Lampert’s Kenmore offer seems like more shuffling of chairs on Titanic’s deck

Discussion
Photo: Sears
Aug 15, 2018
George Anderson

The truth is not many retail industry watchers took Sears Holdings CEO Edward Lampert seriously when he told shareholders at the company’s annual meeting in May that the company was “fighting like hell” to turn its business around. A new Wall Street Journal report that Mr. Lampert’s ESL Holdings, the largest shareholder of Sears stock, has offered to buy the company’s Kenmore brand for $400 million is unlikely to change that perception.

Mr. Lampert, it’s fair to say, has long been seen by many as the person who took two struggling retail businesses — Kmart and Sears — and systematically deprived them of the resources needed to compete while personally profiting from the sale of assets that made the chains unique in the marketplace.

Back in April, the Journal reported that Sears had been looking to sell off several businesses, including Kenmore, for a couple of years without success. An unnamed person familiar with the matter told the paper that Sears thought it could get $500 million for Kenmore.

ESL’s interest in acquiring Kenmore is being positioned as a way to give Sears needed cash to avoid bankruptcy, a scenario that many see as likely whether a deal is made or not. Sears Holdings has cut corporate jobs, closed hundreds of stores and sold off assets such as Craftsman tools in previous bids to cut costs and raise cash. None to date have changed the downward trajectory of the business.

Last year, Sears made a deal to make Kenmore appliances available for sale on Amazon.com. While Amazon owns the inventory, it uses Sears to deliver and install the purchased appliances. When the deal was originally announced, it was positioned as a way for Kenmore to regain market share. The brand saw that share fall to 10.3 percent from 16.7 percent over a four-year period. 

DISCUSSION QUESTIONS: Will an acquisition of the Kenmore brand by Edward Lampert’s ESL Holdings help Sears Holdings achieve a turnaround? Do you think Sears has any other choice other than selling Kenmore at this point to avoid turning to bankruptcy?

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"Lampert is either brilliant or insane, and I think history is proving that the latter is more likely. "
"Am I the only one who thinks this is a clever move?"
"I’m certain that Mr. Lampert is enriching himself during the sinking… Perhaps James Cameron can make a blockbuster movie about Sears some day?!"

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25 Comments on "Lampert’s Kenmore offer seems like more shuffling of chairs on Titanic’s deck"


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Mark Ryski
BrainTrust

The short answer is no. This is yet another strange twist in the long, bizarre story of Sears. It’s difficult to comprehend the decisions Lampert makes because they often seem to conflict with rationality and common sense. Lampert is either brilliant or insane, and I think history is proving that the latter is more likely. Selling Kenmore for cash to pay the light bills for a few more quarters is yet another desperate act on the road to nowhere for Sears.

Chris Petersen, PhD.
BrainTrust

Selling off the crown jewel does not fix the systemic issues. This may finally be the last nail in the coffin of what was inevitable.

Art Suriano
BrainTrust
I don’t see Sears turning around anytime soon or probably at all so selling Kenmore is okay and will buy some time, but it’s unfortunate that there has been no real plan in place these last few years to improve the company. Walking into a Sears store is not only like stepping back in time but, in many cases, it’s a sad walk back in time. The stores are very dated, the merchandise unappealing and there is no compelling reason to shop their stores. It is unfortunate that this once-thriving company was taken over by those who, through the years, could not keep the company in the lead. It is also unfortunate that years later the greed group got their hands on the company. Sears at this point would be best served looking for a buyer that could save maybe half the stores with a robust turnaround plan that is destined to work and keep the company in business, so that it could one day be profitable rather than just making the few on the… Read more »
Neil Saunders
BrainTrust

Selling off assets to fund a loss-making operation will not make Sears sustainable. At best it buys time, at worse it just accelerates the eventual demise as it weakens the balance sheet and means Sears will eventually be worthless.

In some ways, the move is quite appalling. It means that Lampert is able to carve out the few remaining bits of Sears that are successful and integrate them into his other companies. If Sears then goes down the drain, Lampert has separate control of the good bits and can recoup his losses/loans from Sears through a full liquidation.

Bob Amster
BrainTrust

This appears to be part of a well thought-out long-term plan to destroy both businesses but profit from it in the long run. The businesses wind up with no assets, ESL does, Lampert probably gets re-paid his loans with the same money. Now he can sell the Kenmore business to a strategic buyer and pocket the proceeds.

