When Edd Lampert merged K-Mart and Sears Roebuck into Sears Holdings Corp. (NASDAQ: SHLD), he probably didn't plan for a complete and unmitigated disaster. But, from all accounts, that is what the company is at this time. Its sales have consistently plummeted for more than just a few quarters now, the competition has killed it. Sears merchandising frankly is really, really bad -- and on and on.
Lampert's grand vision is still alive, but the realities of running a national retailer in an intense environment have not proved easy at all. What's keeping Sears Holding's shares above $100, you say? Check out the company's vast real estate holdings. Don't think for a second that this isn't the reason Sears is majority owned by Lampert, who could care less about the retail end of the business.
Still, you have to run a business. It's always nice to see that a former CEO who appeared to do virtually nothing in terms of performance get an annual base salary of $1 million through the next few years -- even though he's no longer at the company. Ousted CEO Alwyn Lewis, who was highly regarded when recruited for the Sears Holdings CEO spot but who was wholly ineffective, will receive his salary package through March 24 of 2010. Lewis will also continue to have health and welfare plan availability along with having his remaining stock and option awards vest until 2010 as well.
Even though the boards of public companies should be completely separate from the management and owners of the company, it's hard to see that they're not when excessive, after-term packages like this come to light. Pay for performance? Hogwash. CEO compensation committees can be as corrupt on company boards as those Enron folks from years back. Well, to a degree, anyway.
Eddie Lambert may have to loan Sears Holdings (NYSE: SHLD) some money. Cash at the company be getting very tight. According to the Wall Street Journal, "some analysts wonder whether falling sales, slimmer profit margins and other woes are causing cash flows to decline to a level that could hinder a turnaround."
The last cash balance that Sears announced was lower than most analysts expected. If the company needs to spend money to improve its stores or increase inventory in products it thinks will sell well, it could draw down the cash level even further.
For Lampert, the bad news keeps getting worse. Sears stock has staged a mini-rally over the last two weeks, moving from below $85 to $103. News about cash problems could push the shares back down.
Lampert made the classic error of thinking that with Sears and K-Mart 1+1=3. In reality, he took two weak companies and saved some money in a merger. The problem was that the companies got even weaker.
Who says that hedge fund managers don't make good corporate chiefs?
Douglas A. McIntyre is an editor at 247wallst.com.
Aylwin B. Lewis will step down as CEO of Sears Holdings (NASDAQ: SHLD), paying for the sins of his boss, hedge-fund billionaire Eddie Lampert. Lampert put together the Sears chain with K-Mart and found that one plus one equals zero when the brands are so poor that people would rather shop at Wal-Mart (NYSE: WMT).
Shares in Sears are down from a 52-week high of $195 to under $100. They will probably fall much further. Lampert has said he will make operating units more free to handle decisions at the brand level. He brought in new management to run the company's e-commerce unit.
In a statement quoted atMarketWatch, Lampert said ,"We are entering a new phase in Sears' evolution as a multi-channel retailer, as reflected by the new operational structure we recently announced, and the board has determined that now is the right time to put in place new leadership to take the company forward."
In other words, "we have no idea what we are doing, so we will try a new horse."
Douglas A. McIntyre is an editor at 247wallst.com.
Is it better to invest in a company whose CEO is a star or a company that breeds generations of outstanding CEOs? If you think a star CEO is better, I have two stocks to consider -- but also one to avoid. And if you think a CEO breeding ground is better, one stock comes to mind.
Today, I appeared on CNBC's Squawk Box this morning with Yale's Jeff Sonnenfeld to give my picks for the three best and worst CEOs of 2007. Here are the three best CEOs along with the name of the company, the stock price performance over the last year, and my reasons:
Steve Jobs of Apple Inc. (NASDAQ: AAPL) +144%. Successful iPhone introduction with a million units sold in its first 74 days (some estimate Apple will announce it's sold five million in mid-January) plus outstanding performance of Apple retail stores -- they account for 20% of Apple revenue and those revenues have grown 42% in the last year while the stores earn $4,000 per square foot -- much more than competitors. At a Price/Earnings to Growth (PEG) of 1.8 it remains to be seen whether Apple can grow enough to justify its P/E of 50.
Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK.A) +28%. Berkshire's stock had a great year -- it has not done as well since 1998 when it rose 52%. Berkshire's return on equity is up from 11% in 2006 to almost 16% as of September. Berkshire is a safe haven stock and Buffett continues to find places to invest his $47 billion in cash. One caution -- Barron's thinks that Berkshire stock is 10% overvalued.
Lloyd Blankfein of Goldman Sachs Group (NYSE: GS) +6%. Only firm to make money while peers lost billions -- its short position of the ABX index--which represents a basket of credit default swaps on mortgage-backed securities- yielded $4 billion in profit -- offsetting a $2 billion loss in its $10 billion CDO portfolios. I was impressed by the way Blankfein carried Goldman's culture of encouraging intellectual debate between lower-level traders and top executives to arrive at the best decisions. Goldman trades at a P/E of 8.6 and its earnings are expected to grow 4% next year. But that forecast is a real toss up so if you buy the stock, take a long term view.
I know it's the end of the year. We're all bombarded with the "Top X of 2007" or the "Worst Y this Year." I'm actually thinking of making the top lists of the top lists. It's like Kramer's coffee table book about coffee table books on Seinfeld.
Anyway, Herb Greenberg of Marketwatch threw his hat into the ring this morning with his vote cast on the worst CEO of 2007. The winner (or is it loser?): Eddie Lampert, CEO of Sears Holdings (NASDAQ: SHLD). Herb says of Lampert, "So far, for all of Sears, including Kmart, the strategy [of focusing on profitability over revenue growth] has failed miserably. Not only have same-store sales (which Lampert says are "overrated" as a metric) gone deeper into the red, but gross margins, Ebitda and operating income for Kmart are also going in the wrong direction."
I'd like just to posit the idea that while Lampert might have failed as a CEO of Sears, the retail store, turning around the old-school retailer hasn't really been his main priority. He's trying to follow in Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) shoes by using a cash flow business as the crux of an investment empire. So investors should begin to judge Lampert's firm as a holding company, not just on Sears' results.
Recently 24/7 Wall St. ran a list of CEOs who may need to go back to business school. The performance of their companies has been so poor that they need a period of re-education, some tutoring in the basics.
But, it is time to add a few more names to the list.
Starbucks (NASDAQ: SBUX): These shares are now off to $22.49, near a 52-week low. The shares have a period high of $37.14. James Donald has the CEO job at Starbucks, but the founder Howard Schultz is still around. Wall Street could certainly argue that the company has made a lot of mistakes starting with overbuilding stores in the US. Another is that the new menus in the stores seem to be have been decided by random. If the company cannot improve same-store sales soon, the stock will go lower. This seems basic, but SBUX has not given shareholders any plan for addressing it.
Blockbuster (NYSE: BBI): It is hard to have blown the lead that Blockbuster had in movie distribution. But it did. CEO James Keyes does not seem to have any logical vision about how to solve the company's problem, which is that digital distribution has passed it by. He argues that customers will go to kiosks at Blockbuster stores to download movies. Instead of doing it at home on the internet? Or getting the DVD in the mail? Not much of a plan.
Sears Holdings (NASDAQ: SHLD): The name on the CEO's door at Sears is Aylwin Lewis. But Eddie Lampert is the chief. The marriage of K-Mart and Sears has been a disaster. Same-store sales at both companies run below the industry average. It would be very hard to argue that the merchandising programs at the retail outlets is compelling enough to bring in new customers. Lampert exhibited poor judgment in sending out a letter that was picked up by the press. His defense of the company was that it had reduced debt and bought back shares. That will help a lot when his stores are empty.
Douglas A. McIntyre is an editor at 247wallst.com.
