retail news in context, analysis with attitude

Vanity Fair has a good piece about Eddie Lampert, described as “the billionaire majority shareholder of Sears and Kmart” who established his own hedge fund three decades ago at age 25 and had a series of major successes, all of which have been largely obscured by his decision to get into retailing.

An excerpt:

“Today those triumphs are largely obscured by his worst mistake: the 2005 merging of Sears, the iconic retailer whose doorstop mail-order catalogue was once a fixture in nearly every American home, with the downmarket Kmart chain, which he had brought out of bankruptcy in 2003. Twelve years on, this blundering into retail has made him a poster boy for what some people think is wrong with Wall Street and, in particular, hedge funds. Under his management the number of Sears and Kmart stores nationwide has shrunk to 1,207 from 5,670 at its peak, in the 2000s, and at least 200,000 Sears and Kmart employees have been thrown out of work. The pension fund, for retired Sears employees, is underfunded by around $1.6 billion, and both Lampert and Sears are being sued for investing employees’ retirement money in Sears stock, when the top brass allegedly knew it was a terrible investment.”

Mark Cohen, CEO of Sears Canada from 2001 to 2004 and now a professor at Columbia Business School, says that as bad as it looks, “Lampert’s money is collateralized against hard assets, of which Lampert will take control if the company defaults on the loans.” In other words, if the whole company tanks, Lampert is largely protected, despite the hundreds of millions of dollars he has sunk into Sears and Kmart.

And, Cohen describes Lampert this way: “the wizard behind the curtain.”

You can read the entire piece here.
KC's View:
Cohen’s “wizard behind the curtain” is ironic, because he seems entirely disenchanted with Lampert’s way of doing business, criticizing his strategic approach and a lack of corporate governance at the company, among many things. Plus, let’s remember - the original wizard behind the curtain ended up being nothing but as con man and a fraud.

The Vanity Fair piece is compelling reading, though - it traces Lampert’s life from his working class beginnings through his 2003 kidnapping, and explains his rationale - faulty as it turned out to be - in buying Sears and Kmart and then combining them. I really recommend it.