For the past few years we have been taking quick looks at the fourth quarter and full-year financial reports for Sears, Home Depot, and Lowes. We examine numbers for other public retailers and tool brands as well, as this can offer insight into the directions companies tend to move in.
Related: 5 Lowes and Kobalt Holiday Season Disappointments, Post-Holiday Season Report (Sears, Home Depot, Lowes)
Sears
Sears has reportedly invested hundreds of millions of dollars into transforming the company into a more member-centric retailer with focus on their Shop Your Way platform and “integrated retail.” One of the positive changes we have noticed is a new Craftsman Tool of the Month rewards program, and one of the negative changes is how traditional discounts are at times replaced by Shop Your Way bonus points promotions, where rewards points replace instant savings.
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Last month we discussed how Sears is still in big trouble. Fewer same-store sales and continued losses do not bode well for the retailer.
2012 Recap
In 2012, Sears reported losses of $489 million for the fourth quarter, and $930 million for the year.
Q4 2013
For the fourth quarter of 2013, Sears reported a loss of $358 million.
Sales were down slightly compared to the year before: $10.593 billion (2013) vs. $12.260 billion (2012).
2013 Full-Year
For the year, Sears reported a loss of $1.365 billion.
Sales were down for the year as well, compared to 2013: $36.188 billion (2013) vs. $39.854 billion (2012).
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Home Depot
2012 Recap
In 2012, Home Depot reported a fourth quarter gain of $1.021 billion, and full-year gain of $4.535 billion.
Q4 2013
For the fourth quarter, Home Depot’s net earnings were $1.013 billion.
Fourth quarter sales were slightly lower than last year: $17.696 billion (2013) vs. $18.246 billion (2012), which is possibly attributed to the 1-week shorter holiday shopping season this year.
2013 Full-Year
For the year, Home Depot’s net earnings were $5.385 billion.
Full-year sales were up: $78.812 billion (2013) vs. $74.754 billion (2012).
Lowes
2012 Recap
In 2012, Lowes reported a fourth quarter gain of $288 million, and full-year gain of $1.959 billion.
Q4 2013
For the fourth quarter in 2013, Lowes had net earnings of $306 million.
Sales were up slightly compared to the fourth quarter in 2012: $11.660 billion (2013) vs. $11.046 billion (2012).
2013 Full-Year
For the year, Lowes reported net earnings of $2.286 billion.
Sales for the year were up as well: $53.417 billion (2013) vs. $50.521 billion (2012).
fred
As I recall Sears stock price jumped when they announced that their 4th quarter losses had been trimmed from the 2012 level. I guess that there is no accounting for hope!
Stuart
I don’t think so. The announcement that 4th quarter losses would be between $250 million and $360 million was made in early January, and I don’t see any significant bump-up in stock price. From the day before the announcement to the day after, the stock price dipped quite a bit.
fred
I think that this was the item I recalled seeing:
http://www.bloomberg.com/news/2014-02-27/sears-posts-358-million-fourth-quarter-loss.html
Paul
It’s interesting to watch customers standing in a brick and mortar store, look at an item and then take 5 to 10 minutes on their cell phone finding the best deals. It’s very interesting to me to watch them buy the item on their phone and then walk out of the store. The companies that don’t figure out how to deal with this soon will end up selling just 2X4’s, bags of cement and milk.
One item that most reporters missed in the Sears annual report. In-store sales are less but the online sales are up 10%. There are 4 articles on this page from Lampert that can help us understand where he thinks retail is heading and how Sears is spending money to get there: What Our Reported Financial Results Don’t Clearly Show It will be very interesting to see if he is right.
Matthew
Well said. I know that’s what I do or I ask them to price match & buy it there.
I have found my local stores competing with the online retailers as long as it’s in stock and shipped by amazon, toolup, etc.
Stuart
In regard to tools, electronics, and consumer goods, I rarely go “shopping.” I often go to a store to buy exactly what I want, or I browse around with no purchasing intent in mind.
