When Edward Lampert purchased a majority stake in the then Kmart Holding Company, it was widely suspected that Lampert was more interested in the valuable real estate owned by Kmart than actually continuing the retail side of the business. Although denied by Kmart leadership at the time, this move signifies that the earlier suspicions were correct.

Integity an issue

This is the second major occurrence that brings into question the integrity of Sears Holding Company leadership. When Lampert masterminded the merger of Sears and Kmart, Lampert and other senior executives at Kmart assured the people of the State of Michigan and the City of Troy that Kmart would keep a "significant presence" in Southeastern Michigan. It was widely thought, and not denied, that this meant the new Sears Holding Company would keep the base of its Kmart discount stores in the Troy area. As time passed it became clear that this was not the intention.

Likewise, the Corporation`s leadership had assured other stakeholders that it was committed to making Kmart a viable retailer. This move, forming a real estate venture, confirms earlier suspicions that the lucrative land Kmart sits on is a major part of the long-term Sears financial plan.

According to filings with the Securities and Exchange Commission, New Plan Excel Realty operates hundreds of strip malls throughout the nation. Wal-Mart is their largest tenant followed by Kroger and then Sears Holdings. New Plan Excel Realty is already working on the redevelopment of three Kmart stores in Memphis and the Sears-owned properties closed in September of 2005.

According to Louis Taylor, a real estate analyst at Deutsche Banc Securities in New York, as quoted in Crain`s Business, "This could start the process in earnest of unlocking the value of the real estate. If the economics are what Sears hopes it will be, I think you`ll see Sears broaden it. Instead of three at a time, they can do a hundred and split it up geographically, or have three or four different real estate companies handle pieces of it. If it works with Kmarts, then why not do it with Sears?"

The numbers

Most industry analyst have expected that lamp or would sell 200 to 300 Sears stores that are falling short of required revenue. However according to a recent report from Morgan Stanley, Sears properties are worth only about $50 a square foot. This is due primarily to their location in malls, which continues to be a lesser desired location for large stores and big boxes. On the other hand Kmart`s properties are estimated to be worth an average of $85 a square foot, according to the same Morgan Stanley report. Kmart`s location or more desirable as many are in well-developed areas where land is at a premium and their locations in strip shopping centers are the main target of big-box retailers. With Kmart already meeting the zoning requirements, the startup time to redevelop an existing Kmart into a new retail establishment is shortened.

Sears Holdings started Sears Essentials soon after the merger of the two retail companies. Many at first thought that Sears Essentials would be the new retail brand for the company - provided Sears Essentials was successful. Although Sears Holdings has not reported holiday sales for the untested retail format, some industry analysts feel that the format is falling short of the sales per square foot required to make the retail format liable.

As a major landlord for the former Kmart Corporation, New Plan Excel Realty was instrumental in redeveloping closed Kmart stores into multi-tenant retail formats and into health clubs and office formats prior to the merger with Sears.

The game of TrustBall?

This development, along with prior experiences with Kmart Corporation dating back to Kmart`s pre-bankrutcy days, shows a continued problem at the company with the integrity of its leadership. This is a major emphasis of the TrustBall? workshop offered by Max Impact. Once trust has come under question, the individual organization involved must go to the TrustBall? on-deck circle before they can enter into a trusting relationship with customers, suppliers, employees, and other stakeholders. It is in the on-deck circle that a batter warms up and prepares for the next at-bat. Once at-bat, the hitter will once again be able to establish trust. However without the proper "warm-up" the batter once again strike out.

If you play the game of TrustBall? correctly, you will be able to move around all the bases and score a homerun - perhaps you will even win the world series of trust.

Conclusion

The leadership of any organization needs to realize that trust is a corporate asset and needs to be treated as an investment. When high trust is present, customer, employee, investor, and supplier loyalty increases to the point that all three can be retained for a lifetime. However when trust is low, productivity and profits are lost and customers seek to do business elsewhere, the best suppliers will no longer deal with you, shareholders will sell and drive down stock prices, and employee turnover - especially among the best employees - will increase.