SHLDQ - Sears Holdings Corp

[Liberty]

I wonder if SHLD has looked into working with a company like SolarCity to put solar panels on its stores. With a 'solar lease' type of deal, there would be no upfront cost, and it would reduce the stores' energy costs (at least in areas of the country where solar panels make sense). All the installation and maintenance stuff would be the responsibility of SolarCity, not SHLD.

[CorpRaider]

Kind of a junk/fluff article but it has a response from Lowes so ....

 

http://www.foxbusiness.com/industries/2013/06/19/craftsman-at-lowes-orchard-acquisition-could-make-it-happen/

[stahleyp]

Has anyone seen this seeking alpha article? This is quite possibly the most thorough article I have ever seen on Seeking Alpha. http://seekingalpha.com/article/1509142-sears-holdings-valuation-between-berkshire-hathaway-and-bankruptcy

 

That was a good read, thanks for posting.

 

That was great. Thanks for sharing. I wonder if this is Eric. :P

 

"3): There is also over 95,000 OTM Call options open interest with January 2015 expiration at both the $60 and $70 strike prices, which is more than quadruple all the current at-the-money-or-above calls during that 18-month period. These large January 2015 positions were originally traded on January 14 and 21 of this year. Based on their strike prices and similar open interest, they appear to be spread positions with a $2.80 cost basis, which translates to a $26.6 million position that has a maximum payout potential of $68.4 million if SHLD is at $70 or higher in January 2015."

 

Just kidding.  :-X

[merkhet]

It's Baker Street and Force Capital, actually.

[dcollon]

HHC is redeveloping Landmark Mall in VA (see attachment) and Sears is going to still be an anchor tenant.  Sorry if you all already knew and read about it.

SHLD_in_Landmark.pdf

[stahleyp]

It's Baker Street and Force Capital, actually.

 

Yeah, I was thinking it might have been Baker Street with their 13f looking like 80% of the portfolio was in call options. Didn't know about Force Capital though.

[jeffmori7]

Just saying, but Sears has been falling since Eric started buying...:P

[stahleyp]

Just saying, but Sears has been falling since Eric started buying...:P

 

So did BAC. That worked out pretty well for him.  ;)

[Kraven]

Just saying, but Sears has been falling since Eric started buying...:P

 

Relevance?

[jeffmori7]

Just saying, but Sears has been falling since Eric started buying...:P

 

Relevance?

 

Sorry Kraven, it was just to laugh a bit, implying Eric was responsible for the recent drop, a bad joke. I will try to be more relevant in my future contributions.

[BTShine]

Kind of a junk/fluff article but it has a response from Lowes so ....

 

http://www.foxbusiness.com/industries/2013/06/19/craftsman-at-lowes-orchard-acquisition-could-make-it-happen/

 

I looked into the Orchard Supply S-1 from 2011, and there is a section that pertains to this Lowe's deal.  Bolds below are mine.

 

---

http://www.sec.gov/Archives/edgar/data/896842/000119312511335869/0001193125-11-335869-index.htm

From page 65 of S-1.

 

2. THE BRANDS AGREEMENTS

The Company entered into three brands license agreements, subject to the approval of the audit committee of Sears Holdings (the “Brands Agreements”), with a subsidiary of Sears Holdings effective at the Distribution pursuant to which Sears Holdings will allow us to purchase a limited assortment of Craftsman products, Easy Living and Weatherbeater paints, Kenmore-branded water heaters and consumer household products directly from vendors. Under the Brands Agreements, we will pay specified license fees to Sears Holdings. The agreements generally incorporate arm’s length terms and conditions, including market-based pricing and term of duration. The agreements have a three year term and may be extended subject to the mutual agreement of the parties.

 

The Company entered into a brands sales agreement with Sears Holdings on November 23, 2005, as amended (the “Brands Sales Agreement”), which will be terminated as of the Distribution. All Sears Holdings proprietary branded products purchased and sold to date were made under the Brands Sales Agreement. If the terms of the Brands Agreements with certain Sears Holdings subsidiaries were effective on January 31, 2010, the first day of fiscal 2010, the Company estimates that they would have recorded incremental costs of $0.5 million,...

---

 

I'm not an expert in this, but it looks to me like Sears has the ability to control the sale of Craftsman products at OSH even if Lowe's buys the stores.  According to the S-1, the idea that Lowe's is buying their way into Craftsman tools via OSH is a flawed theory. 

[muscleman]

Kind of a junk/fluff article but it has a response from Lowes so ....

 

http://www.foxbusiness.com/industries/2013/06/19/craftsman-at-lowes-orchard-acquisition-could-make-it-happen/

 

I looked into the Orchard Supply S-1 from 2011, and there is a section that pertains to this Lowe's deal.  Bolds below are mine.

 

---

http://www.sec.gov/Archives/edgar/data/896842/000119312511335869/0001193125-11-335869-index.htm

From page 65 of S-1.

