peridotcapital Posted December 3, 2015 Share Posted December 3, 2015 "Due to the structure of the leases, we expect that our cash rent obligations to Seritage and the Joint Venture partners will decline materially over time as space in these stores is recaptured. So, while the rent paid to Seritage and the Joint Venture partners is a real cash expense, we have chosen to exclude it here to provide a more consistent and comparable view of our operating performance." They exclude all lease payments to Seritage in their adjusted EBITDA? Come on. This is really dishonest. it's the only way he can claim ebitda is improving year-over-year. Link to comment Share on other sites More sharing options...
ScottHall Posted December 3, 2015 Share Posted December 3, 2015 "Kmart and Sears Domestic comparable store sales declined 7.5% and 9.6%, respectively, in the third quarter of 2015 with more than half of the decline coming from declines in apparel and consumer electronics, a lower margin category;" Damn that's awful. Link to comment Share on other sites More sharing options...
ni-co Posted December 3, 2015 Share Posted December 3, 2015 "Due to the structure of the leases, we expect that our cash rent obligations to Seritage and the Joint Venture partners will decline materially over time as space in these stores is recaptured. So, while the rent paid to Seritage and the Joint Venture partners is a real cash expense, we have chosen to exclude it here to provide a more consistent and comparable view of our operating performance." They exclude all lease payments to Seritage in their adjusted EBITDA? Come on. This is really dishonest. it's the only way he can claim ebitda is improving year-over-year. Yes. That's what I was the thinking, too. I absolutely hate this kind of BS and their communication makes it even worse. What's the point in talking those results up? I get why they would like to exclude rent payments: Because interest payments were not included in EBITDA and rent payments now are. There is no theoretical difference between (i) buying your real estate, financing it and paying interest compared (ii) to renting it. So your EBITDA will look better in the first scenario and worse in the second. However, I call them dishonest anyway because, in effect, they compare quarters under both scenarios with each other. This is clearly not an apples-to-apples comparison. When you want to exclude the rent payments and define EBITDA in such a BS way you'd have to compare it to past quarters by correcting for the interest payments (for the part of the debt that was paid back with real estate proceeds)! Comparing the quarters like they do doesn't make any sense. What kind of operating performance are they measuring with this adjusted EBITDA exactly? What they are doing here is giving "operating results" of a theoretical dream company that doesn't have to pay rent but has the same cash flows for some magical reason. Link to comment Share on other sites More sharing options...
BTShine Posted December 3, 2015 Share Posted December 3, 2015 If by 'debt payments' you mean interest payments, that's not included in EBITDA per definition, so no need to worry about that. I think they are trying to show what's happening to the underlying business on a year over year basis, without the effects of changing debt loads or real estate leasing vs ownership. Link to comment Share on other sites More sharing options...
ni-co Posted December 3, 2015 Share Posted December 3, 2015 If by 'debt payments' you mean interest payments, that's not included in EBITDA per definition, so no need to worry about that. I think they are trying to show what's happening to the underlying business on a year over year basis, without the effects of changing debt loads or real estate leasing vs ownership. You are right. Forget what I wrote. It was muddled thinking. What they are doing is saying that, in theory, rent payments are a rough equivalent for interest payments on owned but financed real estate. You wouldn't include the interest payments in EBITDA calculations, so why would you include rent payments? So, if you want to compare both operations you'd have to correct for that. I still think their adjusted EBITDA doesn't make sense for a retailer on an absolute basis, though, because it's overstating the cash flow generating capabilities. What they claim, in essence, is that they are able to produce these cash flows without the need for real estate. While this might be true at some time in the future, it's obviously not true today. It's phantasy land. What they should have done is adjusting prior quarters for theoretical lease payments (the exact payments they have to make today!). This would have been a much better reflection of the underlying business. Link to comment Share on other sites More sharing options...
