adesigar Posted February 7, 2014 Share Posted February 7, 2014 For the cost conscious, notice that eblontech seems to be in India where you pay much less for engineers. …and they have outsourced their social media strategy to Africa: https://www.facebook.com/eblon Yes, that is the Facebook profile eblontech.com links to. The Twitter link goes to their website hosting provider. LOL copy paste error. Link to comment Share on other sites More sharing options...
adesigar Posted February 7, 2014 Share Posted February 7, 2014 Sorry if this has been linked before. More digging turned up http://kitchenandplumbing.com/ and a lot of trademarks http://www.trademarkia.com/company-sears-brands-llc-1087736-page-1-2 which let me to a few other minor sites sears owns eg http://www.nuestragente.com http://studioone.com/content/sears-launches-digital-lifestyle-resource-latina-women-nuestra-gente-reimagines-former-print Link to comment Share on other sites More sharing options...
DCG Posted February 7, 2014 Share Posted February 7, 2014 I reiterate my earlier statement that this is probably the most unfocused large company I've ever seen. I have pretty much zero faith in Lampert's ability to run this company. Link to comment Share on other sites More sharing options...
merkhet Posted February 7, 2014 Share Posted February 7, 2014 Just another anecdote on Sears & SYW. I ordered something off SYW on Wednesday that was normally $99.99 and marked down to $89.99. On top of that discount, I used my SYW points and a random SYW Surprise Redemption Offer of 4,000 points or $4.00. Oh, and I received double SYW points. My guess remains that SYW runs at a higher than 1% rate when you take into account all of the various promotions that they run. Additionally, they indicated that my order would be delivered by February 11th, but it turns out that it's actually being delivered today and shipped from Rhode Island to Connecticut. I was pretty happy about this until I realized that it might be an effect of "under-promise" and "over-deliver." Actually, still pretty happy that it's coming early, but just wondering how much of it was a calculated behavioral effect. Link to comment Share on other sites More sharing options...
Luke 532 Posted February 7, 2014 Share Posted February 7, 2014 The big drop in 2013 was because of the SHOS spin off, no? Yes, the "specialty" stores. Link to comment Share on other sites More sharing options...
oddballstocks Posted February 7, 2014 Share Posted February 7, 2014 We were at the mall last night and decided to look at Sears to see what clothes they had. It was an interesting experience to say the least. Clearly anecdotal evidence isn't anything to base decisions off of, but it's worth knowing. We were at Ross Park Mall in Pittsburgh, a very nice mall with an average amount of traffic last night. Sears was empty, in the 20+m we were in there I saw one person enter the store. We were in an area upstairs where I could see all the entrances. The clothes were marked down a lot, everything was marked down 25% with an additional 50% off. Even still the prices were on the higher side, not unreasonably high, but at the point where unless the item was something I loved I wouldn't purchase it. As someone posted above they need to get someone from upper management to walk around these stores. Next to the suits there was a rack of RC cars and fake mustaches. There were a number of empty clothes racks and shelves in strange places. In the Lands End section there was a huge storage rack, like one you'd buy at Home Depot just sitting in the middle of the floor with some clothes tossed on it. The Lands End clothes were nice, the mens clothes were classic fits, v-necks etc. The non-Lands End clothes seem to be targeting larger customers, there were no pants in any sizes smaller than 36-38. This isn't surprising, Kmart offers a big selection of large sizes as well. The women's clothes really missed the mark for my wife. The fit on the clothes was "frumpy" and "out of date." My wife doesn't know squat about Sears or investing, she offered some fascinating comments. As we left she said it was a shame Sears purchased Lands End because she felt they went downhill with the purchase. Now maybe with the spinoff this will be rectified, maybe they will hire designers who will spruce up their clothes. It's not to say their clothes don't have a target market. My mother-in-law likes their style, she's in her mid-late 60s. Maybe Lands End is targeting the retiree/boomer crowd which in some ways might be savvy. They have more money to spend and their style's change much slower. I have no idea if the Sears real estate has any value in this mall. If it did they really missed their chance, Nordstrom wanted to move into the mall, so they just destroyed some of the parking lot and expanded the mall. Too bad Sears couldn't sell out of their store to Nordstrom. My last thought is this. I enjoyed going to the store because it was nostalgic. It reminded me of shopping at Sears and Kmart in the late 1980s and early 1990s with my parents growing up. A lot of the packaging was still older, and the store just had a feel that they were last updated in 1992. There are a lot of people who are resistant to change, seniors especially who seem to be their target market. Maybe our store is just a bad example or something, and maybe the rest of the Sears locations are packed, I don't know. The question I was thinking yesterday was this. Everyone is attached to this slow liquidation real estate thesis on Sears. I wonder if their retail segment turned around and they started to make money on it would they continue this real estate repurpose strategy, or would they retrench and focus on their retail operations again? Link to comment Share on other sites More sharing options...
