Countdown for Orchard - Edward Lampert Cuts OSH, Sears Backstory


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According to the GuruFocus 52-week low screener , Orchard Supply Hardware ( OSH ) is at a 52-week low, and 93.3% off its high. As Orchard Supply Hardware ( OSH ) faces possible default on a loan payment, top stakeholder Guru Edward Lampert , CEO of Sears Holding Corporation and founder of ESL Investments, reduced his Orchard Supply Hardware ( OSH ) position again by 16.25%, with remaining shares at 839,867, as of April 24, 2013. He traded at an average price of $1.55. The current price is $1.45, with a change from average down 6%. Seeking an out-of-court restructuring, Orchard Supply's lawyers and advisers must strike a deal with lenders by May 1.

Orchard Supply Hardware ( OSH ) operates neighborhood hardware and garden stores featuring products for home improvement, repair and the yard. Founded as a farmers' cooperative in San Jose in 1931, the company has 89 stores in California.

When Sears Holding Corporation ( SHLD ) spun off the California-based Orchard Supply Hardware in December 2011, investors like Lampert and others seemed to believe that the historical brand and neighborhood stores could stand independently. But the backstory is that the split helped Sears get through a cash shortage by shifting $340 million in non-recourse debt off the Sears books, according to Chicago Business. Executive vice president and CFO of Sears Holding Corporation, Robert Schriesheim, called the spin-off a "deleveraging transaction." The Sears credit standing would have suffered if it had owned a defaulted Orchard.

Prior to his most recent trade, Lampert has reduced his OSH position multiple times this year. Since first quarter 2012, between shares bought and sold, Lampert's average cost per share was $27, for a 93% loss.

Edward Lampert , CEO of Sears, also holds SHLD:

For 2012, Orchard Supply Hardware's revenue was $660.7 million. The company reported net sales for the fiscal year ended Jan. 28, 2012 of approximately $658 million. The company's last posting was third quarter fiscal 2012 with a net loss of $53.6 million compared to net loss of $10.1 million in the third quarter of fiscal 2011, and an operating loss of around $74 million.

Those who bought into the dream of an independent Orchard Supply company beating the giants of the home and garden market are surely disappointed. In a few days, Orchard and team may have found a way to restructure the balance sheet and move forward.

Guru Eddie Lampert is a self-made billionaire with a net worth of $3.1 billion as of March 2013. He is 437th on Forbes Billionaires list of the richest people on the planet, and he is 125th on the Forbes 400 list of richest people in America. As of April 24, 2013, his hedge fund, ESL Investments, has a portfolio that lists 11 stocks, with a total value of $3.8 billion and a quarter-over-quarter turnover of 8%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing
Referenced Stocks: OSH , SHLD

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