Wednesday, May 13, 2009

Sears 2009 AGM Notes

From the Motley Fool Board:

I went to the Sears Holdings annual shareholders meeting on May 4th, and thought i'd share some of what i heard.

First, i will say that i was extremely impressed with Eddie Lampert and left the meeting 100% reinforced that he is one of the smartest people out there.

The meeting was about 3 hours, the first 20 minutes or so, Bruce Johnson gave a presentation on the operating businesses, talked about things like expense control and inventory reductions, and he also highlighted things i had not noticed before, such as the improving performance of comp sales relative to competitors, quarter by quarter. The number of competitors who had comp sales worse than Sears Holdings accelerated dramatically towards the end of last year and Eddie Lampert brought up the point of saying, Which is worse, negative 4% comps four quarters in a row, or flat comps for three quarters and then a single quarter of negative 25% comps, as in the case of Abercrombie.

K-Mart had 1.4 million new layaway customers last year. Bruce Johnson talked about the subsequent purchases that layaway brings as customers visit the stores every two weeks to make payments.

Bruce Johnson talked about market share, saying that Sears Holdings has 34.6% market share in appliances, which leads all competitors, up from 30% in Q3 2007. Said they are reversing years of declines in market share in the appliance category. Eddie Lampert said that while you could sell a heck of alot of $3,000 washer/dryers at $1,500... all you'd essentially be doing is "renting market share" and that they wanted to "own market share".

Market share in other categories mentioned:

22.3% tools
14.2% home repair
21.0% power lawn and garden

The majority of the meeting though Eddie Lampert took questions from the audience. Some interesting points and comments he made were:

Lampert wants to encourage more experimentation, even though it could mean more failures.

He noted that Sears is determined not to make any "serious mistakes" that can put you out of business, he noted ethical mistakes and serious amounts of leverage as two "serious mistakes"

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