Kmart parent poses concerns about its future

3/22/2017

HOFFMAN ESTATES, Ill. — Kmart parent Sears Holdings, revealed in in its annual Form 10-K filing with the U.S. Securities and Exchange Commission that its “[H]istorical operating results indicate substantial doubt exists related to the company's ability to continue as a going concern.” 


In response, the company will transition into a “customer-centric” company. “The retail industry is changing rapidly,” the company wrote in the report. “The progression of the Internet, mobile technology, social networking and social media is fundamentally reshaping the way we interact with our core customers and members. As a result, we are transitioning to a member-centric company. Our focus continues to be on our core customers, our members, and finding ways to provide them value and convenience through Integrated Retail and our Shop Your Way membership platform. We have invested significantly in our online ecommerce platforms, our membership program and the technology needed to support these initiatives.”


Sears Holdings added it must respond quickly to ongoing technology developments and implement new ways to understand and rely on the data to interact with its members and customers and its ability to provide attractive, convenient and consistent online and mobile experiences for our members. “We must anticipate and meet our members' and customers' evolving expectations, while counteracting developments by our competitors and striving to deliver a seamless experience across all of our sales channels. We may need to adjust our strategic initiatives depending on our members' and customers' reactions to and level of engagement with our initiatives. Failure to execute these initiatives or provide our members with positive experiences may result in a loss of active members, failure to attract new members and lower than anticipated sales. There is no assurance that our initiatives and strategies will improve our operating results,” the company stated.


The Hoffman Estates-based company added its sales and operating results depend in part on its ability to predict consumer demand for products and services we sell, availability of merchandise, product trends, and its members' and customers' purchasing habits, tastes and preferences. “If we misjudge these predictions, our relationship with our members and customers may be negatively impacted, and we may be faced with excess inventories of some products, which may impact our sales or require us to sell the merchandise we have obtained at lower prices, and missed opportunities for products and services we chose not to offer. In addition, merchandise misjudgments may adversely impact the perception or reputation of our company, which could result in declines in member and customer loyalty and vendor relationships. These factors could have a negative effect on our business, financial condition and results of operations,” the company wrote.


At this point, it is too early to determine if and how this new approach will affect Kmart stores and pharmacies. Sears reported it had 735 Kmart stores as of Jan. 28, a decrease of 206 stores compared to the same time one-year prior. Kmart pharmacies are located in 451 of its stores.


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