RIP Sears: The Original Amazon

I wrote this piece in the summer of 2017 as rumors of an imminent Sears bankruptcy filing swirled. Sears managed to hang on for another 15 months. Now that Sears is officially dead, I thought it would be interesting to rerun this look at how owner/CEO Eddie Lampert's moves to protect his own interests helped bring down this iconic business. You are receiving this email because you subscribed to Wealth Daily. [Click here]( to manage your e-mail preferences. [Wealth Daily logo] RIP Sears: The Original Amazon [Briton Ryle Photo] By [Briton Ryle]( Written Oct. 17, 2018 Editor's Note: I wrote this piece in the summer of 2017 as rumors of an imminent Sears bankruptcy filing swirled. Sears managed to hang on for another 15 months. Now that Sears is officially dead, I thought it would be interesting to rerun this look at how owner/CEO Eddie Lampert's moves to protect his own interests helped bring down this iconic business. --------------------------------------------------------------- As a kid in the early 1970s, I used to surf the original Amazon's "website," fantasizing about all the stuff I would buy as I saved up my $5 allowance. A minibike topped the list. A new bike was also up there. I can still remember the brand-new smell of the snow boots I got as I took them out of the box. I was so happy that I slept with them that night. Of course, I didn't actually order from Amazon. It was Sears, and the "website" was the catalog. The first catalog came out in 1888, selling watches and jewelry. By 1896, Sears had its own Prime, selling the catalog for a quarter, which you could get back if you spent $10 or more. Sears shut down its "website" in 1996. And now it looks like it will shut its doors sometime this summer. We can thank a hedge fund guy named Eddie Lampert for driving this iconic American company into the ground. Now, obviously, Amazon has made it tough for all retailers to compete these days. Amazon has driven a bunch of companies into bankruptcy. When it just sold books, it crushed Borders and nearly took down Barnes & Noble. As it expanded its focus, it took out a bunch more. Ironically, as Kmart failed, Lampert and Sears stepped in and took it over. Bad move — now Sears is going down. In fairness, it's not just Amazon that's killing retailers. They over-expanded over the last couple of decades to the point where the U.S. has three times the retail square footage per capita than any other country. Operating costs are just too high. But Sears is a bit of special case. Eddie Lampert has been gutting the company and will make a lot of money as it goes under. Did you know Amazon is legally obligated to pay billions of dollars to people every year? The company has grown so big that it's forced to pay a "tax" just to continue operating. And this year, a group of in-the-know investors will split $1.5 BILLION in payments. The investors are taking advantage of a little-known strategy that'll get them a share of Amazon's mandated payouts. And now, you can get in on this amazing opportunity, too. [Click here to learn how.]( Lampert's Checkered Past Eddie Lampert got his start at — where else? — Goldman Sachs in the mid-1980s. He was early to the hedge fund game, starting his ESL Investments firm in 1988. In 2004, he was the first hedge fund guy to make $1 billion in a year. By 2006, he was worth over $3 billion. Lampert's style was to invest heavily in a small number of companies. And he was good at it, drawing comparisons to Warren Buffett. But here's the thing: This kind of success tends to go to your head. You start to think you can do it all. And that's probably what made Lampert take over as Sears CEO in 2013. At the time, Sears represented about a third of ESL's $4.6 billion in investments. By 2016, Lampert's fortune had fallen to around $2 billion. And, yeah, it was largely because of his massive exposure to Sears (he owned 28% at the time). If you looked at the situation from the outside, you might think Lampert was going down with the ship. When he took over, annual revenue was around $40 billion. Analysts expect just $17 billion for current fiscal year. Lampert has lent Sears at least $700 million and upped his stake to 49%. Stands to reason that he is losing right along with Sears... Now, Amazon will do $168 billion or so in revenue this year. That's a whole lot better than Sears ever could've imagined in its best years. And it's fair to say that some of the revenue has been taken directly from Sears. But the fall of Sears is a bit more complicated... Because those loans to the company and the amount of shares he owns has given Lampert the opportunity to gut the company for his own benefit. 