Sears’ Wishbook

Businesses need both leaders and investors.

In spite of all the doom and gloom in the economy retailers aren’t doing too badly. In the UK, Xmas sales from stores were up a little but online they were up by 18%. Taken together, that’s pretty good news for retailers provided they have the right balance between the now almost proverbial “bricks and clicks”. If they haven’t, and they are late into the networked era, it is just going to cost them more and more to catch up as each month goes by, but soon it will just be too late. The internet aside, retail has always been a competitive sector that requires passion, commitment and continued investment to survive and prosper.

Sears Holdings Corp. is an interesting case in point. It is struggling and it has just announced the appointment of Edward S.  Lampert as its new CEO. Edward is the “hedge fund billionaire” whose clever idea it was, or so it seemed at the time, to merge Kmart and Sears in 2005 and, to be fair, he has been running the business for years from his position as Chairman, not without some criticism. So far, the metrics aren’t that impressive: Sears has seen same stores sales, of the combined company, fall for each of the past six years. On top of that, it hasn’t made a profit for a while and surely cash is soon going to become a problem too.

Big brand names do not just go on forever without adaption to changing times. Just take a look at the list of failed business over the years: Woolworths comes to mind as a recent retail example. Many of the biggest brands have failed because they just haven’t been able to adjust to change as the world changed around them. Few sectors have had to deal with the sort of rapid technologically driven change that online retailing has put on established retail brands and, not surprisingly, many famous retailers are struggling to adapt.

I am somewhat old fashioned when it comes to managing businesses, particularly at a time when significant change is needed. What you need more than anything, to take a business somewhere it wouldn’t have gotten on its own, is simply visionary and effective leadership. You might think that is too obvious to say but it is a rare commodity and only the lucky businesses find it in time. WH Smiths, in the UK, is a very different business now than it was a decade ago when Kate Swann took over as CEO. Its shareholders were lucky to find her when they did.

Somewhat ironically, for a business that started out and built a lot of its business on catalogues, Sears is now hugely dependent upon its stores at a time when there is a strong movement of retail sales to the internet. It also finds itself with a deal-making leader less versed in the retail trade and apparently not sufficiently confident to invest in reinventing the Sears retail business so that it can thrive again. Sadly, without investment it will not; but money alone isn’t enough, it needs confident leadership that can take the business, its sometimes disgruntled employees, and its customers forward together, building on a once great brand.

Edward is right to see Sears as an investment opportunity, but he doesn’t appear to be able to commit himself to the cash required to make a difference here, or to the recruitment of a leader who has half a chance of making the changes that are self-evidently needed. Without both, the story is likely to get worse by degrees until the business just shrivels up and fades away. It will soon be too big a problem for anyone to solve.

Sears once had a “Wishbook”, a Xmas catalogue of goodies. If I was a shareholder of Sears at the moment my wishbook for the company would have just three things in it: leadership, retail vision and cash to fund it. I hope it works out well for them, but I’m not too hopeful; retail will always be more of a vocation than a cold and deliberate investment. Businesses need both leaders and investors and don’t do well if either one is weak or missing. If I were Edward I’d be out there searching for that leader, not trying to do the job myself: I wonder what Kate Swann is doing in 2013?


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