SHLDQ - Sears Holdings Corp

[elevensecsrt4]

my broker exchanged my shldv shares for shld shares today at correct purchase price

[20ppy]

I found this brief discussion on eBay interesting. 

http://community.ebay.com/t5/Buyer-Central/Why-Are-KMart-and-Sears-Producrs-Dominating-eBay-Search-Results/m-p/20278874

 

There's certainly the potential that Sears maybe able to provide Ebay with package distrubition/delivery business.

[tripleoptician]

Is anyone able to get a quote on Sears Options that are pre-Lands' End spinoff?  I understand how the options work (if exercised I'll get 100 SHLD and 30 LE shares).  But, for some reason I can't get any price quotes.

 

I spent some time with my broker today on this. It seems there is nowhere to look up SHLD1 options online and need to call in for quotes.  Was able to sell all my Jan 2015 35 strike contracts. Last traded at 16 with bid/ask of 17/18.5. Got 17.51 each for a 110% return over 4 months.

 

The SHLD1 Jan 2016 options I have at 40/50 strikes seem to have unusual pricing. My broker could only get the same quoted sell price as the current SHLD options trading ex Lands End. This would mean no value is being attributed to the 30 shares LE/contract. I'm not sure if the lack of regular quotes are making these option pricing inefficient and can be taken advantage of some how....

 

Edit: Nevermind - quotes can be found at the nasdaq website with distinct shld vs shld1. Pricing seems appropriate.

 

http://www.nasdaq.com/symbol/shld/option-chain?callput=call&money=all&dateindex=6

[stevevri]

Maybe others have, but I hadn't noticed this until recently.

 

There is "ShopyourWay Local" https://www.shopyourwaylocal.com/s/web/

 

And it has it's own iOS app.

 

It seems very incomplete at the time but interesting to see.

[ERICOPOLY]

Maybe others have, but I hadn't noticed this until recently.

 

There is "ShopyourWay Local" https://www.shopyourwaylocal.com/s/web/

 

And it has it's own iOS app.

 

It seems very incomplete at the time but interesting to see.

 

I put in my zip code and it said there are no deals near me.

 

I feel like they are going for a design that focuses on simplicity, on not overwhelming the consumer with choices.  This should also take pressure off of their promotional budget, given that no SYW points are going to be spent based on this kind of offering selection.

[Guest hellsten]

Maybe others have, but I hadn't noticed this until recently.

 

There is "ShopyourWay Local" https://www.shopyourwaylocal.com/s/web/

 

And it has it's own iOS app.

 

It seems very incomplete at the time but interesting to see.

 

They, maybe Eddie himself, succeeded in creating something that matches the Sears brand experience:

http://wpmedia.o.canada.com/2013/01/sears.jpg?w=660&h=330&crop=1

[20ppy]

Likewise for the stock price :)

[Luke 532]

Sears blog...

Connecting our Members with Thousands of Our Associates Across the Country

http://blog.searsholdings.com/leadership-viewpoint/connecting-our-members-with-thousands-of-our-associates-across-the-country/

[Luke 532]

Short interest up to 15.982M

 

Summary...

Short (as of 4/15/2014): 15.982M

Lampert/Berkowitz/Tisch: 80.072M

Outstanding: 106.451M

Float: 26.379M

Horizon/Chou/OldWest/BakerSt/Force/GoodHaven/Fine/etc. = ~10.009M

 

Short interest as % of float: 60.6% (assuming zero shares are long-term oriented of those held by Horizon Kinetics, Baker Street, Old West, Chou, Force Capital, etc.)

 

[20ppy]

Short interest up to 15.982M

 

Summary...

Short (as of 4/15/2014): 15.982M

Lampert/Berkowitz/Tisch: 80.072M

Outstanding: 106.451M

Float: 26.379M

Horizon/Chou/OldWest/BakerSt/Force/GoodHaven/Fine/etc. = ~10.009M

 

Short interest as % of float: 60.6% (assuming zero shares are long-term oriented of those held by Horizon Kinetics, Baker Street, Old West, Chou, Force Capital, etc.)

 

Short ratio is approaching 100%. What happens if Eddie buys one more million shares? Then we would have a situation where collectively, we have more than 100% ownership. Any rules against that?

[texual]

This was found on page 4 of the latest thread updates... something I havn't seen in years.

 

Ignite the postcount boys.

 

 

Sears on da rise!

[Luke 532]

Redevelopment projects:

 

Hendrick to build new car dealership at former Kmart in Charleston

http://www.postandcourier.com/article/20140501/PC05/140509927/1010/hendrick-to-build-new-car-dealership-at-former-kmart-in-charleston

"The former Kmart store, which closed last week, and adjacent Sears Parts & Repair shop will be partially demolished and transformed into a nearly 130,000-square-foot collision center. The facility will include a paint shop, service area and parts warehouse, according to the site plans."

