Even before the onslaught of e-commerce players like Amazon (NASDAQ:AMZN), the retail industry had been brutal. We’ve seen many giants vanish, such as WT Grant, Wannamakers and Montgomery Ward. They weren’t able to make the tough choices and evolve their businesses. Instead, other companies filled the void, such as Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD).

Despite all this, an ailing retailer can pull off a successful turnaround. However, it often requires the discipline and focus of a strong owner, such as a private equity firm. Just look at Texas Pacific Group, Leonard Green & Partners and KKR (NYSE:KKR). They were able to revive companies like J. Crew and Petco.

So, can the same be the case for Sears Holdings (NASDAQ:SHLD)? With a market cap of only $3.45 billion, it wouldn’t be tough to get the financing for a going-private transaction. Based on its latest balance sheet, Sears has a net book value of $7.7 billion. Interestingly enough, this likely understates the true market value of Sears’ portfolio of assets. Consider the following:

Sears Canada: Based on its listing on the Toronto Stock Exchange, the value is over $1.8 billion.

Real estate: Sears owns 850 locations, 12 distributions centers and two office buildings. Because of the way real estate is accounted for — based on the original costs — the private market value is likely to be much higher.

But even without making these adjustments, Sears still looks undervalued. This should alert hedge fund manager Edward Lampert, who owns 60% of the company’s shares. As a devoted follower of value investing, would this be an ideal time for Lampert to buy the rest of Sears and take it private?

To be even more cynical, might the latest announcement from the company, which calls for lower cash flows, be a clever way to drive its value down? Perhaps so.

Now it’s true that many of Sears’ locations are in economically distressed areas. But then again, isn’t this a benefit? Keep in mind that dollar-store operators, like Dollar General (NYSE:DG) and Dollar Tree (NASDAQ:DLTR), have done quite well in this market segment. So why not Sears? Maybe it can refocus its merchandise and change its store footprint?

At the same time, Sears might have another catalyst: appliances. When the real estate market comes back — and consumers get more confidence — that business is likely to show improvement. It could actually represent a nice boost to cash flows.

Yet to get things moving, Lampert needs to make some big changes. While he may be a savvy hedge fund manager, he really doesn’t have the skills of a roll-up-your-sleeves operator. Since investing in Sears in 2005, the comparable-store sales have declined each year.

In other words, Lampert could use the help of a private equity firm that understands how to get value from a distressed asset. It’s a unique skill, but it could be critical for a turnaround.

Tom Taulli runs the InvestorPlace blog “IPOPlaybook,” a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned stocks.