Sears is trying to recover with its latest attempt to mix traditional stores with online retailing, shopyourway.com, which combines social media and a loyalty program. But most other national retailers are attempting some version of this. Will Sears get it right? Who knows? But some of the money it spent buying back stock would come in handy right now.
At Sears Holdings’ recent price of about $52, Lampert is way less ahead than he was in 2007, when the stock was at $170. There’s no reason to believe the stock will return to that level anytime soon, if ever.
The idea that if investors make money, everything works out for the best for everyone doesn’t hold in all cases. Lampert has made a ton of money, as have some of his early investors. “It’s been a better investment than people think,” he says, “but the company hasn’t been a success yet.”
In both the J.C. Penney and Sears Holdings sagas, there are lots of losers: vendors, communities with abandoned or failing stores, and, above all, employees. Ed Cox, a former Penney network engineer whose 32-year career ended when he was laid off last April, says: “I was very emotional that day. On those employee-engagement surveys done every year, they said, ‘Do you see yourself retiring at J.C. Penney?’ and I always said yes.” Lee Stoeckert, a former colleague who took a buyout, adds, “They always said it was going to take three years, but not that it was going to crash and burn in the meantime.”
Today, the two American retailing icons look further from revival than they did when Lampert and Ackman entered the picture. The winners, so far, in addition to Lampert and his early investors, are the chains’ competitors. They include Macy’s, Kohl’s, Target and TJX, all of which are run by traditional retailers, not hedge fund guys or their designees. (Co-author Allan Sloan owns $115,000 of TJX and Target stock, purchased well before this article was conceived.)
There’s still time for Ackman and Johnson to prove us wrong. Any number of factors could change Penney’s momentum. The company could emerge with a favorable result from the Martha Stewart litigation. There are whispers afoot of a significant refinancing, which could remove doubt about its ability to renew its revolving line of credit next year. Customers could come flooding in as the store makeovers are completed. Or not.
Whatever happens, here’s the bottom line to this convoluted tale: Retailing is a lot harder than it looks from Wall Street.
Sloan is Fortune magazine’s senior editor at large.