Rumblings that Sears Holdings is facing some liquidity issues makes yesterday's announcement that the company plans to spin off roughly 1,000 hometown and outlet stores and sell 11 full-line mall stores to General Growth Properties less of a shocker than might be expected.
The company, controlled by hedge fund investor and chairman Edward Lampert, expects to raise upwards of $770 million from its actions. The latest move follows December's announcements that the company planned to close over 100 unprofitable stores and that it had completed the spinoff of its Orchard Supply Hardware Store chain.
When Edward Lampert decided to bring together Sears and Kmart seven years ago, speculation was rampant that his motive was the real estate. After all, the chains were struggling mightily; how could they possibly do better under one holding company run by a person with no retail experience? Mr. Lampert, the shrewd investor, must have had a plan to sell off properties to make more money than he ever could operating them as a retail business.
But a funny thing happened along the way. Mr. Lampert kept insisting that he saw the potential of Sears and Kmart to thrive as retail entities. Sure, he closed under-performing stores and used the sale of property and transfer of leases to improve the balance sheet, but for the most part he has stuck, in his own unorthodox manner, to trying to turn the businesses around.
As a Wall Street Journal article pointed out, back in 2006 Mr. Lampert wrote to shareholders, "My goal is to see Sears Holdings become a great company whose greatness is sustainable for generations to come."
The criticisms of Mr. Lampert are well known. He has failed to make necessary capital investments in stores, gone through top executives at a clip reminiscent of the late George Steinbrenner, made investments in digital commerce that, while effective, could never make up for the business lost at physical locations, eroded Sears' point of difference by making its core brands available to other retailers, etc.
So the question now becomes, where do Mr. Lampert and Sears Holdings go next?
- Sears Holdings Reaches $270 Million Deal for Sale of Eleven Sears Stores to General Growth Properties - Sears Holdings Corporation
- Sears Holdings to Separate Sears Hometown and Outlets Businesses and Certain Hardware Stores - Sears Holdings Corporation
- Sears to spin off hardware outlets, sell stores - Chicago Tribune
- In Retreat, Sears Set to Unload Stores - The Wall Street Journal