According to Reuters last week, HBC (and its governor, CEO and executive chairman, Richard Baker) is prepping to make a bid to acquire Kohl’s. Will they succeed? Probably. Should Kohl’s do all they can to repel such a deal? Absolutely!

The Unlocking Value Engineer

Why? Because Richard Baker, real estate mogul extraordinaire is just that. As he reviews the totality of Kohl’s, its problems and opportunities, he is assessing its potential new revenue streams and strategic and structural changes, including economies of scale, consolidating many of the supply chain and administrative functions that can be shared across the HBC enterprise. All roads in his brain ultimately lead to real estate. In other words, “unlocking value” as he described the spinoff of the digital and physical businesses of his current retail brands (the Saks and Hudson Bay properties), or “unlocking” an opportunity such as launching stores in Canada, he is engineering other financial value boosting ideas.

The comparisons made between Baker and Lampert are valid concerns for Kohl’s to be wary. Since Baker has been at the Saks helm for about nine years, it has become obvious that some of his actions (or inactions) and his lack of retail knowledge and experience are similar to Lampert’s

And speaking of which, Eddie Lampert comes to mind. As former CEO and chairman of Sears Holdings he is certainly a financial engineer extraordinaire, who said he “unlocked” a ton of value as he managed Sears and Kmart down and out over the past two decades. At least he gave the dying brands a slow, orderly death. And much of that slow death was managed by securitizing Sears’ private brands to ultimately sell them for higher prices than if they remained solely connected to Sears. Another Eddie example, which would be right in Baker’s wheelhouse and could be an ominous signal for Kohl’s, was Lampert’s move to put the stores in a REIT and then lease the space back to the stores. Back in the day, private equity giants Lupert Adler, Cerberus and Sun Capital choked the life out of Mervyn’s using this very same instrument. Let’s be clear. I doubt that the troika purposely squeezed Mervyn’s to death, it’s just that the short-term prize of winning more bucks was too tempting.

Probably more telling of Lampert’s lack of retail and consumer knowledge, was his cost-cutting efforts. One key executive, having been hired by Lampert and then fired said, “…if any proposed growth initiatives or innovations, including, store improvements, research, etc., did not have some kind of cost reduction, it would not be approved.” The stores quickly became dated, to say it nicely.

The Roads to Nowhere

By the way, I only parachute the Eddie example to draw the parallel to Baker’s roads leading to real estate. As I wrote, Eddie’s mental roads all led to financial engineering to unlock value. https://therobinreport.com/hudson-bay-saks-lt-real-estate-or-retail/ And we all know where that ended up. Yeah, Eddie unlocked value and much of it ended up in his pocket or as I have said, he took the last life raft off the sinking Titanic, filled it with cash and sailed into the sunset. I digress for the fun of it.

However, there is a lesson to be learned from the different but equally personal monetary success of these two moguls. At the end of the day, the tons of money they won were by the core acumen of Baker’s real estate brilliance and Eddie’s financial genius.

The fortunes they have made are not from any measure of retail knowledge. Not one ounce. Another similarity is in how they both declared new avenues of growth and/or economies of scale. More importantly, they both have been very reassuring that they would find seasoned, high-caliber experienced retailers to take the helms of their newly acquired iconic brands. It would take me too long to describe the swinging doors they both generated going through one CEO after another, and finally taking the corner office themselves. In reality, they occupied those offices and acted as operating CEO from day one, even though they publicly kept the doors swinging.

If HBC Wins and Acquires, what Happens?

I believe the comparisons made between Baker and Lampert are valid concerns for Kohl’s to be wary. Since Baker has been at the Saks helm for about nine years, it has become obvious that some of his actions (or inactions) and his lack of retail knowledge and experience are similar to Lampert’s. Although we can’t predict what he might do with Kohl’s, there is reason to believe a spinoff of the digital and physical businesses would be an early move. Baker maintains the Saks spin-off was essentially to unlock real estate value. Baker’s lack of understanding of the long-term consumer-favored omnichannel model that winning retailers are perfecting every day, his potential spinoff of Kohl’s would be a rather stupid move. Yes short-term, it might unlock a higher share price. But that over repeated “low-hanging fruit” of short-termism is the enemy of long-term sustainable growth.

Another death knell quickie? Beware the REIT. And finally, a popular saying in today’s world of alternative realities: Don’t listen to what he says. Watch what he does.

What does Eddie \”fast buck\” Lampert have to do with this? Before I get to the significance of the title of this article and HBC\’s \”go private plan,\” I stated in an article way back in 2014 that Richard Baker is a brilliant real estate mogul and that Eddie \”brilliant financier\” Lampert should hire him.

A bit of tongue-in-cheek, I said \”Now that Eddie \”sell the assets\” Lampert is turning his dying retail business into a real estate play, he should retain Richard Baker as a consultant. If Lampert can afford him. Of course, Richard doesn\’t need the money, so he might do it out of the goodness of his heart. While nobody ever questioned Eddie\’s financial engineering skills, he is now at the 11th hour before bankruptcy or outright liquidation of the Kmart and Sears\’ businesses. The only asset he has left to squeeze more cash out of is the real estate. With that in mind, Baker\’s brilliance in real estate would come in handy. Here\’s his story. In Canada, Baker sells the Zeller\’s chain for a huge premium of $1.8B to Target. This is akin to Target getting whacked in the head with a sandbag. More recently Baker gets an appraisal on Saks 5th Avenue for a whopping $3.7B, making it the most valuable retail building in the world. Just to give some context, it was reported to be worth between $1B and $2B when he bought it a couple years ago.\” Geez!!! This guy is something else.

And a year earlier I wrote \”Hudson Bay – Saks – L&T: Real Estate or Retail.\” I speculated that as the Sears and HBC retail businesses continued to tank, Baker and Lampert would default to each of their excellent skill bases: financial engineering under Lampert and real estate and M&A deals under Baker.

My prediction of Lampert\’s shift from saving the retail business to financially leveraging asset value (brands and real estate) is in fact, playing out. Baker from the get-go has kept to his original dual strategy of appointing a CEO with the expertise and skills to run the retail businesses while he would create and grow the value of their real estate assets. And boy he did go on an acquisition spree. Following his purchase of Hudson\’s Bay, L&T and Saks Fifth Avenue, he acquired Galerie Kaufhof in Germany and opened Hudson\’s Bay stores in the Netherlands. And then he hired Jerry Storch as the CEO to run the retail businesses. Without going into great detail, Storch\’s tenure resulted In a wobbly retail enterprise at best, but flatlining to diminishing growth is probably a more accurate description when he left the company.

Fast forward to a WWD CEO Summit in October 2017 where we heard Mr. Baker discussing the retail environment: \”Being a retailer, that is too tough. Man, that is tough. The second business we are in is the real estate business. That\’s not as tough. It\’s a place where we can make a lot of money.\”

Was this Mr. Baker\’s \”Lampert moment?\” Was this when he began to think of defaulting to his core skills as a real estate and M&A mogul? Was it the beginning of his de-emphasis on the retail business as a losing proposition? Perhaps, at least in his own mind (and publicly unspoken) it was his moment to manage the retail business down and out while selling the real estate assets (à la Lampert).

New Leadership

We do not yet know. But enter Helena Foulkes in February 2018 as the new CEO following Storch. Coming from a top position at CVS where she excelled as a change agent and led its transformation, she knows a thing or two about consumers and strategy. She\’s a Harvard Business School and London School of Economics grad. Foulkes also ranked 12th on Fortune Magazine\’s 2017 Most Powerful Women in Business list and was one of Fast Company\’s Most Creative People in Business, the same year. In 2018, the NRF named her one of the leaders Shaping Retail\’s Future.

I only throw those creds out there as indicators that she does have the chops to figure out what needs to be done to stabilize the business, how to do it and finally, how to implement the strategies to get it done. The caveat: if, and it\’s a big if, she gets the time and the capital necessary to accomplish such a turnaround. And at the end of the day, will Richard Baker provide the capital and time to get it done?

Early into her new role, I met with her and in my opinion, I do believe she is a true change agent. She was totally aware of the complex and giant challenge she faced, and at the time, expressed that she and Baker were on the same page agreeing that the required investment in time and capital would be committed to righting the retail enterprise.

So, back to Mr. Baker and his publicly proclaimed intention to charge ahead focused on the original dual retail and real estate strategy. One would tend to believe that intention, given his new \”go private plan.\” Just as Nordstrom attempted to privatize its business to get out of the glare of Wall Street and the demands of \”short-termers\” so they could buy the time and commit the capital required for transformation, Baker stated the same reason for wanting to take HBC private. In a recent letter to the chairman of a special committee of independent directors, Baker cited the need for \”significant capital investment to execute its strategy, and the high degree of uncertainty in the retail landscape.\” Thus, his plan to sell Gallerie Kaufhof, possibly L&T and other assets.

Now back to Ms. Foulkes. She called the plan \”an exciting milestone\” and a \”bold action\” that will allow the company \”to fully focus our resources on HBC\’s North American operations, including our best growth opportunities – Saks Fifth Avenue and Hudson\’s Bay.\”

On the other hand, she said there are \”no sacred cows.\” Reading between these lines, cost-cutting, consolidation of the organization, store and space shrinkage, etc. are on the top of her priority list. In other words, she needs to stabilize the business to a turnaround point sufficiently enough to put the business on a growth trajectory.

Behind the Curtain

So, what is all this really about? Is it Richard Baker defaulting to, and focusing primarily on real estate dealings, and possibly squeezing cash out of a dying retail business, à la Lampert? Or will he support his new CEO, providing the promised time and capital necessary to transform the retail enterprise back to health and future growth?

