SHLDQ - Sears Holdings Corp

[Picasso]

From earlier, I said:

 

I think the debt is the bigger class here and you need to have a pretty strong feel for it if you are going to be playing the options / stock.

 

You have 3 (basically) publicly tradable classes.

 

'17 SRAC

'18 Secured HoldCo

'19 Unsecured HoldCo

And '28 - '43 SRAC

 

SRAC is rated above HoldCo debt, and Secured HoldCo is above SRAC.  All debt is 1 rating apart...

 

Long term SRAC trading at 40% of par, near term issues trading from 87-95% of par (through '19).

 

Given the above information, the market is saying *strenuously* that a filing won't happen soon (through '19).  If it did, you could create a crazy trade -- short front end debt and long long term debt which would experience extreme pricing convergence upon a filing.... amazingly, this trade would be massively positive carry as well.

 

I hear you on the puts and doing what makes sense and picking your spots; but given the capital structure pricing today it's a very very inefficient way (my opinion) to express your view which while common on this board appears to be very divergent from debt securities' market participants.

 

Clearly the pricing could be due to yield / liquidity, or just plain insanity... but I think it's worth Sears bears doing a lot of work on the debt if you think a filing is imminent.  I may short the '19's just to hedge out my much higher yield SRAC position (given SSRAP structure, that would be a seriously dirty hedge though).

 

Just some thoughts.  Good luck (actually, I take that back...)

 

Just to flash back.  The trade I proposed (long >'28 SRAC, short '19 HoldCo) has strongly converged.  SRAC up 10% (now at $45) and '19 HoldCo down ~30% (now at $60).  SHLD common unchanged basically so the way to play SHLD filing (which is more likely now) was not puts (at least in this reality).

 

Not picking on Walt who's view was clearly articulated, just thought it was an interesting follow up given the bizarre nature of the Sears discussions and business over time. :)

 

I think the issue with this trade (at current levels) is that the quicker SHLD files, the more value is left for those '19 HoldCo's and potentially well in excess of par value depending on how the restructuring is handled.  There's kind of a narrow path where the '19's are impaired while the senior SRAC's are fine.  They'd need to wipe out most of the remaining net assets, pay out the SRAC's, and file before the '19 maturity allowing ESL to prime Berkowitz (who also happens to be a large holder of what is arguably the fulcrum security alongside ESL). 

 

A SHLD restructuring will look like anything but a normal restructuring and the idea of owning one liability versus another based on seniority might not be the right way of looking at this.  Although I imagine the initial knee-jerk reaction to a filing would not be great for the '19 HoldCo's.  Full disclosure: buying some of the '19 notes for various reasons.

[sampr01]

Hi Picasso,

 

Why can't you just buy SRAC instead of 19's and they are much cheaper (some one liquidating 19's today and may be a good reason to buy now and sell couple of months later). Any other reason than BK timing?.

 

Thanks

;D

 

 

 

From earlier, I said:

 

I think the debt is the bigger class here and you need to have a pretty strong feel for it if you are going to be playing the options / stock.

 

You have 3 (basically) publicly tradable classes.

 

'17 SRAC

'18 Secured HoldCo

'19 Unsecured HoldCo

And '28 - '43 SRAC

 

SRAC is rated above HoldCo debt, and Secured HoldCo is above SRAC.  All debt is 1 rating apart...

 

Long term SRAC trading at 40% of par, near term issues trading from 87-95% of par (through '19).

 

Given the above information, the market is saying *strenuously* that a filing won't happen soon (through '19).  If it did, you could create a crazy trade -- short front end debt and long long term debt which would experience extreme pricing convergence upon a filing.... amazingly, this trade would be massively positive carry as well.

 

I hear you on the puts and doing what makes sense and picking your spots; but given the capital structure pricing today it's a very very inefficient way (my opinion) to express your view which while common on this board appears to be very divergent from debt securities' market participants.

 

Clearly the pricing could be due to yield / liquidity, or just plain insanity... but I think it's worth Sears bears doing a lot of work on the debt if you think a filing is imminent.  I may short the '19's just to hedge out my much higher yield SRAC position (given SSRAP structure, that would be a seriously dirty hedge though).

 

Just some thoughts.  Good luck (actually, I take that back...)

 

Just to flash back.  The trade I proposed (long >'28 SRAC, short '19 HoldCo) has strongly converged.  SRAC up 10% (now at $45) and '19 HoldCo down ~30% (now at $60).  SHLD common unchanged basically so the way to play SHLD filing (which is more likely now) was not puts (at least in this reality).