peridotcapital Posted February 7, 2014 Share Posted February 7, 2014 We were at the mall last night and decided to look at Sears to see what clothes they had. It was an interesting experience to say the least. Clearly anecdotal evidence isn't anything to base decisions off of, but it's worth knowing. We were at Ross Park Mall in Pittsburgh, a very nice mall with an average amount of traffic last night. Sears was empty, in the 20+m we were in there I saw one person enter the store. We were in an area upstairs where I could see all the entrances. The clothes were marked down a lot, everything was marked down 25% with an additional 50% off. Even still the prices were on the higher side, not unreasonably high, but at the point where unless the item was something I loved I wouldn't purchase it. As someone posted above they need to get someone from upper management to walk around these stores. Next to the suits there was a rack of RC cars and fake mustaches. There were a number of empty clothes racks and shelves in strange places. In the Lands End section there was a huge storage rack, like one you'd buy at Home Depot just sitting in the middle of the floor with some clothes tossed on it. The Lands End clothes were nice, the mens clothes were classic fits, v-necks etc. The non-Lands End clothes seem to be targeting larger customers, there were no pants in any sizes smaller than 36-38. This isn't surprising, Kmart offers a big selection of large sizes as well. The women's clothes really missed the mark for my wife. The fit on the clothes was "frumpy" and "out of date." My wife doesn't know squat about Sears or investing, she offered some fascinating comments. As we left she said it was a shame Sears purchased Lands End because she felt they went downhill with the purchase. Now maybe with the spinoff this will be rectified, maybe they will hire designers who will spruce up their clothes. It's not to say their clothes don't have a target market. My mother-in-law likes their style, she's in her mid-late 60s. Maybe Lands End is targeting the retiree/boomer crowd which in some ways might be savvy. They have more money to spend and their style's change much slower. I have no idea if the Sears real estate has any value in this mall. If it did they really missed their chance, Nordstrom wanted to move into the mall, so they just destroyed some of the parking lot and expanded the mall. Too bad Sears couldn't sell out of their store to Nordstrom. My last thought is this. I enjoyed going to the store because it was nostalgic. It reminded me of shopping at Sears and Kmart in the late 1980s and early 1990s with my parents growing up. A lot of the packaging was still older, and the store just had a feel that they were last updated in 1992. There are a lot of people who are resistant to change, seniors especially who seem to be their target market. Maybe our store is just a bad example or something, and maybe the rest of the Sears locations are packed, I don't know. The question I was thinking yesterday was this. Everyone is attached to this slow liquidation real estate thesis on Sears. I wonder if their retail segment turned around and they started to make money on it would they continue this real estate repurpose strategy, or would they retrench and focus on their retail operations again? The best part about Ross Park Mall for Sears is that they own their box. It's a Simon property and probably among the nicest malls in the Pittsburgh metropolitan area (I lived there from 2008-2012). They could definitely find subleasors if they wanted to. Link to comment Share on other sites More sharing options...
