SHLDQ - Sears Holdings Corp

[Evolveus]

Once we know the answer to the Sears riddle (along with who killed Kenndy & where is Jimmy Hoffa Buried) I'll be very curious to see if bulls and bears will be able to change their opinions to the winning side -if there is a clear winner- after 591 pages of self inflicted consistency bias and social reinforcement.  ;D

 

I love COBF and the debates here. I've just always been curious about those psychological biases manifesting themselves subtly in us all via Web 2.0 since reading munger and cialdini.

 

Long: SHLD

[merkhet]

Chad, I'm still somewhat confused.

 

If you're saying that the company won't lose money forever, then are you also giving the company any credit for the cash that it brings in over the next ten years? So $150 per share plus appreciation for the real estate over ten years plus the value of the cash that comes in over the next ten years discounted back to the present equals ??

 

Furthermore, I don't understand why you think Sears will be renting all of its stores -- it's pretty clear to me that there are good stores and bad stores -- why would you convert a store that is doing well into a lease for someone else? Therefore 10 years for a complete liquidation seems like overreaching.

[peridotcapital]

Chad, I'm still somewhat confused.

 

If you're saying that the company won't lose money forever, then are you also giving the company any credit for the cash that it brings in over the next ten years? So $150 per share plus appreciation for the real estate over ten years plus the value of the cash that comes in over the next ten years discounted back to the present equals ??

 

Furthermore, I don't understand why you think Sears will be renting all of its stores -- it's pretty clear to me that there are good stores and bad stores -- why would you convert a store that is doing well into a lease for someone else? Therefore 10 years for a complete liquidation seems like overreaching.

 

The value of an asset today is the NPV of its future cash flows, right? So you would not take your estimate of the value of an asset today AND add to that the cash flow it generates over the next 10 years. That's double counting.

 

It is actually not my view that Sears will rent out all their stores. My personal valuation model assumes they operate a smaller footprint over time, ramp up leasing in owned stores they do close, and let most of their leases expire over time. It's a hybrid valuation.

 

But if someone is going to say that 85M SF of owned real estate is worth $200/sf, and therefore their SHLD valuation includes $17B for the real estate, you have to make the underlying assumption that they are not going to keep them open. If not, then for the stores they do keep open you have to value those based on the retail operating profit they generate, not real estate values in a hypothetical situation (selling/leasing) that they are not planning.

 

Think about it another way; a Sears store could be sold to a developer for $20M today. Why is it worth $20M to that developer? Because they are going to lease it out and can make a nice return on the $20M investment by doing so. But if Sears is not going to sell it anytime soon, it's not worth $20M to shareholders. Instead its worth the PV of the future retail cash flow while its open, plus the PV of the future proceeds if/when they shut it down and sell/lease it.

 

One last point: think for a moment if a Sears store that stays open indefinitely could possibly be worth $200/sf (if we are going to value every owned store at that price, regardless of whether it stays open or is sold/leased out, we have to do this exercise). A 100,000 sf store that earns a 3% EBITDA margin (SYW works!), would have to bring in sales of $110 million annually for that store (as a retail operation) to be worth $20M (6x EBITDA). How on earth can a Sears store do $110M a year in sales? In 2013, the average Sears store does less than 1/4 of that in sales.

[merkhet]

The value of an asset today is the NPV of its future cash flows, right? So you would not take your estimate of the value of an asset today AND add to that the cash flow it generates over the next 10 years. That's double counting.

 

I have a machine that spits out a $10 bill every year like clockwork. No more. No less.

 

It is currently worth $100. Since it will do this ad infinitum, this same machine will be worth $100 ten years from now as well. If I then tell you that I will only pay you the present value of that $100 discounted back ten years, would you take it?

 

Well, there's an easy way to figure that out. You have two choices:

 

(1) Take my $100 discounted back to present value over a decade.

(2) Hold on to your machine, collect $10 a year and still have a machine in ten years.

 

Which one is worth more? Alternatively, does (1) equal (2)?

 

It is actually not my view that Sears will rent out all their stores. My personal valuation model assumes they operate a smaller footprint over time, ramp up leasing in owned stores they do close, and let most of their leases expire over time. It's a hybrid valuation.

