SHLDQ - Sears Holdings Corp

[BargainValueHunter]

What Eddie needs to do right now is buy back shares. Theres only ~15mm shares not in Fairholme or ESL accounts. $150mm is all you need.

 

If he/they believe that the value of the companies RE + whatever else is multiples of the current Mkt.Cap., then what better way to return shareholder value then by buying 20c Dollars (or whatever value you want to insert here)?

 

They can't take it private though, can they (since Fairholme is a mutual fund)? So there's a limit to the buybacks.

Did Berkowitz ditch his separate hedge fund? If he hasn't then I don't know why he won't load it up with all the Sears he wants.

[LongTermView]

I've been re-reading older Berkshire writings. This is from the 1989 letter:

Shortly after purchasing Berkshire, I acquired a Baltimore department store, Hochschild Kohn, buying through a company called Diversified Retailing that later merged with Berkshire. I bought at a substantial discount from book value, the people were first-class, and the deal included some extras - unrecorded real estate values and a significant LIFO inventory cushion. How could I miss? So-o-o - three years later I was lucky to sell the business for about what I had paid.

 

[scorpioncapital]

I've been re-reading older Berkshire writings. This is from the 1989 letter:

Shortly after purchasing Berkshire, I acquired a Baltimore department store, Hochschild Kohn, buying through a company called Diversified Retailing that later merged with Berkshire. I bought at a substantial discount from book value, the people were first-class, and the deal included some extras - unrecorded real estate values and a significant LIFO inventory cushion. How could I miss? So-o-o - three years later I was lucky to sell the business for about what I had paid.

 

Yes, sounds cheesy but first mental filter is: Be in the right place at the right time. And of course...nothing lasts forever so keep an eye on it. Some things last longer than others that's about all you can really say.

[paperwerks]

Really good article here about SHLD. Author talked recently to a lot of high level employees who live in fear of being terrorized by Eddie who won't leave his "bunker" in Florida. It is really sad. Looks like he has "lost it" on this SHLD position.

 

http://www.businessinsider.com/sears-failing-stores-closing-edward-lampert-bankruptcy-chances-2017-1

[scorpioncapital]

Do we know if he had acted otherwise Sears wouldn't have folded by now? Are we sure his methods have not in fact gotten the titanic Sears into 2017 whereas doing what the salesman wanted would not have led to the same result - or worse?  I think the ship was going down no matter what he did, but certainly, being eccentric and going down is different than being conventional and going down :)

[paperwerks]

<<I think the ship was going down no matter what he did, >>

 

Of course, it is totally unfair in comparison with Lampert to use hindsight but maybe one of the many lessons from SHLD and Lampert will be:

 

Capital allocation for retailers:

 

A.) Use cash flow to buy back stock for retailers with growing sales, margins and cash flow. Example: AutoZone

 

B.) Use cash flow to pay down debt and fund liquidation and generally unwind retailers with slowing sales, margins and cash flow especially if they have a lot of real estate. And don't wait for the situation to deteriorate; retailer turnarounds are very rare and unlikely. Example: SHLD

[oddballstocks]

Really good article here about SHLD. Author talked recently to a lot of high level employees who live in fear of being terrorized by Eddie who won't leave his "bunker" in Florida. It is really sad. Looks like he has "lost it" on this SHLD position.

 

http://www.businessinsider.com/sears-failing-stores-closing-edward-lampert-bankruptcy-chances-2017-1

 

I like the fact that his pool is green (filled with algae) in the satellite pictures as well.  Seems like the guy skimps on maintenance anywhere possible.  A few dollars a week on chlorine would fix the problem, but instead he's ok with a green pool parked next to his mansion.  Strange..

[rogermunibond]

Pennywise, pound foolish.  His retail people when they leave mention this w/r/t store capex.  It's social signaling like the dark wood panels in a law firm.  When his Sears/Kmart stores look shabby, there's a large group of shoppers that just leave and go to Kohls, Target, etc. to shop and never come back to Sears/Kmart.

 

I don't think he had a good way to quantify the ROI on appearance and cosmetic appearance of stores in retaining shopper.

[Liberty]

Really good article here about SHLD. Author talked recently to a lot of high level employees who live in fear of being terrorized by Eddie who won't leave his "bunker" in Florida. It is really sad. Looks like he has "lost it" on this SHLD position.