oddballstocks Posted February 7, 2014 Share Posted February 7, 2014 We were at the mall last night and decided to look at Sears to see what clothes they had. It was an interesting experience to say the least. Clearly anecdotal evidence isn't anything to base decisions off of, but it's worth knowing. We were at Ross Park Mall in Pittsburgh, a very nice mall with an average amount of traffic last night. Sears was empty, in the 20+m we were in there I saw one person enter the store. We were in an area upstairs where I could see all the entrances. The clothes were marked down a lot, everything was marked down 25% with an additional 50% off. Even still the prices were on the higher side, not unreasonably high, but at the point where unless the item was something I loved I wouldn't purchase it. As someone posted above they need to get someone from upper management to walk around these stores. Next to the suits there was a rack of RC cars and fake mustaches. There were a number of empty clothes racks and shelves in strange places. In the Lands End section there was a huge storage rack, like one you'd buy at Home Depot just sitting in the middle of the floor with some clothes tossed on it. The Lands End clothes were nice, the mens clothes were classic fits, v-necks etc. The non-Lands End clothes seem to be targeting larger customers, there were no pants in any sizes smaller than 36-38. This isn't surprising, Kmart offers a big selection of large sizes as well. The women's clothes really missed the mark for my wife. The fit on the clothes was "frumpy" and "out of date." My wife doesn't know squat about Sears or investing, she offered some fascinating comments. As we left she said it was a shame Sears purchased Lands End because she felt they went downhill with the purchase. Now maybe with the spinoff this will be rectified, maybe they will hire designers who will spruce up their clothes. It's not to say their clothes don't have a target market. My mother-in-law likes their style, she's in her mid-late 60s. Maybe Lands End is targeting the retiree/boomer crowd which in some ways might be savvy. They have more money to spend and their style's change much slower. I have no idea if the Sears real estate has any value in this mall. If it did they really missed their chance, Nordstrom wanted to move into the mall, so they just destroyed some of the parking lot and expanded the mall. Too bad Sears couldn't sell out of their store to Nordstrom. My last thought is this. I enjoyed going to the store because it was nostalgic. It reminded me of shopping at Sears and Kmart in the late 1980s and early 1990s with my parents growing up. A lot of the packaging was still older, and the store just had a feel that they were last updated in 1992. There are a lot of people who are resistant to change, seniors especially who seem to be their target market. Maybe our store is just a bad example or something, and maybe the rest of the Sears locations are packed, I don't know. The question I was thinking yesterday was this. Everyone is attached to this slow liquidation real estate thesis on Sears. I wonder if their retail segment turned around and they started to make money on it would they continue this real estate repurpose strategy, or would they retrench and focus on their retail operations again? The best part about Ross Park Mall for Sears is that they own their box. It's a Simon property and probably among the nicest malls in the Pittsburgh metropolitan area (I lived there from 2008-2012). They could definitely find subleasors if they wanted to. Agreed on the location, it's definitely the nicest mall in the area. Ross Park has been upscaling over the past few years, if Sears wanted out I'm sure they could find someone. I had a realization after typing this. I wonder if Sears' strategy is to be a baby boomer, retiree store? If so it might be genius. Most retailers are targeting a younger segment of the population, there aren't many retailers specifically targeting boomers. A few that do like Coldwater Creek and Chicos seem to be doing well. There's a lot of mindshare with the 50-60+ segment for Sears as well. Link to comment Share on other sites More sharing options...
Luke 532 Posted February 7, 2014 Share Posted February 7, 2014 The question I was thinking yesterday was this. Everyone is attached to this slow liquidation real estate thesis on Sears. I wonder if their retail segment turned around and they started to make money on it would they continue this real estate repurpose strategy, or would they retrench and focus on their retail operations again? I think so, yes. If results today were good, yet Lampert believes the landscape for retail is changing, I would think he would still be making moves to put SHLD in the best position for the future. Those moves would likely include a smaller footprint, leasing some space, redeveloping some space, and so on. Link to comment Share on other sites More sharing options...
