Last year, U.S. department store chain Sears filed for bankruptcy. But just as Americans began to mourn the death of the iconic retailer, hedge-fund manager Edward Lampert saved it with a $5.2 billion offer for its assets.
However, if Lampert wants to turn a profit on the failing company, he’ll have to make some serious changes to how the business is run. In his first interview since the bankruptcy court approved his rescue plan, Lampert revealed his strategy for revitalizing the chain.
“Our goal is to continue to shrink the size of our stores,” Lampert divulged. “If I had my druthers, I’d rather be bigger than smaller. We still have enough of a critical mass.”
According to Lampert, the downsized stores will primarily be centered on tools and appliances. As The Wall Street Journal reports, Sears used to be the largest seller of major appliances in the U.S. However, it has since fallen to fourth place, trailing behind Lowe’s, Home Depot, and Best Buy.
But if anyone is familiar with the challenges and obstacles that come with revitalizing a failing company, it’s Lampert. In 2005, the investor saved Kmart from bankruptcy and merged it with Sears. And while he remains optimistic about his ability to turn the companies around, other experts aren’t so sure.
“They have already been category-killed by the big box chains,” said Burt Flickinger, managing director of Strategic Resource Group, a consulting firm that specializes in U.S. retail and consumer goods. “They have lost the confidence of the vendor community. Sears and Kmart prices are no longer competitive.”
“They have a shot, but it’s a long shot,” said Craig Johnson, president of consulting and research firm Customer Growth Partners. “Most of the profits on appliances are made on the servicing side, and Sears still has a good service business.”