SHLDQ - Sears Holdings Corp

[merkhet]

 

Sears Holdings also posted an update on Q3.

 

Read it and weep.... You know... Because it's terrible... More losses, more sales declines...

 

They do call out SYWR expenses though, saying it's hurting profitability. BTShine I believe pointed out last quarter that SYWR expenses are running a quarter billion annually and are a primary reason SHLD is losing money.

 

http://searsholdings.mediaroom.com/index.php?s=16310&item=137238

 

 

"Third, we seek to accelerate our transformation by becoming a more focused company that is easier to understand and to manage not just from the standpoint of our store portfolio but also from the standpoint of our portfolio of businesses. We are evaluating separating both our Lands' End business and Sears Auto Center ("SAC") business.  We believe separating the management of these two businesses from Sears Holdings would allow them to pursue their own strategic opportunities, optimize their capital structures, attract talent, and allocate capital in a more focused manner while bringing our business unit structure to life outside of the Sears Holdings portfolio.

 

Regarding Lands' End, we believe that Lands' End is an iconic brand with the potential to become a more global brand, and we presently anticipate that any separation, if pursued, would not be structured as a sale but rather through a transaction that would allow existing shareholders the opportunity to benefit from the significant potential for value creation over the long term.

 

Regarding Sears Auto Centers, we believe that SAC has a unique national footprint that can be leveraged to create significant value. We have begun the repositioning of the business around non-tire related services as tire margins have been compressed industry-wide over the past several years, leveraging the store footprint, the number of service bays and our auto technicians.  We are in the process of evaluating strategic alternatives for the business to maximize its value for our shareholders."

 

This reads to me like they're thinking about spinning off Land's End (bought for $1.86 billion in 2002) to shareholders and selling Sears Auto Centers.

 

"With respect to our previously announced objectives, as of this update, we have generated approximately $700 million of asset monetization proceeds and are on track to reduce inventory at peak, year over year, by $500 million as well as reduce fixed expenses by $200 million for the full year. "

[CorpRaider]

Agreed; spinning or splitting it off via a rights offering.

[bmichaud]

aha, now we know why the stock has been moving on "no news". funny how stocks so consistently front run the actual news months in advance...

[compoundinglife]

This reads to me like they're thinking about spinning off Land's End (bought for $1.86 billion in 2002) to shareholders and selling Sears Auto Centers.

 

They shopped around Land's End last year to private equity with a rumoured price tag of 2B but the WSJ article was suggesting something between 1.2B-1.6B was more likely. I am interested to see if they spin off the whole the thing to shareholders or do something similar to Sears Canada.

[ValueBuff]

Nice news.  I think that flipping 5 stores for 28% of market cap of the holdco will tend to lend further credit to the Berkowitz/Baker Street thesis (compares to the CS analyst). 

 

Factor is the tight float, this could have more to go.

 

This is not even putting a value on the lands end spinoff or sears auto sale.

[compoundinglife]

I also thought the choice of words regarding SAC and LE was interesting. Specifically making things more "understandable".

[BTShine]

Sears Holdings also posted an update on Q3.

 

Read it and weep.... You know... Because it's terrible... More losses, more sales declines...

 

They do call out SYWR expenses though, saying it's hurting profitability. BTShine I believe pointed out last quarter that SYWR expenses are running a quarter billion annually and are a primary reason SHLD is losing money.

 

http://searsholdings.mediaroom.com/index.php?s=16310&item=137238

 

Regarding SYWR Points, in Q2 margin decreased by $68 million YoY (see link below; page 6).  If we annualize that quarterly expense, SYWR expenses increased by about $300 million a year versus the SYWR Points expense last year.  I'm assuming SYWR expense last year was around $300 - $400 million, therefore SYWR expense looks to be around $500 - $750 million per year!  The problem is that it's not increasing sales.  The only hope is that it'll allow SHLD to decrease other expenses, like marketing, or allow SHLD to take a higher margin in return for giving out points.  If SHLD could take 5% more margin, and give back 2% in points, then they're net taking 3% more margin.  If revenues don't improve, that's their best hope as I see it. 

 

http://searsholdings.com/invest/docs/Q2_2013_Webcast.pdf

[Luke 532]

Despite the increased operating loss, we have managed our inventory levels and capital expenditures more efficiently to mitigate the impact of this loss on our cash flow.

Wall Street needs to read "The Outsiders."  The market continues to focus on sales and top-line numbers instead of what Lampert's history suggests he's focused on: cash flow.  It's not great, obviously, but aren't they FCF positive if we were to strip out pension liabilities? 

[zarley]

Nice news.  I think that flipping 5 stores for 28% of market cap of the holdco will tend to lend further credit to the Berkowitz/Baker Street thesis (compares to the CS analyst). 

 

It's not 28% of the Holding Co's market cap.  If you want to think of it that way, it's like 6.3% of the holding co's market cap (400/6300).  Not sure what market cap sunrider was talking about; possibly sears canada. 

