- Bruce Berkowitz, a former Sears director and one of its biggest defenders, says the company’s losses “wrecked” his hedge fund’s performance.
- “Sears realized billions of dollars from asset sales, as we predicted, but I did not foresee the operating losses that have significantly reduced values,” he wrote in a letter to investors.
- The letter marks the first time Berkowitz has spoken out about Sears since quietly leaving its board in October.
Hedge fund manager Bruce Berkowitz came out swinging against Sears after quietly leaving its board of directors four months ago.
Berkowitz, who has long been one of Sears’ biggest defenders and remains its second-largest shareholder, wrote in a letter to investors on Monday that Sears “wrecked” the performance of his hedge fund, Fairholme Capital Management.
“Although markets reached new highs in 2017, there was not much to celebrate as the securities of Sears Holdings Corporation (‘Sears’) and Sears Canada wrecked the Funds’ performance,” Berkowitz wrote. “Sears realized billions of dollars from asset sales, as we predicted, but I did not foresee the operating losses that have significantly reduced values.
“Getting the asset values largely correct, but missing the company’s inability to stop retailing losses, has been hugely frustrating and fatiguing for me to watch,” he added. “Today Sears is a much diminished position and nowhere as relevant to our financial position.”
Berkowitz stepped down from Sears’ board in October. In a statement at the time of his departure, a Fairholme Capital Management spokesperson said Berkowitz was leaving because he had “achieved his objective” on the board.
“Mr. Berkowitz believed that his board service would enable him to better communicate Fairholme’s perspective in substantially greater depth and detail than would otherwise have been the case,” the representative said. “Mr. Berkowitz believes that he has achieved that objective.”
Sears told Bloomberg at the time that Berkowitz and Sears’ CEO, Eddie Lampert, were still in good standing.
“Mr. Lampert and Mr. Berkowitz have a longstanding partnership and continue to have great respect for each other,” the company said.
Berkowitz first invested in Sears in 2005 and he has been one of its fiercest defenders over the years despite its continuing losses.
Sears’ sales are down 45% since early 2013, its debt load has spiked to over $4 billion, and the company is losing well over $1 billion annually.
Berkowitz reiterated his belief in Sears as recently as July 31, in a semi-annual report to investors.
“Investors may disagree on the exact path forward for Sears, but the company owns many valuable assets and there is huge value in optimizing all of them,” he wrote.
Berkowitz has been selling off Sears shares since leaving the board but he’s still the company’s second-largest shareholder behind Lampert.