SHLDQ - Sears Holdings Corp

[wisdom]

http://www.cnbc.com/id/101345697?__source=yahoo%257cfinance%257cheadline%257cheadline%257cstory&par=yahoo&doc=101345697%257cHow+retailers+can+fight+A

 

Staples founder on taking on AMZN.

[adesigar]

What made you so confident? Do you expect some short term catalyst?

 

The catalyst was me being distracted at dinner thinking of SHLD. Wife said Cheers. I heard Sears. Decided it was time to buy more to stop being distracted.

 

Seriously though that anecdote really did happen.

 

Lands End Spin off = $8-12 per share +  Sears Auto - no idea but its not zero + SHLD still holds 51% of Sears Canada = $6-7 per share.

That reduces effective price paid for the rest of SHLD from 36 (Price I bought the shares) to around $17-22 for rest of Sears holdings. I like that price. Put some value on the Sears Auto and its even lesser

 

As a bonus I get the following.

 

1. New member on board of directors from FAIRX could mean FAIRX buying more or Berkowitz providing input to speed up transformation/monetization.

 

2. Lampert said details of how SYW is performing are not visible. In the past he has added more details to annual report. I think 06-07 is when he added Real Estate breakup to Annual report. 2010-2011 he added Guarantor and Non Guarantor details. He also added details of how pension plan will be affected with 1% change in interest rates. I guess more SYW details may be provided soon which explain why SYW and how much going into SYW etc. ESL expected SYW to work in 2013. So make or break year for SYW. If SYW works SHLD may reduce conventional marketing. If SYW doesn't work SHLD could points expense.

 

3. Decrease in Pension liabilities.

 

4. SHLD cant keep claiming $500 million excess depreciation.

 

5. ESL may get more shares from his fund. ESL may buy more shares for personal account. Share buyback for 500 Million is still in place. These seem to happen around now.

 

6. Short interest of approximately 14 Million shares at end of Dec. I would guess its 16 Million or higher now.

 

 

[wisdom]

I would add -

1) ESL being more open - blog, interviews, taking over as CEO - he is getting ready for his coming out party.

2) He has stated he will be simplifying the company so that it is easier to understand. The value should be obvious at that stage.

3) Sales in his hedge fund

[adesigar]

Eddie Lampert said he wanted to be remembered as a businessman. He is now CEO of SHLD.

What are his partners paying him for when ESL Funds are down to just 4 holdings.

It has SHLD, SHOS which is a spinoff, AutoNation and Gap.  Will he wind it down like Buffett did?

 

What is the Feb 27th meeting for? Does SHLD have important news?

 

 

 

 

 

 

[Luke 532]

 

What is the Feb 27th meeting for? Does SHLD have important news?

 

Do you mean this?  Just looks like a plain vanilla conference call.

 

The Company currently plans to release financial results for its fiscal 2013 fourth quarter and full year on or about February 27, 2014, before the market opens and hold an analyst and investor conference call on that date. Instructions for participating in the call will be provided in February in advance of the call.

[sampr01]

Hi Mark

 

If I remember correctly, SHLD didn't have any analyst calls for last 4-5 calls.

 

;)

 

What is the Feb 27th meeting for? Does SHLD have important news?

 

Do you mean this?  Just looks like a plain vanilla conference call.

 

The Company currently plans to release financial results for its fiscal 2013 fourth quarter and full year on or about February 27, 2014, before the market opens and hold an analyst and investor conference call on that date. Instructions for participating in the call will be provided in February in advance of the call.

[alertmeipp]

it has one last May

[Mephistopheles]

1/ Yes - "Or is that cancelled out by an increase in borrowing the same amount before the Christmas season?"  See CFFF 'Increase in short-term borrowings, primarily 90 days or less' Which is a net increase.

 

2/ 1.0B refers to the availability on the facility. "And if they are saying that there is $1 billion outstanding, then why does it show $1.6 in the 10Q?

 

Spin

 

Hey, thanks for your response, but it's still not adding up.

 

1. The short-term borrowings is about the same in Q3 as it was in Q2. And the long term debt is higher by $1 billion, which I presume is the term loan - but that was supposed to be used to pay down the revolver, which it doesn't seem to have happened. And the increase in short-term borrowings of $660 mn happened in the first quarter. So I still don't get why they said they used it to pay down the revolver, when it doesn't seem like anything got paid down.

 

2. So you are saying "borrowings outstanding" means "availability"? Are you sure? I think it means how much debt exists at the moment.

[krazeenyc]

1/ Yes - "Or is that cancelled out by an increase in borrowing the same amount before the Christmas season?"  See CFFF 'Increase in short-term borrowings, primarily 90 days or less' Which is a net increase.

 

2/ 1.0B refers to the availability on the facility. "And if they are saying that there is $1 billion outstanding, then why does it show $1.6 in the 10Q?

 

Spin

 

Hey, thanks for your response, but it's still not adding up.