 

http://www.businessinsider.com/sears-failing-stores-closing-edward-lampert-bankruptcy-chances-2017-1

 

This is just... wow. Shows what can happen when one loses touch.

 

 

[Pelagic]

Lampert continues to assert that the retailer is in the midst of a "transformation" into a more "asset-light" organization — rather than the "protracted liquidation" that critics describe it as.

 

This is an interesting point. Let's assume Lampert succeeds in a best case scenario, debt is paid down, properties and remaining brands are sold at a high valuation, one still has to ask whether there will be a return to shareholders in this case. It seems Lampert is intent on funneling the proceeds into the transformation which raises an entirely separate scenario - will the new "asset-light" SHLD be competitive with other online retailers?

 

I almost think Lampert looks at something like Amazon or perhaps more accurately Jet.com enviously and sees an asset light business model that's raking in money without ever pausing to consider just how much money it takes to build and market a successful online retailer. Even in a best case scenario where SHLD bulls are vindicated, is there any indication Lampert won't just plow the money into his dream of turning SYW into Amazon?

 

There are probably still opportunities to make money given how volatile the stock price is but for long term value creation - I just don't see it. I wonder if Berkowitz is onboard with the new SHLD vision or just wants to wind down and take the proceeds.

[Liberty]

Lampert seems to have completely disconnected himself from the informational feedback loop that any good CEO needs. He's basically scared everyone from telling him bad news, and he's even angry when they're don't succeed entirely at telling him what he's trying to hear. He's probably also driving away all his good employees that are employable anywhere else and keeping whatever remains. Maybe if he visited his stores and spoke to his workforce (and they weren't scared to be candid), he could learn a few things about what he owns.

 

Lampert is no doubt a better investor than I'll ever be, and probably smarter too, but he's making a huge mistake with Sears. He's probably on plan D or E by now; he bought back over $6bn in stock years ago, then it was all about Shop Your Way and "becoming like Amazon and Apple" (didn't realize that his customers -- err, members -- where skewing much older and not interested much in e-commerce, and that to attract new customers he'd need much better stores and technology, and a low-cost structure), and now it's about liquidating the RE and selling brands (leaking roofs and cracked floors & al -- when all big retailers except amazon are having a hard time, the value of big box stores is probably not going up).

 

I'm sure that at a certain price SHLD might be undervalued, but time certainly isn't the friend of this business, and the melting seems to be accelerating rather than slowing...

[JSArbitrage]

I think the ship was going down no matter what he did

 

No, this one is on Eddie.  I remember like 10 years ago, SHLD put in a low-ball offer for Restoration Hardware before the MBO.  Like $270M for the entire company.  It ended up being sold for only a little bit higher.  An investor at the annual meeting asked Eddie why he didn't bid more to get such a well-known, growing luxury brand and Eddie sarcastically quipped to the investor, "Well what should I have paid?!?"  ... RH is now a $1.2B company.

 

Not to mention that in any turnaround, you have to know liquidity is very important.  Plowing $6B in cash into buybacks when the stock was rocketing up was greedy.  He should have kept that cash around for the long-haul.  That's not even hindsight - there were people on this board screaming for him to stop in real time.  And that doesn't even take into account what opportunities would have been available during the financial crisis with that kind of cash on the balance sheet. 

 

 

[aws]

Really good article here about SHLD. Author talked recently to a lot of high level employees who live in fear of being terrorized by Eddie who won't leave his "bunker" in Florida. It is really sad. Looks like he has "lost it" on this SHLD position.

 

http://www.businessinsider.com/sears-failing-stores-closing-edward-lampert-bankruptcy-chances-2017-1

 

Reminds me of that Persian Messenger syndrome line from Munger's speech:

 

And all these psychological tendencies work largely or entirely on a subconscious level, which makes them very insidious.  Now you’ve got Persian messenger syndrome.  The Persians really did kill the messenger who brought the bad news.  You think that is dead?  I mean you should’ve seen Bill Paley in his last 20 years.  [Paley was the former owner, chairman and CEO of CBS; his bio is at http://www.kcmetro.cc.mo.us/pennvalley/biology/lewis/crosby/paley.htm]  He didn’t hear one damn thing he didn’t want to hear.  People knew that it was bad for the messenger to bring Bill Paley things he didn’t want to hear.  Well that means that the leader gets in a cocoon of unreality, and this is a great big enterprise, and boy, did he make some dumb

decisions in the last 20 years. 

