7 Ways Retailer CEOs Can Avoid Being The Next Sears

It’s the best of times and it’s the worst of times for American retailer CEOs.

Some, like Sears’ Edward Lampert and Toys ‘R Us ex-CEO David Brandon, have been sadly closing chapters on iconic store brands this year.

But many others, such as Target’s Brian Cornell and Walmart’s Doug McMillon, are looking forward to a very promising Christmas season having made bold and successful moves—and have the economic winds very much at their backs.

In a decisive era for the entire industry, Sears’ slouching toward a bankruptcy filing has thrown the divergent fates of U.S. retailers into even higher relief. Early Monday morning, Sears filed for Chapter 11 bankruptcy and Lampert stepped down as CEO. It reached a deal to keep open hundreds of its stores open for now.

Arguably, we’ve seen one-offs in the fates of Sears and its Kmart subsidiary, which hedgefund king Lambert has fumbled away in the five years since he took it over, and of Toys ‘R Us, which fell victim in a business that was particularly ripe for takeover by e-commerce. Bon-Ton Stores has been liquidated in large part because former CEO Kathryn Bufano and her predecessors couldn’t get the hang of online sales.

But until the economic boom created a rise in disposable income, consumer confidence and spending, there was widespread hand-wringing concerning just about all traditional bricks-and-mortar retailers.

Beyond the ongoing economic surge, how have some retailing CEOs navigated their companies out of that maelstrom? And what should store chiefs be mindful of in the months ahead?

Here are seven ideas:

Don’t give up. A couple of years ago, some analysts were ready to wash their hands of Target. One of the biggest forces in mainstream discounting had lost its edgy mojo with consumers, was mired in a questionable venture into grocery retailing, and then aggravated millions of core consumers by wading into the same-sex-bathroom controversy.

But with Cornell recently giving due credit to the “strong[est] consumer environment … perhaps in my career,” he’s also enjoying presiding over a strategic rally that has seen Target post strong gains in comparable-store sales, overall revenues, and profitability. For instance, a new exclusive housewares partnership with Magnolia, run by Fixer Upper star Joanna Gaines, has given Target some new design buzz.

Meanwhile, digital sales also have boomed as Target is reinvesting in its businesses in the wake of Cornell’s new strategy revealed in 2017 to pour $7 billion into the e-commerce platform, bulk up the chain’s lineup of in-house brands, open new small-format stores and remodel existing locations.

Can’t beat ‘em, join ‘em. Once Walmart decided it couldn’t beat Amazon with brick-and-mortar alone, McMillon and predecessor Michael Duke have presided over a steady resurgence. The world’s largest bricks-and-mortar retailer has invested billions in boosting its e-commerce platform to make it a credible competitor to Amazon online, and now is even copying the digital bogeyman to the extent of starting a video-production arm, echoing Amazon’s Prime.

Yet Walmart also has found ways to leverage its physical footprint in the service of digital business. Moreover, the two CEOs have managed to remove the political opprobrium that once hanged over Walmart like a cloud, in part by leading the way in boosting wages for its workers—long before the currently taut U.S. job market has forced other employers to do so.

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.