Last Updated Feb 28, 2011 6:24 PM EST
Lampert was once widely expected to follow the same trajectory as Warren Buffett. Indeed, the two share the common ground of hedge fund management as well as a penchant for penning annual epistles to document the respective turnarounds of their companies. But Buffett's succeeded while Lampert continues to make some bewildering business decisions. Like his choice of CEO.
After three years of looking, Lampert installed former IBM exec Lou D'Ambrosio as CEO. Huh? Though it's not unprecedented that management would look outside the industry to find a leader, Lampert says, Lou knows what it is like to be the 800-pound gorilla from his days at IBM, and he knows what it is like to compete against 800-pound gorillas from his days at Avaya. He also understands how technology can shape and change companies and industries.
So D'Ambrosio is well-versed in being a blundering behemoth. How is that going to put an ailing retailer back on a growth track? Sears reported a 13 percent drop in fourth-quarter profit, sending the shares down 5.5 percent, or $4.83, to $82.40. This at a time when consumer confidence is inching up and stores peddling general merchandise (think discounters and department stores) pushed sales up 0.8 percent to $51.7 billion, according to the U.S. Commerce Department.
Lampert believes D'Ambrosio's shrewd management will pull the chain out of the doldrums. It's hard to tell if he can pull it off. After all, his last achievement of note was to take enterprise communications vendor Avaya private (right before the recessionary shit hit the fan and Cisco gobbled its market share) and then the guy was out of work for three years for medical reasons.
To help turn SHLD into (bigger, better) Amazon
It's entirely possible that Lampert is dazzled by D'Ambrosio's quasi-tech qualifications. And he's made no secret of his intent to transform Sears into an Amazon (AMZN), albeit one that uses brick-and-mortar outlets to pick up merchandise or return clickable unwanted goods. Last May, Lampert was touting Kmart's MyGofer pickup service designed to lure a new mobile customer to his stores. That was in addition to the under-the-radar Marketplace at Sears.com that launched earlier this year, which is reported to carry 17 million products, most from third party vendors.
Yet even though Lampert recognizes the critical importance of e-commerce, it's tough to see how Sears can pull itself out of the quagmire, even with a new CEO. The company can't even make a strength sustainable. Note as Lampert pats himself on the back for being the market leader in appliances, he admits Sears performance was "not acceptable" in 2010.
While this business is clearly highly dependent upon the macroeconomic environment, our own missteps exacerbated the situation, including delays in our transition to the newly redesigned Kenmore product line.What's worse is that he cites Blockbuster's and Borders' bankruptcies as a cautionary tale to retailers who were too slow to integrate online sales strategies. But rather than cite Sears own actual strategies to win, Lampert delivers some canned corporate rhetoric.
Will increase shareholder values
Lampert then moves to dishing examples of Microsoft's (MSFT) and Apple's (APPL) market capitalizations:
Apple has neither repurchased shares nor paid a dividend since 2003. Currently, Apple sits on about $60 billion of cash and investments, while generating almost $20 billion in cash (after-tax) over the last year. It is the combination of spectacular operating performance and cash retention that has led to a market capitalization that eclipses all but Exxon Mobil.And how Sears is like Apple:
We seek to do so by improving our operating performance, innovating, and delighting customers. In this area, we have fallen far short of our goals and what we aspire to do in the future. On the second dimension of capital allocation, I believe that our behavior and focus has served our shareholders well over the past eight years and will magnify the value creation when our operating performance improves.Yet he still plans a big share repurchase (which he admits is not a panacea), something that Buffett has never done. "Instead, we have retained all of our earnings to strengthen our business, a reinforcement now running about $1 billion per month."
Lampert finally concludes this lengthy diatribe with a promise to do better. If he could truly live up to his early promise as the next Buffett, he'd stop these nonsensical dispatches and concentrate on learning how not to throw good money after bad.
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