Is Sears going to make it?
In Beat the Odds, first published in February 2007, I said this about Kmart and Sears:
“After it emerged from bankruptcy in May of 2003, Kmart still lacked a clearly articulated vision of who it would be, and how it would distinguish itself from its chief competitors such as Wal-Mart (“everyday low prices”), and Target (“cheap chic”). Even the merger of Kmart and Sears, orchestrated by major Kmart stockholder Edward S. Lambert’s ESL Investments, Inc., has not yet changed the picture. Without a clearly defined and articulated vision and strategy that is well-led, Kmart/Sears’ ultimate success as an operating retail business will remain problematic. That is an observation separate from the expectation that the merger – from a strictly financial and tax perspective - may serve as a useful platform for additional retail acquisitions.”
In recent months, CEO/Owner Lambert has announced a “reorganization” – apparently believing that “the organization chart fix” would be what the patient needed. For a discussion about this classic pitfall in management thinking, see my previous blogs on "The Organizational Chart Diversion," which you can read here, here, here and here.
How has Sears stock performed? Since October 2005, Sears Holdings (SHLD) has dropped about 20 percent, while the S&P 500 index – during the same period – rose about 16 percent.
More concerning than the stock drop has been the trend in operating performance. Sears’ press release dated February 28, 2008 noted that “For the fiscal year ended February 2, 2008, net income was $826 million, compared with net income of $1.5 billion for the fiscal year ended February 3, 2007.” That’s one heck of a deterioration.
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