• Jeff Matthews

Eddie to the Rescue

Edward S. Lampert, the billionaire who bought Kmart when it was in bankruptcy and then used it to buy Sears, Roebuck, put himself in charge of creative decision making on Thursday, taking a measure of personal responsibility for lifting two retailers out of a long sales slump. A person familiar with Mr. Lampert’s thinking, who declined to be named because Sears keeps tight control of all disclosures about its business, said the financier believes there is a shortage of talented merchants in the industry. “This is a work in progress,” the person said. “It’s going to be a bumpy ride.” But he noted that Kmart’s sales have pulled out of a nosedive under Mr. Lampert and that both chains are also forsaking mere sales growth through discounting.—New York Times It’s hard to choose where to begin here.

Let’s start with the obvious: Eddie Lampert is one of the all-time great hedge fund managers—in fact, as we have observed in prior discussions of Sears, one of the greatest investors of all time.

Then there’s the other obvious fact: Eddie Lampert has no apparent merchandising skills whatsoever.

And if you want to argue with me about that—well, I suggest you first get yourself to a “Sears Essentials” store and see for yourself how Eddie’s vision of combining the best of Sears’ merchandising with the best of the old K-Mart real estate locations is working out.

I’ve done it, and I can tell you that it’s about as effective as, say, combining US Trust and Charles Schwab.

For starters, the stores all carry bilingual signage—English and Spanish—in one of those corporate money-saving moves that looks good on paper but looks really dumb in a store in rural Putnam Connecticut, with an Hispanic population of zero.

For another, the Lands’ End merchandise is mixed in with all the other Sears apparel brands, further destroying whatever equity value the Lands’ End brand had after the last few years of intensive destruction by the old-line Sears “merchants.”

The list could go on—but suffice it to say that while the store looked clean, thanks to a fresh paint job; and cheery, thanks to new light-bulbs…it uses the same old K-Mart fixtures and the same old K-Mart layout and (I hate to say it because they are the sympton, not the problem) the same old K-Mart employees.

For comparison purposes, the TJ Maxx store right next door not only looked like a real store run by real merchants, but with only half the square footage of the “Sears Essentials” store it was doing more business.

Sears Holdings needs a lot of things—great merchants among them.

And there are plenty of great merchants around—but they work at Abercrombie or Penney or Nordstrom or Williams-Sonoma or Quiksilver…not at hedge funds.

Jeff Matthews I Am Not Making This Up The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.

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The content contained in this blog represents only the opinions of Mr. Matthews. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. The content herein is intended solely for the entertainment of the reader, and the author.

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