In case you were wondering, I have not yet given up following the illusive, opaque and often strange meanderings of Sears (SHLD) chief, Edward “Eddie” Lampert, as he continues what I often referred to as an “abracadabra” strategy: now you see it; now you don’t. And, as I also remarked in the past, even if you thought you saw a strategy, you really didn’t. That’s how good his magic was.

Now, it seems, Mr. Lampert is spinning a whole different strategy which, if it is really there, might mean that Eddie is truly brilliant. However, since I’ve been tricked into seeing things that were not really there in the past, I’m not rushing to judgment. Further, there are still lots of analysts, reporters, and so-called industry experts, who continue to believe, based on both the declining numbers and the strategies/tactics that can be seen, that Lampert is in fact “bonkers” for attempting to right the “Titanic” in what appears to be its third time sinking into the briny.

However, I will lay out the case for both sides so you can take your pick. You probably know what mine will be. But read for yourself to see where you stand.

First, I present the “brilliant” perspective.

BRILLIANT?

Try this analogy out. Perhaps Eddie is doing with Sears and Kmart what our brilliant (I use that term facetiously here) folks in Washington did, and are still doing, about the economy: essentially managing it down to a lower, “new normal” level (managing the deleveraging). And, had they not stepped in to do so, the collapse into depression would have been apocalyptic. Now, I’m not going to comment on their execution of that strategy. But, the strategy itself was a necessary one.

So, did Eddie from the get-go see the inevitability of the twin Titanics (Sears and Kmart) going under for the third time, regardless of any brilliant turnaround strategies he might have whipped up? Publicly of course, he boldly stated that he was, indeed, going to return these two iconic American brands to their rightful and dominant retail positions.

Well, that’s what he said for all of us to hear. But, as I mentioned, Eddie is brilliant when it comes to “abracadabra” strategies. This may have been a great “play fake,” and actually a very seriously planned “abracadabra” strategy: let everybody think he’s determined to right these ships, but in fact, manage a long, slow drowning, while slowly selling off assets, buildings, brands, whatever, at better than the fire sale prices he would have been forced to take had he publicly declared their ultimate death.

A further big hint that this may have been Eddie’s strategy from the very beginning is his total lack of any major capital investments, in store maintenance, renovation or for new store concepts, for example. In fact, a former Sears executive stated that any proposed strategy that did not have cost cutting at its core would get rejected. Furthermore, Eddie is also identifying those things of great value, like the brands and the potential of an online business, and he’s moving them off the sinking ship, where they might live to play another day. A long, well managed death provides a longer period of cash extraction for the benefit of Eddie and other major investors.

But, if the stores are horrible to shop in, and consumers can find the same or better value, for the same or lower prices, plus a better shopping experience, at any one of hundreds of equally compelling competitors, how can he avoid a sudden collapse and the end of his grand cash management strategy?

Well friends, that‘s where the brilliance of Eddie’s “abracadabra” strategy comes in. He’s got to continually sustain a top-line “play-fake” for as long as it takes to manage it into the briny. In short, he’s creating the illusion of a turnaround when in fact he’s managing it down slowly to extract as much value as possible.

And, folks, that could be why, for the past year or so, you can find new “buzz” on almost a daily basis about some new marketing initiative or other. But, keep in mind, if these are a part of the “play-fake,” they are not requiring any substantial capital investments.

So, what are these initiatives, and are they, in fact, brilliant illusions to sustain the “play-fake,” or are they “bonkers” strategies or genuine “hail Mary” attempts to right the ships and grow the business?

Now, we will look at some of these initiatives, which will lead us to a final opinion of what “fast buck Eddie” is up to.

“BONKERS”??

Remember the “Softer Side of Sears” advertising slogan in the 1990s, which was to make Sears a “go-to” destination for apparel? Indeed, they ran a super campaign, which by itself was very powerful. Sears’ historic male positioning as the primary place for hard goods, tools and appliances, sought a more feminine balance. To cut to the chase, it worked for a while, arguably because they doubled down on increasing the amount of space and therefore, inventory of apparel. And, then it didn’t work anymore.

Then in 2002, under another CEO, and after failing through one chief merchant after another, Sears paid a hefty premium to acquire Lands’ End (LND). That “preppy” brand simply did not fit with Sears’ more promotional positioning. Sears did more to dilute the Land’s End brand than the hoped for opposite effect.

Since its pinnacle of Wal-Mart-sized dominance in the 60’s and 70’s, Sears has never gotten apparel “right.” In fact, last May during the company’s annual meeting, Mr. Lampert stated: “If we could turn apparel around, it would be huge for the company.”
So, guess what? Is this just another re-arranging of the deck chairs on the “Titanic,” or a serious turnaround strategy?

“THE MANY SIDES OF ME”

In September Sears launched “The Many Sides of Me” advertising campaign, which will support a hodge- podge of apparel and fashion initiatives that all appear to be separate tactical ideas thrown against the wall to see which of them sticks. According to their press release this effort “celebrates the multidimensional nature of women and re-launches the Sears brand as a fashion destination.”