When Sears Holdings (NYSE: SHLD) reports Q3 earnings tomorrow, we'll see again if chairman and out-of-his-retail-league financier Eddie Lampert will wow investors.
Regardless of how its retail operations have performed, how is Sears doing when it comes to returning equity to shareholders? Now that William Ackman has taken a 3.5% stake in the holding company (oops, retailer), will that investment start paying off tomorrow? Lampert still controls 46% of the retailer, so with activist investor Ackman's new slice, it's unclear if he'll soon be forcing any changes at the company. But, in previous stints, Ackman has forced real estate sales and similar actions at large food service companies and other retailers to get his return. Things are different in Lampert-land, though.
The company has so far underperformed from the retail side of the business, and it's probably forced Lampert to wake up and and realize he has to ensure those operations continue to perform. Analysts polled by Thomson Financial expect a profit of $0.50 on revenue of $11.61 billion tomorrow.
Will we see that? Perhaps. It is still not clear how long it will take Lampert to unlock the value of his grand masterpiece, but so far it's either not working and impatience from the market is bubbling up.
Specialty retailer Restoration Hardware (NASDAQ: RSTO) was supposed to be sold to private equity firm Catterton Partners for $6.70 a share. But, so much for the "done deal," the "sure thing." Late yesterday, Sears Holdings (NASDAQ: SHLD) bought 13.9% of the smaller company's shares.
According to CNN Money, "Sears said it may make a tender offer for all of Restoration Hardware's shares or raise its stake by buying additional shares on the open market." RSTO shares rose to $7.46 after hours.
But with Sears in such deep trouble of its own, why is it fooling around with buying a small retailer with a $250 million market cap, $800 million in sales, and shaky profitability?
Why, indeed? Shareholders in Sears would have a right to be upset. Head man Eddie Lampert would have people believe that his retail giant, which combines Sears and K-Mart, is the picture of efficiency and smart merchandising. Why then, are its shares at a 52-week low of just above $114 a share?
Sears can't waste its time buying little companies. It has too many big problems of its own.
Douglas A. McIntyre is an editor at 247wallst.com.
BusinessWeek's Bob Reed wonders about Eddie Lampert's stewardship of Sears Holdings Corp. (NYSE: SHLD), the parent company of Sears and Kmart. While investors were buoyant about the company's prospects less than a year ago, due largely to Lampert's stellar track record as a hedge fund manager, things have soured. Sears has reported lackluster results, and the retail turnaround appears to be like most so-called turnarounds: not much is turning. Meanwhile, the stock is down about a third from its high.
Reed has this to say about the future of the company: First, consider this possibility: Lampert makes good on his word that he is going to transform Sears Holdings into a dynamic, successful retailer. He pours cash -- lots of it -- into operations, stores, and marketing. More important, he hires a top-notch merchant, a superstar executive to spotlight the five, six, or seven core retail strengths that Sears still possesses, and then embarks on a 5- to 10-year rebuilding effort.
The chances of Lampert signing on for this action? Slim to none. Spending tons of money for a far-off and uncertain payback are not part of his hedge fund manager DNA.
Exactly. His well-documented investment prowess aside, Sears is looking like it could be to Lampert what TWA was to Carl Icahn. A brilliant financial mind takes over the reins of a large, troubled company, and his tightfistedness combined with his lack of operational expertise combine to make an effective turnaround impossible, and shareholders suffer.
Sears Holdings Corp. (NASDAQ: SHLD) the hedge fund ... err, retail chain headed by hedge fund star Eddie Lampert, may see renewed pressure to sell off some it its valuable real estate soon. Notable activist investor William Ackman will see to it, as his fund, Pershing Square Capital Management, has acquired five million shares of the retailer. Mr. Ackman, who battled Lampert last year for control over Sears Canada, is set to have another celebrity deathmatch with him again soon, I'd suspect.
