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Costco Keeps Up; So Why Can't Sears?

Sears blamed the economy, but investors need to ask why its competitor succeeded.

Although GDP was revised upward to much of the business media's stated surprise ( told you so, told you so) no one in their right mind, or without a political ax to grind, can say the economy is good. But is Sears (SHLD) in its pickle because the economy is bad?

In a bit of self-pity, they said so.

They said that the economy was at fault for the terribly disappointing first-quarter report yesterday, as well as increased competition. And the business media, as always eager to please sources and lighten their workload by playing stenographer, almost in unison gave the factors equal weighting. What they did not do often is confine Sears' stale claims about the economy's role in their diminished performance by pairing their results directly and prominently against competitor


(COST) - Get Costco Wholesale Corporation Report

. It's a curious oversight. While Thursday brought Sears' report to the fore and the obvious implication that they had completely lost their way, Costco also reported and guess what? It was just the opposite. Quarterly net income rose 32%, which was stronger than expected.

That's why I submit the following article for your disapproval. Look how

The New York Post

mishandled the situation

. Here is their lead, which passes along the main excuse made by Sears -- that the lame economy done it: "Sears, surprised by the severity of this year's economic slowdown, swung to a $56 million loss in the first quarter that surprised analysts."

First off, anyone who claims surprise by the economic slowdown at this point in time deserves to have their veracity examined or just might need fifty lashes with a wet noodle from The Business Press Maven. Way, way down in the article, we get this caveat: Their stores are shopworn, but guess what? Their merchandise does not have the right price value mix. Slap a new coat of paint on the stores and that does not change. And, dudes, where is the mention of Costco? Is there one single mention? Negative!

"The steep decline in sales isn't just because of the economy. Since he merged Sears and Kmart in 2004, Lampert has aggressively cut costs, questioning the retail industry's focus on driving sales with regular investments in store upgrades and promotions."

Contrast this to an effort by Karen Talley and Donna Kardos in

The Wall Street Journal

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, whom inspire the Business Press Maven to genuflect in your general direction.

We get the carnage in the headline: "Sears Turns in Loss as Sales Drop 5.8%"

And the proper perspective in the subheadline: "Costco's Net Rises 32% As Consumers Shop For Bulk Bargains"

Rather than passing along the economy-made-us-do-it excuse in the lead, they set up the appropriate comparison:

"Sears Holdings Corp. swung to a loss on weak sales, and many of its customers appeared to have fled to discounters such as Costco Wholesale Corp., whose results told a quite different tale.The contrast points to the disparity among retailers during the economic slowdown."

See? The economy is slow sure, but performance is split. Then, rather than the first quote showcasing the economy excuse as it did in so many other articles about Sears, the Journal's shaping quote dealt with the difference in merchandising between Sears and Costco:

"Costco is fundamentally a very good company offering discounted products that are broadly appreciated," said Mike Moriarty, a partner at A.T. Kearney. "But department stores like Sears keep trying to tailor their offerings for their targeted consumer group, while basically everyone is a price shopper at this point."

Even the caption to a photo of the entry to a Sears store carries this message: "Sears saw same-store sales fall almost 10% in the first quarter as shoppers poured into discounters like Costco, where same-store sales increased 8%."

Listen to The Business Press Maven and

The Wall Street Journal

on this one: it's not the economy with Sears. And though the stores need physical freshening, it not that either. It's the merchandising, stupid.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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