 

Reopening Nicollet is key for Midtown Minneapolis

http://www.startribune.com/opinion/editorials/257584931.html

"The best outcome would produce a reopened street surrounded by a cluster of new housing and retail stores — including a new urban-style Kmart — all integrated into a walkable streetscape..."

 

"By 1976, the city was so desperate that it agreed to close off Nicollet Avenue in exchange for a suburban-style Kmart with a massive 500-car parking lot. Also part of the deal was a sweetheart lease that runs through 2053."

 

"In the end, satisfying Kmart might be expensive for the city..."

[Guest hellsten]

This is interesting:

http://static.cdn-seekingalpha.com/uploads/2014/5/251422_13990068636860_rId8.png

 

Barron's latest polling of "Big Money" institutional investors revealed one interesting, investable idea…

 

94% thumbs down.

 

Source: http://seekingalpha.com/article/2185833-when-the-big-money-is-unanimously-wrong-go-long

[txlaw]

Interesting tidbit of info on a particular Sears property in Austin, TX.

 

Yesterday, the city released a first phase recommendation for the central corridor public transport plan, which contemplates multiple modes of transportation being built, including rail.  Well, there is going to be a major underground interconnect station (urban rail, commuter rail, bus, and highway) right next to a shopping center that includes a Sears full line store and a detached Sears Auto center near the highway.  The city says that they're going to be spending quite a bit of money to make the tunnel, which will require "acquisition/displacement" of property and businesses alongside the highway.

 

I think this means that the Sears Auto Center, which is marketed on the SHC Realty site, and the Sears full line store will have to be bought out by the city or by someone who will be willing to let the property lie fallow for a while (maybe the shopping center owner).  It's definitely very valuable property right there -- and we all know that Sears is not the highest and best use.  I could see that Sears site becoming a high value residential tower, which would be attached to a high end shopping complex.

 

It's interesting to see the possibilities of Sears RE so close to home.

[OracleofCarolina]

Anybody attending the AR tomorrow?

[jeffmori7]

A quick check on http://www.shcrealty.com/ shows that there are 3077 operating store opportunities and 120 closed store opportunities.

 

It appears that while Sears are closing a lot of store, they have difficulties selling, leasing, subleasing, transforming them at the same pace. So except for leases not renewed, the story is not always over once the closure or transformation is announced.

 

we should try to keep track of those numbers over time.

 

More than one month later..they are at 3075 operating store opportunities and 117 closed store opportunities...so it is going down..but really slowly.

 

Operating store opportunities down to 3018, while closed are up to 119 opportunities.

[elevensecsrt4]

Anybody attending the AR tomorrow?

 

I wish I could but I look forward to notes taken by others!

 

Thanks in advance to those that take notes and attend!

[TeddyLampert]

I'm attending. Will post any relevant notes afterwards

[peridotcapital]

I have some time before I leave town tomorrow, so here are some notes from today's annual meeting...

 

Not sure how long previous meetings have taken, but we were dismissed at 11:15am (started at 9:00am sharp). After a few minutes of official business Eddie gave a Powerpoint presentation for about an hour and then he took Q&A for an hour before we hit their hard stopping point (I think they were planning to cut it off at 11 but allowed the remaining questioners in line to go ahead).

 

The presentation didn't have much new. He explained the evolution of what they have done over the past decade and why; turn Kmart around from $1B losses to nearly $1B in EBITDA, merge with Sears with the idea of taking the Sears brands off-mall (where they saw the other retailers going), and now try and transform the business to where they believe the customer is going. He also gave 3 examples of corporate transformations (Apple, General Dynamics, and Eastman Kodak) though he tried to assure everyone he was not saying Sears is like Apple. He used Apple as an example of a company that cut R&D and refocused on where they thought the future was going (less Mac focus and more on new digital products starting with the iPod). GenDyn did a ton of divestitures in the early 1990's (sales went from $10B to $3B) and then built the company back up. And Kodak saw that their film cash cow was dying so they embarked on a mission of R&D plus acquisitions, both of which failed miserably. Although he said he was not drawing parallels with Sears, it sure seemed like the undertones were that he is divesting and transforming (from a smaller base) in order to win in the future, and not just throwing money into capex, R&D, and acquisitions (of course, it all depends on how well your ideas work... if EK made smart acquisitions they might have thrived). Anyway, not much new here... he thinks he can do "the future of retail" better than other retailers... more on this later...