The slow roll of Lampert\’s systematic management of Sears decline began over 15 years ago. And it has not yet gone \”poof\” into the night. By gravity alone, it takes multibillion-dollar businesses a long time to die. In any case, if Baker really means what he says about getting the capital necessary to go private so the retail business can buy the time to be re-energized, then my bet is on Foulkes to make it happen.

It is finally happening: Sears is on the brink. I\’ve been predicting this from Eddie Lampert\’s Bezos-like \”day-one\” declaration that he was going to return Kmart and Sears, two iconic American brands, to their once storied greatness. By his own actions and inactions, I argued his true (and unstated) intent was to financially engineer the failing retail business so that cash would flow into his own coffers. And it was, sadly, a chronicle of a death foretold.

I say, \”on the brink,\” because although Sears filed for bankruptcy, there is a very slim chance it may severely downscale the business and come out of bankruptcy a much smaller business, but still breathing. But don\’t bet on it. While revenues and profits have been tanking year-over-year since his first day at the helm, he \”pulled many rabbits out of his hat\” (aka financial engineering) during that long, downward journey to create an illusion that he would find a way back to stability and potential growth. But as the rabbits piled up, the world tired of his illusions. Grabbing for yet another rabbit isn\’t going to fool anybody.

Furthermore, In the real world, the only people that mattered to Sears were the dwindling number of customers. And they were not tricked by any of his illusions. They saw the reality of crumbling, dirty, dull and unraveling stores full of boring merchandise, lousy service and had a generally unhappy experience. At the end of the day, consumers, who are the only reason for any retailer\’s existence, were driven away by the actions and inactions of Mr. Lampert, and accordingly, they drove Sears to the brink. And they are not going to haul it back up and save it from death.

For historical perspective (I have been covering Sears for 40 years), here\’s what I wrote in The Robin Report in November 2004. It is predictive and Eddie proved me right by barging ahead and running Sears right off the cliff. Here is the report, written 14 years ago.

SEARS HOLDINGS CORPORATION: TALKING THE VALUE TALK = WALKING THE VULTURE WALK

1. A New Beginning for a Real Long Ending

How many times have these two dying relics, Kmart and Sears, come back up for air, just to slip back under? And I\’m not referring to bankruptcy, although it applies to Kmart. I\’m referring to their long, painfully slow and \”lumpy\” (to use an Eddie Lampert term) descent into the abyss: Sears for a quarter century and Kmart for at least 15 years. The Titanic metaphor, used to describe Sears\’ sinking woes in my past articles, would have been equally appropriate for Kmart.

However, together they now come up for air once again. Together, they have another chance. Together, under Sears Holdings Corporation, they have a new beginning. Will they create \”Grand\” new retail value, as the newly formed management troika is talking-the-talk about? Or will they walk the Eddie Lampert vulture walk, picking off billions in cash from these slowly dying brands to turn around and invest it in the next leverage opportunity?

My opinion? It\’s going to be the vulture walk. But it will be a real long ending, a continuance of the slow and lumpy descent into the abyss. Therefore, the final metaphor might be \”Two Titanics\” in a great sinking synergy, kind of a swan dive to the bottom.

The end, however, will not come before a new beginning created under the newly formed Sears Holding Corporation is orchestrated by the troika of chairman Eddie Lampert, previously chairman of Kmart and head of his own hedge fund, ESL Investments; vice chairman and CEO Alan Lacy, previously chairman and CEO of Sears; and president Aylwin Lewis, also to be CEO of stores over the newly merged Kmart and Sears. Just prior to the merger, Lewis left his COO position at Yum Brands (Taco Bell, Pizza Hut and others) to take over as CEO of Kmart. Lewis has had no retail experience. He is, however, highly credited for his knowledge of operations.

The conductor of this orchestra will be Eddie Lampert, who will own about 40 percent of the combined $55 billion company, with about 3500 doors (1482 Kmart, 871 Sears \”full-line\” and 1100 specialty stores). Mr. Lampert, a widely acclaimed financial genius, has amassed billions of dollars for his ESL Fund.

Of note, his genius status grew from his ability to identify great deals, particularly distressed retailers that he snapped up. The other part of his MO is simply to cut costs, improve returns on capital, increase cash flow and boost per-share earnings.

Not only has this financial model contributed billions to his Fund (and himself, to the tune of 20 percent of the Fund\’s gains per annum), it also fuels the other part of his self-professed master plan.

2. Eddie Lampert as Warren Buffet?

Eddie thinks of himself as a latter-day Buffet. In the footsteps of his role model, Lampert looks to generate cash, as Buffet did with his original investment in ailing Berkshire Hathaway. Eddie\’s idea is to invest in other bargains so he can begin the cash-generating bargain hunting cycle all over again.

However, in this case, Lampert departs from Buffet\’s formula by not only buying two losers, but losers who have long been and still continue to be badly beaten by dominant competitors. He has also placed himself in charge of the mess. As business writer Jesse Eisinger wryly points out, \”Mr. Lampert is no longer just a hedge-fund whiz against whom it is suicidal to bet. He is also chairman of a mastodonic retail company that has to compete against companies with better brands, better management, more money, and more customers.\”

Another Buffet tenet that Lampert has borrowed and rephrased his own words, \”Managing the business strategically…for the long-term without having to worry about figuring out how to make monthly same-store sales hit a specific target, and without giving any type of quarterly earnings guidance and then trying to manage the business for that guidance.\” In other words, he would focus solely on return-on- investment.

Good luck, Eddie. Perhaps if I were a retail analyst and Mr. Lampert were the grand Poohbah of retailing (say a Les Wexner, Allen Questrom or Lee Scott), and he was telling me to forget same-store sales increases and to focus with him on his long-term strategy of creating a retailing powerhouse (out of two cripples), I might (read: might) go along with him. However, while he may be the Grand Poobah of finance, he\’s no retailing Poohbah, much less a grand retailing Poohbah. And I can\’t imagine too many investors who would be lured to Sears\’ negative 2.1 percent year-to-date comp store sales, or Kmart\’s negative 13.7 percent.

But wait a second! Upon announcement of the merger, the \”greater fools\” raced, lemming-like, to run up the stock prices of both brands. That, folks, is the talk-the-value-talk strategy, so well played out by Mr. Lampert. Can it work… and for how long?

Consultant, Howard Davidowitz, was asked what would result if Sears Holdings were to pull off exactly what they are talking about, that is, gaining synergies from real estate moves, cross marketing brands, and supply chain economies. His answer: \”A cadaver.\” He went on to say of Mr. Lampert: \”He doesn\’t invest in stores, he cuts costs, he cuts expenses, and by the way, here\’s another thing he cuts: customers.\”
So, we have a new beginning with two financial guys and an operations guy talking the talk of taking two really enormous and sick retail businesses and making them healthy. I don\’t think so!

3. Talking the Value Talk

The grand charade (If my assessment is correct) about the ultimate end of Kmart and Sears is why will it take so long? First of all, Lampert declares to the public-at-large and specifically the financial community that the troika is committed to create value where very little now exists. All this says is that the resuscitation efforts to stall off the ultimate demise will take a very long time. The guile of Mr. Lampert is that the longer he can keep these losers afloat, the more cash he can generate for himself. So, the talk and the walk tell us that Kmart and Sears will lump along for a long time before their many assets are finally sold off (that\’s assuming they still have any value at the end). In fact, Lampert himself declared the path ahead as lumpy progress over time. Indeed!

Anyway, the greater fools and the public at large will view this lumpy and long final act as a valiant, sincere and purposeful attempt to rejuvenate the iconic Sears brand and perhaps save and reposition a much smaller Kmart. Realistically, maybe he should just turn them into a \”super\” dollar store chain in urban markets.

As I\’ve said before, the greater fool theory is stronger than ever, and there are more fools than ever before, jumping on even the slightest win for the new holding company. Watch them throw good money after bad, pumping up the stock price.

However, this is but one part of the grand charade and the final act. How long will it play out, or more accurately, how long will Mr. Lampert play it?

I don\’t know, but you can expect the following plot for Act III before the curtain rises on the final act.

4. Act III, Scene I

The troika will likely initiate many of the tactical moves the pundits have been speculating on since the merger was announced.

Real Estate

Sears will continue its off-mall strategy, now able to move into those select Kmart stores (including the larger Kmarts, to be re-named Sears Grand, which will locate them closer to their desired consumer segment of higher income homeowners. A repositioned merchandising strategy might pit them effectively against Kohl\’s. Or, wait a second, is it Kohl\’s they target as their primary competitor, or is it Walmart, Target or Home Depot? Who knows?

The Issues:

• What is the repositioned Sears value proposition for customers in these new locations?
• Is there a potential cannibalization of current Sears locations?
• How many of the Kmart stores that Sears might want to have refurbished, and at what cost (the type of investment costs Lampert historically avoids or cuts, in favor of profits)?
• What does Sears do with its current off-mall Sears hardware division with its eroding appliance share against Home Depot and Lowe\’s?
• When they want to sell off remaining underperforming stores, or those in bad locations, what do they do when they realize that those stores and locations are also undesirable for potential buyers as well?

Brands

The cross-merchandising of proprietary brands is expected to provide a synergy. Sears brings its revered Craftsman, Kenmore, and DieHard brands to the table, along with Lands\’ End and the lesser-known Apostrophe, Covington, and Lucy Pareda to the apparel table.

