Lampert vs. Lemman

[Liberty]

http://oddlotinvest.wordpress.com/2014/01/11/lamperts-lemon-and-lemmans-lemonade-the-difference-between-value-creation-and-destruction/

 

I thought this blog post was interesting. It starts by looking at media coverage of both Lampert and Lemman and finds that they both have similar approaches, despite articles by the same publication published one montha apart using the same types of strategies to explain both success and failure.

 

Seems like a good example of the halo effect; the same thing will be seen in a completely different light depending on whether you are currently succeeding or not. If things ever turn around at SHLD, I'm sure the media will use the same facts to explain a different outcome..

 

But I think the conclusion of the blog post also matters a lot: A jockey will only be as good as his horse. Lampert picked a much tougher business with Sears than Lemman with Heinz...

[ni-co]

Great post, thank you for sharing, Liberty! Almost missed it.

 

I fully agree with the media analysis part of it. However, the theme of retailing being a "lemon business" is so common sensical right now that I become more and more suspicious about it. It's true: it is a commodity business. Yet, the Walton family squeezed this lemon quite successfully, so did the Albrecht brothers (Aldi) in Germany (by far the richest Germans). The richest Spanish, Ortega (Inditex), is also retailer. What they all have in common is embracing low cost strategies – which makes perfect sense in a commodity business. It seems to me, that this exactly what ESL is aiming at, too.

[Liberty]

What they all have in common is embracing low cost strategies – which makes perfect sense in a commodity business. It seems to me, that this exactly what ESL is aiming at, too.

 

It probably helped Walton that they built the company from the ground up with a culture of low-costs, with basically no legacy problems, at a time when most of the competition was still high-cost and high-margins.

 

Sears is in a more difficult position. They are starting from a high-cost business with lots of legacy issues (including the company's culture), and their competition has embraced low-costs and efficiency decades ago.

 

Not saying they can't do it, but the starting point seems quite different.

 

I'm not very familiar with the history of retailing, especially outside North-America. Did any of these other successful retailers start with a big legacy business and turn it around, or were they all built from the ground up?

[ni-co]

Agreed. At least Aldi and Zara (Inditex) have been built from the ground up as low cost retailers. It's difficult to change culture, for sure. At least it's a special situation at Sears as you effectively have a new owner controlling the company. I think that's very rare.