Looking back at my recent posts on Sears Holdings (SHLD), I may have left the impression that improving same store sales trends are necessary to drive the stock higher. Just to be clear, Northlake’s long position in (SHLD) has never been about sales. It has been about free cash flow generation over the 2006 and 2007 time frame. Over this period, sales merely need to be what they have been: terrible but with comps getting slightly less negative.
For 2006 and 2007, combined comps of negative low to mid-single digits should allow the company to produce the expected cash flow, and it is that cash flow will drive the stock price via share repurchases or acquisitions.
Sure, you have to trust Eddie Lampert to wisely spend the money. I am willing to do that given his stellar track record.