Where Did Edward Lampert Go Wrong with Sears?

A New York Times article, “Why Sears’s Last Great Hope Was a Promise That Never Materialized,” explores whether Edward Lampert’s failure to revive Sears was due to the hedge fund manager’s missteps or “bad timing” as the legendary retailer has shrunk to only five U.S. locations.

In 2005, Lampert orchestrated one of the biggest retail mergers in history by using Kmart, which he acquired in bankruptcy in 2003, to buy Sears. The merger created the third-largest retailer in the country in a bid to better compete against Walmart. At the time, Sears owned most of its over 3,400 Sears and Kmart locations, and shares were bid up in hopes of capitalizing on the real estate.

By 2007, sales started sliding and losses arrived. To raise cash, Lampert began selling off divisions, including Lands' End in 2014. Sears also invested in e-commerce, omnichannel and a "Shop Your Way" rewards program to fare better against Amazon, but critics claimed stores were neglected.

Critics have also charged that Lampert’s conflicts of interest undermined Sears’ turnaround efforts, including his fund collecting hundreds of millions of dollars in interest and fees from Sears, and taking stakes in businesses spun off from Sears.

In 2015, Lampert helped form Seritage Growth Properties, a publicly traded real estate company, with a vision of selling Sears’ valuable properties across the U.S. to more profitable retailers -- or converting the spaces into mixed-use developments, whether movie theaters, condominiums or offices.

However, the NYT noted that the success of Seritage was foiled by a string of retail bankruptcies in ensuing years that slashed the prices of retail leases and properties. Seritage also leased the Sears stores it acquired back to Sears, with the rent received expected to fund redevelopment projects. However, Sears’ continued struggles led many of those acquired stores to close.

“Seritage was in a very tough spot — you have all your income tied to dying retailers,” Vince Tibone, a managing director at Green Street, a commercial real estate research and consulting firm, told the New York Times. “They just couldn’t replace the lost income from Sears fast enough.”

Sears' Decline Often Laid at the Feet of Lampert: Is This Fair To Say?

In 2018, Sears filed for bankruptcy with about 700 stores remaining. The retailer has steadily closed locations in the ensuing years.

Many of the nearly 1,100 comments attached to the article referenced private equity’s reputation. One read, “Anyone with any smarts knew years ago that Lampert was destroying Sears for his own, personal, financial gain.”

One response called out Lampert’s infatuation with philosopher and writer Ayn Rand, claiming a relationship with this philosophy that resulted in Sears’ departments competing against each other.

However, some noted that Sears was struggling long before Lampert arrived, including failing to adjust to the price competition of Walmart and its slow adoption of online selling. One believed the "The Softer Side of Sears" push in the 1990s diluted the retailer’s hardlines strength. A few comments reached back to the impact of antitrust and competition laws in the first  half of the twentieth century, which created obstacles for A&P as well.

Many also shared their fond memories of Sears, calling out the durability of Sears’ tools and appliances as well as the famed catalog. One said, “Sears had a continental presence, incredible distribution network, a catalogue we read like a bible of shopping, etc, etc. How they did not simply put that catalogue online and lock in that dominance is still a mystery and a tragedy.”