Sears and my busy week

This week has no been to good for posting my thoughts. It isn't that I didn't have any, I have a whole series of topics to write about, I just didn't get to writing them. Travelling with a baby is unique and I am a creature of habit so altering a business trip that I make regularly proved difficult. I even forgot to remove my computer from it's bag at airport security - what an idiot.

When travelling with small children remember to take an extra bag or one larger then needed to get there - on the way home it will be full.

On to Sears. Sears is a goner. Within 10 years adults will recollect going to Sears and teenagers will be asking what is Sears?

Over the last year or two there have been extensive stories about KMart and then Sears when they merged. KMart was an investment darling when some hedge fund manager whose name I forget (Eddie Lampert or something like that I think) figured out how to game the bankruptcy process and come out of it holding a ton of the company for the bond holders and then somehow getting the stock price to skyrocket making it clear the bondholders got more then their fare share.

Other hedge funds and investors in distressed debt now worship Mr. Lampert (?). He made them a ton of money, not to mention what he did for his funds. Post bankruptcy KMart acquired/merged with Sears. Despite all this activity, the businesses of both companies are in the dumper. Things have been so bad that Mr. Lampert(?) stepped in as the CEO of the firm and is running things himself.

It is clear from articles in the media that Sears is being milked dry. Money is not being spent sprucing up the stores and holiday advertising was lame at best with other stores dominating the headlines. Everyone has said that Mr. Lampert's skill is in recognizing the value of real estate holdings in a company that otherwise don't show up on the balance sheet. This is how he initially scored with KMart when he dumped a bunch of land for a hefty price.

Sears has old property just like Kmart and some pretty sweet leases at malls. It sure looks like these will be milked and sold off and Sears will go the way of Montgomery Wards and Woolworths. The time to save Sears has passed.

I was thinking that a few years ago someone in charge at Sears should have looked at the retailing landscape and made a great leap. They almost did it when they tried out Brand Central but they were tied to their existing format and didn't want to take the risk.

Imagine a Sears store reorganized and laid out as a series of Big Box stores. You could keep your clothing and makeup in one section but break out hardware and electronics into seperate entities. I would propose physically seperating the 'stores' with distinct entrances and everything. Move away from the malls while you are at it for new locations and go into the new retail locations don't screw around like they did with Sears Homestore. Every area I have lived in has a strong regional furniture store or two, they advertise heavily and are generally in areas shoppers frequent. The only Homestore I ever saw was in an area that no one went to for shopping and was hard to access.

The other option would be to compete head to head with WalMart, slash prices and add food but I don't like that scenario. When Sears developed there were a lot of folks using tools so Sears was a great place to get all they needed. That isn't so anymore. Walmart with it's small tool section and tons of toys and everyday needs sucked in the crowd that used to go to Sears.

To keep selling what it has Sears needs to make it's products more accessible. Walk in and boom, there it is. Not walk in and wonder what escalator to take to the tools or where is automotive?

Automotive if done right could be HUGE. Dealerships open up their super garages with folks just waiting to write up the issue and hand it to the mechanics. Sears could convert to this model with a side for the basics like Oil Changes and it would be magic. Just don't bury the garage in the middle of the mall. If you do that tie it in with the valet parking and add on car wash, oil change, etc for a fee.

Oh well, I fear it is too late. If you are an investor and are considering Sears, figure out what the company is worth liquidated because that is where it is going.