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Sears Shares Fall as Lampert's Firm Cuts Stake - Analyst Blog

Posted
12/4/2013 1:05:00 PM
By: Zacks.com
Referenced Stocks:DLTR;M;SHLD;TGT

Shares of Sears Holdings Corp. ( SHLD ) fell 7.7% yesterday after it revealed that Edward S. Lampert's firm, ESL Partners has reduced its stake in the company. However, Lampert did not distribute his personal stake in the financially stressed retail company.

Lampert declared his hedge fund company's disbursement of 7.4 million shares of Sears Holdings to investors who wanted to withdraw their money from his firm. The move has brought down his firm's stake in Sears Holdings to 48.4% on Dec 2, 2013 from 55.4% as of Mar 19, 2013. Despite this, Lampert, who is the chief executive and chairman of Sears Holdings, remains the largest shareholder of the retail company.

Sears Holdings has long been grappling with soft top and bottom lines performance. The company's restructuring initiatives have not been successful and Sears Holdings is constantly lagging its peers Target Corporation ( TGT ), Dollar Tree Inc. ( DLTR ) and Macy's Inc . ( M ).

While Sears Holdings appeared to be returning to the growth trajectory when it posted improved year-over-year bottom-line results for all the quarters of fiscal 2012, the results of the first three quarters of fiscal 2013 have dampened investor sentiment. During all these three quarters, the company's loss per share has widened substantially on a year-over-year basis.

However, in an attempt to boost its financial performance, this Zacks Rank #4 (Sell) company has undertaken a number of measures, such as reducing investment in sections of the company that no longer contribute significantly to its growth. Moreover, Sears Holdings intends to lower the number of Kmart and Sears full-line stores to slash costs.

Last month, the company's unit Sears Canada Inc. successfully terminated leases at 5 stores - 4 in Ontario and 1 in British Columbia - as part of its turnaround strategies to enhance operations. These outlets had 965 staff in total.

Moreover, as part of Sears Holdings' transformation plans announced in October, the company has decided to spin off its Lands' End and Sears Auto Center businesses. The sale will expectedly provide the company additional liquidity and facilitate better focus on its core business.

At present, Sears Holdings is concentrating on cost containment, inventory management and implementation of merchandise initiatives to inflate margins. We commend the company's strategy of capitalizing on opportunities, while augmenting performance through its revamped organizational structure and new operating model. All these measures will expectedly improve its top and bottom lines, going forward.



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