Does Sears deserve a $6 price target?

One analyst firm says the retailer's operating performance continues to deteriorate.

By Kim Peterson Dec 9, 2011 2:20PM
Sears Holdings (SHLD) has been trading above $55 lately, but analysts at Imperial Capital say the stock is only worth about $6. Ouch.

The move comes as other analysts expect Sears, which also owns the struggling Kmart chain, to move from annual profits to losses. The company lost $421 million in the quarter ended Oct. 29 and is expected to report a loss for the full fiscal year.

Post continues below.
And while Sears bulls have long praised the stock as a real-estate play, analysts at Imperial Capital think that benefit is outweighed by the company's underfunded pension plan and deteriorating operating performance.

Cash pension and post-retirement funding costs will hit around $316 million for the fiscal year ending in January, the analysts note, according to Notable Calls. Also, the chain's poor financial performance is draining cash and will need more debt.

Even Sears' iconic brands, which include Craftsman, Kenmore and DieHard, don't sell well enough to make up for the underperforming retail operations, the analysts added.

The analysts also took issue with Sears' employees, saying store-level staff is "unmotivated and poorly trained for the most part." And competition continues to grow from the likes of Lowe's (LOW), Home Depot (HD), Target (TGT) and Wal-Mart (WMT).

So how did the analysts get to that $6-a-share valuation? They started off with an enterprise valuation of about $6.5 billion, but once they deducted the secured and unsecured debt and the pension and post-retirement liabilities, they came up with equity value of just $591.8 million -- or $6 a share.

The analysts, to no one's surprise, have an "underperform" rating on the stock. Sears shares fell 2.4% Friday to $56.95 at midday.

50Comments
Dec 9, 2011 6:48PM
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As long as Sears associates itself with those Kardashian whores it deserves to take a beating.
Dec 10, 2011 12:34AM
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Island with a palm treeSears use to be a class act, you could work there and support a family, they use to encourage longevity by offering stock buys and benefits, but because the new CEO's are paid according to stock value, shareholders and Bonuses are all that matter, it's sad to see old America dying off to support corporate greed.Nerd
Dec 9, 2011 7:00PM
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  Bunch of old men chatting with each other and ignoring the line building up at the register.  

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LOL - at the local Sears - it is a bunch of barely out of teens young guys and gals who stand around talking - ignoring customers - or - acting like the customer is such a bother to deal with.

 

Maybe the problem is not the age - but poor training and supervision.

Dec 9, 2011 4:17PM
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Sears is such a joke. I can't fathom how they continue to stay in business. I recently went with a friend to purchase a lawnmower. It took over ONE HOUR, as each salesman kept passing the buck to another one. Even though the mower was listed as being in stock at that store on their website, it wasn't. Even my friend, who has the patience of Job, was pretty angry by the time we left. For a company that used to represent the backbone of American commerce, they have fallen so far it is unbelievable. The CEOs of Sears should be embarrassed.

 

Dec 9, 2011 6:50PM
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A lot of people had high hopes when Eddie Lampert bought it.  There was talk he would get top dollar for some of the excess real estate and turn it into a holding company where he could use the cash flow to benefit the shareholders.  That hasn’t happened so far.

 

He’s also a finance guy with no expertise in retail and that’s showing.  He’s had about four or five different strategies and CEO’s in as many years and that is the crux of the problem. 

 

What Sears needs is a seasoned CEO who has time to implement a strategy and turn the company around.  They have some good brands and locations, and they should be able to do much better than they are.  Time will tell if they’re able to make a go of it.

 

At this point buying shares of Sears is like buying a lottery ticket.  It has the potential to pay off big, but it’ll most likely end up being a loser.

Dec 10, 2011 4:06AM
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I worked for Sears for over 4 years. I started out at minimum wage and left at minimum wage. I worked in the warehouse and could not believe the amount of merchandise they they threw away or deliberately destroyed. Big screen TV's, washers, dryers, freezers. I always thought "Why not give these to local charities or vocational school to be worked on". Many appliances only had dents in them. I see Sears donating appliances to Extreme Makeover on TV all the time and I think why don't they invest this money in their employees. Employees would care more for a company and work harder if only the company cared for them.
Dec 9, 2011 4:51PM
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Their service, or lack their of is putrid.  Minus the Electronics and appliances where they work mainly off of commission. 