The Issues:

• A big gain for Sears, of course, will be Kmart\’s Martha Stewart brand. And they may find Kmart\’s Thalia Sodi apparel brand a complement to their Hispanic-targeted Lucy Pareda. Other strong apparel brands from Kmart are Jaclyn Smith, Joe Boxer, Route 66, and Sesame Street.
• What are the combined Sears and Kmart value propositions they think will make these synergies work?
• Will Kmart\’s more down-market image dilute Sears\’ brands? Conversely, will Kmart\’s brands diminish Sears\’ image?
• How will the national wholesale brands view potential negative crossover effects on their brands?

Supply Chain Synergies

Reportedly, Sears Holdings Corp. expects to realize $300 million annually in cost savings from merchandise procurement, marketing, technology and supply chain activities.

The Issue:

• According to many experts, both of their supply chains are woefully lagging behind Walmart, the industry gold standard, particularly in technology, logistics, and distribution. As one pundit put it, \”What do you get when you put two messes together? You get a bigger mess.\”

5. Without a Strategic Position and Value Proposition, none of it Matters.

Kmart and Sears must determine strategically who their consumer is and how they are going to be competitively positioned, or will be trapped chasing tactics searching for a strategy. They will therefore have possible short-term wins, but in the long-term, they will continue to sink.

Who is their core consumer? What do they stand for to those consumers? How are they competitively positioned for sustainable advantage? What is their superior value proposition for their very clearly defined consumer?

Some or all of these questions may have been addressed separately by Sears and Kmart over each of their many declining years. Their performance, however, indicates a total lack of execution. Without clear answers to those questions, they have no strategy. Without a strategy, tactics are irrelevant. And with questionable execution, they will certainly not be able to create one viable retail entity (much less two, if they choose to keep the Kmart nameplate).

6. The Competition Never Sleeps and the Consumer Never Waits

Forget about all the textbook stuff. The Lampert troika will soon start the long march of figuring out how to position each business, merge cultures, reorganize, decide on what stores to switch and/or get rid of, what brands to cross-market, how to upgrade their technology, systems, and supply chain processes and ultimately how to create the backend economies they so sorely need.

However well they execute this gargantuan task, it really doesn\’t matter how quickly they accomplish it because It will not be soon enough. If they decide to keep the Kmart nameplate and keep it positioned in the discount sector, Walmart and Target will continue to gobble up their share even faster as Kmart is distracted by the merger.

Likewise, and perhaps worse, Sears has many more competitors, a situation that was largely of their own making. They failed in the late 1970s to define who they were and what they stood for, led by a president who described the retail business as \”mature.\” At the end of the 1980s they failed to focus and reorganize around the home sector, and during the 1990s new leader Arthur Martinez arrived and departed asking the same question, \”What is this company going to be? What does it stand for?\”

Finally, under Alan Lacy, just prior to the merger, it became obvious that he was no better at figuring out who they were and what they stood for. In 2003, he made the statement, \”We\’re just Sears, a broad-line merchant.\”

What that meant for Sears in the 70s, and what that means for Sears now, is that they do not stand for anything. They are selling everything to everybody, therefore meaning nothing to anybody. What this did to them competitively then, and what it is doing to them now, is allowing competitors from many different sectors to steal their business until it is all gone. And like Kmart, the competitive onslaught will accelerate during the merger period. Walmart and Target are killing Sears from below. Home Depot and Lowe\’s are killing them on their flanks. Kohl\’s, JC Penney and even some of the department stores are taking direct chunks out of them. And of course, the specialty chains continue to pick away big pieces.

7. Amazon is Coming

By the way, there\’s a big $64,000 question: What are they going to do about Amazon? Folks, it\’s over.

8. Act III: Final Scene, Year 2007

It\’s 2007, and the Two Titanics, with sterns majestically spiking vertically up above the icy cold surface of the Atlantic, are poised for their final plunge into the swirling abyss. There are no deck chairs left onboard. Those that were not sold at an earlier \”pre-sinking\” auction, now slide quickly into the briny deep.

But just before they plunged beneath the surface in their surreal dive to the bottom, the captain and his two remaining officers telegraphed an urgent request. This was not an S.O.S., but a \”sinking sale\” offer for their final assets. The next day, headlines appeared in newspapers around the world: \”Kmart and Sears brands sold for a song.\” This was no Nearer My God to Thee. Eddie Lampert\’s latest deal nets him billions. As the officers\’ lifeboat raced to escape the inevitable undertow, an aerial photo captures Captain Lampert and officers Alan Lacy and Aylwin Lewis racing away from the wreck toasting in celebration of the consummation of their final deal.

9. Quotes to Remember from the Sears-Kmart Merger

I have compiled numerous quotes taken from individuals as well as various publications that have covered this monumental merger including The New York Times, Wall Street Journal and WWD. Many are from Mr. Lampert, which might be retained for future reference, once the \”talk\” turns into a different \”walk.\” I found some of the quotes witty and entertaining, however, all of them are instructional and I felt they might either support your thinking or provide you with new ideas about how this event is going to unfold. These quotes are random in no defined order, and some individuals wanted to remain anonymous.
\”The Kmart takeover of Sears could be Eddie Lampert\’s Waterloo, and he isn\’t the Duke of Wellington,\” according to business writer Jesse Eisinger. Continuing the analogy, he concluded with a remark about Sears and Kmart\’s competitors: \”It will take quite a lot to successfully meld two creaking retailers whose foes eat Napoleons for breakfast.\”

\”I don\’t think any retailer should aspire to have its real estate be worth more than its operating business,\” declared Mr. Lampert to investors, analysts and reporters.

Mr. Lampert on running a retail business: \”If you can ship a product on June 29 to make the quarter look better, but you can sell it for more the next month, it\’s worth holding off on the sale. The way to create value is to see businesses run better, and that may not be how they are traditionally run. A lot of CEOs are constrained.\”

More from Mr. Lampert on Sears\’ real problem: \”The problem is they are not where the customers are, and that\’s the big opportunity. It\’s not that the retailer per se is weak, but if you have the greatest store and it\’s not where the customers are, that\’s a problem.\” My question: Just who is the customer, Eddie?

Jim McTevia, chairman of his own turnaround firm said of Kmart\’s hiring Aylwin Lewis: \”For Lampert to get his hands on this kind of person tells me that the powers that be at Kmart are thinking about other ways to make Kmart a viable company other than selling merchandise. Lewis has the ability to put deals together.\”

Mr. Lampert described the merger as a blending of the two, \”into one culture, an operation under one culture with two brand names…this is a great opportunity to explore commutations and permutations.\”

Investment banker Peter Solomon commented on the merger of the two cultures: \”That would be the $64,000 question,\” noting the past history of the two operations and lack of success on execution.\”

Retail consultant Walter Loeb commented: \”I think this is a marriage made in heaven by non-merchants. I can visualize that this can take several years to sort out and that the identity of both retailers will be blurred in the customers\’ minds.\” I say, \”Walter, they have been blurred for years. It can only get worse.\” Yours truly.

Lewis Kaplan, retired owner and publisher of Clothes Magazine, weighs in on the blurred meanderings of both searching for an identity: \”The merger of these two losers reminds me of Denny Dimwit, famous for his quote: \’Who am I? That\’s what\’s bothering me.\’\”

UBS analyst, Gary Balter, commented on the competitive situation: \”This move effectively adds a new hardlines competitor in 1300 stores overnight, which is a negative primarily for the home-improvement retailers and to the extent that the brands in Kmart drive traffic, Walmart.\” I say, a threat to Walmart? I think not, Gary.

Business author Tom Peters noted that there was little logic in merging two losers and added, \”If you think they\’ll be able to take on Walmart, I\’ve got a nice bridge.\”

\”This is cause for celebration for competitors,\” said consultant Burt Flickinger.

Anonymous comment on the statement that both \”Sears and Kmart are moving into the unknown\”: \”Both have been doing business in the unknown for years.\”

\”This merger does bring some economies of scale to the picture. Now Walmart can finally put both companies out of business at once versus having to do it one at a time.\” Anonymous.

\”The complexity and time it takes to merge two healthy companies is an enormous, time consuming and often deleterious undertaking. With these two crippled behemoths, the merger dynamics alone could kill them both.\” Anonymous.

\”With two financial and an operations guy and reputed \’dealmaker\’ running the company, and now that Vornado has bought significantly into Sears, let the great asset sale of the century begin.\” Anonymous.

10. The Last Word: The Fat Lady Is Singing

So, the fat lady is finally singing. Eddie \”The Magician\” Lampert has no more rabbits, and Eddie \”The Doctor\” has no more life support. And his \”vision forward\” is now an oxymoron. R.I.P.

I find it hard to believe that “Fast Buck” Eddie actually believes that people in the retail industry and Wall Street actually believe that he is going to rescue the business of Sears. Yes Eddie, that pesky word “believe” is finally catching up to you. For all these years since putting the two “Titanics” together (Sears and Kmart), you were Eddie “The Magician” Lampert. From day one (and you are no Jeff Bezos), you had everybody believing you were going to return these two iconic American brands to their once storied greatness. Well, not everybody. And certainly not me. In fact, from day one I said there was no way you could pull it off. I even suggested that I believed this was going to be a brilliant financial engineering strategy to manage the businesses down over a long period of time, separate the assets, and unlock their greater individual values. Thus, you and ESL could pocket a great deal of money as the Titanics finally sink below the horizon.

So, here we are. Eddie, “The Doctor” Lampert is now asking us to believe his latest vision going forward? OMG, Eddie, look in the rearview mirror to remind you about the year-over-year steady decline in revenues from day one. Honestly, you make your vision forward an oxymoron.

