So here is the financial nitty gritty. Sears Holdings (SHLD) said this morning it expected quarterly profit of $160 million to $200 million, or $1.06 to $1.32 a share, including special items.
Those special items would be an after-tax gain of about $12 million from bankruptcy-related settlements and total return swap investing activities, Sears expects to earn 98 cents to $1.24 per share. A gain on the total return swaps is good news.Last year in Q2, Sears earned $294 million, or $1.88 a share. Excluding special gains, it earned $272 million, or $1.74 per share.
Sears said it expected to end the second quarter with about $2.8 billion in cash and cash equivalents, excluding Sears Canada, down from $3.1 billion at the end of the first quarter.
In addition, Sears announced a new $1 billion share repurchase authorization in addition to the $121 million worth of shares still available for repurchase under an existing program. Sears said it had bought back about 13.8 million shares for $1.9 billion since the repurchase plan was approved in the third quarter of fiscal 2005. As of July 7, it had about 150.9 million common shares outstanding. On the last 10Q, Sears stated that the had 152,492,175 shares outstanding meaning Lampert has bought 1,592,170 shares since May 25. The new $1 billion program will take 7.1 million shares off the market or 4.7% of shares outstanding. A huge amount? No, but we know, based on past results this plan will be completed and share count reduced.
Should we panic? Sell? Hell no. Why? Sears is tied to the housing market far more than most other clothing retailers. It sells a huge amount of appliances, tools and yard equipment. It is a true mix of a Home Depot (HD) and a Macy’s (M) or JC Penny (JCP). That part of Sears is getting hit hard and it is not a management issue as both Home Depot and Lowes (LOW) are suffering the same fate now. Sears did say that women’s and children’s apparel both showed gains last quarter and the Land’s End division is having a record year. Neither of these are signs of a failing retailer. Rather, Sears is a retailer caught in the unavoidable train wreck that is the US housing market. When housing turns around, and yes it will, you will be left with a retailer that has made huge gains fixing it’s apparel offerings and now will be drawing more shoppers to those stores who are now spending money on their homes. They will also now have vastly different choices for apparel and based on current trends, will be buying them also.
Just as folks are claiming Home Depot and Lowes are undervalued, so to is Sears and for the same reasons. Today’s prices are a sale.
The reported numbers were from results for the nine weeks ended on July 7. The second quarter ends on August 4 and Sears said it did not plan to update its outlook before announcing second-quarter results on or about August 30.
5 replies on “Sears Holdings: If Lampert Is Buying More, Shouldn’t We?”
Nice work Todd, I was waiting for a reply about today’s drop in SHLD shares. I agree with your points, I would buy SHLD alone on Lampert’s leadership.
frank
http://www.thestockmasters.com
todd- i love reading your blog, but you drank the esl / jim cramer cool aid. sears announces crappy trends, specifically in hardlines. SHLD, down 10%. Lowe’s, down 2.5%. HD, flat. there’s value here, but its not in sears or kmart.
something more is amiss here. low and hd are taking double digit share away from shld in appliances and tools. apparel may “offset” hardlines declines, but that doesn’t mean those categories are “up”. just means they are down less negatively.
macroeconomic factors aside, shld just isn’t creating greater relevance to its target market. the brand campaign is a bore and obviously isn’t driving more business to stores. the stores are abysmal and the shopping experience couldn’t be more painful. even buying something from their website was difficult – about par for the course.
eddie stablized profitability, but he also strangled capex and the business is suffering. he’s a financial wizard, but certainly not operations or merchandising wizard. if he’s truly committed to turning around the business, he needs some serious retail help and i just don’t see it at this point. lord knows it won’t come from an ex-fast food franchise veteran posing as a ceo.
smart companies invest in capex during a down market – that way, when the market turns, they are poised to take share. witness HP. i would stay away for now… it took autozone 10 years to turn around under esl ownership.
Based on the buyback and debt paydown, Sears spent $684 since May 5 (Q1 results) yet cash on Balance sheet only dropped $300million. $384 million in cash flow over 2 months..not bad at all.
I was certainly hopeful for a better qtr. I agree with the previous post new mktg campaign is pretty weak. The Sears “book” campaign has no story, just a figment of some PR firms imagination imo.
At the end of the day, I’m bullish for 3 reasons:
1. Cash flow is strong
2. Declines are consistent with market trend, ie housing drop.
3. Eddie is buying back shares in bulk. If he wanted the cash to invest elsewhere, he’d just be cutting dividends and probably selling off real estate.
Just my 2 cents
hey guys..
thank you for reading..
couple things:
childrens and ladies apparel are up and land’s end is having a record year. it is just that it takers a lot of shorts sold to offset a $2,000 washer and dryer.
sears of the only real hybrid retailer out there. it is going to drop after the depot and lowes, and going to run up ahead of them when housing resumes.
it is suffering because it is being judged solely as a clothing retailer and not a home improvement one…
it need to be judged as a category to itself..
sounds like another post
there’s an implicit assumption, though – that sears will remain relevant in hardlines until a housing turnaround occurs sometime in the future. from my perspective, therein lies the rub… without investing in a better mousetrap, sears as a retailer is in deep doo-doo. hd and low will continue to take share and customers will continue to seek better value. the lands end store within a store strategy is spot-on, but for some reason, the company can’t get its act together in outsourcing other parts of the business. lampert needs help – time will tell, but as an investment vehicle, shld holds significant promise. as a retailer, its beginning to be laughable.