 

1. The short-term borrowings is about the same in Q3 as it was in Q2. And the long term debt is higher by $1 billion, which I presume is the term loan - but that was supposed to be used to pay down the revolver, which it doesn't seem to have happened. And the increase in short-term borrowings of $660 mn happened in the first quarter. So I still don't get why they said they used it to pay down the revolver, when it doesn't seem like anything got paid down.

 

2. So you are saying "borrowings outstanding" means "availability"? Are you sure? I think it means how much debt exists at the moment.

 

As you probably know during Q3 retailers stock up for Q4. They usually tap their lines of credit to stock up on inventory. So if you look at the end of Q2 2013 they had $7.7B in gross inventory and at the end of Q3 they had $8.9 B in gross inventory. So they tapped their credit to buy inventory, they they took out the term loan to pay that down. 

[spin]

"2. So you are saying "borrowings outstanding" means "availability"? Are you sure? I think it means how much debt exists at the moment."

 

Availability comment was referencing this "As a result, our availability under the Revolving Facility was $1.0 billion at November 2, 2013".

Q3-2013 Availability was 1B and borrowings 1.6B.

 

Regarding your first point, the 1B term went onto the revolver then the redrawn for inventory build.  The Cash-flow number referenced previously is a net number which shows a 675M net increase (CP+Revolver); Inventory increased 1.2B Q2 to Q3 which needed cash to fund it.

 

Q4 ST borrowings = 1094

Q3 ST Borrowings = 1751

CFFF Increase in short-term borrowings, primarily 90 days or less = 657

 

Spin

[alertmeipp]

spin, if you dont mins, are you in Sears or just looking?

[muscleman]

Eddie Lampert said he wanted to be remembered as a businessman. He is now CEO of SHLD.

What are his partners paying him for when ESL Funds are down to just 4 holdings.

It has SHLD, SHOS which is a spinoff, AutoNation and Gap.  Will he wind it down like Buffett did?

 

What is the Feb 27th meeting for? Does SHLD have important news?

 

I am beginning to believe he does not know how to run a retailer. Yes, the stores look like crap and I can live with that, but how about the website that he put his focus on? It is so buggy and uncomfortable to use. If his major investment focus does not work out, then I feel hard to believe that he knows how to run it.

Thoughts?

[alertmeipp]

>>I am beginning to believe he does not know how to run a retailer.

 

Wow, you are late to the game.

[bmichaud]

I just can't get out of my head a separation of SHLD's 68MM SF of core real estate, free and clear of SHLD's retail disaster.

 

In a recent PM swap, a fellow poster suggested SHLD should be viewed as a RE development play, and thus valued as such.

 

So instead of a GGP/SPG-like $250/SF, perhaps $150/SF? Say it costs $50/SF to redevelop the core RE, that's an equity value of $100/SF or ~$64 per share. At worst, say the SpinCo trades at $50/SF, that's $32 per share, just below the current market cap.

 

Depending on the direction Lampert takes, the total fair value is highly dynamic, but again it just seems like it's tough to permanently impair capital here.

[muscleman]

>>I am beginning to believe he does not know how to run a retailer.

 

Wow, you are late to the game.

 

Well, I used to believe that he KNOWS how to run a retailer, because most of his investment success were in the retail sector. But it seems like he is probably not good at the day to day nuances of hands down management.

[adesigar]

>>I am beginning to believe he does not know how to run a retailer.

 

Wow, you are late to the game.

 

Well, I used to believe that he KNOWS how to run a retailer, because most of his investment success were in the retail sector. But it seems like he is probably not good at the day to day nuances of hands down management.

 

From what I recall of his investment history. I think his investment successes were Retail, Technology and Financials. Perfect match for his vision of SHLD.

[Luke 532]

From what I recall of his investment history. I think his investment successes were Retail, Technology and Financials. Perfect match for his vision of SHLD.

 

That's a good point.

[alertmeipp]

From what I recall of his investment history. I think his investment successes were Retail, Technology and Financials. Perfect match for his vision of SHLD.

 

That's a good point.

 

Well, if he turns out to be a retail gurus, that's just the icing on the cake. Market is assuming he will burn all RE value over time with his retail strategy.

[saltybit]

Lampert's Lemon and Lemman's Lemonade (from The Odd Lot)

 

http://oddlotinvest.wordpress.com/2014/01/11/lamperts-lemon-and-lemmans-lemonade-the-difference-between-value-creation-and-destruction/

[Mephistopheles]

"2. So you are saying "borrowings outstanding" means "availability"? Are you sure? I think it means how much debt exists at the moment."

 

Availability comment was referencing this "As a result, our availability under the Revolving Facility was $1.0 billion at November 2, 2013".

Q3-2013 Availability was 1B and borrowings 1.6B.

 

Regarding your first point, the 1B term went onto the revolver then the redrawn for inventory build.  The Cash-flow number referenced previously is a net number which shows a 675M net increase (CP+Revolver); Inventory increased 1.2B Q2 to Q3 which needed cash to fund it.

 

Q4 ST borrowings = 1094

Q3 ST Borrowings = 1751

CFFF Increase in short-term borrowings, primarily 90 days or less = 657

 

Spin

 

Hey thanks for your reply, I think I understand it now.