 

Ergo, my point that if they're not liquidating/leasing everything, it's probably not going to take 10 years for them to ramp up.

 

One last point: think for a moment if a Sears store that stays open indefinitely could possibly be worth $200/sf (if we are going to value every owned store at that price, regardless of whether it stays open or is sold/leased out, we have to do this exercise). A 100,000 sf store that earns a 3% EBITDA margin (SYW works!), would have to bring in sales of $110 million annually for that store (as a retail operation) to be worth $20M (6x EBITDA). How on earth can a Sears store do $110M a year in sales? In 2013, the average Sears store does less than 1/4 of that in sales.

 

And if they can turn a 1% EBITDA, my god, they'd have to bring in $330 million annually for that store!!

 

Of course, Target turns an EBITDA margin about 10x that, but why would I possibly use a comp like Target if I'm trying to see what might happen if Sears is actually successful with SYW. :P

[BTShine]

Chad, I'm still somewhat confused.

 

If you're saying that the company won't lose money forever, then are you also giving the company any credit for the cash that it brings in over the next ten years? So $150 per share plus appreciation for the real estate over ten years plus the value of the cash that comes in over the next ten years discounted back to the present equals ??

 

Furthermore, I don't understand why you think Sears will be renting all of its stores -- it's pretty clear to me that there are good stores and bad stores -- why would you convert a store that is doing well into a lease for someone else? Therefore 10 years for a complete liquidation seems like overreaching.

 

The value of an asset today is the NPV of its future cash flows, right? So you would not take your estimate of the value of an asset today AND add to that the cash flow it generates over the next 10 years. That's double counting.

 

It is actually not my view that Sears will rent out all their stores. My personal valuation model assumes they operate a smaller footprint over time, ramp up leasing in owned stores they do close, and let most of their leases expire over time. It's a hybrid valuation.

 

But if someone is going to say that 85M SF of owned real estate is worth $200/sf, and therefore their SHLD valuation includes $17B for the real estate, you have to make the underlying assumption that they are not going to keep them open. If not, then for the stores they do keep open you have to value those based on the retail operating profit they generate, not real estate values in a hypothetical situation (selling/leasing) that they are not planning.

 

Think about it another way; a Sears store could be sold to a developer for $20M today. Why is it worth $20M to that developer? Because they are going to lease it out and can make a nice return on the $20M investment by doing so. But if Sears is not going to sell it anytime soon, it's not worth $20M to shareholders. Instead its worth the PV of the future retail cash flow while its open, plus the PV of the future proceeds if/when they shut it down and sell/lease it.

 

One last point: think for a moment if a Sears store that stays open indefinitely could possibly be worth $200/sf (if we are going to value every owned store at that price, regardless of whether it stays open or is sold/leased out, we have to do this exercise). A 100,000 sf store that earns a 3% EBITDA margin (SYW works!), would have to bring in sales of $110 million annually for that store (as a retail operation) to be worth $20M (6x EBITDA). How on earth can a Sears store do $110M a year in sales? In 2013, the average Sears store does less than 1/4 of that in sales.

 

My guess is that some stores are on real estate worth $20 million that only make $200,000 a year (close and sell the property please!).

 

Other stores are on real estate worth $5 million and make $1 million a year (keep that store open!).

 

Other stores are on real estate worth $5 million and lose $500,000 a year (close down and sell the store please!)

 

Other stores are on real estate worth $20 million and make $4 million a year (keep that store open!).

 

Other stores...and on, and on, and on....  ;D

 

The point is that every situation is different. 

 

Cheers!

[Luke 532]

My guess is that some stores are on real estate worth $20 million that only make $200,000 a year (close and sell the property please!).

 

Other stores are on real estate worth $5 million and make $1 million a year (keep that store open!).

 

Other stores are on real estate worth $5 million and lose $500,000 a year (close down and sell the store please!)

 

Other stores are on real estate worth $20 million and make $4 million a year (keep that store open!).

 

Other stores...and on, and on, and on....  ;D

 

The point is that every situation is different. 

 

Cheers!

 

Which is one reason why it's so incredibly important to have a detail-oriented capital allocator like Lampert running the show.

