????"I do think Lampert is trying to utilize his assets in the most efficient way, which is what people who run companies are supposed to do," says Stowell, who has studied Sears structure under Lampert. He adds that the hedge fund guru has done better for shareholders than many will admit. "If you can maintain cash flow in the context of declining revenues, that is a pretty good outcome. I give him credit for generating a lot more shareholder value than would have been created in the absence of the Lampert ownership period."
????Original investors in Lampert's reorganized Kmart have done well enough, at least if they didn't keep buying stock (as Lampert has), through the merger with Sears, Roebuck and Co. in 2005 and the other various inspired initiatives and management shakeups that followed.
????In an attempt to boost its financials, Sears has been attempting to shed unproductive stores, enliven its internet presence and lease out bits of the 133,000 square feet that encompass its average location to other retailers, such as Forever 21, Edwin Watts Golf Shops and Work 'N Gear, as well as grocery and health club chains.
????But revenues were down to $43.3 billion last year, from $50.7 in 2008. In August, the company reported that Kmart's comparable store sales were flat in the second quarter, while Sears stores in the U.S. saw a decline of 1.2%. Net loss for shareholders for the quarter equaled $1.37 per diluted share, compared with a 35-cent per diluted share loss in 2010. Cash flow from operations was barely positive for 2010 and was negative $467 million for the 26 weeks ending July, 30, 2011. The consensus estimate is for Sears Holdings to show a loss of $2.29 per share when it reports in mid-November.
????In June, Fitch downgraded Sears Holdings debt to "B" from "B+," due to the continuing deterioration of earnings, particularly the "precipitous decline during the first quarter of 2011." The problem illuminated by Fitch is that domestic Sears and Kmart stores have continued to underperform other retailers on top line growth and operating margins have also lagged. The rating agency says its greatest concern is "the magnitude of decline in profitability and the lack of visibility to turn around operations."
????Professor Steve Hoch, who teaches marketing at University of Pennsylvania's Wharton School, notes that Sears' latest licensing move will help bolster its income by pulling in some additional, albeit lower-margin sales. It will also possibly help a little with store recognition due to the "implicit endorsement by the other retailers," but he sees Sears' ultimate benefit from the licensing deals as being rather small.
????There's no sense in trying to divine a grand plan from the move, according to Davidowitz . "Sears is saying we got all this crap, we've got a new president and we need to buy some time to come up with something online, and this will be something we can do so people won't question if we should even be in business," he opines. "It's about survival."
