SHLDQ - Sears Holdings Corp

[muscleman]

http://www.seritage.com/leasing.aspx

 

Anything new?  Or were you just posting that for people that hadn't seen the site before?

 

"Seritage ramps-up National Road Show with Angie Comstock leading portfolio reviews with national retail chains." 

 

Eddie might be done messing around.

 

 

I would like to get more info in the 10-Q about the breakdown of revenues. How much is from Seritage? How much is from ubiquity? How much is from roof top leasing?

Right now there is no way to watch the speed of transformation going on because there is no disclosure.

[turar]

Amazon definitely has the best search algorithm and classification of products.

 

I'm speculating here, but it looks like the classification of items at Sears and SYW is far from optimal, and their search engine is simply searching the title and description. This will give you the random results you see at Sears.

 

What they need to do is classify products better and tune the search algorithm slightly:

 

The category for the #1 result at Sears:

Tools > Lighting > Flashlights & Lanterns

 

Category for the #1 result at Amazon:

Home Improvement > Electrical > Light Bulbs > LED Bulbs

 

This should be a fairly easy fix. The biggest problem is the amount of items being sold at Sears; if Amazon solved this and they have let's say 100 million items and Sears have let's say 1 million items, then I don't understand why it isn't being fixed other than incompetence.

 

This is what worries me; why hasn't anyone noticed this at Sears and fixed it? I'm speculating that this is because they don't have a management and engineering team that knows what they're doing. Even if they tried to attract top talent, they would have difficulties attracting the best because they work for Amazon and other sexier companies.

 

In my opinion they need to hire an outside company to build and fix their online products.

 

On a positive side, search is really easy to fix. Overstock had similar problems a year or two ago, but now they seem to have a good team in place which is working on improving algorithms. AFAIK, this is one of the many reasons Overstock is again growing:

http://www.overstock.com/search?keywords=led+bulb&SearchType=Header

 

To summarize, my opinion is that Sears and Eddie Lampert doesn't understand online (as well as their competitors)… SYW and Sears.com are proof of that.

 

This is again proof that Eddie's spreadsheets have not helped him engineer a turn around, so far…

 

Amazon's search is powered by A9, a full-blown search engine that was designed to compete with Google, but failed. Now they're a separate wholly owned company focused largely on improving Amazon product search: http://www.a9.com/ 

So yeah, Sears is out of their league with Amazon in terms of search, but what about other retailers?

http://en.wikipedia.org/wiki/A9.com

[krazeenyc]

http://www.seritage.com/leasing.aspx

 

Anything new?  Or were you just posting that for people that hadn't seen the site before?

 

"Seritage ramps-up National Road Show with Angie Comstock leading portfolio reviews with national retail chains." 

 

Eddie might be done messing around.

 

 

I would like to get more info in the 10-Q about the breakdown of revenues. How much is from Seritage? How much is from ubiquity? How much is from roof top leasing?

Right now there is no way to watch the speed of transformation going on because there is no disclosure.

 

I own what I consider a meaningful position appx 5%. it's not HUGE, by any means. I'm not adding any shares until I see more meaningful movement on real estate.  The reason I even entered this position is seeing the CBL sales and Canada Sale this year after seeing the GGP sales and other closing last year.  If same store sales tick up slightly at Sears/Kmart I don't plan to add to my position even if the stock stays flat or moves down slightly.  I think Ubiquity and Seritage are both moving very very slowly. In fact I think they ended up losing  bunch of sublease revenue when they sold the ala moana store as there were many small stores that sublet from that space it was a 300,000 sq ft store in a mall that produced $1200 + per sq ft of sales. Ubiquity is just starting -- I think they said they have 1 meaningful tenant signed up... but I've heard nothing since then.

