Sunday, December 02, 2007

Sears Holdings

On the Fortune magazine website there is a piece on Eddie Lampert and the decline of Sears.

I'm not surprised. The only reason I haven't shorted the stock is that Lampert was too widely popular with his hedge fund friends who were convinced that he would work miracles there. So, too much risk in the short. However, the stock has worked its way down as performance has dwindled.

The question from my viewpoint is simple: why would anyone shop at Sears or Kmart?

The old reasons are gone unless Sears makes a serious effort to regain lost momentum in core categories. Let's examine: Sears used to be powerful in almost every hard goods category, and decent in soft goods. But Best Buy, Lowe's and Home Depot are talking them on in large appliances, and Lowe's and Home Depot have their own lines of high quality tools (e.g. Kobalt) to take on Craftsman tools. Best Buy, Tweeter, Circuit City, Costco and Sam's have to be winning in consumer electronics. Sears does seem to have awakened to all of this a little; I saw the first ad I've seen for a while for Die Hard batteries.

In soft goods, I simply don't understand why anyone would shop there versus Target, WalMart or Bed, Bath and Beyond. They made what could have been a very smart move with the acquisition of Lands End - a line with an outstanding reputation for quality - but screwed up store logistics to the point that I don't know that it mattered.

I expect that bit by bit, year after year, Target, Walmart and the rest will erode Sears market share, until it ends up with Caldor, Richway, Janesway, FedMart, The Treasury, Corvettes, Woolco, Gold Circle, Bradlees, Zayre, Alexanders - well, you get the point.

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