“Ever since hedge fund honcho Eddie Lampert bought Sears and merged it into his already-owned Kmart back in 2005, the combined Sears-Kmart chain has been a business in decline. Same-store sales numbers have dropped consistently since the retailers linked arms.
“Explanations for the decline vary. Professional analysts will tell you Sears' problem is that it doesn't invest enough in store upkeep. If your average chain store spends $6 to $8 a year per square foot of retail space, then Sears' lackluster maintenance budget of $1.90 guarantees that its stores will be dingy, dark, and generally lacking in Christmas cheer.
“Other industry watchers blame CEO Lampert, who famously dismisses investor obsession over "same-store sales," and tells folks to focus instead on how he grows the firm's earnings before interest, taxes, depreciation, and amortization. (Note to Eddie: We have been watching... as your EBITDA dropped from $3.6 billion in 2007 to a projected $400 million this year.)
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When I came home from college for the Christmas Holidays – let’s see, that was about 1960 – my daddy came home for lunch one day and went straight to the telephone.
I heard him tell his broker, Don Frye, “Don, sell all of my Sears stock.”
My daddy had accumulated Sears-Roebuck & Co. stock on a regular basis for at least fifteen years. And now he wanted to sell it all.
I asked him, “Daddy, what caused that call to Mr. Frye?”
Daddy told me that Sears stores had been successful because their store managers ran his store as if he were a local merchant. His wages were based on the store’s net profits, and because of that, Sears let him merchandise the store.
So several times a year, Sears managers would go to the Sears “market,” look at and pick and order the merchandise that their store would carry in the coming season.
"After all," Daddy said, "Who knows better what the locals will buy than the guy who runs the local store? What does a fellow working at the Sears home office in Chicago know about a beach town off of the coast of Texas?"
He continued, “I saw Ernie Norton today (Mr. Norton was the Galveston Sears store manager), and he told me that he had decided it was time to retire. Sears is going to send his store what they think he ought to sell, and from now on, they’re going to pay him a straight salary with a small achievement bonus.
“They are tinkering with the very formula that has made them successful,” Daddy went on.
“I assure you that from now on, they will see their place in corporate America continually diminish.”
For nearly 50 years, what Daddy said would happen, has. And Eddie Lampert apparently hasn’t cared enough to research his company’s history. His problem is obvious to everyone but to him.
BILL CHERRY, REAL ESTATE BROKER
Dallas – Park Cities