Even Sears’ Landlord Wants ‘Non-Sears Tenants’

It's not exactly a vote of confidence

Sears' Hail Mary is smaller stores that sell only home goods. Getty Images
Headshot of Lisa Lacy

If it’s going to survive much longer, Sears truly needs a miracle. Instead, it is getting Home & Life stores.

In May, it will open three such smaller format locations in Anchorage, Alaska; Lafayette, La; and Overland Park, Kan. They will stock a truncated selection of merchandise, including appliances, smart devices and mattresses.

Sears is including some touches that seem like the retailer is striving to be “modern” in the same way Baby Boomers have Facebook accounts, but are simultaneously reminders of how it has failed so spectacularly to keep pace in the Internet Era: This includes a “Search Bar” where consumers can order products online. There is an expanded selection of fulfillment options, however, including in-car pickup.

In a statement, Peter Boutros, chief brand officer of Sears and Kmart, pointed to Sears’ strength in these sectors and called it “part of our strategy to maintain a presence in markets where we have right-sized our footprint.” He was not available for further comment.

And while Sears is certainly sticking to its knitting, analysts have little faith that this is the Hail Mary that will score the beleaguered retailer a life-saving touchdown.

Bruce Winder, partner at Retail Advisors Network, agrees Home & Life focuses on Sears’ strongest businesses, but that’s where his enthusiasm ends.

“The Sears brand has sadly been dragged through the mud for the better part of decade now,” he said.

Further, Winder noted Sears is simply not a brand that resonates with consumers anymore.

“[Millennials] don’t see Sears as a spot to go,” he added. “[Sears’] former customer is the seniors and maybe the Boomers, but they’re not buying mattresses and appliances anymore. I just can’t see it working—it may in the short run, but it’s just a matter of time before it hangs up its skates.”

For his part, Allen Adamson, co-founder of marketing services firm Metaforce, said Sears’ last hope is to really reinvent itself.

“What do you do with a name people know, but don’t care about? You have to reimagine it,” Adamson said. “[Hedge fund kingpin Eddie Lampert, who appointed himself CEO in 2013 after merging Sears and Kmart in 2005,] may be the ultimate financial genius and can find pennies on the dollar, but Sears requires marketing innovation, not financial magic.”

He conceded that smaller stores are a better solution than closing stores—and appliances and mattresses are two sectors where customers still want to touch and feel merchandise. He also said this Home & Life concept could be part of the overall solution, but “they are not going to sell enough appliances and mattresses to pull the company out of the gutter.”

‘Non-Sears tenants’

This is familiar territory for Sears, both literally and figuratively:

These new locations come to cities that have previously lost at least one Sears apiece.

Rreal estate investment trust (REIT) Seritage Growth Properties plays a key role in all of this. You see, Seritage isn’t just any REIT, however. It is the REIT established in 2015 to hold the portfolio of 266 Sears and Kmart stores it assumed from Sears Holdings in exchange for $2.7 billion. (Sadly, Sears said the funds would help it “accelerate investments in its transformation to an asset-light, member-centric integrated retailer.”)

Today, Seritage has more than 30 properties with zero tenants. And, according to a March 1, 2019 SEC filing, its plan is to re-lease open space to anyone but Sears “at materially higher rents.”

But here’s the thing: As Lampert writes about his belief in “the company’s immense potential to evolve and operate profitably,” he is also chairman of Seritage and chairman and CEO of investment firm ESL and its affiliate Transform Holdco, which was created specifically to submit Lampert’s last bid for Sears. And it turns out ESL controls 6.1% of the voting power of the REIT looking to lease space to “more diversified, non-Sears tenants.” And it becomes even more incestuous when you consider Sears stockholders as of January 2019 included Lampert and seven LPs and LLCs that list him as chief executive.

And so—pun intended—it certainly seems Lampert has hedged his bets, doesn’t it?

But if its own REIT doesn’t believe in the softer side of Sears, why should anyone else?

And so, in the end, Adamson and Winder alike say the question about why Sears hasn’t been put out of its misery may boil down to Lampert’s ego. Prior to Sears, he was drawing comparisons to legendary investor Warren Buffett, the so-called Oracle of Omaha.

Now, if Home & Life flops, Lampert is looking at an alliterative nickname more like the Slaughterer of Sears. (Or the Killer of Kmart?)

“He was seen as a miracle worker in the world of finance. Anything he touched turned to gold,” Adamson added. “He was able to do magical things before, until Sears and Kmart. So, clearly, his whole life he was a master of the universe, a genius business person, and the last thing he wants on his Google results is ‘Eddie Lampert put the final nail in Sears’ coffin.’”

@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.