Lampert running short on ideas for Sears
Friday, 18 December 2009

By Matthew Quinn

Sears Holding Corp. announced a new $500 million share repurchase program on Thursday. The new authorization comes on top of $82 million left under the department store chain’s current buyback plan.

Buying back shares seems to be the preferred strategy of Eddie Lambert, whose hedge fund, RBS Partners, owns 57 percent of Sears, which operates its namesake stores, as well as Kmart stores, and owns a number of brands, including Kenmore and Craftsman.

From Feb. 1 through Dec. 16, Sears has repurchased 7.1 million common shares at a total cost of approximately $423 million.

The Sears announcement also came on the heels of an announcement on Thursday from Autozone that it had authorized a new $500 million share buyback program. Lampert’s RBS owns roughly 40 percent of the auto parts retailer.

But whereas Autozone has been thriving during the recession, as many consumers opt to fix up the cars they have rather than buying new ones, Sears has struggled.

For the nine months ended October 31, revenues at Sears Holding were down 8 percent compared to a year earlier. The company lost $195 million over the first three quarters of its fiscal year.

Given that, some analysts wonder how sustainable the buyback strategy is.

“The company has bought back over $4 billion of stock in the past three years, while slashing its capital spending and increasing its net debt load, as its same-store sales have continued to plunge,” wrote GimmeCredit analyst Carol Levenson in a note to investors. “Stock buybacks appear to be the only idea to bolster performance, but financial engineering alone can't turn around a retailer.”

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