 

Another way to think of it is $400 million for a special dividend (mostly to the holding co) that will go straight into the SYWR incinerator.

 

I'll agree, though, that it does reflect positively on the overall value of the real estate.

[Sunrider]

Sears Canada.

 

Nice news.  I think that flipping 5 stores for 28% of market cap of the holdco will tend to lend further credit to the Berkowitz/Baker Street thesis (compares to the CS analyst). 

 

It's not 28% of the Holding Co's market cap.  If you want to think of it that way, it's like 6.3% of the holding co's market cap (400/6300).  Not sure what market cap sunrider was talking about; possibly sears canada. 

 

Another way to think of it is $400 million for a special dividend (mostly to the holding co) that will go straight into the SYWR incinerator.

 

I'll agree, though, that it does reflect positively on the overall value of the real estate.

[fareastwarriors]

http://www.bloomberg.com/news/2013-10-29/sears-considers-separating-lands-end-auto-center-businesses.html

 

Sears Weighs Separating Lands’ End, Auto Centers

[accutronman]

Gary Balter's (Credit Suisse) summary of SHLD results today:

 

■ In summary, our previous commentary on Sears has been that there are four days a year, earnings days, where one gets to see the direction of the company. Today, by including multiple other actions, they may conceal the earnings message. However, don't lose sight of the underlying weakness in earnings. At close to $1 billion in operational cash burn this year (~$10 per share), it once again raises the question of why operate if a liquidation can be so profitable. Perhaps it is not.

[Guest wellmont]

Gary Balter's (Credit Suisse) summary of SHLD results today:

 

■ In summary, our previous commentary on Sears has been that there are four days a year, earnings days, where one gets to see the direction of the company. Today, by including multiple other actions, they may conceal the earnings message. However, don't lose sight of the underlying weakness in earnings. At close to $1 billion in operational cash burn this year (~$10 per share), it once again raises the question of why operate if a liquidation can be so profitable. Perhaps it is not.

 

 

this is what a bear says to his short clients when the stock is up 10% on the session.

[Parsad]

Lol!  Yes, I've heard this stuff before with various investments.  Granted, I wish Eddie took these sort of actions sooner.  Cheers!

[txlaw]

Good news today on the asset monetization front. 

 

Lands' End spinoff or rights offering is a good idea.  Opportunistic PE buyers who want to buy Lands' End will have to be willing to pay a fair price if they want to take it over and grow the company.  Otherwise, the public shareholders will get the growth opportunity. 

[Luke 532]

Kmart® Integrated Retail Services Expand To Puerto Rico

 

Last update: 29/10/2013 2:09:56 pm

 

Localized Online Shopping Experience Enables New Services for Puerto Rico

 

 

HOFFMAN ESTATES, Ill., and SAN JUAN, Puerto Rico, Oct. 29, 2013 /PRNewswire/ -- Kmart announced today that it will extend its integrated retail shopping conveniences to customers in Puerto Rico. Kmart's integrated retail strategy connects online and in-store shopping channels to provide more flexible ways to shop. For the first time this holiday season, Puerto Rico-based Kmart customers and Shop Your Way(SM) members will have access to online layaway, store-to-home shipping, free Anyone, Anywhere pickup and free store pickup.

 

The expansion coincides with the launch of a localized e-commerce channel that has been created within Kmart.com. The site also allows customers in Puerto Rico to enter their zip code and shop online at Kmart.com for a relevant assortment of products.

 

"Kmart strives to provide a seamless experience for our customers," said Dave Rodney, regional vice president of Kmart Puerto Rico and the U.S. Virgin Islands. "We are excited to give our Shop Your Way members and customers in Puerto Rico access to new options that enhance the experience in-store and online."

 

Expanded in-store and online shopping amenities will bring added convenience to customers in Puerto Rico by giving more choices and additional ways to shop and save this holiday season. Customers will find new ways to plan holiday spending with online layaway, save time with store-to-home shipping and minimize unnecessary shipping costs with free Anyone, Anywhere pickup and free store pickup.

 

Online Layaway

 

Kmart customers and Shop Your Way members in Puerto Rico can now take advantage of online layaway as a way to plan their holiday spending. Customers can initiate a layaway contract online and choose to ship their purchases home or pick up their purchases from their selected Kmart store. Kmart shoppers can enjoy free layaway online or in-store through Nov. 23, plus free shipping on purchases $59 or more for the holidays.

 

Store-to-Home Shipping

 

Checking-off holiday shopping lists will be easier than ever as Kmart's 23 Puerto Rico store locations will now offer free store-to-home shipping for customers and members when the product they want is not immediately available in-store.

 

Free Anyone, Anywhere Pickup

 

Free Anyone, Anywhere Pickup provides customers with a way to alleviate shipping fees as they purchase gifts online and have friends or family pick them up at a Kmart location, whether stateside or in Puerto Rico.

 

Free Store Pickup

 

Shop Your Way members can also take advantage of free store pickup while shopping at Kmart.com, featuring free same-day pick up at a local Puerto Rico store.

