SHLDQ - Sears Holdings Corp

[rogermunibond]

Not sure how Lands End gets spunoff since there are quite a few stores where LE comprises 30-40% of the soft goods retailing sq ft. Maybe the spinoff entity pays rent to Sears.

[ShahKhezri]

You mean the other way around.  LE pays rent to SHLD RE?

[rogermunibond]

You mean the other way around.  LE pays rent to SHLD RE?

 

Yes, thanks.  That's what I meant.  :)

[texual]

I wouldn't bet against his insider purchase and I think there's a lot of cash here to distribute but only when there's an economic need to do so. Pundits make it look like sears is about to die the past 20 years and yet they largely missed out on how badly best buy turned out. In 2009 I said best buy would go private or go bankrupt before sears. But the SHLD investment is very long term to me.

 

Bruce is all in. Eddies all in and pundits think I should read their link bait articles and pontificating something they can barely understand outside of same store sales. There's a lot more going on at sears than a retailer.

 

I'm buying more shares.

[Guest wellmont]

Not sure how Lands End gets spunoff since there are quite a few stores where LE comprises 30-40% of the soft goods retailing sq ft. Maybe the spinoff entity pays rent to Sears.

 

I believe they are trying to sell Land's End to p/e buyers.

[ShahKhezri]

Yup, bought early this morning at 42.39, have to buy two more times to make it full. 

[muscleman]

5 years ago Lampert raised money through Goldman Sachs with a 5 year lock-up.  The lock-up expires at the end of the year according to WSJ

 

http://online.wsj.com/article/SB10001424052970203750404577173071474457812.html

 

 

According to the video, every 5 years, investors get a chance to get money out of ESL, and if they choose not to, they have to wait for another 5 years?

I think that is good, because I was worried if in the middle of this SHDL turnaround process, investors start to become impatient and force ESL to sell out of SHDL.

[muscleman]

As far as Sears goes:

a- Bad/average management.  Any retailer without above average management is going to lose.

b- No moat.

 

The economics of the department store business may be bad in the long run.  It is a dying retail format.  Look at every individual department in Sears.  For every department, there is some category-killer store format that is probably doing better than the department store.  For tools, Sears doesn't compete well against the Home Depots.  For clothes, it competes with thrift stores and specialty apparel.  In terms of the big box format (stores with lots of square footage), Walmart seems to be beating out Sears.

 

Right but Lampert has said that they are 'transforming'.  They are and have closed stores that weren't performing, so I'm sure he knows all the stuff you just stated.  I think the key question is if they are doing it fast enough, and if Lampert is the right guy to lead the transformation, or can attract the talent necessary to do it while not having the negative cash flow melt away what's left of the assets.  Looking at Lampert vs Bezos (who also had a hedge fund background), Bezos was able to attract massive talent and motivate them.  I've heard nothing good about Lampert's ability to actually run a business or attract and motivate talent.  Morale is super low, and most of the talent acquisitions I've seen were questionable.

 

The other thing I haven't seen mentioned but I did see written on several interviews is that Lampert was going to shutter things a lot quicker, but then when he realized the human cost of putting 200K people out of jobs, he made a 180 and decided to give a turnaround a go.  The danger is that he will run out of time/assets before pulling the plug on the turnaround attempt.

 

Are these 200k union jobs? If they are, then the potential buyout for these employees could cost a lot of money.

[berkshiremystery]

Just for everybody who is curious about Sears real estate values. I once put some links in an old Berkowitz thread last October, but maybe not everybody has seen them yet, so I repost them here.

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/berkowitz-interview-on-investment-strategy/msg88741/#msg88741

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/berkowitz-interview-on-investment-strategy/msg88750/#msg88750

 

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Some charts from my old message.... "Berkowitz: Case Study III" ---->>

 

http://static5.businessinsider.com/image/50533892eab8eaca25000005-900/.jpg

 

http://static3.businessinsider.com/image/5053389369bedd6206000001-900/.jpg

 

http://static3.businessinsider.com/image/50533895ecad04f22e00002b-900/.jpg

 

http://static2.businessinsider.com/image/5053389669bedd4f0300000b-900/.jpg

 

http://static6.businessinsider.com/image/50533897ecad04e02e000018-900/.jpg

 

http://static3.businessinsider.com/image/50533897ecad041b2f00000b-900/.jpg

 

http://static2.businessinsider.com/image/5053389869bedde105000019-900/.jpg

 

http://static2.businessinsider.com/image/50533899ecad04e32e00000d-900/.jpg

 

http://static2.businessinsider.com/image/5053389b6bb3f7e36e000011-900/.jpg

 

http://static1.businessinsider.com/image/5053389becad04242f00001d-900/.jpg

 

http://static1.businessinsider.com/image/5053389ceab8ea492300000c-900/.jpg

 

http://static2.businessinsider.com/image/5053389deab8eac32300000d-900/.jpg

 

http://static6.businessinsider.com/image/5053389eeab8ea7828000000-900/.jpg

 

 

 

 

[berkshiremystery]

If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

 

-------

Simon Property Group Inc. (SPG)

$49.32 billion market cap    = 245 million square feet of real estate

 

Sears Holdings Corporation (SHLD)

$4.75 billion market cap = 256+ million square feet of real estate

-------

 

So my provocative question as a novice,...

