Wed Oct 5, 2016
Sears downgraded to near default by major rating agencies.
Edward Lampert was hailed as the next Warren Buffet when he bought K Mart out of bankruptcy.
He paid less than the real estate the stores were on for the land land and stored. Then he merged Sears into the firm to become SHLD.
The accolades now are gone. Six straight years of losses proves he is no retailer.
Let's use this article to help us understand more about the relation of the balance sheet, income statement, and cash flow statements.
SHLD is selling its most famous brands, Craftsman, Diehard, and Kenmore. My question, what is left? While all brick and mortar stores struggle, this one seems next to go.
It is ironic that Sears would fall victim to on line shopping. After all Sears invented catalog shopping in the 15890s. Is buying on the internet really so different from buying out of a catalog?
Lampert's idea has been to buy back shares.Why does this help? It decreases the denominator of the E/S ratio, so earnings appear higher though they are not, there are just fewer shares.
Here is a link to his last undated blog, apparently posted in 2014.
Read to see how incredibly naive he was then.
Here is a monthly chart detailing the entire rise and fall.
Lampert created SHLD when I began teaching here in 2003. Note the parabolic rise into 2007.
SHLD then collapsed along with everything else into 2009. The rebound stopped at 90. And it has been downhill ever since.
It is hard to see what he was optimistic about in 2014.
Fitch's view in 2014 was that 2016 is about it.
In 2014 Fitch dropped SHLD below CCC.
Spiceland discusse bond ratings in Chapter 14.
Professor Elam 