Will Sear’s (NASDAQ:SHLD) Recovery Strategy Bring Long Term Damage?

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By Thomas Copeland on October 22, 2014 Company

The Sears (NASDAQ:SHLD) saga has been going on for the past few months now. Their story of struggle and losses isn’t new to anyone. Their attempts for recovery included taking loans or leasing out their properties. In a similar effort, it revealed yesterday that Primark will lease about 520,000 square feet of Sears Holding (NASDAQ:SHLD) in seven different locations. These locations are considered the prime spots with in the North eastern part of the United States. Sears (NASDAQ:SHLD) is an Irish company, that sells fashion commodities of good quality at low and affordable prices. Whereas Primark on the other hand deals with throw away merchandise, that’s becoming popular with time.

Primark is a company based in Ireland that is run by George W Weston; CEO of the company. Primark is a subsidiary of Associated British Foods, which was founded by Arthur Ryan. Primark in total has 278 stores in Europe up and running and it plans to start its first store in Boston in later part of 2015. According to Primark press releases, they will initially start with opening warehouse facilities first, and in 2016 will introduce 16 additional stores. Most of these locations are former Sears (NASDAQ:SHLD) location, from which they would withdraw services. Primark aims at being the prime mark for consumers when they think of cheap yet chic clothing. Currently, it is UK’s second largest clothing retailer. It caters to less than 35 years of age customers, fashion conscious people with its wide range of products in women’s wear, children wear, menswear, footwear, lingerie, accessories and household items.

Initially, this idea seemed to hit the mark. Eddie Lampert, chairman of Sears (NASDAQ:SHLD) Holding allowed existing Sears (NASDAQ:SHLD) and Kmart locations to quality retailers. These retailers included Whole Foods (NASDAQ: WFM), Dick’s Sporting Goods, Nordstorm (NYSE: JWN), Rack, Forever 21, Corner Bakery, West Elm and Aldi and Primark. A detailed study of this move may reveal that opening up new retail and company outlets may result in changing the whole perspective of how the mall was viewed in the past. Malls that were once considered slow, might feed a new energy with the flow of young consumers, with a limited budget purchasing low price commodities in bulks. This would eventually cheapen the mall as well as its reputation.

The German Aldi is another name that will be taking over Kmart properties. Aldi’s primary focus is food and this too wouldn’t help build up the mall image. Such stores opening around Sears (NASDAQ:SHLD) will hurt Sears (NASDAQ:SHLD) more than benefit it, as Sears (NASDAQ:SHLD) has very limited variety of its hallmark brands and some of those products are now available at other retailers too. Primark does help Sears (NASDAQ:SHLD) with bringing in more traffic, but as the US consumers start accepting Primark; more locations will be required and it might eventually become subtenant with JC Penney (NYSE: JCP), Kohl or Macy’s (NYSE: M) and generate traffic at lower prices. This move works in favor of Primark more than Sears (NASDAQ:SHLD).