The Wall Street Journal reports that Sears Holdings CEO Edward Lampert has offered to buy the Kenmore appliance brand, the company’s home improvement business, and its Parts Direct business - all assets that retain a certain amount of currency with customers that Lampert says he has been unable to sell to an outside entity.
According to the story, Lampert’s hedge fund, ESL Investments, also is willing “to buy Sears’ real estate, including the $1.2 billion in debt associated with it. Sears could then lease the stores to keep running them.”
The Journal writes that “the moves are an effort by Mr. Lampert to inject Sears with cash and stave off a bankruptcy filing, while at the same time allowing the hived-off businesses to grow by distributing their products and services beyond Sears and Kmart, according to people familiar with the matter.
“Some critics, however, have argued that the strategy further weakens Sears by giving shoppers less reason to visit the retailer.”
The Los Angeles Times reports that “using the pieces of its retail empire to generate cash isn't a new strategy for Sears, which shut 426 stores last year and has repeatedly tapped Lampert for loans as it works to stem the red ink and slash costs. It spun off the Lands' End brand in 2015, bringing in a $500-million cash dividend. A year later, Sears sold 235 stores to real estate investment trust Seritage Growth Properties — in which Lampert holds a stake and serves as chairman of the board — and raised $2.72 billion. And last year, it sold its Craftsman tool brand to Stanley Black and Decker in a deal valued at $900 million.”
According to the story, Lampert’s hedge fund, ESL Investments, also is willing “to buy Sears’ real estate, including the $1.2 billion in debt associated with it. Sears could then lease the stores to keep running them.”
The Journal writes that “the moves are an effort by Mr. Lampert to inject Sears with cash and stave off a bankruptcy filing, while at the same time allowing the hived-off businesses to grow by distributing their products and services beyond Sears and Kmart, according to people familiar with the matter.
“Some critics, however, have argued that the strategy further weakens Sears by giving shoppers less reason to visit the retailer.”
The Los Angeles Times reports that “using the pieces of its retail empire to generate cash isn't a new strategy for Sears, which shut 426 stores last year and has repeatedly tapped Lampert for loans as it works to stem the red ink and slash costs. It spun off the Lands' End brand in 2015, bringing in a $500-million cash dividend. A year later, Sears sold 235 stores to real estate investment trust Seritage Growth Properties — in which Lampert holds a stake and serves as chairman of the board — and raised $2.72 billion. And last year, it sold its Craftsman tool brand to Stanley Black and Decker in a deal valued at $900 million.”
- KC's View:
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I have to be honest here, and concede that the financial machinations of hedge fund moguls probably are a little beyond my modest ability to understand. But, on first blush, I think I agree with “some critics.”
I’m trying to understand what Lampert is trying to do. If I understand it, he would pay for the few things that make Sears barely functional … which sounds more like it is a move to protect his own rear end, as opposed to a strategic move to keep the retailer viable, which is what they’re arguing.
Not that any of this should be a surprise. He’s gonna strip Sears down to the studs, and then sell off the real estate. It seems like a pretty good bet that Lampert and ESL will come out of this thing relatively okay, but that’ll be a lonely place to be.
