Retail Sales GrowthBII


Sears reported disappointing Q2 2016 results, as the company continues to experience declining in-store foot traffic and sales.
As e-commerce becomes a nearly ubiquitous part of the retail industry, legacy department stores are trying to adapt, but compared to competitors like Target and Kohl's, Sears has not been able to adjust to the shifting tides in retail. The company — which owns both Sears and Kmart — has launched limited digital tools, which have failed to attract shoppers. 
  • Total revenue continues to fall off: Sears' revenue, including both Sears and Kmart, declined nearly 9% year-over-year (YoY) totaling $5.6 billion. This is consistent with the company's Q1 2016 performance, which saw revenue decline 8% YoY.
Sears stopped reporting e-commerce growth in late 2014, but the rates were inconsistent up to that point:
  • Sears' digital faltered during the holidays: At its lowest, Sears' e-commerce business grew just 10% during Q4 2013, which is especially surprising considering the bump in sales most retailers experience as a result of the holiday shopping season.
  • Things seemed to be looking up two years ago: During Q3 2014 — the last quarter in which the company reported e-commerce growth — online sales grew 18% YoY. Historically, the company's e-commerce growth rates had hovered around the high-teens to mid-twenties.
  • But since then, the company has kept a lid on digital results as its overall sales sag:Little has been revealed about the company's digital efforts or performance since Q3 2014, including sales performance or even new improvements on the digital front.
Sears' lack of focus on the digital front is quite evident in its quarterly performance reports. The company has reported cutting back on physical store locations in order to focus on its e-commerce presence for six consecutive quarters. 
However, the only initiative being discussed in the company's earnings calls has been its partnership with Shop Your Way — an online loyalty program that rewards shoppers for every dollar they spend with Sears. Additionally, the Sears mobile app only has 1.5 stars on the iOS app store, with recent reviews indicating slow functionality and inability to access loyalty accounts. The company has not discussed its mobile efforts, either. Whether Sears is working quietly on building up its online tools or simply not taking the threat of e-commerce seriously, the company is continually taking hits on revenue growth.
Outside factors aside, the de-emphasis on digital initiatives is likely contributing to the retailer's decline, as other legacy players have successfully adapted to e-commerce. Competitors like Walmart, Target, and Kohl's have all reported significant growth in e-commerce sales, as they compete against online giant Amazon. Target's e-commerce sales reached over $533 million during Q2, according to our calculations, marking 16% YoY growth. And global online sales on Walmart's e-commerce sites grew nearly 12% YoY during the same period. 
While Amazon casts a large shadow, these chains have been able to keep up sales by treating digital as a vital part of their businesses. Sears, meanwhile, still leans too heavily on its brick-and-mortar locations to drive sales without supplementing these shopping experiences with innovative, engaging digital tools. Moving forward, investing in digital may help Sears salvage some of its retail business. But it would still have quite a lot of catching up to do, as it lags far behind competitors that recognized the threat posed by digital-native retailers earlier on.