Sears, Troubled Company?

The New York Times has this story titled
Saving Sears Doesn’t Look Easy Anymore
. I wonder if we are witnessing the end of Sears. In April of 2007, Sears (SHLD) traded over $195 a share. Friday it closed at $99! An evaporation of $14 billion in market value.

Since combining the two retailers, Mr. (Edward S.) Lampert, 45, has raised prices even as he has cut capital spending and marketing budgets. The dearth of investment shows up in stores, many of which look shabby next to those of rivals like Target and J. C. Penney. Mr. Lampert’s major use of cash has been to buy back Sears Holdings’ shares.

And in 2008 he faces three problems that were only partly evident last year: belt-tightening by consumers, a falling housing market and a possible recession. “Sears is woefully unprepared to handle this kind of consumer spending slowdown,” said Bill Dreher, an analyst at Deutsche Bank Securities. “The underinvestment in stores has hurt sales, hurt customer good will and will hurt their long-term competitiveness.”

The market cap of Sears is currently at $14 Billion on sales of over $52 Billion. The $14 Billion is basically the value of the real estate.

Craig Schmidt, an analyst at Merrill Lynch, and Gregory Melich, an analyst at Morgan Stanley, value Sears real estate at around $16 billion. The company’s market capitalization is $14 billion, as of Friday’s close. One investor who has bet against Sears said he believes the real estate may be worth just $10 billion.

Mish’s Global Economic Trend Analysis believes that there is a
Commercial Real Estate Crash Underway.
The $10 Billion is about $72 per share. The market is not giving much value to the long history of Sears.

Sears (SHLD) Edward S. Lampert Mover Mike

2 Responses to “Sears, Troubled Company?”

  1. This reminds me of the movie, A Wonderful Life, where our hero finds out he’s worth more dead with an insurance policy to cover his family’s needs than alive with a scandal brewing.

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