krazeenyc Posted February 7, 2014 Share Posted February 7, 2014 The bears think Eddie Lampert has no clue. They assume that he doesn't understand that underinvesting in your stores will lead to decreased sales. They additionally assume he's burning all the quality assets and putting it towards Shop Your Way or some other insane idea. Additionally, they think he doesn't understand finance and the retail business and at the pace Sears and Kmart are going they'll be insolvent in 3 years. Eddie has said all along that he does not intend to throw good money after bad. That means that he understands that a lot of the Sears and Kmart stores are hopeless wrecks and he's going to spend $0.00 on them. ESL made this statement years ago -- he knew and knows many of these stores are hopeless (he's not clueless). In some cases stores that were going to close soon did not even carry ANY apparel (a business that has been pretty good for SHLD over the past couple years). As a long term owner operator he is not incentivized like other CEOs to improve the short term metrics. For example when a Macys closes it does not liquidate -- it simply moves the inventory to other locations (very little GAAP losses). Sears is trying to right size the company (decreased store count, decrease store size, and decrease inventory need). When it closes a store it liquidates all the inventory -- this gives SHLD cash flow, but GAAP losses and negative Ebitda -- these losses are GOOD for SHLD. Sears does, however selectively improve stores (especially owned/LT leased locations) after they find high quality tenants. For example, we all know that in Greensboro NC the Sears cut out 34,000 sq ft of its location to lease space to a Whole Foods. In addition to putting in the Whole Foods, they renovated their own space. Guess what, even though that store is now 115,000 sq ft instead of 160,000 sq ft they have actually INCREASED TOTAL sales in that store. I think Eddie Lampert knows the importance of spending to improve your stores he knows which ones are worth the effort and which ones are not. Will this phenomenon occur in OakBrook where a PB Kids, PB Teen and West Elm were all built in a Sears? I know everyone is so unhappy about SYW. SYW is both a tool to push more business online, but I think it's actually designed to save SHLD money over the longer term. As recently as 2011, SHLD was spending $1.5 Billion annually on traditional marketing. Eddie has made it clear that he plans to greatly reduce traditional marketing and replace it with SYW. My expectation is that SYW will be a money saving tool for Sears. Finally, I am betting that Eddie Lampert has a much better knowledge of SHLD's financial condition than Mr. Sozzi or Gary Balter. I trust Eddie Lampert's financial acumen. Also based on my research there are many more lease deals being signed than are being publicized/discussed. For the large majority of the deals, they're not issuing press releases or publicizing them. FWIW I've been accumulating more SHLD shares -- and my position is now around 6%. Link to comment Share on other sites More sharing options...
JSArbitrage Posted February 7, 2014 Share Posted February 7, 2014 The bears think Eddie Lampert has no clue. They assume that he doesn't understand that underinvesting in your stores will lead to decreased sales. They additionally assume he's burning all the quality assets and putting it towards Shop Your Way or some other insane idea. Additionally, they think he doesn't understand finance and the retail business and at the pace Sears and Kmart are going they'll be insolvent in 3 years. Oh Jesus. Link to comment Share on other sites More sharing options...
Luke 532 Posted February 7, 2014 Share Posted February 7, 2014 Also based on my research there are many more lease deals being signed than are being publicized/discussed. For the large majority of the deals, they're not issuing press releases or publicizing them. Care to share what you've found? :) Link to comment Share on other sites More sharing options...
krazeenyc Posted February 7, 2014 Share Posted February 7, 2014 Also based on my research there are many more lease deals being signed than are being publicized/discussed. For the large majority of the deals, they're not issuing press releases or publicizing them. Care to share what you've found? :) No (srry). Link to comment Share on other sites More sharing options...
bmichaud Posted February 7, 2014 Share Posted February 7, 2014 I'm sure most here have seen this article, but I found it beyond disturbing if true... http://www.businessweek.com/articles/2013-07-11/at-sears-eddie-lamperts-warring-divisions-model-adds-to-the-troubles If true, the only thing guarding against this *supposed* egomaniac driving SHLD into the ground is his substantial personal stake in the equity, which I assume he would ultimately want to maximize... Link to comment Share on other sites More sharing options...
Luke 532 Posted February 7, 2014 Share Posted February 7, 2014 I'm sure most here have seen this article, but I found it beyond disturbing if true... http://www.businessweek.com/articles/2013-07-11/at-sears-eddie-lamperts-warring-divisions-model-adds-to-the-troubles If true, the only thing guarding against this *supposed* egomaniac driving SHLD into the ground is his substantial personal stake in the equity, which I assume he would ultimately want to maximize... That was published awhile back. This entire article screams to me that these moves were not intended to improve the retailer Sears as it currently stands, it screams to me that Lampert wanted to break up the company into smaller pieces so he could get clean information from each division and figure out what he wants to do with each division. Decentralization. Link to comment Share on other sites More sharing options...
adesigar Posted February 7, 2014 Share Posted February 7, 2014 I'm sure most here have seen this article, but I found it beyond disturbing if true... http://www.businessweek.com/articles/2013-07-11/at-sears-eddie-lamperts-warring-divisions-model-adds-to-the-troubles If true, the only thing guarding against this *supposed* egomaniac driving SHLD into the ground is his substantial personal stake in the equity, which I assume he would ultimately want to maximize... Like I said two pages ago about this article. I don't agree with BusinessWeek that its a bad thing. What Lampert did makes sense to me. I think that since Sears is such an old company they probably have a ton of divisions in house. So each division needs to show that they can match or beat having the work handed off to a specialized company. Sears Canada just cut a ton of jobs and handed the work off to IBM. Makes no sense to have things in-house when a specialized firm could do it better and cheaper. Lampert would need the warring divisions model to figure out what to keep in house vs. hand off to an outside company. Short Term pain -> Long Term Gain. Another advantage is if they have a division that performs better than what's available in the market they can expand/monetize it and make it a profit center. Link to comment Share on other sites More sharing options...