 

One of the useful tidbits (there weren't many) was that it is by design that he is communicating more recently. A shareholder told him he had to do better explaining that when doing major surgery, the patient often gets worse before they heal.  He agreed, hence he is now explaining more. Although he did not give specific numbers today, he did say the next earnings release (later this month) will have more details around the transformation effort. It seems he might even begin to disclose more metrics (like SYW points expenses). This is something to (potentially) look forward to in a few weeks. He still insists the financial results are masking the changes they are making.

 

They have closed about 500 stores so far, which cumulatively lost more than $100M in the 12 months prior to closing. He said he wanted to give these stores time to turnaround, even though the advisors told him to close hundreds more after the merger. Now that he has given them 5-7 years in most cases, he is accelerating closures. He did not give any indication how the pace of closures will go from here. He dismissed press reports that they are closing their best stores (in fact its the opposite), but this board I think knows very well that the best stores remain open. The operational focus is on SYW and on the best stores.... focused on the future,. not the past.

 

Most of Eddie's remarks were about SYW. He will continue to expand it around 4 key areas: rewards points to incentivize customer loyalty, SYW marketplace (third party items), SYW.com social platform ("Wouldn't it be nice to find out which refrigerators your friends have when you need to buy one"), and SYW Max (which he implied is better than Amazon Prime because it's free). There was a video  showing examples of SYW and its benefits... it highlighted things like e-receipts, buy online, pick up in store, digital signs, in-car curbside pickup, RFID inventory mgmt, etc and he even went to live feeds of store managers in various stores to demonstrate these features. If you ask me, he is going all-in on SYW. And to be honest, these upgraded stores look nice (not only in the presentation, but I also visited the one in Schaumburg after the meeting... it's very nice compared with your typical mall-based Sears).

 

On to the Q&A. Like I said there was only about an hour of this, maybe 15-20 questions total. Some of the more relevant ones:

 

1) Can you quantify the SYW investment on an annual basis, last year you said it was "in the hundreds of millions", is it $1B+ yet?

 

He wouldn't say.

 

2) Can you tell us how much rental income is currently? What happened with David Lukes?

 

Would not disclose rental income, said it is rising and will continue to rise as they optimize their real estate. David got a great offer and not many people would turn down a CEO job. Interestingly, he did say that the rental income "has the ability to be monetized at some point in time" but did not elaborate.

 

3) Why wait so long to close stores?

 

Reiterated the answer given above... gave them plenty of time to be turned around.. he thought they could do that. Only reason to keep a money-losing store open is because you think they can make money.

 

4) Robert Jaffe from Force Capital (who I randomly was sitting next to and didn't know it) asked a 3-part question: Could you spin off the warranty business? How many employees does Seritage have and how many are professional vs administrative? Was your CFO correct when he said at a recent BofA conference that in 3 years or less there might only be a Sears store every 200 miles, with some small satellite stores filled in?

 

The warranty business is very capital intensive, and he prefers not to be in those businesses. The announcement they made was conditional and any deal to sell or spin off or partner with it would depend on "the right deal at the right time." So it appears price was a big issue. Seritage has 20 employees, all of whom "are very professional" --- a zinger from Eddie! The CFO backtracked from the comment he made at the conference, saying that he could see a hub type of setup but did not recall giving out numbers like that (even though Force said they had him on tape saying it).... "it must have been my twin."

 

5) What was your largest capital allocation mistake since Sears and Kmart merged?

 

He punted this one. Said there were "lots." Some of the biggest were ones of omission... said he really thought Sears Essentials would work and regretted that it didn't. Does not like to call them mistakes, but rather "ideas that didn't work." Learn from them and improve.

 

6) Someone from Blackstone asked a 3-parter: Can Seritage exist outside of SHLD (would not answer), can you give any more disclosures about the capitalization of Sears Re (no, but you can call the Bermuda regulatory bodies and see what they can give you), and why was the Sear REMIC sent up to the parent (Sears Re was overcapitalized and there was no reason to keep the securities there, they needed to correct "sloppy capital allocation")

 

7) Asked about timing of future monetizations. Didn't divulge much. Said analysis on Auto Centers was a work in process. A lot depends on whether it makes sense to keep something, spin it, partner with someone, etc. Sears Re structure makes sense based on how they have to handle and structure liabilities like workers comp and warranty protection.

 

8 ) How do you divide your time between Sears and ESL? "More than a majority" of my time is devoted to Sears, but it varies (for instance, this week we have a board meeting here). He finds it "challenging and enjoyable." (not exactly reassuring if you ask me... you would think/hope it would be very high since he is CEO)

 

9) I had multiple questions I wanted to ask, but after seeing the video on SYW decided to ask him how he thinks about SYW and how they will differentiate it from the competition given that most of things he was highlighting are either being done already by other retailers (RFID, e-receipts, shop online/pickup in store, social media engagement, free shipping, third party item marketplace, rewards cards), or could be done by them very easily in the future (curb-side pickup, digital signs).

