CEO’s Plan to Save Sears Would Hand His Hedge Fund $1B

Some highlights:

> "To boost “visibility and accountability,” Lampert explained in a letter to investors, he divided the company into more than 30 business units, including product-based divisions (apparel, tools, appliances), support functions (human resources, IT), brands (Kenmore appliances, Craftsman tools, DieHard batteries), and units focused on e-commerce and real estate. Under the new scheme, each business unit had its own president, chief marketing officer, board of directors, and, most important, its own profit-and-loss statement.

Large technology companies and industrial conglomerates such as General Electric also take a decentralized approach. But retailers tend to favor an integrated model. That way, different divisions can be compelled to make sacrifices, such as discounting goods, to attract shoppers to stores."

> "Former Sears executives say their biggest objection to Lampert’s model is that it discourages cooperation. “Organizations need a holistic strategy,” says Erik Rosenstrauch, former head of Sears’s DieHard unit, who is now CEO of Fuel Partnerships, a retail marketing agency. As the business unit leaders pursued individual profits, rivalries broke out. Former executives say they began to bring laptops with screen protectors to meetings so their colleagues couldn’t see what they were doing.

Appliance maker Kenmore is a widely recognized brand sold exclusively at Sears. Under SOAR, the appliances unit had to pay fees to the Kenmore unit. Because the appliances unit could make more money selling devices manufactured by outside brands, such as LG Electronics, it began giving Kenmore’s rivals more prominent placement in stores. A similar problem arose when Craftsman, Sears’s beloved tool brand, considered selling a tool with a battery made by DieHard, also owned by Sears. Craftsman didn’t want to pay extra royalties to DieHard, so the idea was quashed."

> "The bloodiest battles took place in the marketing meetings, where different units sent their CMOs to fight for space in the weekly circular. These sessions would often degenerate into screaming matches. Marketing chiefs would argue to the point of exhaustion. The result, former executives say, was a “Frankenstein” circular with incoherent product combinations (think screwdrivers being advertised next to lingerie)."

> "Eventually Lampert’s advisory committee instituted a bidding system, forcing the units to pay for space in the circular. This eliminated some of the infighting but created a new problem: The wealthier business units, such as appliances, could purchase more space. Two former business unit heads recall how, for the 2011 Mother’s Day circular, the sporting-goods unit purchased space on the cover for a product called a Doodle Bug minibike, popular with young boys."

> "In the weeks leading up to Black Friday in 2011, Sears discovered that some of its rivals planned to open on Thanksgiving at midnight. Sears executives knew they should open early, too, but couldn’t get all the business unit heads on board, according to former executives. (A Sears spokesman says the decision “was not contingent on the business unit structure.”) Instead, the stores opened early the following morning. One former vice president drove to the mall that night and watched families pack into rival stores. By the time Sears opened, he says, cars were leaving the parking lot."

I have personally not worked for a major retailer, but I have worked for a vendor to several major retail chains in North America.

It is certainly not the industry norm to have this kind of management and internal competition serve as a substitute for merchandising know-how. I think these quotes from the article speak for themselves.

At the same time, if you look at Sears's peers, most of them are still alive and kicking, if not thriving. E.g. Target, Wal-Mart, Macy's, Kohl's, JC Penney, Best Buy etc.

Is that really a resurgence or just an attempt to profit by burning up the brand's remaining goodwill?

I can't imagine Craftsman tools maintaining their reputation after they've been been positioned as the cheaper alternative to store-brand tools for a while. They must be cutting massive corners to achieve that price-point.

Am I mistaken in this?

Note: this is what Warren Buffett did several times, with massive leverage, to make his riches before he became the baby boomer conservative investment guru.

Sears just happens to be a household name that is getting a lot of discerning eyes on it.

this statement is kind of misleading because "value" means NAV, not actual losses. it could very well be that the fund neither made or lost money, but 80% of the investors pulled out.

Sounds spooky to me! I bet they do good business around Halloween

The current “Sears Holdings” is, in fact, actually the result of Kmart buying the old Sears.

> Unlike many other retail stores, it doesn't even feel like Kmart is trying to adapt.

Ruthless cost cutting is an attempt to adapt. It's just a bad one, as actually executed by Sears/Kmart.

I can name at least 5 department stores that I'd check before even thinking about Sears when it comes to clothing. It is simply not their specialty, and it's weird to expect the selection to be good there.

I will, however, echo your sentiment that the store looks very bare and very few customers. It looks closer to a warehouse than a retail location.

No other major retailer creates completely siloed divisions, each with its own C-suite of executives. No other major retailer throws common-sense merchandising tenets to the wind in service of some idea of a "free market" of ideas.

That will inevitable result in a race to convert corporate commons (brand goodwill) into short term gains. That kind of game will be won by making your peers lose faster.

2. Invest in nostalgia brands like Craftsman, that can't be purchased on amazon, and come with a built in consumer base.

3. Use previously considerable resources to position yourself as the best place to shop for X product, and make sure that several brands of X product are only available through you.

4. Still probably fail, but at least it looks like you tried.

"Right, I'm smart enough to realize that Amazon will crush us, and I can't outsmart Bezos, so why not enrich myself, say fuck the world, and go retire with a cool billion?"

Walmart being the exception having bought jet.com (?). After all Amazon is making the majority of its profits from AWS.

See Pension Protection Act of 2006:

https://www.treasury.gov/resource-center/economic-policy/cor...

I dunno, it was also really weird to have tech people show up to a large tech company’s office in full suits during the summer. Felt really out of touch honestly.