It's not me, it's you. That about sums up the views of Sears Holdings (NASDAQ:SHLDQ) Chairman and CEO Eddie Lampert on the retailer's woes. Everyone else is the cause of the retailer's problems; it's not anything he's done.
In statements made at Sears' recent annual shareholders meeting and a rare interview given just beforehand, the hedge fund operator has railed against all the forces arrayed against him, conspiring to take the retailer down. These three quotes from those two events show just why Sears Holdings is doomed.
"We don't need more customers. We have all the customers we could possibly want."
Apparently referring to the significant investments that have been made in Sears Shop Your Way member loyalty program, one of the more transformational moves he's made over the years, Lampert told shareholders at the annual meeting that getting customers into the retailers stores is not the problem.
Lampert has used Shop Your Way to complete his integrated retail strategy, and he continues to expand the program's partnerships, such as including ride-sharing service Uber and a Shop Your Way-branded credit card with MasterCard.
Yet a lack of customers is what's caused Lampert to shed stores over the years, both by selling them to the real estate investment trust, Seritage Growth Properties (NYSE:SRG), he spun off from Sears, and by renting out space in existing stores to other retailers. Certainly rightsizing Sears' footprint to match demand is called for, but what he doesn't need more of is stores; more customers, he could use.
"I feel like we're ahead of J.C. Penney, we're ahead of Macy's, we're ahead of Target, in some aspects of where the world is going."
When Lampert sat down with The Chicago Tribune ahead of Sears' annual meeting, the paper observed there's little evidence that his promised turnaround of Sears is working, but he asserted that the retailer is actually doing better than the competition.
Maybe he was talking about the move to digital, since Shop Your Way is seen as one of the few successes he's enjoyed, meager though it is. Almost three-quarters of eligible sales now come through the loyalty program, but it's basically scooping up a greater share of sales in a smaller pond. Over the last six years, companywide sales have fallen by nearly $10 billion annually, and while much of that was the result of closing or selling off stores, it's also reflects the fact that those that remain aren't attracting customers. Comparable-store sales continue to plunge at double-digit percentage rates, meaning Shop Your Way has had little success in keeping consumers loyal.
While J.C. Penney, Macy's, and Target are indeed going through some turmoil of their own, and J.C. Penney has arguably quickly become the worst off of the bunch, even its condition doesn't seem as dire. Nor are any of them burning though as much cash as Sears.
"While we are not asking to be spared from informed opinions about our business performance, for far too long, many commentators have rushed to conclusions about the future of our company."
From relying upon financial gymnastics to boost numbers early on to refusing to invest in sprucing up his stores because he didn't think customers cared about that stuff, Lampert has made any number of decisions that have directly impacted Sears' current condition. And though the retailer has survived longer than many pundits expected, decrying media coverage as biased -- as he did in a blog post issued in conjunction with the annual meeting -- ignores the very real issues his company faces.
Lampert compared Sears' large and growing losses to those experienced by Amazon.com, but it's clear the two retailers are traveling in entirely opposite directions. It's true that headlines focusing on a potential bankruptcy do worry customers and vendors, but there's a good reason the word figures so prominently in reports, particularly when Lampert needs to inject a "going concern" notice into his SEC filings.
Cost cutting, real estate sales, and the spinoffs and sales of assets like Land's End and the Craftsman tool brand, will likely help Sears survive a bit longer, but adjusted losses are still widening. What happens when it runs out of real estate and has no more brands of value left to sell?
Separated from reality?
Sears has been on a long downward spiral, and the numbers no longer add up. Even the profit it recorded last quarter -- its first profitable period in nearly two years -- was only possible thanks to one-time events. Lambert's attempt to jawbone the company to health doesn't change that.
Lampert insists he's not in denial about the retailer's precarious situation, yet he points at finger at everyone but himself. Not everything he's done over the years was bad (I think his new DieHard auto service centers are a stroke of marketing genius, in fact), the good has been much too little and it comes much too late.
Sears' isn't alone in the difficulties it faces going up against Amazon and its ilk; the threat e-commerce represents to bricks-and-mortar retailers is broad and real. But the chief executives at J.C. Penney, Macy's, and Target aren't exhibiting the same delusions about the cause of their woes. Lambert's unwillingness to accept any responsibility for where Sears Holdings finds itself today suggests there's little hope the retailer can be saved tomorrow.