The Valuation
of
Sears Holdings
Calvin Wing
2nd Annual Wall Street Conference and Case
competition
A college student competition that offers a real world application of the
knowledge attained with an undergraduate degree.
Criteria:
Choose an industry
Choose a company from that industry
Compile comprehensive report within 9 days.
Report must include a description of the industry, an overview of
the chosen company, drivers of growth for the company, competitor
overview, and the final valuation methods used to
make a conclusion.
Retail industry
Department and discount retail industry is built up of roughly 50
companies. (i.g.) Wal-Mart, JC Penny, Kohl’s, Macy’s, K-Mart, and
many more.
Effects on industry from recession?
Industry valued at $1.25 trillion in 2007. Within year has grown to
approximately $1.6 trillion.
Consumer increase in consumption spending in market rise of 28.14%
Net income valued at $43.36 billion in 2007. Has grown to
approximately 60.9 billion. Resulting growth of 40.48%
Possible reasons?
SEARS HOLDINGS
Originally started by Richard Sears, Alvah Roebuck
Sears catalog debut 1888, main target audience
was farmers.
Catalog popularity.1895 closing sales of $750,000
($19,952,780 current)
First retail store opens 1925
For next 50 years company expands to urban and
suburban markets as the largest retailer in the US.
Starts incurring some losses in the 1980’s.
Is purchases by K-mart in 2005.
Is ranked 65th on the Fortune 500 list.
Sears Holdings Current
Headquarters is located in Hoffman Estates Illinois.
Operates through three subsidiaries, Canada Inc., K-Mart Holdings
Corporation, and Sears Roebuck Co.
Owns 4,010 Full line and specialty retail stores in the US and Canada.
For competition performed a SWOT analysis from I-Metrix.
SWOT:
Strengths
Weaknesses
Opportunity
Threat
Drivers of growth
Technology adaptation.
Creating loyalty programs.
Digital marketplace.
Shop Your Way Rewards
Cutting cost
By eliminating marginally performing
stores, and converting stores.
Competitor Overview
comparison analysis.
We chose to compare Sears Holdings to Macy’s,
Kohl’s, and Wal-Mart.
Compared current financial standings as well as
past finances, as well as technological advances
and new business strategies.
Valuation
Methodology
Variables chosen: Total current liabilities,
debt, long term lease obligations, assets,
profit margins, and after tax returns on
equity.
Running a company comparison using
I-Metrix, we were able to calculate a
company’s risk as well as how they balance
their assets with their liabilities.
Conclusion
Overall financial standings.
After-tax return on equity of -47%
Difference with entire retail industry of 96%
Spread too thin with too many liabilities
Sears is a high risk company that we have valued as a low
company that will continue to suffer as long as they continue to try
and fill so many market wants.
Thank you