Sears has announced that it is forming a Real Estate Investment Trust (REIT) in a move that will generate about $2.5 billion for Sears.
Sears will then lease its once-owned properties. This comes after Sears divested its Hometown & Outlet stores as well as its Lands End brand. Sears has even leased parts of buildings in which it currently resides. (We have a Whole Foods, an entire grocery store, here locally that has leased part of a Sears location.)
Much like the 2004 $11 billion deal for Kmart and the nearly $2 billion deal for Lands End, the Sears REIT once again does nothing to build long term value for Sears. Sears will fail because its horizon is not long enough. It has not invested in its brand for long term.
To see proof of this, I ask you this question: “What is Sears?” At best, your answer will be as ambiguous as “I don’t know.” When asking yourself the same question about Kmart, the answer is likely a bit more damaging. Your likely response is simply “cheap,” which is a failure on Kmart’s part because it will never outdo Walmart in “cheap.” Walmart stores are also everywhere so Kmart will also lose the convenience battle as well.
For Sears, it’s easy to blame the end of the golden age of the department store and mall, thinking the changing landscape and customer preferences is beyond its control. The enviable demise of Sears will come as a result of its victim mentality if history is any indication. Sears’ seeming unwillingness to change at its core to be something better and different is what spells its doom.
The Sears REIT will keep it afloat in the hopes that customer expectations will change, but will do little to align the once great brand into something meaningful in the long term.