 

Not picking on Walt who's view was clearly articulated, just thought it was an interesting follow up given the bizarre nature of the Sears discussions and business over time. :)

 

I think the issue with this trade (at current levels) is that the quicker SHLD files, the more value is left for those '19 HoldCo's and potentially well in excess of par value depending on how the restructuring is handled.  There's kind of a narrow path where the '19's are impaired while the senior SRAC's are fine.  They'd need to wipe out most of the remaining net assets, pay out the SRAC's, and file before the '19 maturity allowing ESL to prime Berkowitz (who also happens to be a large holder of what is arguably the fulcrum security alongside ESL). 

 

A SHLD restructuring will look like anything but a normal restructuring and the idea of owning one liability versus another based on seniority might not be the right way of looking at this.  Although I imagine the initial knee-jerk reaction to a filing would not be great for the '19 HoldCo's.  Full disclosure: buying some of the '19 notes for various reasons.

[Picasso]

SHLD isn't going away completely.  They might file bankruptcy multiple times but I imagine there will be some new company formed for certain debt holders in the meantime and it will probably be worth something.  The only SRAC's deeply discounted are the ones maturing well after SHLD is likely to run out of cash or liquid assets.  And upside on them is capped at maybe a double. 

 

There's a double w/ the 2019's as well but you also have even more optionality because of where it sits and ESL's incentives.  They need to give SRG more time into 2019 and they already own the majority of those fulcrum notes. 

 

I think they're particularly more interesting because you can easily make the case that if SHLD files tomorrow, SRG is going to get hammered but the '19's will very likely be worth north of par.  If they file in '19 ahead of the maturity then SRG is probably worth a lot more than $40 but the '19's are probably not worth as much. 

 

Also if you look at the implied value for a newco with $625mn of the '19's at 50 cents on the dollar... I think the math gets kind of nutty in terms of good things that can happen versus bad. 

 

I sort of wonder what the appetite would be for SRG to issue equity to reduce leverage if ESL just totally threw in the towel.  Maybe something to watch for but until then it looks like ESL is still going for the home run.  The comments about being caught off guard w/ SRSC and the defensiveness of that blog post seem to indicate that isn't close to being the case.

 

I might be colored by the fact I've come to enjoy shopping at Sears and Kmart ;) 

[Jurgis]

I might be colored by the fact I've come to enjoy shopping at Sears and Kmart ;)

 

Talk about going native...  ::)  8)

[BeerBBQ]

 

 

Also if you look at the implied value for a newco with $625mn of the '19's at 50 cents on the dollar... I think the math gets kind of nutty in terms of good things that can happen versus bad. 

 

 

 

Could you please expand a little on this comment?

[adesigar]

Eddie Lampert on Sears Canada

 

https://eddielampert.wordpress.com/2017/10/22/esl-response-to-the-globe-and-mail-article/

[Parsad]

Eddie Lampert on Sears Canada

 

https://eddielampert.wordpress.com/2017/10/22/esl-response-to-the-globe-and-mail-article/

 

Yeah, that's kind of a bullshit letter.  We all know how much money was pulled out of Sears Canada and distributed to shareholders...ESL being the largest shareholder.  I live in Canada and watched Sears Canada collapse.  It wasn't because of management, but because ownership (primarily ESL through their stake) decided not to put any money into modernizing and updating Sears Canada.  Three perfect examples are the core locations around Vancouver and its suburbs...Downtown (Pacific Centre), Metrotown and Brentwood Mall.  All three disintegrated with barely any money put into Brentwood and Metrotown, while nominal upgrades were put into the Pacific Centre location.  Take a look at what Sears Pacific Centre looked like and what the new Nordstrom's in the exact same location looks like:

 

Sears Pacific Centre

 

https://static1.squarespace.com/static/529fc0c0e4b088b079c3fb6d/t/5977d9bc15d5db539c9f9aa9/1501026842305/Screen+Shot+2017-07-25+at+7.52.00+PM.png

 

Nordstroms - exact same location

 

https://imageserver-bisnow1.netdna-ssl.com/8G8ZBOGLXPmvZzL8xIUiVCPgUvg=/0x0/publisher/78504_1442848564_Nordstrom_Pacific-Centre-large.jpg

 

Nordstroms spent over $100M renovating the exterior and interior.  Added a white-linen restaurant, mid-level bar and lobby level cafe/bistro.  They also used only three floors of 8, and leased out the top 5 floors to Amazon, Microsoft and 2 of the 5 floors to a large law firm.  That Nordstroms is busy, all day, every day!  If people aren't shopping, they are eating there.

 

Eddie is a smart investor, but he may arguably be the worst retailer in history!  Cheers!

