Tag: SHLD

Here are the retail states for the wek ending 11/24 (including “Black Friday”)

1. www.walmart.com (WMT)= 10.9%
2. www.target.com (TGT)= 5.64%
3. www.bestbuy.com (BBY)= 5.62%
4. www.circuitcity.com (CC)= 4.53%
5. www.sears.com (SHLD)= 2.85%
6. www.toysrus.com (private)= 2.66%
7. www.jcpenney.com (JCP) = 2.35%
8. www.kmart.com (SHLD)= 1.89%

Walmart.com continues to set the pace at almost twice its closest competitor and even outdrawing amazon.com (AMZN) for the big week. An interesting note, the combined Sears and Kmart traffic, both owned by Sears Holdings places them in 4th place with more than double the traffic of JC Penny and just behind Best Buy.

Data from hitwise.com

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Sears Holdings (SHLD) Chairman Eddie Lampert issued the following letter to employees yesterday.

To our Associates:

Yesterday, Sears Holdings announced our results for the third quarter of 2007. While we were not pleased with these results, much of the commentary in the media and on Wall Street following the results ignores the strength of our company and the progress that we have made. In fact, over the past several years, we are one of the few retail companies that have actually reduced our overall debt levels, while at the same time investing over $1 billion on capital expenditures, making investments in inventory for our customers, contributing significantly to our pension plans for our past and future retirees and repurchasing over $3 billion of our shares.

As Aylwin said yesterday, we cannot blame our results entirely on the retail and macro-economic environments, and we need to continue our quest to improve. At the same time, it is also the case that many retailers, including Home Depot (HD), Lowe’s (LOW), Macy’s (M), Kohl’s (KSS) and JC Penney (JCP), have suffered from the economic environment of the past year and have had disappointing sales and earnings results. Much of the commentary following their results focused on the difficulties in the housing markets, the overall macro environment, and the highly promotional nature of the retail environment that has existed recently. An analyst for Fitch, the credit rating agency, reacting to JC Penney’s new store openings was cited as praising JC Penney for keeping expenses under control. When other companies manage expenses carefully, it is often characterized as a sign of good management and prudence. In the case of Sears Holdings, meanwhile, expense controls are often cited as a root cause of poor performance.

Sears Holdings sells a large variety of merchandise. Many of our merchandise categories, including home appliances, tools, and lawn and garden equipment are directly related to home improvement, home maintenance and home turnover related activities. As Mike Ullman, CEO of JC Penney, was quoted recently as saying, “It’s hard to sell window coverings to homes that aren’t being built.” JC Penney reported lower income in its most recent quarter compared to last year. Kohl’s Corp. reported that its income for the past quarter was lower as well. The same goes for Home Depot and Lowe’s. All of these companies have spent enormous amounts to open new stores and to remodel existing stores and still ended up with lower earnings. Spending lots of money doesn’t always lead to the results people expect.

In fact, Sears Holdings has made significant investments and taken measured risks, including the increase in our inventory position over the past couple of years. Not all of these risks pan out and, in the case of our inventory investment, the additional inventory has not resulted in improved sales and profitability. Had the economic environment been different, certain actions may have led to different results. We are taking actions to adjust our inventory position so that, by the end of our fiscal year, we expect our inventory levels will be below the levels of the prior year.

Retail is a fickle business. Nevertheless, like any other business, by focusing on the long term, making decisions based on facts and logic, and appreciating that all decisions are based on many possible future scenarios, companies can navigate the ups and downs of the economy and the stock market to create long term value for their shareholders. That is our focus, and our goal, at Sears Holdings. We will take the actions we believe are necessary to drive value over the long term and manage the business closely and opportunistically in the short term.

We thank you for your hard work and are committed to working to deliver better results in the future. Remember, not everybody likes rooting for the underdog. It is up to us to earn their respect by our performance on the retail playing field.

Respectfully,

Edward S. Lampert
Chairman
Sears Holdings

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Jesus, what did Sears Holdings (SHLD) Eddie Lampert do to CNBC’s Erin Burnett? Did they date when she worked at Goldman Sachs (GS) or did he rebuff her advances? Perhaps she is miffed that she did not get an interview she wanted?

