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SHLDQ - Sears Holdings Corp

alertmeipp

By alertmeipp
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BTShine Newbie

BTShine

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Apparently there's also an estimated 17 Billion square feet of retail real estate, too. 

 

SHLD owns, or controls at low lease rates, approx. 200 million square feet.  About 1.1% of the total retail space in America.  They also estimated a mean value of $101/sq ft. for retail space.

 

http://www.sandiego.edu/business/documents/sizeofthemarketdraftApril26.pdf

(See pg. 11 and 15)

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BTShine Newbie

BTShine

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Some people must be sneaking by us.  What were revenues in the last quarter, like $8 billion?

 

This is why site visits can oftentimes be a worthless practice in terms of investment analysis.  It's similar to judging a baseball player's entire season on one at-bat.

 

If it's a small company with 10 locations then it makes sense.

 

You are on top of the store stats, do you know which locations are busy?  I'm guessing Sears makes most of their money from a few places, any idea which ones?

 

I'm not on top of the store stats and I don't know which ones do X in sales and which do Y in sales.  Those stores that have been outfitted with new technology and other improvements probably do better than those that Lampert spends minimum cap ex on, obviously.

 

I'm not sure if this is what you guys are referring to, but we can see some stats from the worst performing stores (assuming the stores they're closing are the worst performing -- fair assumption I think).  On page 27 of the Q2 earnings presentation we can see in the slide and footnotes (note 4) that SHLD is closing 128 stores and expects to lose $983 million of revenue from the closings.  This equates to $7.7 million in revenue per store.  With ~$30 Billion in revenue and approx. 2,000 stores we can say each store averages $15 million in sales.  The one's they're closing are doing 55% of average store sales.  Horrid.  No surprise they're closing these stores.

 

Here's the presentation I'm referring. http://searsholdings.com/invest/docs/Q2_2014_EarningsDeck.pdf

 

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BTShine Newbie

BTShine

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It's not an S&P Composite 1500 Index stock.

 

I tried to find if it was, but couldn't find a list of S&P 1500 stocks.  In Aug. 2012 they were removed from the S&P 500, but I thought they might be still in the 1500.  This report implied that they were -- http://irrcinstitute.org/pdf/FINAL-Controlled-Company-ISS-Report.pdf  but I could be misled on this.

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BTShine Newbie

BTShine

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"15 most hated S&P 1500 stocks in this terrible market"

 

Hu? What terrible market? This must have slipped in from a parallel universum!

 

Exactly.  The media can be brutal with thier perspective. 

 

Edit:  On another note, Bruce B. is back in the heezy fo sheezy.  He just bought 44,000 shares. 

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Picasso Newbie

Picasso

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Some people must be sneaking by us.  What were revenues in the last quarter, like $8 billion?

 

This is why site visits can oftentimes be a worthless practice in terms of investment analysis.  It's similar to judging a baseball player's entire season on one at-bat.

 

If it's a small company with 10 locations then it makes sense.

 

You are on top of the store stats, do you know which locations are busy?  I'm guessing Sears makes most of their money from a few places, any idea which ones?

 

I'm not on top of the store stats and I don't know which ones do X in sales and which do Y in sales.  Those stores that have been outfitted with new technology and other improvements probably do better than those that Lampert spends minimum cap ex on, obviously.

 

I'm not sure if this is what you guys are referring to, but we can see some stats from the worst performing stores (assuming the stores they're closing are the worst performing -- fair assumption I think).  On page 27 of the Q2 earnings presentation we can see in the slide and footnotes (note 4) that SHLD is closing 128 stores and expects to lose $983 million of revenue from the closings.  This equates to $7.7 million in revenue per store.  With ~$30 Billion in revenue and approx. 2,000 stores we can say each store averages $15 million in sales.  The one's they're closing are doing 55% of average store sales.  Horrid.  No surprise they're closing these stores.

 

Here's the presentation I'm referring. http://searsholdings.com/invest/docs/Q2_2014_EarningsDeck.pdf

 

Hmm.  I'm doing some back of the envelope math here trying to figure out this "transformation.' *cough* turnaround *cough*

 

Let's say they close 500 stores doing $8 million of sales each.  That brings us down to $26 billion.  Now close another 500 stores doing $10 million of sales each.  So down to $21 billion of revenue.  You would be left with a thousand locations each doing close to $21 million of sales.

 

Right now it costs Sears about $36 billion a year to keep the lights on.  If those costs go down, say, 40%, you are left with $21.6 billion of costs.  Still burning through a little cash or breaking even.

 

How long would it take them to close down 1000 stores?  At the current run rate, it seems like it could take 4-5 years.  You really need SSS to start picking up to provide more time for the transformation.

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BTShine Newbie

BTShine

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Solid questions.  I'm not sure they're planning to close more than 500 stores, but anything is possible. 