[randomep]

Eddie Lampert on Sears Canada

 

https://eddielampert.wordpress.com/2017/10/22/esl-response-to-the-globe-and-mail-article/

 

Huh, say what? He says Sears Holdings owns 90% of Sears Canada and it distributed shares to shareholders including ESL. So he runs ESL and Sears Holdings. How can he say Sears Canada did something without him knowing, as if he is an impotent outsider??  He pulls the strings on everything.... if they go bankrupt it is his doing IMHO

[Cardboard]

"That Nordstroms is busy, all day, every day!  If people aren't shopping, they are eating there."

 

The clientele of a Nordstrom is a little different than Sears even when Sears was doing really well. Don't recall seeing Burbery and Louis Vuitton bags at Sears. So even if they had invested the $100 million at that mall, it basically did not belong there.

 

The tragedy is that this company should have been folded years ago: liquidated. Declining same store sales, lack of appeal by consumers for the stores, poor inventory turnover, poor profitability, etc. did not begin with the advent of Internet shopping. The decline of a retail chain is well documented with turnovers almost never occuring. I have seen Gap stabilizing but, that is about it. Back then, there was a good amount of value in the real estate and other assets. For example, these stores in the Vancouver area would have generated top dollar.

 

Unfortunately, Lampert blew a lot of money buying back the shares at very high prices, then kept on dreaming with an internet concept while depleting the stores of any resource and created a sink hole.

 

I mentioned tragedy because I recall this notion that firing employees or upon a liquidation would have been a terrible thing to do. Here you can pull some pages from Jack Welch: Straight from the Gut, who rightfully mention that keeping employees into a declining business with no opportunity is a disservice to these employees.

 

Guess what? That is exactly what happened. The people who stuck at Sears ended up with a demoralizing job and now to find a new one must be quite difficult because who wants to employ people from a failure? Are they motivated employees? Do they have special skills adapted to today's retail environment?

 

Cardboard

[Parsad]

"That Nordstroms is busy, all day, every day!  If people aren't shopping, they are eating there."

 

The clientele of a Nordstrom is a little different than Sears even when Sears was doing really well. Don't recall seeing Burbery and Louis Vuitton bags at Sears. So even if they had invested the $100 million at that mall, it basically did not belong there.

 

The tragedy is that this company should have been folded years ago: liquidated. Declining same store sales, lack of appeal by consumers for the stores, poor inventory turnover, poor profitability, etc. did not begin with the advent of Internet shopping. The decline of a retail chain is well documented with turnovers almost never occuring. I have seen Gap stabilizing but, that is about it. Back then, there was a good amount of value in the real estate and other assets. For example, these stores in the Vancouver area would have generated top dollar.

 

Unfortunately, Lampert blew a lot of money buying back the shares at very high prices, then kept on dreaming with an internet concept while depleting the stores of any resource and created a sink hole.

 

I mentioned tragedy because I recall this notion that firing employees or upon a liquidation would have been a terrible thing to do. Here you can pull some pages from Jack Welch: Straight from the Gut, who rightfully mention that keeping employees into a declining business with no opportunity is a disservice to these employees.

 

Guess what? That is exactly what happened. The people who stuck at Sears ended up with a demoralizing job and now to find a new one must be quite difficult because who wants to employ people from a failure? Are they motivated employees? Do they have special skills adapted to today's retail environment?

 

Cardboard

 

I absolutely agree Cardboard!  I'm not saying that Sears in it's current form was salvageable.  But there were alot of mistakes made by Lampert, including siphoning off most of the cash, that lead to Sears Canada's demise. 

 

Sears was not going to become Nordstroms...but it certainly could have taken a page and learned to evolve.  It certainly could have morphed into Target after selling off the appliance, hardware and furniture businesses and focusing on housewares, apparel and common goods.  Or focused on the mid-market regions where they were the primary department store.  They chose to do neither! 

 

They could have certainly taken a page from Nordstroms and leased off much of the space, while downsizing the retail portion.  Again, they didn't do any of that until they had no choice.  And by that point, Lampert had been buying back the U.S. stock from $200 down!  Cheers!

[Cigarbutt]

And now Sears retirees may have to take a hard look at their finances.

http://www.cbc.ca/news/business/sears-pension-reduced-1.4289380

 

But you have to keep those with special skills on board "as the situation could worsen without them".

http://torontosun.com/2017/07/14/sears-canadas-92-million-retention-bonuses-for-execs-absolutely-unacceptable-laid-off-worker-says/wcm/9619e8b8-4b2c-4d2b-bf81-a491a750284a

 

 

 

[Parsad]

And now Sears retirees may have to take a hard look at their finances.

http://www.cbc.ca/news/business/sears-pension-reduced-1.4289380

 

But you have to keep those with special skills on board "as the situation could worsen without them".

http://torontosun.com/2017/07/14/sears-canadas-92-million-retention-bonuses-for-execs-absolutely-unacceptable-laid-off-worker-says/wcm/9619e8b8-4b2c-4d2b-bf81-a491a750284a

 

Yeah, in my opinion, this should be illegal.  Pensions should be first in line creditors, alongside banks, etc.  Spend 20 years working for a company and they keep your pension underfunded for half of that time and then seek creditor protection!  The executives should have to eat the losses on their bonuses as well!  Cheers!

