Kmart, Sears Learn Value of Location, Location, Location

Jul 29, 2004
George Anderson

By George Anderson

Talk about shaking things up.

A recent report from analysts at Deutsche Bank says the real estate holdings of Kmart and Sears are worth substantially more than the current value of the companies as reflected
in their share prices.

Kmart’s value could be worth up to $150 a share while Sears’ real estate is worth $67, according to Deutsche Bank. At the close of trading yesterday, Kmart’s shares were $74.19
and Sears’ were $36.66.

There has been speculation that Kmart’s chairman, Edward Lampert, sees more value in the chain’s real estate holdings than its future as a retailer. Mr. Lampert has successfully
bolstered Kmart’s bottom line since the company emerged from Chapter 11 bankruptcy protection, in part, through the sale of stores to Home Depot and Sears.

Mr. Lampert’s ESL Investments is also the single largest shareholder of Sears stock. The retailer has maintained, as reported by the Chicago Tribune, that Mr. Lampert
“has no input in its day-to-day operations, though he’s alerted of major business decisions once they’re made public.”

Deutsche Bank suggests that Mr. Lampert may be ready to become more hands-on in the running of Sears as the retailer has consistently come in below expectations.

Moderator’s Comment: What is your reaction to Deutsche Bank’s assessment of the value of Kmart and Sears’ real estate holdings? What do you make of this
story if you work for one of the chains, invest in it, supply it, etc.?

If we’re an investor in Kmart or Sears who is simply in it for the returns, we’ve got to be asking ourselves why management hasn’t put ‘for sale” signs
on all its properties? If Deutsche Bank is correct, then Kmart and Sears are worth twice as much dead as alive.

George Anderson – Moderator

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