Many people think of Sears(SHLD)as that old line retailer who had those big thick catalogues that came out every year that offered a zillion items inside its pages. Those days have been replaced by the internet + other big box retailers such as Walmart and Target. What many people including investors don't realize that underneath this stodgy retailer breathe a different animal. Sure Sears is still a retailer with stores everywhere. But it is not just any retailer. Sears is comprised of Sears, K-Mart and Sears Canada(70% owned subsidiary). Sears is the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics , automotive repair and maintenance. Their main brands are Kennmore, Craftsman, and DieHard. They also have several different lines of apparel such as Lands' End, Jaclyn Smith and Joe Boxer, they also offer Apostrophe, Covington Brands and Martha Stewart Everyday products. Sears is the nations largest provider of home services, with more than 13 million service calls made annually. ESL Investments Inc a privately owned hedge fund run by famous value investor Eddie Lampert is the man running the show. Lampert has a 20 year track record of 20% annually. Besides being Sears Holdings largest shareholder he has sizable stakes in AutoZone(AZO), AutoNation(AN), Home Depot(HD), and Citigroup(C). Sears is ranked number eight in the U.S. for internet retail sales. Currently Sears trades at .60 book value (48.50 per share/ 80.80 book value per share). The company made 49 billion over last 12 months with a market cap of 6 billion. The company has 1.5 billion in cash with a low debt/equity ratio compared to its pier group. The company has been buying back shares in the open market which should further strenghten shareholder value. Lastly Sears sits on a huge real estate portfolio that is valued at $50 per share to over $100 per share.
Cash = 1.5 bil
Real Estate = 6 bil + (low estimate)
Lands'End = 1.5 bil +
Service Call Unit = 1.3 bil (13mil service calls a year @ $100 per call) low estimate
Total = 10.3 bil/126.4 mil shares = $81.50 per share
These figures do not include the values of the Kennmore, Craftsman, and DieHard brands that could be sold off or sold through different chains like Home Depot, Walmart, Target and AutoZone or different distribution channels which would increase revenue and put a much higher value on the company.
The author suggest further research before investing.
STOCKMANMARC
Good post. I've read a few other articles that state how under appreciated Sears is.
ReplyDeleteHowever, my stance is that Sears is an asset play, and asset plays usually take a long long time for anyone to realise. Sometimes it just continues to go unnoticed, which is why I am not purchasing Sears.
Jae
ReplyDeleteTrue, Sears looks more like a asset play however I think the only asset being recognized right now is the real estate and and their retail and brand names are being thrown out the door.