Underestimate Sears at Your Peril

If Sears Holdings (SHLD - commentary - Cramer's Take) is so bad, why didn't it go down yesterday? Reading the stories this morning about the quarter, you would have thought that the company is going to file soon for Chapter 11. We got tons of descriptions of how bad the stores looked, how Eddie Lampert's strategy of not reinvesting is doomed to cause the chain to be crushed, and how he can't find a CEO.

I think there are a couple of reasons why it didn't go down. First, the company showed inventory control, which is a sign of life, given that everything the company has done since the merger has seemed to be wrong on every front. If they are so stupid, why didn't they have a lot of inventory that they have to write down?

Second, Lampert's spending, or lack of it, didn't seem to have the stores do any worse than anyone else in the category. I didn't see Lowe's (LOW - commentary - Cramer's Take) or Home Depot (HD - commentary - Cramer's Take) do any better.

Finally, there's the question of the shares outstanding and the float. Slowly but surely, Eddie is buying up every single share. This is an $11 billion company. There are 56 million shares that trade, and 33 million are short. But it isn't losing money.

What's upsetting to me is the possibility that any sort of restructuring or asset sales, as much as they were once expected, now seem to have been taken off the table either through indecision, or, at this point, a lack of options. I don't know if this is Lampert's waiting game: pick a new CEO, and maybe he can figure out which Kmart or Sears stores to close or if the previous CEO was so bad -- and judging by the lack of any initiatives at all that worked, that could be a good judgment -- Lampert lacked the feel to make that judgment. Boy, that last CEO did a terrible job, and it is not all Lampert's fault.

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