When you’ve been a critic of the Eddie Lampert-run Sears as long as I have, you just want to blurt out: This is a joke, right?
After a three-year search, Sears issues a press release at around 7 p.m. ET last night to announce that it has named a new CEO.
The winner (or loser, depending on the outcome): former tech exec Lou D’Ambrosio.
The knee-jerk reaction is that hiring a non-merchant after a three-year search is just another shake-your-head moment in the recent history of Sears, which at best can be described as flailing and at worst as failed.
You can only imagine the public embarrassment Sears must be to Eddie Lampert, an otherwise successful hedge fund manager, whose winners include AutoNation and AutoZone. It was Lampert, you may recall, who engineered the takeover of Sears in 2004 with Kmart, which he then controlled. It has since been viewed as one of the classic examples of two turkeys not making an eagle.
Lampert became chairman of the newly created Sears Holdings, which went from bad to worse. It was so bad that in 2007 I crowned him as the year’s worst CEO.
Say what you will about Eddie, however, but stupid is not one of them.
Everybody makes a mistake, and Kmart/Sears was his.
Sears has since struggled, and a quick look at the numbers tells the story: Years of falling top-line sales growth, a history of losses, falling free cash flow. Then there are operating margins, a negative 3% last quarter versus a positive 3% at J.C. Penney. (Click here for Sears' latest earnings report).
Which gets us to the hiring of D’Ambrosio, the non-merchant, whose hiring comes a week after Lampert’s hedge fund took a 5.8% stake in Gap.
The telltale signs of what Sears may be planning would appear to be spelled out clearly in the press release announcing his hiring:
“Mr. D’Ambrosio led Avaya through a going private transaction, delivering attractive returns to its shareholders. ... Lou led the company through a successful $8.3 billion private equity transaction.”
Combine that with what Bruce Berkowitz of Fairholme Capital, a big Sears holder, said recently on CNBC’s Strategy Session about Sears: That if the company continues to buy back stock, and he continues to buy back its stock: “At the end of the day there will be two shares left. Eddie Lampert will own one and we will own one.” (See video)
In other words, the betting continues to be that Lampert’s goal now is to take Sears private and D’Ambrosio is the guy for the job.
Of course, Lampert also said in the press release that Sears was determined to find “a leader with information and technology experience who could catalyze the transformation of our portfolio of business in the context of the evolution of the retail industry that is occurring more broadly.”
It’s unclear what that means. For the sake of Sears investors, let’s hope it doesn’t mean that having failed as a brick-and-mortar retailer Sears is setting its sights on being “Where America Shops … Online” as a competitor to Amazon.
After everything Lampert has been through, this is his moment for Sears to make it or break it. Well, actually, it’s already broken.
In the end, the real joke will be if, after a three-year search, D'Ambrosio turns out to be .... a dud.
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