While Lampert insists that he isn't selling his personal shares ("My significant personal ownership in the company is a sign of my confidence and alignment with all shareholders," he said in a statement), the regulatory filing yesterday and subsequent stock drop Wednesday show that investors may no longer be standing with him.
"Almost since the day he acquired control of Sears, he has been milking the company for cash as opposed to maximizing its performance as a retailer," says Craig Johnson, president of Customer Growth Partners. "Its decline began way before Eddie Lampert, but look at the stuff he’s done. He hasn't invested in stores, in marketing. He's doing nothing to grow the business."
Lampert began at Sears with the ill-fated $12 billion merger with Kmart in 2005. Sales have declined for 27 straight quarters and the company's stock is down over 70% from its high in 2007. Last quarter, Sears lost $534 million, and same store sales declined 3.1%. Lampert's latest plan to save Sears includes spinning off two more of its brands: Sears Auto Center and Lands' End.
The company bought Land's End in 2002 for $1.9 billion. Johnson says Lampert will be lucky to get anything close to that back for a brand that has been relegated to "stepchild" status at Sears. He also disagrees with the Auto Center sale, since the unit is profitable and dovetails nicely with Sears' Craftsman and DieHard Battery brands.
Other analysts take a more positive view of the recent actions, but still think the overall trajectory is sour. "Given the weak market positioning of both Kmart and Sears Domestic, we see SHLD struggling to keep pace with competitors in a difficult retail environment," S&P Capital IQ equity analyst Jason Asaeda wrote in a note last week.
One of the biggest assets Sears still has is its real estate, but there aren't many other department stores looking to expand these days, so even selling some prime locations may not be enough.
Any turnaround, says Johnson, starts with removing Lampert from the company: "First of all, you need a CEO who’s a retailer. Eddie’s not a retailer, he’s a value guy. Until you put a retail guy on top of the company, the decline is inevitable. But no one's going to come in even as a nominal CEO if he still owns a controlling share either."
With over 48% of the stock still under Lampert's thumb, that doesn't seem likely any time soon.
