HOFFMAN ESTATES, Ill. — No one could accuse Edward S. Lampert of lacking confidence: The self-described entrepreneur vowed Wednesday that Sears Holdings Corp. will eventually be profitable.
But will his ideas — which include being faster to market, reducing real estate and reading customers better — be enough to save his fast-sinking Sears?
“We don’t need just velocity, we need acceleration. The challenge is, can we move fast enough?” the chairman and chief executive officer asked during Sears’ annual shareholders’ meeting at its headquarters here Wednesday. “We’ve always been store first, product first….The trick is, can we get people to change their behavior in a way that saves them time, saves them money? That’s really the big challenge.”
Highlighting service-oriented, inventory-free companies like Uber, Facebook, eBay and Airbnb, Lampert noted their pervasive influence on the business landscape.
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“People can laugh, but I believe these business models are here to stay,” he said. “Doing it better, doing it faster, doing it cheaper, all of these characteristics are now in play and they’re all enabled by technology.”
Pushing the rewards-driven Shop Your Way platform — which Lampert said the company has spent “hundreds of millions of dollars” on – and integrated technology will be a major focus going forward.
“There’s so much information we have that’s available about each of us,” he said. “On one hand, there’s concern about privacy rights. More and more things are going to be measured and monitored. Privacy is a real concern. Being a company that is trusted I think is an incredible asset we have. And trust can be lost very quickly.”
There is at least one thing Lampert doesn’t trust in any longer: the Kardashians. The meeting came one day after the retailer revealed that it would no longer carry the Kardashian Kollection designed by Kim, Khloe and Kourtney Kardashian. The two partners claimed the parting was amicable and the Kardashians are said to be near signing a deal with another major retailer.
“Was it profitable? How big was it? They have a perspective as well. I wouldn’t say their perspective is necessarily the truth,” Lampert told reporters following the meeting. “We’ve always had these celebrity lines. Jaclyn Smith was one, Kmart had Martha Stewart. Nicki Minaj and Adam Levine. It’s still relatively new and much more social-media-related in terms of how we’re looking at those lines.”
Jamie Stein, a spokeswoman for Sears, said the company enjoyed a “terrific relationship” with the Kardashians and is now focused on developing its private-label offerings.
“There’s always a role for celebrity brands,” Stein said. “They play an important role. As we transform our apparel business, we’re looking at elevating our private label. Faster to market, fashion trends at a quicker pace in a real time way.”
During the shareholders’ meeting, Lampert said Sears Holdings is expected to sell and lease back about 254 stores to the real estate investment trust Seritage Growth Properties. This trust is expected to result in $2.5 billion in cash proceeds seen as vital to the group. Sears last year reported a net loss of $1.7 billion on sales of $31.2 billion.
“With the REIT, we raised substantial capital. There will continue to be a Sears and Kmart presence. Instead of selling stores, we’re selling it in a way to raise capital,” Lampert said. “A lot of the Sears stores were built in a different era. The REIT will have the ability to recapture our space…we believe it will bring more traffic to our stores and de-risk the relationship we have with the mall owners.”
Lampert said Sears is in a unique position in that it owns a lot of real estate to leverage. “Even if we were making a ton of money, I still believe in these actions,” he said, before assuring: “Over time, we’ll be more profitable. We’ve been in many of the best malls in America.”
Shop Your Way is key to Sears’ transformation strategy and Lampert stressed to reporters the company’s commitment to it.
“I do believe there’s a big difference between serving you as a member versus selling a shirt,” Lampert said. “The attitude we have is focusing on who you are, what do you need, why do you need it and what are your circumstances. Others may say ‘it’s great you’re focused on me, but I’m still buying my shirts at Macy’s or J.C. Penney.’ Once I focus on you, I believe I can win more of your business.”
The philosophy may be a far cry from the Sears of yesteryear, but will it change?
“We sell products to serve people and it’s not the other way around,” he said. “Twenty years ago, the attitude of Sears was, if we don’t sell it, you don’t need it. Now, we’re first and foremost on what your needs are.”
During the question-and-answer session of the meeting, one shareholder from Spokane, Wash., asked Lampert if he saw himself as ceo of Sears in five years.
“With [Louis] D’Ambrosio leaving, the board asked me to step in. I’ve tried to deepen our executive talent,” Lampert said. “This is not something I would say I’m going to be doing forever. Most of the things I’m doing I’m very excited about. If there’s time for a change, there will be a change.”
And when asked if he enjoys being a ceo, he said: “Most of the time.”
Earlier in the day, Lampert revealed in a blog post that he has one regret in steering the nameplates Sears and Kmart over the last decade: “We haven’t had or generated the money to fund our transformation quickly enough.”
He noted, “While operational performance has been the cause of some of that, pension expenses, the recession and other factors have impacted us as well.”
The blog post recapped the points he made in last year’s annual shareholders’ meeting and indicated the points he would make at Wednesday’s meeting. Lampert noted that last year, he discussed the differences between turnarounds, those when a company succeeds at doing what it did in the past and the “transformations that occur when companies adapt their business model to fundamental shifts in technology, competitive landscapes and other macro trends to serve their customers in new ways.”
Some companies noted last year were General Dynamics, Kodak and Apple, when it was still called Apple Computer.
“As important as it is to have a good plan and adapt to changing circumstances, you also need to find the resources to effect the transformation,” Lampert said, adding that would be the focus of Wednesday’s meeting with shareholders.
While the $2.4 billion in funds generated from last year — including the Lands’ End spinoff and other rights offering — helped put Sears on a better footing, that’s just the beginning, the ceo said.
“This year, we believe we can derive even more value than we did last year,” he concluded.
He pointed to the formation of Seritage Growth Properties as well as other real estate deals that involve ventures with General Growth Properties, Simon Property Group and Macerich. The funds will allow Sears to invest in long-term strategies to enhance Sears’ members’ experiences, as well as expand its integrated retail platforms, Lampert added.
He went on to say that Sears and Kmart have “already moved beyond the old and sorely outdated traditional store network models,” and that the new cash raised will help to accelerate the company’s transformation.
Lampert didn’t address a point that credit analysts have been noting in the past six months — the company’s cash-burn rate — which could be an issue down the road. Lampert concluded in his blog post that he will have more to say today and “over the next year. Stay tuned.”