peridotcapital Posted December 3, 2015 Share Posted December 3, 2015 It's pretty easy to see that results are not improving just by looking at the top of their income statement. Let's just focus on 3 line items: revenue dollars, gross margin dollars, and selling/administrative dollars: 9M 2014: Rev: 23,099 GM: 5,171 S&A: 6,218 GM-S&A: -1,047 % of rev: -4.53% 9M 2015: Rev: 17,843 GM: 4,215 S&A: 5,005 GM-S&A: -790 % of rev: -4.43% As long as they continue to try and shrink to get into the black (in such a high fixed cost model like retail), it's going to be very hard to get that minus 4%+ into positive territory. The expense deleveraging with sales declines of this magnitude is just too great. Plus, they are de-emphasizing products that shoppers want to buy, if they are low margin. Not the way to attract a highly loyal and satisfied membership base. Link to comment Share on other sites More sharing options...
adesigar Posted December 3, 2015 Share Posted December 3, 2015 Side 17 (Financial Capacity) in the presentation deck is new It includes Owned Stores 421 and a note that says "Includes [125] stores in the REMIC. No credit agreement limits exist on real estate financing or non-remic properties" Link to comment Share on other sites More sharing options...
hardincap Posted December 3, 2015 Share Posted December 3, 2015 Lampert has been a buyer. I believe he may have purchased as much as $30 mil worth of shares recently. The hedge fund may have distributed the SHLD shares as it reduce the number of investors it has from what I can recall. Why would he buy as much as he did ahead of a poor report, that he must know will drive the stock down? Anyone venture a guess? Link to comment Share on other sites More sharing options...
adesigar Posted December 3, 2015 Share Posted December 3, 2015 Lampert has been a buyer. I believe he may have purchased as much as $30 mil worth of shares recently. The hedge fund may have distributed the SHLD shares as it reduce the number of investors it has from what I can recall. Why would he buy as much as he did ahead of a poor report, that he must know will drive the stock down? Anyone venture a guess? No clue but since August he has purchased approximately 2 Million shares which takes his total to 64 Million Shares+Warrants and again now controls more than 50% of the company. Link to comment Share on other sites More sharing options...
Scudbucket Posted December 4, 2015 Share Posted December 4, 2015 Anyone ever look into the logistics side of the business? It's called Innovel Solutions (http://innovelsolutions.com/). Their goal is to be the "UPS" of retail. They've done some impressive work by making their shipping capabilities much more robust across the U.S. I wonder why Lampert never mentions this or MetaScale. Also, anyone have any thoughts on the pension liability? I wonder what it'll show when they re-evaluate at the year-end. Their discount rate of 3.7% seems to me to be at the lower end (so more conservative) of other S&P 500 companies. I also wonder why Lampert keeps buying. It's extremely curious. How can someone who was raved about 10 years ago and on track to be the next "Buffett" be so hated and out of favor? I can't imagine he got stupid over night. And I don't think his track record was all luck either. Link to comment Share on other sites More sharing options...
adesigar Posted December 4, 2015 Share Posted December 4, 2015 Anyone ever look into the logistics side of the business? It's called Innovel Solutions (http://innovelsolutions.com/). Their goal is to be the "UPS" of retail. They've done some impressive work by making their shipping capabilities much more robust across the U.S. I wonder why Lampert never mentions this or MetaScale. Also, anyone have any thoughts on the pension liability? I wonder what it'll show when they re-evaluate at the year-end. Their discount rate of 3.7% seems to me to be at the lower end (so more conservative) of other S&P 500 companies. I also wonder why Lampert keeps buying. It's extremely curious. How can someone who was raved about 10 years ago and on track to be the next "Buffett" be so hated and out of favor? I can't imagine he got stupid over night. And I don't think his track record was all luck either. Innovel is the unit that bought the Descartes solution for saving time http://www.eweek.com/mobile/sears-dumps-paper-gains-efficiency-with-app-based-delivery-system.html I think both Innovel and Metascale are just SHLD divisions created from the SOAR thing that was done 8 years ago. 1% increase in rates = 600 Million in unfunded pension obligation reduction. Its currently underfunded by 2.25 Billion. Few years ago rate was near 6%. IT wont get back there soon. Fed will take its time raising rates. I don't know about other S&P Companies but I believe IBM also changed rate to 3.7% at the end of 2014. Link to comment Share on other sites More sharing options...
adesigar Posted December 8, 2015 Share Posted December 8, 2015 And the buying continues... Berkowitz added over half a million shares after the Q3 report. Link to comment Share on other sites More sharing options...
