Industry News

Sears, Yet Again

There are corporate moguls who are diplomatic, patient, statesmanlike. Sears CEO and primary shareholder Eddie Lampert is not one of them.

In 2005, the owners of Kmart Holdings purchased the much-larger Sears, transforming both into Sears Holdings. The Kmart group propounded the idea of adding one struggling retail chain to another, claiming it would save both. Few believed them.

The years have proven the doubters correct: the group floundered from the outset, and in a 2013 Hail Mary move, Lampert, a former Wall Street funds manager who once earned over a billion dollars in a single year, was brought in as CEO. Since 2012 (immediately preceding Lampert’s watch), the group has lost a staggering $11.7 Billion. To break that down into terms mere wage-earners can understand, that’s over $5.3 Million per day. Over $222,000 per hour. How about $3,700 per minute? Almost $62 per SECOND? Every second of every day? Now that’s a relatable, if mind-melting, amount.

When the retail chains merged, there were 3500 stores between them. As of Q2 2018, 506 Sears stores and 360 Kmart stores remained open—meaning over 75% of the group’s stores have closed since the merger, and it appears more stores will close before the end of 2018.

Lampert has sold much of the group’s real estate holdings and sold or licensed such iconic brands as Craftsman and DieHard, and Lampert has suggested that his hedge fund would be willing to buy the Kenmore brand for $400M.  Many have called the offer an extreme conflict of interest, including this recent analysis from the Wharton School of Business. To add to an already acrimonious situation, Lampert recently stated that the company’s failure was due to its pension obligations: over 100,000 receive pension payments from the group, well in excess of its current employee count of around 89,000.

At this point the company’s debt is well in excess of its market cap of a mere $83 million. To put that into perspective: a single Apple Store has revenue of $50 million per year.

It’s unlikely the company will rebound. It’s tempting to blame Lampert for all the company’s woes, but as this article points out, Sears had a history of overreaching and making questionable decisions long before Lampert arrived. —and yes, the article does use that telling word, “hubris”.

The company that once built the tallest building in the world (Chicago’s Sears Tower, 1974) may well be defunct less than half a century later.