SHLDQ - Sears Holdings Corp

[alertmeipp]

looks like some mall owners maybe willing to pay up to sears to get them go away. convert the space to shops and lease them out, much more profitable.

 

bruce is a pretty smart guy, maybe he should give eddie some serious feedback soon.

 

if they cant speed up the asset value realization they got to slow down the spending.

 

 

[plato1976]

Will activism work here ?

Eddie controls too many shares

 

Looking at the way ESL describes himself on the blog - "I am also the Chairman and CEO of Sears Holdings Corporation, a membership-focused, integrated retailer in the process of transforming from a traditional retail company", I think he has tied his personal identity to SYW. He will not listen to anyone until the "process of tranforming" has played out even if in the process sears is destroyed. He says he is "data driven" but consistent with an Ayn Rand zealot he is probably driven by his own "ideas which are superior to everyone elses that they just dont see".

 

Anyways, I speculate, we will shortly see some kind of activist action from Baker Street to drive sense into him (perhaps a letter?). Privately perhaps Fairholme is already engaging him. In addition, we will probably see a bounce because of the Land's end spinoff.

[bmichaud]

DCG - the big REITs indicate mall supply is tight and unlikely to grow much if any over the next decade. Do you disagree with that? Are the REITs themselves being overly optimistic about mall demand?

[ERICOPOLY]

Clearwire: losing hundreds of millions, sold for billions

 

Dish spectrum: $0 cash generation, worth north of $10B

 

Twitter: $32B market cap for something not in existence 10 years ago with barely a dime of profit.

 

SHLD: 68MM SF of some of the most valuable real estate in the world for under $7B (mkt cap + long term debt).

 

GGP trades for $260/SF and SHLD's high quality portfolio trades at ~$100/SF. This cannot be lost on market participants.

 

Suppose you see a guy in a warehouse burning priceless antiques to heat the place with the air conditioner turned on.  An auctioneer announces that the bidding for the remaining antiques has begun.

 

You have been screaming at him for a while now trying to tell him that the air conditioner is on.  He ignores you and keeps trying to heat the place.

 

How much are you going to bid for the remaining antiques?

 

That's what is scaring me.

[thecynic]

Will activism work here ?

Eddie controls too many shares

 

At the very least the activists can try & hopefully make him see the error of his SYW idea. Looking at all the hedge funds that jumped in last year in JCP and given the market valuations, it is likely we will see at least some funds (Ackman? :) ) buy into Sears on its recent drop.

[thecynic]

Suppose you see a guy in a warehouse burning priceless antiques to heat the place with the air conditioner turned on.  An auctioneer announces that the bidding for the remaining antiques has begun.

 

You have been screaming at him for a while now trying to tell him that the air conditioner is on.  He ignores you and keeps trying to heat the place.

 

How much are you going to bid for the remaining antiques?

 

That's what is scaring me.

 

What if instead of just one person a whole crowd gathers and screams at that guy? Will the air conditioner guy listen? I bet he would.

 

If people think there is value here, the crowd is going to gather & shout at ESL. Only question is, is SHLD cheap enough to go through the trouble.

[vinod1]

DCG - the big REITs indicate mall supply is tight and unlikely to grow much if any over the next decade. Do you disagree with that? Are the REITs themselves being overly optimistic about mall demand?

 

You would expect the REIT's to say that, dont you?

 

Ron Johnson and others mentioned that America is over retailed. Further, you have online sales growing that would require lower retail space ("Integrated Retail"). When you combine these two why do you think demand would be high?

 

Vinod

[bmichaud]

Clearwire: losing hundreds of millions, sold for billions

 

Dish spectrum: $0 cash generation, worth north of $10B

 

Twitter: $32B market cap for something not in existence 10 years ago with barely a dime of profit.

 

SHLD: 68MM SF of some of the most valuable real estate in the world for under $7B (mkt cap + long term debt).

 

GGP trades for $260/SF and SHLD's high quality portfolio trades at ~$100/SF. This cannot be lost on market participants.

 

Suppose you see a guy in a warehouse burning priceless antiques to heat the place with the air conditioner turned on.  An auctioneer announces that the bidding for the remaining antiques has begun.

 

You have been screaming at him for a while now trying to tell him that the air conditioner is on.  He ignores you and keeps trying to heat the place.

