A Tale of Two Retailers*

If you ever needed to see the contrast between how certain retailers view their businesses, there was no better example than the recent earnings calls from Sears and Kohl's.

The comparison was startling.
Both companies are having a rough stretch right now out there in retaildom. For Sears Holdings, this situation has been going on for the better part of a decade, going back to the time Eddie Lampert - or as I have started calling him, Eddie Money - bought Sears and Kmart and began his slow, gradual dismemberment of the combined entity.

For Kohl's, the downturn is more recent and, frankly, a little more troubling. Kohl's has been one of the best retailers in the country for a very long time, and to see it start to hit the wall this suddenly really shakes things up a lot.

But how each talked about what they were going to do about it and put their respective spins on their situations says volumes about the differences between the two operations.

For Kevin Mansell, ceo of Kohl's - another retail chief who came out of home, by the way - it was all about the company's merchandising. "We lost some of our leadership on the price element of our value equation," he said in a conference call. "We didn't have enough consistent excitement in our merchandise content, and our sense is our marketing message did not cut through, especially in a highly promotional fourth quarter."

This is the way somebody running a retailer talks. Let's fix the product, let's fix the promotional pitch, let's get our marketing working a little better.
Eddie Money took a very different approach. "In my opinion, Sears Holdings has a profit problem, not a liquidity nor an asset problem," he wrote in his shareholder letter, having gone to man-behind-the-curtain mode when it comes to conference calls. "We intend to evaluate other opportunities to separate parts of our portfolio into separately owned companies."

This is how somebody running a hedge fund talks. Let's fix the balance sheet, let's fix the asset base, let's get our portfolio working a little better.
People still don't get that about Eddie Money. The Wall Street Journal, reporting on the bad Sears numbers, once again dredged up the Warren Buffett comparison when talking about Lampert. If I were Warren Buffett, I'd sue all these guys to protect my name. I've met Warren Buffett, and Lampert is no Warren Buffett.

Kohl's will figure out its problems. Its over-emphasis on percentage-off promotions is maxed out and needs to be adjusted. With its closest rival JCPenney clearly taking another route, there is a clear path for Kohl's to differentiate its merchandising position. The Menomonee Posse is too smart to not get this right.

But Sears is a different story altogether. Kohl's knows that if it fixes the store, the finances will follow. Sears wants to fix the finances. Period.
It's the difference between a retailing company and a company in retailing.

* One is actually a retailer and one, well, not so much.