[Mephistopheles]

I am looking through the guarantor/non-guarantor structure, and trying to estimate what KCD earns.

 

According to exhibit 21 from the 10-k (http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm), the non-guarantor subsidiaries are:

 

Sears Holdings Global Sourcing

Sears Reinsurance

Sears Canada

Sears Financial Holding Corporation

Sears Brands LLC - KCD IP

SRC Depositor Corporation

SRC O.P. Corporation - SRC Facilities Statutory Trust No. 2003-A - SRC Real Estate Holdings (TX), SRC Real Estate (TX) (REMIC related subsidiaries)

 

According to the last 10-K, the non-guarantor subsidiaries had $8 billion in sales and $446 million in net income.

 

As we know, the REMIC subsidiaries earn lease income from 125 stores, and KCD IP earns royalty income on KCD products. And we also know that Sears Re owns MBS and ABS on these income streams.

 

Sears Re owns $1.25 billion in securities issued by the REMIC from which they get paid through the lease income. So if the 125 stores are valued at $1.25 billion, then at a cap rate of say 8%, the lease income is $100 million. Is this a good way to approach it?

 

Sears Canada earned C$101 million in 2012 (CAD and USD were about the same last year when these figures were released).

 

So if we subtract $100 million in leases and $100 million in SCC net income from $446, we get $246 million in income from the other non-guarantors, including KCD, and the insurance operations of Sears Re. Does anyone know what the other non-guarantors may earn, or is it safe to say that a good chunk of that $246 million belongs to KCD? If we assume $200 million in income for KCD, then at a 10x multiple that is 1/2 of the current market cap, or $2 billion. This is fairly close to the ABS value of $1.8 billion.

 

I also noticed that operating cash flow for the non-guarantors was $1 billion in 2012. If we take out $100 or even $200 million for lease income, that is still a lot of cash being produced by the non-guarantors, which I believe don't include any of the real estate besides those 125 stores (and SCC stores). If the bulk of the value of the non-guarantors include only 125 domestic stores, SCC stores, SCC, and KCD, then it makes SHLD a screaming buy.

 

Thoughts?

[Luke 532]

New Lampert post today.  He sure is being more talkative in the past month.

 

http://blog.searsholdings.com/eddie-lampert/are-the-new-ideas-about-how-retail-is-changing-really-new/

Are the new ideas about how retail is changing really new?

 

I find it interesting all in the span of a month or so that he has created his personal blog, the SHC blog, did a press release on King of Prussia (hasn't done press releases like that before) and included a link to SHCRealty in that release (don't think they've linked to it before), etc.  He is definitely making major changes in terms of holding his cards close to the chest.  Perhaps all the table cards are down, he likes what he saw on the flop, the turn and the river, and he's ready to show that he has a nuts straight when nobody expected it?

 

[bmichaud]

Oh Eddie, your're so brilliant. Your words are so dreamy  :-*

 

STFU, sell some real estate and unlock the value once and for all.

[JAllen]

Comments from CBL regarding JCP store closures:

 

 

http://www.snl.com/irweblinkx/file.aspx?IID=103092&FID=21641144

 

 

“One of our most attractive investments coming out of the recession has been to improve the performance of our properties through redeveloping underperforming anchor locations. The opportunities created by the four JCPenney closures announced today fit perfectly with that objective,” said Stephen Lebovitz, president & CEO. “While we have been encouraged by JCPenney’s recent improvements in sales and traffic, we have been anticipating certain store closures to occur. As we said in our most recent earnings call, we have been proactively engaging in discussions and gauging retail demand with this in mind and are pleased to announce strong interest for the locations expected to close in 2014. Our next steps will be to move forward with negotiations with retailers and finalize redevelopment plans. Once leases are signed, we will share specific retail names joining each mall, as well as construction and opening timelines. The list of retailers interested in these specific locations includes sporting goods, arts and crafts and other box retailers, as well as a traditional department store for one location, all of which will enhance the performance of the malls overall.”

[JAllen]

Comments from CBL regarding JCP store closures:

 

 

http://www.snl.com/irweblinkx/file.aspx?IID=103092&FID=21641144

 

 

“One of our most attractive investments coming out of the recession has been to improve the performance of our properties through redeveloping underperforming anchor locations. The opportunities created by the four JCPenney closures announced today fit perfectly with that objective,” said Stephen Lebovitz, president & CEO. “While we have been encouraged by JCPenney’s recent improvements in sales and traffic, we have been anticipating certain store closures to occur. As we said in our most recent earnings call, we have been proactively engaging in discussions and gauging retail demand with this in mind and are pleased to announce strong interest for the locations expected to close in 2014. Our next steps will be to move forward with negotiations with retailers and finalize redevelopment plans. Once leases are signed, we will share specific retail names joining each mall, as well as construction and opening timelines. The list of retailers interested in these specific locations includes sporting goods, arts and crafts and other box retailers, as well as a traditional department store for one location, all of which will enhance the performance of the malls overall.”

 

 

Another from that PR: "Today, other than locations under redevelopment, CBL has no vacant anchor locations in its core portfolio.[/size] "