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The Wall Street Journal throws some cold water this morning on what seems to be the prevailing wisdom among investors – that Edward Lampert, the hedge fund manager who control Sears Holdings and has now placed himself in charge of marketing and merchandising for both Sears and Kmart, is taking the company in the right direction.

Lampert has created the image of a company that is more interested in long-term growth than short-term profits, and the WSJ notes that he has taken “a scythe to bureaucratic waste, advertising and marketing costs and capital expenditures. He is proceeding with his plan to streamline the businesses by having sold off the Sears Canada credit-card portfolio and by putting the Orchard Supply hardware business up for sale.” The goal is improved cash flow, with many investors believing that there is an insurance policy – that Lampert “will be able to sell off assets judiciously, including some of its valuable real estate, if sales don't pickup.”

The problem, the WSJ writes, is that “it makes theoretical sense that both Sears and Kmart were wildly inefficient, advertising too much, stocking too many unprofitable items and ordering poorly.” But, “in cutting costs, Mr. Lampert may be starving the business.” Eventually, the WSJ suggests, the result may be a company that is so lean that it lacks both fat and muscle, and is unable to compete on any level with the likes of Wal-Mart and Target.
KC's View:
At which point, inevitably, selling off real estate won’t just be an insurance policy. It’ll be an imperative for Fast Eddie to get out of a retailing business he knows little about and still make some money.

Which is what a lot of us believe has been the point all along.