Eddie sees Sears future as an asset-light business, focusing on ecommerce memberships in the Shop Your Way program. He blogs that Sears is “fighting like hell” and making progress. Anybody who believes any of this is living on another planet. Come on Eddie! We all know it’s a shell game. We know your real intent is to stick another life support tube into Sears’ slowly dying body to keep it alive long enough for another round of squeezing cash out of it. Hey! You received kudos, including mine, for your brilliant financial engineering to manage a slow death, while identifying and securitizing the most valuable assets to eventually lease or sell, including the iconic brands and real estate. In terms of the real estate value, much of it was placed in a REIT and then you charged the dying retail business rent while you methodically sold off the properties, and pocketed a good share of the proceeds.

And now, Eddie “The Doctor’s” latest injection of a hallucinogenic life-saving drug is his offer to the ESL board, and himself as Chairman, to acquire what’s left of certain assets. Once again it will be a “buy from Peter to pay Paul” transaction. Except, Peter and Paul are both Eddie.

As majority owner of Sears and its assets, Eddie “The Magician” (his alter-ego) seems to be conducting a sleight of hand trick. He’s exploring the sale of Kenmore, the Sears Home Improvement Products business, as well as the Parts Direct component of the Sears Home Services division. And here’s the magic: he’s shopping them around and is getting no takers because the price tags were considered astronomical by potential buyers so very few bids were received. So, if you look closely enough and don’t get confused by all the abracadabra stuff, maybe the wizard (a step up from a magician) intentionally threw a price out to the market that he knew would not snag any takers.

Why would he do such a thing? Ah ha! It’s a setup. Remember Peter and Paul are both Eddie.

So, Eddie playing Peter (who is in actuality Sears and ESL Holdings) offers to acquire those Sears assets he can’t sell to anybody else. Paul (who also happens to be Eddie and ESL Holdings) is the seller. Is the magic driving you crazy yet? Are you trying to watch where the rabbit’s going?

Don’t even try to figure out what the assets are worth either to Peter or Paul. They will be worth whatever Eddie Peter and Eddie Paul say they are worth. Oh, and while the magician is pulling all of this off and when the “now you see it, now you don’t” moment arrives, he going to pull yet another rabbit out of his hat: the real estate rabbit. Again, Peter can buy some more real estate from himself and lease it out to himself, AKA Paul.

As the financial magician, he dazzles and blinds us. His moves are so quick and seemingly so complicated that we, the audience, will gasp at the end of his act because we couldn’t keep up with all the rabbits he pulled out of a hat, figure out how a dozen doves flew out of a bag or how one scarf turned into fifty…or whatever.

So, logically you say, come on, give us the numbers. Forget it. That’s part of his act. Throw all those numbers around with such a complicated magical process of borrowing from Peter to pay Paul, he completely confuses everyone. Most of his accounting magic leaves even the great financial minds and analysts baffled.

Here’s all you need to take away from this article, the “nut” of it all, is that Sears is almost dead. And no surprisingly Eddie is continuing to do what he did almost from the get-go 15 years ago. He is financially engineering Sears down into the briny. While he is doing this, he unlocked the value of most its assets in such magical ways that a good chunk of it has flowed back into his pocket.

So, Eddie, I plead of you, to stop being the magician, and continue playing the good doctor. Recognize that’s it’s too late to save what is essentially a dying carcass. Just pull the plug. Puhleeze.

This article is not an attempt to match Edward Gibbon’s epic book, The Rise and Fall of the Roman Empire, in quantity or quality, although its quantity might seem as intense. And it’s not another bashing of Eddie “the magician” Lampert, or “fast buck” Eddie, or whatever I have called him. It is a long, really long, but serious story of one of the greatest brands in the history of the world. At its pinnacle, it was bigger than Walmart. So I believe the story is worthy of its length. I also believe there are many strategic lessons to be learned from the incredible “rise” of Sears and from its nearly four decades of “falling.” I know the attention span of some of my readers will be challenged, but grab a Starbucks and plow through it. I think you will be glad you did.

The Beginning

In 1886, the combined vision of Richard Sears and Alvah Roebuck was every bit as genius as those of Jeffrey Bezos and Steve Jobs. The tools Sears and Roebuck had to work with were just not as advanced.

With 60 percent of the U.S. population living in rural areas, they launched the Sears catalog, which was equivalent to the internet and smartphone of today. Essentially, Sears was distributing its entire store into the living rooms of America’s middle class, whose shopping options were slim to none. And with its 1,000-plus pages containing everything a human being would want or need, from their cradle, to an entire home they could live in, to the coffin they could be buried in, it was perceived by those families to be as big and amazing as Amazon’s marketplace. The entire family would eagerly gather around this Sears “store” in their living room to enjoy the dazzling experience of browsing, selecting and ordering whatever their hearts desired, at affordable prices. And if they couldn’t pay it all at once, Sears would help them out with payment terms.

Furthermore, a growing number of those products were exclusive to, and some even produced by, Sears. In this early stage, Sears was truly on the leading edge of value-chain control through vertical integration, one of the three imperative strategies for success (neurological connecting experiences and preemptive distribution being the other two), as defined in my co-authored book, The New Rules of Retail.

Just as the consumer was at the center and the beginning, middle and end of every thought, idea and innovation that Jobs and Bezos created (and Bezos still does), so too were Sears and Roebuck equally consumer driven.

Just like the smartphone as the marketplace for everything on earth has turned consumers into the point of sale (as it sits in their pockets wherever they are), so too did Sears “follow” its consumers into their homes, thus making it the point of sale. (Thinking Amazon, anyone?) Then from a store (catalog), in their living rooms, as the population began migrating from rural areas to the newly forming towns, cities and then suburbs, and particularly after the construction of the interstate highway system in the 50s, Sears adjusted its distribution strategy to follow those consumers to ensure that its stores were the first ones to reach them in their new neighborhoods.

In fact, Sears was the developer and ultimate anchor for the very first shopping centers in the country, and its business expanded along with the mall movement across the United States. Sears thus executed its strategy through multi-distribution platforms (thinking omnichannel anyone?), and physically demonstrated the extent of its investment in the consumer. This was also a preemptive distribution strategy, the second of the three mentioned above: go where the consumer is, and get there first, faster and more often than the competition.

Sears was beginning to become untouchable.

Sears Supremacy: The 60s and 70s

During the 60s and 70s, Sears transformed its model from being a catalog and brick-and-mortar retailer to becoming a powerful go-to brand that also created and produced its own private-branded products. Sears was continuing to move toward a totally vertical integrated value chain. They had a view of marketing that embodied all the activities of value creation, including research and development, branding/imaging, communications/advertising, publicity and distribution. These functions were arguably nonexistent in most retail businesses at the time.

They firmly believed that relentless consumer research and product development and testing (as opposed to gut instinct) were the only sure paths to successful innovation. And successful they were. A constant stream of brands and products were rolled out through the largest distribution machine in the world.

The number of “firsts” and private, exclusive Sears brands was mindboggling: the first steel-belted radial tire; Craftsman tools; DieHard batteries; Kenmore appliances; Toughskin jeans; Cling-alon hosiery; the Comfort Shirt; the NFL and Winnie-the-Pooh exclusive licenses; and many others. These exclusive brands were made possible by Sears’ unique merchandising structure and process. As the owner of many of its suppliers, or as the primary buyer from others, its vertical integration facilitated a continuous process of joint research, innovation, testing and therefore a continuous stream of new and exclusive products and brands. It provided the foundation of Sears’ value proposition, and was an enormous advantage over competitors.

Sears also pursued product innovations for all consumers. Their open acknowledgment of their desires for better quality and better performance and for honest, low prices, made Sears a “democratic” retailer. It was a resource for all Americans, not just the middle class. High- and low-income consumers of all ages and genders shopped at Sears. Thus, it had a unique niche—in the sense that it wasn’t niche at all. Sears’ then-CEO Robert Wood said, “The customer is your employer, and the moment we lose their confidence is the beginning of the disintegration of the company.”

Sears did not have to compete head-on with the department stores (because it had its own exclusive brands) or with the discounters (they couldn’t operate on the higher cost structure necessary to match Sears’ offerings). Most important, Sears’ sales associates were the early equivalent of Apple’s T-shirted Geniuses. They were thoroughly trained and proficient in the Sears rule book and could instruct customers how to use every brand and product in the store.

Furthermore, all Sears stores were decentralized when it came to merchandise decisions. Therefore, store managers ordered and bought the products and quantities according to their local consumers’ preferences. Through this localization, there was a clear competitive advantage. And they didn’t need “big data” analytics. Although, imagine the possibilities if they did have that capability at the time.

For all the reasons just mentioned, Sears was uniquely nailing the neurological connection and engaging experiences for consumers (the third “new rule”) that no other retailer could touch at the time.

During this period, Sears was the equivalent of Walmart today. And it powered into the 70s as an unparalleled master of retailing, bigger than the next five largest retailers combined, with 900 large stores and over 2,600 smaller retail and catalog outlets, accounting for an incredible one percent of the gross national product. More than half the households in the country had a Sears credit card, and a survey at the time confirmed that it was the most trusted economic institution in the country.

Then in the mid-to-late 70s the unraveling began. Tragically, after 84 years of building one of the greatest brands the world had ever seen, it would take Sears just a few years to lose its unique competitive position (awesome experiences, preemptive distribution and vertically integrated and controlled value chain) and veer into a quarter century of decline that sadly continues to this day. What happened?

Misreading the Tea Leaves

Sears conducted a major study in the early 70s that alerted them to the following major shifts which were exacerbated by growing market saturation and the slowing economy.

