The looting of Sears Canada

In yesterday’s Globe and Mail business section, “retailing reporter” Marina Strauss offers yet another it’s-all-over-but-the-crying insight into the slow and painful death of Sears Canada. This paragraph caught my eye;

 Sears’s insolvency came after years of declines and red ink at the retailer amid shifting strategies and leaders. At the same time, its major U.S. shareholder – hedge fund manager Edward Lampert – profited from Sears Canada’s asset sales over the years in the form of generous dividends while leaving relatively little money to invest in the chain.

That’s the only mention of Edward Lampert. So he arranged for some generous dividends for himself, did he? Just how generous were they? Don’t the folks at the Globe and Mail think that might be a relevant bit of info? I’d sure like to know!

This seems like an unfortunate oversight from an outfit that never tires of reminding us how great their professionally trained journalists are, how they speak truth to power, and blah blah blah… Anyway, since Marina won’t tell me, I decided to look it up for myself.

According to dividendchannel.com, in the ten years before Sears Canada fell into the clutches of Ed Lampert, the company paid a modest dividend of .24 per share per year. That’s $2.40 over ten years. Then our brilliant American hedgie gets his hands on the wheel, and the good times get a-rollin’!

First thing over the side is the Sears Canada credit card unit. That was considered the most valuable part of the company according to news stories of the day. It fetched almost three billions at auction! At that point, the company could have chosen to reinvest in the business, but who are we kidding!? That’s not generally the business model that hedge funds pursue, so instead, within months of Lampert’s arrival, there’s a special dividend of $18.64 per share to spread the loot to the shareholders, especially himself! 

That’s about 750% more paid out in the first year of King Eddie’s reign than was paid out in the ten years previous!

Is this guy a genius or what!

And the special dividend gravy train had barely left the station. There followed special dividends totaling $7.00/share in 2010, another 100 million out the door in 2012, and yet another ten bucks/share in 2013!

The company that paid out a dividend of twenty-four cents/share per year before Eddie, paid out an average of $4.50/share in each of the first eight years after Eddie. 

In other words, over ten years before Eddie, the then profitable company paid out about a quarter of a billion dollars in dividends. In the ten years after Eddie, the money losing company paid out close to four billion dollars in dividends. And as the biggest shareholder, Eddie Lampert was the biggest beneficiary of these “special” dividends!

Ain’t that special!

So now the game is over. Twelve thousand employees have an opportunity to find more meaningful work, and who needs a pension anyway?… 

But that’s a small price to pay for this great system that brings so much prosperity to all of us.

More to some than to others.