In 1989 Sears was the largest retailer in the United States. When it filed for bankruptcy on Monday, it had fallen to 23rd biggest. Today it seems inevitable that the company once known as America’s store would fail, but 30 years ago—even though there were signs—this was much less clear.
Many people will lay the blame at the feet of Eddie Lampert, the Wall Street power investor who took control of Sears in 2004 and soon after merged it with Kmart which he also controlled. Lampert, who has now stepped down as CEO of Sears as part of the bankruptcy filing, remains its chairman and its largest shareholder. According to a person close to the situation, Lampert is “relieved” and even “happy.” Lampert, the source says, “wishes he could have avoided this, but now is focused on getting to the other side and taking it from there.” Asked what the other side might entail, this person said they had no idea.
A massive one-two punch
Lampert cites Sears’s pension fund and its 90,000 beneficiaries as a huge drag on the company. “Amazon doesn’t have this kind of thing and neither does Walmart. This was a problem for him,” the source said. “Eddie really put his heart and soul in this. He could have walked away and didn’t.”
Well, you could say the same for those 90,000 former employees—never mind the 140,000 current workers—as far as the heart and soul part. Walking away, not as easy.
No matter what you think of Lampert—and some characterize him as a shell gaming, wheeler-dealer who was only in the company for its real estate holdings and to milk it dry—you have to acknowledge that when he got into Sears it was already in deep trouble. True, Sears filed for Chapter 11 bankruptcy on his watch, but years of mismanagement and giants shifts in the business preceded that.
At the very least, Sears was hit with a massive one-two punch. First came the big-box stores, principally Walmart of course, but also Home Depot, Staples, PetSmart, and Toys R Us (more on the latter in a second.) The big-box stores replicated every department that was in Sears.
Next of course came the internet, particularly Amazon, which was the second punch, and which is what killed Toys R Us. Amazon didn’t just depress Sears’s sales year after year; it also made its once-vaunted real estate portfolio much less valuable as it killed off retailers, aka mall tenants, left and right. That made Sears’s footprint in malls worth less and less every year, further undermining Edie Lampert’s monetization and/or turnaround plan—whatever that exactly might have been.
How long Lampert remains in the fray is anyone’s guess. He’s still heavily invested in the company, but at some point you have to figure enough will be enough. It’s been kind of a bizarre obsession if you think about it — Lampert, once called the next Warren Buffett, sinking all that real and emotional capital into … wait for it … Sears!
You have to ask why.
Lampert is still a billionaire with houses in Greenwich, Aspen and Florida. He has a $130 million yacht, Fountainhead, no doubt named after the 1943 Ayn Rand novel. And he was recently spotted relaxing at a David Byrne concert.
Wonder what Lampert thought when the former Talking Heads front man played “Burning Down the House.”
Andy Serwer is editor-in-chief of Yahoo Finance.
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