Let’s be realistic. Eddie Lampert, chairman of Sears Holdings (NasdaqGS: $SHLD), is not a merchant, and as a portfolio manager and investor, he has missed the mark. He has now announced to his board that his ESL hedge fund wants to buy the Kenmore brand and other assets from Sears Holdings.
Sears Holdings has slimmed down and reported sales in fiscal 2017 of $16.7 billion, from $22.1 billion the year before. The company reported a loss of $383 million or $3.57 a share. Of course, in his letter to shareholders, Lampert promised a transformation, which most investors could not believe.
He wants to acquire, through ESL Investments, the leading home appliance brand, which is Kenmore. In addition, Lampert also wants to acquire Sears Home Improvement Service (SHIP) and the PartsDirect business. Basically, he is treating Sears assets like a typical portfolio manager by selling pieces of a dying company. Lampert indicated that he is willing to pay $500 Million SHIP and PartsDirect.
Trust in Sears was always based on three exclusive, quality brands. They were Kenmore appliances, Diehard batteries and Craftsman tools. Craftsman tools have been sold to Stanley Black & Decker for an estimated $900 million. It helped Sears’ cash flow but robbed it of a valuable, exclusive destination merchandise. I understand the new owners have expanded the line with new items that are very successful.
Lampert also sold Diehard batteries, which were exclusive at Sears and drew a lot of praise. In short, the attraction to shop at Sears is gone. The valuable brands that generated a lot of business for Sears are available on Amazon and everywhere else.
I believe that the sale sale of the Kenmore brand could bring in about $800 million. That is no surprise since one-third of American home have these appliances in their home. The quality brand was introduced in 1927, and Whirlpool was and is the main manufacturer. Electrolux has also supplied some models. Home Depot, Lowe’s, Amazon and others have been aggressively chipping away at Sears’ dominance to gain business. Today, customers wonder if they can trust buying from the dying swan.
I believe that Lampert thinks he is trying to throw Sears a lifeline by selling assets. I respectfully disagree with his method. You do not sell valuable brands to competition. You do not tear down the company unless his strategy is to close more stores and give Seritage Holding the opportunity to rebuild their malls with valuable tenants.
I believe a strong, flamboyant merchant with youthful savvy could make Sears a fashion destination. Instead, Sears has sold some locations to Primark, which will benefit by generating increased customer traffic in excellent locations.
For more information: forbes.com/sears-eddie-lampert-wants-to-buy-kenmore
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