Posts for Ticker ‘Sears’

Sears..Barron’s May Have Understated Upside (SHLD, CC, TGT, SPG)

Sears Holdings Corp. (NASDAQ:SHLD) enjoyed a meteoric rise from 2003 to 2005, but now the company is facing the dead money status for investors after recently hitting near-term lows.  Eddie Lampert knows that this current status wasn’t the end-game goal.  This weekend’s issue of Barron’s points out the understated value of Sears.

The Barron’s article does a good job of pointing out the upside and the contingencies here.  The one issue that exists is that Sears as a retail player just isn’t doing that well and 24/7 Wall St. has pointed out how poor of a retailer it is.  But there is lot more to the story that we have been investigating for subscribers of our Special Situation Investing Newsletter which might imply close to a doubling of shares if the company makes the right calls.  There is the shot of a REIT-qualification aspect to Sears, but that will be another discussion at a different time.

Some of the factors that are working against the company are actually not the fault of the company.  And some are.  In fact, if you were going to evaluate the macro-scenario here we’d go ahead and warn the Sears permabulls that the raw numbers out of Eddie Lampert’s retail empire may have another 18 to 24 months of having to stomach poor retail results.  In its latest fiscal year, Sears mustered margins of 4.74%, in comparison to Penney’s 9.66%, Target’s 8.76% and Kohl’s’ 11.7%.

Sears_valuation_targets_2But there are two companies here that we believe will be the savior of the otherwise poor situation: Simon Property (NYSE:SPG) and Target (NYSE:TGT).  Simon is a very expensive stock with premium mall and shopping operations and it would be able to acquire the dirt owned and under long-term leases for a fay cry short of the lofty valuations of each square foot it owns.  It recently raised cash as well.  Target (NYSE:TGT) has already expressed that it outright wants to continue its current expansion and outlined a 25% increase in stores over the next few years. 

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Posted on: October 21, 2007 – 11:26 am in Retail, , , , , , ,

Entrenched Corporate Leader: Eddie Lampert (SHLD)

Could You imagine Sears (SHLD-NASDAQ) without Eddie Lampert?  Last week we noted that one of Jim Cramer’s "CEO’s Who Get the Benefit of the Doubt" was also one of our most entrenched CEO’s.  Eddie Lampert is that person, although he is technically the Chairman of the Board.  He is the one credited with getting this back to where it is.  Sure, it’s by team effort; but go ask anyone who they think is really responsible bringing back Sears & K-Mart.  It’s Lampert.

In reality, Eddie Lampert is a true mystery to many "retail analysts" on Wall Street because they are having to evaluate a retail company that is now worth $28 Billion since the combination of Sears and K-Mart that is not merely a large retailer.  In fact, the retail efforts have recently been mixed instead of the turnarounds seen in prior quarters.  The wildcard for just analyzing this as a retailer is that this is still a large real estate holder that is deemed as undervalued on the books versus what the remaining dirt might really fetch in a true sale lease-back, and when you culminate the real estate with the point that this is really a hidden hedge fund it is mystifying. 

As long as Eddie Lampert doesn’t start to AND then continue to consistently make costly errors quarter after quarter, no one is going to say anything.  Even if they did, they don’t have the votes or shares to influence a change.  Shareholders have been so rewarded that any major hit to the stock might just make investors think there is a shot to go back in.  As long as investors feel like he is potentially the next Warren Buffett, he is virtually immune from any criticism or efforts against him. 

With the potentiality that he has been mentioned (via rumors and occasional holdings) as potentially rolling up numerous other retail related efforts, and seeing those stocks rise, he is well-heeled there AND wherever else he wants to go.  Much more money has been made investing with Eddie Lampert than against him.

Jon C. Ogg
April 5, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 5, 2007 – 2:01 pm in Retail, , ,