It's no surprise to anyone that Lampert's real mission with Sears Holdings is not the operational efficiency (or even profit) of the retail side of things; that's just a side mission probably talked about a few minutes at each board meeting. What Lampert did with Sears was to make it a holding company -- but the truth is, he owns so much of it that Ackman's potential advances may be akin to ascending a steep hill with slippery shoes on his feet. The New York Post even says that Ackman's buy-in was for "a long term investment" more than any moves to get Sears on the property-unloading trail.
Still, Ackman's purchase makes him the fourth-largest SHLD shareholder, and it's hard to imagine him wanting those shares for some kind of "long term investment" -- it just doesn't suit Ackman's profile at all. He's said before that the combined value of Sears' real estate is valued more than Lampert's $22 billion figure, and that difference provides a nice "cushion" should the retail end of things continue to falter. Sears' retail operations are going nowhere these days since there appears to be little direction to that end of the business. I submit that Ackman wants to break it all up and sell some real estate, Gekko-style. That, or he does not deserve the title 'activist investor.'
As BloggingStocks' Brent Archer indicated a few days ago, Sears Holdings Corp. (NYSE: SHLD) announced a rather large $1.5 billion share buyback in the face of declining quarterly sales and profits. These figures came as no surprise to the retail pundits keeping an eye on Sears and Kmart same-store comps and details. So, why is Sears buying back ... now?
It's a standard procedure for Sears Holdings Chairman and top investor Eddie Lampert, who was hailed as the next Warren Buffet a few years ago after orchestrating the merger between retail laggard Sears and bankrupt-prone Kmart. Yes, there were more than just retail assets in that decision (like real estate holdings), but the retail side, despite many promises from Lampert, has still not shown any real threat to competitors like Kohl's Stores, Inc. (NYSE: KSS), Target Corp. (NYSE: TGT), Wal-Mart Stores, Inc. (NYSE: WMT) and Macy's Inc. (NYSE: M).
Sales at Sears Holdings have slid, its stock has lost almost 33% of its market value since peaking earlier this year, and its cash pile is dwindling. Solidifying market value with buybacks is not exactly new, and it's an oft-ran strategy for Lampert. Is it a sign of desperation or simply a timed event? Is Lampert even in tune with the retail side of the business he now chairs or is he just trying to maximize his investment? The smart money says the second choice is the correct one, and I'd be surprised if Lampert gives a rat's behind about any focus on improving the retail operations of either Sears or Kmart. But, the next Warren Buffett? Meh.
By most measures, Sears Holdings Corp's (NASDAQ: SHLD) latest confession that same-store sales continue to suck would be a sign to abandon ship. However, the fact that Eddie Lampert, a Warren Buffett disciple, is at the helm with billions of dollars of loose cash in his pocket continues to buoy up the foundering company's stock.
The spring sales results were stinkers, for sure. Kmart sales fell 3.9%, while Sears stores took a 4% hit, this after a concerted effort to trim expenses. With these results, the company warned that the second quarter EPS would finish at $1.06-1.32, far short of analyst's expectations of $2.12.
The slacking sales have been blamed variously on the housing decline, rising energy costs and poor weather conditions. No mention was made of tired locations, tired store designs and uninspired product lines, all of which could be addressed with some of the $3 billion plus cash on hand or the $4 billion in prearranged borrowing in their pocket. The company, instead, bought back almost $500 million in shares in the past nine weeks, with a further $1 billion already authorized by the board. This should offset some of the profit shortfall, but the market is indicating its overall displeasure with a sharp decline in SHLD price of more than 6%.
The question is, does Lampert intend to invest to check the decline in the value of these iconic brands, or pull them apart to strip out their value and use the profits to acquire other properties? The longer Sears and Kmart are allowed to languish, the more probable this seems. Recent speculation by BloggingStocks writers about this issue are seeming prescient.
