By George Anderson
A Detroit Free Press article questions where Edward Lampert plans on taking Kmart and Sears.
For those not familiar, Mr. Lampert's company, ESL Investments, will be the largest shareholder of Kmart stock once the retailer emerges from Chapter 11.
According to the Free Press, "Kmart insiders say Lampert is deeply involved in turning around the retailer. He has at least two to three lengthy conference calls a week with the company's chief executive, Julian Day, and participated in a number of meetings with the executive team."
ESL Investments is also the second largest holder of Sears shares.
So, what might Mr. Lampert have planned for Kmart and Sears? The analysts, who spoke with the Free Press said:
- Mr. Lampert may see Kmart's and Sears' primary value being real estate. In essence, selling the leases would be more profitable than keeping stores operating.
- Kmart may be liquidated. Based on the price of purchase, it may be possible for Mr. Lampert to "recoup his investment and make a profit" by taking this route.
- A merger between Kmart and Sears. Each would benefit as Kmart could now sell Sears' brands such as Kenmore and Sears would begin selling Martha Stewart's line.
Sean Egan, managing director, Egan-Jones Ratings Co., sees value in the merger approach. "He can make the argument of economies of scale, hope to raise additional equity and be cashed out that way. It would be unreasonable for any decent investor not to consider that."
Moderator's Comment: Does Edward Lampert's and ESL Investments' involvement mean that the futures of Kmart and Sears are intertwined? What do you think are likely future scenarios for the two chains?
Here is how Howard Davidowitz, chairman, Davidowitz & Associates, assesses Mr. Lampert's interest in Kmart and Sears. "He's a man who made a fortune so he's not to be underestimated, but I disagree, I think these two investments are both insane." [George Anderson - Moderator]