bmichaud Posted February 7, 2014 Share Posted February 7, 2014 Creating a board of directors/CEO/CFO for 30 different divisions at first blush appears bizarre. So bizarre in fact that I almost have a tough time believing it. It just makes it seem like he's flailing. But who knows. Link to comment Share on other sites More sharing options...
gg Posted February 7, 2014 Share Posted February 7, 2014 I'm sure most here have seen this article, but I found it beyond disturbing if true... http://www.businessweek.com/articles/2013-07-11/at-sears-eddie-lamperts-warring-divisions-model-adds-to-the-troubles If true, the only thing guarding against this *supposed* egomaniac driving SHLD into the ground is his substantial personal stake in the equity, which I assume he would ultimately want to maximize... That was published awhile back. This entire article screams to me that these moves were not intended to improve the retailer Sears as it currently stands, it screams to me that Lampert wanted to break up the company into smaller pieces so he could get clean information from each division and figure out what he wants to do with each division. Decentralization. At the end of the day, as Oddball and others in the past have pointed out, the stores are not being run to produce top revenue per store. Part of that is because Lampert does not need to impress the street with better SSS numbers each quarter, and part of that is because the company is in massive transition. The BusinessWeek article clearly wanted to paint a picture of warring divisions, with an evil General Lampert calling the shots from his desk in sunny Florida. Is he doing a perfect job? Certainly not. But if you look at all his actions from the lens of "Long term, get SHLD to become a reasonably profitable retailer with a smaller footprint, and sell off the valuable, excess assets that are not needed for this end goal" then I don't think you can really fault him for his work in recent years. In fact, seeing the divisions fight each other for part of the budget is what should be happening at a lot more large companies, and having the hedge fund / Portfolio Manager attitude is really a fantastic thing. Ultimately, he wants each of the SHLD sub-businesses to be able to stand on their own, and with his use of spin-offs with Lands End, SHOS, Sears Canada, etc, its not simply a theoretical activity. Any business that has merit and value and would create long term shareholder value by being spun-off, likely will be spun off... Capitalism is not meant to make every SHLD executive feel giddy about each micro-decision and presentation to their company's CEO, but when you bring completely rational decision making (which I think is Lampert's goal) as opposed to just being a career retailer who thinks you need to increase SSS at expense of long term shareholder value, you at least have a chance of not ending up like all the other failed retailers. I have no insight or opinion on whether Lampert's retail strategy will prove successful, but to me, it seems like the Lampert haters would rather see SHLD fail conventionally than succeed unconventionally. It reminds me of the book Moneyball, how all the scouts thought Billy Beane was dumb for caring more about statistics than the 'look' of the players. Ultimately the analysts, or scouts, are looking at SHLD and incorrectly judging them with the same valuation methods they use for other, asset-lite and healthier retailers like JCrew (valuation based on EBITDA, times a multiple tied to recent SSS trends). Everyone knows and agrees that SHLD isn't going to be driving long term shareholder value because it can sell refrigerators and sweaters in 200,000 sqft super centers better than walmart. It can't compete there. But if it can find a way to focus on a specific subset of customers and it can profitably sell them goods in a 20,000 sqft location (maybe through SYW loyalty as a component), and monetize the other 180,000 sqft, then there might be value here that exceeds the market cap. All that to say anecdotal stories from the BusinessWeek article, or Brian Sozzi's visits to Sears with pictures uploaded to twitter, are mostly irrelevant. /end rant Link to comment Share on other sites More sharing options...