 

How much are you going to bid for the remaining antiques?

 

That's what is scaring me.

 

While Eddie the Antiquer burns the not-so-priceless antiques, I am fine bidding for the priceless antiques hived off in the adjacent warehouse. Once he ventures over there, I'd stop bidding.

[bmichaud]

DCG - the big REITs indicate mall supply is tight and unlikely to grow much if any over the next decade. Do you disagree with that? Are the REITs themselves being overly optimistic about mall demand?

 

You would expect the REIT's to say that, dont you?

 

Ron Johnson and others mentioned that America is over retailed. Further, you have online sales growing that would require lower retail space ("Integrated Retail"). When you combine these two why do you think demand would be high?

 

Vinod

 

Perhaps there is a difference between retail in general and A-quality malls. From REIT presentation slides, it appears rents are rising for quality mall space.

[AZ_Value]

Stan - agreed, but unlike Ron Johnson who had nothing but his pride to lose as he ran JCP into the ground, Lampert has literally billions at risk.

 

Bmichaud,

 

This is not totally true. Ron Johnson doesn't have ESL kind of money but he spent $50 million of his own money buying JCP warrants when Ackman hired him. These are now pretty much worthless right now as their exercise price was around 30 bucks with the stock going for 7.

 

I also believe that Eddie's ego is a big part of the situation now, after starving the company of any significant capital for years he is now suddenly spending hundreds of millions into some loyalty program he claims to be revolutionary...

 

For some reason Retail seems to be one of those places where value investors go to die, even the greatest one of them all (WEB) will be the first to tell you that he tried and failed at it

 

 

 

[finetrader]

I'm gonna tell you why Eddie wants to keep this going..

 

The brands! The craftsman, kenmore, lands'end...  Eddie believe there is value in those.

 

Sure there is value in RE to monetize, but if you close all the Sears locations, and thoses brands only sells at those locations, they aren't worth anything anymore. So he has to find a way to shrink the store count so to get them profitable, get to sell those brands in competitors stores( haven't seen anything in that direction), and get his customers to shop online.

 

That is the best way I can understand Eddies' decision.

 

Now again, if I see insiders buying by Eddie in the near future I might jump in.

 

Which web site should we look to be the first to know about ESL or Edddie's inside transaction?

[stahleyp]

A bit of side story.

 

I was speaking with a friend yesterday. She had trouble with her furnace and had Sears come to work on it. They said they'd try to "fit her in" and would arrive sometime during Friday but didn't know when - but sometime between 8am-5pm, I think she said. I think it ended up being even later than 5pm when they actually arrived.

 

She also told me that when she spoke to a technician on another occasion a while ago that, while they have a schedule, they'd go to the houses they wanted to first. For instance, she was given the 8am-5pm "window." And the guy showed up at 8am. He told her that he had instructions to go to another house first, but decided to work backwards. I guess he didn't like the 8am person...so that person became the 5pm appointment. Great customer service.

 

I fail to see why they can't give people a better estimate for a window if they are investing in all of this technology.

 

 

[AZ_Value]

Why is there even an argument going on whether a retail turnaround is part of the equation?

 

For the first time in a decade Eddie finally seems to be pretty clear about this. I mean, the guy just started a blog to taunt his revolutionary integrated retail efforts.

"We’re enhancing our membership benefits associated with Shop Your Way, and developing digital and social relationships with our members. We’re using data and analytics to make targeted offers and decisions delivered in real-time.

 

Because as we all know Amazon and Wal Mart etc. don't use analytics to target their audience.

 

But even if you don't believe him, we can at least start believing his wallet now, he is spending hundreds and hundreds of millions into this thing.

 

And for those saying that a turnaround was never part of the story, why all the pages of SYW stats and discussion as well as the videos about their revolutionary integrated retail vision that have been going on in the thread

[DCG]

SYW seems like a joke of a way to try to distract people of how bad their business is.

[AZ_Value]

I'm gonna tell you why Eddie wants to keep this going..

 

The brands! The craftsman, kenmore, lands'end...  Eddie believe there is value in those.

