Friday, February 27, 2009

Slicing up Eddie Lamperts Pie!?$$$

I thought this might be a good time for an up date on Sears Holdings $SHLD considering they just released earnings yesterday of $2.94 excl items vs. estimate of $2.68. While the economy sank deeper into a recession Sears held up fairly well. However many financial media pundits talk otherwise. To the ones that are new to this story let me catch you up. Mr. Edward Lampert who is the Chairman of Sears Holdings runs a Hedge Fund- ESL Investments. The Hedge Fund or ESL has 16 stocks in its portfolio totaling over 7 billion with SHLD and AutoZone $AZO making up the lions share at 75%. Lampert bought into Kmart in 2003 and Sears in 2005 and merged the two companies. The company had success coming out of the box with the stock fetching as much as $195 a share. This was due to many investors thinking Lampert would sell off part of its large real estate holdings. This has not occurred and we all know what the economy has done over the last year and a half- tanked. Many investors jumped aboard this stock solely due to its real estate, that's fine but since the stock has gone south many bailed and seem to think Sears better days are behind them. As a retailer this may be true but as a potential Investment Holding company I think otherwise. Many large profiled investment companies have been in and (out) of this stock. Two of the larger players that have their funds money invested are the Fairholme Fund run by Bruce Berkowitz and the Third Avenue Fund fund run by the veteran Marty Whitman. With the economy in tough times this company along with the majority of others will take time to pay off or will it PAY off? Lampert states in his current news letter:

Sears will continue to evaluate opportunities based upon our expectations for returns and continue to experiment with a variety of options where the returns could justify higher levels of investment...

  • Taking this approach a step further this month with plans to close its Joliet, Ill., Kmart store and transform it into MyGofer, a store where buyers can pick up their online orders. An estimated 80% of the facility will be dedicated to merchandise storage; 20% will be allotted for showroom space.
  • The public launch of ServiceLive earlier this month is another example of how we are creating relationships with customers that empower them to manage their lives. is an online marketplace where homeowners and businesses can name their price for a wide variety of services, improvements and repairs.
  • The company said Kmart, which has benefited from increased layaway sales to cost-conscious shoppers, increased its adjusted earnings before interest and taxes from the prior year.
  • Reduced short-term borrowings on its $4 billion revolving credit line to $435 million as of January 31 from $1.9 billion at November 1, 2008.
  • Plans to close 24 stores in addition to the eight already announced.
  • Repurchased 2.9 million shares for $120 million and debt securities for $29 million during the fourth quarter
  • Maintained strong balance sheet and liquidity position
  • Cash balance of $1.3bil as of January 31st 2009 vs. $1.6bil February 2nd 2008
  • Kmart began operating its own footwear business on January 1, 2009, which had previously been operated by a third party


  1. Thanks for the recap.

    Things look good to me, positive cash flow with low cap ex. Pension fund looks good. Lowering the debt levels. Trying new retail strategies, and we saw that layaway was successful over the holidays. So, overall, I have no complaints.

    Things would be better if Joe and Jane American consumer were running up their credit cards, but outside of that, they are doing well with what they have.

  2. Joe & Jane have spent the last 20 or so years charging...time to go back to that Good Old American Greenback...Cashhh!!!