The battle for Sears customers is underway. Walmart, Target, Kohl’s, Home Depot, and Best Buy are poised to capitalize from Sears’ bankruptcy filing.
Sears and Kmart have a combined 700 stores. The company has brought in $8.7 billion in revenue over the past year, leaving market share opportunities and sales of home appliances, TVs, tools, and clothing up for grabs.
About 20% of Sears and Kmart stores will close by the end of the year, and rivals could face short-term pressure if the company heavily marks down merchandise. But big-box players, department chains, and discount stores are in strong positions to win former Sears’ shoppers for years to come.
Many companies, including Walmart (WMT), Amazon (AMZN), and Target (TGT), are hoping for a repeat of how they benefited from Toys “R” Us’ liquidation earlier this year. The three are gunning to sweep up a chunk of the $7 billion in sales Toys “R” Us has left behind. Target’s chief executive has noted how Toys “R” Us has already helped his company.
Retailers have feasted off Sears’ troubles for years and positioned their businesses for an environment without the once-dominant company. JCPenney (JCP), for example, made a big push into selling home appliances under former CEO Marvin Ellison. Appliances made up 16% of Sears’ sales in 2017.
Best Buy (BBY) will get a $175 million lift this year from shoppers who once bought TVs, iPhones and home speakers at Sears.
Other companies will get a sales boost from shoppers who go to Sears for clothes and home decor.
Kohl’s (KSS), Macy’s (M), and JCPenney share middle-age customers with Sears. The average age of both Kohl and Sears’ shoppers is 50, while Macy’s and Penney’s average is 48, according to John Mercer, a senior analyst at retail think tank Coresight Research.
Sears shoppers are most likely to shop at Walmart and Target. 92% of Sears customers visited Walmart, while 75% hit up Target, according to a Cowen research report.
Walmart, Burlington Stores, JCPenney, and Ross Stores also have similar middle-income core customers. The average Sears customer had a $59,000 household income, while Walmart customers’ average income was $55,000. Penney and Ross’ were $61,000, Cowen found.
A big factor in the race for Sears’ customers will come down to where the company decides to shut down stores. Sears is expected post that list Monday afternoon.
Here, TJX Companies (TJX), which owns Marshalls, TJ Maxx, and HomeGoods, has more than 1,300 stores within five miles of Sears’, followed by Walmart and Target. Both have more than 500 stores within five miles of a Sears, according to Cowen.
But the fight for the scraps at Sears’ will be crowded.
Retailers will need to bolster their relationships with Sears’ suppliers and raise customer awareness about their brands and merchandise, according to Melich.
“We believe the fight for share gains will be highly competitive, shares will be likely somewhat fragmented, and prior [Sears] shoppers could also just stay home and not shop for items that were more discretionary,” Cowen analysts said.