Paula Rosenblum
BrainTrust

Or just license the thing. Exactly right, Bob.

Steve Montgomery
BrainTrust

The movie Sand Pebbles was the first time I heard the phrase “death by a thousand cuts.” Since Lampert bought the once proud name of Sears Roebuck & Company he has been practicing that philosophy. Sell a little land, more, locations, a brand here and there, etc. The sale of the Kenmore brand is just another cut. All in the name of turning around the company.

While he has made a great deal of money doing so, the company has continued to suffer. Unfortunately, I fully expect to read a headline that says Sears is going out of business in the not-too-distant future.

Dick Seesel
BrainTrust

I must not be smart enough to figure out the financial maneuvering that Lampert is up to — other than keeping the crown jewel of the Sears “empire” close to the vest after the rest of the business has collapsed. Otherwise, why pay $400 million for a brand that Sears Holdings already owns?

Phil Masiello
BrainTrust

I totally agree. Shuffling the deck chairs on the Titanic. This is nothing more than another way for ESL to strip value out of these retailers. I don’t see any way to turn these chains around. He needs to face reality and just put the companies into bankruptcy. It is over.

Lee Kent
BrainTrust

Lampert knows it’s over, don’t you think? It appears he has simply been making strategic moves to make sure he makes a profit. Did he come in with good intentions? I think so however, he couldn’t make it happen and now he’s stripping the ship. For my 2 cents.

Doug Garnett
BrainTrust

Although corporate leaders want to think brands are like baseball trading cards — “I’ll swap you a Kenmore and a Craftsman for … ” — they aren’t. Retail private labels are serious parts of the foundation of a retailer.

Sears has already proven that a sale like this won’t help — and it started when they shifted Craftsman from a private label brand to a marketplace brand putting product into Ace Hardware and Orchard. The result? A further weakening Craftsman brand and a loss for Sears.

They’ve already sold Craftsman (I won’t talk about the serious error I believe Lowe’s is making by picking it up) and that sale didn’t do much but offer an extra few months of lifeline. Selling Kenmore makes Sears a complete loss — now lacking any of the strengths that made it worth shopping.

Rich Kizer
BrainTrust

This is really sad. I guess even when you are featured on the Time list of 100 most influential people in the world for being one of the “brightest minds on Wall Street,” that still doesn’t make you a retail giant. This is sliding downhill fast.

Ricardo Belmar
BrainTrust

This is just further proof that Lampert’s plan all along has been to bleed the brand dry to line his own fortunes at the expense of a once-proud brand. Sears is in a downward spiral that seemingly will only end with a liquidation of what few remaining assets Lampert will leave them with. If by “fighting like hell” he meant stripping the Sears brand of any last remaining brand equity it has, then yes, he’s taking the fight to the finish line — except the only thing on the other side of that line is liquidation. It has turned into a sad story for a classic retailer.

Anne Howe
BrainTrust

If Lampert really cared about the retail business he’d be willing to sell the Kenmore brand to Home Depot or Lowe’s and let them retain/rebuild a customer base around the differentiated product. Kenmore used to be the brand that got all the tech upgrades before Whirlpool and Kitchen Aid, giving Sears’ a leg up with shoppers. Selling the brand to the hedge fund is a sad and selfish move.

Adrian Weidmann
BrainTrust

Every time I drive past the mall nearest to me, I expect to see the Sears store shuttered. It’s hard to imagine how Sears could ever return to its once and former glory. The retail and brand landscape are seismically changing so fast that even if changes were made today, I don’t know that they would ever resonate with today’s shopper expectations. I’m certain that Mr. Lampert is enriching himself during the sinking… Perhaps James Cameron can make a blockbuster movie about Sears some day?!

Paula Rosenblum
BrainTrust

Am I the only one who thinks this is a clever move? He retains control of an iconic brand that he can continue to license and sell after Sears finally gives up the ghost. He’s not stupid, he’s a vulture. They live by their own rules. One of those rules is “Who cares who I hurt along the way? I’m going to pick at those bones!”

So he’s not evil. Just gross.