 

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!

 

 

 

Any reasonable objections are welcome ?

 

 

[compoundinglife]

If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

 

-------

Simon Property Group Inc. (SPG)

$49.32 billion market cap    = 245 million square feet of real estate

 

Sears Holdings Corporation (SHLD)

$4.75 billion market cap = 256+ million square feet of real estate

-------

 

So my provacitive question as a novice,...

 

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!

 

 

 

Any reasonable objections are welcome ?

 

In the BB video I watched I think that is the point he is trying to make valuation wise. However SPG is a REIT that is earning a positive return and able to pay out its earnings to shareholders so its not an apples to apples comparison. So I don't object with the idea that it is possible but I felt like the way BB presented it in the video, he tried to make it sound as simple as the market just needs to realize that SHLD is like SPG and its not that simple. There is a lot of work that needs to be done to get it there.

 

When you look at the project in St. Paul and some of the other stuff going on it seems like the RE group at SHLD might be slowly making the transformation to operating more like a SPG.  If they did a decent job then we might start to see the multiple that BB speaks of.

 

The way I look at SHLD is that you don't need to know a mans weight to know he is fat, its obvious. I don't know the exact future value of SHLD to know its cheap, I just know that it is  much greater than what I can buy it for today.

 

So in 5-10 years if things play out well you could see a bunch of things come together in a lollapalooza type affect between monetizing real estate (not necessarily liquidating), leveraging the KCD brands, retail turn around or housing recovery, progress in the online business and the chance for ESL to actually have some CF coming in the door that he can use for investments. I don't think its that far of a stretch.

 

 

[berkshiremystery]

If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

 

-------

Simon Property Group Inc. (SPG)

$49.32 billion market cap    = 245 million square feet of real estate

 

Sears Holdings Corporation (SHLD)

$4.75 billion market cap = 256+ million square feet of real estate

-------

 

So my provacitive question as a novice,...

 

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!

 

 

 

Any reasonable objections are welcome ?

 

In the BB video I watched I think that is the point he is trying to make valuation wise. However SPG is a REIT that is earning a positive return and able to pay out its earnings to shareholders so its not an apples to apples comparison. So I don't object with the idea that it is possible but I felt like the way BB presented it in the video, he tried to make it sound as simple as the market just needs to realize that SHLD is like SPG and its not that simple. There is a lot of work that needs to be done to get it there.

 

When you look at the project in St. Paul and some of the other stuff going on it seems like the RE group at SHLD might be slowly making the transformation to operating more like a SPG.  If they did a decent job then we might start to see the multiple that BB speaks of.

 

The way I look at SHLD is that you don't need to know a mans weight to know he is fat, its obvious. I don't know the exact future value of SHLD to know its cheap, I just know that it is  much greater than what I can buy it for today.

 

So in 5-10 years if things play out well you could see a bunch of things come together in a lollapalooza type affect between monetizing real estate (not necessarily liquidating), leveraging the KCD brands, retail turn around or housing recovery, progress in the online business and the chance for ESL to actually have some CF coming in the door that he can use for investments. I don't think its that far of a stretch.

 

But the ride will definitly be bumpy for sure like Autozone.

 

"We purchased Autozone at $27 in 1997.  The stock stayed flat for 4 years.  Then it went to $70 in 2001.  It stayed flat for another 5 years until it went to $110.  Today it is $395 a share.  If you owned a hundred shares, a  thousand shares or a million shares you got to ride with us all the way up."

 

 

Edward Lampert at the 2012 Annual Meeting

[compoundinglife]

 

But the ride will definitly be bumpy for sure like Autozone.

 

"We purchased Autozone at $27 in 1997.  The stock stayed flat for 4 years.  Then it went to $70 in 2001.  It stayed flat for another 5 years until it went to $110.  Today it is $395 a share.  If you owned a hundred shares, a  thousand shares or a million shares you got to ride with us all the way up."

 

Edward Lampert at the 2012 Annual Meeting

Yup, it already has been. I have my seatbelt on :)

[siddharth18]

But the ride will definitly be bumpy for sure like Autozone.

