SHLDQ - Sears Holdings Corp

[Matson125]

When I seen the report this morning I shipped my pants :)

 

 

[Guest hellsten]

I'm still speculating that there's some value left at Sears, but with the market's reaction I'm not so sure.

 

Maybe Sears broke Nasdaq:

http://online.wsj.com/article/SB10001424127887324619504579028873794227410.html

 

Sorry, I have nothing to add that hasn't been discussed already in this thread.

 

I'm also working on my market timing and tea leaf reading skills ;D

[stahleyp]

store sales sucked and people are surprised? :P

[PLynchJr]

Appliance sales sucked.  That surprised me.  Not a good sign.

[heth247]

"To date have generated $287 million in real estate sales proceeds".

 

In the 8-K, I noticed this:

Gain on sales of assets: (241).

 

I guess this probably means that the properties were carried at 46 Million at book, and got sold for 287 Million.

I bet this is the only good news, which is that the real estate assets do worth something.

 

Other than that, I looked at the guarantor vs non-guarantor breakdown in the 10-K again, and I felt like it is more misleading than actually providing a good picture of how assets and liabilities are separated. I think it makes more sense to look at the structure from a top-down approach and then check if any sub's liability is guranteed by the parent.

 

This again confirms the value of the RE. Btw, Bishop Research is going to publish another few Seeking Alpha articles on this topic, possibly as soon as next week.

 

 

[stahleyp]

Appliance sales sucked.  That surprised me.  Not a good sign.

 

Right, but my understanding of the thesis is that this is more of an asset investment. Berkowitz talks about that. If Lampert can turnaround it would be a "grand slam."

 

This one is a few years old but here is the quote:

 

http://money.usnews.com/money/business-economy/articles/2008/02/29/a-portfolio-warren-buffett-would-love?page=2

 

"Of course, the best thing that could happen would be that he turns around Sears and Kmart and it's a grand-slam home run. The worst thing that happens is he gives it his best shot and starts to find higher and better uses for all of the assets, from land to trademarks to online. If you can see three or four different ways where you can make an awful lot of money with a guy who has a record of making an awful lot of money, it's not such a bad thing."

[premfan]

Sitting back with my popcorn and green tea. Great case study on why turnarounds rarely turn or if they do turn its hard to know when.

 

Traditional turnarounds rarely work.  However, in the words of the well-respected Plan Maestro:  "Now, if they decide to liquidate abruptly or in willful steps … well, that’s not a turnaround." http://variantperceptions.wordpress.com/2012/12/04/buffett-on-the-imperfect-turnaround/

 

In my opinion this is not a traditional turnaround (like JCP is).  There are highly valuable assets behind Sears Holdings.  The success of this investment isn't dependent on retail operations, that is a bonus in my opinion.  If SHLD decided to sell stores or sub-lease them at today's market rates, liquidate their inventory ($4.8B net of payables), sell their brands, etc. I believe they'd easily extract $50+ net of liabilities per share... likely $100 or more.

 

 

Yes all true. BUT in the real world you cant close down all the underperforming stores all at once. It takes ALOT of time to execute the downsizing correctly. Its a battle between the operations bleeding cash and closing down horrible stores. Why lock up your capital in something that is going to take a long time to occur? If you ( and I believe 80 percent of the investors) are investing only in the hope that his will become an capital allocation vehicle ala Berkshire its much simpler and prudent to wait for the shit to hit the fan. Until they achieve the right balance of closing stores and operation improvement. Until then ( if ever) this is dead money and a perfect trading stock. This stock will never  become anything like a Berkshire type vehicle until the right balance is made between closing stores and operation improvement. This can take a decade. Are you willing to hold this stock for a decade based on asset valuation? If so probadly better to buy illiquid land in Wyoming, north Dakota, and south Dakota. Hold the land for a decade and because of the natural gas boom in those areas. You will kill it because hotels need land to build to supply all the contractors that will have to be moved there to do drilling.

[hyten1]

i still have a very small speculative/waiting for next pop/short squeeze play

 

i understand this is mostly a RE/asset play. But i believe fundamentally the retail real estate landscape has change due to the internet. (a chunk of shopping, buying, etc that use to do in stores are now done online). sure don't give me wrong retail real estate are still needed, people will still shop in stores, but just not the same way or as much (per person at least). sure the entire pie can grow etc. also the RE can be repurpose etc.

 

now i just don't know how to quantify it?

 

another thing that trouble me was recently some company (i forget who, credit sussie?) did an analysis using JCP as comp and came up with... what was it $16 to $60 in RE value? that was not very encouraging.

 

will time be a friend to SHLD or the enemy? would SHLD's real estate increase or decrease in value over time (in the next 5 to 10 years).

i am sure some will increase, but as a whole?

