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TheStreet Open House

Sears Needs New Leadership Immediately, if Not Sooner

Stocks in this article: JCPSHLDWMTTGTBBYEBAYAMZNGSAAPLBBY

NEW YORK (TheStreet) -- J.C. Penney (JCP) was a painful disaster for Bill Ackman and his hedge fund investors in 2013. Ackman had the right idea but the wrong retailer. What if, instead, he had set his sights on Sears Holdings (SHLD)? I think his plan to revitalize a failing retailer would have been genius with the right fit. Sears enjoys many competitive advantages compared to smaller competitor J.C. Penney.

One needn't look any further than each company's products to know that Sears has the greater potential. You probably can't name two principal household brands owned by Penney's, but Sears owns Craftsman, DieHard, Kenmore and others.

It's difficult to imagine now, but it wasn't that long ago that Sears was the largest American retailer, before it surrendered to Wal-Mart (WMT). Sears continued its slide towards irrelevance as Target (TGT), Best Buy (BBY), Ebay (EBAY) and Amazon (AMZN) surpassed the retailer in total merchandise sales.

Sears has the tools, but not the craftsman to get the job done. The company is missing the one element needed most: leadership focusing on customer service. Current CEO and chairman of the board Edward Lampert may have a keen grasp on business finance from his time at Goldman Sachs (GS), but in retail and merchandising, he's a rudderless boat. Since 2010, Sears, a.k.a. the S.S. Going Nowhere, has drifted mostly lower, and losses continue to erode shareholder value.

It's time for new leadership at Sears. Someone with the skill set of Ron Johnson would make an excellent fit. After his time at Target in merchandising and at Apple (AAPL), Johnson is well prepared to take the reins at Sears. At J.C. Penney, Johnson was fighting with one hand tied behind his back. Simply put, J.C. Penney doesn't have brand pricing power that he can monetize as effectively as he could at Sears. Unfortunately for shareholders and employees alike, Lampert's strategy was to bastardize valuable Sears brands to Kmart (also owned by Sears) in an attempt to increase sales.

There are better Kmarts, but in many locations, they're one small step away from flea market status. And TheStreet's Rocco Pendola and Brian Sozzi recently documented the mess at more than one location of Sears and J.C. Penney.

The problem faced by shareholders is that Sears Holdings isn't a financial company, it's a retailer. It appears this fact is lost upon the leadership. As desperate as the front line staff is to perform; they're not given the tools to succeed.

I highlighted a service issue that demonstrated how far the company is willing to allow a customer to fall through the cracks this summer. Sears's problem wasn't pricing, product knowledge, availability, or location. Sears's defects are logistics, customer service and procedure. It shouldn't take two hours to complete a sale for a storage unit and gas grill, and when the order gets screwed up, it shouldn't take several visits and phone calls to get it right.

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