Despite using the full panoply of financial tricks available to the hedge fund operator, Sears Holdings chairman and CEO Eddie Lampert has accomplished little except bring the retailer closer to the brink.

Investors can thank chairman and CEO Eddie Lampert for the ruination of Sears Holdings (OTC:SHLDQ). Despite recent stock gains, the once iconic retailer has little chance of becoming more than an asterisk on the future of the retail landscape.

A decade after merging the ailing Kmart and Sears, Roebuck chains into a retail holding company, billionaire hedge fund operator Lampert has presided over the transformation of two once-great industry names into shells of their former self, stripping virtually everything of value from the company.

Even the recent move to form a real estate investment trust, which finally -- finally! -- seeks to monetize the portfolio of properties Sears owns, it's being done in such a way that investors will likely see little benefit.

Breaking open the piggy bank with a sledgehammer
From early on it was clear Lampert's goal was not to resurrect their respective retail empires, but to use them to bolster his hedge fund, ESL Investments, which to Lampert's credit was and to this day remains Sears Holdings largest shareholder.

Back when Sears Holdings was still generating profits, Lampert was using the company's available cash to buy back its high-priced stock to juice per-share earnings. Between 2005 and 2010 (the last year the retailer reported a profit), Sears recorded net income of almost $3.8 billion, but spent over $5.8 billion on share repurchases, sometimes at prices as high as $170 a share. It was a careless decision at a time when many other businesses were curtailing their buyback programs to adjust to the recession and constrained consumer spending. 

That was money that could have been better spent shoring up the financial position of the damaged retailers, remaking the stores into destinations shoppers actually wanted to visit. Instead Lampert eschewed deploying any maintenance investments in the stores, viewing the troubled companies as distressed retailers from which the last ounce of value could be squeezed. 

After Sears stock cratered, theoretically at least becoming a better buy at a fraction of the price, Lampert stopped purchasing shares because it could no longer benefit him. Sears Holdings lost around two-thirds of its value since 2011, but Lampert only bought back $183 million worth of stock, and over the past three years when shares were cheapest, he's made no buybacks at all.

Squandered opportunity
In reality that was a wise move since Sears no longer had any money to spare. Cash on the balance sheet went from $4.4 billion in 2005 to just $250 million at the end of last year.

Data: Sears Holdings annual SEC filings.

Lampert could have invested in the businesses earlier, but as he revealed in his annual letter to shareholders last year, he purposely dismissed spending "hundreds of millions of dollars more in decor and fixtures" because he said customers weren't interested in that, believing instead they wanted digital enhancements and omnichannel shopping opportunities.

Perhaps true, except it wasn't at Sears stores they were looking for them. Sales at Sears and Kmart have evaporated over the course of Lampert's tenure, with revenues falling from $49.1 billion in 2005 to $31.2 billion last year, while comparable sales, or those that strip out the impact of revenues generated from store expansion and discontinued operations, continue to dissolve.

Data: Sears Holdings quarterly SEC filings.

And discontinued operations it has. Over the years Lampert has stripped bare from Sears Holdings many of its best features including Orchard Supply, Sears Hometown & Outlet Stores, and Land's End, while also shedding its investment in Sears Canada and possibly even Sears Automotive.

A fast-fading reputation
Brand names still remaining in its portfolio, like Craftsman tools, DieHard batteries, and Kenmore appliances, don't have the same cachet they once did. As recently as 2002, for example, Kenmore owned a 40% share of the appliance market, but now that's shrunk to less than 30%, and the loss is at least partially attributable to Lampert.

Sears had a special relationship with Whirlpool (NYSE:WHR) that dated back in one form or another to 1916 where its rival actually made many Kenmore appliances for Sears. The agreement required Whirlpool to introduce features on the Kenmore brand first before it offered them on its own products, but Lampert dissolved the agreement in a cost-cutting move, and partnered instead with LG Electronics and Samsung.

As features consumers looked for disappeared from Kenmore appliances, so did sales. Now Kenmore lags both Whirlpool and General Electric appliances.

They're not making any more land
Yet it's Sears' real estate holdings that have long held the interest of investors who've wanted Lampert to wield the vast portfolio as weapon to enhance shareholder value. And though he's finally agreed to do that, creating a REIT that will ultimately house the vast majority of the retailer's real estate holdings, it may be a case of too little, too late.

Sears Holdings will now be on the hook for lease payments even as revenues erode further putting additional pressure on its finances. And the financing deals Lampert wrangled in the past may no longer be available because many of them were predicated on the value of the real estate.

The value of an investment in Sears Holdings has always been about the real estate, but did Eddie Lampert wait too long to monetize it? Photo: Nicholas Eckhart.

There's also no payout to investors like a special dividend, as is often the case when assets are monetized. Lampert says some of the money raised from the effort will go toward paying down Sears' sizable debt as well as toward its pension obligations. The stores themselves are expected to be cut in half, with the REIT generating any returns from leasing out space. If it can, that is. Part of the reason Sears hasn't been able to sell them itself has been their location in rundown urban areas, and mall traffic itself has generally been on the decline, making the stores less valuable. So how much can the REIT really reap?

And because the REIT will still be just a portfolio of money-losing stores that have become dilapidated through not-so-benign neglect, don't think a stake in the REIT will be a worthwhile trade-off.

A wide swath of destruction
Like a neutron bomb that leaves just buildings standing in the wake of its blast, Eddie Lampert has blown through Sears Holdings and left an empty hull of a business. There's been little evidence of a comprehensive plan to fix the broken retail operations, and not even his integrated retail program Shop Your Way can stem the tide of losses.

Rather, Sears Holdings has run the gamut of financial gimmicks and engineering tricks that inject cash into the business short-term, yet lack any lasting impact on the retail operations. The REIT plan is no different and nothing's been offered to save the iconic department store operator, which appears was Eddie Lampert's intent all along

As Sears Holdings coalesces into a smaller, weaker retail outfit, investors know where they can pin the blame.