Category Archives: SHLD

On September 28, 2018, we said that “Delisting and Bankruptcy Await.”  On October 10, 2018, it was reported in Bloomberg News that there is talk of Sears filing bankruptcy as early as October 13, 2018.

If we look at the price of Sears on September 28 2018, almost anyone could make the claim that Sears was facing delisting and bankruptcy.  After all, by that time, SHLD was trading below a dollar and had fallen –86% in the last year.  So it was no feat of epic proportions to claim that SHLD was on its deathbed.

However, when Sears was trading above $30, we said the following:

• December 19, 2014
  • • • "Sears Holdings (SHLD) on the other hand has been worth avoiding as the stock has declined as much as –42% and is currently down –18%.  SHLD has rebounded to some extent but continues to be too hot to handle in our opinion.”

• August 26, 2014
  • • • "The worst performing stock was Sears Holdings (SHLD).  Sears has essentially traded with descending peaks since 2007 with price support at around $30.  A break below $30 could result in significant loss for any remaining shareholders.  Private equity firms must be circling Sears at the prospect of a decline below the long-term support."

Even at what is now a towering price of $30, Sears (SHLD) was a dumpster fire in the making.

In our August 26, 2014 posting, we said the followings on Sears Holdings (SHLD) when the stock was trading at $34.67:

“The worst performing stock was Sears Holdings (SHLD).  Sears has essentially traded with descending peaks since 2007 with price support at around $30.  A break below $30 could result in significant loss for any remaining shareholders.  Private equity firms must be circling Sears at the prospect of a decline below the long-term support.”

On September 28, 2018, at the close, Sears was trading at $0.97, a staggering loss of –97.11% from the August 26, 2014 commentary.

Bloomberg.com has highlighted an issue that we have been pointing out for some time, the massive conflict of interest.  Below are details of the most recent conflict of interest.

Our last posting on January 28, 2018 closed with the following remark:

“So what do we expect from SHLD management in the short-term?  We believe that the stock will experience another short squeeze with news that is supposed to reflect that the company has ‘turned the corner.’  The temporary boost will rout the short-sellers and buy some time for management.  However, as we said in our February 10, 2017 posting, ‘…anyone who continues to hold their position in Sears will not be rewarded for the value that has been lost since Lampert came on board.’”

The goal of our posting in January was to continue to caution readers before they consider putting money into SHLD stock.  Since January 2018, we’ve seen the following “short squeeze” action in SHLD.

After not having posting anything on his blog since October 2017, on February 11, 2018, Lampert responds to critics questioning his involvement in the Sears Canada bankruptcy.  Lampert, in spite of having a combined 53% stake in Sears Canada said, “…I don’t have firsthand knowledge of their internal deliberations and the alternatives considered.”  Apparently, this was good enough to see reversal of the long-established declining trend in SHLD stock price.

On March 14, 2018, SHLD was reported to have sales profit from the holiday quarter.  However, much of the profit was due to the $470 million dollar gain from U.S. tax legislation.  Without the tax gain, SHLD would have a reported loss for the same quarter.

In spite of losing $10.8 billion since 2010, on March 29, 2018, it is reported that Lampert gets a pay increase of +24%.  However, it is pointed out that Lampert continues to do a bulk of his charity work for Sears at a meager annual salary of $1.

On May 9, 2018, it was reported that at the annual shareholder meeting, Eddie Lampert said to the amassed crowd, “…we are still ‘fighting like hell…’”

All of these talking points have managed to increase the price of SHLD from a low of $2.15 on February 9, 2018 to a high of $3.80 by May 16, 2018, a change of +76% in three months.  This had to be a devastating blow to the short sellers that were right about the company prospects but wrong about the timing.

Based on our January 28, 2018 article, Sears has lost –23% in the share price. We aren’t confident about the prospects for SHLD at this time. However, a “short squeeze” is always a tactic for boosting confidence that won’t draw the same kind of criticism from regulators that a short selling campaign would. 

In an article dated October 24, 2017 on BNN, Eddie Lampert, CEO of Sears Holdings complained that “Sears Canada could have avoided liquidation.”

Lampert, who has been lauded as the next Warren Buffett, seems to think that Sears Canada executive chairman Brandon Stranzl made a mistake when he introduced his “Sears 2.0” strategy in 2016.  Lampert, through his ESL Holdings held a large stake in Sears Canada and said that, “ESL believed that [Sears 2.0] strategy was highly risky and unlikely to succeed.”

Let’s look at the failings of Brandon Stranzl at Sears Canada and Eddie Lampert at Sears Holdings by comparing the stock prices of the respective companies.  As Warren Buffett’s mentor Benjamin Graham said, “in the short run, the market is a voting machine but in the long run, it is a weighing machine.”

Brandon Stranzl tenure at Sears Canada:

Eddie Lampert tenure at Sears Holdings:

There is such a refreshing difference between the Lampert years at Sears Holdings compared to the job done by Stranzl.  The primary difference is that Sears Holdings was already in a rising trend in the stock price before Lampert took over.  Therefore, we cannot necessarily attribute the near doubling in price to the fact that Lampert did anything revolutionary at the company.

Ultimately, Lampert, when faced with challenges, was not equal to the task, as reflected in the subsequent decline in Sears Holdings.  Contrast Lampert’s good fortune of taking over when the company stock price was already in a rising trend to the challenge of Stranzl who took over Sears Canada after the stock price had been in a multiyear declining trend.

If the passage of time truly weighs the impact of stock value then Lampert’s years have proven to be of little merit to the shareholders of Sears Holdings.  Meanwhile, Stranzl’s two year history at Sears Canada was merely a vote of no confidence as a result of prior lack of leadership.