[JSArbitrage]

 

I have a machine that spits out a $10 bill every year like clockwork. No more. No less.

 

It is currently worth $100. Since it will do this ad infinitum, this same machine will be worth $100 ten years from now as well. If I then tell you that I will only pay you the present value of that $100 discounted back ten years, would you take it?

 

Well, there's an easy way to figure that out. You have two choices:

 

(1) Take my $100 discounted back to present value over a decade.

(2) Hold on to your machine, collect $10 a year and still have a machine in ten years.

 

Which one is worth more? Alternatively, does (1) equal (2)?

 

 

1 must equal 2 assuming cost of capital is equal among all participants. 

 

Think of a more simple application: a perpetuity. 

 

If I give you $100/year to infinity, let's say you determined using your personal discount rate that the PV of that sum is $1,000.  You cannot say that it's really worth more than $1,000 because you can buy it for $1,000, get $100 in Year 1, and then sell it for $1,000 in Year 2.  Because the $100 you gain in Year 1 makes up for the PV of the $1,000 you'd realize in the sale of the perpetuity in Year 2.  There is no arbitrage to be had.

 

Same thing with the $/SF metric.  A building sells for $100/SF because that the market-determined PV of the cash-flows for that asset at  a market discount rate.  If you buy at $100/SF, collect a year of rent and then sell at $100/SF, then the PV of the future sale plus the rent you received for that one year must equal your original purchase price assuming no change in the discount rate.

 

 

[merkhet]

 

I have a machine that spits out a $10 bill every year like clockwork. No more. No less.

 

It is currently worth $100. Since it will do this ad infinitum, this same machine will be worth $100 ten years from now as well. If I then tell you that I will only pay you the present value of that $100 discounted back ten years, would you take it?

 

Well, there's an easy way to figure that out. You have two choices:

 

(1) Take my $100 discounted back to present value over a decade.

(2) Hold on to your machine, collect $10 a year and still have a machine in ten years.

 

Which one is worth more? Alternatively, does (1) equal (2)?

 

 

1 must equal 2 assuming cost of capital is equal among all participants. 

 

Think of a more simple application: a perpetuity. 

 

If I give you $100/year to infinity, let's say you determined using your personal discount rate that the PV of that sum is $1,000.  You cannot say that it's really worth more than $1,000 because you can buy it for $1,000, get $100 in Year 1, and then sell it for $1,000 in Year 2.  Because the $100 you gain in Year 1 makes up for the PV of the $1,000 you'd realize in the sale of the perpetuity in Year 2.  There is no arbitrage to be had.

 

Same thing with the $/SF metric.  A building sells for $100/SF because that the market-determined PV of the cash-flows for that asset at  a market discount rate.  If you buy at $100/SF, collect a year of rent and then sell at $100/SF, then the PV of the future sale plus the rent you received for that one year must equal your original purchase price assuming no change in the discount rate.

 

I think it might be easier to see my point graphically. Imagine a grouping like so [X,Y] where X is the amount of money that you get per year and Y is the amount of money you get when selling the machine.

 

Option 1: [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,100]

Option 2: [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [00,100]

 

Which option is more valuable?

[texual]

There also seems to be a component of ESL's strategy that mirrors how the market views Amazon. It makes a lot of money but the market has perpetually over-valued this company for years based on the internet growth spurt, and future growth rate. Almost no real value was placed on the tangible assets of Amazon nor its profitability which even today seems to fluxuate wildly. I think ESL wants to have a darling internet stock under SHLD via SYW, but maybe there is a part of his strategy that allows the market to place many more multiples on the faster growing internet division of the company that mimics how other internet retailers are valued.

 

Just my own two cents - ESL built SYW as a small part of the company that can grow fast enough to garner some attention. Who knows, maybe someday SYW will be the only thing analysts focus on talking about with Sears.

[texual]

If he really truly cared to become a multi bagger, billionaire again and again - the best strategy would be to inflate the stock price to insane valuations using the nutty multiples the market places on AMZN... just imagine what would happen if SYW suddenly gained traction, was profitable and actually became a real online retail giant. 50...100... 500 multiples on that part of the business alone wouldn't be out of the question.

 

The PE ratio of AMZN is 800...

