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Holly LaFon
Holly LaFon
Articles (10140)  | Author's Website |

Bruce Berkowitz Buys More Shares of Sears as Stock Tumbles

Sears says it may not make it another year and Fairholme Fund increases position

March 23, 2017 | About:

Hopes raised by a chairman’s letter on future strategy March 9 were crushed Wednesday when Sears Holdings listed a “going concern” statement in its annual report. The same day, Bruce Berkowitz (Trades, Portfolio) increased his position in the dying retailer 2.05% in his third purchase of the month.

Berkowitz, the founder of the celebrated Fairholme Fund (Trades, Portfolio), is the second-largest stakeholder in Sears (SHLD), behind Eddie Lampert’s ESL Partners. He held 28,628,848 shares, or 25.87% of the company, after Wednesday’s purchase of 574,800 shares as the price plunged more than 12% to below $8.

The stock has traded down 49% in the past year and 89% in the past five years as Lampert ostensibly tried to improve operating performance but saw five years of unprofitability.

"Our historical operating results indicate substantial doubt exists related to the company's ability to continue as a going concern" after 12 months, Sears said in its annual report.

It also expressed doubt it could raise further liquidity to meet its needs for the following 12 months. In February, Sears moved to cut costs by $1.0 billion, primarily by closing stores. In January, it sold its Craftsman brand to Stanley Black & Decker for an additional $900 million.

“If we continue to experience operating losses, and we are not able to generate additional liquidity through the mechanisms described above or through some combination of other actions, while not expected, we may not be able to access additional funds under our amended Domestic Credit Agreement and we might need to secure additional sources of funds, which may or may not be available to us,” the statement said.

Sears ended 2016 with $3.57 billion in long-term debt and $752 million in cash on its balance sheet.

Jason Hollar, Sears’ chief financial officer and vice president of finance, posted a letter to clarify the statements Wednesday, saying the company still aimed to survive past the year.

“It is very important to reiterate that Sears Holdings remains focused on executing our transformation plan and will continue to take actions to help ensure our competitiveness and ability to continue to meet our financial obligations,” he said.

See Bruce Berkowitz (Trades, Portfolio)'s portfolio here.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


Rating: 5.0/5 (1 vote)

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Comments

Dr. Paul Price
Dr. Paul Price - 2 years ago    Report SPAM

He has lost HIS mind and tons of OPM (other people's money) on SHLD, which is heading to zero.

Mark Yu
Mark Yu - 2 years ago    Report SPAM

Gutsy gutsy move. Maybe he thinks AMZN would buy SHLD to help it with its omnichannel? Could be?

Good luck to all SHLD shareholders.

Seattle Ethan
Seattle Ethan - 2 years ago    Report SPAM
Puzzling. I know Francis Chou (Trades, Portfolio) was looking at info from Seritage as a positive news...ie market value of the real estate holdings for Sears Holdings. Berkowitz mentioned that the shares should be reduced to just 2 shares, one for Eddie and one for Fairholme. It sounded like privatization awhile back.


Awhile back, someone thought Craftman, Die hard batteries, and Kenmore were worth $6 billion. But then they had trouble selling and think Craftman got $900 million? Crazy.

Sivaram
Sivaram - 2 years ago    Report SPAM

Does anyone have any idea why Berkowitz would buy Sears common shares? He could have bought the bonds.

The thing that is interesting to me is that the vast majority of Berkowitz's forune is in Fairholme (as far as I know). He is investing his own money into Sears at this stage, while also being a board member. He has been wrong over the last few years but what does he see now? Why invest more now?

Anyone else bullish on Sears or thinking of it?

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