Sears (NASDAQ: SHLD) is scheduled to report earnings for the third quarter on Tuesday, December 2. The expectation is for a loss of $0.49 per share. I think it's therefore safe to say that the retailer won't be turning a profit.
Sears has been one awful retail story as of late. Actually, just about every retailer has been awful as of late. It's no surprise, of course, considering the economy. But Sears has been experiencing challenges even beyond what can be explained by the economy. The company has been missing estimates, same-store sales haven't been great, and if you take the time to talk to people about Sears, or if you follow the comments of pundits, you'll sometimes note a tone of repulsion when it comes to the big chain.
I haven't been a fan of the shopping experience at Sears either, and it's been a very, very long time since I've stepped into a Kmart. In fact, there isn't a Kmart close to me. Eddie Lampert's enormous task of helping to turn this ship around is not one I envy. Of course, many retailers make the mistake of only focusing on merchandising in the stores and figuring out what should be in the weekly circulars. Don't get me wrong, that's important stuff. But Sears needs to engage a branding campaign to make people feel good about its stores, to feel confident about the shopping environment. When you look at TV ads by Wal-Mart (NYSE: WMT) and Target (NYSE: TGT), you can't help but marvel at the branding acumen of those retailers. Sears needs to get creative, too.
As we begin the trek to grandmother's house, it's worth reflecting on what we have to be thankful for. The answer? When it comes to money, most of us have a lot less than we did a year ago. But for those of you who have your health and your families to comfort you, it will cost much less to buy the gasoline to visit than it would have in July. And as you're driving to visit those families -- consider how much less you lost in the last year than the world's 10 biggest losers.
According to the web site, The Business Sheet, those unfortunate people suffered a mind-boggling $176 billion in lost stock market value in the last 12 months. It turns out that 52% of the losses were suffered by three executives based in India. Here they are:
Anil Ambani - $32.5 billion. Ambani heads Reliance Communications that invested $500 million in Dreamworks earlier this year.
Lakshmi Mittal- $30.5 billion. Mittal heads ArcelorMittal which has suffered from a decline in the price of steel.
Mukesh Ambani -$28.2 billion is Anil's brother and controls Reliance Industries, a petrochemical manufacturer.
These are some other folks that make The Business Sheet's list:
Sheldon Adelson -$30 billion. I did consulting work for Adelson about 22 years ago and he is quite a character. His Las Vegas Sands (NYSE: LVS) casino is suffering from the economic slowdown and he's had some trouble with debt.
Warren Buffett -$13.6 billion. As I posted, Buffett's Berkshire Hathaway (NYSE: BRK.A) has had some problems this year.
Just as soon as Sears Holdings (NYSE: SHLD) re-arranged deck chairs on the Titanic, the retailer, headed by hedge-fund guru Eddie Lampert, reported another absolutely dismal quarter Thursday morning. In 2008, shares in Sears Holdings have sunk 36% as the retailer continued to report quarter after quarter of sluggish sales, declining revenue and underinvestment in its retail locations.
Lampert's idea of cutting investment in stores to boost actual investment returns has failed, and failed miserably. One thing customers respond to is constant change in their shopping environment, and this is where Sears has failed. Its stores look the exact same as they did four years ago. Even the logo has not changed.
Retailers like Target Corp. (NYSE: TGT) and Wal-Mart Stores, Inc. (NYSE: WMT) apparently know way better how to get seasonal and high-request goods to their stores. They do it in a fashion that turns inventory and makes sales far better than Sears' manages with its current grip on retail. In fact, I am not sure Sears even has a current grip of retail. It's a goldfish (albeit a large one) nearing the top of the fishbowl. With Lampert's track record, one would think he would have made changes a year ago. He has not, and Sears continues to flounder badly. The Wall Street Journalthinks Lampert should go, and go now. What do you think?
Even Lampert's acumen in taking out pieces of an investment and selling for a profit hasn't worked out. What about selling off a good portion of its real estate holdings under the combined Sears/KMart umbrella to help make a profit? Even that time has passed though. Lampert's original prediction for Sears Holdings has failed, and unfortunately he won't be adding this experiment to his resume that includes the years-ago notion that he was the next Warren Buffett.
This past week, Sears Holdings Corp. (NASDAQ: SHLD) announced the addition of two new senior executives to replace the departing heads of its business segments. The former head of Motorola's (NYSE: MOT) mobile devices business, Stu Reed, will become senior vice president of Sears's home services unit. His predecessor was Mark Good. Former Procter & Gamble (NYSE: PG) senior executive Guenther Trieb will take charge of the Kenmore, Craftsman, and Diehard brands.