I went in last weekend to simply get a new battery air gun for my dad for christmas.  They had none on the shelf and I went over to the "manager" who was my age 25ish.  I asked if he could look it up and get me one.  He first says there is one right there, trying to get out of actually helping me.  There was not(Not like I just didn't take my time to make sure there was not, and he saw me as I looked).  Then he has to ask an associate to locate them.  She says there are 5 in the warehouse.  So he is like let me find some one to get that for you. 

Give or take 10 minutes later after he does NOT locate someone, he "painstakingly" has to go look himself.  It took 30, let me repeat, 30 minutes to get that product for me.  I scolded the manager paid for my air gun then left.  I love craftsman, great working mans tool with a solid guarantee.  But the stores employees ALL have their own agendas instead of what can I do for the customer.  Not to mention the horrendous service that was Black Friday......

If Sears, or ANY retail sales thinks by keeping us in the store longer will make us buy more is so far from the truth, it makes me sick to think we(the consumer) are that stupid/dumb.  If the service was good, sure, but not with sh*t service.  I want OUT.
Dec 9, 2011 4:43PM
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I am also appalled at the level of service at Sears. Every time I go to our Sears store i go with much anxiety. I only go when i need something  or a part for a Craftsman tool or an appliance we bought at Sears. The staff has no clue what customer service is. they will do anything to avoid making eye contact so they don't have to help you. If you ask for help they act like you are interrupting their day. then they tell you what you are looking for is over there with a nonchalant wave and usually it is not. They rarely know their products or if they even have any on the shelves. the other day i went in looking for staples for roofing stapler ( a pneumatic stapler) of which I had called ahead to see if they had any in stock an was told they did. I asked the clerk that was trying to ignore me where thye were and he just pointed down the isle and said over there and walked off. They were not and went to the service desk the clerk there did everythin g he could to avoid me, and finally said he would be with me in minute. The first clerk I spoke with came over and asked if i was being helped (as if he cared) and i said "N0" , so hea walked behind the counter an loitered and ignored me. ABSOLUTELY AMAZING!! I WILL NEVER GO IN SEARS AGAIN. I will replace all tools I have before I buy another item at Sears.
Dec 9, 2011 3:49PM
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Put a fork in Sears. I get emails almost daily from them begging for business. I briefly looked a coffee maker on their site. Now I get emails offering discounts on coffee makers! Even discounted their prices are too high! Sears needs to do a lot of things different and most of it I think is too late.

Their Web site is a joke, their stores are not attractive and their business model is so broken no super glue can fix it. Its too bad but they have lost the image people used to go to for shopping. Now its WalMart and Target.

Dec 9, 2011 4:38PM
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I really liked Sears tools department. Mostly Craftsman. Now, they are so expensive that I don't even buy them.  Also, when they publish the shoppers on the news paper, they tell you, for instance, was a $150.00, reduce to $90.00 and 10% with your Sears card. Suddenly I remember that I bought the very same tool for $75.00 (regular price) two weeks ago. Seems to be that Sears doesn't,t know that CREDIBILITY is an important part of business. If you loose it, "you're closed for business"

Sorry about you.

Dec 9, 2011 7:10PM
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I have (had) been buying Craftsman tools for the past 50 years.  I travel the U.S. and always liked that I could go to any Sears store to replace a broken tool.  Last year I found that the switch on my new flashlight (1 month old) wasn't working, went to Sears for a replacement but was told that I needed the receipt for any replacements.  Who carries 50 years worth of receipts around the country with them.  I now buy Snap-on.
Dec 9, 2011 3:58PM
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As a GI in W. Germany in the early 60s for 30 months I often ordered civies from a  Sears catalog if I couldn't find what I wanted in the Post PX.  Six bucks for cotton pants, etc.  I think it peaked in the early 70s as far as sales and service are concerned.  Since then it has gone downhill, with dingy stores and bad service. 