[doughishere]

eddie has caused a lot of headaches over the years.

 

http://www.planadviser.com/Second-Sears-Stock-Drop-Suit-Includes-Puerto-Rico-Plan/

[OracleofCarolina]

Ron  Johnson is a close second for worst performance in retailing with his work at JC Penney...but most agree, SHLD and “shop your way” are retailing disasters!

[adesigar]

Messy Canadian Shoppers. :P

 

http://www.businessinsider.com/sears-clearance-sales-canada-chaos-2017-10

 

 

[Greyhound]

An anonymous post on thelayoff.com a couple of days ago. Seems authentic but cannot be confirmed.

 

Breaking my silence

I want to speak directly to those of you on this board who are employees of Sears. I work at HE and no, I’m not here to troll and no we don’t monitor this website or have people post on it to “rah-rah” about the company.

 

Truth be told I only heard about this website a few weeks ago and began checking it a few times a week. I wanted to come on here and clear up some of the many misconceptions about the company.

 

First the recent Whirlpool news. We did try to negotiate w/Whirlpool for several months, however they were insistent on charging us 15-20% over what they are charging certain competitors. At the end of the day we had no choice but to drop them from our lineup.

 

This in turn has caused a massive drop in the market cap of whirlpool, today their CEO tried hitting us back which has caused a drop in SHLD market cap however I suspect that will rebound within the next few days as our liquidity position is more than ample for the foreseeable future and that is the markets primary concern regarding SHLD. As we speak SHLD is moving up off its lows and WHR continues its descent, now down about 11%. As a result of our dropping WHR from our lineup they were forced to lower their market forward EPS projections and it is driving them down substantially.

 

Believe me we would like nothing more than to continue to work with WHR however they cannot merely take advantage of us. We have been a loyal partner for a century and have never had so much as a late payment. Whirlpool would not be in business today if it were not for Sears & Roebuck. Recently the quality of WHR products has also been a growing concern as well.

 

For the last week I have witnessed posts on this site implying that WHR was cutting off SHLD and the doom and gloom etc. this is simply not the case. WHR needs SHLD more than we need them.

 

There is substantial misinformation being spread to our employees on this website. Yes, this has been a difficult year. Yes we face challenges as all retailers do in the current environment. Bankruptcy however is not imminent nor is it something Mr. Lampert is even considering at this juncture. Please take these rumors with a large grain of salt.

 

Our transformation has been slower and more difficult than anyone could have imagined. However we have made progress. Through 2018 we will continue our efforts to remodel and enhance our stores. New POS systems have been in development to eliminate the bottlenecks in store and we hope to deploy late 2018 based on cash flow. Also you will see an expansion of our smaller format stores - in particular the continued development of the Pharr, Tx model as well as Fort Collins style of stores. More information about this will be on Pebble in the near future.

 

At HE we do think of all of our associates as family. While we have been focused on the transformation we have probably not been paying enough attention to morale. I’m sorry for that. When I looked at this website and saw some of the posts I realized we were letting some of you down. We will try to do more and do it better.

 

As chairman Lampert said a few months ago, we are fighting like hell to save this company. And together we will.

 

One more thing. A lot of you aren’t aware but Eddie Lampert wasn’t born into money. His father died when he was young and his mother worked retail at the counter at saks. Eddie Lampert did his part going to high school and working in a warehouse nights and weekends to help make ends meet. He only went to college on a partial scholarship and a lot of financial aid and became the success he is today through hard work. He wasn’t born with a silver spoon in his mouth. He’s fighting too and he’s standing right there with you.

 

Best wishes for a successful holiday season to all of you and here’s to the beginning of the new Sears.

 

Thoughts?

[oddballstocks]

An anonymous post on thelayoff.com a couple of days ago. Seems authentic but cannot be confirmed.

 

Breaking my silence

I want to speak directly to those of you on this board who are employees of Sears. I work at HE and no, I’m not here to troll and no we don’t monitor this website or have people post on it to “rah-rah” about the company.

 

Truth be told I only heard about this website a few weeks ago and began checking it a few times a week. I wanted to come on here and clear up some of the many misconceptions about the company.

 

First the recent Whirlpool news. We did try to negotiate w/Whirlpool for several months, however they were insistent on charging us 15-20% over what they are charging certain competitors. At the end of the day we had no choice but to drop them from our lineup.