 

In their 10-K CBL gives you a good idea of how much the Sears stores in CBLs malls are worth to them -- if they renovated them for smaller stores and leased them out.  . But even if those stores are worth X, it's not like CBL could buy them all out right away -- nor would it necessarily make sense for sears to do so.  For the most part, it's in the mall owners best interests to buy out Sears or have sears sublease their space to generate more traffic to the mall, b/c sears is not doing a great job. (To be fair, Sears still does a lot of sales their footprint is just too huge to do it efficiently).

 

I'm not an Eddie Lampert fan or anything, but I assume he's a good investor based on his track record. I also assume, that if he keeps buying more SHLD and he's an insider with intimate knowledge of what the properties are actually worth-- it is a good sign. Who knows when the turning point will be, when the real estate will begin generating meaningful profits with a small retailer attached, or if it will ever get to that point, but if it does the stock will rise and rise fast. Given the current price, I'm willing to hold my position 5% and enjoy the wild ride. (My entry is slightly under $41 or so and I only bought it this summer -- If I owned as long as Bruce or some other holders I might sing a different tune -- I know patience is not my strongest quality as an investor. )

[thecynic]

 

Alexander's did that back in the early 1990's (1992?).  I believe Steven Roth of Vornado took them through the process.  http://www.nytimes.com/1992/05/16/business/alexander-s-shuts-all-its-11-stores-plans-liquidation.html?pagewanted=all&src=pm

 

http://www.google.com/finance?q=NYSE%3AALX&ei=ro0WUoi7I4WCrQHQ3AE

 

If you look at the stock price, you can see that the equity never lost its value through the bankrupcty process (similar to GGP in recent years).  Clearly, Sears has many more stores than the 11 Alexander's stores, so they are different in that way.

 

Thanks for the link! I found some of the quotes quite interesting comparing then & now:

"..But real estate brokers were wringing their hands yesterday at the thought of hundreds of thousands of feet of more retail space added to the already depressed market. .." (Even so the stock did not go to 0)

"..Over the last decade, Alexander's managers and owners became more interested in developing the company's real estate and allowed the retailing business to decline, failing to address ever-intensifying competition from new discount stores.." (Now the competitors have changed to online stores)

".."This is not just an individual story about a retailer fallen on hard times but another very sad part of the difficulties of the whole retail scene in New York City," said Samuel M. Ehrenhalt, regional commissioner of the Bureau of Labor Statistics, a division of the Labor Department.."

 

Another interesting story I found was Mervyn's which had ~180 stores [ http://en.wikipedia.org/wiki/Mervyns ] when it filed. From the wikipedia article, "..When Sun Capital Partners, Cerberus Capital Management, and Lubert-Adler bought Mervyn's, the new owners changed the structure of the company, dividing it into separate real estate and retail businesses. In essence, the Mervyn's real estate arm charged retailer Mervyn's huge rents for its department store space..."

 

It seems to me that there are enough instances where value for equity was preserved old companies carrying real estate at understated prices went under.

 

I bought a 5% position today. In the end, I thought the price was too good to pass up for being partners with some of the great investing minds.

[stahleyp]

I like the analogy, Eric.  Quick question though. If the oil company has $120 billion of oil in the ground, it it rational for the market to value it at $5 billion? Maybe it does and, like you smartly pointed it out, the market counts what oil brings to the market.

 

It absolutely does.  As an example, if you take Apache's proved reserves only (not even counting any P2 or P3) as of 12/31/2012 and multiply those reserves times spot price as of 12/31/2012, you get something like 5.5x enterprise value.  Why is this? Because Apache's reserves might have a weighted average life of like 35 years. 

 

This is why I stressed the time factor so much in my previous posts.  At a 7.0% discount rate, your 10 year PV factor is ~50%.  Meaning that $100/share you get 10 years from now is really $50/share. 

 

I vaguely recall (and maybe someone else can jump in) but Buffett once used the example of buying a REIT at less than book value as being a horrible investment because you couldn't force a liquidation and were you essentially became stuck in an illiquid situation.

