The imminent departure of two so-perplexingly-empty-as-to-be-infamous Sears department stores — the “still open” Sears at Landover Mall (the rest of which died in 2002) and its hometown flagship at State & Madison in Chicago — brought out the usual drumbeat of obituaries about Sears. As Lewis Lazare, a standby on the Chicago biz beat, writes about State Street: “So, the drip, drip, drip that is Sears’ excruciatingly slow death march goes on.”
Wondering why isn’t this company gone yet?, I discovered a 2012 pre-obituary from Crain’s Chicago Business. They’ve even scanned in three previous cover packages, from 1978, 1988, and 1990, all of which identify pretty much the same troubles in the core department-store business — one of which being that malls had stalled as a growth platform by the late 1980s. (The 2012 article quotes former CEO Alan Lacy about the 1990s: “We did the analysis. Shoppers who used to go to the mall eight times a year now went three.”)
The 1978 article trumpets that Sears, whose then-new tower crowned Chicago’s skyline, has “gross sales account[ing] for about 1%* of the Gross National Product… Last year’s sales: $17.22 billion. Profits: $838 million.” In 2013 (based on guidance, not final report) domestic Sears sales will amount to about $20.1 billion, and domestic losses about $300-400 million. So, in nominal dollars, the company’s sales have grown! (2017 update: Whoops. 2015 sales failed to reach $15 billion, and full-year 2016 might not hit $13 billion. That’s about 40 years of lost time.) And yet…
Some have bid up SHLD, hoping that a breakup might unlock vast sums in real estate value. Well, consider that just being near a Sears for all these years likely depresses property values. Given Sears’ sheer ubiquity among malls of a certain age, it’s much more likely that only a handful of its locations remain trophies; the rest are in B/C malls which are headed for demolition.
(2017 update: Landlords that own these spaces don’t have a lot of options, Cushman & Wakefield’s VP of retail research in the Americas Garrick Brown told [Champaign Williams from] Bisnow… “I haven’t seen a great big move of subleasing, mainly because the locations that [buyers] would be open to subleasing are Class-A, and they’re the ones [retailers] don’t want to close or get out of.”)
(2017 update 2: Steven Roth’s Vornado shareholder letter mentions annual sales at the Sears in Rego Park, which leases from Alexander’s, a defunct department store now affiliated with VNO. Its nominal sales have declined from $86.8 million in 1997 to $28.7 million in 2016 — a 78% decline, adjusted for CPI.)
It seems that there’s still a long way for Sears to fall. With any luck, I hope it won’t be too ignominious an end.
* By comparison, Wal-Mart’s 2012 domestic sales were $275 billion, which accounts for 1.6% of US GDP. Perhaps there’s an implicit limit to be learned here…