Sears (NASDAQ:SHLD) has a Wall Street problem: Analysts just don't understand what CEO Eddie Lampert has in mind for the largest U.S. department-store chain, according to Bloomberg.
Some analysts want Sears to close as many as one-third of its stores in order to get rid of the underperforming locations. The problem with that plan is that it would require a huge amount of cash to buy out leases—something that real-estate-focused Lampert knows very well. Other analysts asked at Sears Holding's annual meeting in May whether it makes sense to keep both the Sears and Kmart chains running. Lampert argues that Kmart is more down-market than Sears, and that Kmart's strength in clothing and home goods can boost profits.
Still other analysts joke about Lampert's statements that he wants to turn Sears into a membership chain, based on the fact that 60 percent of Sears sales come from loyalty members. "Eddie's got the equation wrong," said Morningstar analyst Paul Swinand. "Loyalty only works when the customer wants stuff you have."
There certainly doesn't seem to be enough customers who want stuff from Sears—sales have declined for six years in a row. And Lampert certainly hasn't laid out a clear strategy for fixing the business. But there's something to be said for Lampert's seat-of-the-pants approach to looking for a Sears fix. Not knowing what to do hasn't stopped Lampert from launching online initiatives, spinning off tech startups and smaller-format stores, and even moving some Sears private-label brands such as Craftsman into other chains.
Whether Lampert has actually gained enough experience to have a strategy at this point is still up in the air. But it's worth remembering that when Sears spun off its Orchard Supply Hardware subsidiary a year and a half ago, retail analysts thought it was the best thing that could happen—for Orchard Supply (NASDAQ:OSH). "It's a really good thing they are spinning it off. When you have a small, good division within a large, dying business, it doesn't get the attention it deserves," one analyst said at the time, adding, "I don't see where Sears fits into the retail landscape anymore. It's not clear how it will survive."
That's still not clear. What is clear is that large, declining Sears shows no sign of actually keeling over any time soon, while small, good Orchard Supply filed for Chapter 11 bankruptcy on Monday (June 17).
- See this Bloomberg story
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