 

"We purchased Autozone at $27 in 1997.  The stock stayed flat for 4 years.  Then it went to $70 in 2001.  It stayed flat for another 5 years until it went to $110.  Today it is $395 a share.  If you owned a hundred shares, a  thousand shares or a million shares you got to ride with us all the way up."

 

 

Edward Lampert at the 2012 Annual Meeting

 

I guess with SHLD you just have to ask yourself what type of investor you are. Are you a buy-and-sit-on-it-for-5-years-or-more type of guy? Or would you rather want to own something else - like quick hits/cigar-butts?

 

The value is there and you have a reasonably clever manager (playing on your team with a huge stake) that sees the value.

[FCharlie]

If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

 

-------

Simon Property Group Inc. (SPG)

$49.32 billion market cap    = 245 million square feet of real estate

 

Sears Holdings Corporation (SHLD)

$4.75 billion market cap = 256+ million square feet of real estate

-------

 

So my provocative question as a novice,...

 

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!

 

 

 

Any reasonable objections are welcome ?

 

I don't think the values are completely hidden. Bruce Berkowitz claims he knows the value of all SHLD properties. Eddie Lampert has said at the annual meeting that they "get calls all the time" from people wanting to lease or buy their properties. The fact that these two men who happen to have terrific track records as investors appear to know the values fairly well, combined with the fact that they are both buying more year after year should be a huge wake up call to skeptics, in my opinion.

 

 

 

 

 

[MYDemaray]

Thought this was pertinent reminder that square feet is only one of the drivers of retail location values... http://online.wsj.com/article/SB10001424127887324595704578242161282500552.html?mod=ITP_moneyandinvesting_5

 

[racemize]

Thought this was pertinent reminder that square feet is only one of the drivers of retail location values... http://online.wsj.com/article/SB10001424127887324595704578242161282500552.html?mod=ITP_moneyandinvesting_5

 

I agree with the sentiment (e.g., particularly for Kmarts), but the above was for an entire mall, versus Sears, which just a portion of a mall.  They get a lot more diversification in that respect, since they are surely anchor stores for most of the best malls out there.

[muscleman]

There is the traditional retail turnaround, which JCP is doing and there is execution/operation/financial (capex) risk, and then there's SHLD or the kitchen sink approach.  So let’s go back to 2008 and assume he spends instead of the 4-500MM in Capex/year, but $1bn, that would have been a disaster as evidenced by housing only starting to pickup at 2011/2012.  Keep in mind that Ackman brought the “retail genius” and now the fund managers and retail think he’s an idiot for trying to engineer a turnaround. 

Sales have dropped from $53Bn in FY07 to $40Bn LTM FY12.  This is a period where stores with poor economics AND upcoming leases maturing have closed down.  Also, it's no wonder that they are through Q4 reporting positive comps for Sears - Domestic when this is a retailer that is fundamentally driven by housing.  This is hindsight, but who actually thinks that if in FY'08, FY'09 and FY'10 he spend $1bn/year vs. the approximately $1.4Bn total that sales would have moved up?

HD from 07-10 sales down ~16%

Stanley Black and Decker 07-10 sales down ~15%

SHLD 07-10 sales down ~18%

 

I also want to ask the group that believes he should have done something differently as far as doing something radically different than what he has, how many exciting/new retailing concepts have been introduced in the last 5 years?  (LULU, ULTA, UA, FRAN - ok?).  JCP is bringing in Levis, Disney and they have a crown in Sephora…none of  those would have fit in at SHLD. 

He's gone from being a genius in 2006 to being labeled an idiot in 5 years and I'm not sure if I would have done anything differently if you factor in a pension liability, 200K employees and the worst housing crisis in a long time. 

1.  People want him to monetize assets as quickly/rapidly as possible - which is nonsense considering consolidated still has $40Bn in sales and 4 major brand anchors.  If you have a cheap lease and the store is at breakeven cashflow, why would you shut it down if that lease matures in 12-24 months?  You simply let it come within 3 months and announce a closing.

2. People want a retail turnaround, but if spent the $1bn in capex/year there would have been a liquidity issue. 

Surprisingly, 1 and 2 are brought up by the same people which I don't understand. 

One concern that I think is valid and Al brought up is the customer service.  I think that in order to be a well thought retailer, great (not good) customer service is important.

 

Got you. I was wondering why he won't just liquidate the company ASAP and start to invest that money. I realize that is probably not the best option now.

I heard that for the big retailers, they have an account payable period that is longer than their inventory turnaround, so they actually keep a big "FLOAT" just like the insurance company? If that can work, then it does make sense to hold on to Sears stores even if it merely breaks even. Then Lambert can use all that money to invest.

