In late November, I purchased shares in Footstar at $2.8 per share. In January I received a $1 dividend as part of the company’s liquidation. In the 4th quarter the company received $53 million from Kmart for the remaining inventory and reduced the market price of their headquarters building to $12 million from $19 million. The current carrying value on the balance sheet is $6.2 million. In addition, 4th quarter earnings came in at the high end of my estimate at $25 million.
Last week, I sold my shares for $2.63. In 3 months I made a 30% return on my investment in Footstar. I purchased Footstar because I believed that the company would be able to distribute at least $4.5 per share as part of their liquidation. After accounting for the recent dividend and the operating results for the 4th quarter which were better than I had estimated they would be, the company estimates it will distribute $2.65-$3.45 per share to shareholders.
There is still a 30% upside from the current price using the best case. But the sale of the headquarters building could take time especially in this environment. If the best and worse cases are averaged shareholders would end up with a 15% return on their money. With the opportunities available in the market today, I’ve decided to sell my shares in Footstar.