Craig Sundstrom
Guest

I think even this effort is a bungled move: years of poor (customer) support and doubts about Sears’ viability have done enormous damage to the brand already — yes, paradoxically the time to sell a brand is when it’s at its peak (i.e. when you don’t need to) — I have doubts about its standalone power.

Ed Rosenbaum
BrainTrust

I think Lampert is hearing the sounds of the fat lady singing. Now it is time to divest the main asset; yet still keep it close, a la Kmart. Once the end comes he can sell it off for a big payday. Anybody out there surprised? Remember the movie “Pretty Woman”? Richard Gere’s character made huge fortunes doing the same thing as ESL seems to be doing here.

Seth Nagle
BrainTrust

If the 400 million is to invest and bring Sears up to speed with the competition I would say sell, but if it’s to keep the lights on for a few more months then I question the real value.

Sears has been in a death spiral for a while now and with a lack of innovation to draw in consumers the C-suite might just be relying on their golden parachutes to get them out of this one.

Richard J. George, Ph.D.
BrainTrust

The title of the article is appropriate. Sears is where “America used to shop.” The continued sell off of iconic brands like Kenmore and last year’s sale of Craftsman tools to Stanley Black & Decker, severely dilute what made Sears a preferred shopping destination at one time. Craftsman tools are now available in a number of Sears’ competitors, such as Lowe’s. Sears stores, on the other hand, have fallen into disrepair. Stained carpeting, broken fixtures and dim lighting are commonplace.

Head for the lifeboats!!!

Kai Clarke
BrainTrust

This is just another scheme for Lampert to make short term profits from a transfer of cash. Should Kenmore be sold, we will probably see Lampert sell the brand to another company (probably a Chinese based company like Haier) where some value would be generated, at least in the short term. Either way, Lampert will win and Sears Holdings will continue to fail.

Ananda Chakravarty
BrainTrust
Not being able to read Eddie’s mind nor really knowing where he really fits on magnanimity, you have to remember he’s runs a hedge fund, which means it’s all about money. Turnaround, burnaround, the whole effort for Eddie is a not just a soft landing for himself. He’s cushioning himself in case SHLD does collapse, but still pushing money into the brand. Owning the Kenmore brand is brilliant — he knows it has value and may sell it/license it to others in the future (Bob and Paula gave great opinions here). Despite public sentiment, the amount he’s putting into Sears is more than twice that of it’s market cap, so he still believes there’s value. The company still has over $7B in assets, and as of Feb. drew almost $17B in revenue. There is still an incentive on his part to keep Sears afloat, although bit by bit he’s effectively taking the company private — he owns the real estate, and now the IP — at which time he will have other options to play… Read more »
Cathy Hotka
BrainTrust

To paraphrase a recent book title, everything Eddie Lampert touches dies. Future chroniclers will see Mr. Lampert as a kleptocrat who ruined a once-proud company.

Mike Osorio
BrainTrust

Sears/K-Mart is a sad and compelling case study in vulture venture capitalism and how it has destroyed so many heritage retail nameplates. Venture Capitalism isn’t necessarily bad — but the vulture version is pure evil. Please, put the employees and customers of these once mighty retailers out of their misery. There are better retailers to work for and better retailers in which to shop. There’s barely any meat left on the bones. Bury them already!

Larry Corda
Guest

It’s more likely the $400 million will be spent covering Sears Holdings losses rather than turning the company around. Sears had ten years to try to make a profit and reinvent itself and couldn’t do it. Now, Sears doesn’t have time or money on its side and most shoppers have given up on them.

Ten years ago I thought Sears might be better off to focus on “working people.” Replace all clothing with work/uniform clothing for tradespeople such as construction, medical and foodservice. Reinforce the change with footwear and protective eyewear for additional sales. Focus on customer service and building relationships with local companies. Be the go to place for workers. Develop quality private label work clothing and footwear that is competitively priced (think Toughskins for work). Kenmore appliances would be promoted as “hardworking appliances for hardworking people”. Everything Sears would carry would be geared for and promoted to “hardworking people.”

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Braintrust
"Lampert is either brilliant or insane, and I think history is proving that the latter is more likely. "
"Am I the only one who thinks this is a clever move?"
"I’m certain that Mr. Lampert is enriching himself during the sinking… Perhaps James Cameron can make a blockbuster movie about Sears some day?!"

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