 

2. THE BRANDS AGREEMENTS

The Company entered into three brands license agreements, subject to the approval of the audit committee of Sears Holdings (the “Brands Agreements”), with a subsidiary of Sears Holdings effective at the Distribution pursuant to which Sears Holdings will allow us to purchase a limited assortment of Craftsman products, Easy Living and Weatherbeater paints, Kenmore-branded water heaters and consumer household products directly from vendors. Under the Brands Agreements, we will pay specified license fees to Sears Holdings. The agreements generally incorporate arm’s length terms and conditions, including market-based pricing and term of duration. The agreements have a three year term and may be extended subject to the mutual agreement of the parties.

 

The Company entered into a brands sales agreement with Sears Holdings on November 23, 2005, as amended (the “Brands Sales Agreement”), which will be terminated as of the Distribution. All Sears Holdings proprietary branded products purchased and sold to date were made under the Brands Sales Agreement. If the terms of the Brands Agreements with certain Sears Holdings subsidiaries were effective on January 31, 2010, the first day of fiscal 2010, the Company estimates that they would have recorded incremental costs of $0.5 million,...

---

 

I'm not an expert in this, but it looks to me like Sears has the ability to control the sale of Craftsman products at OSH even if Lowe's buys the stores.  According to the S-1, the idea that Lowe's is buying their way into Craftsman tools via OSH is a flawed theory.

 

This means if Lowes pays a high enough fee to SHLD, Eddie will likely have Craftsman tools avaiable in Lowes, right? That is not bad at all.

[enoch01]

Has anyone seen this seeking alpha article? It's quite thorough, which is unusual for most SeekingAlpha articles. http://seekingalpha.com/article/1509142-sears-holdings-valuation-between-berkshire-hathaway-and-bankruptcy

 

They conclude with a reasonable valuation.  Happily, there has been no positive response in the market.  If it is possible to be worse than hated, Sears Holdings qualifies.

 

Recent bonus: higher rates will reduce the pension liability.

[FCharlie]

 

Recent bonus: higher rates will reduce the pension liability.

 

 

Regarding the pension:

 

Year        Discount Rate      Cash Contributions    Actual Return      Benefits Paid    Status

 

2005        5.5%                    $262 Million            $345 Million        ($455 Million )  ($1.54 Bln)

 

2006        5.9%                    $355 Million              $602 Million        ($578 Million)  ($1.01 Bln)

 

2007        6.45%                  $184 Million              $285 Million        ($620 Million)    ($719 Mln)

 

2008        7.0%                    $262 Million            ($1.16 Billion)      ($541 Million)    ($1.52 Bln)

 

2009        6.0%                    $183 Million              $699 Million        ($447 Million)    ($1.84 Bln)

 

2010        5.75%                  $279 Million              $550 Million        ($416 Million)    ($1.68 Bln)

 

2011        4.9%                    $358 Million              $55 Million          ($479 Million)    ($2.25 Bln)

 

2012        4.25%                  $549 Million              $512 Million        ($445 Million)    ($2.25 Bln)

 

 

 

Thought I'd share this to show how much of an impact changes in interest rates are.  For example, in 2012, even after a $549 Million contribution and a $512 Million gain in asset values, the funded status of the pension was unchanged. Benefits paid was not greatly different than any other year.... but the change in interest rates made hundreds of millions of dollars *disappear*

 

SHLD has had only one out of the past eight years (2008) with an actual negative return on assets... That was thanks to the 2008 stock market crash. Anyone who's ever been to an annual meeting of SHLD will recall Eddie Lampert making comments on the Federal Reserve and how damaging their 0% interest rate policies have been.

 

Finally, not to pretend that the retail operations are performing wonderfully, but the reality is the pension drain is consuming all free cash flow that this company can produce. Recall 2008,2009, 2010... It wasn't that the company was performing stellar, they were nearly break even on GAAP during those years, but they managed to produce tons of free cash flow and managed to buy back incredible amounts of the float.

[Guest hellsten]

Has anyone seen this seeking alpha article? It's quite thorough, which is unusual for most SeekingAlpha articles. http://seekingalpha.com/article/1509142-sears-holdings-valuation-between-berkshire-hathaway-and-bankruptcy

 

Thank you for sharing. Great article. The comments were also interesting to read.

 

Our estimated valuation of Sears Holdings Corporation of $25.511 billion infers a fair value for SHLD shares at $239 per share

[txlaw]

Have any of you guys been able to read the WWD article on ESL's expansion plans for Lands' End?

 

See http://www.wwd.com/retail-news/retail-features/edward-lamperts-expansion-strategy-for-lands-end-6947414

 

I just want to see if anyone can give me a sense of what ESL's plan is with Lands' End, without having to subscribe to WWD.

[wisdom]

http://www.retailwire.com/discussion/16794/will-lands-end-finally-prosper-under-sears-holdings

 

the article below refers/quotes the WWD article.

[Matson125]

Hawaii's original Kmart store goes on the market for lease

http://www.bizjournals.com/pacific/news/2013/06/27/hawaiis-first-kmart-store-goes-on-the.html

 

"The building is valued at $3.2 million and the four acres of land, also owned by Kmart Corp., is valued at $13.9 million for a total assessed value of about $17 million, according to City and County of Honolulu tax records."

