Tag: SHLD

So, housing has to bottom some time. Toll Brothers results were released yesterday and it was a mixed bag and Robert Toll himself had some interesting thoughts

Toll’s Results:

Toll Interview:
Part 1

Part 2

Now, let’s put Toll aside and look at housing in general. There are pockets in hard hit places that seem to be thawing:

Sears Holdings (SHLD) Eddie Lampert recently bought shares in Centex (CTX) and KB Homes (KBH)(Bill Miller also owns shares). Chris Davis and Ron Baron recently bought Toll Brothers (TOL) and Richard Snow recently bought Hovnanian (HOV) shares.

All these are value investors and all are dipping their toes in the home builders. The position are all new ans small. Perhaps they are adding to them currently, this quarters reports will tell.

That being said, the fact the they are entering tells us something. I am looking at the sector and will report mote later.

Disclosure (“none” means no position):None

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Kudos to Concentrated Value for the pickup

Bruce Berkowitz of the Fairholme Capital picked up call options on Sears Holdings (SHLD) shares. He hold options on 354,000 shares having a current value of $28.3 million.

The options are at the $80 strike price and if exercised would increase Berkowitz’s position by 39%.

The options were purchased between the Feb. and the May filings

Disclosure (“none” means no position):Long SHLD

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Sears reported a 43 cent loss (53 cents without items) today vs a $1.15 gain last year. Lousy but not surprising..

Our first quarter results reflect the difficult economic environment and intense competition for consumer business. That said, since May 3, 2008, our sales declines have moderated somewhat,” said W. Bruce Johnson, Sears Holdings’ interim chief executive officer and president. “As a result of actions we have taken and will continue to take to manage our costs, our current forecast for 2008 reflects higher EBITDA than we achieved last year. At the same time we are managing costs, we will continue to invest in our future by hiring talented leaders and improving our online and multi-channel capabilities.”

Cash Position
They had cash and cash equivalents of $1.4 billion at May 3, 2008 (of which $656 million was domestic and $757 million was at Sears Canada) as compared to $3.5 billion at May 5, 2007 and $1.6 billion at February 2, 2008. The $0.2 billion net decline in cash and cash equivalents since the end of fiscal 2007 primarily reflects $517 million of cash used in operating activities, capital expenditures of $178 million and total long-term debt payments (net of new borrowings) of approximately $131 million. These amounts were partially offset by a $646 million increase in short-term borrowings, primarily through borrowing on our $4 billion credit facility. As of this date borrowings on the facility have been reduced to $400 million.

Inventories
Merchandise inventories at May 3, 2008 and May 5, 2007 were $10.3 billion. Domestic inventory levels declined from $9.5 billion at May 5, 2007 to $9.4 billion at May 3, 2008. Sears Canada’s inventory levels increased from $0.8 billion at May 5, 2007 to $0.9 billion at May 3, 2008. The increase in Sears Canada’s inventory is primarily due to the change in exchange rates.

Share repurchases:
The Company also announced today that our Board of Directors has approved the repurchase of up to an additional $500 million of the Company’s common shares. This authorization, when added to the $143 million remaining as of May 3, 2008 under previous authorizations, provides us with a current aggregate authorization of $643 million. Share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods. Timing of repurchases is dependent on prevailing market conditions, alternative uses of capital and other factors.

Bruce Johnson added, “We continue to have a strong balance sheet which, when combined with our expected free cash flow generation in 2008, enables us to take steps to invest in our business, consider other alternative investment opportunities, pay down debt, and repurchase our shares.”

Sears repurchased 0.4 million common shares at a total cost of $40 million (or $94.19 per share) under the share repurchase program during the first quarter of fiscal 2008. Since the third quarter of fiscal 2005, when the repurchase plan was first approved, they have repurchased approximately 33.1 million of the common shares at a total cost of $4.4 billion pursuant to the program. As of May 3, 2008, they had approximately 132 million common shares outstanding.

Now the hysterical folks out there will screaming about a loss that ought not be all that surprising. Those of us who invest in the business, look at the balance sheet and cash position and recognize those are a solid as ever. As a mater of fact, when compared to competitors JC Penny (JCP), Kohl’s (KSS), Macy’s (M) and even Home Depot (HD), Sears has by far the strongest balance sheet. It also is the largest appliance retailer by FAR. Since that category currently is being hit very hard by housing, it only stands to reason that they will suffer more than the others.

The balance sheet is what will position Sears to capitalize when retail finds footing and rebounds. Also, nothing has been said about the brand positioning the company is undertaking.

I will be a tough ride in the near term. The question is “would you be better off as an investor of any of the about companies”? No. Your investment would be impacted the same or worse and of more importance, the balance sheet of the company you are invested in has been more negatively impacted as well.

What to do? Hold on. Maybe we get lucky and be able to get more in the mid 70’s. It all comes down to your time frame. If it it years then this is just a blip on the screen and a great buying opportunity. If it is months, then you are panicking and if you invested in a big box retailer for the short term in the current environment, you should be.

It should be noted they are forecasting higher EBITDA than last year (an unusual move) and Johnson said they are going to “consider alternative investments”. Something will happen, just a matter of time…

Disclosure (“none” means no position):Long SHLD, None

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Sears reported a 43 cent loss (53 cents without items) today vs a $1.15 gain last year. Lousy but not surprising..

