Now comes word that the once lionized Edward S. Lampert is having troubles with the combined Sears-Kmart giant he assembled only two years ago. What a far cry from the days when he was being hailed for his management genius.
In brief, Lampert’s problem is that falling sales and sharply weaker earnings could force Sears Holding Corp. to restructure itself. Analysts are saying that it needs to raise cash and should sell assets to do that. Lampert apparently has been squeezing cash out of Sears but he’s taken his eye off the key challenge of a retail CEO–getting the merchandise right. The Wall Street Journal called the company “a second-rate retailer.”
Lampert was one of the hedge fund operators who, while paying himself $1 billion a year, raced into the corporate sector in the years of easy credit, along with a raft of private equity players. Now the funny-money boys are finding out that actually running businesses is a lot more complex than engineering deals. In the coming year or two of economic shakeout, particularly in the housing and retail sectors, it’s inevitable that Lampert is going to get stung and so are dozens of other financial wunderkind who got in way over their heads.
The only way out for many of the financial whiz-kids to get out of their investments with even pennies on the dollar may be going the old-fashioned route of declaring Chapter 11 bankruptcy. It will be yet another demonstration of the eternal lesson: People who think they are repealing the laws of common-sense business always get their heads handed to them.