[LongTermView]

That Business Insider article is fascinating and this is all very sad.  When I was 16 my friend helped me get a job at Sears so I have an emotional attachment.

 

This is from Berkshire's 1995 letter:

Retailing is a tough business.  During my investment career, I have watched a large number of retailers enjoy terrific growth and superb returns on equity for a period, and then suddenly nosedive, often all the way into bankruptcy.  This shooting-star phenomenon is far more common in retailing than it is in manufacturing or service businesses.

 

[LR1400]

Really good article here about SHLD. Author talked recently to a lot of high level employees who live in fear of being terrorized by Eddie who won't leave his "bunker" in Florida. It is really sad. Looks like he has "lost it" on this SHLD position.

 

http://www.businessinsider.com/sears-failing-stores-closing-edward-lampert-bankruptcy-chances-2017-1

 

This is just... wow. Shows what can happen when one loses touch.

 

While it's clear Lampert probably has some issues with management style, he also is trying to push people to execute a strategy that he feels the company should pursue. Lampert should be open to their opinions, and he may not be; that's a problem. However, once the decision is made to pursue a specific strategy, the executives need to get onboard and execute the strategy. He should have probably liquidated the business long ago because of the awful industry it in, but I respect the fact he seems to be committed to seeing it work.

 

I have no problem with him saying he wants people to refer to customers as members and not consumers. He feels it's important and they should follow his guidance. We have requested people not use certain terms in our business, we don't like to use the word "division" because it has a divisive connotation and we prefer the word "group".

 

It's easy for people to criticize in interviews, especially anonymously. I lose a little respect for the executives just jumping ship. They aren't totally absolved. They were employed by the company to perform and execute the strategy and they haven't done a good job either. Jumping ship and then bitching anonymously is a low blow.

 

On a smaller scale I have had similar things happen in our company. We are in a cyclical industry so we see massive swings all of the time and it never fails that some quitters come along with big talk and requesting high pay. Then they under perform and don't meet the expectations we set and that they set for themselves. They quit and run instead of assisting with fixing problems they helped create.

[BargainValueHunter]

November 2004:

 

https://www.bloomberg.com/news/articles/2004-11-21/the-next-warren-buffett

 

If anyone is destined to inherit Buffett's perch as the leading investment wizard of his day, it just might be Edward S. Lampert. Since he started ESL in 1988 with a grubstake of $28 million, he has racked up Buffett-style returns averaging 29% a year. His top-drawer clients range from media mogul David Geffen and Dell Inc. (DELL ) founder Michael S. Dell to the Tisch family of Loews Corp. (LTR ) and the Ziff family publishing heirs.

 

Only 42, Lampert has amassed a fortune estimated at nearly $2 billion. So focused is he on his goals that he was back at work negotiating a big deal two days after his kidnappers released him. Says Thomas J. Tisch, son of Loews's founder Laurence Tisch: "Eddie is one of the extraordinary investors of our age, if not the most extraordinary."

 

July 2013:

 

https://www.bloomberg.com/news/articles/2013-07-11/at-sears-eddie-lamperts-warring-divisions-model-adds-to-the-troubles

 

In January, eight years after Lampert masterminded Kmart’s $12 billion buyout of Sears in 2005, the board appointed him chief executive officer of the 120-year-old retailer. The company had gone through four CEOs since the merger, yet former executives say Lampert has long been running the show. Since the takeover, Sears Holdings’ sales have dropped from $49.1 billion to $39.9 billion, and its stock has sunk 64 percent. Its cash recently fell to a 10-year low.

 

Although it has plenty of assets to unload before bankruptcy looms, the odds of a turnaround grow longer every quarter. “The way it’s being managed, it doesn’t work,” says Mary Ross Gilbert, a managing director at investment bank Imperial Capital. “They’re going to continue to deteriorate.”