 

One point I think ownership is counting on is the retention of members that shopped the closed store that now will shop the remaining stores.  That same slide shows they plan on retaining $184 million of the $983 million in sales from the closed store.  This is about 19% retention and I'd say somewhat due to the SYW program.  If they closed 400 of their money-losing or barely breakeven stores, they might see a loss of $4 or $5 Billion in sales.  But, we might see retention of $1 Billion in sales that flows to other stores.  If their margin is approx. 23%, then SHLD would see an increase of EBITDA by $230 million. 

 

I do think they believe SSS will increase due to all of the SYW points they've distributed.  And, they believe they can reduce traditional advertising and promotional markdowns because of their SYW program.  Obviously people are going to be skeptical of SHLD management and their statements, but I do believe mgmt is telling the truth when they say internal data shows that SYW is working. 

 

For example, they said on slide 32 "Fixed to Digital Marketing – Shifted 12% of our marketing dollar spend from fixed-cost traditional

marketing to variable-cost digital assets, which reduc(ed) expenses by $42M in first half of 2014 while

increasing productivity"  If they did that for 100% of their marketing dollar spend it would be a reduction of $350 million...all while improving their marketing productivity.  This implies the $350+ would flow through to the bottom line.

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heth247 Newbie

heth247

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For example, they said on slide 32 "Fixed to Digital Marketing – Shifted 12% of our marketing dollar spend from fixed-cost traditional

marketing to variable-cost digital assets, which reduc(ed) expenses by $42M in first half of 2014 while

increasing productivity"  If they did that for 100% of their marketing dollar spend it would be a reduction of $350 million...all while improving their marketing productivity.  This implies the $350+ would flow through to the bottom line.

 

Umm... so I guess the example of "$20 cash burn" I mentioned in my previous post, ($10 from groupon, and $10 for linking credit card with SYW), should really not be considered as cash burn, but the "variable-cost digital assets"?

 

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BTShine Newbie

BTShine

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For example, they said on slide 32 "Fixed to Digital Marketing – Shifted 12% of our marketing dollar spend from fixed-cost traditional

marketing to variable-cost digital assets, which reduc(ed) expenses by $42M in first half of 2014 while

increasing productivity"  If they did that for 100% of their marketing dollar spend it would be a reduction of $350 million...all while improving their marketing productivity.  This implies the $350+ would flow through to the bottom line.

 

Umm... so I guess the example of "$20 cash burn" I mentioned in my previous post, ($10 from groupon, and $10 for linking credit card with SYW), should really not be considered as cash burn, but the "variable-cost digital assets"?

 

I can't tell how serious you are (if at all), but I think it's safe to say your 'cash burn' is a form of marketing that is a variable cost, not fixed like a newspaper insert or a billboard ad.  Does their $10 or $20 investment in you turn out to be worth more than $10 or $20 to SHLD is the question?  Does their investment in marketing (this is not an investment/asset in the accounting sense) via giving you $10/$20 make the typical 'you' spend $40+ or $80+ more than you otherwise would have?  They believe marketing $ is better spent by giving out points (free $$$) than on fixed spend.

 

It's cash burn, but is it paying off?  Some of this is making them lose more $$ than otherwise, but will it be a good investment long term?  AMZN lost money for years when they were building a customer base. That clearly worked out.  SHLD says they're spending money intelligently.  Time will tell if they are right, wrong or lying.

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Luke 532 Newbie

Luke 532

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One good thing about days like this (aside from volatility trading) is that the most shorted names get covered so institutions can meet the margin calls. XCO is up 12%. SHOS is nearly unch'ed. FIG is up after getting slaughtered in the AM.

 

True, yet the volume is still fairly normal on SHLD.  There were 17M+ shorts at last count.  And yesterday it was up 11% on ~1.4M shares.  This could drag on for quite awhile.

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krazeenyc Newbie

krazeenyc

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Anyone received SHLDR in their brokerage account ?

 

No, record date is today at 5pm EST.

 

I thought so too but I saw it traded today.

 

Rights often trade a day or even a few days before the shares are actually ex-rights. It's a bit like a test run for the market. It's standard.

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CorpRaider Newbie

CorpRaider

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Steven Bregman from Horizon Kinetics comments on his Sears position yesterday

 

http://www.horizonkinetics.com/video.asp?vidID=171

 

FF to the 47 minute mark

 

Thanks for posting.  For some reason, I didn't know they did these.  Interesting discussion of the correlations  between various rtfs across sector and market cap, but I gotta' say they seem to be cherry picking the data a bit.  Pointing to different sector rtfs and different market cap indices and noting high correlation in US stocks post great recession, in a QE, risk-on world doesn't really blow my kilt up.

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Picasso Newbie

Picasso

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Steven Bregman from Horizon Kinetics comments on his Sears position yesterday

 

http://www.horizonkinetics.com/video.asp?vidID=171

 

FF to the 47 minute mark

 

Thanks for posting.  For some reason, I didn't know they did these.  Interesting discussion of the correlations but I gotta' say they seem to be cherry picking the data set.  Point to different rtfs and different market cap indices and noting high correlation in a post great recession; QE, risk-on world doesn't really blow my skirt up.

 

What blows your skirt up if I may ask  ;)

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