Francis Chou Talks Sears Holdings Corp (SHLD) in Chou Associates Letter — Sears “Misunderstood Story”

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The situation at Sears Holdings Corp (NASDAQ:SHLD) Holdings may seem dire from a distance, but a closer look one cannot fail to notice that things are slowly falling into place. The retail giant has embarked on a transformation strategy for its retail business, which has been under immense pressure in the recent years, attributed to stiff competition in the space. Françis Chou’s most recent letter for Chou Associates talks about how the company is backed by the highly valuable real estate holdings, and the belief that everything will fall into place in the long term, guaranteeing more shareholder value.  The letter open by mentioning that as they have indicated before they believe Sears Holdings Corp (NASDAQ:SHLD) is a misunderstood story and that the intrinsic value lies in its real estate.

Focus On Service Delivery

Sears remains focused on giving its retail business a boost by improving on service delivery at the department store level, at home or through digital devices. It is expected to give the company the much needed advantage in the highly competitive business. Sears Holdings Corp (NASDAQ:SHLD) has slowly been moving away from its outdated traditional store network model, opting to focus more on developing deeper relationships with loyal members.

There have been concerns that Sears Holdings is struggling on the retail sector which is giving rise to fear that the value of its real estate holdings may not be enough to offset any downturn that might be forthcoming. The value of the real estate holdings remains strong having accorded the current management team the confidence and time to initiate a couple of changes. That is expected to set retail giant on a recovery path in the long run.

Need for Financial Discipline

CEO, Eddie Lampert remains confident that the $2.4 billion generated last year from asset configuration and financing activities should be more than enough to set the company on a recovery path. Lampert does not expect the company to face any cash problems this year as the Seritage Growth Properties REIT comes online, according the company more financial flexibility

Real estate holdings are not the only valuable asset in Sears Holdings Corp (NASDAQ:SHLD)’s as reiterated by many people. If this were the case, the company could have been liquated long time ago with many shareholders pulling out of the stock.

A lot still needs to be done with respect to the way the company has been burning cash all in the effort of transforming its ailing retail business. Sears Holdings Corp (NASDAQ:SHLD) might end up being a risky investment should its transformation fail to gain traction while it continues to rely heavily on its real estate holdings and burning more cash.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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