 

This in turn has caused a massive drop in the market cap of whirlpool, today their CEO tried hitting us back which has caused a drop in SHLD market cap however I suspect that will rebound within the next few days as our liquidity position is more than ample for the foreseeable future and that is the markets primary concern regarding SHLD. As we speak SHLD is moving up off its lows and WHR continues its descent, now down about 11%. As a result of our dropping WHR from our lineup they were forced to lower their market forward EPS projections and it is driving them down substantially.

 

Believe me we would like nothing more than to continue to work with WHR however they cannot merely take advantage of us. We have been a loyal partner for a century and have never had so much as a late payment. Whirlpool would not be in business today if it were not for Sears & Roebuck. Recently the quality of WHR products has also been a growing concern as well.

 

For the last week I have witnessed posts on this site implying that WHR was cutting off SHLD and the doom and gloom etc. this is simply not the case. WHR needs SHLD more than we need them.

 

There is substantial misinformation being spread to our employees on this website. Yes, this has been a difficult year. Yes we face challenges as all retailers do in the current environment. Bankruptcy however is not imminent nor is it something Mr. Lampert is even considering at this juncture. Please take these rumors with a large grain of salt.

 

Our transformation has been slower and more difficult than anyone could have imagined. However we have made progress. Through 2018 we will continue our efforts to remodel and enhance our stores. New POS systems have been in development to eliminate the bottlenecks in store and we hope to deploy late 2018 based on cash flow. Also you will see an expansion of our smaller format stores - in particular the continued development of the Pharr, Tx model as well as Fort Collins style of stores. More information about this will be on Pebble in the near future.

 

At HE we do think of all of our associates as family. While we have been focused on the transformation we have probably not been paying enough attention to morale. I’m sorry for that. When I looked at this website and saw some of the posts I realized we were letting some of you down. We will try to do more and do it better.

 

As chairman Lampert said a few months ago, we are fighting like hell to save this company. And together we will.

 

One more thing. A lot of you aren’t aware but Eddie Lampert wasn’t born into money. His father died when he was young and his mother worked retail at the counter at saks. Eddie Lampert did his part going to high school and working in a warehouse nights and weekends to help make ends meet. He only went to college on a partial scholarship and a lot of financial aid and became the success he is today through hard work. He wasn’t born with a silver spoon in his mouth. He’s fighting too and he’s standing right there with you.

 

Best wishes for a successful holiday season to all of you and here’s to the beginning of the new Sears.

 

Thoughts?

 

Thanks for finding this.  I have no dog in this fight, but I just want to say that too many times investors have trouble grasping the human element in these things.  For everyone at Sears this is their job, it puts food on the table.  I don't doubt this is true, I've seen similar emails for other private companies from top execs.  The story is always the same, transformation is taking longer, we forgot about the grunts, we're sorry.  I think whomever wrote this really is sorry, but unfortunately there isn't much they can do either.

 

Sears is like a giant freighter cruising straight towards the shores.  Everyone on board is working like crazy to get the direction changed.  But big ships move slow and don't change directions quickly.  Some on board decided they could change direction quicker if they chopped it into three boats, and it seems like the minions are working to get that to happen.  But ultimately it will probably crash.  To keep the analogy going.  The thing is ESL has a giant paddle and while he can't stop it, he's slowed the speed of demise.

 

Ultimate the equity is probably a donut.  But I think savvy investors will be able to profit from some of the weird stuff elsewhere in the capital structure.

 

I have no doubt this board will still be talking Sears in 2/3/5 years.

[Greyhound]

Anyone pay attention to the WeWork/HBC press release?

 

Beyond the headlines that WeWork was going to buy a Lord and Taylor store for $850m, an interesting observation is that WeWork Property Advisors is going to be taking a preferred share stake in HBC together with starting a leasing arrangement for department store retail space from HBC.

 

 

Agreements with WeWork to lease retail space within select HBC department stores, beginning with the upper floors of the Hudson’s Bay locations on Queen Street in Toronto and Granville Street in Vancouver and Galeria Kaufhof in Frankfurt. HBC currently anticipates minimal impact on the earnings from these locations.

 

This leasing arrangement with HBC deal clearly validates the value of prime department store space  in urban locations.

[Greyhound]

An anonymous post on thelayoff.com a couple of days ago. Seems authentic but cannot be confirmed.

 

Breaking my silence

I want to speak directly to those of you on this board who are employees of Sears. I work at HE and no, I’m not here to troll and no we don’t monitor this website or have people post on it to “rah-rah” about the company.

 

Truth be told I only heard about this website a few weeks ago and began checking it a few times a week. I wanted to come on here and clear up some of the many misconceptions about the company.

 

First the recent Whirlpool news. We did try to negotiate w/Whirlpool for several months, however they were insistent on charging us 15-20% over what they are charging certain competitors. At the end of the day we had no choice but to drop them from our lineup.

