Two years ago I last wrote about Sears, linking to my earlier discussion of Sears' former glory as the poster child of the integrated large corporation (with the stock price symbol S), and speculating that Eddie Lampert bought it as a real estate deal. I wondered:
Why leave the real estate portfolio in the combined corporate entity -- i.e., why not spin it off into a tax-advantaged REIT or a limited partnership, and chuck the double corporate tax?
* * * Jesse Eisinger, writing about the deal in today’s W$J, persists in seeing Sears as a retailer.
* * * Where are all these new Sears shoppers coming from? Nostalgia freaks? Dawn of the Dead zombies? * * * Why not just become a real estate portfolio right now?
* * * [I]n order to keep the stock price up Lempert just needs to hang on while the old Sears customers wander into the faded deteriorating stores out of habit because there's still a glimmer of life in the old name. This will generate cash flow, until the real estate market clears. Then S will finally become Sears LLC.
Today the WSJ notes:
Sears shares have plunged nearly 50% from the April high. Yesterday, the stock chalked up its biggest one-day decline since Mr. Lampert engineered the merger of Sears and Kmart two years ago.. . . Sears is in an awkward spot. Apart from the general malaise affecting the sector, Sears lacks a compelling strategy to attract more customers to its stores. It offers little of interest to wealthier customers, who may withstand a coming recession, and it faces fierce competition at the lower end of the spectrum from Wal-Mart Stores and Target. Both J.C. Penney and Kohl's have proved to be worthy midtier rivals.
Except that that 50% decline is still a 600% increase since your original post...
Posted by: Ted | November 30, 2007 at 03:28 PM