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May 4, 2018updated 08 May 2018 9:46am

Eddie Lampert’s plan to sell Sears’ assets to his hedge fund is bad news for retail chain

By MarketLine

In wanting to sell Sears’ assets to his investment vehicle ESL, chief executive Eddie Lampert is tacitly admitting his tenure has been a failure.

Sears Holding Corporation has been in decline for a long time. So far, Sears CEO Eddie Lampert has resisted all calls to step down, or to transform his approach to running the company.

The decision to sell the most lucrative assets, including appliance brand Kenmore to ESL Investments, a hedge fund controlled by Lampert, to raise capital is a tacit admission of failure. The much-criticised hedge fund billionaire is seeking to sell the assets from his own company to his own hedge fund.

Lampert himself claims the sale “will provide an important source of liquidity” for Sears and help “to complete its transformation to respond to the challenging retail environment”.

Conventional wisdom dictates a troubled retailer needs to maintain the most lucrative assets under its control. However, in selling assets to his hedge fund, Eddie Lampert will maintain control of the most valuable parts of what remains of the Sears business.

The sale of assets to himself will likely remove enough value from the company that carrying on once the money from the sale runs out will be almost impossible. Choosing to sell many of the remaining assets to his own hedge fund may be good for the personal fortune of Lampert, but will be to the detriment of Sears.

The company desperately requires heaps of investment to make stores an attractive place for consumers to visit, as well as investing in desirable products sold at competitive prices.

When viewed through the context of decision making to have taken place since the creation of the company, the latest move comes as little surprise.

Despite success with AutoZone, Lampert has not proven to be an effective leader in retail. Under normal circumstances, his tenure as CEO and chairman would have ended a long time ago.

The call made by Lampert joins a long list of others, such as selling Craftsman to Stanley Black & Decker and Lowe’s in a deal which will raise $525 million. The initial figure could rise depending on results and was another of Sears’ few profitable assets.

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