Edward Lampert Cuts Sears to Meet Redemptions, Still Confident
ESL Investments, the hedge fund of Lampert that is tracked by GuruFocus, retains 26,427,295 Sears shares after reducing the holding by 21.94%, or about 7,428,774 shares, from 33,856,069 shares held at the end of the third quarter. Lampert said the recent reduction was in order to distribute 7.4 million shares among clients who were withdrawing from his firm, meaning none of those reduced came from his personal holdings. Including his personal holdings, Lampert owns roughly 51.6 million Sears shares.
Lampert appeared unbowed by Sears’ weak progress with its turnaround efforts. He said in a statement: “My significant personal ownership in the company is a sign of my confidence and alignment with all shareholders.”
Lampert has been selling down his stake in the company significantly over the past several quarters, though he has not said whether those sales were also to meet client redemptions. Since the first quarter of 2010 when he held more than 66 million shares, he has cut the position size by almost half through quarterly sales.
He may have continued confidence in the turnaround strategy, however, because he is leading it after becoming chief executive officer of the company in January of this year, taking over for Lou D’Ambrosio, who served for two years.
The redemption requests come just after Sears reported its financial results for his third quarter in leadership. The company reported a $534 million loss, or $5.03 per diluted share, deeper than the $498 million, or $4.70 per diluted share lost the previous year. Sales declined for the 27th consecutive quarter.
It made modest progress toward Lampert’s goal of transforming the company to a member-centric and online-oriented business. Those enrolled in its membership benefits program composed 70% of sales, up from 65% the previous quarter, and online and multi-channel sales growth increased by 17% over the prior year.
Another guru with a substantial holding in Sears is Bruce Berkowitz of the Fairholme Fund, who in 2012 praised the company’s real estate assets:
“Sears Holdings (SHLD) (11% of the Fund) is one of the largest corporate real estate organizations in the world, with a portfolio of retail locations that is second to none. Generally Accepted Accounting Principles ("GAAP") mandate valuing their real estate at the lower of cost or market. GAAP would force the Dutch settlers to value Manhattan today at the 1626 purchase price of $23.70. The company's reported book value of $43 understates real values.”
Since then, Sears’ book value per share has declined to $17.68.
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