Sears Contemplates Next Act

Sears Holdings (SHLD) received a lot of attention when it announced that it would not offer any guidance to Wall Street whatsoever. They don’t even host conference calls to discuss quarterly financial results. I don’t know of any other large cap company that doesn’t host at least four calls a year. As a result of the lack of transparency, only a handful of analysts cover the stock.

Based on their track record, it was very interesting to read the company’s press release last week detailing their second quarter results. Buried toward the end of the unusually lengthy release was a section entitled “Investment of Available Capital.” Below are a couple of excerpts:

“The Company has also repurchased $1.1 billion of its common shares since the merger and expects to continue to repurchase shares subject to market conditions and board authorization. In addition, the Company may pursue investments in the form of acquisitions, joint ventures and partnerships where the Company believes attractive returns can be obtained. Further, the Company may determine under certain market conditions that available capital is best utilized to fund investments that it believes offer the Company attractive return opportunities, whether or not related to its ongoing business activities.”

“Our strong financial position and cash flow generation provide us with the flexibility to capitalize on a wide range of market opportunities as they arise. In addition to investing in our business and acquiring our shares, we are prepared to invest substantial amounts of capital if we identify other attractive investment opportunities which have the potential for returns we believe appropriately compensate the Company for the associated risks.”

The significance of these statements might not be obvious at first blush, but you need to take into account that this is a company that keeps everything very close to its chest. They rarely offer a glimpse into their strategy. Heck, for years the media has been reporting that the Sears/Kmart deal was about real estate. When was the last time they did a real estate deal.

To me it’s pretty clear why, for the first time, Sears has chosen to tell investors a little but more about their plans. They’re going to do something, and it’s not necessarily going to have anything to do with Sears or Kmart. And it might not make any sense whatsoever when it happens. After all, everybody thought Lampert was crazy buying Kmart in bankruptcy and swapping his debt for new equity at $15 per share. Well, that $15 stock that nobody wanted to touch went up 11-fold in only a few years.

I have no idea what he has up his sleeve this time, but I’m very interested and I don’t think we’ll have to wait too long to find out. Stay tuned.