Sometimes I will make an impulse purchase, but most of the time I will lookup an item I find interesting and add it to a wishlist for future consideration.
I used to request price matches in stores, but I haven’t done this very much for a few years now. Most of the time I just order what I want or need online for delivery or pickup from a favored store.
Stuart
It’s really difficult to trust anything that Lampert says, because we don’t understand his motives.
Some of the statements he made recently seem to be aimed at cushioning the stock price.
Sears has reported steep losses every year for the past 3 years. They suffered greater losses in the fourth quarter of 2013 than they earned in their last two profitable years (2009 and 2010) combined.
Everything Lampert says is carefully crafted to oppose what their financial data shows.
Online sales might be up 10%, but that won’t soften the bleak outlook for underperforming stores.
Sears moved towards building an Amazon-like “marketplace” shopping environment, but it’s very cumbersome and unpleasant to use.
Sears.com needs MAJOR work. My local Sears stores are in sad states as well.
Lampert says:
But what does that mean? Oh, NOW they’re going to focus on online sales?
Increased social media engagement is great, but a lot of what Lampert claims Sears is now doing are the types of things they should have already been doing for years now.
Increased “interaction” and “membership benefits” won’t make up for Sears’ shortfalls in customers’ shopping experiences or dealings with customer service.
For Black Friday, certain products that were previously on sale were priced higher but offered expirable “rewards points” of equal value to prior instant savings. If that’s what Lampert has in mind for members, then it’s going to hurt them in the long run, because customers will shop elsewhere to get lower prices at the time of purchase.
Sears has online and in-store components. I’m sure that Home Depot, Lowes, and other retailers see increased online sales activity as well.
Lampert is trying to suggest that Sears’ online sales and membership activities are not reflected by the picture their financial data paints. He emphasizes the positive aspects of their online and digital sales. But another interpretation would be that Sears’ numbers could potentially be worse if not for the positives brought in by online sales.
The fact of the matter is that Sears is in very big trouble. Lampert is going to say whatever he can – even if he’s being sincere – in order to counter the overly negative state of affairs Sears’ financial data and analysts’ reports describe. He MUST speak positively, otherwise public opinion will plummet and sales will drop even further.
I am hopeful that Sears will get its act together and their work towards transformation and improvement will create positive results. But my observations suggest otherwise and so I am not optimistic.
Sears needs to do things differently, but they’re not. If they were, they wouldn’t continue hemorrhaging money like this.
Jerry
Your comment that Sears.com needs MAJOR work, is an understatement. If Sears were to put me in charge, I would first require the sears.com and craftsman.com websites be easy to navigate. Second, I would fix the in store pickup snafus they seem to have. Maybe schedule a pickup through their website, or have a phone number to call, to verify they have it in stock, and ready to load. They have some great deals online, if one can find them (I once took 10+ minutes to find an item I knew was on sale, but couldn’t get the search engine to find) and after you get that done, if you select store pickup, you have a crap shoot on how long that will take, as well.
To be fair, they do have some things right, like some small tools get free shipping for shop your way members, even if on sale. I do think the points thing is kind of a gimmick, to entice future orders. However, if they fixed the website headaches, and gave free shipping on lightweight items with a $35 order for shop your way members, I bet Internet sales would jump.
JCC
I’ve been convinced for some time now that Lampert’s goal is to run Sears out of business. I recently discovered that unlike many other department stores, Sears actually OWNS the properties where its stores sit. This is because long ago, Sears had a ton of money and could afford to buy their spaces in malls, rather than merely rent. What’s more, even if the Sears store in a particular mall has gone out of business (even if this was a decade or more ago), whoever is using that space now is more than likely paying rent to the Sears Holdings Company for the privilege.
So the bottom line is that SHC may theoretically be sitting on a massive real estate gold mine. If the company goes out of business, and the value of certain brands (Craftsman, Kenmore, Die Hard, etc) goes so low that they can be sold elsewhere, then Lampert can sell off all those properties in the liquidation and realize decades of prime real property profit, along with all of the shareholders and boardmembers of course. Meanwhile, another American institution goes under.
