Can Lampert make Sears great?

Posted Oct 21st 2007 4:10PM by Zac Bissonnette
Filed under: Management, Sears Holdings (SHLD)

Sears Holdings (NYSE: SHLD) had been on a tear for the past few years, as investors were buoyed by hopes that hedge fund manager/CEO Ed Lampert could do great things with the company -- possibly even make it the next Berkshire Hathaway (NYSE: BRK.A).

But Sears under Lampert has not been without its detractors, who fear that the company is neglecting its flagship retail stores to focus on non-retail investments. Back in June, Julie Tilsner wrote about Why Sears Stinks, and the stock has stunk since that time too -- big time. But Barron's thinks that there may be value here -- and that Sears' weak operating performance could push Lampert to unlock value sooner. His hedge fund owns 45% of the company:

Likewise, Sears' business is getting short shrift, as some of Lampert's restructuring efforts are likely to bear fruit. Too, the retailer's real estate has considerable value that is not reflected in the stock. Add up this real estate, valuable brands like Kenmore and Craftsman, and Sears' huge appliance and home-remodeling business, and the company could have a liquidation value of more than $300 a share. The worse Sears performs in the next year or so, the more likely Lampert is to monetize and harvest this potential real-estate bonanza.

If Sears' liquidation value really is that high, it looks like a no-brainer buy here at $130. Getting a manager with Lampert's track record -- and a huge personal stake in the company -- in the executive suite at a fraction of liquidation value is intriguing.

The uncertainty surrounding Sears' retail operations could be a case of optionality at its finest.

Tags: Berkshire Hathaway, BRK.A, Ed Lampert, Julie Tilsner, liquidation value, optionality, retail, Sears, Sears Holdings, SHLD

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Reader Comments (Page 1 of 1)

10-22-2007 @ 8:33AM

JC said...

After my last experience with Sears, they can count me and my family out on doing any such business with them. They need to focus on there customer relations before they make any other drastic changes to there company, they can do whatever they want but the sour apples they have working there for them dealing with the customers will still be the number one reasons for returning. Ill never step foot in another Sears.

10-22-2007 @ 9:18AM

Warren said...

I've heard how wonderful SHLD is going to be for the last year now. Where's the beef?

10-22-2007 @ 6:47PM

vlad said...

It would be interesting to go back in time and get a feel for the sentiment when a little known company named "Berkshire Hathaway" had a trend of deminishing returns on its textile business.

I wonder if Mr. Buffett's moves were scrutinized to this degree.

10-23-2007 @ 6:31AM

Tonya Beth said...

The credit crunch and the real estate problem will effect SHLD. Eddie is scrambling now with the lame "bid news" of selling Dell computers. Too little, too late. No one gives a rat's ass about Dell computer. All Eddie is doing is manipulating the news to give a rise in the stock price and his holdings before he releases the results for November. Does anybody else find it odd that for months there has been virtually no advertising for Sears and now supposedly they are going gangbusters. Eddie is playing everybody for the fool to save his fortune.
Everyone call your senator now and let them know that it is time to end the tax break for the hedge fund billionaries and the "carried interest" deduction that allows them to pay a lower rate of taxes than their secretaries. The diffence in income levels is worse than it was in the 1920's and we all know what happened than. The house and senate are being bought off by lobbyists paid for by the big money guys at the expense of the security of the American Economy.