Crain’s Chicago Business reports that Edward S. Lampert, the hedge fund manager who is the chairman of Sears Holdings – which owns both Sears and Kmart – is wringing “hundreds of millions of dollars in savings from the combined company. Sears Holdings Corp. cut its marketing costs $226 million last year, with Craftsman and Lands' End's ad budgets being slashed. Kenmore's spending rose 4%, but only after a key supplier pressured Sears to promote the brand more vigorously.”
The problem, according to industry experts, is that by reducing the marketing dollars put behind these brand names, “these three brands could become faded memories.” However, this isn’t much a surprise, according to Crain’s, because “investors think Mr. Lampert's true game plan is to sell large amounts of the company's real estate.” The problem is that “the current market isn't favorable for such sales,” and for the moment Lampert may be stuck operating stores – but the value of these stores may quickly erode if he is unwilling to support the brands with which they are most closely associated.
And while Sears’ profitability has improved during the Lampert regime, largely because of cost cutting moves, same-store sales continue to be in decline – never a good sign for a retailer.
The problem, according to industry experts, is that by reducing the marketing dollars put behind these brand names, “these three brands could become faded memories.” However, this isn’t much a surprise, according to Crain’s, because “investors think Mr. Lampert's true game plan is to sell large amounts of the company's real estate.” The problem is that “the current market isn't favorable for such sales,” and for the moment Lampert may be stuck operating stores – but the value of these stores may quickly erode if he is unwilling to support the brands with which they are most closely associated.
And while Sears’ profitability has improved during the Lampert regime, largely because of cost cutting moves, same-store sales continue to be in decline – never a good sign for a retailer.
- KC's View:
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Fast Eddie Lampert, the hedge fund manager, clearly is hedging his bets by not supporting the brand names that are the only reason for people to walk into a Sears store.
He’d better hope the real estate market turns around and that he’s able to bail out of these store locations sooner rather than later.
Wonder if there is a possibility that he might sell the Craftsman brand to a company like Home Depot or Lowe’s? We don’t know much about this business, but this seems like it might be a likely move…though if he were to do, he might as well turn off the lights and lock the doors.
One analyst tells Crain’s that Lampert seems to be taking the opposite approach that Sam Walton took, which was to emphasize same-store sales growth.
Sam Walton may be dead, but we’d still rather have him running our retail stores than Fast Eddie.