As for myself, I’m just trying to pick up the last of the U.S. made hand tools before they’re gone.
Hang Fire
Given the huge overcapacity of US malls, and the fact that many mall residents are paying nominal or no rent at all in order to keep occupancy high, owning a lot of mall real estate is about the worst thing to put on the quarterly report.
Greg Post
I am guilty of “showrooming” all the time and the reason is not just price but also convenience. I recently went to purchase a new computer monitor and went to a TigerDirect store, Best Buy, and HH Gregg. I did online research before the trip but haven’t bought a monitor in years so I wanted to physically see what was out there. The selection in these stores was not great. Best Buy had the best selection but didn’t have the model I wanted in stock and ordering online would take more than 2 days. Tiger Direct also didn’t have the model in stock, wouldn’t do a price match with Amazon on another model, and when they offered me a $20 coupon off $200 to order something else from their online store, the server was down that links the Brick and Mortar store to the online system. I ended up ordering everything I needed off Amazon and got 2 day shipping with my Prime account. There are places that I know can beat Amazon on price like Walmart but I’m not a fan of Walmart’s corporate culture and I also find their stores disorganized and employees to be mostly unhelpful. The more items I buy in one trip the more sense it makes for me to buy from Amazon because I can find everything in minutes versus much more time spent finding items across a large store and having employees check stock for items I can’t find or are not displayed.
Stuart
I think most consumers have a similar attitude these days.
Even though Amazon charges sales tax in a lot of states now, I still prefer ordering from them.
I went to Target to order a small HTPC keyboard they reported as being in-stock. Found an empty spot on the shelf. An associate checked the computer and saw 2 were supposed to be in stock. A week later, same story. I ordered the keyboard from Amazon but checked back later in the month. Yup – 2 in stock but none could be found.
jesse
That’s not at all unusual when the inventory count gets that low, for many reasons. The shipment from the warehouse may have been short but not noticed when received. Merchandise may be lost, stolen, misplaced, swapped out for defective items at Customer Returns without proper paperwork, taken off the floor for store use without authorization, damaged on the floor or in the warehouse and dumped, etc.
All these happen, and I have seen it.
Seth
Sure, all of those happen, but none of those are excuses why they didn’t adjust accordingly and get it back in stock. That’s just pure apathy by the store associates.
But its me!
I am also guilty of occasional showrooming, although only to a handful of items thusfar. Usually I like to just look around and dream/scheme up projects, drool at the dwindling tool selection, or have an item clearly in mind to take home. Amazon manages to carry stuff Lowes and Home Depot have decided to no longer carry, like chrome stub plumbing pieces (which I naively assumed they would carry). As an aside, I like to spread my purchases around between Lowes and Home Depot, especially after the local Ace became so unfriendly, customer service-wise.
And count me among those that refuse to shop at Wal-Mart, if at all possible, thanks to their labor practices (and our closest store leaves me feeling like I need a shower). But, as my 10 year old reminds me, Amazon’s warehouse labor issues are not exactly the best, either. Yeah, my 10 year old sees all these packages from Amazon and gives me a hard time!
I have noticed that Amazon’s prices do seem to have creeped up of late, bringing them more inline with local prices (in my state we pay tax on Amazon, which is only fair in my opinion). So now I find myself purchasing less at Amazon than previous years. Unfortunately, as noted above, Amazon carries items I cannot get locally, big box store or not.
I have Prime, but find the two-day shipping not all that enticing, as I don’t mind waiting for most items. If Amazon raises the fee, as the media has indicated may occur, I may well not renew Prime (off topic for certain, so please accept my apology).
I sure do hope Sears, or at least Craftsman stays in business. While Craftsman may be derided by tool snobs, I certainly find their hand tools to be good (especially the dwindling US made selection).
Stuart
Let’s also not forget that Lampert owns and controls a large number of Sears stock shares personally and via his investment company. He is going to say anything and everything he legally can to keep Sears’ stock price from tumbling.
rob
A couple of thoughts came to mind when reading this.