She has been joyously drubbing this quarters performance all day today on CNBC. She does is with this sick little smile on her face too. Odd…

Now, I am not saying this was a good quarter, it sucked. But, Burnett has taking it a bit farther. She spent this morning comparing his Citigroup (C) purchases to that of Saudi Prince Alwaleed’s. Now, it is one thing to compare two investors purchase price but is it really legitimate or the slightest bit honest to compare purchases of a company made 17 years apart? Am I the only one who finds that embarrassingly transparent?

Then she jumps into the “how much time does Lampert have left” doomsday scenario. Okay,,,,,, let’s just forget the 20 year and 28% annual return Lampert has produced for investors. That track record alone places him in a handful of investors. I mean, I am sure anyone who has made a fortune with Lampert is jumping ship now because of a bad year. Let’s also forget the 5 year lockup people give him when they fork over their $10 million minimum to invest with him. Let’s also ignore the fact that folks who have $10 million to give someone for 5 years to invest, did not get that type of money by pissing their pants at every bump in the road.

Sears. Burnett clearly has no grasp of the situation. It is a retail turnaround story. Those take years. Sears is not losing money and still is producing billions for Lampert to repurchase shares. Has Burnett seen the stock price and performance of other comparable retailers like JC Penny (JCP) down 48% from its high and Macy’s (M) down 30% from its high? Apparently not. Check out the one year chart of all three here. Look similar?

What Burnett casually glosses over is that when Lampert took control of both Sears and Kmart, they were careening toward extinction (Kmart actually was bankrupt). Now they produce about $1 billion in cash and every quarter that goes buy, Lampert increases our ownership percentage.

Awful job Eddie…. (please detect the sarcasm)

Erin, get over it “he just not that into you”

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Going to be an ugly day for Lampert and compnay.

Sears (SHLD) today reported net income of $2 million, or $0.01 per diluted share, for
the Q3 ended November 3, 2007, compared with net income of $196 million, or $1.27 per diluted share, for the Q3 ended October 28, 2006. The Q3 2006 results included $101 million in pre-tax gains ($64 million after tax or $0.42 per diluted share) on total return swap investments outstanding during that period.

Excluding these gains, earnings per diluted share were $0.85 for the Q3 of fiscal 2006. The year-over-year decline in income is primarily the result of a $223
million decline in gross margin, reflecting both sales declines, as well as an overall decline in our gross margin rate for the quarter due to discounting.

Operating income for the quarter decreased $230 million to $46 million in 2007, as compared to $276 million in the third quarter of 2006, mainly due to lower gross margin generated at both Kmart and Sears. For the quarter, Sears Holdings generated $3.2 billion in total gross margin as compared to $3.4 billion in the third quarter last year.

Lampert had cash and cash equivalents of $1.5 billion at 11/3 (of which $0.8 billion was domestic and $0.7 billion was at Sears Canada) as compared to $2.1 billion at October 28, 2006. The $1.1 billion net decline in cash for the quarter primarily reflects $0.9 billion used for share repurchases and $0.9 billion used to build inventories for the holiday selling season, partially offset by $0.6 billion of cash generated through short-term borrowings that have been repaid as of 11/27.

Lampert repurchased 6.7 million common shares at a total cost of $0.9 billion (or $131.72 per share) under our share repurchase program during Q3. As of November 27, he had remaining authorization to repurchase $736 million of common shares under the program.

The bright spot was November month-to-date period (Sunday, November 4, 2007
through Tuesday, November 27, 2007) domestic comparable store sales
at Sears increasing 1.9%.

Good? Hell no. Sucks actually. But, did you really expect any better? Sears is going to get hit hard today and that is fine as I will be a buyer when shares drop below $110. Retails stories are long term ones ans Lampert is only in act two. Act one was getting both companies off the bankruptcy express, act two is determining the format which appears to be a brand central one. Act three will be the roll out of this (this will happen over the next year) and then we wait.

The good news is share count is decreasing rapidly, now down to about 137 million so the turnaround earnings will be excellerated for those holding shares.

