Wednesday, June 13, 2007

Finally An Analyst Call That Makes Sense (SHLD)

After the last few analyst changes I have been reading I was beginning to wonder. All is not lost, here is one today from Goldman Sachs (GS) that makes perfect sense.

"Sears Holdings (SHLD) price target raised at Goldman to $200 from $195 based on strong cash flow generation and valuation updates. Promising initiatives include brand relaunches, growth of Land's End, commitment to Sears Grand, and new IT systems. Maintained Neutral rating."

Now, I will not address the price target because let's be honest, it is a guess. Nobody knows what the price of the stock will be 5 months or a year from now. I am not also going to address the "rating" because it means something different at every brokerage even though they call them the same names.

So, then , what does matter? The reasoning behind it. Since January (and repeatedly since then) I have been saying the Land's End store in a store concept was going to be a big winner and the record sales they produced last year prove that and, Lampert's plan to double the number of stores that have from 100 to 200 illustrate his belief in the same. Goldman seems to also recognize this.

The IT upgrades to date have saved millions of dollars in inventory levels and operating efficiencies. Additional investment here (referenced at annual meeting) will enable Sears to streamline operations more and increase margins that have increase 3 years in a row now.

Brand launches of Craftsmen tool in Kmart is going full steam ahead and will have the multiplier effect of drawing more people onto Kmart for the tool and they will undoubtedly pick up other item while there.

Again, ignore the predictions of price and the "rating" but pay close attention to the reasoning.


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