Hoffman Estates, Ill.-based Sears also announced the impending departure of Chief Marketing Officer Maureen McGuire. Senior vice president Richard Gerstein, also of the marketing team, will serve as chief marketing officer of Kmart and Sears.
Earlier this year Chairman Eddie Lampert split the company into five business units. But, the company reported in May its largest quarterly loss since the merger of Kmart and Sears in 2005. The company is scheduled to report second quarter results this week. Analysts surveyed by Thomson Financial on average expect a profit of 33 cents per share, up from a loss of 53 cents in the previous quarter, but still down from net income of $1.14 in the same quarter a year ago. Also, Sears has tended to offer negative surprises in the most recent quarterly reports. Analysts rate Sears as underperforming.
Shares closed Friday at $88.43, which is down 13.4% since the beginning of the year and down 38.4% from a year ago.
KB Home (NYSE: KBH) shares are trading higher after a report that hedge fund manager Edward Lampert has bought "small stakes" in homebuildersCentex (NYSE: CTX) and KBH, thinking that the housing market may be poised for a recovery. Investors are taking this news as a good sign for KBH. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on KBH.
After hitting a one-year high of $44.51 last June, the stock hit a one-year low of $15.76 in January. KBH opened this morning at $18.21. So far today the stock has hit a low of $18.15 and a high of $19.07. As of 12:00, KBH is trading at $18.87, up 1.00 (5.6%). The chart for KBH looks bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just five weeks as long as KBH is above $15 at July expiration. KBH would have to fall by more than 20% before we would start to lose money. Learn more about this type of trade here.
KBH hasn't been below $15 at all in the past year and has shown support around $17.50 recently. This trade could be risky if the financial sector continues to tumble or if the Fed makes its first interest rate hike in a while, but even if that happens, this position could be protected by the support the stock might find around $16 where it put in a bottom in January.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in KBH.
Sears Holdings (NASDAQ: SHLD) really blew its earnings numbers. According to Briefing.com, Sears' Q1 adjusted earnings missed by 68 cents. Nope, no beating by the proverbial penny here, folks. Sears was expected to report an adjusted profit closer to 15 cents per share; instead, not the 53 cent loss booked by the retailer. Man, that's bad. Wall Street also expected a better top-line performance. But Sears couldn't come through on that count, either. Net sales for the quarter declined almost 6% to a little more than $11 billion.
But wait, there's more bad news. Same-store sales at Sears took a turn for the worse, diving almost 10%! Comps at Kmart decreased 7%! The gross margin went down! Want more, or is that enough? The Sears story is not a good one. What's going on here? Well, the release does say something about a bad economy, but that isn't a worthwhile excuse. Sears simply needs to apply itself and get traffic into its stores. Use some thinking-outside-of-the-box marketing campaigns to reignite the brand's fire.
Today's stock market rally may be more of a relief run than anything, but the end of day strength of late has been hard to ignore. Today we saw a huge drop of almost 9 million barrels of oil that caught traders off guard, but interestingly enough the oil markets dropped considerably. Combine that with a slightly higher revision to Q1 US GDP to +0.9% and all of a sudden the recession isn't looking so serious. These are the major US index closing levels:
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.
Super-investor Eddie Lampert has cut his stake in Citigroup Inc. (NYSE: C) by 31%, leaving him with a position of 19.1 million shares valued at a little under $500 million. It is likely that Mr. Lampert sold the shares at a substantial loss.
Lampert's large presence in the stock was a source of confidence for battered bulls who watched the stock decline through subprime write-downs and a managerial shake-up. Long considered to be one of the great value investors, Lampert's latest 13-F filed with the SEC shows stakes in Acxiom Corp. (NASDAQ: ACXM), AutoNation Inc. (NYSE: AN), AutoZone Inc. (NYSE: AZO), Citigroup, Home Depot Inc. (NYSE: HD), and, of course, Sears Holdings Corp. (NYSE: SHLD).
Lampert's decision to cut his stake in Citi has to make investors nervous. He's ridden the stock down for months, and it hasn't exactly been rebounding.
Last year was tough for Lampert, with Sears' stalled turnaround bringing him poor returns and the worst publicity of his career.
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.
Quoted in a piece in the Sunday New York Times, Bruce Greenwald (author of the terrific Value Investing: From Graham to Buffett and Beyond) sums up Eddie Lampert's problems at Sears Holdings (NYSE: SHLD) beautifully: "He did really well on Autozone. Most of his stocks are retail stocks, and he has done really well with them. So he decided he was a genius at retail, and it didn't occur to him he could be wrong about it. He believed his own press."