 

Is ESL looking to create an 800 lb gorilla in SYW? Maybe he can spin it off when it truly gains momentum and the market will just blow it up into the next big thing. Screw Sears.

 

I just don't see Sears becoming that 800 lb gorilla... ever. But with SYW, perhaps there is some method to the madness.

[texual]

He needs to separate Sears and Kmart by essentially destroying their name from SYW. It is the sacrifice necessary to bring Sears into the 21st century, by killing it off because nobody likes what it represents anymore.

 

Let SYW just be a standalone brand that doesn't have an association with Sears.

 

Start to pull in other retailers. Have it sell way more products than Amazon. And with more same day delivery and perks. Membership benefits to SYW should bring in special sales. Flash sales, make SYW into something different. A hybrid of Groupon, Gilt, Walmart, Amazon... but just keep integrating how easy the stores are to access viewing products and returns.

 

In a sense I see the melting cube as the brands of Sears and Kmart. They eventually will just become storefronts for the new, SYW branding. SYW is either a dud, or the only thing that will solidify in the new company that ESL is building from the existing infrastructure. Just keep pushing SYW points until there is a natural stickiness. I believe it could work provided it isn't just a shell over Sears stores. There has to be a differentiation and a newness to SYW to last.

 

The whole company may just become ShopYourWay. And it could be huge if they really focus the entire thing as an internet retailer with an incredible shipping and warehouse experience.

 

Ikea does well with the warehouse concept, and sells a lot online. Can Sears do that with SYW? Who knows. I think ESL just wanted to create an online retailer with the backbone of Sears to provide speed and stability to the operation. Hopefully enough people care to use SYW. I havn't used it. Maybe that isn't a good sign?

 

Does anyone use SYW? Is it special?

[JSArbitrage]

 

I have a machine that spits out a $10 bill every year like clockwork. No more. No less.

 

It is currently worth $100. Since it will do this ad infinitum, this same machine will be worth $100 ten years from now as well. If I then tell you that I will only pay you the present value of that $100 discounted back ten years, would you take it?

 

Well, there's an easy way to figure that out. You have two choices:

 

(1) Take my $100 discounted back to present value over a decade.

(2) Hold on to your machine, collect $10 a year and still have a machine in ten years.

 

Which one is worth more? Alternatively, does (1) equal (2)?

 

 

1 must equal 2 assuming cost of capital is equal among all participants. 

 

Think of a more simple application: a perpetuity. 

 

If I give you $100/year to infinity, let's say you determined using your personal discount rate that the PV of that sum is $1,000.  You cannot say that it's really worth more than $1,000 because you can buy it for $1,000, get $100 in Year 1, and then sell it for $1,000 in Year 2.  Because the $100 you gain in Year 1 makes up for the PV of the $1,000 you'd realize in the sale of the perpetuity in Year 2.  There is no arbitrage to be had.

 

Same thing with the $/SF metric.  A building sells for $100/SF because that the market-determined PV of the cash-flows for that asset at  a market discount rate.  If you buy at $100/SF, collect a year of rent and then sell at $100/SF, then the PV of the future sale plus the rent you received for that one year must equal your original purchase price assuming no change in the discount rate.

 

I think it might be easier to see my point graphically. Imagine a grouping like so [X,Y] where X is the amount of money that you get per year and Y is the amount of money you get when selling the machine.

 

Option 1: [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,0] [00,100]

Option 2: [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [10,0] [00,100]

 

Which option is more valuable?

 

Clearly Option 2.  But Option 2 and Option 1 do not have the same PV given the same discount rates. 

[ZenaidaMacroura]

 

 

Clearly Option 2.  But Option 2 and Option 1 do not have the same PV given the same discount rates.

 

 

[peridotcapital]

Kmart actually owns this store, and Seritage has been listing it for a while. Will be interesting to see if news of a tenant comes along in late 2014/early 2015. A Sears Outlet actually already operates out of a portion of the building (one of 7 Sears Outlet locations that lease space in owned Kmart boxes), so the reduced square footage likely would help on that front.

 

http://www.news-record.com/business/article_b95028c0-1e31-11e4-99c6-0017a43b2370.html

[merkhet]

Clearly Option 2.  But Option 2 and Option 1 do not have the same PV given the same discount rates.

