FCharlie Posted March 1, 2013 Share Posted March 1, 2013 The main issue Sears faces is it's pension liability. I was happy to see that one third of pension participants took the one time buyout. Going forward, if the pension could get under control, Sears really doesn't have a problem being cash flow positive. Even with mediocre profits during 2008/2009/2010, Sears produced a ton of cash. Assuming they can get back to cash flow positive, they really don't need to do anything except buy back stock and cherry pick offers to sell/sublease real estate. It may take decades to wind Sears down and that assumes that it doesn't continue to exist for the remainder of our lives, which would be fine with me so long as E.L does a good job of allocating the capital that is generated. Link to comment Share on other sites More sharing options...
ShahKhezri Posted March 1, 2013 Share Posted March 1, 2013 I'll just note 5-year SRAC cds hit a 52-week low yesterday. Link to comment Share on other sites More sharing options...
20ppy Posted March 1, 2013 Share Posted March 1, 2013 I'll just comment that I've been hoarding Sears shares :) Link to comment Share on other sites More sharing options...
premfan Posted March 1, 2013 Share Posted March 1, 2013 Buying back stock and selling off estate is a capital allocation plan not a catalyst for the business. Sears needs a catalyst. "Potential" catalyst 1.) Turned into berkshire type structure. This is obviously everyones hopes and dreams 2.) Really embracing technology to "wow" the customer like no traditional retailer has done before. The best bet for sears to me is to be so high tech in every aspect of customer service that it stands apart from other retailer competitors. Then the other retailers will just copy that. The owners of sears should know why they are holding the company. Hoping for a sudden situation of turning this into a berkshire type vehicle is irrational. Own it cause eventually in the future. Way Way Way in the future they are going to be a lean mean technology embracing retailing machine. Hopefully by then robots are not the cashiers and the singularity wouldnt have happened yet. Link to comment Share on other sites More sharing options...
Guest wellmont Posted March 1, 2013 Share Posted March 1, 2013 I think the sell off is related to esl giving his shareholders absolutely nothing in terms of future tactics and timing for value creation. he is creating a shareholder base of patient investors because anybody who's not is selling. Link to comment Share on other sites More sharing options...
Sportgamma Posted March 1, 2013 Share Posted March 1, 2013 I think the sell off is related to esl giving his shareholders absolutely nothing in terms of future tactics and timing for value creation. he is creating a shareholder base of patient investors because anybody who's not is selling. ESL is a clever guy, the kind of guy who could negotiate his way out of a hostage situation. If he is going to liquidate in a way that benefits him the most, slowly is likely the way go. Its in his own best interest to keep his cards close to his chest...my $0.02 Link to comment Share on other sites More sharing options...
texual Posted March 1, 2013 Share Posted March 1, 2013 The noise against sears is deafening to me however the noise against jcp suddenly changed tunes this past few months. Ron Johnson was a hero a short while ago. Today he's a loser. Take it from me, there's a lot of truth to lamperts ominous forcast: there are dark days ahead for most of the retailers who are general merchandisers. It will take Jeff bezos analytical and technical skills and Millard drexler merchandisers to vault the department store category to survival. Today the only company who admits this is sears. To a degree I'd expect Ron Johnson to say the same stuff down the line. Three things I learned from esl was 1. He is not going to improve stores. Sorry, there's a god reason why closing underperforming ones could be key to long term profits. It needs to stay ahead by holding back. Smartest move so far. 2. Pensions are hard to get rid of but he's doing damn well at getting rid of it. Good thing they got rid of 1/3 more, and it'll be a few years to go but it will be resolved eventually. And 3. His only investment in sears has and will be the shop your way program. They'll keep building it and soon they'll have a great deal more leverage over their competitors. For now it's too early to tell bit it's grown larger each year. I don't use it but ill look at the site later to give it a shot. I'm optimistic that from what it seems he believes the store is important as a means to an end while other competitors are relying on old world tactics to keep doing the same thing they've always done. It won't work as esl says, they are missing the real critical changes. It might work for analysts and e short term but here's food for thought: if amazon has such sales and low costs and power to market withou a single store, how come sears has to be wal mart when they can be a hybrid of both but lean more on the digital aspects? If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart. The natural benefit is a online digital business takes care of itself and is far less cumbersome than running a retail empire. It would be great for esl to invest alongside a business that weans itself away from big box and transformed into a hybrid where stores don't need such a big investment of time and money. I think Lampert saw that years ago and it was hard to grasp because everyone thinks Macy's is what retailers should all copy. But that's simply a case that stands out from the rest, who tried that stuff and failed. You can't think of retail like Android for instance. The ideas great but who makes all the ash from android? Samsung. Everyone's trying to copy them but they are not making money. So being in that environment is hostile and profit less. These guys are not chasing Macy's they re chasing amazon. Smart business acumen I'd you ask me. Walmart could have done this years ago too, they chose to avoid online and will find out that its not so easy to do. Sears hopefully might die while shop your way lives. It very ell could become independent of the retail entity. They could even include other retailers in the platform and do many other things. I'd keep sears on the hope they can manage through the crisis and let other stores fail and some day analysts will say wow, they had it right all along. Any other thoughts? Link to comment Share on other sites More sharing options...
