Why Sears Should Just Call It Quits

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Former Sears exec calls for retailer to liquidate
Scott Olson/Getty ImagesCustomers leave Sears' flagship store in downtown Chicago in January. The store closed last month.
By Krysta Gustafson | @KrystinaGustafs

Former Sears executive Steven Dennis says now is the time for the struggling retailer to liquidate.

In a commentary on his blog last week, Dennis, a former vice president at Sears who exited the company in 2003 after about a decade, listed five reasons why the company should "stop the charade and embrace the inevitable." His points were:
  • It doesn't offer a value proposition.
  • It's lost its relevance in nearly every major category, while its competitors have gained ground.
  • After years of underinvesting in its stores, it has a lot of catching up to do, and it now would be unable to fund the necessary upgrades.
  • CEO Eddie Lampert "doesn't know what he is doing," and is investing in the wrong areas, such as the Shop Your Way loyalty program.
  • Its valuable assets, including proprietary brands Kenmore and Craftsman and its real estate portfolio, are becoming "less valuable every day."
Sears (SHLD) has closed hundreds of stores in the past decade, leaving more than 2,000 stores in its footprint, when accounting for both Sears and Kmart. More closings are expected.

Lampert, who owns about a 50 percent stake in the company, emphasized on his blog following last week's shareholder meeting that turnarounds are different than transformations, and the company is taking measures to improve its profitability.

He wrote: "Turnarounds happen when a company succeeds again at doing what it had once done successfully before. Transformations are almost entirely different -- they occur when companies adapt their business model to fundamental shifts in technology, competitive landscapes, government policies and regulations, or macro trends to serve their customers [or, in our case, members] in new ways.

"Over the last decade, incidentally, Sears and Kmart have faced all of the challenges I just listed." Lampert continued, "Turnarounds are challenging, but transformations are even harder because not everyone sees the direction you're heading in or your destination. After spending our annual meeting with shareholders, associates, and other partners, however, I am hopeful that looking carefully at other companies' transformations sheds more light on the actions we are taking and why."

He also asked people to remember the transformations that took place at Apple (AAPL), General Dynamics (GD) and Eastman Kodak (KODK).

"I want to be clear that I am in no way saying that Sears Holdings is just like any of these companies, but there are lessons to be learned from them," he said.

Last month, retail expert Robin Lewis, author of online newsletter The Robin Report, made the argument that Amazon.com (AMZN) should acquire Sears. He called the idea "win-win" for both companies, as an acquisition would supply the online giant with thousands of distribution centers, while it would give Lampert a "profitable exit strategy."

Sears posted a loss of $930 million for the year ended Feb. 1. It is scheduled to announce first-quarter earnings on May 22.

Sears' shares are slightly higher since Tuesday, the day of the company's annual meeting, after falling 4.9 percent that day.


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a1623yankee

This is what Sears Holding investors have wanted right along...liquidation. They only let it live long enough to milk it to the bitter end, in other words to steal as much as they could from a dying giant.

The worst of the raiders.

May 14 2014 at 6:12 AM Report abuse rate up rate down Reply
Stephen

For some reason… every local Sears store tends to smell like a tire storage facility in someone's damp basement.

May 13 2014 at 10:28 PM Report abuse rate up rate down Reply
Kent

I think Sears can be turned around, but Lampert has to either become a passive investor, like Warren Buffet, or admit defeat and sell the company. Lampert fancies himself as the next Warren Buffet. But, there are three issues.

First, Buffet will fly anywhere, if there is a good deal to be made, or if he needs to attend a meeting with heads of the various companies that Berkshire owns. Lampert is afraid to fly, meaning everyone else has to fly to his office in Connecticut.

Second, Buffet doesn't micromange. He buys companies with good management teams. Sears had issues, and it needed new management. I don't think Lampert can evaluate talent, and he wants to add his two cents to everything.

Third, Lampert won't do interviews. Not that Warren is a media hound, but I've seen him on CNBC, Bloomberg, Charlie Rose, and Seth Meyers. He even did a phone interview on ESPN's Mike and Mike, about the perfect NCAA bracket. I think Lampert is afraid of tough questions, which he would get a lot, if he went on CNBC. Heck, his friend from his Goldman, Sachs days, Jim Cramer, can't get him on Mad Money.

So, when you don't take questions from the media, you don't have to defend a bad strategy and poor execution.

I bought a refridgerator last year from Lowe's because its prices were cheaper. But, the model I wanted wasn't on the floor, and the sales associate wasn't that knowledgable about the product line.

Let's just say that I'm not happy with the fridge. I wish I had gone to Sears, because their sales staff know their products.

By the same token, I still swear by Craftsman tools, both hand and power. About the only hand tool that might be as good as Craftsman is Stanley. Black & Decker makes good small power tools, but you have to pay a lot more than Craftsman, for larger power tools.

May 13 2014 at 11:23 AM Report abuse rate up rate down Reply
1 reply to Kent's comment
Ken

KMart is useless....

May 13 2014 at 5:17 PM Report abuse rate up rate down Reply