(Bloomberg)—Eddie Lampert is a tough guy, but he’s got a soft spot for Sears Holdings Corp.
A billion-dollar soft spot.
Lampert, the Sears president, chief executive officer, top shareholder and, through his hedge fund, owner of about $900 million in Sears debt, has almost singlehandedly bought time for his struggling retailer. Transactions just since Christmas include an additional $500 million loan facility (Jan. 4), two letters of credit worth as much as another half-billion (Dec. 29), an agreement to sell Craftsman tools for a total of $900 million (Jan. 5) and the announcement of 150 more store closings (same day).
The seemingly full-time job of keeping afloat Sears and its units and spinoffs now represents $1.16 billion of Lampert’s personal net worth of $3.8 billion, according to an analysis by the Bloomberg Billionaires Index.
As goes Sears, so goes Lampert.
“I don’t think there is any viable path to any sort of profitability,” said analyst Matthew McGinley at Evercore ISI.
Howard Riefs, a Sears spokesman, said the company, based in Hoffman Estates, Illinois, has consistently shown that it “will take actions to adjust our capital structure, generate liquidity and manage our business while meeting all of our financial obligations.” The loan facility and letters of credit were extended “on an arms-length basis and reflect the best terms available to the company,” he said. Lampert’s representatives didn’t respond to requests for comment.
Kidnappers With Shotgun
Lampert proved his toughness 14 years ago this month, when he was abducted as he left work at his ESL Investments Inc. hedge fund. The kidnappers used a shotgun to keep him in their clutches for two days before Lampert negotiated his own release and walked by himself to the Greenwich, Connecticut, police station.
The incident only added to his fame. Lampert, 54, gained Wall Street renown by leading ESL Investments, which began in 1988 with a grubstake of $28 million and grew to become the owner of Kmart Corp., which acquired Sears in 2005.
Merging a pair of troubled retailers didn’t turn out to be a road map for success, and Lampert’s strategy wasn’t a big help. He spent less than competitors did on store upkeep, focusing instead on building the retailer’s digital operations and loyalty program.
When Lampert took over as CEO in early 2013, he was the company’s fifth in seven years. The four years since have cemented his status as the face of Sears.
It’s true that many U.S. malls are struggling, along with plenty of retailers that are victims of the historic shift to Internet buying. Macy’s Inc. and Kohl’s Corp. both cut their earnings forecasts this week after a lackluster holiday season.
But Sears has been losing customers for years.
Stay Afloat
The company has tried a number of stratagems to keep above water. Spinoffs include Seritage Growth Properties, a real estate investment trust that markets Sears store locations; clothier Lands’ End Inc.; and Sears Hometown and Outlet Stores Inc., which sells appliances and tools.
Last month, Sears posted its biggest quarterly loss in more than four years, bringing the nosedive to $6.3 billion since the beginning of 2013. On Thursday, it said holiday same-store sales declined at least 12 percent.
The sale of the 90-year-old Craftsman brand to Stanley Black & Decker Inc. was a “stopgap measure” at a disappointing price, according to Bloomberg Intelligence analyst Noel Hebert.
Lampert is “clearly trying to avoid the inevitable” Sears bankruptcy, according to McGinley.
Hebert, however, says the key might be Lampert’s current approach -- Sears surviving in a smaller form.
Lampert’s net worth, tied up as it is with Sears, may need to survive in a smaller form, too.
To contact the reporters on this story: Lauren Coleman-Lochner in New York at [email protected]; Brendan Coffey in Boston at [email protected]. To contact the editors responsible for this story: Nick Turner at [email protected]; Robert LaFranco at [email protected] Bob Ivry, Anne Reifenberg.
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