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Former Sears CEO Arthur Martinez on the challenges facing the retailer and the retail stocks for investors to watch.
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My next guest knows retail inside and out under his -- Sears had its most successful year ever and that was back in 2000.
Which retailers does he -- right now it's gonna name them and what are his thoughts about Sears today.
Joining me now out of Fox Business exclusive Arthur Martinez former chairman and CEO and president of Sears is also chairman of HS and a and a member of from port of AIG.
You're busy guy -- I sure am I would tell other area -- love love it.
Up first to -- years you know when I.
Just what August saw that it was being booted out of the S&P 500 caught my heart a little bit my mom used to buyers she used by the catalog at Sears -- a big deal back in Canada.
And and I saw that -- thought that's really sad had a connection what you must've thought having done well for the company.
Well it's always a disappointment when you fall from the exulted ranks I remember when we were kicked out of the doubt a number of years ago and -- -- blow that was especially being.
Replaced as we were at the time by Home Depot.
But -- it has a tremendous effect I think on internal morale when when a company has removed from the premier averages in the marketplace.
It also has a tremendous effect on investor base because a lot of the index funds can't invest in you anymore if you're not in the S&P 500 so it has cumulative effect.
-- -- to the hedge fund manager ESL you know -- best of intentions taking overseers.
But he's had -- now for years what's he doing wrong I mean it has been a pretty decent year to date move for the stock but.
What's going on there with the strategy well this is of course a hard conversation for me to have bent on pushing you wanna be accepted even that I have -- it.
You've done before if that's so it's spent and there's been a pretty dismal downward spiral ever sense of mr.
-- took over the company some 67 years ago.
Any evidence has been I think quite clear at every single quarter since he took over.
Negative comparable store sales now I know he says he doesn't care about those.
But it's a measure of your relevance to your customer if you're not showing positive comps here are not growing customers and satisfying -- the store.
Second of all the executive suite has been a revolving door I don't know how many CE o.s CFOs chief marketing officers he's had during that period of time.
The company has been starved for investment investment in stores -- now I think unattractive and on appealing investment in marketing and investment and inventory.
He's now selling some assets that generate liquidity buffer and I think the cumulative effect of all of this points to a very unhappy -- doesn't survive.
But it -- -- retailers a long time to fail that doesn't mean it's impossible to restore them but this has been a long downward spiral.
Well -- it doesn't actually hurt them the JC Penney and Ron Johnson who's taken over -- have not had a good strategy either in fact one analyst said that Eddie -- should be writing a thank you know Toronto often because.
Shoppers from JC -- are so fed up they're now going to -- years.
About JC -- well.
-- set another example of what I would consider to be a radical and risky plan that was not properly.
Stress tested before it was announced to the public to the employees to the vendors to the entire investment community.
And it has 22 elements number number one.
He like mr.
-- had some disdain for the promotional and -- orientation of big box retailers like department stores.
The fact is those strategies can work and I point to Macy's and to Coles as examples of two.
Chains -- -- a very effective and very profitable job accusing those strategies the problem is not in the strategy per say it's an excuse and the strategy.
And what he has now done as we've seen from the minus -- percent comp store results.
He's left his customers behind.
And will he get them back I just don't know.
JC -- down 8% year over year but there are companies that you think are doing it right and you -- been the chief financial officer years ago -- -- are you know luxury you're picking three luxury names puppy that's.
At that some great personal risk you.
Not at all I mean people want to hear from insiders like who have been in the -- and now.
I -- say upfront I'm not -- -- name many of the two companies that touch the retail space -- a set of that wouldn't be right I understand that not number one I have a lot of hard for Burberry they've had a little bump in the road here with their profit warning earlier this year but I think the job that.
Enjoy parents is done at the company is absolutely superb.
And the long term prospects remain very very good.
I would point to Prada as another company which even number ray had its little hiccup here.
Has done exceptionally well in the first half of the year I think sales were up some 40% profits up 50%.
My second favorite is in detects and his apparent -- up.
Which is huge lately I see them everywhere -- Fifth Avenue now -- victim ubiquitous.
Fast fashion chain.
-- global in scope absolutely fantastic -- job there's no question about it.
I also think Ralph Lauren polo as an example of enduring success in the luxury marketplace and I have.
A lot of support for that Michael courses getting a lot of attention it is a wonderful story especially if -- founding shareholder.
A lot of wealth has been created for those guys they deserve it I would question other reminds better than -- about whether the valuation is appropriate.
In this marketplace but -- been a hot story and it's a great -- these affordable luxury it's.
These are all names that will put up on our FaceBook dot com slash -- -- With the outcome countdown of the causing a Liz Claman whatever fits -- -- I wanna ask you quickly because you do sit on the board of AIG the government has pretty much made a big stock sale the government now only hasn't.
Minority stake after bailing out AIG.
Will the company be able to successfully re emerge and stand on its own wealth and will the taxpayer.
-- -- first of all I hope this is the last time anybody -- first AIG is the bailed out insurer because I think we're past that.
We received exceptional assistance from the US government 182 billion dollars.
It was much appreciate at the time there's a long conversation about the financial system at the time that.
That support was given what we have systematically under the leadership of Bob them -- our CEO.
Worked our way out of that situation the government has now been fully repaid at a profit.
We have re emerged as a smaller but profitable company.
Still have a sixty billion dollar market cap which is nothing to sneeze at.
We have the world's largest property and casualty insurance business and a very big US domestic retirement and life insurance business.
And we are very excited about our gross profit growth prospects the balance sheets been fixed I think we're on our way.
-- it's great to have you once again especially caring about retail how to think the holiday season -- -- that it is going to be better than the forecasts I know -- better than -- -- better than the 4% that was mentioned earlier.
We have a little uptick in consumer confidence noted over the last couple of months.
Consumers.
Last year's sales were up like five and a half percent in the holiday period I think -- do at least that -- this year.
Arthur Martinez.
Former chairman and CEO of Sears now chairman of HS and it sits on the board of AIG's.
What's the CFO of -- what am I missing here.
A husband and father to kids in five grandkids great having thinking it's really nice to see again thank you let -- visit once again I'm --
