Sears Holdings (Nasdaq: SHLD ) just announced that CEO Louis D'Ambrosio is leaving the company after two years on the job due to family health reasons and that Chairman Eddie Lampert will take over. Then again, it's not like he can do any worse than the list of people who have previously held the position.
But being Sears' CEO was kind of like being the Queen of England, anyway: You're a figurehead, with Lampert acting the part of Rasputin behind the throne. His fingerprints are all over the crime scene that is the retailer's operations.
A crime of passion
Ever since Lampert threw together the two failing businesses of Sears and Kmart in 2005, it's been a case of how long he could remain on the lam while Wal-Mart (NYSE: WMT ) and Target (NYSE: TGT ) took over the territory.
It's been a long time since the Warren Buffett wannabe displayed any of his "Lampert magic." He neglected to invest in his stores and then when he did, it was a case of too little, too late. His use of total return swaps seemingly failed more times than it has worked in the retailer's favor, and the idea that Sears may have been some kind of asset play with valuable real estate in prime locations has faltered as the commercial market remains sluggish after a precipitous decline. It's been slowly closing down and selling off stores, but it's been no windfall.
Then he spun off Orchard Supply Hardware Stores (Nasdaq: OSH ) , Sears Hometown & Outlet Stores (Nasdaq: SHOS ) , and even Sears Canada in an effort to give long-suffering investors some sort of return on their money. But all too often it seemed Lampert resorted to using share buybacks to prop up earnings, squandering hard-earned capital on buying up overpriced shares instead of investing in the stores.
While he's taken a breather from the buyback spree this year, customers are still fleeing his stores in droves, never to return. Revenues fell 5.8% to $8.86 billion from a year ago with same-store sales dropping 3.1% at its namesake stores and tumbling 4.8% at Kmart. Even Sears Canada, which at one time seemed to be all that was holding Sears up, saw comps fall 5.7% in the quarter.
Just apply yourself
Not all is a cold serving of gruel. Sears does possess a powerful stable of brands in Craftsman, Kenmore, DieHard, and Land's End. Indeed, appliances have always been one of Sears' saving graces.
When consumers do want to shop for a washing machine or refrigerator, by and large they turned to Sears. Despite increased competition from the likes of Home Depot (NYSE: HD ) , Lowe's (NYSE: LOW ) , and Best Buy (NYSE: BBY ) , which have increased the number of white goods made by Whirlpool (NYSE: WHR ) , Electrolux, and Viking, it remains the largest appliance retailer in the country and still owns around 31% of the market . Even last quarter when everything else was going to hell in a hand basket (as it seemingly does every quarter), the appliance division reported higher comparable sales.
In the end, D'Ambrosio's selection as chief executive never made much sense to begin with. After three years of searching, they came up with someone who last headed up a telecom equipment company (Avaya). Apparently, Lampert thought consumers might mistake their local Sears for an Apple (Nasdaq: AAPL ) store or one of its appliances for Microsoft's (Nasdaq: MSFT ) operating system. His letter to shareholders at the time sought to draw parallels between the two tech giants and the old-line retailer. While that bit of self-delusional chatter caused belly laughs, it did give clues as to why he selected D'Ambrosio.
Lampert will now have direct control over Sears operations, and responsibility for the rise or (more likely) fall of the retailer will rest solely in his hands. While he's been the great puppet master up until this point, pulling the strings that made his minions jiggle he'll have no one but himself to blame if the once-venerable company crashes and burns.
Crime and punishment
Since Lampert has long been the man behind the curtain, I don't foresee any change in direction by this move to assume the helm and aggregate the alphabet soup of titles next to his name. There's no catalyst for change at Sears, and even with the stock trading at such a discount, there's plenty more room below for it to fall.
I might not short the stock, since markets can remain irrational for a long time, but I won't be buying its shares either, as only two outcomes seem assured: bankruptcy or getting bought out at a much lower level. I tend to think the former is the most probable scenario, but I haven't had much hope for Sears for many years, and believe it will be brought to justice before too long.
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