Sears started as a catalog/mail order company and will eventually turn back to its old roots–shed the real estate, close all the stores and sell from the internet only.

Just a thought.

Rocky Humbert comments: 

Interesting timing for Ken's post!

Exact 7 years ago today, (11/17/04), Eddie Lampert announced the acquisition of Sears by Kmart. Lampert took control of Kmart during its bankruptcy.

Eddie (a fellow Yalie and GS risk-arbitrage alum) is a very smart guy. His resume includes the improbable feat of having talked his way out of a kidnapping, and some fabulous investments, including Autozone.

Alas, Sears was Eddie's biggest transaction.

And how have Sears shareholders fared? Not so good. The Sears story morphed from a real-estate play (which quadrupled the stock) to cost-cutting to "we're not going to sacrifice profits for revenues"  to who cares about sames-stores-sales to the present morass.

Since the merger, the S&P 500 has returned +23.1%. Walmart has returned 24.1%. Sears has returned negative 24%.

Which raises the tasteless counterfactual question: How would have Sears performed if the kidnappers had not been persuaded?

The lesson: always have an exit strategy other than the graveyard.

Stefan Jovanovich comments:

This is Sears' own potted history of its going into store building:

The first Sears retail store opened in Chicago on February 2, 1925 in the Merchandise building. This store included an optical shop and a soda fountain. During the summer of 1928 three more Chicago department stores opened, one on the north side at Lawrence and Winchester, a second on the south side at 79th and Kenwood, and the third at 62nd and Western. In 1929 Sears took over the department store business of Becker-Ryan Company. In 1933 Sears tore down the old Becker-Ryan Company store in Englewood, and built the first windowless department store, inspired by the 1932 Chicago worlds fair. In March of 1932, Sears opened its first downtown department store in Chicago on State Street. Sears located the store in an eight-story building, built in 1893 by Levi Z. Leiter, which for years housed the Stegel-Cooper department store. The original Chicago occupant on this piece of land was William Bross who in 1871 mounted his house on wheels and rolled it down State Street to the corner of Van Buren Street. He kept his house on wheels for several years because of the marshy conditions of the land. The Leiter Building, designed by famous skyscraper architect William LeBaron Jenny, included walls of New England granite.

The store sat on the corner of Van Buren, State and Congress streets and cost over a million dollars to refurbish. A 72-foot long electric Sears sign greeted shoppers at the front entrance. A stunning black and white terrazzo covered the main floor. The State street store was the first Sears store in a downtown shopping district, the sixth store in Chicago, and the 381st store the company built. Opening day for the State Street store took place deep in the Great Depression. Local newspapers reported that 15,000 shoppers visited the new store and several thousand people flooded the store's employment office. Sears did everything it could to help put people to work, employing 750 Chicago workers for four months during the renovation and staffing the new store with over 1,000 people.

Illinois Governor Louis Emmerson in a message to Sears Chairman Lessing Rosenwald stated, "I cannot help but feel that this opening will mean a great deal for your organization as well as for your city." Rosenwald proudly proclaimed that, "We regard the opening of our new store on the world's greatest thoroughfare as one of the high spots of our company's history." Within the store the sale of tombstones, farm tractors, and ready-made milking stalls caught customer's attention. The sporting goods department featured a model-hunting lodge. Other attractions included a candy shop, soda fountain, lunch counters, a shoe repair shop, a pet shop, dentists, chiropodists, a first aid station with a trained nurse, a children's playground, and a department for demonstrating kitchen utensils.

The company's chronology of its adventures in retailing in North Carolina is revealing. It did not build stores outside of the major cities– Charlotte, Durham, Goldsboro, Raleigh, etc, — until the 1980s! Meanwhile, some bright people in the truly small town of Wilkesboro had started their own enterprise, now known as Lowes.

Market Caps today (according to Google Finance):

SHLD - 6.83B LOW - 29.98B





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