SHLDQ - Sears Holdings Corp

[FCharlie]

It's fascinating how SHLD gets no love no matter what happens.

 

Are we supposed to infer that the stock is down because the CEO with no retail experience that no one wanted as CEO is leaving or because the quarter was more profitable than expected and that same store sales at Sears were actually positive? Ha!

 

 

 

 

 

[JRH]

language in the press release seems like he is wanting to split it up, which is what a lot of people have been saying for a while. I just wonder why it's taking so long?

 

Also, what JCP has been doing with their different shops in the store idea is kind of like what could happen with the leases and such in SHLD?

 

Seems to me the "store in a store" idea didn't stick at Sears - they talked about it for a year or two a few years back and then largely stopped mentioning it.

 

Lampert has mentioned that the real estate deserves to earn a return.  The question is, even if they close down Sears/K-mart stores, what is the highest and best alternative use, and what is the return they can expect with that use?  The answer obviously is different for different stores - and for the 80% of the stores outside of big cities, I really scratch my head on the answer.

 

I did dip my toes into Jan 2015 calls recently.  Berkowitz said in an interview that the real estate is worth $160/share liquidated.  I don't think you have to know exactly when liquidation will take place to understand that long-dated calls might be an interesting lottery ticket.

[ragnarisapirate]

The old stores in rural KY that got closed generally turned into peddler's malls. Basically, a slightly nicer version of a flea market...

[Parsad]

It's fascinating how SHLD gets no love no matter what happens.

 

Are we supposed to infer that the stock is down because the CEO with no retail experience that no one wanted as CEO is leaving or because the quarter was more profitable than expected and that same store sales at Sears were actually positive? Ha!

 

How do you know same store sales were positive?  I hope for shareholder's sake that it was a good quarter, but I have hard time believing that was the case in this environment.  Cheers!

[compoundinglife]

It's fascinating how SHLD gets no love no matter what happens.

 

Are we supposed to infer that the stock is down because the CEO with no retail experience that no one wanted as CEO is leaving or because the quarter was more profitable than expected and that same store sales at Sears were actually positive? Ha!

 

How do you know same store sales were positive?  I hope for shareholder's sake that it was a good quarter, but I have hard time believing that was the case in this environment.  Cheers!

 

I believe they said that after backing out electronics comps were up in Sears domestic, but down including electronics. Kmart was down.

[JRH]

I believe they said that after backing out electronics comps were up in Sears domestic, but down including electronics. Kmart was down.

 

The problem is that comps would look good most quarters/years if you pick out the worst couple categories (which they consistently do in their reports - they will report overall results and then identify which categories were leaders/laggards).  I see no reason to assume that they will ever be able to optimize to a product mix for any meaningful length of time.

[txlaw]

It's fascinating how SHLD gets no love no matter what happens.

 

Are we supposed to infer that the stock is down because the CEO with no retail experience that no one wanted as CEO is leaving or because the quarter was more profitable than expected and that same store sales at Sears were actually positive? Ha!

 

How do you know same store sales were positive?  I hope for shareholder's sake that it was a good quarter, but I have hard time believing that was the case in this environment.  Cheers!

 

I believe they said that after backing out electronics comps were up in Sears domestic, but down including electronics. Kmart was down.

 

FCharlie is probably referring to Sears Domestic.  For the last nine weeks of last year, comps were up at Sears Domestic despite electronics (not after backing out electronics).  Comps were down for Sears Domestic and Kmart together.

 

http://searsholdings.mediaroom.com/index.php?s=16310&item=136558

 

Comparable store sales for the nine-week ("QTD") and year-to-date ("YTD") periods ended December 29, 2012 for its Sears Domestic and Kmart stores are as follows:

 

Total domestic comparable store sales for the nine-week period declined 1.8% largely due to sales declines in the consumer electronics category at both Sears and Kmart.  Excluding the consumer electronics category, total comparable stores sales decreased 0.2%, with Sears Domestic increasing 2.4% and Kmart decreasing 2.4%.

 

Sears Domestic generated a quarter-to-date comparable store sales increase despite the decline in consumer electronics.  The improvement at Sears Domestic was driven by the apparel and appliance categories. The apparel category is on track for six consecutive quarters of comparable store sales increases. Kmart's quarter-to-date comparable store sales decline reflects a significant decline in consumer electronics, as well as declines in the pharmacy, grocery & household and drug categories. The decline in pharmacy reflects the conversion of brand name drugs to equivalent generic drugs.

 

Sears Domestic and Kmart online sales increased approximately 20% with the largest growth occurring in multi-channel transactions (buy online, pick-up in store and order in store, ship to home) which now make up approximately half of our online business.

 

It's sort of surprising that apparel sales were up at Sears.  I was expecting appliance sales to be up, but not apparel. 

 

Additional comment: Sears Domestic was only marginally "up" (0.5%) when you include electronics.  When you strip out electronics, you get the 2.4% for Sears Domestic

[Parsad]

It's fascinating how SHLD gets no love no matter what happens.

 

Are we supposed to infer that the stock is down because the CEO with no retail experience that no one wanted as CEO is leaving or because the quarter was more profitable than expected and that same store sales at Sears were actually positive? Ha!

 

How do you know same store sales were positive?  I hope for shareholder's sake that it was a good quarter, but I have hard time believing that was the case in this environment.  Cheers!

 

I believe they said that after backing out electronics comps were up in Sears domestic, but down including electronics. Kmart was down.

 

Yeah, this is the problem I see...Sears always spins their reporting, instead of just admitting their mistakes and doing what needs to be done.  The simple truth is that they were incredibly slow in monetizing assets, and they've slowed down again since they closed all those stores and spun off a couple of brands.  The existing business has eaten up a ton of shareholder value over the years.  The balance sheet looks like crap year after year...constant deterioration...and no one, including Eddie, has ever stepped up and said "we've just done a plain shitty job of this over the last few years!  We're trying to save something that just doesn't work anymore." 