 

About Kmart

 

Kmart, a wholly owned subsidiary of Sears Holdings Corporation (NASDAQ: SHLD), is a mass merchandising company and part of SHOP YOUR WAY, a social shopping experience where members have the ability to earn points and receive benefits across a wide variety of physical and digital formats through ShopYourWay.com. Kmart offers customers quality products through a portfolio of exclusive brands that include Sofia by Sofia Vergara, Jaclyn Smith, Joe Boxer, Route 66 and Smart Sense. For more information visit the company's website at www.kmart.com | Sears Holdings Corporation website at www.searsholdings.com | Facebook: www.facebook.com/kmart

 

Media Contacts:

Shannelle Armstrong-Fowler Nathaly Gamino

Sears Holdings Flowers Communications Group

847-286-0715 312-228-8832

shannelle.armstrong-fowler@searshc.com ngamino@flowerscomm.com

[zarley]

Kmart® Integrated Retail Services Expand To Puerto Rico

 

Last update: 29/10/2013 2:09:56 pm

 

Localized Online Shopping Experience Enables New Services for Puerto Rico

 

 

HOFFMAN ESTATES, Ill., and SAN JUAN, Puerto Rico, Oct. 29, 2013 /PRNewswire/ -- Kmart announced today that it will extend its integrated retail shopping conveniences to customers in Puerto Rico.

 

K-Mart Puerto Rico . . . what is that?  20 Stores? 

 

Edited to remove rudeness.

[mlcglobal]

As a reminder here is the SHOS press release for subscription of shares. This may be the path they follow. http://goo.gl/WvRgNT  and here is the total SHOS press string from Sears  http://goo.gl/rh7sDQ

[longtermdave]

Can someone please educate me or point me where I can find out - What is the effect on the LEAPS of a spin off?

[Parsad]

Can someone please educate me or point me where I can find out - What is the effect on the LEAPS of a spin off?

 

They'll pop, but you won't benefit from the spin-off in terms of any long-term value.  The shares would only be issued to shareholders, not LEAP holders.  I would actually want to own the Lands End shares, since it is very well run and profitable.  Maybe even the Auto Service Centers.  So, unlike the Sears Hometown Stores, it may make sense to exercise whatever number of LEAPs you want get shares from.  Cheers!

[FCharlie]

My guess is that Lands' End is still quite profitable.

 

My other guess is that SHLD will, upon spinning Lands' End, immediately replace those missing profits with rent checks from their newest, and largest tenant... Lands' End.

 

If they do a rights offering, SHLD could put up to $2 billion cash into their hands whilst still keeping the cash flow from Lands' End coming in.

 

 

[heth247]

My guess is that Lands' End is still quite profitable.

 

My other guess is that SHLD will, upon spinning Lands' End, immediately replace those missing profits with rent checks from their newest, and largest tenant... Lands' End.

 

If they do a rights offering, SHLD could put up to $2 billion cash into their hands whilst still keeping the cash flow from Lands' End coming in.

 

FCharlie, maybe I don't quite get what you are saying... Let's say SHLD spin off Lands' End for $2BB. While as a SHLD holder, I might get some Lands' End shares, wouldn't that also suggest SHLD's market cap will decrease approximately same amount of value?  How does that translate into extra liquidity for the holding company?

 

[FCharlie]

My guess is that Lands' End is still quite profitable.

 

My other guess is that SHLD will, upon spinning Lands' End, immediately replace those missing profits with rent checks from their newest, and largest tenant... Lands' End.

 

If they do a rights offering, SHLD could put up to $2 billion cash into their hands whilst still keeping the cash flow from Lands' End coming in.

 

FCharlie, maybe I don't quite get what you are saying... Let's say SHLD spin off Lands' End for $2BB. While as a SHLD holder, I might get some Lands' End shares, wouldn't that also suggest SHLD's market cap will decrease approximately same amount of value?  How does that translate into extra liquidity for the holding company?

 

What I was saying is if SHLD did a rights offering and sold Lands' End to existing SHLD shareholders, they'd put the cash into their pocket and begin leasing space to Lands' End in all their locations.... Lands' End could also sell externally, but they'd be paying SHLD rent for all the locations they exist in already, which would offset the loss of income to SHLD for being separately owned....  In this case, SHLD would be flush with cash and still producing income from Lands' End. It would just be rental income as opposed to income from selling clothing.

 

I'm not saying that's what will happen. It's just an idea of what could happen.

 

 

[constructive]

SHC bonds should be selling off on talk of spinning off Lands' End and Sears Auto. Hello credit downgrade.

[accutronman]

New York, October 29, 2013 -- Moody's Investors Service today stated that Sears Holdings' announcement concerning its third quarter operating performance, and its initiatives related to its Lands' End and Sears Auto Center businesses as well as certain Canadian store leases, has no immediate impact on the company's B3 Corporate Family Rating or its stable rating outlook.