 

This in turn has caused a massive drop in the market cap of whirlpool, today their CEO tried hitting us back which has caused a drop in SHLD market cap however I suspect that will rebound within the next few days as our liquidity position is more than ample for the foreseeable future and that is the markets primary concern regarding SHLD. As we speak SHLD is moving up off its lows and WHR continues its descent, now down about 11%. As a result of our dropping WHR from our lineup they were forced to lower their market forward EPS projections and it is driving them down substantially.

 

Believe me we would like nothing more than to continue to work with WHR however they cannot merely take advantage of us. We have been a loyal partner for a century and have never had so much as a late payment. Whirlpool would not be in business today if it were not for Sears & Roebuck. Recently the quality of WHR products has also been a growing concern as well.

 

For the last week I have witnessed posts on this site implying that WHR was cutting off SHLD and the doom and gloom etc. this is simply not the case. WHR needs SHLD more than we need them.

 

There is substantial misinformation being spread to our employees on this website. Yes, this has been a difficult year. Yes we face challenges as all retailers do in the current environment. Bankruptcy however is not imminent nor is it something Mr. Lampert is even considering at this juncture. Please take these rumors with a large grain of salt.

 

Our transformation has been slower and more difficult than anyone could have imagined. However we have made progress. Through 2018 we will continue our efforts to remodel and enhance our stores. New POS systems have been in development to eliminate the bottlenecks in store and we hope to deploy late 2018 based on cash flow. Also you will see an expansion of our smaller format stores - in particular the continued development of the Pharr, Tx model as well as Fort Collins style of stores. More information about this will be on Pebble in the near future.

 

At HE we do think of all of our associates as family. While we have been focused on the transformation we have probably not been paying enough attention to morale. I’m sorry for that. When I looked at this website and saw some of the posts I realized we were letting some of you down. We will try to do more and do it better.

 

As chairman Lampert said a few months ago, we are fighting like hell to save this company. And together we will.

 

One more thing. A lot of you aren’t aware but Eddie Lampert wasn’t born into money. His father died when he was young and his mother worked retail at the counter at saks. Eddie Lampert did his part going to high school and working in a warehouse nights and weekends to help make ends meet. He only went to college on a partial scholarship and a lot of financial aid and became the success he is today through hard work. He wasn’t born with a silver spoon in his mouth. He’s fighting too and he’s standing right there with you.

 

Best wishes for a successful holiday season to all of you and here’s to the beginning of the new Sears.

 

Thoughts?

 

Thanks for finding this.  I have no dog in this fight, but I just want to say that too many times investors have trouble grasping the human element in these things.  For everyone at Sears this is their job, it puts food on the table.  I don't doubt this is true, I've seen similar emails for other private companies from top execs.  The story is always the same, transformation is taking longer, we forgot about the grunts, we're sorry.  I think whomever wrote this really is sorry, but unfortunately there isn't much they can do either.

 

Sears is like a giant freighter cruising straight towards the shores.  Everyone on board is working like crazy to get the direction changed.  But big ships move slow and don't change directions quickly.  Some on board decided they could change direction quicker if they chopped it into three boats, and it seems like the minions are working to get that to happen.  But ultimately it will probably crash.  To keep the analogy going.  The thing is ESL has a giant paddle and while he can't stop it, he's slowed the speed of demise.

 

Ultimate the equity is probably a donut.  But I think savvy investors will be able to profit from some of the weird stuff elsewhere in the capital structure.

 

I have no doubt this board will still be talking Sears in 2/3/5 years.

 

I agree. Its practically impossible to turnaround the retail department store business. Even Warren Buffett acknowledges it with his failed Baltimore department store. He still talks about how difficult it is to change retail sentiment in the 2016 AGM of BRK.

 

Using the analogy of the ship hitting the shore, I think the value in SHLD is in the scrap metal (the real estate) of the ship once the ship hits the shore. Not to mention any other goods on the ship that could be salvaged (their services business etc) once the ship hits the shore.

[Eye4Valu]

I agree with the misinformation component of the post. Bruce described it as being a "psychology" that SHLD cannot be turned around. It seems to propagate with media stories and posts on this board, which by and large are negatively skewed. I respectfully disagree with the negativity, and not because I'm drastically underwater in SHLD,  which I'm not. I noticed another poster brought that up when I stated something positive about SHLD. I think the smaller store concept can work. I believe valuable assets remain. I don't think the equity is a donut, and have decided many posters on this board are part of the crowd which should be ignored. I think many people will be surprised when SHLD posts a profit, but not me. I also don't think Bruce has radically changed his investment style, and think people are letting the market guide them, instead of serve them, both in SHLD and FAIRX. Of course, the naysayers on this board who aren't even 1/4 as successful as Bruce will immediately chime in with more criticism immediately following this post.

