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The euphoria surrounding Apple’s (NASDAQ:AAPL) App Store success has caused investors to search high and low for stocks of companies that can take advantage of the mobile platform. In 2010, the big winners on this app revolution thesis were Netflix (NASDAQ:NFLX) and Priceline (NASDAQ:PCLN), two companies that were able to leverage mobile apps into actual growth. These stocks have rewarded investors with 280% and 110% returns, respectively.

In 2011, we have narrowed in on Sirius XM (NASDAQ:SIRI) as one of our favorite mobile app plays, and today we are ready to copy you on another favorite. If I was given the responsibility of resurrecting a retailer for the mobile app era, I would be doing exactly what chairman Eddie Lampert is doing with Sears (NASDAQ:SHLD). For the first time since the Sears/Kmart merger in 2004, it looks like Lampert might actually be a competitive threat. Consider the following seven elements of the new Sears business model that have me thinking Sears finally has a chance to reverse its multiyear revenue drop:

1. Sears offers innovative mobile apps. Lampert’s mygofer web shopping service is designed for mobile users living in a busy world. With mygofer, you can order groceries, household items, cleaning supplies, electronics, prescriptions, etc., then pick them up in-store or have them delivered to your home or office the same day. Mygofer is able to consolidate items from multiple stores into a single delivery location. At the most recent shareholders' meeting, Lampert illustrated how one could use mygofer by creating "Eddie's grocery list" of milk, Kleenex and allergy pills, bought the goods online at Kmart's MyGofer in-store pickup service, and showed the audience how it all could be done from their seats with an iPhone.

On December 28, Imran Jooma, president of eCommerce at Sears Holdings, announced that millions of customers chose to use the new online offering during the holiday season. “Every online shopping feature we offer, from 'buy online, pick up in-store,' and mobile shopping to Personal Shopper, is available because we are dedicated to making customers' online shopping experiences simple and convenient for their busy lives. More customers than ever preferred to skip the wait and get their orders instantly by using buy online, pick up in-store on sears.com and kmart.com powered by mygofer. 48 to 72 hours of waiting were saved for every one customer who used 'buy online, pick up in-store' instead of waiting for the orders to be shipped. It's thrilling to see all the positive feedback from customers utilizing many of our online shopping features this holiday season."

Sears obviously needs to do things a little differently if it hopes to regain its former glory. An effective app presence might be the only chance. If it can build on this holiday shopping momentum, investors will be quick to jump back on Lampert’s bandwagon.

2. Sears has the existing infrastructure to make new growth a reality. Sears isn’t the first to have this idea of using an app to speed up the mundane shopping process, but it is the first company with over 3,000 U.S. retail locations to give it a real try. Sears is positioning itself to be a leader of a new niche that lies somewhere between the shipping-only model of Amazon (NASDAQ:AMZN) and the physical retail experience of Wal-Mart (NYSE:WMT) and Target (NYSE:TGT).

Lampert has known ever since he merged Kmart and Sears that his company would never be able to compete directly with these proven winners. Over the last five years, the company’s revenue has dropped more than 10 percent while Wal-Mart revenue is up 31 percent and Target revenue is up 24 percent. In 2009, Lampert invested only 0.82 percent of sales back into the brick and mortar stores -- a fraction of the spending at Target, Walmart, J.C. Penney (NYSE:JCP) and even publicly-traded dollar stores. Credit Suisse (NYSE:CS) analyst Gary Balter reinforced this lack of progress when he said, “If you’re Sears, you’ve got a problem because you’re trying to sell a product in a dilapidated building, and Kmart stores are about a quarter the sales productivity of Wal-Mart. How do you compete?”

The simple answer to Balter’s question is that you cannot compete -- at least not in an offline world. But what about an online world? What about a mobile world? Lampert is no idiot. He’s not going to spend money on updating his stores when he knows they are going to be turned into glorified warehouses over the next decade. If the retailer of the future is less concerned with brick and mortar appearance and more concerned with customer convenience, than Sears’ worn-down stores aren’t as big of a liability. All of a sudden the large amount of stores becomes a great asset against the up and comers.

3. Sears Marketplace can be a viable competitor to Amazon. Sears has expanded its website dramatically with the introduction of the Marketplace platform, enabling third party vendors to sell merchandise. To illustrate the scope of Sears Marketplace, Lampert searched for sunglasses during the 2010 shareholders' meeting and pulled up 67,419 choices. "We don't want to wake up some day and find we missed the big trick," he said.

