Is This Any Way To Run A Retailer?

Implications: Although this article deals with the management of SHLD, I have placed it under the REIT category because it is the single most important issue that will be influencing the success of Mall REITs for many years to come. Mr. Lampert is rebuilding his management team from the bottom up rather than from the top down and still expects to attract a top notch retail executive to "save" the company. The continued decline of Sears and the proposed closing of 200 to 300 "underperforming" Sears stores will have a profound effect on all Mall REITs. When it happens, (and notice that I did not say "if") the short term decline in FFO will be substantial but nowhere near the long term impact that will be felt for the next 5 years it will take to rebuild the anchor attractions of the vacant Sears stores. Talk about fiddling while Rome burns!

Analysis: Turning any company around is a rare and herculean feat. You can count on one hand the number of companies that have been successfully turned around after suffering the kind of loss of market share SHLD has suffered under Eddie Lampert's direction.

In fact in over 40 years of close observation of the retail industry, I cannot think of a single instance where any retailer of any size has been successfully resuscitated after being as close to death as SHLD is now.
 
A close examination of the successful turnaround stories will all reveal the handiwork of a great merchant-businessman. Not one has been the work of a leader with the financial acumen of an Eddie Lampert with a staff of cast off executives from non-retail companies.

SHLD's new CFO comes from GE by way of NBC. This is being heralded as an indication that Mr. Lampert is making all the right moves. I submit that this announcement is just one more indication that Sears will continue its' decline and will soon be announcing the closing of many of its money-losing stores. When the deluge starts it will have a major impact on all mall REITs!