So how does Eddie Lampert, chairman of Sears Holdings (NASDAQ: SHLD), with his stellar track record as a hedge fund manager, the man behind the 2005 merger of Sears Roebuck and Kmart merger -- how does he end up as a Money Loser of 2007?
Things looked bright at the beginning of the year as Lampert was hailed as the next Warren Buffett, and Sears Holdings was seen as developing in the mold of Berkshire Hathaway (NYSE: BRK.A). Lampert was a long-time favorite of Jim Cramer, who early in the year felt that Sears was a better investment than Wal-Mart (NYSE: WMT).
Investors and watchers waiting for the Lampert magic to happen were puzzled by his interest in Citigroup (NYSE:C), though that interest did benefit Citigroup at the time. But as Sears' first quarter results showed sales further slumping, investors grew impatient.
Even as Lampert called for $5 billion in cash in early summer, a visit to Sears stores showed an enterprise badly in need of a face-lift. Sears was lagging further behind other retailers, and the share price was sliding from a 52-week high in April. It grew increasingly clear that Lampert was neglecting the retail side of the business. Sears warned not to expect much in the second quarter.
Sears began buying back shares late in the summer, seeming to confirm that Sears, and Lampert, were struggling. Dismal second quarter results only added to that impression. In a head-to-head face-off between Eddie Lampert and Warren Buffett here on BloggingStocks, readers overwhelming voted for Buffett as the more money savvy. So much for the pupil besting the master.
As autumn rolled along, Lampert faced increasing pressure to sell real estate, which had been seen as the strength of the Sears-Kmart merger. Shares continued to fall, attracting the attention of some bargain hunters, and reached a new 52-week low. Meanwhile, Citigroup took a big hit due to the mortgage meltdown, and so did Lampert's stake in it. On top of that, Sears third quarter results showed a 99 percent drop in profits year over year.
Criticism has continued to build, and rumors of a breakup of Sears Holding have swirled. Jim Cramer now sees Sears as being on par with Wal-Mart as an investment to avoid. Lampert lashed out at critics, which did nothing to help his case, of course.
The question is, is Lampert's neglect of the retail side of the business to focus on Sears as an investment vehicle a failure on his part? Not everyone thinks so. Even now, Lampert has his supporters.
Be sure to check out other Money Losers of 2007.











Reader Comments (Page 1 of 1)
12-21-2007 @ 11:52AM
Gerry Reeves said...
All you have to do to see why Sears is losing money is look at its management and its marketing. The company appears to be in a state of chaos. Long-time, experienced employees are being sacrificed and replaced with low-cost workers who perform as you would expect of part-time or low-cost workers. Idiot employee policies are driving off the few stalwarts who remain. A company that either doesn't care about or drives away its biggest asset is not long for this world. I expect Sears to go the way of Montgomery Ward in the near future.
1-14-2008 @ 3:40AM
sandra said...
I want to say that wal-mart seems to have a problem with standing by thrie products.. I was given a electric blanket and it was labled to be machine washable I was it and it came apart and when I returned it back to the store I was treated very unprofreshonaly and could not exchange the blanket so here I sit looking and feel like I was nothing to this store and still had a torn apart blanket.. So in my apinion I would rather pay a few extra dollars to know I was sold good product and that it would be back by the store.. I did not ask for money back only to exchange the blanket but boy did I get treatrd like I was nothing to that store and looked stupid in front of all the other coustomers.. The sign in the store says it is there to satisfiey their coustomers by refund/exchange/or money back but I did not get any of them so I think they need to take the sign down if they are not going to stand by it... So I will go the extra mile and pay a few extra bucks to get good quilty...
12-21-2007 @ 1:24PM
LAWMANTOO said...
Eddie's got a tip for yah. "Don't buy anything".
12-21-2007 @ 1:30PM
Elita A. Knight said...
Sears and Kmart has no business merging, since they are two different companies!!.
12-23-2007 @ 2:40PM
tc said...
kmart and sears merged TWO YEARS AGO!!
DO YOU KNOW WHAT YOU ARE TALKING ABOUT?
12-21-2007 @ 3:27PM
Thomas Banks said...
I can't remember anytime in recent history when a combination of two (2) losers resulted in a winning retailer. A 2 loser combo invariably multiplies the problems instead of gleaning the best of two worlds.
Any comparason of Buffett and Lampert is analogous to a comparason between Einstein and Marlyn Monroe.