 

Sure there is value in RE to monetize, but if you close all the Sears locations, and thoses brands only sells at those locations, they aren't worth anything anymore. So he has to find a way to shrink the store count so to get them profitable, get to sell those brands in competitors stores( haven't seen anything in that direction), and get his customers to shop online.

 

That is the best way I can understand Eddies' decision.

 

Now again, if I see insiders buying by Eddie in the near future I might jump in.

 

Which web site should we look to be the first to know about ESL or Edddie's inside transaction?

 

Maybe but can a shareholder here tell me with what degree of certainty they know how much and when they will get something out of it when it's all said and done?

 

Take the brands for example, and Kenmore in particular, even with many claiming Kenmore to still be a major leading brand, how in the world do they manage to post negative comps in home appliances when home appliances are staging a big comeback with an improving economy and recovering housing market? One would at least think that Kenmore would be doing OK. Can you riddle me this?

 

[alertmeipp]

SYW seems like a joke of a way to try to distract people of how bad their business is.

 

Maybe Eddie can take it to a TV show called Dragon's Den.

I saw quite a few people spending millions of hard earned money in so-called innovation that looks so foolish from an outsider there.

[ERICOPOLY]

Take the brands for example, and Kenmore in particular, even with many claiming Kenmore to still be a major leading brand, how in the world do they manage to post negative comps when home appliances are staging a big comeback with an improving economy and recovering housing market? One would at least think that Kenmore would be doing OK. Can you riddle me this?

 

That's easy.  The brands are losing their grip on customer mindshare.  They lose their value year over year.

 

This started to happen when Home Depot and Lowes cropped up.  People now are becoming familiar with the brands sold at Lowes and Home Depot.  And yes, they sell appliances too.  And yes, you can buy online and pick up in store.

 

So once you've realized that you can buy solid tools from Home Depot or Lowes (and also buy your lumber at the same time), you don't need to spend the extra 45 minutes driving across town to Sears to get the tool you want just because it says "Craftsman" on it.

 

Plus, when you don't know what tools you need for a particular project, will you get better advice from the staff at:

A) Sears

B) Home Depot

C) Loews

[alertmeipp]

Take the brands for example, and Kenmore in particular, even with many claiming Kenmore to still be a major leading brand, how in the world do they manage to post negative comps when home appliances are staging a big comeback with an improving economy and recovering housing market? One would at least think that Kenmore would be doing OK. Can you riddle me this?

 

That's easy.  The brands are losing their grip on customer mindshare.  They lose their value year over year.

 

This started to happen when Home Depot and Lowes cropped up.  People now are becoming familiar with the brands sold at Lowes and Home Depot.  And yes, they sell appliances too.  And yes, you can buy online and pick up in store.

 

So once you've realized that you can buy solid tools from Home Depot or Lowes (and also buy your lumber at the same time), you don't need to spend the extra 45 minutes driving across town to Sears to get the tool you want just because it says "Craftsman" on it.

 

Plus, when you don't know what tools you need for a particular project, will you get better advice from the staff at:

A) Sears

B) Home Depot

C) Loews

 

Didn't one just sent they need those brands to keep people to go to their stores...

But why can't Kenmore be more like Whirlpool then, I remember Whirlpool spent a fortune to get Maytag years ago. Kenmore is a still a strong brand.

[ERICOPOLY]

Take the brands for example, and Kenmore in particular, even with many claiming Kenmore to still be a major leading brand, how in the world do they manage to post negative comps when home appliances are staging a big comeback with an improving economy and recovering housing market? One would at least think that Kenmore would be doing OK. Can you riddle me this?

 

That's easy.  The brands are losing their grip on customer mindshare.  They lose their value year over year.

 

This started to happen when Home Depot and Lowes cropped up.  People now are becoming familiar with the brands sold at Lowes and Home Depot.  And yes, they sell appliances too.  And yes, you can buy online and pick up in store.

 

So once you've realized that you can buy solid tools from Home Depot or Lowes (and also buy your lumber at the same time), you don't need to spend the extra 45 minutes driving across town to Sears to get the tool you want just because it says "Craftsman" on it.

 

Plus, when you don't know what tools you need for a particular project, will you get better advice from the staff at:

A) Sears

B) Home Depot

C) Loews

 

Didn't one just sent they need those brands to keep people to go to their stores...