 

Like I said before, you can't take your proportion of net assets of a balance sheet at fair value home with you.  You either (a) trust management to get an adequate ROE to compensate you for your equity investment or (b) liquidate the balance sheet in a timely manner to secure an IRR greater than your opportunity cost.  If you can't come up with a reasonable explanation as to how either of these can be achieved, then you're not investing.  You are speculating.

 

Right, but what's the right discount rate? How much of the value is artificially driven down by the shorts (somewhat similar to Fairfax a few years back - to be fair I suppose you could also say it's artificially boosted by the long term holders)? I don't know the answer to this. I do know though that you have a ton of real estate that has some value to it (potentially much more than the current MV) with a smart guy and a really good work ethic (from what I can tell) working for free. It wouldn't take much to move the needle in a large manner. Yes, you're  taking a risk. Any investment has risk and unknowns. That's what creates opportunities. If you have someone that is betting their career and a large amount of their personal net worth into something, there is a reasonable chance it could work out wonderfully.

[txlaw]

Here is revenue growth for Lowes over the last 5 yrs.

 

http://ycharts.com/companies/LOW/revenue_growth

 

You can check out most retailers. They have been adding to stores but revenues haven't moved up that much in my opinion.

 

yeah but lets focus on profits. the idea of NOT growing was to be profitable. He made a trade off. He makes Zero ebitda.

 

That's why I thought of the oil analogy.  If the profit comes from asset sales, then value it on that income stream (rather than a sum of all assets less liabilities).  You effectively have a real estate mine.

 

The analogy you've made would be more apt for a real estate development company that develops land, putting capital in to develop the infrastructure and essential facilities, and then sells it to developers who will build rentable buildings and businesses on top of that property. 

 

When a RE company has a business model like that, you are right that it is essentially a DCF.  The value of the company is the NPV of cash inflows and outflows until the time at which the company runs out of RE inventory.

 

With SHLD, the RE operations are different.  It's a hybrid of a master planned community developer, land banker, and income property owner.  Additionally, you have a retail business running on top of the RE, which has some amount of value that is dependent on the RE footprint of the business.

 

So you cannot simply assess SHLD's value by thinking about it like an O&G company, where it is depleting RE inventory. 

 

However, you are correct to indicate that opportunity cost matters. 

 

Some would say that ESL should have liquidated quickly and extracted all the cash upfront for reinvestment into unrelated opportunities in order to maximize shareholder value.  ESL will say that he maximized the value of all of the assets -- the RE, owned brands, appliance market share, online presence, etc. -- by engaging in slow liquidation (what I would call run off), thereby resulting in more value over the long term. 

 

Perhaps the truth lies somewhere in between?

[tooskinneejs]

stahleyp, I have not read the Bishop report (as I don't want to joing Seeking Alpha to see the second page).  I'm guessing the report discusses the R/E values underlying the operations.  What are these R/E values, how are they reliably determined, and are they more than the $11.2 billion of contractual obligations as of February 2, 2013?  I'm asking this rhetorically.

[stahleyp]

stahleyp, I have not read the Bishop report (as I don't want to joing Seeking Alpha to see the second page).  I'm guessing the report discusses the R/E values underlying the operations.  What are these R/E values, how are they reliably determined, and are they more than the $11.2 billion of contractual obligations as of February 2, 2013?  I'm asking this rhetorically.

 

The report goes in to a good amount of detail (in my opinion worth the hassle of a few emails - especially if you block them).