I would argue that the problem might even run deeper than that: Lampert wanted to be seen, and to see himself, as more than just a great investor. He wanted to become a great manager.
It's somewhat similar to former all-star slugger Jose Canseco, who decided he wanted to try pitching. He promptly injured his arm and missed the rest of the season. His attempt at pitching hurt him as a hitter.
Lampert's fall from grace has been steep and rapid. We used to talk about how shares of Sears were trading at a "Lampert premium," based on the idea that his investment prowess would lead to great returns on capital for the struggling retailer.
Now, with Herb Greenberg recently having named him the worst CEO of 2007, shares of Sears are trading at a Lampert discount and are, according to many, currently valued at well below the company's break-up value. There may be value to be had in Sears, but Lampert's struggles provide an important lesson for investors: great investors aren't necessarily great managers, but, like Carl Icahn did with TWA, they might not be able to help themselves from giving it a try.
I wrote a couple weeks ago about a very serious issue with Sears.com's privacy policy. It seemed that Sears Holding Corp. (NASDAQ: SHLD) had a major issue with their online offering. Sears has finally taken the issue seriously and disabled the bug in their how-to-figure-out-how-much-your-next-door-neighbor-paid-for-his-plasma-TV search function on the Sears website.
This morning, WSJ.com reports (subscription required) that an ex-Microsoft (NASDAQ: MSFT) executive is being appointed head of Sears' newly formed online division, one of five such divisions the retailer is forming as part of a turnaround. The article says that James Barr, a 12-year Microsoft executive and general manager of MSN Shopping and Marketplaces, will take over the online unit effective Feb. 2 as a senior vice president of Sears Holdings.
Barr joins former Walmart.com executive, Neil Day, the newly-named Chief Technology Officer for the Sears.com group.
These changes are being made by Chairman Eddie Lampert as he tries to boost sales and stave off further profit losses.
It appears one of my personal favorites, LandsEnd's, LandsEnd.com, will not be part of this unit, which will include Kmart.com and Sears.com.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author holds no positions in stocks mentioned above.
I like Eddie Lampert and I like those Sears stores. I like Craftsman tools and I (sort of) also like the Kmart part of Sears Holdings (NYSE: SHLD).
For those who might be confused as to what Eddie is doing with his potential company "break up," he's taking a distressed operation and laying it directly at the feet of the rubes who have screwed it up. It's a tactic that I myself would employ. Eddie Lampert is the somewhat silent watchful type, observant to a fault. He's a "big picture" thinker in the classic style. He plans and plots and weighs. Yeah, that's the ticket.
You see, Eddie "Golden Boy" Lampert isn't the kind of fellow who'll just blindly clear the decks of seasoned personnel in an effort to generate profit. If such were the case, we'd have seen way more of those pink slips flying long before now. I believe that by fracturing the company structure and by giving more divisional independence, he is now setting the stage for some timely and precise head-chopping down the road.
Eddie Lampert, worst CEO of 2007? Not in my book, not by a long shot. Yes, perhaps if you measure things strictly in growth dollars, Sears Holdings looks pretty ugly right now, but there's far more to the retail game than just rapid growth. Give the man some time to reveal his hand, one carefully picked card at a time. Besides, Eddie Lampert doesn't hold much regard for judgment by share price alone, and frankly my friends, neither do I.
Eddie Lampert is desperate. His Sears Holdings (NASDAQ: SHLD) will divide itself into several units to try to stop its hemorrhaging of customers. According to (subscription required) The Wall Street Journal, "the contemplated restructuring would create separate units to manage Sears's real-estate holdings and run brands such as Kenmore, Diehard, and Craftsman." How the stores-owned under brands like Kmart and Sears will be divided has not been disclosed.
Shares in Sears now trade at just above $89, down from a 52-week high of $195.18. The stock is down about 50% in the last year, while shares in rival Wal-Mart Stores (NYSE: WMT) are flat.
Why Lampert believes that moving his chess pieces around the table will work is anyone's guess. Pushing decisions about merchandise and brand marketing to divisions is no different than having "brand managers" under the current structure. Many successful companies, such as Procter & Gamble (NYSE: PG), are already run this way.
People don't want to shop at Sears and Kmart. The brands are dying.
Lampert is just grasping at straws.
Douglas A. McIntyre is an editor at 247wallst.com.
Just as soon as 
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