 

Haha, I love the Simpsons. Thanks Zenaida.

 

JS, so here's the comparison to Sears' real estate. The price of the real estate, in theory, is "the NPV of its future cash flows," as Chad mentions. I do not quibble with that.

 

However, I doubt that the calculation of $150 per share in net tangible assets includes the NPV of the future cash flows of Sears as a retail operation. Instead, Chad and I both think that it probably has more to do with the real estate than anything else. So let's think about this with a quick thought experiment.

 

(I'm going to choose numbers to make it easier for me to do the calculation without having to reach my calculator... remember that this is not a real calculation but just an illustration.)

 

Let's say Sears has 250 million sq. ft. in total and that they're worth about $200 per square foot on average. That means that Sears has around $50 billion of real estate lying around. (Yes, I know that there are owned versus leased real estate, just work with me here for illustrative purposes...)

 

Let's further say that Sears has sales of around $500 per square foot. (Again, quite high, but it makes the math easy.) Let's further assume that they can hit roughly a 10% EBITDA margin on that square footage and get roughly 6x EBITDA in value. In that case, the value of Sears' real estate has not changed from $50 billion but the value of Sears in total is $75 billion.

 

In other words, there's a DCF off the retail operations stream of an additional $25 billion in value.

 

Now these are all made up numbers, but the point I'm trying to get across is that the value of the real estate is one thing. The value of the cash flow is something entirely different. If you can utilize the real estate to produce a high amount of cash flow that would not be reflected off a pure (cap rate) times (rental price per square foot) calculation, then you're going to have some value above just net tangible assets.

 

It's a very similar thesis to the fact that some companies are worth 10% ROE and some are worth 20% ROE -- and you might only be able to sell an asset for "book value," but, in the right hands, those assets could be worth far more than just book value.

[JSArbitrage]

Clearly Option 2.  But Option 2 and Option 1 do not have the same PV given the same discount rates.

 

Haha, I love the Simpsons. Thanks Zenaida.

 

JS, so here's the comparison to Sears' real estate. The price of the real estate, in theory, is "the NPV of its future cash flows," as Chad mentions. I do not quibble with that.

 

However, I doubt that the calculation of $150 per share in net tangible assets includes the NPV of the future cash flows of Sears as a retail operation. Instead, Chad and I both think that it probably has more to do with the real estate than anything else. So let's think about this with a quick thought experiment.

 

(I'm going to choose numbers to make it easier for me to do the calculation without having to reach my calculator... remember that this is not a real calculation but just an illustration.)

 

Let's say Sears has 250 million sq. ft. in total and that they're worth about $200 per square foot on average. That means that Sears has around $50 billion of real estate lying around. (Yes, I know that there are owned versus leased real estate, just work with me here for illustrative purposes...)

 

Let's further say that Sears has sales of around $500 per square foot. (Again, quite high, but it makes the math easy.) Let's further assume that they can hit roughly a 10% EBITDA margin on that square footage and get roughly 6x EBITDA in value. In that case, the value of Sears' real estate has not changed from $50 billion but the value of Sears in total is $75 billion.

 

In other words, there's a DCF off the retail operations stream of an additional $25 billion in value.

 

Now these are all made up numbers, but the point I'm trying to get across is that the value of the real estate is one thing. The value of the cash flow is something entirely different. If you can utilize the real estate to produce a high amount of cash flow that would not be reflected off a pure (cap rate) times (rental price per square foot) calculation, then you're going to have some value above just net tangible assets.

 

It's a very similar thesis to the fact that some companies are worth 10% ROE and some are worth 20% ROE -- and you might only be able to sell an asset for "book value," but, in the right hands, those assets could be worth far more than just book value.

 

First, this is actually a different argument than your "buy a machine, collect the cash flows and sell the machine" argument you made before but that's ok.

 

I understand this new argument completely but I think there is an error in your thinking.  If the market believed that SHLD has a retail DCF of $75B, then SHLD's $/SF would be greater than the $200/SF in your original sentence.

 

Think of it this way - what does "$/SF" mean?  What determines the "$" of dollar per square foot?  The answer is the DCF approach.  So it is not possible to say, "the market is not using DCF so the $/SF is not accurate."  You can only disagree with the market's assessment of the DCF inputs.