 

Here's a small piece:

 

"At Sears Holdings' current $4.984 billion market capitalization, with $16.475 billion in total liabilities, this infers total assets and shareholder equity of $21.459 billion. By subtracting the $7.5 billion of inventory from this total, that leaves $13.959 billion for the remaining assets. Leaving aside estimated values of Land's End and KCD, LP LLC, and focusing solely on the real estate values, a clearer picture of the real value of Sears Holdings begins to emerge. When this $13.959 billion figure is divided by the 250 million square feet of retail commercial real estate Sears Holdings either owns or leases at its 2,270 stores, the result is a price of $55.83 per square foot, which - as detailed earlier in this report, according to LoopNet - corresponds to the current average market sales price per square foot for retail space in economically distressed Detroit, Michigan. Clearly, based on the current $4.984 billion market capitalization of Sears Holdings, this company is substantially undervalued at $46.84 per share based on the value of its underlying assets."

[CorpRaider]

Here is revenue growth for Lowes over the last 5 yrs.

 

http://ycharts.com/companies/LOW/revenue_growth

 

You can check out most retailers. They have been adding to stores but revenues haven't moved up that much in my opinion.

 

yeah but lets focus on profits. the idea of NOT growing was to be profitable. He made a trade off. He makes Zero ebitda.

 

That's why I thought of the oil analogy.  If the profit comes from asset sales, then value it on that income stream (rather than a sum of all assets less liabilities).  You effectively have a real estate mine.

 

The analogy you've made would be more apt for a real estate development company that develops land, putting capital in to develop the infrastructure and essential facilities, and then sells it to developers who will build rentable buildings and businesses on top of that property. 

 

When a RE company has a business model like that, you are right that it is essentially a DCF.  The value of the company is the NPV of cash inflows and outflows until the time at which the company runs out of RE inventory.

 

With SHLD, the RE operations are different.  It's a hybrid of a master planned community developer, land banker, and income property owner.  Additionally, you have a retail business running on top of the RE, which has some amount of value that is dependent on the RE footprint of the business.

 

So you cannot simply assess SHLD's value by thinking about it like an O&G company, where it is depleting RE inventory. 

 

However, you are correct to indicate that opportunity cost matters. 

 

Some would say that ESL should have liquidated quickly and extracted all the cash upfront for reinvestment into unrelated opportunities in order to maximize shareholder value.  ESL will say that he maximized the value of all of the assets -- the RE, owned brands, appliance market share, online presence, etc. -- by engaging in slow liquidation (what I would call run off), thereby resulting in more value over the long term. 

 

Perhaps the truth lies somewhere in between?

 

Yeah and in fairness to him I doubt he predicted realestatemageddon.  That maybe slowed the plan.

[tooskinneejs]

"At Sears Holdings' current $4.984 billion market capitalization, with $16.475 billion in total liabilities, this infers total assets and shareholder equity of $21.459 billion."

 

Oh boy!  Where to begin?

 

If all I have to my name is $100 cash and an electric bill payable in the amount of $75, my net worth (or "shareholder's equity" in accounting-speak) is $25, right?  And certainly no one would believe I'm worth $125 (the sum of both my $100 in cash AND my net worth of $25), right?

 

And yet, this is exactly the mistake "Bishop" is making in his report.  He's adding (incorrectly) "assets and shareholder equity" together (while ignoring liabilities) to arrive at a figure of $21.459 billion.  But what about those poor, lonely, liabilities?  You can't ignore then.  It's just not right.  After all, they have to be paid.

 

Besides the logical flaw in his calculation, he has also erred by "measuring" stockholders' equity based on market price rather than book value.  By doing so, and then including this figure as part of his basis for computing "price per square foot", he's actually no longer measuring it based on its carrying amount (which is obviously what he was trying to do) on the company's financial statements, but is measuring it in part based on market value of the stock and then comparing this logically flawed calculation right back to market value again.

 

In short, he's made several logical and mathematical mistakes all in attempt to do something that could have been done much more simply:  take the carrying amount of PP&E from the audited balance sheet, divide by square feet, to come up with a carrying value per square foot which he could then compare to Detroit.  Again, even calculating this correctly as I suggest would still have several logical flaws from an investment analysis standpoint.  Namely, it ignores liabilities (both on and off balance sheet) and it spreads a "carrying value per square foot" across square feet that aren't even carried on the balance sheet (i.e., stores under operating leases).

