Who’s Running the Store? The Shareholders!

As I understand what’s going on right now with Eddie Lampert, Sears Holdings and ESL Investments, ESL investors are pulling their money out of the hedge fund because they doubt the continued wisdom of backing a sinking ship like Sears. And so, Lampert has reduced his stake in the company he owns and runs, to convince his other audience that he gets their impatience and feels their pain.

In other words, in the broadest of possible strokes, there’s a battle going on at Sears between the management team – led by Lampert – and the investors – led by Lampert.

Retail historians may look back at 2013 as the year of the shareholder. William Ackman set the early pace: He is the ceo of hedge fund Pershing Square Capital as well as director and 18 percent stockholder of JCPenney. Starting in the spring, Ackman began loudly questioning the policies of ceo Ron Johnson, then demanded his resignation. Lots of people had been thinking Johnson had passed his expiration date, but Ackman gobbled up the oxygen in the room.

After Johnson finally resigned, replaced on an interim basis by ex-ceo Mike Ullman, Ackman led the summer-long fight to replace Ullman, even urging Allen Questrom to return to the company. He lost that fight, though, and in August resigned from JCPenney’s board.

Next up was Ricky Sandler, ceo of Eminence Capital, who jumped right into the Men’s Wearhouse situation, beginning with the ouster of George Zimmer this summer. Sandler was pleased with the subsequent takeover offer by Jos. A. Bank; disappointed when Men’s Wearhouse management declined by saying it had a better turnaround strategy; and cheered when Men’s Wearhouse suddenly pivoted and made a takeover offer for Jos. A. Bank. Some say Sandler engineered it. (Turns out Eminence owns stakes in both Men’s Wearhouse and Jos. A. Bank.)

All year, shareholders have loudly voiced their opinions, from the Harris Teeter acquisition by Kroger (against it) to the intemperate statements of Mike Jeffries at Abercrombie & Fitch (fire him).

Modern retail began to take shape when super merchants like Marshall Field, James Cash Penney and Isidore Straus devised ways of creating brands, stores and unique lines of merchandise. Through the ensuing generations – from Stanley Marcus, Marvin Traub and Eugene Ferkauf, to Sam Walton, Les Wexner, Gordon Segal, Lenny Riggio, Joe Mimran, Ralph Lauren, Howard Schultz, John Mackey, Steve Jobs and, yes let’s acknowledge, Jeff Bezos – retail was shaped by ultra hands-on merchants with a vision.

Today, “vision” is considered an impractical luxury in a world run by financial types who count up the balance sheets and see stores as nothing but assets (or, too often these days, depreciating liabilities).

The goal now seems to be to please shareholders. And shareholders are proving to be increasingly hard to please – and they’re saying so.

As a journalist, writer, editor and commentator, Steve Kaufman has been watching the store design industry for 20 years, as editor of both DDI and VMSD magazines. He has seen the business cycle through retailtainment, minimalism, category killers, big boxes, pop-ups, custom stores, global roll-outs, international sourcing, interactive kiosks, the emergence of China, the various definitions of “branding” and Amazon.com. He has reported on the rise of brand concept shops, the demise of brand concept shops and the resurgence of brand concept shops. He has been an eyewitness to the reality that nothing stays the same, except the retailer-shopper relationship.