Sears Holdings Corp (NASDAQ:SHLD) CFO Responds to WSJ Pension Article — No Misplaced Bet on Oil

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Sears Holdings Corp (NASDAQ:SHLD)‘s CFO Rob Schriesheim responded to a “continuing series of articles by major publication that selectively uses certain facts” regarding the company’s pension plan and obligations. The article is clearly a response to a recent Wall Street Journal article by Suzanne Kapner, “Poor Returns Weigh on Sears Pension Plan.” He lays out just the facts in a new blog post on the Sears Holdings’ SHC Speaks Blog titled, “Just the Facts–Our Pension Plan and Obligations.” The Wall Street Journal article stipulated that the poor returns in 2014 compared to other pension funds must have be related to oil or other commodity prices. He dismisses that saying “This is false.”

Conservative Pension Investing

Schrieshiem took exception to the fact that the articles used selective facts for a negative spin without considering things like their asset allocation disclosures which are available via the company’s 10-K. He points out that a review of those documents would reveal a “much more conservative approach than many other pension-plans.” He notes that the company has two thirds of its plan invested in fixed income securities with a duration of less than 5 years. Schriesheim clarifies that this is because they believe their primary responsibility is to meet the obligations of the plan not gamble with pensioners’ money.

He notes that:
“…given the performance of equities over the past several years, any portfolio with a disproportionate exposure to equities or to longer term bonds, including many pension plans, would have had higher returns than our plan. That’s ok with us.”

The company goes further to defend its position saying that because they have been making such meaningful contributions to their plan annually they wish to minimize risk of having to do it again should equity markets falter or interest rates rise.  They plan on continuing with their conservative posture and leaving comparative performance to others.

Our Quick Take

The Wall Street Journal take focusing on oil and commodities was definitely a reach but pension liabilities do weigh heavily on Sears. Sears has previously stated that its cumulative pension contributions have been about $1.6 billion for the four year period 2011 through 2014.

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