[RichardGibbons]

Sears acquired Kmart in Q1, 2005. That means that Lampert has had 12 years to turn around the company, and thus far has not succeeded.

 

12 years is a really long time. I feel like, if there was a plan that was going to work, then the plan would've likely have been found sometime in the previous 12 years. What about the current plan makes you think it's more likely to succeed than not?

 

(I know little about Sears, but just based on failure to find a solution for 12 years would make me put the odds at below 5%. Since you know more about Sears than me, I'm curious what knowledge you have that make you think that that SWAG is wildly wrong.)

[Greyhound]

Sears acquired Kmart in Q1, 2005. That means that Lampert has had 12 years to turn around the company, and thus far has not succeeded.

 

12 years is a really long time. I feel like, if there was a plan that was going to work, then the plan would've likely have been found sometime in the previous 12 years. What about the current plan makes you think it's more likely to succeed than not?

 

(I know little about Sears, but just based on failure to find a solution for 12 years would make me put the odds at below 5%. Since you know more about Sears than me, I'm curious what knowledge you have that make you think that that SWAG is wildly wrong.)

 

 

 

Yes, Eddie has been in control of the company for over 12 years. But put things into perspective. Since acquisition right through Jan 2011, the company on Net Income basis had been profitable. That’s right, right through the Great Recession, it was profitable.

 

Since Jan 2011, the company has had a cumulative horrific loss per share of ~$90. Its been in this period that the company has been selling off assets. More importantly, its been in 2017 that the company has taken the most dramatic steps to right the ship.  These include:

 

Craftsman deal with Stanley

200+ nationally announced and regionally announced store closings,

SYW credit card,

Kenmore partnership with Amazon

1bn of 1.25bn cost savings actioned

 

So far there’s a been a some green shoots appearing. Despite SSS plunge of ~11.5% in the second quarter, adjusted EBITDA actually improved by $124m on a QoQ basis.

 

 

[DTEJD1997]

Sears acquired Kmart in Q1, 2005. That means that Lampert has had 12 years to turn around the company, and thus far has not succeeded.

 

12 years is a really long time. I feel like, if there was a plan that was going to work, then the plan would've likely have been found sometime in the previous 12 years. What about the current plan makes you think it's more likely to succeed than not?

 

(I know little about Sears, but just based on failure to find a solution for 12 years would make me put the odds at below 5%. Since you know more about Sears than me, I'm curious what knowledge you have that make you think that that SWAG is wildly wrong.)

 

I think Lampert is in way over his head on this one.  I've been to maybe somewhat over a dozen and half Sears & Kmarts in various locations and states over the past 18 months.  I am not adverse to going into somewhat "dicey" neighborhoods and situations (where some K-marts are).  EVERY SINGLE STORE I'VE BEEN IN has been a disaster of biblical proportions on the bad end to just VERY poorly run in the best case scenario.  Every thing I've seen with my eyes tells me these guys are getting clobbered.  How exactly are they going to make a "comeback"?  Wal-Mart, Meijers, Costco and other competitors are adequately staffed and run...some of them are even above average!  Just how is Kmart-Sears going to beat their competition?  Forget about "beating" them, how about making an honest run at it?  There is simply no way, no way out for them.

 

It is one thing to look at financials & different scenarios from the comfort of your study or office...it is another thing to go out and actually GET INTO these stores.  Of course, maybe the stores in Michigan, Ohio, North Carolina, and W. Virginia are just exceptionally poorly run...but I doubt it.  I am going to guess what I have seen is representative of the company as a hole.

 

If I polled the board, I would shocked if more than 15% has shopped in a K-Mart in the last year.  I would be surprised if more than 25% has shopped out Sears.

 

How many have been to a Wal-Mart, Costco?  I am going to guess well more than half...

 

SHLD is in a death spiral and I simply don't see how common shareholders get anything other than a "0" eventually.

[dyow]

An anonymous post on thelayoff.com a couple of days ago. Seems authentic but cannot be confirmed.

 

Breaking my silence

I want to speak directly to those of you on this board who are employees of Sears. I work at HE and no, I’m not here to troll and no we don’t monitor this website or have people post on it to “rah-rah” about the company.

 

Truth be told I only heard about this website a few weeks ago and began checking it a few times a week. I wanted to come on here and clear up some of the many misconceptions about the company.

 

First the recent Whirlpool news. We did try to negotiate w/Whirlpool for several months, however they were insistent on charging us 15-20% over what they are charging certain competitors. At the end of the day we had no choice but to drop them from our lineup.