Dec 9, 2011 7:23PM
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This spring my wife and I were in the market for a new stove, washer, dryer, and dishwasher. We live in a "big" small town in Kansas. Wanting to keep our business local we went to our local Sears. What a joke! Not only were the prices ridiculous, the young salesman had no clue about what he was selling, or did he really care. He told us it would $45 per appliance for delivery, I live 2 miles from the store. As it ended up I bought them on-line, they were delivered free, no sales tax, and brought into my home. Do you think there might be a problem here? Sears will not be with us much longer    RIP.
Dec 10, 2011 8:14AM
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Well I am sorry that most of you have had bad experiences at Sears. I have dealt with Sears in two Areas. One in Lake Charles Louisiana and an Outlet Store in Hobbs New Mexico and The sales people were great to deal with. They always answered my questions and never given me any problem with returns. As for price, I guess it is just the management in certain stores. I will stick by sears because I am told When there employees are called to serve our country Sears keeps them in there employment and lets them keep their insurance. They also guarantee them their jobs back when they get back. Have most of you complainers called the corporate office and let them know what is going on in your area store or filled out their online survey? If you haven't try that before crying and bad mouthing them.
Dec 9, 2011 11:55PM
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omg i hate sears.  i ordered two pop up tents on sale. sears cancelled my order and when i called they told me sorry the store i ordered them from was out of stock. but i ordered them online!! so the kind rep Sad tells me i can re order at the non sale price. im like wth how is it possible i can reorder but you can cancel my original order.  sears is bassackwards and has lost their way.  this has happened to me twice on seperate orders and i will never order or shop from them again. theres plenty of choices out there.
Dec 10, 2011 10:56AM
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calling customer service is just like TV commercial where the guy on the phone says this is Peggy in bad broken english from a phone bank in India that don't have a clue how to help you and just a big waste of time to call.
Dec 9, 2011 11:53PM
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always bought everthingthing at sears .Bought washer and dryer last jan, because ours was out.was on vacation when delivered to house (4 days late).thier delivery company hooked it up wrong (notated by sears tech). my kids ..17 and 20 went to wash clothes and left.Because washer was hooked up incorrectly  had water damage leak into the basement ruining keepsakes old computers wit pics , putting a stain on carpet that wont come out .sears blames the delivery company and i toldthem i bought this from sears not the delivery company ,than turned over supposedly to thier ins co sedgewick which is a joke... only person that will call you back is kiara  (who works for sears social media),not sedgewick and all im told is we,ll reach out to sedgewick every month when she calls me.... and she understands my frustration...if you did you would gt this corrected, no follow up by manager Adam at tuttle crossing in columbus ohio  or salesman that wouldnt get a service guy  out for 3 days and told my son he would deal with his p.o  dad (me)  when i got back from  vacation' who didnt even want to see damage pictures
 and evertime kiara goes on 3 way call with sedgewick the person is out or my case reassigned just to delay this longer(and i have been more than patient) and this with me being a GREAT sears customer.... imagine if you werent one of thier best customers .Next letter is to the ohio attorney general.... and you wonder why people are shopping elsewhere.

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Sears is not what they used to be. Their prices are oftentimes exorbitant, their employees often rude, and uninformed about their products. Their credit card, better make SURE you always pay on time as they will NOT use the KY when bending you over ... . Helping my daughter pay her Sears off because I am encouraging her to cut the card up and she's listening.

When I was a child Sears was the place to go, no longer is that so.
Dec 9, 2011 9:57PM
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I can beat Sears' prices at just about any other retailer by simply checking out the weekly circulars.  And the shopping experience at KMart is horrible--typically a parking lot full of cars and three of fifteen checkout lines open.  But a few extra low wage cashiers in every store would cut into the executive bonuses.
Dec 10, 2011 1:56PM
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I don't know of any Craftsman Brand tools made in China like some say here? I could be wrong but I have buy their socket sets only because they are made in USA this helps keep American jobs in the USA, Sears is not all bad they have lots of tools you can not find any where else, and it is the only store a man can shop at in the mall that has manly clothes, and manly tools.

I do wish they would bring back the gun departments to all stores, and on line, makes them look anti-gun not selling them in their sporting goods any more.

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