 

This is the problem with Seeking Alpha.  Because the "posts" appear as articles, many assume the content can be relied upon as being accurate and coming from subject matter experts.  Often, that is not the case.

[enoch01]

"At Sears Holdings' current $4.984 billion market capitalization, with $16.475 billion in total liabilities, this infers total assets and shareholder equity of $21.459 billion."

 

Oh boy!  Where to begin?

 

If all I have to my name is $100 cash and an electric bill payable in the amount of $75, my net worth (or "shareholder's equity" in accounting-speak) is $25, right?  And certainly no one would believe I'm worth $125 (the sum of both my $100 in cash AND my net worth of $25), right?

 

And yet, this is exactly the mistake "Bishop" is making in his report.  He's adding (incorrectly) "assets and shareholder equity" together (while ignoring liabilities) to arrive at a figure of $21.459 billion.  But what about those poor, lonely, liabilities?  You can't ignore then.  It's just not right.  After all, they have to be paid.

 

Besides the logical flaw in his calculation, he has also erred by "measuring" stockholders' equity based on market price rather than book value.  By doing so, and then including this figure as part of his basis for computing "price per square foot", he's actually no longer measuring it based on its carrying amount (which is obviously what he was trying to do) on the company's financial statements, but is measuring it in part based on market value of the stock and then comparing this logically flawed calculation right back to market value again.

 

In short, he's made several logical and mathematical mistakes all in attempt to do something that could have been done much more simply:  take the carrying amount of PP&E from the audited balance sheet, divide by square feet, to come up with a carrying value per square foot which he could then compare to Detroit.  Again, even calculating this correctly as I suggest would still have several logical flaws from an investment analysis standpoint.  Namely, it ignores liabilities (both on and off balance sheet) and it spreads a "carrying value per square foot" across square feet that aren't even carried on the balance sheet (i.e., stores under operating leases).

 

This is the problem with Seeking Alpha.  Because the "posts" appear as articles, many assume the content can be relied upon as being accurate and coming from subject matter experts.  Often, that is not the case.

 

Suppose you bought all shares and assumed all liabilities.  Add those 2 numbers together.  Then the question is: what is on the other side of the balance sheet that weighs against that number?  What is the market saying about the asset side of the balance sheet such that it matches the market cap plus assumed liabilities.  That's what "Bishop" is trying to get at.

 

I bought more today.

[Luke 532]

"At Sears Holdings' current $4.984 billion market capitalization, with $16.475 billion in total liabilities, this infers total assets and shareholder equity of $21.459 billion."

 

Oh boy!  Where to begin?

 

If all I have to my name is $100 cash and an electric bill payable in the amount of $75, my net worth (or "shareholder's equity" in accounting-speak) is $25, right?  And certainly no one would believe I'm worth $125 (the sum of both my $100 in cash AND my net worth of $25), right?

 

And yet, this is exactly the mistake "Bishop" is making in his report.  He's adding (incorrectly) "assets and shareholder equity" together (while ignoring liabilities) to arrive at a figure of $21.459 billion.  But what about those poor, lonely, liabilities?  You can't ignore then.  It's just not right.  After all, they have to be paid.

 

Besides the logical flaw in his calculation, he has also erred by "measuring" stockholders' equity based on market price rather than book value.  By doing so, and then including this figure as part of his basis for computing "price per square foot", he's actually no longer measuring it based on its carrying amount (which is obviously what he was trying to do) on the company's financial statements, but is measuring it in part based on market value of the stock and then comparing this logically flawed calculation right back to market value again.

