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Sears Holdings Corp. (SHLD) Message Board

  • micaiah2004 micaiah2004 Jan 14, 2008 2:03 PM Flag

    Sears Repeats its Woes

    "Not surprisingly, Sears Holdings is warning investors to brace for another punk quarter. Sears isn�t alone citing the economy as an issue, but Sears has the added woe of competitors encroaching on its turf (such as Home Depot and Lowes) in the appliance space and everybody else in apparel and electronics.

    A bigger problem for Sears, as has been pointed out in this blog previously, is that it�s not compelling or relevant (or fun!) as a retailer. And when consumers feel pinched, the last thing they want to do is also feel downtrodden when they part with their dollars. (The downtrodden part comes from visiting local Sears stores, which are in many cases in need of TLC.)

    What�s most evident with this warning is that Sears, in many respects, has been a financial shell game, with stock buybacks paving the way while hedge-fund like derivatives, if done right, providing an added bonus. Now, the company says, with $1 billion in the bank and its stock falling (when buybacks are typically done) it doesn�t see buybacks in its immediate future. Back in 2005, when the Sears Holdings story was still in its infancy and the economy was still firing on all cylinders, the company had more than $4 billion in cash.

    That cash went into buying back stock rather than helping improve the retail business. What�s clear is that Sears can�t save its way to prosperity by not investing in its retail business. But with the economy weakening, the timing for that would appear to be wrong. Even analyst Gary Balter of Credit Suisse, who has championed the Sears story, has thrown in the towel by downgrading Sears to an underperform. �Our outperform rating originally was based on free cash flow and asset value,� he wrote in a note to clients. �Unfortunately, over the past few months, we believe the largest piece of that value, real estate, has declined materially, with other pieces including brand value also losing a substantial part of their value in this market.�--H.Greenberg

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SHLD
28.00-1.56(-5.28%)Sep 18 4:00 PMEDT

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