such as Amazon and Alibaba. E-commerce will sincerely become the future of retail, as nearly all of the progression in the retail sector now takes place in the digital space.

BI Intelligence, Business Insider’s premium research service, predicts that U.S. consumers will spend $385 billion online in 2016. Moreover, BI Intelligence forecasts that number will grow to $632 billion in 2020. This is hardly unexpected reflecting e-commerce’s healthy growth. Though the U.S. retail average growth rate in the first half of 2016 was just 2% for total retail, it was 16% for e-commerce. The number of online shoppers has increased by nearly 20 million from 2015 to 2016. And these 224 million shoppers are spending more, as the total amount spent online increased from $61 billion in the first quarter of 2015 to $68 billion in Q1 2016. Alas, these customers are conducting more frequently, as the number of online transactions has increased by 115 million from 2015 to 2016. But all of this shopping online develops its own set of obstacles, both for consumers and the companies that are trying to get their products onto shoppers’ screens and into their shopping carts.

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