 

In short, he's made several logical and mathematical mistakes all in attempt to do something that could have been done much more simply:  take the carrying amount of PP&E from the audited balance sheet, divide by square feet, to come up with a carrying value per square foot which he could then compare to Detroit.  Again, even calculating this correctly as I suggest would still have several logical flaws from an investment analysis standpoint.  Namely, it ignores liabilities (both on and off balance sheet) and it spreads a "carrying value per square foot" across square feet that aren't even carried on the balance sheet (i.e., stores under operating leases).

 

This is the problem with Seeking Alpha.  Because the "posts" appear as articles, many assume the content can be relied upon as being accurate and coming from subject matter experts.  Often, that is not the case.

 

tooskinneej's, I think what the author was trying to convey was that in a simplistic liquidation scenario the assets - liabilities = market cap... not counting in FCF, revenue, etc... just if everything was liquidated at today's prices, and assuming the market cap represents excess assets over and above all liabilities, then that's how he came up with "market infers 21.459B."

 

Seeking Alpha is awful.  However, this article is actually pretty good.  I make it a point to avoid Seeking Alpha but I do admittedly read everything on the companies I own, so I read this and was pleasantly surprised.  I'd recommend it.

 

By the way, were you in Too Skinnee J's or just a fan?

[stahleyp]

Tooskin,

 

Thanks for your response. I'm looking for the truth so I appreciate any insights you can provide. Rather than pick apart the blurb I posted, don't you feel it would be more prudent to read the article in its entirety? He does a good job of explaining the asset to debt issue.

[CorpRaider]

WSJ says SHLD screwed the pooch by emphasizing LG and Samsung over WHR products.  C'mon Eddie!  I used to like two skinny J's, especially that one track with the empire strikes back theme.

[Luke 532]

WSJ says SHLD screwed the pooch by emphasizing LG and Samsung over WHR products.  C'mon Eddie!  I used to like two skinny J's, especially that one track with the empire strikes back theme.

 

How many self-made investing billionaires publish stuff for WSJ, CNBC, etc.?  :)  I'm never going to try to teach Dustin Pedroia how to hit a baseball even if I think I know the right mechanics.

 

 

[fareastwarriors]

http://www.mevsemt.blogspot.com/

[tooskinneejs]

enocho1 said: "What is the market saying about the asset side of the balance sheet such that it matches the market cap plus assumed liabilities.  That's what "Bishop" is trying to get at."

 

This is one of the problems with Bishop's analysis.  Market cap ($4.2b) plus liabilities ($16.5b) do not equal total assets ($19.3b) as you state above.  But if I were to try to infer anything by letting the market price of the equity be my guide as to value (which I don't suggest), it would be that the market believes the net assets are worth $1.4b more than their carrying value (calculated as $4.2b market cap less $2.8b stockholders' equity).  But I'm not sure how that matters given that that "surplus" is already reflected in the price of the stock (the excess of market cap over book value of equity) and that - at least for the foreseeable future - this is a going concern scenario because they aren't going to liquidate.  And even if they did, you'd have to take into account off balance sheet liabilities, which Bishop failed to do.  This would obviously weigh heavily against any excess of market value of assets over their respective carrying amounts.

 

stahleyp said: "I'm looking for the truth so I appreciate any insights you can provide. Rather than pick apart the blurb I posted, don't you feel it would be more prudent to read the article in its entirety? He does a good job of explaining the asset to debt issue."

 

Since this is about one of the last company's I would ever invest in, I'm not interested in an in-depth analysis.  I'm more concerned with other people wasting their time buying into the hope that some fruit may fall from this tree.  Proponents of this stock have been buying this story for year after year after year after year, and the tree has never borne the fruit expected long, long ago.

 

I never see any real analysis of the worth of this company, and when I finally see a smidge of it (by Bishop), it is full of mistakes and illogic.  There are so many other quality companies out there, I just don't get why people are betting (because that is what they are really doing, not investing) on this one especially at 1.7x book value for a money-losing, shrinking company.

