The ‘fat lady’ is getting ready to sing.
I don’t know if Eddie Lampert’s recent quote in The New York Times was intended to be a tutorial on business or if he was just whining about his long and ongoing failure to fix the miserably declining retail mess called Sears Holdings (of which he is chairman and CEO).
Read this and imagine hearing him saying it:
“I’d like to go faster. I’d like to go bigger. We’re just not making money, which makes it much, much harder to fund the transformation.”
Doesn’t that sound like whining to you? It sure does to me. Of course I’ve purposely made myself privy to all of his many ‘trickster’ statements ever since he cobbled together the two ‘Titanics’ in 2005, better known as Kmart and Sears. And I’ve attached as many descriptive monikers to his name as there have been tricks up his sleeve. From Eddie, the “magician” to “fast buck” Eddie to “Dr. Strangelove” to Eddie “hedge-your-bets” Lampert, and now I give you Eddie “the whining professor” Lampert.
I added “professor” to his whining because given his degree in economics, summa cum laude from Yale University, as well as his remarkable success in the world of finance, one might think this is supposed to be a serious teachable moment from Eddie and a profound learning moment for all of us. However, don’t allow yourself to be tricked into believing that. I mean, give me a break. That faster, bigger statement would not be a profound learning moment for even a high school dropout.
So, once again, I had to sort through the layers of “trickiness” to find the statement’s true meaning.
The Trickster is Back
First of all, the quote was part of a general presentation he made a couple weeks ago, following the announcement of a possible spin-off of Lands’ End and Sears Auto Centers. His spin on the spin-offs is that they would “accelerate our (Sears) transformation into a leading integrated retailer.”
Nice spin Eddie. First of all, the word “leading” is totally misleading. There are so many failing parts of the Sears mess that, forget “transformation,” it needs a transfusion merely to survive. Secondly, the word “integrated” would imply there are vital parts to be integrated, when none of the parts seem to even be breathing.
Yes, having lost more than $4.5 billion over the past couple years, the spin-offs look more like unloading (vs. “unlocking”) value, “because he must.”
Then, of course, there’s the now over-referenced fact that he has actually been destroying value by not investing in the upkeep and general appearance of the stores. Investing about $1.50 a square foot vs. his peers at about $10 a square foot, more stores than not are beginning to look ready for the trash collector.
The “professor” in Lampert says: “For sure there is more money we could be investing in our stores, but when we did invest in our stores, we didn’t see a return. If I can’t invest in 100 stores and do well, doing that across 1,000 stores doesn’t make sense.”
Was this to be another profound learning moment for us? No, it’s just another layer of “trickiness” we must sort through to eventually get to the true (vs. spin) core of his intentions. So, the next layer gets us a little closer: Eddie the “professor” says: “Store investment may be necessary, but it’s not sufficient in helping to transform a traditional retailer to a retailer that’s more competitive in the 21st Century.”
I guess this is another profundity, which indeed does get us closer to what seems to be his real game plan. According to Gary Balter, a retail analyst at Credit Suisse, “The irony of Eddie is he’s one of the retailers who did see the Internet coming. I have so many retailers who were so blind to the impact. Eddie saw it and he made significant investments. His website is better than just about any other retailer I cover.”
Well, I would like to know which retailers Mr. Balter is actually covering. And I will leave the argument about Eddie’s website ranking to those who have greater expertise in this area. But these “significant” investments by the “professor” do begin to reveal what I have speculated in the past about Eddie’s real intentions.
The ‘Fat Lady’ is About to Sing:
‘Nearer my God to Thee’
In my blog, “Captain Lampert Takes the Helm,” on January 10, 2013 in The Robin Report, I speculated that Eddie not only realized that he couldn’t return the two “Titanics” (Kmart and Sears) to their iconic greatness as retail brands, but, indeed, he realized they were sinking.
And given his brilliant financial acumen, in my opinion, it was at that moment he decided the best strategy was to manage the business “down,” to financially engineer its demise (vs. outright collapse), while selling off assets and cashing out of it as much as possible.
So, if that’s the case, and with analysts predicting a “slowing to a trickle” cash flow, Eddie may have decided “Nearer my God to Thee” is the song to be singing right now. If so, he may figure that by taking the helm, he better than anyone else, can best and least painfully manage the Titanic through its final plunge, while selling the rest of the “deck chairs” and whatever else is still worth good hard cash.
However, I also allowed that maybe there was an “abracadabra” strategy, another trick from Eddie ”the magician.” I suggested he might manage it down to a level at which he and his pals could take it private, and reposition it solely around the ‘home’ category, poised to rebuild from a smaller base.
Either way, I believe he is proactively managing the business down in a methodical, financially brilliant way (read: to make sure the life rafts are loaded with as much cash as possible).
The Final Profundity
Having said all of this, Eddie once again has the ability to confuse me. Eddie “the magician” always has one last trick up his sleeve. And this quote truly confounds me, not because I don’t understand the point, but because I’m not sure if Eddie does, and even less sure of what he means:
“The role of the store is changing. It’s got to be both experiential, but also utilitarian. We want to be on the right side of behavioral change. But the business model has to support the experiential model and vice versa.”
Wow! That’s almost as an absurdly profound, teachable and learning moment as his first quote in this article. Are we to believe this has come out of the mouth of Eddie “the professor,” or Eddie “the magician,” or Eddie “hedge-your-bets” Lampert.
Take your pick. It could be any one of the three. Perhaps that’s why the Titanic has stayed afloat for so long. But now it is definitely a “man the lifeboats” moment.