Our first quarter results reflect the difficult economic environment and intense competition for consumer business. That said, since May 3, 2008, our sales declines have moderated somewhat,” said W. Bruce Johnson, Sears Holdings’ interim chief executive officer and president. “As a result of actions we have taken and will continue to take to manage our costs, our current forecast for 2008 reflects higher EBITDA than we achieved last year. At the same time we are managing costs, we will continue to invest in our future by hiring talented leaders and improving our online and multi-channel capabilities.”

Cash Position
They had cash and cash equivalents of $1.4 billion at May 3, 2008 (of which $656 million was domestic and $757 million was at Sears Canada) as compared to $3.5 billion at May 5, 2007 and $1.6 billion at February 2, 2008. The $0.2 billion net decline in cash and cash equivalents since the end of fiscal 2007 primarily reflects $517 million of cash used in operating activities, capital expenditures of $178 million and total long-term debt payments (net of new borrowings) of approximately $131 million. These amounts were partially offset by a $646 million increase in short-term borrowings, primarily through borrowing on our $4 billion credit facility. As of this date borrowings on the facility have been reduced to $400 million.

Inventories
Merchandise inventories at May 3, 2008 and May 5, 2007 were $10.3 billion. Domestic inventory levels declined from $9.5 billion at May 5, 2007 to $9.4 billion at May 3, 2008. Sears Canada’s inventory levels increased from $0.8 billion at May 5, 2007 to $0.9 billion at May 3, 2008. The increase in Sears Canada’s inventory is primarily due to the change in exchange rates.

Share repurchases:
The Company also announced today that our Board of Directors has approved the repurchase of up to an additional $500 million of the Company’s common shares. This authorization, when added to the $143 million remaining as of May 3, 2008 under previous authorizations, provides us with a current aggregate authorization of $643 million. Share repurchases may be implemented using a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, the purchase of call options, the sale of put options or otherwise, or by any combination of such methods. Timing of repurchases is dependent on prevailing market conditions, alternative uses of capital and other factors.

Bruce Johnson added, “We continue to have a strong balance sheet which, when combined with our expected free cash flow generation in 2008, enables us to take steps to invest in our business, consider other alternative investment opportunities, pay down debt, and repurchase our shares.”

Sears repurchased 0.4 million common shares at a total cost of $40 million (or $94.19 per share) under the share repurchase program during the first quarter of fiscal 2008. Since the third quarter of fiscal 2005, when the repurchase plan was first approved, they have repurchased approximately 33.1 million of the common shares at a total cost of $4.4 billion pursuant to the program. As of May 3, 2008, they had approximately 132 million common shares outstanding.

Now the hysterical folks out there will screaming about a loss that ought not be all that surprising. Those of us who invest in the business, look at the balance sheet and cash position and recognize those are a solid as ever. As a mater of fact, when compared to competitors JC Penny (JCP), Kohl’s (KSS), Macy’s (M) and even Home Depot (HD), Sears has by far the strongest balance sheet. It also is the largest appliance retailer by FAR. Since that category currently is being hit very hard by housing, it only stands to reason that they will suffer more than the others.

The balance sheet is what will position Sears to capitalize when retail finds footing and rebounds. Also, nothing has been said about the brand positioning the company is undertaking.

I will be a tough ride in the near term. The question is “would you be better off as an investor of any of the about companies”? No. Your investment would be impacted the same or worse and of more importance, the balance sheet of the company you are invested in has been more negatively impacted as well.

What to do? Hold on. Maybe we get lucky and be able to get more in the mid 70’s. It all comes down to your time frame. If it it years then this is just a blip on the screen and a great buying opportunity. If it is months, then you are panicking and if you invested in a big box retailer for the short term in the current environment, you should be.

It should be noted they are forecasting higher EBITDA than last year (an unusual move) and Johnson said they are going to “consider alternative investments”. Something will happen, just a matter of time…

Disclosure (“none” means no position):Long SHLD, None

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It has been 6 months since I first posted on this. Does anyone know what Sears Holdings (SHLD) Eddie Lampert did to CNBC’s Erin Burnett? Watch below..

Now, I have never seem a “anchor” with such a snotty almost giddy reaction to a company or its head at news that is less than wonderful. Now, had Lampert been convicted of inside trading or fraud, it would be one thing and more than justified. But, Lampert has done nothing wrong except make shareholders very wealthy. Yes, despite the stock’s recent fall, those who invested with him 4 years ago are still way ahead and he has an almost unmatched track record.

Does anyone know the back-history here?

I have yet to see or find and example where Burnett has reported on any of Lampert’s investing successes. Anyone?

Disclosure (“none” means no position):Long SHLD.

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It has been 6 months since I first posted on this. Does anyone know what Sears Holdings (SHLD) Eddie Lampert did to CNBC’s Erin Burnett? Watch below..

Now, I have never seem a “anchor” with such a snotty almost giddy reaction to a company or its head at news that is less than wonderful. Now, had Lampert been convicted of inside trading or fraud, it would be one thing and more than justified. But, Lampert has done nothing wrong except make shareholders very wealthy. Yes, despite the stock’s recent fall, those who invested with him 4 years ago are still way ahead and he has an almost unmatched track record.

Does anyone know the back-history here?

I have yet to see or find and example where Burnett has reported on any of Lampert’s investing successes. Anyone?

Disclosure (“none” means no position):Long SHLD.

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Visit the ValuePlays Bookstore for Great Investing Books