View release here:

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Restoration Hardware (RSTO) answered Sears Holdings (SHLD) today only a day after Sears reminded it who was “it largest shareholder”.

The release below:

PRNewswire-FirstCall/ — “In response to media and other inquiries concerning the Schedule 13D amendment filed by Sears Holdings Corporation on Monday, November 26, 2007, the Independent Committee of Restoration Hardware’s Board of Directors stated if Sears will agree to execute the customary confidentiality and standstill agreement on substantially the same terms that other parties have signed, it would be pleased to provide Sears with the confidential information it requested.

“While Sears has announced its willingness to sign a confidentiality agreement, there is no agreement on terms and, to date, instead of agreeing to the standstill agreement to which other interested parties have agreed, Sears has proposed to reserve the right to launch a tender offer outside the process,” the Independent Committee said in a statement today.

The Committee stated that it is encouraged by Sears’ current proposal at $6.75 per share based upon publicly available information, which is a vast improvement over its prior proposal at $4.00 per share. At the same time, the Committee stated that it believes that stockholder value will be maximized if Sears participates inside the process with other interested parties.

“Sears is an American icon,” said Ray Hemmig, Chairman of the Independent Committee. “We are flattered that it is interested in learning more about our company. We welcome its participation in the process along with the other interested parties. However, the Committee is firmly committed to a fair process that will yield the best results for all stockholders and believes that process is best served through all parties agreeing to the proposed standstill terms without preferential treatment of one party over another.”

On November 8, 2007, Restoration Hardware announced a merger agreement with Catterton Partners. In that announcement, the Company said that under the terms of the agreement, the Independent Committee of the Company’s Board of Directors, consistent with its fiduciary duties, would be soliciting competing proposals from third parties during a 35 day period ending December 13, 2007. On November 19, 2007, Sears filed a Schedule 13D with the SEC indicating that it had accumulated shares equaling just under a 14% ownership position in the Company.”

The whole release is a bit self-serving at best. Why? The other “bidders” in this situation is management itself! What unfair advantage could Sears possibly get over the people currently running the company? Answer? None. Restoration is trying to save face.

Restoration got bitch slapped by Lampert & Co. the other day when they reminded them that as the “largest shareholder” they actually owned more of the company than the current bidders and the Board or Directors themselves and that as such, deserved consideration in the process in getting the information they wanted. It is no coincidence that this information was forthcoming immediately.

There is nothing to stop Lampert from acquiring more shares on the open market during this process, he just cannot launch an official tender offer for shares. Semantics.

Where do we go from here? Lampert gets what he wants (information) and either two things happen. He ends up buying the company OR management raises it offer above that of what Sears would be willing to pay and Lampert cashes out at a profit. Either way Sears shareholders win.

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The key paragraph here in the letter filed today from Sears Holdings (SHLD) is the last one where it calls out management and the board of Restoration (RSTO) and states that “as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout.”

Dear Mr. Hemmig:

We are disappointed that our numerous requests to receive confidential information have not yet been granted by the Special Committee of the Board of Directors (the “Special Committee”) of Restoration Hardware, Inc. (the “Company”). As you know, we have sought such information to enable us to determine whether to submit a binding proposal to acquire the Company on terms superior to the insider buyout contemplated by the Agreement and Plan of Merger (the “Current Merger Agreement”), dated as of November 8, 2007, among the Company, Home Holdings, LLC, and Home Merger Sub, Inc.

As you know we have been discussing the terms of a confidentiality agreement with you and your advisors and in this regard you have asked us to provide you with a proposal to acquire the Company. While we do not understand your requirement that we submit such a proposal prior to providing us with due diligence information during the “go shop” period, we are prepared to inform you that, based on the public information currently available to us, we would be prepared to enter into an agreement to offer your stockholders $6.75 per share in cash via tender offer. We would contemplate entering into a merger agreement on terms substantially similar to the Current Merger Agreement, modified as necessary to accommodate the tender offer structure and with a lower, more reasonable break-up fee than contained in the Current Merger Agreement.