I was recently in a Sears store in Reno NV-walked through the garden/tool dept. It was a disaster empty shelves, items on the floor, huge display space with nothing it etc. If I didn’t know better I would have thought they recently had a going out of business sale. Other depts within the store looked well kept but the tool dept was another story. Just to double check things I walked into my local Sears in the SF Bay Area and found it well stocked, customers looking at various items, and nice displays. Seems that Sears may have some ordering issues or possibly issues within dept managers.
As for Lowes I wonder how their purchase of Orchard Supply Hardware will help or hinder them. I know they planned to use it to get a foothold in the CA market where Home Depot out numbers them probably 3 to 1. Long term I would hope they keep the Orchard Supply name, it’s well known in CA and been around for 60+ years. If Lowes manages things right it would seem Orchard could be a way to grow; smaller footprint stores infilling many old supermarkets and other defunct retailers locations. I would say their stores avg 60,000 sqft. Much smaller than your typical HD or Lowes.
Jeffrey
I probably have more Craftsman tools that any other brand. I have been buying them for over 20 years. While I will be sad if Sears goes out of business, but I think it is inevitable. Between offshoring hand tools and the datedness of the stores, they are sealing their fate. Every time my wife goes to the mall, I go to the Sears tool area. I never find anything worth buying anymore. Almost everything is foreign. My garage full of made in USA lifetime warranty tools is just taunting me. Anything that gets warranted will get replaced with mostly foreign tools. I did not sign up for that. Sears deserves to fail.
David
I feel the same about Craftsman’s warranty. If it is backed up by foreign made tools, it is worthless to me.
Jeffrey
My problem with Lowe’s is the electrical tool section. Lowe’s replaced all the electrical tool brands with made in china Southwire tools. They are crappy foreign tools for the same price as the quality brands they replaced. The packaging is shit brown too.
Home Depot has it’s flaws too, but until the Southwire tools are gone I see no reason to go to Lowe’s anymore. At least I can still buy Klein tools at Home Depot.
fred
My local Lowes still carries a few Ideal and Greenlee electric tools – but most of it and all of the good Knipex stuff has pretty much disappeared in favor of Southwire.
Home Depot also seems to be giving more rack space to their house brand HDX and Commercial Electric tools – but still have a fair selection of Klein and a few Greenlee items
David
I finally quit Lowes after Southwire took over. I didn’t buy Greenlee or Ideal, either, since they have sold out to Asia, but they ditched Channellock and don’t carry Klein here. That did it for me.
Brian
When I’m looking to purchase tools or building supplies that last place I think of is Sears even though I am very familiar with the Craftsman line. Nearly all of my hand tools have been purchased at estate sales. I’ve found Snap-On, Mac and Blue Point as well as Craftsman and have tools from all of those companies. My estate sale shopping started when I wanted a bench vise. Most of my power tools have come from OSH or Home Depot. Recently I’ve shopped our two local honest to goodness old fashioned hardware stores and love them! Helpful, knowledgeable people, a good selection and reasonable prices most of the time.
Hang Fire
Sears thinks they are transforming themselves into a customer-driven, internet centric buyer’s club.
Sadly, they are completely just fooling themselves. The fact is they have zero idea of what their actual inventory is- and I’m not talking about sockets and shoes, I’m talking about large items like rolling tool chests and outdoor power equipment.
This conclusion is based on repeated experience over the past year, where “out of stock” items were found on the store floor, and “in stock” items were not available when I came to pick them up.
I have bought a few items from Sears over the past year, but not because of the changes. My buying habits have not changed at all- they were all closeouts at blowout prices. The everyday prices and sale prices all held zero interest for me.
Walty
I think its amusing how Sears won’t match their online prices in the store. I went to buy a wrench set that was advertised as $49.99 online at sears.com. Got to the store and the price tag said $79.99. I asked if they would match THEIR online price. They said “no, we can’t match the online prices.” WTF??
Steve Cox
I have never had any issues with them matching sears.com or craftsman.com.
I have pulled up the price on my smart phone and show it to the clerk.