7 Ways Retailer CEOs Can Avoid Being The Next Sears

Don’t bet wrong. The consumer economy hasn’t become so strong that retailer CEOs can overcome huge mistakes. Consider the case of JCPenney, which former CEO Myron Ullman walked back from the precipice of disaster a few years ago by returning to his old company to rescue it. He basically rescued it from the boneheaded moves upscale—and away from its traditional boomer clientele—made by discredited former CEO Ron Johnson.

Unfortunately, after Ullman retired, under new CEO Marvin Ellison the company went hard after millennials again as Johnson had, only this time with missteps such as new private labels that didn’t catch on. Ellison since has departed to run Lowe’s. But even as it welcomes a new CEO in Jill Soltau, Penney may be repeating its old mistakes by harboring high hopes for the launch of yet another new private-label line in September, this one called Artesia and rendered in the hot “boho” style.

Don’t discount. One of the biggest annual delicate dances in the American economy is between retailers and consumers at Christmastime over how long the stores can go toward December 25 without having to deeply discount merchandise. In preparation for what promises to be a robust holiday season driven by flush consumers, savvy retailing CEOs have been looking for ways to keep fire-sale impulses to a record low.

For example, record earnings for Lululemon have been attributed in part to a no-discount policy. A similar story is unfolding at Michael Kors, which has been scaling back on wholesale distribution and tightly controlling inventory to cut down on discounts.

This caution, of course, doesn’t apply to properties such as Kohl’s and TJX, where price discounting is a huge part of the brands’ DNA. Sticking with the formula has helped TJX’s Marshall’s and T.J. Maxx chains remain sizzling and has helped Kohl’s to recover smartly after a soft couple of years.

Be artificial. Big data is coming to the rescue of many retailer CEOs. In May, for instance, H&M announced plans to adopt artificial intelligence and big-data capabilities for making each location more inventory-efficient. By using AI to keep an eye on and control inventories, H&M has joined a vanguard of retailers that are cutting their reliance on seasonal markdowns that drain margins.

Unravel China. Retailers are finally having to sneak price increases into their stores—such as the recent bump up in prices for couch materials at Pier One—because new U.S. tariffs on Chinese imports have begun to bite in earnest.

But to the extent possible, savvy retail CEOs have stopped trying to ride out the Trump administration’s trade war with China and are making moves to permanently detach themselves from Chinese sources of supply where possible.

Be wary of politics. It’s getting hard for retailer CEOs not to follow many other brands in becoming blatantly political in view of the rising demands by millennials that companies “stand” for something. The latest prod is a study by Global Strategy Group which says that 81 percent of Americans believe corporations should take action to address important issues facing society. And, well, that whole Colin Kaepernick thing doesn’t seem to have blown up in Nike’s face.

But remember that Ed Stack may have different advice. In the wake of the February killing by gun of 17 people at a high school in Florida, the CEO of Dick’s Sporting Goods boldly decided to tighten the chain’s gun-sales policies, including halting the sale of assault-style weapons at its Field & Stream subsidiary.

Comparable-store sales have dragged in part as many in Dick’s core clientele, gun-rights advocates, have abandoned the chain in principle. Stack said there were other contributors to its new sluggishness and that “the health of our core business is relatively strong,” but Dick’s results will continue to be worth watching for those retailer CEOs who would follow Stack into the political fray.