Sears/Kmart Borrows Money to Pay to Shareholders – So Who is More Stupid, Sears or the People Who Loaned the Money or Its Shareholders?

Tough Question – Could be All of the Above

Sears is not doing well. 

Sears’s stockpile of cash and cash equivalents fell to $952 million as of Apr. 30, down from $1.74 billion a year earlier. The retailer may generate “well under” $1 billion of earnings before interest, taxes, depreciation, and amortization this year, down from $1.3 billion last year, according to Aggarwal. That’s less than the $1.5 billion Sears needs to cover expenses, says Aggarwal: “We think that free cash flow will be negative this year.

So what is the Company doing about this?

 

Even though it lost $170 million in the first quarter, the company last month said it would spend as much as $500 million to buy back shares.

And where is it getting the money to do this?

Sears sold $1.25 billion of secured bonds yielding 6.625 percent in September, in part to fund stock repurchases. The price of those bonds, due in October 2018, fell to 90.3¢ on the dollar on June 16 from 92.5¢ at the end of May as investors fretted about declining earnings.

and how is this working out for employees and the stores?


Sears laid off 700 appliance salespeople at Kmart on June 13. The retailer spent $441 million on property, buildings, and equipment last year, about 1 percent of revenue. That’s less than the 3 percent average for similar retailers

So the lesson from this is investors beware. Future prospects are for

"Attention K-mart Shoppers, Going Out of Business Sale on Aisle 6 (and Aisle 7 and Aisle 8 and so on)."


  And for Mr. Eddie Lambert, who controls Sears what happens after he drives this once great company into ground, taking his money along the way?

You have a great future in Republican politics Mr. Lambert.  They also have the philosophy that when they are in power they borrow money to pay the wealthy and they reduce investing which grows the economy and then they cut spending and fire people.  You will fit right in.