premfan Posted March 1, 2013 Share Posted March 1, 2013 The noise against sears is deafening to me however the noise against jcp suddenly changed tunes this past few months. Ron Johnson was a hero a short while ago. Today he's a loser. Take it from me, there's a lot of truth to lamperts ominous forcast: there are dark days ahead for most of the retailers who are general merchandisers. It will take Jeff bezos analytical and technical skills and Millard drexler merchandisers to vault the department store category to survival. Today the only company who admits this is sears. To a degree I'd expect Ron Johnson to say the same stuff down the line. Three things I learned from esl was 1. He is not going to improve stores. Sorry, there's a god reason why closing underperforming ones could be key to long term profits. It needs to stay ahead by holding back. Smartest move so far. 2. Pensions are hard to get rid of but he's doing damn well at getting rid of it. Good thing they got rid of 1/3 more, and it'll be a few years to go but it will be resolved eventually. And 3. His only investment in sears has and will be the shop your way program. They'll keep building it and soon they'll have a great deal more leverage over their competitors. For now it's too early to tell bit it's grown larger each year. I don't use it but ill look at the site later to give it a shot. I'm optimistic that from what it seems he believes the store is important as a means to an end while other competitors are relying on old world tactics to keep doing the same thing they've always done. It won't work as esl says, they are missing the real critical changes. It might work for analysts and e short term but here's food for thought: if amazon has such sales and low costs and power to market withou a single store, how come sears has to be wal mart when they can be a hybrid of both but lean more on the digital aspects? If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart. The natural benefit is a online digital business takes care of itself and is far less cumbersome than running a retail empire. It would be great for esl to invest alongside a business that weans itself away from big box and transformed into a hybrid where stores don't need such a big investment of time and money. I think Lampert saw that years ago and it was hard to grasp because everyone thinks Macy's is what retailers should all copy. But that's simply a case that stands out from the rest, who tried that stuff and failed. You can't think of retail like Android for instance. The ideas great but who makes all the ash from android? Samsung. Everyone's trying to copy them but they are not making money. So being in that environment is hostile and profit less. These guys are not chasing Macy's they re chasing amazon. Smart business acumen I'd you ask me. Walmart could have done this years ago too, they chose to avoid online and will find out that its not so easy to do. Sears hopefully might die while shop your way lives. It very ell could become independent of the retail entity. They could even include other retailers in the platform and do many other things. I'd keep sears on the hope they can manage through the crisis and let other stores fail and some day analysts will say wow, they had it right all along. Any other thoughts? Hey that was a great post. My thinking on this is that eventually online brands will pivot into offline retail stores. This has already occurred with apple and Microsoft. Vice Versa offline retail brands would need to downsize and have more of a influence online to be sustainable. Its the yin/yang of life and the tao te ching thinking. What goes up must come down. What is online now will be offline later. Its much easier to obviously pivot into having retail stores while having an online brand already established. This is the future of retail. For the online brands to justify having offline retail stores they must be vertically aligned with a product to sell. So in sears case it makes sense to only have retail stores that only sell there brands. Everything else is a waste. Link to comment Share on other sites More sharing options...
muscleman Posted March 1, 2013 Share Posted March 1, 2013 http://www.scribd.com/doc/79854534/Baker-Street-Investor-Presentation Removed...... :-[ Link to comment Share on other sites More sharing options...
Grahamisback Posted March 1, 2013 Share Posted March 1, 2013 I did not read everything (there were great case studies) :( Did someone have the time to download it? Link to comment Share on other sites More sharing options...
constructive Posted March 1, 2013 Share Posted March 1, 2013 If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart. I disagree. Berkshire is a lot more similar to Wal-Mart than Amazon. -massive physical presence compared to online presence -more concerned with profitability than growth -as a consequence, highly profitable -optimizes existing markets, doesn't create new markets Link to comment Share on other sites More sharing options...
compoundinglife Posted March 1, 2013 Share Posted March 1, 2013 I did not read everything (there were great case studies) :( Did someone have the time to download it? I found another copy on Issu.com: http://issuu.com/teee6/docs/baker_street_capital_management They don't allow downloads for this document, but there is always a way ;) http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_1.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_2.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_3.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_4.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_5.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_6.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_7.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_8.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_9.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_10.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_11.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_12.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_13.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_14.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_15.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_16.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_17.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_18.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_19.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_20.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_21.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_22.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_23.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_24.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_25.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_26.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_27.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_28.jpg Link to comment Share on other sites More sharing options...