 

sure if you wait long enough, RE will prob increase in value :)

 

 

 

hy

 

[premfan]

i still have a very small speculative/waiting for next pop/short squeeze play

 

i understand this is mostly a RE/asset play. But i believe fundamentally the retail real estate landscape has change due to the internet. (a chunk of shopping, buying, etc that use to do in stores are now done online). sure don't give me wrong retail real estate are still needed, people will still shop in stores, but just not the same way or as much (per person at least). sure the entire pie can grow etc.

 

now i just don't know how to quantify it?

 

 

hy

 

Perfect. Sears is the ideal trading stock if that's a game you want to play. I totally understand the rationale to trade this stock. I don't understand people trying to frame this as an investment. Currently this is not an investment. People are just imaging future events that have no bases in reality. The perfect future where eddie rights the ship and compounds 25 plus percent for 20 or 30 years. Maybe it will happen. Lets wait until the ship stops sinking and then make the long term bet. Say the ship stops sinking in 3 years. You still have 20 or so years to partner up if you still trust eddie.

[CorpRaider]

I expected another horrendous quarter given what everyone else has said, but if they're going to suck at retailing appliances, they need to sell that Kenmore brand to samsung, maytag, GE, tata industries or Lowes before they let it waste away.

[merkhet]

ERICOPOLY, I think I bought your shares @ $40 today.

 

We've spent a lot of time looking at Sears from a fundamental standpoint, and I think the consensus is that there is probably a lot of hidden value but we aren't sure when that will be unlocked.

 

I think it's instructive to look at the liquidity profile as well. By my calculations, somewhere between 85% and 295% of the float is sold short right now.

 

I'm currently traveling to Montreal, but I'll try to expound more later.

[BTShine]

Appliance sales sucked.  That surprised me.  Not a good sign.

 

That's the one big disappointment.  Everything else was either expected (SSS, losses, margins) or encouraging (apparel sales, SYWR traction). 

[ERICOPOLY]

ERICOPOLY, I think I bought your shares @ $40 today.

 

We've spent a lot of time looking at Sears from a fundamental standpoint, and I think the consensus is that there is probably a lot of hidden value but we aren't sure when that will be unlocked.

 

I think it's instructive to look at the liquidity profile as well. By my calculations, somewhere between 85% and 295% of the float is sold short right now.

 

I'm currently traveling to Montreal, but I'll try to expound more later.

 

My thoughts are that it's probably worth at least $120 in assets.  However if an oil company has $5b of oil in the ground it doesn't trade for $5b necessarily.  Rather, it trades roughly based upon the speed that oil comes to the surface.

[constructive]

Its a battle between the operations bleeding cash and closing down horrible stores.

 

The problem is, store profitability probably has some correlation with real estate value. Closing unprofitable stores is a good idea but it doesn't provide that much cash flow on average. To generate a lot of cash, on average you have to sell more profitable stores.

[ERICOPOLY]

Appliance sales sucked.  That surprised me.  Not a good sign.

 

To find out why, just remember where people go for home improvement projects these days.  It's not Sears, it's Lowe's and Home Depot.

 

And look at the home page for Home Depot today:

 

"10% off Appliances.  Free delivery and haul away."

 

Sears could cease to exist tonight and shoppers tomorrow morning could find everything they need elsewhere, in nicer stores with helpful salespeople and better organized searches on websites.  In fact, you'd probably be doing the habitual Sears shoppers a favor.

[Guest wellmont]

i got back from hd 20 minutes ago. it was really jumping for a thursday. lots of projects going on. lots of wood being bought. lots of stuff being bought here that used to be bought at sears.

 

the old bull case on sears was it was a fantastic housing recovery play. their appliance business had lots of operating leverage. well that bull case is down the drain. and we run the risk of the echo bubble in housing correcting again, and then where would sears be? now the bull case is the "massive" short position and Eddie is a genius, albeit one that is buried in an incredibly poor equity position.

[CorpRaider]

Selling the stores is ok, but I get more excited to see the leases to WFMI. 

[hyten1]

but i have to say i am surprise

 

sears keep gaining sales in apparel? (who buys apparel from sears?, i know i don't) yet lose in appliances?

 

i guess its expected, appliances is more a commodity (same appliance is same appliance no matter where you get it, it all comes down to prices and service)

 

but apparel can have more variations, as long has they have the right style and provide the value. sears should concentrate on items that cannot easily be replace by the internet. not saying anything that is not common knowledge.

 

EDIT: but i am puzzle, i don't see why sears can't compete more effectively in appliances. I live in NYC, PC Richards is everywhere and they mainly sell appliances and i am sure their cost is pretty high considering their RE locations? if PC richards can compete why can't sears.

 

maybe it has to do to the fact, kenmore is/will be available at costco and ace hardware? one less reason to go to sears for costco/ace hardware customers.

 

hy

[Liberty]

EDIT: but i am puzzle, i don't see why sears can't compete more effectively in appliances. I live in NYC, PC Richards is everywhere and they mainly sell appliances and i am sure their cost is pretty high considering their RE locations? if PC richards can compete why can't sears.

