Millennials may not be familiar with Sears, but ask anyone over 40 years of age and they will be able to share a Sears story or two. I got my first credit card from Sears. I probably used it a hand full of times, but being approved all on my own made me feel so adult. When I bought my first house, the only company that I called for appliances was Sears. From washer and dryer to refrigerator, I waited for the Black Friday sale and they hooked me.
Once the nation’s retailer, the 125 year old Sears, filed for bankruptcy protection in the early hours of October 15, 2018. Kmart acquired Sears back in 2004 for $11 billion dollars. At the time, the merger of two of the nation’s largest retailers seemed like it would make them a superpower in the retail space. Sears hasn’t made money in the last 7 years.
When is the last time you visited a Sears store or their website? Were the shelves stocked with items you would purchase? My last visit was a forced visit with a friend. I normally like to approach a visit to a department store like a sightseeing excursion. I made a quick assessment at the door that there was nothing I wanted to see.
The CEO, Eddie Lampert owns 31% of the outstanding shares of the company stock and his hedge fund owns an additional 19%. That’s a combined 50%. This is the perfect argument for diversification. The company’s stock price is currently $0.35. Yes; that’s less than a dollar. A year ago, the stock price was $6.79. I’m hopeful that Mr. Lampert has other investments, but that is a large percentage of ownership in one company. This is a scenario where he receives compensation from the company and also has to rely on positive performance of the company stock since he is an investor. That is banking a lot on his company.
If you’re asking what how this correlates to you as an individual, we’re turning that corner right now. When I think of the Sears story, I think of how critical evolution and prudent decision making are to success. Over the years, the company has poured hundreds of millions of dollars into the same failing strategy when what was actually needed was change. Change to make them relevant in their space. Take a look at your life. Are you pouring in money and effort into a failing strategy? Is time standing still for you? Are you becoming more or less relevant? There is a time to pivot. When I relocated, to care for my aging and ill parents, time seemed to stand still. I had no idea what I was doing with my life, where I was going, or what I wanted. My attention was solely on my parents and I lost myself within caring for them. It wasn’t until I committed to working on myself, getting to the core of why I exist and moving forward to achieve my goals did I evolve. Looking at my goals gave me a reminder of what I was to be doing. Like the Bible says, “write the vision, and make it plain upon tables, that he may run that readeth it”. Reading the vision gave me something to run with. Given that the vision is something forward looking, I couldn’t run and not evolve.
The final point is diversification. In terms of revenue streams, receiving your paycheck from the same company that you rely on for increases in stock performance is risky. It’s great if it works, but what happens if the company fails? You don’t want to be in a situation where you are no longer receiving a paycheck from the company and now the stock that you relied on has tanked. I speak from experience. When companies that were doing so well like MCI, WorldCom, and Enron all vaporized in front of our eyes, I had a front row seat because I worked with the companies retirement programs. I had the sad and eye opening experience of speaking to the employees of these no longer existing companies. They would call my department in an attempt to take their money out of the company stock, but it was too late. People lost their entire life savings. That is probably why so many people stay out of the stock markets in its entirety. That’s not the solution. We don’t have a crystal ball that can predict the future performance of the markets. What we can do is make decisions that are prudent. That means, we think about the potential outcome of the decision on our future. Ask yourself the following questions: What will happen if the investment goes really well? What will happen if the investment tanks? Consider both sides of the coin when making any decision.
Sears lost their way. They became less and less relevant and sometimes we as individuals go through the same thing. Sears thought the answer was to keep pouring money into the company without changing the strategy. Throwing good money into a bad or outdated strategy is no different than using cash to feed a bonfire. Let’s identify the areas in our lives where we need to course correct, put a plan in place, and take action to achieve our goals.