Grahamisback Posted March 1, 2013 Share Posted March 1, 2013 Thank you ;) Link to comment Share on other sites More sharing options...
BargainValueHunter Posted March 1, 2013 Share Posted March 1, 2013 Regarding Amazon: When I hear "Amazon" I think "micron-thin margins". Shouldn't the goal of a retailer be (in part) expanding operating margins? If another company is going to be a good comparison for where Sears needs to go then perhaps http://www.shopyourway.com/ should emulate www.herbalife.com/ Link to comment Share on other sites More sharing options...
plato1976 Posted March 2, 2013 Share Posted March 2, 2013 For all the wonderful discussion here, I only have one question : What will those commercial real estate be worth in a few years ? I see all those big box retailers are in big trouble. They are really losing business to online competitors quickly. It's a paradigm shift and I don't think anyone can reverse it. So, if all these big retailers go down, or at least shrink to a much much smaller size, who will take up all these commercial real estate capacity in this country ? I just feel SHLD 's commercial real estate is not worth that much unless they immediately liquidate them now. When Bruce compared SHLD with Simon , I believe it's not SHLD undervalued, it's Simon overvalued... Anyway, I don't have a lot knowledge in commercial real estate, can someone more knowlegeable educate me on this ? How do we plan to use all these commercial real estate - I think it has lots of overcapacity in the long run... Regarding Amazon: When I hear "Amazon" I think "micron-thin margins". Shouldn't the goal of a retailer be (in part) expanding operating margins? If another company is going to be a good comparison for where Sears needs to go then perhaps http://www.shopyourway.com/ should emulate www.herbalife.com/ Link to comment Share on other sites More sharing options...
bargainman Posted March 2, 2013 Share Posted March 2, 2013 A few things. If he's talking about technological transformation, tell me where the techie talent that's going to do this transformation is going to come from? The last time I looked good techie talent was in high demand, and I don't know anyone who's gearing up to go to SHLD. I'm sure he'll be able to find people but they won't be top notch as far as I can tell. With regards to razor thin margins, think WMT and COST, it's possible to be a good company with those margins. I don't see him trying to play this game though. I still think this is primarily a real estate recovery play short term. He's the biggest in appliances. Longer term it's some form of asset monetization and reinvestment. I don't know if that reinvestment in sears and retail or something else. Link to comment Share on other sites More sharing options...
RichardGibbons Posted March 2, 2013 Share Posted March 2, 2013 Walmart could have done this years ago too, they chose to avoid online and will find out that its not so easy to do. Sears hopefully might die while shop your way lives. It very ell could become independent of the retail entity. They could even include other retailers in the platform and do many other things. I'd keep sears on the hope they can manage through the crisis and let other stores fail and some day analysts will say wow, they had it right all along. It's worthwhile noting that Walmart is the combination of Walmart and Amazon. Walmart is certainly a top 5 online retailer. This list says #4: http://www.internetretailer.com/top500/list/ It's also worthwhile to note that Walmart has marketplace, like Amazon and Overstock. So, I think if you're going to look for who combines online and bricks and mortar most effectively now, you probably have to chose between Walmart, Staples, and Office Depot. And if you're talking about general merchandise, there is no answer other than Walmart. Link to comment Share on other sites More sharing options...
Kiltacular Posted March 3, 2013 Share Posted March 3, 2013 Hey that was a great post. +1 Link to comment Share on other sites More sharing options...
Junto Posted March 3, 2013 Share Posted March 3, 2013 If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart. In reality, if it were to be Berkshire like, it would pivot and exit retailing and move cash resources into another more long-term value generating business via acquisition or money management. I think this is what some have been betting on but has not come forth to date. Lampert appears to be sizing up the best way to pull apart the various value drivers of the legacy Sears and Kmart business. He may be on to it now. I own a small position but I can't say I know exactly what the long-term plan is yet from Lampert and certainly don't believe that plan is to keep all its cash resources in the existing business. Link to comment Share on other sites More sharing options...
muscleman Posted March 3, 2013 Share Posted March 3, 2013 I did not read everything (there were great case studies) :( Did someone have the time to download it? I found another copy on Issu.com: http://issuu.com/teee6/docs/baker_street_capital_management They don't allow downloads for this document, but there is always a way ;) http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_1.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_2.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_3.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_4.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_5.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_6.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_7.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_8.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_9.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_10.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_11.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_12.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_13.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_14.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_15.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_16.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_17.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_18.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_19.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_20.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_21.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_22.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_23.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_24.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_25.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_26.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_27.jpg http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_28.jpg hmm. Their performance has been very good, though it is a short track record. From here, it show what it bought is not SHLD, but Sears home town. http://whalewisdom.com/filer/baker-street-capital-management-llc Link to comment Share on other sites More sharing options...