 

 

[muscleman]

Hawaii's original Kmart store goes on the market for lease

http://www.bizjournals.com/pacific/news/2013/06/27/hawaiis-first-kmart-store-goes-on-the.html

 

"The building is valued at $3.2 million and the four acres of land, also owned by Kmart Corp., is valued at $13.9 million for a total assessed value of about $17 million, according to City and County of Honolulu tax records."

 

i thought they sold a Hawaii store in 2011 or 2012? Maybe that is the more valuable one, and this is the less valuable one?

So Eddie is continuing with his store closing strategies, but he didn't disclose any store closing plan in the Q1 CC.

[krazeenyc]

Hawaii's original Kmart store goes on the market for lease

http://www.bizjournals.com/pacific/news/2013/06/27/hawaiis-first-kmart-store-goes-on-the.html

 

"The building is valued at $3.2 million and the four acres of land, also owned by Kmart Corp., is valued at $13.9 million for a total assessed value of about $17 million, according to City and County of Honolulu tax records."

 

i thought they sold a Hawaii store in 2011 or 2012? Maybe that is the more valuable one, and this is the less valuable one?

So Eddie is continuing with his store closing strategies, but he didn't disclose any store closing plan in the Q1 CC.

 

That was part of the 11/12 store deal with GGP for $260? million? I think that flagship Hawaii store accounted for over 90% of the value of that deal.  I actually just got long Sears a tad bit under $43 a share -- it's a 2% position right now. I'd probably be willing to go as high as 6-7% eventually -- (i'll kick myself if it shoots up /but i'll be happy i got in)  -- but it's just so volatile in the short term.

[texual]

I didn't pay attention to SHLD the past two years actually. I missed nothing apparently ;)

 

I'd be willing to say until ESL closes his fund or totally divests himself of all stocks besides SHLD, I would take a nap. But if you pay close attention to his fund moves the past few years it seems he purchases a lot of SHLD from exiting partners, and cashed out AZO and AN more recently. The way I see it, hes going to end up with a fund of SHLD and some small stocks, and everyone remaining (Last I read there were only around 150 investors left in ESL), I would bet he isn't going to remain interested in that business, once he can focus on SHLD as his primary target.

 

And theres a LOT of value in SHLD real estate, not to mention his brands and online membership program. I think SHLD is worth a lot more than JCP and look at how interested hedge funds got with JCP. They cant touch SHLD as long as ESL is involved. He won't let anyone control the company besides himself and Bruce, and a few of us.

 

Wait this one out, let the price become attractive and scoop up shares slowly as I have for the past, I don't know, 5, 6 years?

 

I liked the analogy I read once earlier that being in SHLD is like going for a dip with Lampert, except its a plunge into a icy cold lake. And you are all holding your breath to see who lasts. In the beginning of SHLD everyone seemed to want to take a leap into the water. Look who's left? Its ESL, Fairholme, and a few rich guys, and a couple of us. I'd be ok with this crowd. I've been holding my breath ever since. Methinks they'll warm it up enough for all of us to survive - when the lake thaws and all that fish is left for us !

[Matson125]

2 More Sears Stores Sold

 

http://www.benzinga.com/news/13/07/3724331/cbl-announces-acquisition-and-planned-redevelopment-of-two-sears-anchor-locations

http://www.kentucky.com/2013/07/01/2700452/sears-at-lexingtons-fayette-mall.html

"Terms of the sale were not disclosed"

[muscleman]

2 More Sears Stores Sold

 

http://www.benzinga.com/news/13/07/3724331/cbl-announces-acquisition-and-planned-redevelopment-of-two-sears-anchor-locations

http://www.kentucky.com/2013/07/01/2700452/sears-at-lexingtons-fayette-mall.html

"Terms of the sale were not disclosed"

Weird.  Why is the price undisclosed?

[alertmeipp]

2 More Sears Stores Sold

 

http://www.benzinga.com/news/13/07/3724331/cbl-announces-acquisition-and-planned-redevelopment-of-two-sears-anchor-locations

http://www.kentucky.com/2013/07/01/2700452/sears-at-lexingtons-fayette-mall.html

"Terms of the sale were not disclosed"

Weird.  Why is the price undisclosed?

 

Maybe the price is too good they don't want others to be jealous ;)

[ragnarisapirate]

It seems that you have to bet this thing as a gradual liquidation sort of play... or at least be OK with the fact that the company probably won't look anything like it does now in 10 years.

 

Reason being: the Lexington, KY store is the BEST piece of real estate in that mall... it sits in front of one of the main entrances from the road and you literally have to walk through that store to get from one end of the mall to the other- and it's the nicest mall in the city, by far. It's funny, I was in the store today, actually.

 

If SHLD can't make that store work, then there is no way they will ever be able to get the rest of the company going. Maybe CBL just offered them so much they couldn't refuse though.