adesigar Posted February 7, 2014 Share Posted February 7, 2014 The bears think Eddie Lampert has no clue. They assume that he doesn't understand that underinvesting in your stores will lead to decreased sales. They additionally assume he's burning all the quality assets and putting it towards Shop Your Way or some other insane idea. Additionally, they think he doesn't understand finance and the retail business and at the pace Sears and Kmart are going they'll be insolvent in 3 years. Eddie has said all along that he does not intend to throw good money after bad. That means that he understands that a lot of the Sears and Kmart stores are hopeless wrecks and he's going to spend $0.00 on them. ESL made this statement years ago -- he knew and knows many of these stores are hopeless (he's not clueless). In some cases stores that were going to close soon did not even carry ANY apparel (a business that has been pretty good for SHLD over the past couple years). As a long term owner operator he is not incentivized like other CEOs to improve the short term metrics. For example when a Macys closes it does not liquidate -- it simply moves the inventory to other locations (very little GAAP losses). Sears is trying to right size the company (decreased store count, decrease store size, and decrease inventory need). When it closes a store it liquidates all the inventory -- this gives SHLD cash flow, but GAAP losses and negative Ebitda -- these losses are GOOD for SHLD. Sears does, however selectively improve stores (especially owned/LT leased locations) after they find high quality tenants. For example, we all know that in Greensboro NC the Sears cut out 34,000 sq ft of its location to lease space to a Whole Foods. In addition to putting in the Whole Foods, they renovated their own space. Guess what, even though that store is now 115,000 sq ft instead of 160,000 sq ft they have actually INCREASED TOTAL sales in that store. I think Eddie Lampert knows the importance of spending to improve your stores he knows which ones are worth the effort and which ones are not. Will this phenomenon occur in OakBrook where a PB Kids, PB Teen and West Elm were all built in a Sears? I know everyone is so unhappy about SYW. SYW is both a tool to push more business online, but I think it's actually designed to save SHLD money over the longer term. As recently as 2011, SHLD was spending $1.5 Billion annually on traditional marketing. Eddie has made it clear that he plans to greatly reduce traditional marketing and replace it with SYW. My expectation is that SYW will be a money saving tool for Sears. Finally, I am betting that Eddie Lampert has a much better knowledge of SHLD's financial condition than Mr. Sozzi or Gary Balter. I trust Eddie Lampert's financial acumen. Also based on my research there are many more lease deals being signed than are being publicized/discussed. For the large majority of the deals, they're not issuing press releases or publicizing them. FWIW I've been accumulating more SHLD shares -- and my position is now around 6%. 100% agree about Eddie Lampert. I believe he knows every little detail about the company. He has a vision and a direction for the company. He is also very secretive and wants us to trust him to make the right decision. I remember an article from 2006 which said he was so secretive he wouldn't even tell his biggest hedge fund investors where he had invested their money. My only concern is the "getting hit by a bus" effect. All the knowledge, plans and info about the moving parts are with Eddie Lampert. I hope its all documented and not in his head or I hope the company has a insurance policy for a few billion dollars. But I am happy about the negative press and bears. Gives me more time to increase position. I'm hoping for sub $30 (can dream of sub $25) around the annual results. btw Who is Mr. Sozzi or Gary Balter? Link to comment Share on other sites More sharing options...
Luke 532 Posted February 7, 2014 Share Posted February 7, 2014 It reminds me of the book Moneyball, how all the scouts thought Billy Beane was dumb for caring more about statistics than the 'look' of the players. Lampert and DePodesta likely view things the way you have explained it. http://www.searsholdings.com/pubrel/pressOne.jsp?id=s16310_item136236 Link to comment Share on other sites More sharing options...