 

This in turn has caused a massive drop in the market cap of whirlpool, today their CEO tried hitting us back which has caused a drop in SHLD market cap however I suspect that will rebound within the next few days as our liquidity position is more than ample for the foreseeable future and that is the markets primary concern regarding SHLD. As we speak SHLD is moving up off its lows and WHR continues its descent, now down about 11%. As a result of our dropping WHR from our lineup they were forced to lower their market forward EPS projections and it is driving them down substantially.

 

Believe me we would like nothing more than to continue to work with WHR however they cannot merely take advantage of us. We have been a loyal partner for a century and have never had so much as a late payment. Whirlpool would not be in business today if it were not for Sears & Roebuck. Recently the quality of WHR products has also been a growing concern as well.

 

For the last week I have witnessed posts on this site implying that WHR was cutting off SHLD and the doom and gloom etc. this is simply not the case. WHR needs SHLD more than we need them.

 

There is substantial misinformation being spread to our employees on this website. Yes, this has been a difficult year. Yes we face challenges as all retailers do in the current environment. Bankruptcy however is not imminent nor is it something Mr. Lampert is even considering at this juncture. Please take these rumors with a large grain of salt.

 

Our transformation has been slower and more difficult than anyone could have imagined. However we have made progress. Through 2018 we will continue our efforts to remodel and enhance our stores. New POS systems have been in development to eliminate the bottlenecks in store and we hope to deploy late 2018 based on cash flow. Also you will see an expansion of our smaller format stores - in particular the continued development of the Pharr, Tx model as well as Fort Collins style of stores. More information about this will be on Pebble in the near future.

 

At HE we do think of all of our associates as family. While we have been focused on the transformation we have probably not been paying enough attention to morale. I’m sorry for that. When I looked at this website and saw some of the posts I realized we were letting some of you down. We will try to do more and do it better.

 

As chairman Lampert said a few months ago, we are fighting like hell to save this company. And together we will.

 

One more thing. A lot of you aren’t aware but Eddie Lampert wasn’t born into money. His father died when he was young and his mother worked retail at the counter at saks. Eddie Lampert did his part going to high school and working in a warehouse nights and weekends to help make ends meet. He only went to college on a partial scholarship and a lot of financial aid and became the success he is today through hard work. He wasn’t born with a silver spoon in his mouth. He’s fighting too and he’s standing right there with you.

 

Best wishes for a successful holiday season to all of you and here’s to the beginning of the new Sears.

 

Thoughts?

 

What is Lampert saying here?  That we go long Sears and short whirlpool? 

 

 

 

 

[ScottHall]

Sears acquired Kmart in Q1, 2005. That means that Lampert has had 12 years to turn around the company, and thus far has not succeeded.

 

12 years is a really long time. I feel like, if there was a plan that was going to work, then the plan would've likely have been found sometime in the previous 12 years. What about the current plan makes you think it's more likely to succeed than not?

 

(I know little about Sears, but just based on failure to find a solution for 12 years would make me put the odds at below 5%. Since you know more about Sears than me, I'm curious what knowledge you have that make you think that that SWAG is wildly wrong.)

 

I think Lampert is in way over his head on this one.  I've been to maybe somewhat over a dozen and half Sears & Kmarts in various locations and states over the past 18 months.  I am not adverse to going into somewhat "dicey" neighborhoods and situations (where some K-marts are).  EVERY SINGLE STORE I'VE BEEN IN has been a disaster of biblical proportions on the bad end to just VERY poorly run in the best case scenario.  Every thing I've seen with my eyes tells me these guys are getting clobbered.  How exactly are they going to make a "comeback"?  Wal-Mart, Meijers, Costco and other competitors are adequately staffed and run...some of them are even above average!  Just how is Kmart-Sears going to beat their competition?  Forget about "beating" them, how about making an honest run at it?  There is simply no way, no way out for them.

 

It is one thing to look at financials & different scenarios from the comfort of your study or office...it is another thing to go out and actually GET INTO these stores.  Of course, maybe the stores in Michigan, Ohio, North Carolina, and W. Virginia are just exceptionally poorly run...but I doubt it.  I am going to guess what I have seen is representative of the company as a hole.

 

If I polled the board, I would shocked if more than 15% has shopped in a K-Mart in the last year.  I would be surprised if more than 25% has shopped out Sears.

 

How many have been to a Wal-Mart, Costco?  I am going to guess well more than half...

 

SHLD is in a death spiral and I simply don't see how common shareholders get anything other than a "0" eventually.

 

Local Sears here in Redding, CA is just as bad. Empty parking lot all the time.

 

I think it's now clear that the bulls were right about Sears. There was a lot of value here. But it was horribly mismanaged and burned away, and now what we're left with is a carcass to be picked at by the vultures.