For some reason stock trading is still running rampant in the market despite all the evidence to the contrary that it is a bad idea. It is a bad idea to pay fees and taxes (or take losses, even worse) no matter how low because they eat away at your overall returns. It is a bad idea because the basis of the decision to buy or sell has little or no fundamental rationale except momentum, or charts, or news of the day, or analysts' calls, or a Cramer rant. But most importantly to me it is a bad idea because all of the most successful and wealthiest investors do the opposite -- Warren Buffett, Bill Miller, Eddie Lampert and Carl Icahn just to name a few.
Since history has proved over and over and over that day trading is a loser's game, why do it? The only reason I can think of is for the adrenaline rush. It's the sport of it. Just watch Cramer and you can see the crazed sports fanatic looking for a fix. He makes it exciting! He makes it an adventure! He needs something to talk about!
If he followed a process enjoyed by Buffett or Miller his show might be on the air monthly instead of several times a week. Instead of frantic or manic gyrations he would be making a few boring comments and calm suggestions about a few stock possibilities before encouraging his viewers to tune in next month. Cramer and other traders have built up business as a sport and as entertainment. But, if you want to get rich, follow the investors not the traders.
Sears Holdings Corporation (NASDAQ: SHLD) opened at $168.05. So far today the stock has hit a low of $167.57 and a high of $169.91. As of 10:50 a.m., SHLD is trading at $169.04, up 0.97 (0.6%).
After hitting a one year high of $195.18 in April, the stock has been sliding over the past two months. The stock is continuing a rally that began yesterday afternoon as retail stocks were boosted by a Kohl's (NYSE: KSS) upgrade and Best Buy's (NYSE: BBY) expansion, buyback, and dividend hike trifecta. Shares of SHLD make up 71.44% of Chairman Eddie Lampert's portfolio. Lampert is a student of Warren Buffett's who believes in investing in a stock for long term gains, and also investing in a company that is undervalued but ripe for a turnaround. This recent dip in SHLD may be a good buying opportunity for investors looking to get in on what this guru investor believes to be a solid long-term performer. Recent technical indicators for SHLD have been bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $140 range. SHLD hasn't been below $140 since September and has shown support around $165 recently. This trade could be risky if retail numbers are soft over the summer, especially with SHLD reporting earnings in the week before August expiration, but the stock would have to fall by 17.3% before we would be in trouble.
Over the years, the master hedge fund manager of ESL – Eddie Lampert – has made a fortune by scoping up big positions in ailing companies. Then with some operational magic, he turns things around. In fact, one of his latest investments is Citigroup (NYSE: C).
Because of his mega success, some think he's building the next Berkshire Hathaway (NYSE: BRK.A) and will become immortalized like Warren Buffett.
What's next for Eddie? Well, according to a report from CNBC's David Faber, Lampert is looking to raise between $3 billion to $5 billion. True, he already manages $18 billion. But why not get some more?
With the frothiness in the equity markets, I don't think he'll have any trouble getting what he wants. If anything, he'll probably be turning money away.
OK, so you want to invest with Eddie? First of all, there will be a five year lock-up on your money. And, yes, you'll need a minimum of $25 million.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
When Edd Lampert merged K-Mart and Sears Roebuck into Sears Holdings Corp. (NASDAQ: SHLD), he probably didn't plan for a complete and unmitigated disaster. But, from all accounts, that is what the company is at this time. Its sales have consistently plummeted for more than just a few quarters now, the competition has killed it. Sears merchandising frankly is really, really bad -- and on and on.
Is it better to invest in a company whose CEO is a star or a company that breeds generations of outstanding CEOs? If you think a star CEO is better, I have two stocks to consider -- but also one to avoid. And if you think a CEO breeding ground is better, one stock comes to mind.
I know it's the end of the year. We're all bombarded with the "Top X of 2007" or the "Worst Y this Year." I'm actually thinking of making the top lists of the top lists. It's like Kramer's coffee table book about coffee table books on Seinfeld. 
When 
BusinessWeek's Bob Reed 
By most measures, 
Over the years, the master hedge fund manager of ESL – Eddie Lampert – has made a fortune by scoping up big positions in ailing companies. Then with some operational magic, he turns things around. In fact, one of his latest investments is 
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