 

[finetrader]

Interesting article explaining a little bit about the relationship between Sears and Simon property.

Could help defining Sears's real estate IV.

 

http://www.ibj.com/sears-closings-shouldnt-be-big-problem-for-simon/PARAMS/article/31649

[ERICOPOLY]

I heard that for the big retailers, they have an account payable period that is longer than their inventory turnaround, so they actually keep a big "FLOAT" just like the insurance company? If that can work, then it does make sense to hold on to Sears stores even if it merely breaks even. Then Lambert can use all that money to invest.

 

Things may change of course, but what's holding him back so far?  He's controlled SHLD through a period of incredibly cheap stock prices, and the only thing he has done is returned cash to shareholders.

 

 

[berkshiremystery]

Interesting article explaining a little bit about the relationship between Sears and Simon property.

Could help defining Sears's real estate IV.

 

http://www.ibj.com/sears-closings-shouldnt-be-big-problem-for-simon/PARAMS/article/31649

 

Very interesting... from the article...

 

-----

Simon has Sears as a tenant in 137 of its 190 malls, while competitor General Growth Properties Inc. has Sears in 110 of its 167 malls, said Andrew Johns, an analyst at Green Street Advisors Inc. in Newport Beach, Calif.

-----

 

Sears is a tenant @ Simon Property Group !!!!!

 

Simon trades at 10x Sears, while they both each and individually control almost the same sq ft of real estate,... they even share the same mall locations,.... that it's even more outrageous in logic to my mind,... the biggest contradiction I have seen yet  :o

 

 

 

[Sportgamma]

http://www.costar.com/News/Article/The-De-Malling-of-America-Whats-Next-for-Hundreds-of-Outmoded-Malls-/141980

[berkshiremystery]

http://www.costar.com/News/Article/The-De-Malling-of-America-Whats-Next-for-Hundreds-of-Outmoded-Malls-/141980

 

Like in any slow growth or declining markets, there are a few winners and many losers. I bet there are more losers than winners, and those losers feed the few winners, it's evolution.

 

-----

 

Kristin Mueller, executive vice president and director of retail business development with Jones Lang LaSalle in Atlanta, has a simple message to those who would write their obituary: Malls are not dead.

 

"The vast majority of the malls in the U.S. will continue to be incredibly relevant and are thriving," Mueller said. "There are many indicators that show malls are going very strong; you see it in their sales performance and in the REIT stocks of those that own two-thirds of the malls in this country.

 

"There are many different ways that we as an industry are working with malls to make sure they're relevant for their shoppers and communities, usually through a combination of new retail and other alternative uses," Mueller said.

 

Mueller acknowledged that some, "perhaps more than a handful," of the country's stock of 1,200 to 1,400 enclosed malls are in serious trouble. "Those malls have usually been unfavorably impacted by their surrounding communities, or they’ve been outflanked by bigger, better competition" from lifestyle and power centers, Mueller said.

[Guest wellmont]

Interesting article explaining a little bit about the relationship between Sears and Simon property.

Could help defining Sears's real estate IV.

 

http://www.ibj.com/sears-closings-shouldnt-be-big-problem-for-simon/PARAMS/article/31649

 

Very interesting... from the article...

 

-----

Simon has Sears as a tenant in 137 of its 190 malls, while competitor General Growth Properties Inc. has Sears in 110 of its 167 malls, said Andrew Johns, an analyst at Green Street Advisors Inc. in Newport Beach, Calif.

-----

 

Sears is a tenant @ Simon Property Group !!!!!

 

Simon trades at 10x Sears, while they both each and individually control almost the same sq ft of real estate,... they even share the same mall locations,.... that it's even more outrageous in logic to my mind,... the biggest contradiction I have seen yet  :o

 

it's all about the structure. investors prefer the simon structure at the moment. they hate the shld structure, which is probably by ESL design. investors don't like their real estate assets being enclosed in a money losing envelope which doesn't pay a dividend. this is all very convienent for  esl who wants to increase his ownership stake in those assets.

[hyten1]

also note even if sears is in ALL of simon and ggp's mall we still need to know the % or the amount of sq ft that is as a percentage of the entire sq ft.

 

it is a little premature to say  because sears is in 100% of simon and ggp that means 100% or close to 100% of sears sq ft is prime real estate.

 

i am not saying sears is bad or putting it down.

 

at the end of the day i have not seen anyone (it doesn't mean it doesn;t exist, i just have not seen it nor did i do the work for it) analyzing entire sears RE portfolio breaking it down what percentage is class A vs B or C etc.

 

eddie and bruce prob have this? if they did they have not share it with the  public? if someone has this info please share.