 

He admitted that SYW marketplace was no different than Amazon or Ebay, and that other companies are doing most of what they are doing. That said, he does not believe "the core" of other retailers is integrated retail. He thinks they can form stronger relationships with their members than the rest of the industry. He actually came back to this question during another answer and said "we believe we can build a better mousetrap." He said he is less concerned with getting people who use Amazon, etc to switch to SYW and more concerned with building better relationships with those who already use SYW. And he actually gave one metric... he said the number of people who shop 4 times or more per year is going up, so that is one engagement metric he clearly tracks (which was one of the other questions I was going to ask --- since % of sales from members is pretty meaningless by itself --- but time didn't permit).

 

Hope that is a helpful rundown!

[Luke 532]

Thanks for posting that, Chad!

[krazeenyc]

THANKS Chad for the notes. I wanted to make it out there but some family emergencies over the past couple weeks made it impossible.

[wisdom]

Thanks Chad!!

[Mephistopheles]

Thanks for the notes peridot! I'm glad they will disclose more about SYW next quarter.

 

About the 2nd question you listed, they already disclose rental income unless I am misinterpreting.

 

Note 14 in the 10-k shows that sublease income was $56 million last year, up from $47 and $30 in 2012 and 2011, respectively.

 

http://www.sec.gov/Archives/edgar/data/1310067/000131006714000007/shld201310k.htm#sB15C350C81FDC5FB440A95CC8EAA824B

 

Pg. 105

[peridotcapital]

Thanks for the notes peridot! I'm glad they will disclose more about SYW next quarter.

 

About the 2nd question you listed, they already disclose rental income unless I am misinterpreting.

 

Note 14 in the 10-k shows that sublease income was $56 million last year, up from $47 and $30 in 2012 and 2011, respectively.

 

http://www.sec.gov/Archives/edgar/data/1310067/000131006714000007/shld201310k.htm#sB15C350C81FDC5FB440A95CC8EAA824B

 

Pg. 105

 

You are correct about the sublease income disclosure. The shareholder question was trying to find out how much rent they collect from leases on properties SHLD owns outright, since many of the mall locations are owned and not leased and they are dividing up some of these locations now. Unfortunately, they did not want to talk about it in any detail other than to state the obvious, that it's rising...

[cubsfan]

Chad - I was there as well - and I think you provided an excellent summary.

 

I'll just offer a couple comments:

 

-- Meeting was less hostile than previous 2 I attended. Generally there is a heckler or two giving Eddie a hard time.

  My first meeting one guy would not sit down until Eddie answered his question "Eddie, where is that suit from, is

  that a Sears suit?" Finally Eddie told him it was not Sears, it was from Brooks Brothers.

 

-- Meeting was about the right length, maybe 11:00 end time.

 

-- Not as well attended with analysts, pretty clear to me people are losing interest. Last 2 years there were way

  more analysts - and always 2 microphones and 10 people in each line. Looks like people are giving up on Sears.

 

-- I thought it was very interesting Eddie was NOT wearing a tie. The previous meetings, all the Sears execs are dressed

  to kill and uptight, and seem scared shitless of Eddie. I thought it was interesting that Eddie was so relaxed in dress and manner.

  (Eddie mentioned a few times about "changing the culture and moving out management who don't get it")

 

-- Personally, I thought his presentation was good and cleared up some issues in my mind. I don't know SHLD or other

  retailers as well as Chad, but I thought his introductory comments about "we are performing major surgery" need to be

  understood by the majority of shareholders. It's a SLOW and PAINFUL transformation - with many fits and starts, but

  I guess I don't have any doubts about his conviction. We may have doubts about his competence, and I think Chad

  hit Eddie right between the eyes when he challenged him "many other retailers are doing the same thing Eddie, what make's you different?"

  I actually expected Eddie to get defensive, but he didn't and I almost think he appreciates being challenged.

  He's making it clear that this can take many years, and has changed course as the retail environment has changed course.

  He talked about 2005 where there was NO focus on Facebook or Amazon, just the effort to integrate K-Mart/Sears operations.

 

 

-- I just come away thinking - there is total commitment to the retail transformation, and we should not get our hopes up

  about any grand liquidation plan. He is going to liquidate assets to fund the transformation with assets that are not productive

  AFTER giving them PLENTY of time to show they are not working. I am going to be very interested to see the

  "Profit Recovery Plan" that will be released with earnings at the end of the month.

 

-- I thought his discussion of Apple, General Dynamics and Kodak where effective - without at all claiming victory.

    If you are a shareholder, it's a LT transformation, where it may get worse before it gets better.

 

Anyway - Chad's summary is excellent and accurate in my opinion.