In addition to Marketplace, the company offers Sears2go, Kmart2go, mygofer2go, ManageMyLife and PersonalShopper apps for smart phones and a new interactive Sears app for the iPad. Lampert wants to "get this thing right," and Sears is leading the competition among big box retailers as they all test multiple ideas. Lampert also said there is nothing wrong with making a $5 million mistake, but there is something wrong with making a $500 million dollar mistake. Look for Sears to narrow online initiatives down to the winners in 2011.

4. Sears is expanding its online ecosystem. If you’re serious about developing an online brand, it’s important to create an ecosystem of services. The days of being a one-trick pony are over. Over the holidays, Sears quietly added a video-on-demand service called Alphaline Entertainment, which has movies available the day of the DVD release rather than the standard 28-day wait for Redbox and Netflix.

I’m not sure this will ever provide a significant revenue stream for Sears, but at least it's showing Wall Street that it's serious about becoming a legitimate online retail innovator. Giving away deals for video streaming is a perk that could bring new customers to the Sears platform. I know it sounds ridiculous that Sears would enter the business of online video, but I think it’s time to start viewing this company with a new perspective, as obviously you need online video if you’re going to attract the new generation.

5. Sears’ financial operations are managed with hedge fund savvy. Lampert, Lampert, and more Lampert. You don’t become one of the greatest hedge fund managers of our time without the ability to be one step ahead of the pack. Over the last six years, Lampert has been contracting the number of stores while expanding their operations. He has shown tremendous discipline in his stock buyback program even in the midst of the great recession.

Although sales and profits have been in decline, the number of shares outstanding continues to shrink. In the most recent quarter, Sears purchased another 1.2 million shares, which drops the total share count down to 108.8 million. Sears has bought back an average of 10 million shares over the last five years. Lampert and his hedge fund own 65.3 million of those shares, Bruce Berkowitz through his Fairholme Fund owns 14.7 million shares (Berkowitz mentioned his rationale for owning Sears in a 2010 Bloomberg interview by saying, “Right now you’re getting Eddie Lampert’s future for free"), and there are approximately 12.6 million shares sold short, which equals 44% of the remaining float.

This is exactly the kind of situation a brilliant hedge fund manager would love to find himself in. Lampert has worked diligently to create this once-in-a-lifetime opportunity where any kind of good news will result in a supply shortage of shares. That’s quite a recipe for some insane volatility in SHLD going forward. If Lampert can show investors that his online initiative is working to generate growth, this stock will skyrocket because of its anemic float.

6. Sears is working to leverage the brand. "I don't believe it has been an optimal strategy historically to sell Craftsman and Kenmore appliances only at Sears stores," remarked Lampert in the shareholder Q&A. "When I think of the great brands of the world, Apple and Nike (NYSE:NKE) both operate stores and sell to third parties. Their focus is, 'How do we expand our customer base?' I believe that the Craftsman and Kenmore customer is much broader then the Sears customer."

Sears recently announced a new partnership with the Kardashian sisters to launch an exclusive fashion line of apparel, handbags, accessories and shoes in August 2011 that could be a great catalyst, in conjunction with Lampert’s plan to extend the Craftsman and Kenmore brands, to put an end to year over year sales weakness. Sears has also been able to sublease space to the popular teenage retailer Forever 21 and is working to lease other spaces to other brands. This management team is not sitting still.

7. Smart appliances will drive sales in 2011. We’ve talked about the innovative mygofer service, the massive retail presence that could enable Sears to thrive in this new era, the different apps and websites, the movie streaming service, the declining float, and of course the Kardashian sisters -- but perhaps the best chance of resurrecting the Sears brand will come from its bread and butter appliances division.

Kenmore introduced some revolutionary prototypes at this year's Consumer Electronics Show that are expected to be available next year. Its new oven can be controlled by a smart phone app allowing the user to adjust the temperature or turn it on or off from anywhere. The app can also control the ice machine inside the fridge and report how often the door’s been opened. Other features include remote diagnostics that allow parts to be ordered and delivered before a serviceman arrives. Cameras will be placed inside the oven to monitor cooking. This year, everyone is excited about apps for smart phones and computers. Next year the excitement might move to smart appliances, which would be a major victory for Sears.

In conclusion, Sears and Kmart stores aren't going away, but they are in need of a new identity. "Five years from now, I believe this company, to some people, will be unrecognizable to what it was 30 years ago," said Lampert. “Shopping behavior is changing, and the Internet will be a key component of whatever shape Sears takes."

We believe that Lampert’s innovative efforts will pay off, and that Sears is on the verge of achieving newfound success as society continues to adopt mobile apps into its everyday lives.

Disclosure: I am long SHLD, AAPL, SIRI.

Source: Sears: An Apple App Play for 2011