 

January 2017:

 

http://www.businessinsider.com/sears-failing-stores-closing-edward-lampert-bankruptcy-chances-2017-1

 

The meeting in which employees were instructed not to say "consumer" was the last straw for one senior executive who spoke to Business Insider.

 

It was emblematic of an overarching problem plaguing Sears: Lampert "doesn't want to hear anything that challenges his vision," even if it could help improve business, he said.

 

The executive sought guidance from a colleague after the meeting, who advised him to jump ship.

 

"He said, 'On your watch, this thing is going to sink,'" the executive said. "This is when I knew I had to leave."

 

 

[rogermunibond]

Yet another HFer, Fed chairman, or CEO who has ODed on Ayn Rand.

[John Hjorth]

The only problem I have with this is: How did this escalate into 874 pages on this board? Oh well, that may just be me <pressing the unnotify button now>

[Guest longinvestor]

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.........Buffett

[Guest longinvestor]

The only problem I have with this is: How did this escalate into 874 pages on this board? Oh well, that may just be me <pressing the unnotify button now>

 

Well, COBF did it again! Almost all of the most frequented names under Investment ideas have been mediocre to plain duds. You can sort the Investment Ideas section by # replies and see that. I even posted the lack lustre to poor stock price performance for the most popular names from post #1 to post #xxxxx here in 2015. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-happened-to-this-board/msg223221/#msg223221

 

Stay away from the most discussed stocks on COBF!

 

[fareastwarriors]

The only problem I have with this is: How did this escalate into 874 pages on this board? Oh well, that may just be me <pressing the unnotify button now>

 

Well, COBF did it again! Almost all of the most frequented names under Investment ideas have been mediocre to plain duds. You can sort the Investment Ideas section by # replies and see that. I even posted the lack lustre to poor stock price performance for the most popular names from post #1 to post #xxxxx here in 2015. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-happened-to-this-board/msg223221/#msg223221

 

Stay away from the most discussed stocks on COBF!

 

But it's fun even you're not long/short to partake, can't resist!

[arcube]

Yet another HFer, Fed chairman, or CEO who has ODed on Ayn Rand.

Well said!

[Mephistopheles]

The only problem I have with this is: How did this escalate into 874 pages on this board? Oh well, that may just be me <pressing the unnotify button now>

 

Well, COBF did it again! Almost all of the most frequented names under Investment ideas have been mediocre to plain duds. You can sort the Investment Ideas section by # replies and see that. I even posted the lack lustre to poor stock price performance for the most popular names from post #1 to post #xxxxx here in 2015. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-happened-to-this-board/msg223221/#msg223221

 

Stay away from the most discussed stocks on COBF!

 

 

At least in SHLD case, lately it's the most frequented name because it's a dud.

[John Hjorth]

The only problem I have with this is: How did this escalate into 874 pages on this board? Oh well, that may just be me <pressing the unnotify button now>

 

Well, COBF did it again! Almost all of the most frequented names under Investment ideas have been mediocre to plain duds. You can sort the Investment Ideas section by # replies and see that. I even posted the lack lustre to poor stock price performance for the most popular names from post #1 to post #xxxxx here in 2015. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-happened-to-this-board/msg223221/#msg223221

 

Stay away from the most discussed stocks on COBF!

 

But it's fun even you're not long/short to partake, can't resist!

 

fareastwarriors,

 

It's OK.

 

Personally, I apologize if I have been condescending prior in this topic towards SHLD longs on this board. Personally, I just don't get it [sHLD].

 

Somehow, it's all about the purpose of the trade, I know some people on this board [sharperdigaan among others] made a short term killing some time ago of the then short squeeze, based on the meticulous work of Luke 5:32.

[bennycx]

The only problem I have with this is: How did this escalate into 874 pages on this board? Oh well, that may just be me <pressing the unnotify button now>

 

Well, COBF did it again! Almost all of the most frequented names under Investment ideas have been mediocre to plain duds. You can sort the Investment Ideas section by # replies and see that. I even posted the lack lustre to poor stock price performance for the most popular names from post #1 to post #xxxxx here in 2015. http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/what-happened-to-this-board/msg223221/#msg223221

 

Stay away from the most discussed stocks on COBF!

 

I guess because if it is a STUD, people are busy buying and not posting - that is what I do anyway! But if it is a dud, people keep arguing over how bad or good it is!