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Subject:  Re: Sears Date:  12/27/2011  5:43 PM
Author:  LeKitKat Number:  8764 of 25497

Lampert has steadfastly refused to invest in stores. He did well with Autozone using this strategy and massive share repurchases. The following article gives a hint why that worked for him with AZO but has completely failed with SHLD

Using the same strategy across acquisitions in a one size fits all mentality does not work. I am wondering if Biglari may want to take heed.

Amazingly, Sear's has spent $5.2 billion over the past five years buying back its stock, more than twice as much as on capital investment. That strategy, of buying back stock and keeping capital expenditures low, worked well for Mr. Lampert at Autozone Inc. He began amassing shares of that company in the late 1990s, and engineered a management shakeup in 2001.

But selling car parts and accessories is not the same as running a retailer. In general retail, customers put a higher premium on service, the competition from the likes of Lowe's Cos. and Target Inc. is intense, and an inventory miss doesn't mean having an excess of mufflers that will eventually sell but an excess of ear muffs that will never sell.

While retailers generally spend $6 to $8 per square foot a year on updating their stores, Sear's spends only about $1.50 to $2, notes ISI analyst Greg Melich. That is not even enough to keep up with depreciation and amortization.

Clearly, Sears needs to invest in its operations. But it also needs an experienced retail hand to run it—without interference from Mr. Lampert. As it is now, Mr. Lampert's cooking isn't fit for eating.
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