Mr. Lampert Got The Wrong Size

Implications: This is an important article because it puts the entire SHLD story into an accurate historical perspective and makes some insightful observations of the problems still facing any possible turn around.  Although I disagree with the authors on several key points, for the most part this is one of the more informative and realistic assessments of SHLD that I have seen.

Analysis: The entire article is definitely worth reading but I would like to point out the two key points that I am firmly convinced they got totally wrong. 

The first point is their characterization of why the monetizing of the SHLD real estate portfolio will be difficult, if not impossible, to achieve. 

The second is the author's (who are both long time followers of the company and frequent commentators, (usually getting certain things wrong on a regular basis)) overly simplistic  formula for "fixing"  the problems. 

In respect to the SHLD real estate portfolio, readers of my previous articles will be familiar with my oft repeated observation that the lack of value has nothing to do with the current slowdown in the real estate markets. The real problem is that there was simply very little value in the entire portfolio to begin with! The last 6 months market activities had no affect on the value.
 
The real reason for the lack of real estate value, in a nutshell, is that the imputed leasehold value of the leased stores never took into consideration the very high cost of renovation and/or reconstruction. The lack of value of the owned stores is due entirely to the use restrictions contained in the mall operating and/or reciprocal easement agreements  which prohibit using the Sears stores for anything other than a department store.

In respect to the authors suggestions as how best to "fix" the merchandizing and operational problems, while I agree that it sounds plausible to simply "consider bringing in a new CEO", that is easier said than done. For one thing there is likely to be only one or two people in the entire industry qualified for the task and they are both gainfully employed in situations where they have complete control.

The likelihood that Mr. Lampert would admit defeat and acknowledge that he does not have all the answers, by turning over control to a new CEO, is almost as remote a possibility as finding a top quality CEO that would be willing to go to work for this man whose reputation is that he believes he knows more about retailing than anyone else in the retail world.

If Mr. Bodamer & Mr. Davis were sportswriters suggesting a solution to the Chicago Bears problems I am sure they would simply say the Bears should go out and hire a quarterback with the talents of a Tom Brady or Payton Manning.