Cardboard Posted March 3, 2013 Share Posted March 3, 2013 I find interesting that Lampert seems to be "blaming" a lot of what has happened to them to online retailing. Also interesting to read that he "claims" to be one of the very few to see the inescapable terminal decline of traditional retail. To my knowledge, traditional retailing has grown since 2006 despite the faster growth seen at online retailing. There are winners and losers and unfortunately, their operation is in the latter category. For all of you who believe that online retailing will be everything in the future then I say good luck. It will represent a big percentage of the pie, but not all of it. It will be big especially for the boring and recurring part of shopping. However, going to the marketplace to find goods has been a human activity since the beginning of times. It is a social activity while shopping online, on your own, is not. It may change with virtual reality, but we are not there yet and I also suspect that the physical activity associated with walking through shops may be seen as a benefit going forward with jobs requiring less and less physical effort. Get out of your tech labs and go to the mall or an outlet mall. Look at the beautiful women hunting around and chatting to each other about this and that. Then you may see the light. What is lacking at Sears is an enjoyable shopping experience and the goods that you are looking for. One thing that I know about Sears since a very long time is to never buy anything that is not at a major discount. The staff will even tell you to come back in a week since the article that you are looking for will sell at 30 or 50% of the current price! What kind of strategy is that? Not only is it inconvenient, it creates a bad reputation. So on that count, I know that the JC Penney strategy of fair prices and better inventory is the right one. It may be too late to reverse the reputation at JC Penney, but I can't see how this is wrong. Regarding investing in the stores, there is a limit to cutting spending on displays that add no value, to no spending at all which makes the stores obsolete and looking like garbage bins to shoppers. He says that he invested selectively, but it is pretty hard for me to see where at supposedly winning stores. The technology push and membership idea are definitely good ones, however I am not sure that it is enough to turn around such massive operation with so many square feet. Anyhow, I would love to hear about your upside target on Sears and HOW it gets there. What is your thesis? By the way, that Lampert or Berkowitz owns it in size does not cut it. He says that he got $1 billion out of 300 closed stores with half of them in the last year. There are 2,500 left. Doing the math, you get $8.3 billion. Add back their cash, substract short term debt and all long term liabilities and you get about $0. If he gets double that amount, then there is $78 left per share. Not even sure if that is realistic considering that they are still bleeding money overall and that there should be a glut of retail space going forward if he is right about online retail. If it is not a liquidation thesis, then is it based on earnings? What is it? Cardboard Link to comment Share on other sites More sharing options...
bargainman Posted March 3, 2013 Share Posted March 3, 2013 In reality, if it were to be Berkshire like, it would pivot and exit retailing and move cash resources into another more long-term value generating business via acquisition or money management. I don't know if 'pivot' is the right word here.. maybe more like 'run off' then 'redirect'? didn't Buffett take 10 years + to wind down/run off the berkshire textile mill? I remember reading recently that he even bought another mill in the process no? Link to comment Share on other sites More sharing options...
finetrader Posted March 3, 2013 Share Posted March 3, 2013 Get out of your tech labs and go to the mall or an outlet mall. Look at the beautiful women hunting around and chatting to each other about this and that. Then you may see the light. Indeed!! And you may find yourself in a position where you want to go and speak to them! Link to comment Share on other sites More sharing options...
bargainman Posted March 3, 2013 Share Posted March 3, 2013 It is a social activity while shopping online, on your own, is not. It may change with virtual reality, but we are not there yet and I also suspect that the physical activity associated with walking through shops may be seen as a benefit going forward with jobs requiring less and less physical effort. Get out of your tech labs and go to the mall or an outlet mall. Look at the beautiful women hunting around and chatting to each other about this and that. Then you may see the light. Cardboard Cardboard, in general I agree with you that this is correct for some segment of the population. I would point out though that in some ways online shopping can be as 'social' or 'community driven'. In fact that's one of the big drivers of amazon. The community reviews. You don't just see a product, you get to see all the reviews of a product. People write stuff up, post pictures with comments, and even do videos. You really don't get that at a real mall. I do believe that both will continue to exist though. in particular I suspect both women and teenagers will keep going to malls. Link to comment Share on other sites More sharing options...
EdWatchesBoxing Posted March 3, 2013 Share Posted March 3, 2013 Checking out the women in malls makes it a less painful visit! Link to comment Share on other sites More sharing options...
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