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Here's Why Sears Holdings (SHLD) Stock Is Slipping Again

Ryan McQueeney
Shares of Sears Holdings (SHLD) were down more than 9% in morning trading Monday after the struggling retail company announced that a key investor is leaving its board of directors.

Shares of Sears Holdings SHLD were down more than 9% in morning trading Monday after the struggling retail company announced that a key investor is leaving its board of directors.

The departing executive is Bruce Berkowitz, the chief investment manager of Fairholme Capital Management. Berkowitz joined Sears’ board in February 2016, although his investment in the retailer dates back more than a decade.

“On behalf of the board of directors and management, I want to thank Bruce for his long-term commitment and investment in Sears Holdings,” said Sears CEO Eddie Lampert. “His leadership, guidance and counsel as a board member have been invaluable to our company.”

Berkowitz first took a stake in Sears in August 2005. Consistency in picking solid investments brought Berkowitz widespread acclaim, and his Fairholme Fund would peak in 2011. However, the fund has slumped on the back of Sears’ well-documented struggles.

Nevertheless, Fairholme has remained one of Sears’ biggest investors—often behind only Lampert’s own hedge fund, ESL Investments. Berkowitz and Fairholme have also invested in Seritage Growth Properties (SRG), a real estate investment trust that spun off from Sears Holdings about two years ago.

At one point, Fairholme’s success led to Berkowitz being named fund manager of the decade by research firm Morningstar. But Berkowitz has remained loyal to the sinking ships of SHLD and SRG, and his credibility as a fund manager has subsequently tumbled.

“Mr. Lampert and Mr. Berkowitz have a long-standing partnership and continue to have great respect for each other,” a Sears spokesperson told CNBC. “They both expressed their appreciation for the time they spent together serving on Sears' board of directors.”

Berkowitz’s departure comes in the wake of the news that Sears is planning to liquidate its Sears Canada stores. The company will close 82 locations, leaving 12,000 employees without a job. Sears Canada had previously declared bankruptcy in June, but the retailer could not find a buyer for its assets.

Sears Holdings is a minority owner of the Sears Canada brand, so the news led to even more investor frustration. SHLD also recently announced that it was taking another $100 million loan from Lampert’s ESP Investments in an effort to keep itself afloat through the holiday season.

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