A fashion destination? I don’t think so. The word “re-launches” also suggests they had once been a fashion destination. Well, not in modern times. As I said, you’d have to reach back a half century.

They go on to say it’s a “strategic effort to transform its soft-lines businesses and emotionally re-engage women in the Sears brand.” RE-engage? Again, look back fifty years for the last time they engaged women with fashion.

Finally, Sears’ EVP of Operating and Support Businesses, Scott Freidheim said: “with this launch, we’re on a path to feminize, energize and digitize the Sears soft side brand positioning.”

Ooooo-kay! And, I’m glad they added the word “digitize.” It makes me understand that they are “with it” when it comes to e-commerce.

AN INTEGRATED STRATEGY, OR LOOSELY COBBLED TACTICS?

First of all, before we even get to “the many sides” of the many initiatives, Sears moved its apparel buying and merchandising offices to San Francisco. Well, that makes a lot of sense. The very first time Sears’ fashion and apparel business imploded was in the early 1980’s, when they moved their merchandising headquarters out of New York to Chicago. However, back then there was something to implode. As I mentioned, they did have an apparel strategy and branded business that was working. What is there to implode this time? I guess the good news is that there’s not much to lose.

So, what’s going on? Well, for one, they are going to focus on the teen business. I guess their thought process is that they can steal share from the likes of the fast-fashion specialists like Forever 21, H&M and Zara, and other brands like Aeropostale (ARO) and A&F (ANF).

By the way, and another reason to question any cohesive strategy development, Sears’ recent space leasing to Forever 21, was just that: leasing space. It was not a mutually planned “shop-in-shop” concept to create a synergy. In fact, it’s an adjacent space, employing its own sales people, with its own payment and receipt system. And, it was reported that there are conflicting accounts about whether Forever 21 customers can enter through the Sears store. Now, what sense does this make? Maybe Sears believes that Forever 21 will build traffic next to their store and therefore, some of those teens will drop into Sears while in the neighborhood. Go figure.

Well, they are moving their teen apparel closer to the mall entrances of 200 stores in the major cities, and are contemporizing the presentation with runway groupings of mannequins, spiffy presentations, including TVs playing music videos. They are also delivering new lines every six weeks versus every six months.

Okay, on to many other sides to the many initiatives. Sears partnered with NEXT, the British fashion retailer for brand exclusivity for men’s and women’s shoes, apparel and accessories in the U.S.

The British brand, French Connection UK, through Li & Fung’s Regatta division, launched an exclusive brand for Sears called UK Style by French Connection offering contemporary apparel and accessories for men, women and children. The brand will be featured in UK Style by French Connection boutiques in 500 Sears’ locations in early 2011.

Here and there, Sears has other “chairs” it’s moving around: Online contests, layaway plans, home delivery for all retailers in major markets, 12 Edwin Watts Golf shops within select stores (Hmmm—just as most golf clubs are losing members in droves), a Sears Hometown Store program (owned and operated by local residents), a waste reduction program, a “cash for appliances” recycling project, and other such stuff.

I ask: are all of these integrated strategies or loosely cobbled tactics in search of a strategy?

MEANWHILE, “ROME IS BURNING”

While all of these ad hoc initiatives are bleeding time, energy, dollars and focus, Sears’ once vaunted appliance business, and core to what the Sears brand best stands for as well as its most significant revenue generator, is taking a drubbing. Lowe’s and Home Depot have been largely responsible for stealing 10 percentage points from Sears’ 40 percent share of the appliance business just a decade ago. Now, at about a 30 percent share, and still the largest purveyor of appliances, it’s unlikely to hold that position much longer. Lowe’s alone increased their share just last year by 4 percentage points, now owning about a 20% share. With cleaner stores, more selection and many new stores, Lowe’s will not take long to outdo Sears.

Once again, Sears blames the economy, discounts and distribution problems for its recent declines in business.

So, here we are again: thousands of days late and billions of dollars short, indeed as “Rome is burning,” JCPenney (JCP), Kohl’s (KSS), Target (TGT), the various apparel specialty chains, Lowe’s (LOW), Home Depot (HD) and others continue to steal customers and share away from Sears.

BRILLIANCE OR “BONKERS”

Okay, it is now time to weigh the debate:

Is he the master of magic proactively and brilliantly managing the ultimate demise of Sears, or as he originally declared, attempting to bring the brands back to relevance through the use of arguably “bonker-like” initiatives?

You decide for yourself, of course, but I believe that Mr. Lampert, shortly after forming Sears Holdings, genuinely believed he could and would turn those businesses around. However, by the time he segmented the Sears enterprise into four pieces (brands, stores, marketing and supply chain), securitized the major brands, and announced a wholesale strategy for those brands, he knew he was on the Titanic.

So, the final “abracadabra” is to keep it afloat as long as it takes to get as many assets off the ship that he can sell or re-direct, and yes, somewhat altruistically, to get as many people into lifeboats or on another ship, saving them from going under with it.
Regardless, “fast buck Eddie” is brilliant and will live, and live well, to fight another day.