Our recommendation is to take Sears Holdings Corp. (SHLD) private through a private equity buyout. After doing so, we recommend implementing a centralized management structure and recruiting retail-savvy executives for the upper management team. We then recommend focusing on increasing value by capitalizing on SHLD’s real estate holdings through leasing agreements and increasing partnerships with complementary enterprises. Also, we recommend improving employee retention rates and retaining exclusive rights to private brands. Finally, we recommend focusing on a long-term strategy to continue to maximize SHLD’s ecommerce platforms. We believe these recommendations will lead to long-term stability through increases in customer base and revenues and decreases in overhead costs.
One of SHLD’s main strengths is its proprietary brands such as Diehard, Kenmore, Craftsman, and Lands’ End because these brands have a great amount of customer loyalty and repeat customers. Another one of our strengths is our vast pool of valuable real estate assets. These assets enable SHLD to generate continuous revenue through leasing agreements and a safety net in a liquidity crunch. Additionally, “mygofer” and “Shop Your Way” programs account for more than 60% of revenues for Sears and Kmart stores. These loyalty programs have created a strong and loyal member base who provide repeat business for SHLD. Lastly, Sears Holdings’ has been around for over a hundred years and thus has an established brand name within the discount retail sector.
One of SHLD’s weaknesses is an upper management team who lacks knowledge of the retail sector and fails to communicate effectively across business units. A second weakness is the decrease in its new customer base, which has lead to a loss in revenue and a decrease in profit. Thirdly, relative to many of its competitors, SHLD ecommerce is weak as it only makes up 3% of all of Sears Holdings’ revenue. Additionally, Sears’ inventory turnover is equal to 148 days, which is more than 2x the industry average of 65 days. Finally, Sears Holdings’ quick ratio is .20, which indicates potential for a liquidity crunch because its liquid assets cannot pay off its current liabilities in a crisis.
One of the opportunities for SHDL to explore is to expand in to other nations, particularly emerging markets. Another opportunity is to expand is to accelerate the growth of SHLD’s ecommerce programs, which only represents 3% of its revenues, especially as the industry is slowly shifting from brick and mortar to brick and click format. Lastly, SHLD has an opportunity to lease floor space out to companies who can increase traffic into the store.
One threat to SHLD is its competition with many retailers because it is not very differentiated from its competitors and lacks brand loyalty, thus nothing is stopping the customer from overlooking Sears and visiting a rival retailer. Another...