Under CEO Eddie Lampert, Sears has always found enough money to struggle onwards. Now the much criticized hedge fund billionaire is seeking to buy the Kenmore appliance brand from his own company via his own hedge fund, ESL Investments. Lampert himself claims the sale “will provide an important source of liquidity” for Sears and help “to complete its transformation to respond to the challenging retail environment.” Few expect that sort of turnaround. Conventional wisdom dictates a troubled retailer needs to maintain the most lucrative assets under its control, not sell them off. The decision to sell all but seals the fate of a company many expected to have already fallen into bankruptcy.
In selling assets to his hedge fund, Eddie Lampert will maintain control of the most valuable parts of what remains of the Sears business. The sale of assets from himself to himself (albeit when wearing different hats) will likely remove enough value from the company that carrying on once the money from the sale runs out will be almost impossible. Assuming Sears does indeed go under completely, the sale of assets to ESL Investments before the banks become involved – seeking to recoup as much of the $10.8bn debt the retailer owes as is possible – would enable Lampert to recover some of the money he invested into Sears, and then lost.
The attempt to sell assets to his own hedge fund represents the latest in a now lengthy list of strategic decisions made by Lampert which have not proven to be in the best interests of the Sears business. Choosing to sell many of the remaining assets to his own hedge fund may very well be good for the personal business fortune of Lampert, but it does Sears no favors at all. When viewed through the context of decision making to have taken place since the creation of the company, the latest move comes as little surprise. Despite success with AutoZone, Lampert has not proven to be an effective leader in retail. Under normal circumstances his tenure as CEO and chairman would have ended a long time ago.