Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) is renowned as an all-around awesome company, envied by its rivals. It seems the comparisons of its leader to other investment luminaries are endless, but a common opinion is that Sears Holdings' (NASDAQ:SHLD) Eddie Lampert is, or could be, the next Warren Buffett.
I’m not so sure about that. Lampert is similar to Buffett in investing style, but the way things have been going, Sears Holdings kind of seems like Berkshire Hathaway's dorky twin. (I'll bet you've known twins like that, too. There's some resemblance, but one is an achiever and the other just … isn't.)
Collecting stuff that doesn't work
My colleague Kristin Graham and I found ourselves talking retail last week, as we often do. We discussed the fate of women's retailers like Chico's and Coldwater Creek (NASDAQ:CWTR). We questioned when -- if ever -- Chico's might be able to stage a solid turnaround. After all, although Chico's did better than expected with its latest quarterly results, you'd still be hard-pressed to argue it was a strong quarter, much less any sign of a real turnaround.
We realized that the answer to the question, "When will it turn around?" could turn out to be "never." We wondered would happen next if things continued to worsen for the retailer.
That was when we came up with the (gallows humor) solution: Sears Holdings could buy it! It could buy a whole collection of such beleaguered retailers, collecting more and more companies, just as Berkshire has. The Berkshire Hathaway of Fading Retailers!
Of course, it kind of is already: Both Sears and Kmart had seen better days before they united. They had to merge because other discounters with far more competitive advantages, namely Wal-Mart, Target, and Costco (NASDAQ:COST), had swooped in and eaten their lunch. And of course, there's Sears' Restoration Hardware (NASDAQ:RSTO) bid, too, which certainly attracted some skepticism. (If you can't turn two retailers around, can you turn three around? I'm betting "not.")
Hey, why not -- the Berkshire Hathaway of Fading Retailers could also pick up Blockbuster (NYSE:BBI), and maybe its potential sweetheart Circuit City. Pick your favorites. Surely throwing a bunch of floundering retailers into one pot is a sure recipe for success! (Kidding.)
Sears Holdings' affinity for ailing retailers has never struck me as a logical strategy. Retailers experiencing temporary hard times is one thing, but then there are the ones that face way too many headwinds of formidable competition or changing consumer taste. I wouldn't underestimate the possibilities (and negative ramifications) of tarnished brands.
Regardless of cash and real estate assets, if the core business can't drum up decent growth, I don't see the allure. It reminds me of "South Park"'s underpants gnomes' business model: "Phase 1: Get underperforming retailers. Phase 2: ? Phase 3: Profit!"
Bad chemistry
Sears' abysmal quarter last week (not to mention its sad one-year stock chart) underlines the idea that it has been a weird and so far unsuccessful experiment. (Maybe somebody shouldn't have been playing with the chemistry set in the basement!)
Perhaps over the next few years, Lampert and his friends at Sears Holdings will show us all that they knew better all along, and that the entity known as Sears Holdings was a brilliant move. I may be bearish on Sears Holdings, but I know that many value investors feel differently, including the folks at Motley Fool Inside Value, who recommended Sears Holdings to subscribers in December 2007.
So far, and I'm not alone in finding no Berkshire in the remodeled Sears, I'd say any resemblance Sears has to the Berkshire magic remains invisible.
