Enough With the Spin, It's Time for the Sears Board to Act!

Implications: Sears management needs to spend less time on "spin" and more time on retailing basics. The company's latest PR efforts will do nothing to improve business and wastes company resources too.  At best, it will temporarily diffuse skeptics criticism of managements performance.  Worse it will delay the board making the kind of real change needed at Americas second largest retailer.      

Analysis: First, we all should thank Mr. Lampert et al for their contribution to our Armed Forces veterans.  Whether each of us just saying thank you or Sears paying for the renovation of 70 veteran’s homes, we all owe a debt of gratitude to the brave men and women serving on our behalf both here and overseas.  However, in the words of Bill O’Reilly, host of the TV show the O’Reilly Factor, while Chairman Lampert is may be a “Patriot”, he also may be a “Pin Head” for wasting shareholder’s money on Sear’s new public relations campaign.

O’Reilly’s TV news show claims that the “spin stops here”.  Regrettably, for investors and consumers alike, Sears Holding’s Chairman and CEO hasn’t got that message yet. Unfortunately, spin is what this campaign is all about.  The fact is nothing has changed for the better at Sears; at least nothing worth spending millions to tell the public about.  In reality, Sears’ image problem is not a failure in public relations, but Lampert’s failure to recognize that the stores are understaffed, product isn’t in stock, and assortments fail to meet the consumers’ expectations and no amount of PR spin will change that.  Sears’ difficulty isn’t communicating with the consumer.  Their stores do that everyday in terms of poor service and a non-compelling product offer.  Sears’ communication problem is convincing their Chairman that as brilliant as he may have been as a professional investor, he’s a poor retailer.  Sadly, for investors and company employee’s alike, Lampert is in denial of that fact. 

Part of the reason may be hubris on the part of Sears’ Chairman, but another reason is common view that running a large retail business is primarily a financial and administrative task.  Someone once said “retail is detail” and that’s a half truth.  It takes a lot of planning and follow up to accurately execute a complex sales plan in a multi-brand retail chain.  That’s a doable task for many executives that are trained in financial discipline and detailed oriented.  But developing a retail strategy for Sears and building a consensus with in the organization to implement it requires much more than a good administrator which is about the highest marks you can give Mr. Lampert in his current position at Sears today.  Sadly for both consumers and investors, that probably won’t change anytime soon.  

With out being pejorative, it is unlikely his new choice to head Sears’ retail operations will be anymore successful than his predecessor.  Originally hired as Sears’ Chief Efficiency Officer, Kevin Holt is as unlikely a candidate for such a daunting turn around job as Lewis was; perhaps more so.  An outsider to Chairman’s inner circle, his influence on Lampert thinking is problematic at best.  Also his appointment comes at a time when Sears continues to search for a seasoned retail chief executive to take over from Lampert.  Whether Holt’s skill sets will appeal to the new Holding’s CEO is anybodies guess.

According to a variety of sources, the company hasn’t found a candidate that is willing to take the CEO job because Lampert refuses to give up operating control of the business; despite his failure to produce a sustainable turn around since the merger in 2005.  That’s partly understandable since a substantial part of the Chairman’s personal wealth is at risk.  But Lampert isn’t the only investor with a lot of money at risk and he isn’t the only stake holder at risk either. 

Sears employees more than 350,000 people in its operations and buys product and services from support business that employees hundreds of thousands more.  That makes Sears more than just a public business, but a strategic one for the United States too.  Like our large airline companies, steel, computer, automotive, and energy businesses, the success of the countries largest retail businesses are a critical component of our national economy. 

For the security of investors, employees, and citizens, it’s time for the spin to stop and recognize the merger of Sears and Kmart was one of the biggest retailing fiascos in modern history.  While it can’t be undone, it certainly can be better managed and the economic risk to all its stakeholders minimized.  Ultimately, that’s the responsibility of the company’s Board of Directors and its time for them to act.