Is Eddie Lampert Ruining Sears Holdings Corp (SHLD)?

The decline of Sears

Don’t get me wrong, I’m not bullish on Sears Holdings Corp (NASDAQ:SHLD). I just don’t think investors should factor in Lampert’s love of Ayn Rand when they decide to buy or sell the stock.

Much more pertinent is the fact that Sears Holdings Corp (NASDAQ:SHLD) is an unprofitable company in a struggling industry. Just recently, Sears had to sell its warranty division to avoid running out of cash, and the industry that it still primarily operates in — middle class department stores — is not a high growth area.

Although Ron Johnson failed to turn around J.C. Penney Company, Inc. (NYSE:JCP), he was at least able to see the situation for what it was. In the presentation he gave shortly after taking the CEO job, Johnson noted that the American department store has been steadily losing market share to its specialty store rivals. In 1992, department stores had nearly 60% of the market — today it’s about half that.

Sears Holdings Corp (NASDAQ:SHLD) bulls have argued for the stock with a sum-of-the-parts valuation. Most notably, hedge fund manager Bruce Berkowitz has argued for Sears on basis of the company’s real estate holdings.

But, as analysts at Credit Suisse point out, why does the company continue to operate if its assets are so valuable? Shouldn’t liquidation be preferable to operating at a loss?

Investing around management structure

No doubt management systems play a role in attracting (or driving away) talent. But unless you’re a direct insider, the situation is just too complex to factor into investment decisions. Stories about horrific management structures seem to only appear after the fact, making them virtually useless for fundamental analysis.

Based on the stock’s decline, Eddie Lampert has already ruined Sears Holdings Corp (NASDAQ:SHLD) — infighting or not.

The article Is Eddie Lampert Ruining Sears? originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Sam Mattera owns shares of Best Buy. The Motley Fool owns shares of Microsoft. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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