• Sears’ customer base was getting older and turning into two-income families, plus women were becoming the most important shoppers.
• The youth of America were not getting married as early as their parents had, and they were seeking their own shopping sources such as the rapidly growing specialty chains.
• Sears’ profitability was shifting from merchandise, which had been contributing 80 to 90 percent of profits, to services, which were contributing 75 percent by the end of the 70s (including installation, credit extension and its Allstate insurance business).
• Competitors were closing the gap—JCPenney in the malls and Kmarts appearing on every corner. The specialty store upstarts were also staking a claim in the malls, and Walmart was a preview of coming attractions.

The result of this study, along with many other internal issues that were coming to a head, which included political infighting between stores and merchandising management; mounting costs; and a calcifying culture, ultimately forced Sears management to seek a new direction. They began to believe that the key to growth was not to be found in the core competencies that had driven the success of the company. They started to look into new businesses that would be complementary and synergistic. So, Sears moved in a completely different direction.

This was the critical juncture in Sears’ history.

The Tumbling 80s

Even as the Sears Tower was going up in the late 70s and early 80s, to become the company’s new Chicago headquarters, much of its world, inside and outside, was starting to crack. And to make matters worse, the larger economy was tanking.

While Sears’ profits were plummeting in 1979 and 1980 because of the combination of inflation-raging interest rates, rising operating costs, loss of direction, mounting competition and organizational disarray, Sears new CEO at the time, Ed Telling, determined that the retail business had matured, and retreated to the Tower with his new team to work on building what he called the “Great American Company.” Sears as a diversified conglomerate of financial, real estate and insurance services. At the same time, he assigned another executive, Edward Brennan, to head up the retail business. Ironically, Brennan was charged with saving what truly was the Great American Company—the Sears retail business. At this crucial crossroads in Sears’ history, CEO Telling was essentially turning his back on, and leaving the scene of, the disaster to chase his dreams. He would initiate and oversee the dismantling of arguably one of the greatest American companies in history.

Telling’s dream was of a great synergy between financial services and the core retail business. Sears already owned Allstate Insurance, and it went on to acquire Dean Witter Reynolds financial services, Coldwell Banker real estate and, later, Discover Card. It also created the Sears U.S. Government Money Market Trust Fund and formed the Sears World Trade Company. The synergy was to come from Sears using its stores, catalogs and Allstate Insurance offices as additional locations where they could insert the financial service businesses. It expected to lure the millions of Sears’ customers across the aisle to purchase financial services, and vice versa. Telling boasted to the press about their “socks and stocks” strategy.

Chief among the several factors necessary for this grand strategy to work, however, was a successful and growing core retail business to generate the crossover and new traffic expected. But this was not the case. Not only was the core business beginning to decline during this period, but the customers also questioned Sears’ authority on financial skills and management, citing confusion about where Sears now belonged in their lives. What was it—retailer, banker, financier, real estate mogul or a “money store”? What did it stand for? Does this ring a bell in describing their position today? Don’t worry, I’m getting to that.

In the end, rather than an inspired synergy, Telling’s so-called Great American Company was one of the first major strategy missteps that sent Sears into its long decline. In fact, instead of a synergy for growth, the strategy likely caused a reverse downward synergy. Along with the already daunting task of turning the retail business around, Telling’s idea to “bolt on” a completely different business just compounded the complexity and confusion of accomplishing either.

So, Telling’s dream did not come true. In fact, the financial services businesses might as well have been independent entities of a holding company. They ended up contributing only incrementally (with the exception of Allstate, which Sears held even before Telling, and eventually the Discover Card). By the early 90s all the financial services, real estate and insurance businesses were sold off as Sears entered another decade-long search for direction.

As the new head of retail, Brennan did make some bold moves in the early 80s, enough to achieve a short-lived spike in business and confirm his promotion to CEO in 1984 upon Telling’s retirement. Some of his initiatives for a “new Sears” included: improving stores and merchandise presentations; adding national brands; trying to strengthen apparel lines; launching a “Store of the Future” concept as a template for refurbishing stores over a five-year period; rolling out Business System Centers and paint and hardware specialty stores (a beginning probe for competing in the specialty tier); and the launch of a national ad campaign.

However, all these initiatives turned out to be merely opportunistic tactics. The ad campaign’s underlying message said it all: Sears has everything. So, while Sears gained a momentary boost through Brennan’s initiatives, it had definitely lost its once-supreme position and still lacked a clear strategic direction.

The once-proud culture turned arrogant, then bureaucratic. The constructive balance between stores and merchandising and marketing deteriorated into constant infighting. This conflict, along with the loss of their private and exclusive branding strategy (giving way to national brands) and cost cutting, led to the unraveling of Sears’ fully integrated (and/or exclusively controlled) product development and production sourcing. This was further exacerbated when it shuttered its R&D and consumer research departments.

Sears’ small-store preemptive and multichannel distribution strategy, also initiated under Brennan, would prove to be too little too late, as well as underfunded, since more capital was being infused into the financial services business. Finally, it was confronting the arrival of Walmart as the new, hot discounter in small towns. Cutbacks in store expansion also left many of its original stores anchored in declining locations.

For 10 years Sears focused on the so-called synergy for growing financial services while ignoring the store. The “store of the future” was a flop. And everyday-low-price branding strategy failed.

During the 70s and 80s total retail space doubled in the United States, while Sears concentrated on closing and remodeling. It halfheartedly dabbled in specialty store concepts that turned out to be too late and insufficiently funded.

Sears’ return on equity in 1984 was at 14 percent. In 1992 it stood at 9.6 percent. Virtually all Sears’ earnings between 1985 and 1992 came from the financial services businesses. And for all of Sears’ numerous cost-reduction efforts during the 1980s, its cost-to-sales ratio continued to be almost double that of Walmart and well above the rest of its competitors.

Finally, with the $3 billion sale of the financial services business, which at the time was claimed to have reduced debt, many experts said there would not be enough left for capital spending on the stores.

Sears was not only on a severely declining revenue and income trajectory, it was waffling on a strategic positioning in the no-man’s-land of being “everything for everybody.” Therefore, it was competing against the discounters from below, the department stores from above, the specialty stores in front, and the newly emerging big-box specialists from the front, and the rear. In the process, Sears had become a traditional retailer instead of the greatest brand and marketer with the strongest consumer connection the country had ever known.

It was time for a new leader.

The 90s: The Softer Side of Sears

In 1992, Arthur Martinez became only the second leader from outside Sears in its history (“General” Robert Wood being the first). By then, Sears had shed all its financial services businesses.

Martinez came in with a strategic vision for Sears and developed a plan for fundamental transformation, primarily focusing on women’s apparel, with an advertising slogan emphasizing “The Softer Side of Sears.” Having come from the Saks department stores, he would also move Sears into more of a department store positioning. This and other strategic initiatives showed initial success.

By 1998, revenues had increased about 30 percent to roughly $36 billion, and profits rose from losses of close to $3 billion to a gain of over $1 billion.

However, when sales and income started to drop in 1998, there was speculation that the seemingly spectacular turnaround may in fact have been due to Sears’ aggressive focus on growing its credit card business, beginning in 1993. By 1997, 60 percent of all sales transactions were done with credit cards, and experts suggested that over 60 percent of Sears’ bottom line was coming from the credit business.

Despite the potential of the credit business as the growth engine for the retail business, Martinez simply could not change the culture of Sears. In fact, in Martinez’s book, The Hard Road to the Softer Side: Lessons from the Transformation of Sears, he stated that toward the end of his tenure he felt Sears was falling back into the same trap he inherited when he took over in 1992: “Just do more of the same, only work harder.” He was also asking himself the same question as when he arrived: “What is this company going to be? What does it stand for?”

At the end of the 90s, Sears had no more of a strategic compass than it had 10 years before. It was time for yet another leader.

Does this sound like musical chairs on the Titanic? Oh yes, it’s sinking.

The 2000s: Sinking Slowly

With a primarily financial background, Lacy was made CEO in 2001, he immediately moved to grab the low-hanging fruit by doing what he had done best as CFO under Martinez. He slashed costs and further pumped up the credit business. With a primarily financial background, Lacy would be the fourth non-merchant in a row to run the company, and the second, after Martinez.

In less than a year, The Wall Street Journal reported that Lacy was considering abandoning the apparel business altogether after a 25 percent drop in net income in the first quarter of 2001. He admitted at an analyst meeting that Sears could not find its place in fashion, stating, “We almost don’t have any personality.”

As apparel growth slipped, critics increasingly took shots at Martinez’s efforts, which now appeared short-lived. However, Lacy realized that the cost of radically changing stores and replacing lost clothing sales (stagnant, at about $8 billion) would be too steep.

By 2003, Sears had experienced 18 consecutive months of sales declines, and the credit business was responsible for over two-thirds of total net income. In reaction, Sears bought Lands’ End, thereby going deeper into the apparel category, where it had had no success since the late 70s.

If Martinez lost his control of the culture, Lacy was losing it on all fronts. Sears still didn’t know what it stood for. Indeed, Sears seemed to be poised for its final descent. Adjusted for inflation, Sears volume declined about 20 percent from its pinnacle in the late 70s, and continues to drop today.

Sears Struggling to Stay Afloat

In 2004, a strategic financial visionary named Edward “Eddie” Lampert came to the rescue. Head of his own hedge fund, ESL Investments, and a former Goldman Sachs risk arbitrageur, Lampert has a genius for spotting great deals among distressed companies that he considers to be undervalued. He then buys a major stake at a bargain price.

Having made such a deal for the equally distressed Kmart a couple years before his move on Sears, he combined the two companies under the name Sears Holdings (to be owned by ESL Investments, with Lampert owning 41 percent of the stock). He and his newly appointed team declared to Wall Street and the world that they were going to return Kmart and Sears to their rightful positions as successful, iconic retail brands.

