Ackman buy seen good for Sears regardless of sales

By Karen Jacobs - Analysis

ATLANTA (Reuters) - Activist investor Bill Ackman could help lift shareholder returns for Sears Holdings Corp (SHLD.O: Quote, Profile, Research) by pushing for asset disposals, even if sales at the U.S. retailer continue to decline.

His Pershing Square Capital Management hedge fund bought 5 million Sears shares, a source said this week. The stock rose 7.5 percent combined on Thursday and Friday as speculation mounted about Ackman influencing strategy with his stake of more than 3 percent.

"The increase in price ... is a function of people still believing in the concept that restructuring can continue to occur at Sears," said Mitch Zacks, portfolio manager at Zacks Investment Management.

Eddie Lampert, another hedge fund manager who is chairman of Sears Holdings, presided over the merger of Sears, Roebuck and Kmart in 2005. Ackman may have spotted the potential for property sales among the combined company's 3,800 stores.

"He's going to ask Eddie Lampert to step up asset sales and maybe Ackman will ask for a seat on the board," said Scott Rothbort, president of LakeView Asset Management in Millburn, New Jersey.

There have been no big sell-offs announced since the merger was completed in March 2005, but Lampert gained favor at Kmart for making shareholders rich by selling chunks of prime real estate.

"The basic idea is that you can be more aggressive in selling off assets," said Zacks, whose firm sold most of its Sears stock earlier this year as earnings weakened. "It doesn't necessarily help sales but it does help investors."

Despite a recent rally, Sears shares are still down 11 percent this year and same-store sales at both Kmart and Sears, Roebuck have sagged for the past six quarters. In August, Sears Holdings posted a 40 percent drop in quarterly profit.