Jobs will be cut at 225 Kmart stores as those outlets transition to a new cash… (Chitose Suzuki, Associated…)
Reporting from Chicago — Sears Holdings Corp. is letting go about 700 Kmart appliance salespeople as the retailer struggles to turn around its slumping appliance business.
The move will eliminate jobs at 225 Kmart stores as those outlets transition to a new cash register system that makes additional salespeople unnecessary, a Sears spokesman said.
When Hoffman States, Ill.-based Sears first put appliances in Kmart stores in 2005, the spokesman said, Kmart point-of-sale systems weren't set up for appliance sales. So the chain had to deploy specialists to handle the transactions, which incorporate delivery scheduling and other technical issues.
New point-of-sale systems fixed the problem and allow customers to pay for an appliance anywhere in the store. The job cuts will leave a knowledge gap about appliances among Kmart salespeople. But the spokesman said the chain hopes to make up for that by training existing associates to answer questions about appliances and affixing a toll-free number to each appliance so customers can call for help.
Retail experts found the move puzzling given Sears' overall sluggishness in appliances and Kmart's push to build an appliance business in stores that haven't traditionally carried washers, dryers and refrigerators.
Kmart started out selling an assortment of Sears' Kenmore brand goods in 270 of its stores. But in February, the chain started selling varying degrees of appliance inventory in all 1,300 of its stores, the spokesman said.
Love Goel, chairman of a retail-focused private equity firm called GVG Capital Group near Minneapolis, said eliminating salespeople to cut costs is most often a mistake.
His research shows that stores with a well-trained staff can generate 30% to 40% more sales than ones where store owners skimp on training. Yet chains such as Circuit City, which has been liquidated, tend to cut payroll to contain costs when times get tough and then live to regret it.
"This doesn't make any sense," Goel said. "This is a category they should dominate. They should be doubling down."
Sears' appliance business, traditionally one of its strengths, has been under siege lately from big-box competitors such as Home Depot, Lowes, Wal-Mart and Best Buy, all of which have been making a big push in the segment. Sears has fought back with a variety of strategies, but recent results have been disappointing.
Sears posted a $170-million first-quarter loss in May, as sales sank at both Kmart and Sears stores. Overall revenue fell 3.4% to $9.7 billion, as Sears operated fewer stores and sales at its existing stores fell. Appliance sales fell in the "low double digits," the company said.
Sales at U.S. stores open at least one year, a key measure of retail health, fell 3.6%, with a 5.2% drop at Sears stores and a 1.6% decline at Kmart.
The poor results highlighted the challenge faced by new Sears Chief Executive Lou D'Ambrosio, who was hired to stem the retailer's prolonged decline. The former IBM Corp. executive has said he hopes to revive the company by capitalizing on its marquee brands, including Kenmore appliances, Craftsman tools, DieHard car batteries and Lands' End apparel.
"We fell short on executing with excellence," D'Ambrosio said in May after the first-quarter report. "We cannot control the weather or economy or government spending. But we can control how we execute and leverage the potent set of assets we have."