In keeping with his track record, Lampert and his team slashed costs across the boards to boost per-share earnings and improve returns on capital, even though both retailers were hemorrhaging before he bought them. Comparative store sales were, and still are, declining month-over-month. However, by cutting people, advertising and research costs and slashing store maintenance and capital improvements, he improved profitability and share prices. Lampert could then leverage the earnings and cash to invest in more promising growth opportunities with higher returns—not necessarily back into the dying businesses.

After several years of cost cutting, even amid a flurry of tactical initiatives, Sears Holdings still does not clearly stand for anything so compelling that consumers make Sears (or Kmart) their destination of choice.

Still Falling

The combined sales of Kmart and Sears in 2005 when Eddie took the helm was about $50 billion. As reported last December, after its 20th consecutive quarterly decline in sales and revenues, the combined top-line number had dropped to about $25 billion. More warning lights are on the bottom line. They lost $2.2 billion in 2016 and over $5 billion over the last three years. And during the past decade, the number of Kmart and Sears stores has dropped from more than 3,800 to 1,430.

In the face of this dark reality, Mr. Lampert made this preposterous comment in the annual meeting in early May 2017: “We don’t need more customers. We have all the customers we could possibly want.” The factual reality is that not only does he need more customers, he needs to keep the ones he has, who, according to the top and bottom line numbers, seem to be leaving in droves.

According to a statement from Sears Holdings’ annual report for the fiscal year ending in January, there appear to be no rabbits left, or hats to pull them out of, in Lampert’s bag of tricks. The report stated, “Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.” It cited that continuing operating losses were choking off liquidity that might limit its access to new merchandise and new funding.

From day one, when Lampert acquired Sears and merged it with Kmart, he operated the business as though he had absolutely no retail experience, which of course he did not. He declared in a 15-page manifesto in 2005 that traditional measures of retail success, such as same-store sales, were no longer relevant. This statement reminded me of CEO Ed Telling’s proclamation that “the retail business is mature,” as he retreated into Sears Tower to oversee its first unravelling during the 80s.

Cost-cutting, slashing capital spending and store maintenance, closing stores, putting other stores in REITs, selling assets like the Craftsman tool brand and putting Kenmore and DieHard into the for-sale line-up, all of these were, and still are, tactical moves to just survive another day. They are not the strategic decisions required to find another path for growth.

Is There a Sears in Our Future?

Today there are many focused “masters” competing in each of Sears’ many businesses. Indeed, Sears’ 30-year quest to regain its former glory has certainly eroded its relevance to consumers, or at least severely tested their patience.

Simply put, Sears is still in the middle of a perfect storm. The seminal question is whether the following three storm fronts will allow Sears the time to find a meaningful position:

1. Perhaps the most powerful negative driver for the Sears demise are the millennial and Gen Z consumers, who find everything about Sears, including the iconic brand itself, “old world.” Certainly, the poorly maintained stores offer no compelling, experiential destination for these consumers. They have unlimited, better or equal shopping choices, many of which are located closer to where the consumers live. And there’s Amazon, growing at the rate of 20-30 percent and eating everybody’s lunch. Additionally, Sears’ omnichannel efforts have arguably been too little and too late. Sears’ captivity in malls is another major issue, as declining traffic is driving the majority of them to repurpose or close.
2. Competitors have more efficient and effective business models, focused and positioned with dominant value propositions and elevated shopping experiences, attacking each or several of the conglomeration of Sears’ waning businesses (appliances and tools included). This includes a repositioned JCPenney, as well as competitors such as Walmart, Kohl’s, Target, Home Depot, Lowe’s and the multiplicity of specialty chains, all of which have a major advantage because of their lower operating costs and real estate flexibility. Thus, they gain more pricing leverage and greater profitability, as well as better proximity to the consumer. Between 1998 and 2010, the number of competitors within a 15-minute drive from Sears grew from 1,400 to 4,300 stores.
3. Economy and industry dynamics are a weakened, post-recession economy and an oversaturated retail industry.

The Final Fall?

I have written about the demise of Sears almost from the first day of Eddie Lampert’s acquisition and merging of the two “Titanics,” as I called Sears and Kmart. I did, and still do, admire and respect Mr. Lampert’s financial brilliance. But financial brilliance alone is not enough to turn around two enormous and already tanking retailers when he took them over. And perhaps nobody could have turned those businesses around. Certainly, under Lampert’s micro-managing control and his cost cutting and resistance to invest in store maintenance, much less anything else, not even the most talented turnaround artist and leader would have been able to stop the bleeding.

I sadly conclude this story of one of the most famous and recognized iconic brands in the world. And while you are reading this, Sears may in fact be filing for bankruptcy, which better minds than mine are predicting will happen in July of 2017. While we are waiting for that to happen, let this be a cautionary tale to some of our major brands in business today who are mirroring where Sears was in the 80s. Be forewarned.

The only possible good news is that the death of Sears will reduce a severely over-stored industry.

Amen

Or does he? He’s fooled us before with his abracadabra – now you see it, now you don’t, flimflammery. And at Sears Holdings’ annual meeting last week, he once again waved his wand around and tried to convince all in attendance, or on the call, that reality was not really reality at all, or maybe it was just alt-facts. In fact, he went all “Mark Twainian” on us by saying, “Reports of the death of Sears Holdings and its subsidiaries Sears and Kmart have been greatly exaggerated.” He even got a little “Trumpian” with a hint of paranoia insinuating that the media was his enemy. Instead of accusing them of “witch-hunting,” he said the headlines can “sandbag” the company. He referred to such headlines even from a decade ago and said, “You look at these headlines, and you might think they were from a month ago.” As an aside, I’m sure many of those headlines were from yours truly and The Robin Report. And yes, they could be from a month ago because I have written several blogs about Sears’ demise fairly recently, and all of the headlines across media-land have not really changed since Eddie took over the two sinking Titanics, (seems like a century ago). Most of these headlines, certainly mine, have simply cited the facts (aka reality) that the business continued heading south from his day one.

Eddie’s mantra could have been opposite that of Jeff Bezos, “get big fast,” to “get small fast.” However, “fast” is relative when one considers the time it takes to sink a roughly $50 billion “Titanic,” which was the combined sales of Kmart and Sears in 2005 when Eddie took the helm. As reported last December, after its 20th consecutive quarterly decline in sales and revenues, the combined top line number had dropped to about $25 billion. More warning lights are on the bottom line. They lost $2.2 billion in 2016 and over $5 billion over the last three years. And during the past decade, the number of Kmart and Sears stores has dropped from more than 3,800 to 1,430.
In the face of this dark reality, Eddie “the magician” makes this preposterous comment in the annual meeting: \”We don\’t need more customers. We have all the customers we could possibly want.\” I guess this was an alternative fact that he hoped we would believe. However, the factual reality is that not only does he need more customers, he needs to keep the ones he has, who according to the top and bottom line numbers, seem to be leaving in droves.

So do we have any reason to believe the sinking ship can be saved, much less find a path to growth?

More Wand Waving

Defying gravity, Eddie “the magician” performs a levitation illusion. He says, “We know our financial results don’t provide a demonstration that what we’re doing is working. There are a lot of elements that are working, and a lot of elements that need improving. I feel very strongly that what we’re doing deserves a chance.”

Have we not heard this litany before—like over and over?

Then he lashes out at the sandbagging press. He cites a headline, “Vendor Cuts Off Sears.” He complains, “We don’t call up the newspapers and say, ‘We just cut off a vendor because they’re jerks,’ but they will do that. Then it becomes, ‘Vendor Cuts Off Sears.’ If you’re a vendor and you read that, you say, ‘Let’s call them up and get better terms.’”

Duhhh!! Of course, in fact, vendors are very nervous about not getting paid and will either demand a better deal or cut Sears off altogether.
One shareholder spoke up, suggesting that Lampert was sounding both paranoid about vendors and in denial about the future of Sears. Lampert responded with quotes that you cannot even make up. “There’s a lot of things happening behind the scenes. They’d (people in general) be shocked at the behavior of so many parties trying to take advantage of our situation. That’s not paranoia, that’s just reality. If you’re playing basketball, and the refs are not calling it when you’re elbowed in the chest, you have to deal with that.”

His comment on being in denial about Sears’ future was a bizarre comparison to Amazon. He said, “A lot of people who have been in denial, in some people’s view, eventually broke through. Amazon — people said it’s growing, they like Amazon — but they never make money. They missed [the company’s potential]. It was in plain sight. As soon as we make money…people are going to look and say, ‘How did I miss this?’ But we need to prove it’s working. I accept that … our financial results give people a lot of ammunition to shoot at us.”
Eddie, the only people who are going to be saying “how did I miss this” regarding Sears, are those shareholders who continue to believe you’re a magician, and rather than short the stock, they sink with the ship. To compare Sears with Amazon in any way is just plain laughable. The magician rambled on with tactical bromides about promotional deals, a “Shop Your Way” Sears MasterCard, using stores as showrooms, and blah, blah, blah, blah, blah.

“It’s not traditional retail,” Lampert said. “We’re focusing on the customer and our members, and how we bring value to them. It’s not just selling products.” That’s for sure Eddie. You are not selling products and that is why you are going under.

No Rabbits or Hats Left

And, according to a statement from Sears Holdings annual report for the fiscal year ending in January, there appear to be no rabbits left, or hats to pull them out of, in the “magician’s” bag of tricks. The report stated, “Our historical operating results indicate substantial doubt exists related to the company’s ability to continue as a going concern.” It cited that continuing operating losses were choking off liquidity that might limit its access to new merchandise and new funding.

So when Mr. Lampert rails against the sandbagging press, and their dire headlines, isn’t he being a tad hypocritical when his own annual report headlines his potential demise?

