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The Valuation of Sears Holdings

The Valuation of Sears Holdings. Calvin Wing. 2 nd 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

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The Valuation of Sears Holdings

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  1. The Valuation of Sears Holdings • Calvin Wing

  2. 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.

  3. 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?

  4. 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.

  5. 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

  6. Drivers of growth • Technology adaptation. • Creating loyalty programs. • Digital marketplace. • Shop Your Way Rewards • Cutting cost • By eliminating marginally performing stores, and converting stores.

  7. 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.

  8. 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.

  9. 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.

  10. Thank you

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