12-21-2007 @ 10:43PM
Jim said...
A week ago our old dishwasher finally died, so we went to Sears and bought a new one. At the time Sears internet site was advertizing next day delivery and installation and -- guess what -- the diswasher was delivered and installed the next day. We've NEVER had service that good.
That's the good news. The bad news is that the salesman who sold us the dishwasher didn't seem aware of Sears advertisment, he scheduled delivery 4 days in the future. We've run into this before, locals not knowing what the store was advertizing regionally or nationally. It seems Lampert (or somebody at Sears) is getting his act together, but he ain't there yet. Guess it takes time.
I think we'll hold on to our Sears investment a little longer. Obviously the man thinks the outfit is worth more as a functioning business, as opposed to being sold off piecemeal. If he's right, we'll clean up. If he's wrong, the assets are still there and their value hasn't shrunk. The payoff may be tardy, but we should still come out okay.
12-21-2007 @ 9:23PM
NMcowboy said...
Our local and only Sears Store recently closed down the automotive department. And that
ended one of this stores busiest departments.
But then the last time I went to Sears for
a set of new tires I had to wait for over
30 minutes before anyone waited on me
and then only to find out they did not have
my size of tires of which were a common
size. Then if that is not enough when I
went back again for some lawn equipment
replacement items they gave me the wrong
item for my weed eater after I even brought
the old one in to show them. It appears that
they only hire part time students now as
they seem to not understand or know
anything about the merchandise they
have on display. I think Sears Management
is trying to run their Sears Stores out of Biz
as they seem to not even have the funds
to repair the pot holes in their parking lots.
And instead of replacing some broken
windows they have covered them up with
4 X 8 sheets of particle board.
Oh well perhaps someday they will become
a discount or some type of dollar store.
I now just order my stuff via their internet
sales site when I need replacement parts
for my Craftsman tools and Lawn Items.
12-22-2007 @ 5:56PM
RETIREE OF SEARS said...
This is all true
I had 35 years and could not wait untill I turned 55 to leave.
Eddie is the problem, not the managers
He makes them hire these partimers
I was like a home to me and had great friends and the best customers in the world
the 1970's
12-22-2007 @ 11:09PM
JackSprat said...
Why does anyone think a general merchandise store in a department store concept is a smart investment? It just proves that ivy league means nothing, I guess. The department store as a general merchandiser died a long time ago. Only specialty department stores that stress something not offered by their big box retailer competitors survive. Sears will go the way of the dodo bird.
12-24-2007 @ 2:54PM
David said...
SHLD just completed the back half of it's bottom "W" formation. Should start trending higher in 2008. This is a holding company, not just a retail giant that has a ton of free cash flow.
12-25-2007 @ 4:20PM
Fran Pipkin said...
Sadly hiring part time clueless help is a nationwide trend in retailing. The companies no longer care about the customer service aspect of the business only the money end. You are in their store they got you. They've got your money even though you got bad customer service and not exactly what you went in the store for. They count on that. If everyone got together and boycotted the stores with the worst customer service.... well maybe they would wake up when their money wasn't comming in anymore.
12-26-2007 @ 6:20PM
matt said...
Sears was a great company and still is.all business these days are hurting its not 1970 anymore.compared to other service companys sears is still the best.There warrantys are the best in the business.see back in the 70s all our jobs werent going to india and property taxes werent 10grand a year people had money to spend and healthcare,pensions.soon we all be flipping burgers
12-28-2007 @ 12:45PM
Bill York said...
I worked for Sears many years ago when every employee was professional and devoted to Sears. The company has changed, with part-time people now discussing the previous night's conquests with friends on their cell-phones. I now work part-time at Ace Hardware where failure to make smiling eye and friendly voice contact with customers entering the store is a firable offense. To see the results of great customer appreciation you might see Ace's % increase in sales and profits. Old time customer service is still effective. In Sears 1887 employee training manual retail truth is revealed 'Nothing happens until someone sells something'.
1-07-2008 @ 11:51AM
syd s. said...
the writing was on the wall when k mart (a bankrupt co.) found the money to buy out sears. ever since then the name of sears has gone down hill. i worked for sears for 13 years. i retired against my better judgement. i track the stock and it is a shame to see it under 100.00. mr. lampert should wake up.
1-14-2008 @ 3:36AM
sandra said...
You sure got that right and it includes so called we care to satisfie our customers WAL_MART also..