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Strategies & Market Trends : Can you beat 50% per month? -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (13139)	2/28/2008 10:17:44 AM
From: Smiling Bob	Read Replies (1) \| Respond to of 19256

SHLD -pissed away 2.9 billion buying declining shares Today Eddie's charging shares on his AXP Platinum --- Portfolio.com Deeper Hole for Sears Thursday February 28, 7:30 am ET The many challenges facing hedge fund manager Eddie Lampert as he launches another turnover attempt at Sears Holdings are starkly apparent today. Sears, the parent of Sears and Kmart stores, reported a more than 47 percent decline in quarterly earnings, as sales fell and profit margins weakened amid a general slowdown in consumer spending. More worrisome, the company's cash position fell to $1.6 billion at the end of the quarter, down more than half from $3.8 billion a year ago. The drawdown could restrict the company's options when it comes to investment and promotions as it reorganizes into five business units. The overhaul, and the replacement of Sears' chief executive, was announced last month, a clear sign, Jesse Eisinger wrote on Portfolio.com at the time, that Lampert's original strategy was not working. Most of the company's cash—$2.9 billion over the year—went to buying back Sears shares. Lampert, in a letter to shareholders, hailed the use of cash for buybacks, which have reduced the number of outstanding Sears shares by 20 percent. "For those investors who have sold their shares, we have helped provide liquidity to exit their investment," he said. "For those investors who have held onto their shares, they get to participate to a greater extent in the company's future performance." In the last three years, Sears has spent $4.3 billion on stock buybacks. Lampert's hedge fund is the biggest shareholder in Sears, with a 48 percent stake. In his letter, Lampert, comparing his effort to the Super Bowl win of the underdog New York Giants (although he says he is a Jets fan), says that skeptics have not understood his strategy. In response to criticisms about why Sears has not invested more in its 3,800 stores, Lampert says an investment cannot be justified if the store's profitability remains the same. He goes on to say: "To be clear, we are not saying that we can't justify investing in our stores. The issue is more about the size and type of investment as well as the timing and sequencing of an investment. There are many things that a retailer can do to improve its business without the significant amounts of capital that a major remodel would require. Improving the assortment of products and services, mix of inventory, visual presentation, recruitment and training of employees, and marketing and communications to customers are all ways to generate improved performance. They all require significant investments, but we already invest a significant amount of capital and expense in all of these areas." Sears spent $580 million in capital investments last year, significantly less than the $2 million per store envisioned when Sears and Kmart merged more than three years ago. For the quarter, Sears earned $426 million, or $3.17 per share, compared with $811 million, or $5.27 per share, a year earlier. Revenue fell nearly 7 percent, to $15 billion. Sales at Sears and Kmart stores open at least a year declined 4.5 percent. Lampert has played down the importance of quarterly performance, preferring to focus on the long term. Three years after the merger, however, the pressure is mounting to start showing some signs of a turnaround. Such pressure may come from the investors in Lampert's $15 billion hedge fund. In any case, it is certain to come from Lampert's own pride. As Eisinger noted in his in-depth examination of the hedge fund manager's failed tinkering with Sears in Condé Nast Portfolio, there is much at stake: "Once hailed as the Warren Buffett of his generation, Lampert, at 45, now has another turnaround job on his hands: his own reputation."