From day one, when he acquired Sears and merged it with Kmart, he operated the business as though he had absolutely no retail experience, which of course he did not. He declared in a 15-page manifesto in 2005 that traditional measures of retail success, such as same-store sales, were no longer relevant.

So the magician proceeds with his illusions, hoping to pull growth out of a hat. Cost-cutting, slashing capital spending and store maintenance, closing stores, putting other stores in REITs, selling assets like the Craftsman tool brand and putting Kenmore and DieHard into the line-up: all of these were, and still are, the magician’s tactical realities in search of the illusion of profitable growth.

The illusion is about to end.

Man the Lifeboats

Like the metaphorical Titanic, there are not enough lifeboats for all of the passengers, (read shareholders). So will “Captain” Eddie, like all good captains, go down with the ship? Not a chance. As I have written before, he’ll sell off whatever deck chairs (assets) are left, including real estate and brands. He will pocket his share of the equity in any of those assets. And then he will inflate his private raft and float away into the night.

I really thought I was done with beating on Eddie “Take the Money and Run” Lampert when I last wrote about his sinking ship, “Sears Titanic: SOS” on February 5, 2016. But no such luck. It’s worse than watching the energizer bunny run around insanely over and over and over again. Here comes Eddie, again. Oh no!!! I envision finding an illustration of him in a captain’s outfit, selling the last deck chair while jumping into a lifeboat. The last deck chair is a metaphor, of course, for selling off Sears’ assets. He still has some of those assets, but not enough to keep the retail operation going for much longer. And when major vendors stop shipping goods, as they already have, you know the end must be near.

But Eddie “abracadabra” Lampert still wants us to believe he’s in control of transforming the business and righting the ship. How preposterously stupid can he think we are? Q3, 2016 marks the 20th consecutive quarterly revenue decline, to say nothing of consistently diminished foot traffic (are these buildings doubling as echo chambers?). The dumb duo of Sears and Kmart declined 13 percent year over year, worse than Q2’s 9 percent drop.

And what happened to what was supposed to be the magical lifesaver: e-commerce? Well, Eddie “now you see it, now you don’t” Lampert decided not to report online growth rates since Q3 2014, when he reported 18 percent YoY. You might be wondering why? None of us are that stupid. “Abracadabra” Eddie thinks he can somehow make the numbers disappear without us realizing it.

So, not even his online magic is working.

So, that will be another deck chair that won’t make it off the ship. My good friend, colleague and contributor to The Robin Report, Mark Cohen, who is Director of Retail Studies at Columbia University’s Graduate School of Business, had this to say about the sinking Titanic: “Lampert can\’t make it through 2017 without another substantial cash infusion. So he may do another big real estate deal and/or he might find a buyer for KCD (the securitized Kenmore, Craftsman and Die-Hard brands). He\’s not going to have any vendor support without putting cash and cash capacity on the company\’s balance sheet in 2017.

Most retailers who file C11 do it in January when their cash receipts from sales are at peak along with their accounts payable balances. There is some opinion (not unanimous among legal experts) that he can \’t file until July 2017 or face a fraudulent conveyance charge stemming from having sold off a large group of stores into the REIT that he created (Seritage) and that he controls. So…my guess is January or July 2017 is belly up time, absent some kind of divine intervention.

Don\’t cry for him — he\’s SHLD\’s principal creditor, so in a C 11 scenario, he remains in control and becomes principal shareholder of its new equity when it comes out of C 11. Then he gets to continue his mission of wringing the vestiges out of this monstrosity until there really is nothing left.

All I can say is the “Shop Your Way” folks will definitely shop their way. It just won’t be at Sears.

What’s old is new again. It’s back to the future. Mobile phones are the new stores.

These and many other metaphors reflect how the technology age is taking us back in time to century-old retail models. Living with technology on steroids will not only revive and make these models new again, but will also geometrically accelerate and propel those models through the next century.

And, not so surprisingly, Eddie (no vision) Lampert, CEO of Sears Holdings, doesn’t have a clue. I pick on him not just because I enjoy doing so, but because I have been doing so for some time based on his total lack of interest in retailing, except for lining his pockets with the “money-spewing machine” retail can be. I single him out more for his lack of understanding the strategic irony that Sears represented when he acquired it. Had he understood the potential (even with his total lack of retail acumen), he might have been able to save his sinking Titanic. Of course it’s a moot point now because we know that his acquisition objective was actually to financially engineer the sinking of Sears and sell off all the “deck chairs,” to add to his incredible personal fortune.

But I digress. What was the strategic irony that he and many others missed early on in this technology age?

It Began Over a Century Ago

In 1908 when about 60 percent of the population in the U.S. lived in rural areas, the only retail store most of them had access to was the Sears catalogue. In that same year, Sears published its now historic catalogue with 1148 pages, weighing 2.5 pounds. It included everything from the cradle a child was born into, to the coffin she would be buried in. It even included a complete home a customer could order and have delivered by mail.

The Sears “store” literally mailed its way into these rural folks’ living rooms and became a wonderful anticipated shopping experience for the entire family as they poured through the catalogue in the comfort of their own homes. This was the beginning of an era of the store going directly to the consumer.

The Seeds of Enormous Change

The year of 1908 was also punctuated with Henry Ford’s introduction of the Model T Ford. Incidentally, the sticker price at the time was $950, which would be roughly equivalent to $26,000 today. Fast forward to Ford’s historic innovation of assembly line production, ultimately providing affordable automobiles to the masses.

Fast forward again to 1956 when President Dwight Eisenhower’s signed the Federal Aid Highway Act, creating a 41,000-mile national system of interstate highways. Approximately 6.2 million cars were sold that year. Americans were going mobile. During the 1950s, an estimated 58 million automobiles were purchased in a country with a population of 178 million; that\’s about one car for every three people.

Highways + Cars = Mobility = Lots of Stores

Along with the massive construction of highways, the mall was created with hundreds of shopping centers anchored by department stores and populated with specialty shops. They became the destinations for a newly mobile population. Shoppers left the comfort of their homes and the Sears catalog behind to feel and touch merchandise in these new meccas of consumerism. Now-mobile consumers went to the stores. Often and in droves.

Back to the Future and a New Shock-and-Awe Era

Fast forward again to the late 1990s when something crazy happened on the way into the new Millennium. Behind the leprechaun grin of Jeff Bezos was the brain of a genius. Wall Street believed in his vision enough to grant him a free pass on making profits so he could scale up Amazon fast. The Bezos mantra is that each day is day-one for Amazon with the objective to get “bigger faster.”

He has delivered on that promise. But more significantly, the Amazon phenomenon sparked the now-historic explosion of e-commerce and the innovation of stores going back to the consumers in their living rooms, offices, anywhere and everywhere.

Bigger Shock and Awe

An equally brilliant genius, Steve Jobs, presented the “next biggest thing” – the iPhone — at Apple\’s MacWorld 2007. The smartphone changed the world and continues to do so. The iPhone was truly the “igniter in chief” of the entire technology era.

Every store, every brand, every product, service, entertainment and news media brand in the world, is sitting comfortably in every consumer’s pocket. So the world has not only changed, the world of retailing has been flipped on its head, from the store in 1908 being the center of the retail world to the consumer in 2016 being the center. The store goes to the consumer – wherever they are, with whatever they want it, and whenever they want it. It’s a 24/7 marketplace.

The consumer is the new POS – point of sale — and therefore also the point of distribution. So metaphorically, thousands of miles of highways, all the malls, stores, products and services in the world, and millions of automobiles are sitting in a two-by-four-inch device — the smartphone.

How many 1148-page Sears catalogues would fit into the smartphone? Ironically, in the early 1900s, Richard Sears and Alvah Roebuck were every bit as visionary as Jeff Bezos and Steve Jobs. These two pioneers figured out how to take the store to the consumers. And the rest is, as we say, history.

Full Circle – An Epilogue for Sears

Had Eddie (no vision) Lampert really understood this enormous strategic distribution shift early on, he might have patched the leak and more quickly pivoted to an omnichannel distribution process keeping his Titanic afloat. He could have taken back the power of the Sears brand as the pioneer in direct in-home sales to customers. Now it’s too late for Eddie. The sinking sound of gurgle, gurgle, gurgle is the real thing.

We know what. We know how. And we certainly know who. The only thing we don’t know is when. But sooner or later—and increasingly it’s sooner—Sears Holdings and its two operating retail divisions, Sears Roebuck and Kmart, will cease to exist as we know them.

And when that happens, the business of American retailing will change in the most profound way within several generations.

Two venerable nameplates—each at one time the largest retailer in the country—will forever be altered. And while shreds of their remnants may live on in one form or another, these two legendary entities will go the way of Montgomery Ward, Woolworth, Gimbels, and countless other retail ghosts haunting the memories of those who have been around too long.

But the scale and scope of this event will dwarf anything we’ve ever witnessed before on the retail landscape and it will impact the business in both some predictable and perhaps even more unforeseen ways.

So, taking out the retail crystal ball, let’s look at what we think could happen the day after Sears…files for bankruptcy.

Two for the Road

First and foremost, this will not mean the end of either the Sears or Kmart nameplates. If there’s one thing we’ve learned from recent shutterings of such brands as Filene’s Basement, Linens ’n Things, and even old Monkey Ward, it’s that old retail names don’t die…in fact they don’t even fade away. While it is likely that most full-line, mall-based Sears stores will go away, its network of smaller, neighborhood stores and franchises will continue. Some will even expand and many will downright prosper, building on the cornerstones of the legacy brands of Kenmore, Craftsman, and DieHard.

