Another dismal quarter shows that Sears Holdings' strategy is failing. The retailer's stock has fallen 36% in the past year. Rivals are eating its lunch. And it missed out on reaping potential gains from the credit and property booms. As Sears's top shareholder, activist investor Edward Lampert should fire the chairman and architect of this woeful strategy -- himself.
For more comment by BreakingViews, visit www.breakingviews.com.Mr. Lampert's approach was simple, if radical by industry standards. Retailers, he argued, invest too much to meet Wall Street's expectations. If capital expenditures were cut, returns on investment would go up. It hasn't quite worked out that way. Sure, the company invests less than rivals -- its capital expenditure in the past three years has averaged about 1% of sales. Rival Wal-Mart Stores spends five times as much. But its declining sales and earnings show the perils of underinvestment.
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For more comment by BreakingViews, visit www.breakingviews.com.Mr. Lampert's approach was simple, if radical by industry standards. Retailers, he argued, invest too much to meet Wall Street's expectations. If capital expenditures were cut, returns on investment would go up. It hasn't quite worked out that way. Sure, the company invests less than rivals -- its capital expenditure in the past three years has averaged about 1% of sales. Rival Wal-Mart Stores spends five times as much. But its declining sales and earnings show the perils of underinvestment.
Read the complet earticle