heth247 Posted February 7, 2014 Share Posted February 7, 2014 The bears think Eddie Lampert has no clue. They assume that he doesn't understand that underinvesting in your stores will lead to decreased sales. They additionally assume he's burning all the quality assets and putting it towards Shop Your Way or some other insane idea. Additionally, they think he doesn't understand finance and the retail business and at the pace Sears and Kmart are going they'll be insolvent in 3 years. Eddie has said all along that he does not intend to throw good money after bad. That means that he understands that a lot of the Sears and Kmart stores are hopeless wrecks and he's going to spend $0.00 on them. ESL made this statement years ago -- he knew and knows many of these stores are hopeless (he's not clueless). In some cases stores that were going to close soon did not even carry ANY apparel (a business that has been pretty good for SHLD over the past couple years). As a long term owner operator he is not incentivized like other CEOs to improve the short term metrics. For example when a Macys closes it does not liquidate -- it simply moves the inventory to other locations (very little GAAP losses). Sears is trying to right size the company (decreased store count, decrease store size, and decrease inventory need). When it closes a store it liquidates all the inventory -- this gives SHLD cash flow, but GAAP losses and negative Ebitda -- these losses are GOOD for SHLD. Sears does, however selectively improve stores (especially owned/LT leased locations) after they find high quality tenants. For example, we all know that in Greensboro NC the Sears cut out 34,000 sq ft of its location to lease space to a Whole Foods. In addition to putting in the Whole Foods, they renovated their own space. Guess what, even though that store is now 115,000 sq ft instead of 160,000 sq ft they have actually INCREASED TOTAL sales in that store. I think Eddie Lampert knows the importance of spending to improve your stores he knows which ones are worth the effort and which ones are not. Will this phenomenon occur in OakBrook where a PB Kids, PB Teen and West Elm were all built in a Sears? I know everyone is so unhappy about SYW. SYW is both a tool to push more business online, but I think it's actually designed to save SHLD money over the longer term. As recently as 2011, SHLD was spending $1.5 Billion annually on traditional marketing. Eddie has made it clear that he plans to greatly reduce traditional marketing and replace it with SYW. My expectation is that SYW will be a money saving tool for Sears. Finally, I am betting that Eddie Lampert has a much better knowledge of SHLD's financial condition than Mr. Sozzi or Gary Balter. I trust Eddie Lampert's financial acumen. Also based on my research there are many more lease deals being signed than are being publicized/discussed. For the large majority of the deals, they're not issuing press releases or publicizing them. FWIW I've been accumulating more SHLD shares -- and my position is now around 6%. Well said, Krazeenyc. In three years, lets say 1. Sears closed another 300 store to further reduced physical footprint + SGA 2. Pension contribution goes down to zero. 3. SYW ramp up to 85%~90% sales so they cut traditional promotion in half or more. Wouldn't Sears be able to do 700m~1bn EBITDA? This does not even factor in any RE monetizing income. Link to comment Share on other sites More sharing options...
Kraven Posted February 7, 2014 Share Posted February 7, 2014 We were at the mall last night and decided to look at Sears to see what clothes they had. It was an interesting experience to say the least. Clearly anecdotal evidence isn't anything to base decisions off of, but it's worth knowing. We were at Ross Park Mall in Pittsburgh, a very nice mall with an average amount of traffic last night. Sears was empty, in the 20+m we were in there I saw one person enter the store. We were in an area upstairs where I could see all the entrances. The clothes were marked down a lot, everything was marked down 25% with an additional 50% off. Even still the prices were on the higher side, not unreasonably high, but at the point where unless the item was something I loved I wouldn't purchase it. As someone posted above they need to get someone from upper management to walk around these stores. Next to the suits there was a rack of RC cars and fake mustaches. There were a number of empty clothes racks and shelves in strange places. In the Lands End section there was a huge storage rack, like one you'd buy at Home Depot just sitting in the middle of the floor with some clothes tossed on it. The Lands End clothes were nice, the mens clothes were classic fits, v-necks etc. The non-Lands End clothes seem to be targeting larger customers, there were no pants in any sizes smaller than 36-38. This isn't surprising, Kmart offers a big selection of large sizes as well. The women's clothes really missed the mark for my wife. The fit on the clothes was "frumpy" and "out of date." My wife doesn't know squat about Sears or investing, she offered some fascinating comments. As we left she said it was a shame Sears purchased Lands End because she felt they went downhill with the purchase. Now maybe with the spinoff this will be rectified, maybe they will hire designers who will spruce up their clothes. It's not to say their clothes don't have a target market. My mother-in-law likes their style, she's in her mid-late 60s. Maybe Lands End is targeting the retiree/boomer crowd which in some ways might be savvy. They have more money to spend and their style's change much slower. I have no idea if the Sears real