 

I see people talking about hopes for the hometown stores they spun off.  Has anyone been in one of these.  I went in one in Rehoboth, DE and the prices were ridiculous compared to other stores.  I'm talking 50% more.  Who is going to shop there?

 

One last point, I hear people mentioning some secret plan that Eddie has to unlock the hidden value of the assets of the company.  People infer that he has a plan for riches that he just hasn't shared with us regular folk.  What kind of partner is that?  One who has really good information that is material to your investment decision, but that he doesn't share and instead keeps for himself to benefit his own investment decisions?  Is that really the kind of person you want as a partner?  If he really had these insights (say, appraised values and a plan to sell stores) and he didn't share it even though that was in fact his plan, wouldn't he be in violation of not disclosing material information?  That said, i think the reason you haven't heard any of the details is because there really isn't any secret plan to unlock value.  You can't have your cake and eat it too - you can't sell your stores for way more than carrying value and continue to run your retail business. 

 

Luke said: "By the way, were you in Too Skinnee J's or just a fan?"

 

Just an aging fan.  Sure do miss seeing their live shows.  If there was ever a band that should have made it big, it was them.

 

Corpraider - irresistible force.

[stahleyp]

What off balance sheet liabilities are you referring to?

 

Also, if you haven't done any indepth research, why would this be the last company you would ever invest in? I  don't see why this is a poor investment just because people have been buying the story for years and years...at much higher prices. That is a the margin of safety. It's about the price you're paying for the value.

[CorpRaider]

WSJ says SHLD screwed the pooch by emphasizing LG and Samsung over WHR products.  C'mon Eddie!  I used to like two skinny J's, especially that one track with the empire strikes back theme.

 

How many self-made investing billionaires publish stuff for WSJ, CNBC, etc.?  :)  I'm never going to try to teach Dustin Pedroia how to hit a baseball even if I think I know the right mechanics.

 

Come on now, Crazy Eddie is no pedroia of retail.  hah!  Also, can someone get me a detailed market analysis of the prices in the BFE DE SHOS store?  hehe.

[tooskinneejs]

stahleyp said: "What off balance sheet liabilities are you referring to?"

 

See page 47...

 

http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shld201210k.htm

 

"I  don't see why this is a poor investment just because people have been buying the story for years and years...at much higher prices. That is a the margin of safety."

 

Margin of safety comes from intrinsic value being in excess of current price.  It does not come from past price being in excess of current price.

 

"It's about the price you're paying for the value."

 

On this, I agree.  But what I haven't seen is anyone (including Eddie) articulate (without illogic) what the value is.  I certainly can't see anyone seeing much value based on a business plan of continuing to run the run-down stores.  And apparently, most people aren't investing for this reason, but rather for the hidden assets theory that Eddie supposedly has in his back pocket but won't reveal.

[alertmeipp]

I am thinking the other day, would a company like Amazon be interested in forming an alliance with Sears?

 

From BBY's result, we can tell having store foot print does provide some competitive edges... but hard to see any net companies willing to tie its name to Sears.

[muscleman]

So many posts after Q2 result is out, but has anyone spent time to read the 10-Q yet?

Most of the gains on sales of assets is from Sears Canada. Since SHLD holds 51% of it, it consolidates the whole gain into it, which is 191 Million.

The remaining 55 Million gains on sales of assets comes from 4 Sears domestic stores. I am not sure if this includes the CBL store, because that one seems to have great value.

If we assume that in average, each store can book a 14 million gain. Sears domestic has 800 stores, which translates into 10 Bn, which is not bad. But I am worried if this is actually the case here.

But if we can really extrapolate like that, Sears Canada's valuation would be through the roof.

Also note that Bishop research used Cadillac Fairview transactions to value the properties, which is clearly wrong. Canadian properties seem to have way more value than the US properties.

 

"During the second quarter of 2013, we recorded gains on the sales of assets of $235 million in connection with real estate transactions which included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds. Gains on sales of assets recorded in the second quarter of 2013 also included gains of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store.