 

So what the market is saying is this: "Merkhet, we have done our DCF too and that DCF gives us a value of $50B.  Eddie will never realize the retail cash flows you think he will."  So you can say, "Sorry market, but you are wrong.  My DCF is more accurate than yours."  But you CANNOT say, "The market is doing $/SF while I am doing DCF to capture the additional value of the retail operations." 

 

See the difference?

[merkhet]

First, this is actually a different argument than your "buy a machine, collect the cash flows and sell the machine" argument you made before but that's ok.

 

It's actually not, but I think I know why you might think so. Think about it the following way. The value of Sears is equal to the value of its real estate yield + whatever extra yield the retail operations might provide -- Chad was saying previously that I was double counting because the $150 per share in net tangible assets already included the value of the cash flow from that asset.

 

My $10 machine experiment was meant to provide a counterpoint at an extra retail yield of zero.

 

In other words, some yield of the real estate is getting captured (possible burned, depending on your point of view) by the retail yield on the assets. This is not necessarily baked into the valuation of the $150 per share of net tangible assets. Again, this is the point I was trying to make on ROEs.

 

Let's think about it this way -- the real estate is worth $150 per share right now. Let's say in ten years, there's no appreciation, and it's still worth $150 per share. However, in the interim, it's thrown off cash flow in the amount of $15 per share for ten years. (Maybe it's seen as rent. Maybe it's seen as retail return on that real estate.) It would be wrong not to include this amount and merely just discount the $150 per share back to present day.

 

In my Sears example, I have just added in the possibility of another variable -- retail yield in excess of real estate yield. The example becomes the same as the $10 machine once you set (retail yield in excess of real estate yield) to zero.

 

I understand this new argument completely but I think there is an error in your thinking.  If the market believed that SHLD has a retail DCF of $75B, then SHLD's $/SF would be greater than the $200/SF in your original sentence.

 

I don't know where you live, but if it's not Manhattan, you should take a trip to East 57th Street and Fifth Avenue. On that corner, there is the big glass cube Apple Store. One block away is the flagship Tiffany & Co. store on Fifth Avenue. The Apple Store does approximately $35,000 in sales per square feet. The Tiffany's does approximately $18,000 in sales per square feet. You're telling me that the difference in that block is equal to a doubling of the real estate valuation? Please.

 

Is it more likely that the real estate is worth that much more or is it more likely that the company sitting on top of it is worth that much more?

 

Think about it another way. If Apple then sold the store to a Radio Shack, you think that sales per square feet would maintain at $35,000? I suspect the answer is no.

 

Think of it this way - what does "$/SF" mean?  What determines the "$" of dollar per square foot?  The answer is the DCF approach.  So it is not possible to say, "the market is not using DCF so the $/SF is not accurate."  You can only disagree with the market's assessment of the DCF inputs.

 

So what the market is saying is this: "Merkhet, we have done our DCF too and that DCF gives us a value of $50B.  Eddie will never realize the retail cash flows you think he will."  So you can say, "Sorry market, but you are wrong.  My DCF is more accurate than yours."  But you CANNOT say, "The market is doing $/SF while I am doing DCF to capture the additional value of the retail operations." 

 

See the difference?

 

See above.

 

EDIT: It occurs to me that you may have fundamentally misunderstood what Murray Stahl meant when he said that the value of the Sears' square footage was $200 per square foot. He meant that the real estate could be sold to someone else for $200 per square foot -- not that Sears makes a $20 net margin per square foot which should be given a 10x multiple.

[Luke 532]

Anybody else find the large position increases the past 2 quarters from these noteworthy investors just a bit interesting?  Looking forward to see what they report in the next week or two.

 

46% Horizon Kinetics (Murray Stahl): 3.541M to 5.158M = +46%

31% Fine Capital (Debra Fine): 1.436M to 1.881M = +31%

18% Fairholme Fund (Bruce Berkowitz): 20.758M to 24.502M = +18%

[focusinvestor]

Anybody else find the large position increases the past 2 quarters from these noteworthy investors just a bit interesting?  Looking forward to see what they report in the next week or two.