estate has any value in this mall. If it did they really missed their chance, Nordstrom wanted to move into the mall, so they just destroyed some of the parking lot and expanded the mall. Too bad Sears couldn't sell out of their store to Nordstrom. My last thought is this. I enjoyed going to the store because it was nostalgic. It reminded me of shopping at Sears and Kmart in the late 1980s and early 1990s with my parents growing up. A lot of the packaging was still older, and the store just had a feel that they were last updated in 1992. There are a lot of people who are resistant to change, seniors especially who seem to be their target market. Maybe our store is just a bad example or something, and maybe the rest of the Sears locations are packed, I don't know. The question I was thinking yesterday was this. Everyone is attached to this slow liquidation real estate thesis on Sears. I wonder if their retail segment turned around and they started to make money on it would they continue this real estate repurpose strategy, or would they retrench and focus on their retail operations again? Oddball, I am getting the sense that you just don't get what's going on here. Not everyone can have a well organized store with things people want to buy. Did you ever see the old yellow pages commercial for "Arnold's Rug"? It was a rug store owned by Arnold and there was only one rug (thus, Arnold's Rug, not Rugs). He refused to sell the rug because if he did then there'd be no more Arnold's Rug. In addition, I am glad to see Sears capitalizing on the massive market for fake mustaches. Oh sure, you and your ivory tower friends who can grow a mustache probably don't need one, but think about all those people out there unable to grow a mustache. What about the 17 year old who wants to sneak into a bar? What about the 24 year old guy who never moved beyond peach fuzz and wants to impress his girlfriend? What about them? Should they just not have a mustache? I for one am glad to see Eddie helping out the little guy who can't grow a mustache. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted February 7, 2014 Share Posted February 7, 2014 The bears think Eddie Lampert has no clue. They assume that he doesn't understand that underinvesting in your stores will lead to decreased sales. Didn't Eddie tell them that he had expected the company to turn around in 2013, and that last year's results surprised him? His actions so far have not led to the turnaround he was expecting. So they say he doesn't have a clue if he expected the current state of his stores to have been the catalyst for improved sales. Link to comment Share on other sites More sharing options...
peridotcapital Posted February 7, 2014 Share Posted February 7, 2014 Well said, Krazeenyc. In three years, lets say 1. Sears closed another 300 store to further reduced physical footprint + SGA 2. Pension contribution goes down to zero. 3. SYW ramp up to 85%~90% sales so they cut traditional promotion in half or more. Wouldn't Sears be able to do 700m~1bn EBITDA? This does not even factor in any RE monetizing income. That seems very, very optimistic. 2013 FCF ex-pension is likely to be in the neighborhood of negative $500M. Closing 300 stores and cutting traditional marketing will reverse that figure by $1.25B-$1.50B? That would likely be an EBITDA margin of positive 3-4%. I think I'm going to spend more time in coming weeks and months digging deeper into the Sears RE portfolio. Obviously I think the retail side is a distaster, and even the bulls on this thread seem to agree that they are not counting on a turnaround and that any success would be icing on the cake. In that case, I think I'm going to slap a value of zero on the non-RE, non-publicly traded assets owned by SHLD, and focus on the RE value. I don't see any other business that Eddie is toying with as being material anytime soon, and all of the so-called valuable businesses within SHLD like warranties, home services, sears.com, and even KCD, are directly linked to retail success. Since I thought valuing everything else at zero might be a bit too pessimistic, I looked at the Baker Street "low" case to see how he valued those assets. The answer: $400 million (4% of the total, $3.75 per share). Essentially, nothing I see right now tells me that this is anything but an RE company, in terms of where future FCF (and therefore intrinsic value) will come from. Link to comment Share on other sites More sharing options...
Luke 532 Posted February 7, 2014 Share Posted February 7, 2014 Closing 300 stores and cutting traditional marketing will reverse that figure by $1.25B-$1.50B? If history is any indicator, SHLD could gain $3.3M/store closure. The $1 billion net proceeds from 300 closed stores since 2006 - most of which occurred in 2012 - implies around $3.3 million net gain for each closed store. http://seekingalpha.com/article/1509142-sears-holdings-valuation-between-berkshire-hathaway-and-bankruptcy#comment-29583631 Yes, it could be higher or lower. Heck, just use a conservative $2M and you still see heavily favorable conditions for closing stores. JCP recent closures as a proxy gives roughly $2M/store of annual cost savings. The ailing retailer announced Wednesday that it was cutting 2,000 jobs and closing 33 "underperforming" stores in an effort to rein in expenses. The store closings -- listed here -- are likely to be complete by early May. J.C. Penney said it expected the moves to generate $65 million in annual cost savings. http://money.cnn.com/2014/01/15/news/companies/jcpenney-jobs/ Link to comment Share on other sites More sharing options...
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