Sears Pushes Technology, Fails at Sales

If, as is often said, catalogs were the precursor to online selling, Sears Holdings Corp. SHLD, in the form of Sears, Roebuck, and Co. set the standard in 1894 with the introduction of its “Book of Bargains.”

So why, with all this history behind it, is the company struggling to connect with customers in an increasingly online (electronic catalog) world? More importantly, why is Sears unable to be profitable in any form? Wall Street, according to The Wall Street Journal, wants answers to these and other questions.

Sears CEO, Edward Lampert has said he wants to attract "hyper-connected" shoppers with tablets and mobile phones. Lampert sees the need for bricks-and-mortar retailers like Sears to accommodate a seismic shift in consumer buying habits. He is pushing the company to embrace technology in a big way.

Investors simply want the company to make a profit. After reporting a $279 million quarterly loss last Thursday, Sears stock dropped 14 percent. Shares fell an additional 2.5 percent Tuesday, closing at $48.98.

On a conference call with Lampert Thursday, Morningstar analyst, Paul Swinand, said, "We're all interested and view the online and technology investments positively. I guess we're trying to bridge the gap of how we get to a profitable company from where we are today."

Lampert provided iPads to Sears store associates and has ordered the development of online and mobile apps to improve communication with tech-savvy customers. One app even allows customers to text store employees with product questions, according to The Wall Street Journal report.

Other improvements include reducing delivery time for online shipments to an average of two days from the five days it took previously. In addition, like Amazon.com Inc. AMZN Sears now allows third party retailers to sell to Sears customers through its Marketplace.

Finally, a loyalty program called Shop Your Way Rewards lets Sears track customer buying habits to better target promotions in a way that could lead to higher margins, according to Lampert.

Despite all these technology-oriented efforts, online sales, according to analysts, account for only about 2 percent of revenue, The Wall Street Journal reported. At that rate, e-commerce is years away from meaningful impact on Sears’ bottom line.

Meanwhile, the company has 2000 physical stores and has not been keeping up with the competition when it comes to upgrading the bricks-and-mortar part of the business. Sears spent $378 million on capital expenditures last year. Kohl’s Corp. KSS spent $785 million, J.C. Penney Co. JCP dished out $810 million, and, Macy’s Inc. M spent $942 million on store upgrades, according to regulatory filings.

At the time of this writing, Jim Probasco had no position in any mentioned securities.