During the first quarter of 2012, we recorded gains on the sales of assets of $386 million in connection with real estate transactions which included a gain of $223 million recognized on the sale of 11 ( six owned and five leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds, and a gain of $163 million recognized on the surrender and early termination of the leases on three properties operated by Sears Canada, under an agreement with The Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash proceeds."

[Guest wellmont]

weren't posters here doing their own homework and coming up with much higher store closing numbers in USA than what was reported in the 10q? sigh. it's another super secret confounding mysterious thing about shld nobody can figure out! didn't buffett say something like if you don't understand the disclosures it's because they don't want you to understand em?

[muscleman]

weren't posters here doing their own homework and coming up with much higher store closing numbers in USA than what was reported in the 10q? sigh. it's another super secret confounding mysterious thing about shld nobody can figure out! didn't buffett say something like if you don't understand the disclosures it's because they don't want you to understand em?

 

Well, to be fair, the poster here who said 50 store closings actually included the ones announced to be closed but not yet closed, if you read some of the links he posted. But the 10-Q only mentioned the stores actually closed.

 

Anyway, I think closing 26 stores or so in 6 months is way too slow. I would expect closing 500 stores per year and call it a 3 year transformation plan.

I am now waiting for Bishop research's next few articles and see what he would say.

I am also waiting to see what Baker street would do, as they bet a big option position on it.

 

 

When I first started the long position, I thought that closing 200 stores in 2012 is great, so probably he will accelerate the pace. But that seems to be wrong here. Also I thought closing unprofitable stores would make SHLD suddenly report positive earnings and burn the shorts. But how come after closing the money losing stores, the EBITDA is even worse?

[krazeenyc]

So many posts after Q2 result is out, but has anyone spent time to read the 10-Q yet?

Most of the gains on sales of assets is from Sears Canada. Since SHLD holds 51% of it, it consolidates the whole gain into it, which is 191 Million.

The remaining 55 Million gains on sales of assets comes from 4 Sears domestic stores. I am not sure if this includes the CBL store, because that one seems to have great value.

If we assume that in average, each store can book a 14 million gain. Sears domestic has 800 stores, which translates into 10 Bn, which is not bad. But I am worried if this is actually the case here.

But if we can really extrapolate like that, Sears Canada's valuation would be through the roof.

Also note that Bishop research used Cadillac Fairview transactions to value the properties, which is clearly wrong. Canadian properties seem to have way more value than the US properties.

 

"During the second quarter of 2013, we recorded gains on the sales of assets of $235 million in connection with real estate transactions which included a gain of $180 million recognized on the amendment and early termination of the leases on two properties operated by Sears Canada for which Sears Canada received $191 million Canadian in cash proceeds. Gains on sales of assets recorded in the second quarter of 2013 also included gains of $55 million related to the sale of a store previously operated under The Great Indoors format, two Sears Full-line stores and one Kmart store.

During the first quarter of 2012, we recorded gains on the sales of assets of $386 million in connection with real estate transactions which included a gain of $223 million recognized on the sale of 11 ( six owned and five leased) Sears Full-line store locations to General Growth Properties for $270 million in cash proceeds, and a gain of $163 million recognized on the surrender and early termination of the leases on three properties operated by Sears Canada, under an agreement with The Cadillac Fairview Corporation Limited for which Sears Canada received $170 million Canadian in cash proceeds."

 

Yes -- basically all these sales have been posted here. I discussed this in a post recently too.

 

The Kmart gain I believe is for the sale to Chevron. The Canada lease sale was this one :

http://online.wsj.com/article/SB10001424127887323734304578545511032136042.html

 

and the Sears Domestic Sales were to CBL. You kind of had an idea how much these 2 stores were sold for based on the sq footage, sales per sq ft of the malls, the fact that they were both owned (1 paid a ground lease).  What you didn't know what how much they were held on the books for.