 

46% Horizon Kinetics (Murray Stahl): 3.541M to 5.158M = +46%

31% Fine Capital (Debra Fine): 1.436M to 1.881M = +31%

18% Fairholme Fund (Bruce Berkowitz): 20.758M to 24.502M = +18%

 

The liquidity has dried up as well... very little shares are trading on a daily basis. SHOS is similar as well. I love to see that just as operating momentum might start to turn...

[Luke 532]

Sears Holdings Names Alasdair James As Kmart's President And Chief Member Officer

http://searsholdings.mediaroom.com/index.php?s=16310&item=137303

 

Interesting that Lampert plucked somebody from Tesco.  He did mention them in the Richard Rainwater video around the 20-minute mark. http://www.bing.com/videos/watch/video/eddie-lampert-on-rainwaters-legacy/3xlrwn2f

“The things that we’ve been working on for the last 5 years, for example at Sears, those things at least those ideas are becoming more and more apparent to other companies and observers in general, and the hard part is executing.  Wal-Mart has smaller stores.  You have virtual stores like Tesco in the UK.” 

[Luke 532]

Couple posters (mevsemt and vinod1) that discussed the potential similarities/influence of Tesco on SHLD/SYW...

 

Has anyone seen this video on Tesco in South Korea?  It wouldn't surprise me if SHLD is trying to develop similar capabilities with SYW.  Also, if they can build something similar and offer the service to other retailers who share space with them (Whole Foods, Trader Joes, etc.) it could really be interesting...

 

 

and...

 

1. Rewards Program: I think looking at Tesco's clubcard program would provide some insight into how this might or might not work for Sears. Tesco's program has high frequency contact with customers i.e. each of its customers bought 20-30 items every week or so. That provided a lot of insight for Tesco to target individual preferences so that it did not have to do across the board discounts. It could just tailor targeted promotions to individual customers.

[Picasso]

Couple posters (mevsemt and vinod1) that discussed the potential similarities/influence of Tesco on SHLD/SYW...

 

Has anyone seen this video on Tesco in South Korea?  It wouldn't surprise me if SHLD is trying to develop similar capabilities with SYW.  Also, if they can build something similar and offer the service to other retailers who share space with them (Whole Foods, Trader Joes, etc.) it could really be interesting...

 

 

and...

 

1. Rewards Program: I think looking at Tesco's clubcard program would provide some insight into how this might or might not work for Sears. Tesco's program has high frequency contact with customers i.e. each of its customers bought 20-30 items every week or so. That provided a lot of insight for Tesco to target individual preferences so that it did not have to do across the board discounts. It could just tailor targeted promotions to individual customers.

 

It would be awesome to see how Sears will setup QR codes in subway stations so a Kenmore washer will be delivered by the time they get back to their studio apartment in Manhattan.

 

Does anyone really think that Sears has the capability of executing this type of program?  I don't think half of their core customer even knows what a QR code is.

 

Honestly, if I spoke with 10 random people about "Shop Your Way," they would have no idea what that is.  I only know SYW from following SHLD. 

 

Hope I'm not being rude but this is a reach to think SHLD has the kind of bench to execute on that kind of plan.  SYW just seems like a way to slow the bleeding and experiment with technology Eddie knows little about.

[Luke 532]

Does anyone really think that Sears has the capability of executing this type of program? 

 

There's one way to find out... hire one of the top dogs from Tesco.  And there's something attracting James to SHLD.

[rogermunibond]

That Homeplus video is from 2011.  Anyone have info on how's its faring now in 2014.

 

Sears has tried drive through pickup.  It's not that different from pharmacies that do drive through.

 

In the Midwest, pony keg stores were something I grew up with.  You would drive through a smallish barn and pick up beer, wine, party supplies/convenience items.

[Picasso]

That Homeplus video is from 2011.  Anyone have info on how's its faring now in 2014.

 

Sears has tried drive through pickup.  It's not that different from pharmacies that do drive through.

 

In the Midwest, pony keg stores were something I grew up with.  You would drive through a smallish barn and pick up beer, wine, party supplies/convenience items.

 

Take a look at Tesco stock.  Down 42% from 2011.  I'm sure it's doing great.