Edward Lampert

The New York Times and Wall Street Journal reported that Steve & Barry’s, a clothing chain that tried to undercut competitors by selling celebrity fashion and shoes for less than $10, was preparing to file for bankruptcy protection. A private company, Steve & Barry's had been one of the fastest-growing retailers in the country, "opening hundreds of stores selling clothes under the names of Sarah Jessica Parker, Venus Williams and Stephon Marbury."

The company everyone loves to hate is actually getting more profitable. In their 1Q earnings release Sears said it expects EBITDA to be higher than last year. Normally EBITDA doesn’t mean a lot because maintenance capital expenditures generally approximate depreciation and amortization expenses. Sears, however, is not not maintaing their capital expenditures at a level that approximates depreciation and amortization. Given the low cap-ex a more relevant metric to approximate owners earnings for shareholders is EBIT (pre-tax operating profit) less capital expenditures.

Eddie Lampert used to be the smartest investor in retailing, if not the best investor of his generation. That was the case last summer when shares of Sears (SHLD) hovered above $170. In his recent letter to shareholders, Lampert presented a chart showing that even as Sears stock collapsed in the latter half of last year, his five-year return on investment in Sears Holdings, the combination of Kmart and Sears, exceeded 900%. His return, in fact, beat that of every other major retailer.

Edward Lampert is well-known for taking over Sears Holdings(SHLD) as chairman of the board. He is also the founder, chairman and CEO of ESL Investments, a hedge fund with $10 billion under management that has reportedly provided an average annual return of 30% since inception. Some investors consider this former Goldman Sachs arbitrager to be another Warren Buffett.

As of May 23, 2008, Sears Holdings has 132,013,524 outstanding common shares. ESL Investments currently owns 65,639,184 shares giving the fund a 49.7215% ownership stake in SHLD. Notice how SHLD buybacks have significantly slowed as ESL closed in on the 50% ownership stake. Is Lampert timing the buybacks to coincide with a larger event?

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Billionaire Edward Lampert reported that his hedge fund held a 1.3 percent stake in SLM Corp., the largest U.S. provider of student loans, at the end of the first quarter.

ESL Investments Inc., based in Greenwich, Conn., owned 6.02 million shares of the firm, better known as Sallie Mae, according to a filing with the Securities and Exchange Commission. The stake would have a current market value of almost $130 million.

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Eddie Lampert has once again increased his stake in autoNation (AN)

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Billionaire investor and Sears Holdings Corp. Chairman Edward S. Lampert has increased his stake in AutoZone Inc. to 36.2 percent, according to a filing with the Securities and Exchange Commission Tuesday.

Through his Greenwich, Conn.-based hedge fund ESL Investments Inc., Lampert now beneficially owns about 22.9 million shares.

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Once dubbed the next Warren Buffett, Eddie Lampert is now being well and truly buffeted. EDDIE LAMPERT has endured worse days than these. After all, it is only five years since the billionaire investor was kidnapped in the garage of his office in leafy Greenwich, Connecticut, and spent a weekend tied up in a motel bath-tub before somehow talking his way to freedom.

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Consider the following scenario: A great company faces a languishing stock price. A few quarters of managerial efforts fail to revive profits. The stock continues to decline. As a result, the CEO is ostracized for having lost his ability. Sound all too familiar?