75 Million Americans to See Their Retirement Ruined 75 million baby boomers are set to retire over the next 10 years. And there’s one thing they all have in common: Their retirement dreams could be destroyed overnight. A market OMEN has just pinpointed December 19th as the day our economy comes to a screeching halt. It’s predicted every recession of the past 40 years and is now indicating a market crash WORSE than 2008. It will wipe out trillions of dollars just in time for Christmas. Yet you still have time to prepare. See THE OMEN for yourself and discover how to [protect your savings here](. How to Profit from Failure Part of the reason Sears revenue has fallen so dramatically is that Lampert sold off key assets to raise cash for the company. Sears spun out Land's End in 2014. Land's End is currently worth around $360 million. In 2015, it sold 235 stores to a real estate investment trust called Seritage Growth Properties for $2.7 billion. Sears is then leasing back those stores for $134 million a year (plus 2% a year inflation raises). And Sears spun out part of Sears Canada in 2012, which is currently worth around $80 million. But, of course, Lampert's hedge fund owns 59% of Land's End. Lampert also owns 43% of Seritage Growth Partners. And he owns 45% of Sears Canada. And those loans he's made? They are secured by real estate, which Lampert will get in a bankruptcy. And since he is the biggest creditor, he will get the biggest pieces when the inevitable happens. Then there's the Craftsman tool division sale to Black & Decker from January 2017. That deal brought $900 million to Sears. But not all at once. It got a down payment of $525 million. And it will get another $250 million in three years plus 3% of all Craftsman sales for the next 15 years. That's a sneaky deal, because it's highly unlikely that Sears is around in three months, let alone three years, to collect that loot. Which means — you guessed it — as the biggest creditor, Lampert will be getting checks for a long time. The Big Lie In a letter from March 9 of this year, Lampert wrote, “I firmly believe we will succeed in becoming a new kind of retailer as we provide real value to members with value offerings, personalized services and easy access to the brands, convenience and value they want, whenever and wherever they want.” This is basically a lie. He knows Sears will be bankrupt. He has assured it by selling off the most valuable pieces. And he will profit from it when the inevitable happens. Sears' board responded with a letter to shareholders dated March 22 that read: “Affiliates of our Chairman and Chief Executive Officer, whose interests may be different than your interests, exert substantial influence over our Company.” That's Lampert they are talking about. The ship is going down, but the captain will definitely not be on board. --------------------------------------------------------------- Over the last year since this article was written, the competitive threat from Amazon has ballooned, sealing Sears' fate. From the outside, Amazon looks like it takes no prisoners. But the truth is, it has created alliances and programs that make it very beneficial to side with Amazon. One program, which I've dubbed Prime Profits, pays out nearly a billion dollars a year in passive income to ordinary Americans. There's no approval process or anything like that. It takes just a few minutes to get set up, and once you do, it's the ultimate "set it and forget it" income. I've got all the details on how you can [tap into the billion-dollar Prime Profits program right here](. Until next time, [brit''s sig] Briton Ryle [[follow basic]@BritonRyle on Twitter]( A 21-year veteran of the newsletter business, Briton Ryle is the editor of [The Wealth Advisory]( income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the [Real Income Trader]( advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the [Wealth Daily]( e-letter. To learn more about Briton, [click here.]( Enjoy reading this article? [Click here]( to like it and receive similar articles to read! Browse Our Archives [Facebook Gets Hacked]( [Has the Fed Gone Crazy?]( [Is it Time to Panic About Stocks? This Indicator Says No]( [Good Investments in Bad Markets]( [It Consumes Half of All Electricity Mankind Generates]( --------------------------------------------------------------- This email was sent to {EMAIL}. It is not our intention to send email to anyone who doesn't want it. If you're not sure why you've received this e-letter, or no longer wish to receive it, you may [unsubscribe here](, and view our privacy policy and information on how to manage your subscription. To ensure that you receive future issues of Wealth Daily, please add newsletter@wealthdaily.com to your address book or whitelist within your spam settings. For customer service questions or issues, please contact us for assistance. [Wealth Daily](, Copyright © 2018, [Angel Publishing LLC](. All rights reserved. 111 Market Place #720 Baltimore, MD 21202. The content of this site may not be redistributed without the express written consent of Angel Publishing. Individual editorials, articles and essays appearing on this site may be republished, but only with full attribution of both the author and Wealth Daily as well as a link to www.wealthdaily.com. Your privacy is important to us -- we will never rent or sell your e-mail or personal information. [View our privacy policy here.]( No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. [Wealth Daily]( does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question.