Small town America will be the final resting place of the Sears Roebuck name. Kmart is a different story. While it too has much equity with shoppers, its stores have become so downtrodden and thoroughly trashed that it is unlikely they will survive intact. Like their Sears sisters they have become largely irrelevant to a generation of shoppers that has learned to find its needs elsewhere. But the Kmart name will live on. It will no doubt morph into a quasi dollar/closeout/crap store, smaller in store size and ironically situated down the strip center from their former anchors. The blue lights will stay on but the merchandise inside will bear no resemblance whatsoever to what once was.

The Competition

There will be winners and there will be losers. Without Sears at one end of most major shopping malls around the country, it stands to reason that the other anchors will have the most to benefit. That should make J.C. Penney the biggest winner. Its customer profile in the mall most closely aligns with Sears; many of those shoppers will learn to make a right rather than a left when they enter the mall and head for the red Penney sign.

It’s no coincidence that Penney announced it would test major appliances this year in selected stores. While mall shoppers aren’t necessarily the best demographic for refrigerators and washing machines, those who want them will soon find them at Penney.

The other moderate anchors in the mall—Macy’s, Dillard’s, Belk, and Bon-Ton—will pick up some share but it will be minimal. As with many retail collapses, most of the business will recede into a merchandising black hole, never to be seen again. Other winners will be Home Depot and Lowes, which stand to gain the most from Sears’ departure in home hard goods like major appliances, kitchen and bath, and garden. That process is well on its way, it will only accelerate as the void emerges.

On the other side of the house, it will be similar fate for much of Kmart’s business…but perhaps less so. In strip centers where Kmart was co-located with so-called power anchors like Best Buy, TJX nameplates including Home Goods and Gap, those neighbors will see some quick pick-ups of business. Newer apparel players like H&M, Uniqlo and even Primark will see new customers looking for the faddish fashions Kmart was still able to muster up in its final days.

But again, much of the $30 billion in retail sales Sears Holdings represented will be dispersed in small pieces, vaporized into the retail ether and otherwise cease to exist. Retail business is more ephemeral than anybody will ever admit.

The Brands

As mentioned, shoppers will still be able to buy the Sears powerhouse brand. Sears Holdings has seen to that already by moving the rights to those brands into a separate corporate entity. The licensing out of Kenmore, Craftsman, and DieHard is already well on its way, which of course is a brilliant move for ownership but part of the self-fulfilling prophecy. But as with other once benchmark brands in their fields—Westinghouse or Frigidaire for instance—they will lose their well-earned stature and eventually be reduced to stickers on generic products. And the Kmart brands? Other than licensed labels and celebrity rentals, it’s hard to cite one that has any meaning to anybody anymore. Only the store name itself resonates and that is destined to be the next RadioShack, a name over a store with little relationship to its former existence.

Real Estate Operators

Even though the overall store count for the two chains is way down from the over 3000 individual doors it once operated, there are still more than 1700 remaining open for business.
Again, ownership’s financial wizardry has transferred several hundred of the best of these into Real Estate Investment Trusts (REITs) it will still control after the bankruptcy. But depending on the math, at least 1200 individual leases will fall back into the hands of mall and strip center owners…and their hands will be full. Nobody is clamoring for mall anchor stores or 120,000-square-foot strip-center locations.

The latter will no doubt be cut up into smaller units and many will fill up with those retailers that are still expanding, particularly European chains looking to escape their reliance on their home territories. But there will be probably be hundreds of additional new dead strip centers built for which there is absolutely no demand.

Not to worry, we won’t have to run any benefits for strip center operators.

The shopping mall owners will have a slightly tougher time. They too will end up dividing those multi-floor Sears anchors, but there are only so many retailers who want to expand into regional malls. What will happen instead is an acceleration of the process of these locations being transformed for non-retail purposes. Day care centers, technical schools, medical facilities, and workout centers will take many of them, further redefining the role shopping centers play in the American social scene.

But even that will have its limits. So, as with strip centers, some of these malls will be emptied out and bulldozed. The world will survive.

Shoppers

It will be a sad, if fleeting, moment for most of America—at least those who aren’t on the Sears Holding payroll—when the company files for bankruptcy. We saw the same thing when Woolworth went out and people fondly remembered the grilled cheese sandwiches and notions departments. That didn’t last all that long.

Consumers will still be able to buy those legendary brands. They will still be able to find stores with the Sears and Kmart names over the front doors. And, let’s face it; there isn’t exactly a shortage of alternatives out there. Mostly, though, what will be the lasting impression is how quickly the lasting impression of Sears and Kmart will fade.

And Finally, There’s Eddie

The casual observer would say the most devastated person in America when Sears Holdings goes belly up will be its CEO, primary owner and creator, Edward S. Lampert.

Ha.

You know the expression, laughing all the way to the bank? Fast Eddie has been doing that for more than ten years. The amount of cash he has pulled out of this company—through special dividends, stock buybacks, asset sales, and other financial transactions that are diabolical (and entirely legal) in their brilliance—may never be known.

But he won’t even be done with the chapter 11 filing. He will still own the key brands through a separate corporation. He will still own the best real estate through his REITs. No doubt, we’ll discover other assets have been stripped out and are no longer part of the parent company. Eddie will have a good story to tell when Sears files, all about competition and vendors who didn’t support the store, and knowing him, he’ll even find ways to blame low oil prices, the Federal Reserve, and North Korea for its demise.

But you can’t say Eddie didn’t warn you. There, in clear wording, he laid it out in the company’s last annual report: “Affiliates of our Chairman and Chief Executive Officer, whose interests may be different than your interests, exert substantial influence over our Company.”

Sears and Kmart may be gone, but Eddie will live on to see another day.

Good Ship Goodwill to the Rescue

I thought I had finally ended my coverage of Captain Lampert driving the Sears Titanic to the bottom of the briney deep. Well, think again. On its way to oblivion, Sears just keeps on giving me amazing little nuggets, which I am compelled to write about. I just read some interesting stuff from Prosper Insights and Analytics, a detail of which just blew me away. From their analysis of shoppers’ preferences for women’s apparel, Sears’ share has plummeted 53% from January, 2006 to January, 2016. And get this: it ranks them at 15th in the category, behind Goodwill! Yes, you read that right. Incredibly, women would rather shop at Goodwill for apparel than Sears. In my opinion, that’s one step closer to not even being able to give the stuff away.

And when one thinks about the fact that Sears still carries some respectable brands like Lands’ End, Michael Kors, Nike, Lee Jeans, Everlast, and some others, are those brands going to go down with the ship? What it does tell you is that Sears has become a place where people just do not want to go, an odorous Limburger cheese.

Gurgle, Gurgle

While Eddie “fast buck” (now you see it, now you don’t) Lampert calls what he’s doing, a “massive transformation,” it’s really a massive financial engineering feat. He continues to surprise us with one clever gimmick after another, all designed to keep squeezing cash out of the business and into his coffers, whether they be his REIT deals or other asset moves to “unlock value,” as he calls it.

Prosper has a couple other charts that provide a clear picture of Sears sinking. In all product categories, their shopper share has lost 40% in the last 10 years, including all apparel and shoes, sporting goods, linens/bedding, home improvement and electronics.

Having dropped less precipitously in share of shopper preference is the appliance category. Even though the category is also downward bound, the Kenmore brand is still the “go-to-first” for one in five shoppers. Of course, Lowe’s, Home Depot and Best Buy continue to hack away at Sears’ share. Lowe’s in particular has steadily stolen share over the past decade, when Sears led Lowe’s by 20%. Today, they’ve been cut down to 8%.

JCPenney Anyone???

JCPenney recently announced that they were going to put their toe in the water by testing the viability of adding the appliance category. And if their appliance test markets prove successful, JCPenney may be another major competitor in the field. Naysayers abound who believe JCPenney is unlikely to succeed. In my opinion, so far everything the new CEO, Marvin Ellison, has done over the past year has been proven successful, as reflected in the 2015 financial results. Furthermore, Ellison hails from Home Depot with years of experience heading up stores, including appliances. Therefore, he most certainly understands how to manage that business. And why not go after a chunk of Sears’ declining share, particularly since JCPenney’s stores are most likely closer to Sears’ locations than the other competitors. They could win big.

The Future – What Future?

Lastly, are there any consumers at all, of any age, who want to shop in those aesthetically challenged, abysmal four walls? We of the grandparent class used to be whispered about as being the “Sears’ shopper.” Well, you couldn’t pay me, or most of my peers, to shop there. And, forget about the younger age groups. Ugh! might be the appropriate response. And look at the numbers to prove it.

Sears Could Have Been a Contender

A quarter of a century ago, in the late 1980s, when Sears was about to go under for the first time, had there been a strategic cell in any of their C-level brains, Sears would have shed all product categories other than home. They might even have managed to acquire Home Depot at the time, which was roughly a mere $1.5 billion size company. Can you imagine what a different path they might be on today?

Instead, they hired a new CEO, whose only major department store experience was that of Chief Financial Officer for Saks Fifth Avenue. How he could match anything about the Saks experience, including its luxury products and consumers, with any part of Sears is, and was, beyond my wildest imagination. It was the beginning of the end.

So rather than focusing on Sears’ one proven strength, appliances and the home, the new CEO hires a department store apparel guy and they literally doubled-down on apparel, hugely expanding the space for the women’s category.

What an audacious leap, followed by the CEO authoring a book titled: “The Softer Side of Sears.”

The book sold well. The Titanic, springing new leaks, sailed further into the storm, where Captain Eddie took the helm. Now, as it\’s sinking, \”fast buck\” Eddie is tossing cash into his dinghy that he will hop into just before the ship goes under.

Gurgle, gurgle, gurgle.