Sears Lost $56M in Q1

Date: Monday, June 2, 2008
Author: HFN Daily Report

Sears reported an unexpected $56 million first-quarter loss Thursday.

The loss marked another setback for company chairman and hedge fund kingpin Ed Lampert.

Lampert, mastermind of the 2005 Kmart-Sears merger, has been under criticism for failing to makeover the retailer into a Wal-Mart. Sparse consumer spending and a slumping housing market has hurt business.

The Q1 loss contrasted with the $220 million profit from a year ago. Revenue fell 6% to $11.1 billion. Meanwhile, stock in Sears fell to $86.14 a share, near its Jan. 15 52-week low of $86.02.

ESL Investments, the hedge fund run by Lampert, is the largest shareholder in Sears, owning almost half of the company. AutoNation, AutoZone and Citi, which along with Sears account for the bulk of his portfolio, have also underperformed.

Lampert has been defensive in response to criticism of Sears. In a February shareholder letter, Lampert compared Sears to the underdog New York Giants who went on to win the Super Bowl. He has predicted that the retail environment will remain unfavorable.

His Connecticut-based ESL Investments lost 1.3% in Q1.