But why can't Kenmore be more like Whirlpool then, I remember Whirlpool spent a fortune to get Maytag years ago. Kenmore is a still a strong brand.

 

Somewhere along the line the brands become less valuable as they keep closing down stores and losing customers.  Meanwhile, people get familiar with using other brands.

 

Look, if there are only 100 Sears stores left and Kenmore is exclusively available at Sears, then it's worth a hell of a lot less as a brand since those 100 remaining stores serve a lot fewer customers.

 

You can look at home much cash is being generated by store closures, but how much intangible value is being lost from those brands?

[AZ_Value]

Take the brands for example, and Kenmore in particular, even with many claiming Kenmore to still be a major leading brand, how in the world do they manage to post negative comps when home appliances are staging a big comeback with an improving economy and recovering housing market? One would at least think that Kenmore would be doing OK. Can you riddle me this?

 

That's easy.  The brands are losing their grip on customer mindshare.  They lose their value year over year.

 

This started to happen when Home Depot and Lowes cropped up.  People now are becoming familiar with the brands sold at Lowes and Home Depot.  And yes, they sell appliances too.  And yes, you can buy online and pick up in store.

 

So once you've realized that you can buy solid tools from Home Depot or Lowes (and also buy your lumber at the same time), you don't need to spend the extra 45 minutes driving across town to Sears to get the tool you want just because it says "Craftsman" on it.

 

Plus, when you don't know what tools you need for a particular project, will you get better advice from the staff at:

A) Sears

B) Home Depot

C) Loews

 

Great. That is the most plausible explanation and would be my explanation as well.

Now, I've heard and seen many people attaching valuations in the billions of dollars to these brands, anyone trying to factor in a "declining factor" when they value them?

 

It is actually my personal opinion that the best thing Eddie could do for these brands is to spin them off and let them fight on their own without dragging them down with him. The sooner the better.

Like the LE spin off coming up, if the new entity's CEO truly has his shareholders  best interests at heart (notwithstanding the fact that ESL will represent 48%), his first action item should be to tell ESL that they will stop selling their merchandise exclusively at Sears because.... hmmm... the stores suck and nobody stops by to buy our stuff anymore.

The huge decrease in EBITDA from the LE financials recently published is quite worrisome to me and I hope it's not a trend. But with the way everything else is going...

[ERICOPOLY]

I'm actually curious how much a company like Home Depot would bid for the Craftsman brand.  They already have tools on their shelves that their customers show up to buy.  What is Craftsman going to do for them?  Perhaps it would help differentiate themselves from Lowes, but do the customers at those two stores really need Craftsman at this point?

[finetrader]

that is a good question. Will LE as a stand alone company will want/be able to sell their products to others retailers than Sears?

 

I figure that if they are EBITDA neutral in 2013 Q4(christmas quarter), and SSS continue to decrease, than 2014 Q4 will be negative. Then it is practically game over for Sears restructuring efforts(SYW, and other initiatives).

 

So maybe LE spin off is the first initiative to monetize the brands.

 

I figure that if this is working, then monetize others brands. and then monetize the real estate.

 

This way you get the most value out of this thing. Monetize the brand, and  then the RE.

 

 

[wisdom]

SYW will be shared by all the spin offs from SHLD - LE, SAC, SHOS, etc.

 

Sears.com has nearly $5 B in sales just under 10% of AMZN and is one of the top ten online merchants.

 

Craftsman, Kenmore, diehard are still the top brands in their categories and can be sold online.

[wisdom]

I should add AMZN has a mkt cap of $180 B. Sears.com has a -ve value if you take out other assets.

 

SHLD mkt cap $4B. Just cancelled a few leases in Canada for $500 mil or 1/8th of mkt cap. Where else can you find this kind of MOS.

[ERICOPOLY]

SYW will be shared by all the spin offs from SHLD - LE, SAC, SHOS, etc.

 

Sears.com has nearly $5 B in sales just under 10% of AMZN and is one of the top ten online merchants.

 

Craftsman, Kenmore, diehard are still the top brands in their categories and can be sold online.

 

I appreciate your feedback.  In your opinion, why is the leading brand, Kenmore, seeing declining sales during a period of increased housing activity.  Even though it can be sold online?  Aren't appliance sales of the non-leading brands rising year over year?  So what does it mean to be a market leader?