Taking Stock

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Requiem For A Lightweight: As Sears Falls, Eddie Lampert Deserves Much Of the Blame

As I write this on October 12, Sears Holdings remains on life support. By the time most of you read this piece – and with a $134 billion debt payment due on October 15 – the burial will likely have already taken place.

The end of another iconic American brand hasn’t really been in doubt for several years – the date and form of death left some mystery to be included in the obituary. And let’s be clear: despite the challenges that chairman and CEO Eddie Lampert inherited when he acquired Sears (and Kmart) more than a dozen years ago, he has almost singlehandedly destroyed a company which for much of its 125-year history was the country’s largest retailer.

Ah yes, “Slow Eddie” once had high hopes for his prized acquisition. In a 2005 letter to the company’s shareholders he stated: “We intend to build on the historic strengths of (Sears and Kmart) while overcoming some of the more recent weaknesses (cue laugh track).”

Eighteen months later, there was some reason to believe the boy genius (he was a billionaire before the age of 30 spearheading his hedge fund ESL Investments) when Sears Holdings’ shares peaked at $195 per share.

But for those who follow the inside baseball of retailing knew this was pure fool’s gold. Lampert was running his organization even more ineffectively than his failed predecessors. His continued reliance on using financial logic over the need to prioritize selling more stuff became evident as the company began to shed stores and produce consistently poor sales and earnings.

By 2008, Sears’ shares had plummeted to $28 and, save for a few spikes over the past decades, it’s been the biggest failure in American business in the past 50 years. However, “Slow Eddie” didn’t quite see it that way – he was perhaps the only retail or financial executive who believed that a turnaround was plausible (cue laugh track again).

In 2006, the company employed 355,000 people. Today there are 89,000 Sears Holdings associates. Twelve years ago, it operated more than 4,000 stores. That number is currently approximately 820 units. Companies and brands that it owned or curated – Lands’ End, Craftsmen, Kenmore – have been sold or spun off to create more cash, all while diluting the value of the enterprise. And here’s arguably the stat that secures Lampert’s place in the RKM (Reverse King Midas) Hall of Fame: in the past eight years, Sears Holdings has lost an incredible $11.2 billion.

Perhaps as a financial whiz, Lampert was absurdly overrated. As a merchant, he just plain sucks.

As I write, Sears Holdings’ shares have plunged to $0.45 per share. The stench of death is profound.

After it’s all over, Lampert will continue to live his lavish lifestyle; Sears’ demise will likely only marginally impact his personal fortune.

But scars this deep will be indelible – the hundreds of thousands of jobs lost and the billions of ruined investments are not only profound by themselves; Sears’ prolonged and deep failures have created a domino effect that impact many people and businesses who have dealt or still deal with the company.

In his next life, let Lampert serve as a glorified day trader – just keep him the hell out of retailing.