We believe that this proposal, if agreed, would provide a compelling opportunity for your stockholders to realize significant value for their shares in an all cash transaction. The structure of our proposal would enable all of your stockholders to realize value for their shares sooner with less execution and other risk than the transaction contemplated by the Current Merger Agreement. Accordingly, we believe that the Special Committee should as soon as practicable designate Sears Holdings Corporation and its subsidiaries as “Excluded Parties,” as defined in the Current Merger Agreement and should exempt the transactions contemplated by our proposal, including the tender offer, from Section 203 of the Delaware General Corporation Law.

As noted above, our proposal is based solely on publicly available information (including the projections contained in your August 30 press release but not including the results of your most recent quarter, which we expect to be announced shortly), and would require access to the due diligence information we have been seeking. To that end, we again request that you allow us to enter into a confidentiality agreement with the Company on terms permissible under the Current Merger Agreement. Moreover, as you have requested we would be willing to agree to a customary “standstill” provision in such confidentiality agreement, subject to the exception we have discussed with you and your advisors which would enable us to commence a tender offer for all of the shares of the Company only at a price greater than that offered pursuant to the Current Merger Agreement.

We believe that providing us with information and the opportunity to offer all stockholders more consideration than they would receive pursuant to the Current Merger Agreement would be in their best interest. As your largest stockholder, we would similarly encourage you to provide this “superior tender offer” exception to other persons, if any, who might also be interested in receiving confidential information in order to submit a superior proposal, whether as part of a “process” or otherwise.

Additionally, as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout. We note in this regard that you entered into a confidentiality agreement with the private equity leader of the insider group on July 20, 2007 and apparently have been focused exclusively on the insider deal since that time rather than exploring our known interest (first expressed to you in June of this year and repeatedly reiterated). Notwithstanding our known interest, you did not provide us with either guidance or information which could potentially have enabled us to submit a superior proposal to the insider deal in advance of its execution. Our concerns have been increased by the delays we’ve encountered during the “go shop” period which have served to further exacerbate the procedural, contractual advantages (including break-up fees, match rights, and new change of control benefits) and informational superiority which the insider group enjoys.

We hope that you will recognize the benefits of a transaction along the lines that we have proposed and quickly grant us access to the information we have requested as we believe that this would be in the best interests of the Company, its stockholders, customers and employees. We stand ready and willing to complete this transaction quickly, and look forward to doing so.
Sincerely,

/s/ William C. Crowley

Now, it should also be noted that Sears upped its offer from $4 an share to $6.75 a share. Sears, being the largest shareholder (double that of the next largest shareholder) here does have management in a precarious situation. I would bet Lampert has been buying more shares recently (or soon will be) and will up his ownership percentage. At that point, what management wants to do could become essentially irrelevant

One has to think management is stonewalling Sears in order to keep their jobs since they are the one trying to buy the company currently. If Lampert gets control of more shares, it will become a moot point. Currently share trade about 25 cents over Lampert’s offer price indicating folks feel Lampert will eventually pay more. That being said, Lampert could double his ownership to 27.4% for about $1.5 million more than he would pay if the offer price was accepted. It would be a rather cheap premium to pay to all but assure a deal.

Also, the letter twice refers to Sears as “your largest stockholder”. It is a veiled way of saying “hey, we own more of this sucker than you do, want to get ugly?
Go ahead.”

Now, Restoration management has done the right thing in waiting this out until now to get a higher price. However, there now comes a point where they will be viewed as obstructing the process rather than getting the best deal. This is especially apparent since the are the other bidder for the company and their offer is now inferior to the one Sears has made. Sears, being the “largest stockholder” does have the the upper hand should things get contentious.

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Romney, Lampert, Confirmation, Murdoch

– Now, if you truly believe the nation is “in trouble” and you honestly will vote for the “most qualified person”, how can you vote for anyone other than this guy?

– Sears Holdings boards member Richard Perry’s thoughts on Eddie Lampert

– Like me, this blogger enjoys the validation his thought process gets when the worlds greatest investors are buying the same stocks he is.

– Remember the dire predictions when Ruppert bought Dow Jones, right, all crap.

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