Sears Holdings Takes a Beating, I'm Waiting for the Turnaround

What an ugly day for Lampert and company. Sears (SHLD) 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 and that is fine, as I will be a buyer when shares drop below $110. Retails stories are long term ones and 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 accelerated for those holding shares.

View release here.

Did Lampert Dump Burnett?

What did Sears Holdings 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,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 fearing every bump in the road.

down 48% from its high and Macy's Burnett clearly has no grasp of the situation. Sears is a retail turnaround story and 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)(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."

Comments

[User 79907:]

YES, I did notice and felt the same way!!!!!!!!!
Wasn't sure of what was behind her thinking.

2007 Nov 30 11:09 AM

[User 126705:]

How much did Lampert make those people who bought his stock in the 190's? Erin Burnett is absolutely correct. He deserves to be ridiculed over terrible numbers. How are you supposed to earn $.50 a share and earn a penney? Inexcuseable! Can you say preannounce. Kmart in the dictionary stands for junk store.

2007 Nov 30 09:51 PM

[zibi:]

I found this article by searching "burnett lampert" on google, because I wanted to find out if anybody else noticed and was upset by Burnett talking thrash and see that evil smile(not sure she tried to hide or show her happiness)on her face. I found it very unprofessional and repulsive. She certainly doesn't get from Lampert whatever she's getting from Trump. She would bend over for Trump anytime during the show, when Trump teaches us to be millionaires and if she'll ever report YTD performance on TRMP we will not see her with that nasty grin on her face, guaranteed. Her personality must be horrible, because even Cramer didn't put much fight for Eddie to prevent her from offending Lampert even further. Compared to Lampert, she's nobody.Her recent perfomance show she's not objective at all, has hidden interest and CNBC should give more opportunity to Melissa Francis, or perhaps remove Burnett from reporting markets and let her do evening shows with Trump. I admire Lampert's decision not to give interviews to backstabbing TV people, showing , he is not only wise investor, but wise man.

2007 Nov 30 10:43 PM