FCharlie Posted December 8, 2015 Share Posted December 8, 2015 And the buying continues... Berkowitz added over half a million shares after the Q3 report. Unreal... Those two guys own almost 90 million shares... Link to comment Share on other sites More sharing options...
adesigar Posted December 8, 2015 Share Posted December 8, 2015 And the buying continues... Berkowitz added over half a million shares after the Q3 report. Unreal... Those two guys own almost 90 million shares... I believe the two control approx 80 million shares and 18 Million warrants out of 106 Million shares and 22 Million Warrants. Link to comment Share on other sites More sharing options...
Against the crowd Posted December 8, 2015 Share Posted December 8, 2015 Are they buying because they see something really big happening in the business or do they suffer from commitment bias since both of them have very publicly talked about their position . Both have insider view of the business. Link to comment Share on other sites More sharing options...
BTShine Posted December 8, 2015 Share Posted December 8, 2015 Even they may not know that answer. Link to comment Share on other sites More sharing options...
Sionnach Posted December 10, 2015 Share Posted December 10, 2015 Holy cow... http://www.cnbc.com/2015/12/10/reuters-america-warren-buffett-reports-802-pct-stake-in-seritage-growth.html Is this his PA? Link to comment Share on other sites More sharing options...
ni-co Posted December 10, 2015 Share Posted December 10, 2015 Is this his PA? Yes. https://www.sec.gov/Archives/edgar/data/315090/000119312515399523/d103925dsc13g.htm Link to comment Share on other sites More sharing options...
valueyoda Posted December 10, 2015 Share Posted December 10, 2015 Remember that he bought a lot of cheap REITs in the late 90s as well for his PA. Just a sharp rise in SHLD is a bit silly. Link to comment Share on other sites More sharing options...
krazeenyc Posted December 10, 2015 Share Posted December 10, 2015 Remember that he bought a lot of cheap REITs in the late 90s as well for his PA. Just a sharp rise in SHLD is a bit silly. Lampert did disclose after hours yesterday that he add a quarter million shares on the 7th and 8th. That probably has something to do with the move up. Link to comment Share on other sites More sharing options...
ni-co Posted December 10, 2015 Share Posted December 10, 2015 This Buffett investment makes complete sense. You basically only need to think a little bit about these 3 points from the last press release: Third-party tenants other than Sears Holdings Corporation (“Sears Holdings”) represented 22.0% of annual base revenue, including all signed leases Base rents across the portfolio averaged $18.95 PSF for signed but not yet opened leases, $11.23 PSF for existing third-party leases and $4.31 PSF for Sears Holdings Total annual NOI is approximately $196.0 million, including all signed leases http://ir.seritage.com/file/Index?KeyFile=31850567 I can't believe that I missed this. On average, they rent to new tenants at 4x the price Sears pays. People are talking about single tenant risk at SRG. I'd argue that your risk is quite limited if you can quadruple your income on average in case your main tenant goes bust. Link to comment Share on other sites More sharing options...
JRH Posted December 10, 2015 Share Posted December 10, 2015 This Buffett investment makes complete sense. You basically only need to think a little bit about these 3 points from the last press release: Anecdotally, Buffett also lives about a mile from a prime example ghost-town Sears store sitting on the corner of one of the busiest intersections in Omaha. Link to comment Share on other sites More sharing options...
BTShine Posted December 10, 2015 Share Posted December 10, 2015 For Buffett to invest in SRG, what's his estimated discount to value? Does he think it's worth 50% more? 500% more? Link to comment Share on other sites More sharing options...
ourkid8 Posted December 10, 2015 Share Posted December 10, 2015 Buffett does not get excited on anything below $1B (I think $1B is still too little) so this investment must be from one of his deputies. For Buffett to invest in SRG, what's his estimated discount to value? Does he think it's worth 50% more? 500% more? Link to comment Share on other sites More sharing options...
merkhet Posted December 10, 2015 Share Posted December 10, 2015 Buffett does not get excited on anything below $1B (I think $1B is still too little) so this investment must be from one of his deputies. For Buffett to invest in SRG, what's his estimated discount to value? Does he think it's worth 50% more? 500% more? The filing indicates that this was in his PA. Link to comment Share on other sites More sharing options...
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