 

maybe it has to do to the fact, kenmore is/will be available at costco and ace hardware? one less reason to go to sears for costco/ace hardware customers.

 

That's a good point. Part of the bull case is "They can license these brands and sell them everywhere!". But if they do, it's one less reason to go into a Sears store, and people who go in for a Kenmore or power drill might come out with some clothes and kitchen utensils...

[hyten1]

sorry still puzzle, i wish i know more the inner workings of shld

 

keep increase in apparel?!? (what about profit in this area)

 

isn't apparel one of the harder areas to compete in? what are they doing at shld that kept seeing increase in apparel? maybe its beacuse jcp is dying.

 

shld should capitalize on jcp's troubles and strengthen their apparel, home, make ups etc.

 

EDIT: honestly its a little annoying and disappointing. pc richards can compete, and best buy surging, yet shld just keep on trailing off... wtf

 

[Kraven]

but i have to say i am surprise

 

sears keep gaining sales in apparel? (who buys apparel from sears?, i know i don't) yet lose in appliances?

 

 

You probably weren't aware that they have the Kardashian line.  Nuff said.

[muscleman]

sorry still puzzle, i wish i know more the inner workings of shld

 

keep increase in apparel?!? (what about profit in this area)

 

isn't apparel one of the harder areas to compete in? what are they doing at shld that kept seeing increase in apparel? maybe its beacuse jcp is dying.

 

shld should capitalize on jcp's troubles and strengthen their apparel, home, make ups etc.

 

EDIT: honestly its a little annoying and disappointing. pc richards can compete, and best buy surging, yet shld just keep on trailing off... wtf

 

Also there is no news about ubiquity and the SHC realty subs. Are they doing any business right now?

[muscleman]

"To date have generated $287 million in real estate sales proceeds".

 

In the 8-K, I noticed this:

Gain on sales of assets: (241).

 

I guess this probably means that the properties were carried at 46 Million at book, and got sold for 287 Million.

I bet this is the only good news, which is that the real estate assets do worth something.

 

Other than that, I looked at the guarantor vs non-guarantor breakdown in the 10-K again, and I felt like it is more misleading than actually providing a good picture of how assets and liabilities are separated. I think it makes more sense to look at the structure from a top-down approach and then check if any sub's liability is guranteed by the parent.

 

This again confirms the value of the RE. Btw, Bishop Research is going to publish another few Seeking Alpha articles on this topic, possibly as soon as next week.

 

I saw the first article by Bishop Research. Did you know this guy personally? How did you know he is writing more articles on SHLD?

I would hope it uncovers the corp structures and how assets are separated from the liabilities. Right now there is simply not enough info to figure out what is going on.

[Luke 532]

I sold out at $40.

 

Eric,

 

I would be interested to hear why you sold, if you don't mind sharing.  Was it because you were looking for a big short squeeze or a small loss and didn't want to wait around for something in between?  Or was there something in the report that actually bothered you.

 

I'm adding to my call position (that got "hosed" today, to use the technical jargon) and happy to hold me stock as well, but always interested if there is a good reason to sell that I don't know about.

 

Thanks,

 

t-bone1

 

I have no particularly new insights that I haven't already expressed.  I woke up in a bad mood perhaps.

 

It was a 20% position.

 

Eric, I'm curious of your strategy.  I recall you buying a few months ago, then selling to take the tax loss, then buying 31 days later, then selling today.  Do you typically trade your portfolio this actively or is it more "I like the upside but I'm just unsure as to when it will be unlocked" kind of thing?  Just caught me by surprise you were trading it being 1/5th of your portfolio.  When I have positions that size (as I do with SHLD) it's due to a certain amount of conviction and I might trade options around it, but I leave the core position intact.

[BTShine]

I sold out at $40.

 

Eric,

 

I would be interested to hear why you sold, if you don't mind sharing.  Was it because you were looking for a big short squeeze or a small loss and didn't want to wait around for something in between?  Or was there something in the report that actually bothered you.

 

I'm adding to my call position (that got "hosed" today, to use the technical jargon) and happy to hold me stock as well, but always interested if there is a good reason to sell that I don't know about.

 

Thanks,

 

t-bone1

 

I have no particularly new insights that I haven't already expressed.  I woke up in a bad mood perhaps.

 

It was a 20% position.

 

Eric, I'm curious of your strategy.  I recall you buying a few months ago, then selling to take the tax loss, then buying 31 days later, then selling today.  Do you typically trade your portfolio this actively or is it more "I like the upside but I'm just unsure as to when it will be unlocked" kind of thing?  Just caught me by surprise you were trading it being 1/5th of your portfolio.  When I have positions that size (as I do with SHLD) it's due to a certain amount of conviction and I might trade options around it, but I leave the core position intact.

 

+1 

 

Great question.