 

Now this CEO is gone and Eddie steps in...again!  It's been a horror story for shareholders, and there are few positives around the business and model.  It's become incredibly difficult to stop the bleeding...same store sales were up if you exclude electronics...but they sell electronics.  That's a significant part of their business.  It's like saying, let's exclude home furnishings or ladies apparel.  Kmart was down...so let's exclude Kmart too.  I don't understand this logic, because what good is improving sales in some areas, while it is deteriorating in other areas. 

 

The assets have value, but delays are just eating up that value, and I don't know how much upside will be left for shareholders.  Cheers! 

[JAllen]

They're deemphasizing consumer electronics at SHOS; can't imagine they're not doing the same thing at SHLD.

 

"Partially offsetting these increases were declines in lawn and garden due to drought conditions experienced in large portions of the U.S. and in consumer electronics resulting from our strategy to de-emphasize the category."

 

http://sec.gov/Archives/edgar/data/1548309/000154830912000013/sho-102712x10q.htm

[txlaw]

It's fascinating how SHLD gets no love no matter what happens.

 

Are we supposed to infer that the stock is down because the CEO with no retail experience that no one wanted as CEO is leaving or because the quarter was more profitable than expected and that same store sales at Sears were actually positive? Ha!

 

How do you know same store sales were positive?  I hope for shareholder's sake that it was a good quarter, but I have hard time believing that was the case in this environment.  Cheers!

 

I believe they said that after backing out electronics comps were up in Sears domestic, but down including electronics. Kmart was down.

 

Yeah, this is the problem I see...Sears always spins their reporting, instead of just admitting their mistakes and doing what needs to be done.  The simple truth is that they were incredibly slow in monetizing assets, and they've slowed down again since they closed all those stores and spun off a couple of brands.  The existing business has eaten up a ton of shareholder value over the years.  The balance sheet looks like crap year after year...constant deterioration...and no one, including Eddie, has ever stepped up and said "we've just done a plain shitty job of this over the last few years!  We're trying to save something that just doesn't work anymore." 

 

Now this CEO is gone and Eddie steps in...again!  It's been a horror story for shareholders, and there are few positives around the business and model.  It's become incredibly difficult to stop the bleeding...same store sales were up if you exclude electronics...but they sell electronics.  That's a significant part of their business.  It's like saying, let's exclude home furnishings or ladies apparel.  Kmart was down...so let's exclude Kmart too.  I don't understand this logic, because what good is improving sales in some areas, while it is deteriorating in other areas. 

 

The assets have value, but delays are just eating up that value, and I don't know how much upside will be left for shareholders.  Cheers!

 

I disagree with you on this one, Sanjeev.

 

"Sears always spins their reporting, instead of just admitting their mistakes and doing what needs to be done."

 

As I mentioned in my last post, they actually did have a Sears Domestic increase in sales, though it was minute when you include electronics.  So perhaps you may call that spin.

 

Or is it giving more information to shareholders?  When FFH says that our combined ratio was X stripping out cat losses, is that spin?  I tend to be on the side that they are giving us more info that is useful, as market participants generally wouldn't be fooled by any such spin. 

 

"The simple truth is that they were incredibly slow in monetizing assets, and they've slowed down again since they closed all those stores and spun off a couple of brands."

 

I actually think that ESL is right to be patient on monetizing assets.  I think that ESL is getting better prices for his assets because he has waited, and might (just might) have preserved Sears Domestic's ability to have a real future as a 21st Century appliance and tool retailer as a result.  Remember, we can't forget Sears' number one market share in appliances.  ESL could not do anything to jeopardize that position, and closing all those stores at once would have caused a terminal decline in Sears' position in that regard.

 

I always wanted him to sell Land's End, but if apparel sales are actually going up, and that's being driven in part by Land's End, maybe even now is not the right time to sell that business, despite my wish that ESL do so. 

 

To sum it up, we fundamentally disagree on what the right approach is here.  You say SHLD is a melting ice cube.  I say that taking a measured, slow approach is actually preserving value for shareholders over the long term by increasing the value of our assets. 

[compoundinglife]

It's fascinating how SHLD gets no love no matter what happens.

 

Are we supposed to infer that the stock is down because the CEO with no retail experience that no one wanted as CEO is leaving or because the quarter was more profitable than expected and that same store sales at Sears were actually positive? Ha!

 

How do you know same store sales were positive?  I hope for shareholder's sake that it was a good quarter, but I have hard time believing that was the case in this environment.  Cheers!

 

I believe they said that after backing out electronics comps were up in Sears domestic, but down including electronics. Kmart was down.

 

Yeah, this is the problem I see...Sears always spins their reporting, instead of just admitting their mistakes and doing what needs to be done. 

 

I don't think they are spinning it. They make it very clear in the press release that comps that are down in aggregate for the quarter and year and then break it down to kmart and sears for the year and offer the backout of electronics number to see where their bigger problems are.

 

Apologies for the information in my previous post that was off memory and incorrect, yes QTD comps are up for Sears domestic a tiny bit w/o backing out electronics.

 

 

[Rabbitisrich]

 

 

 

 

As I mentioned in my last post, they actually did have a Sears Domestic increase in sales, though it was minute when you include electronics.  So perhaps you may call that spin.

 

Or is it giving more information to shareholders?  When FFH says that our combined ratio was X stripping out cat losses, is that spin?  I tend to be on the side that they are giving us more info that is useful, as market participants generally wouldn't be fooled by any such spin. 

 

It's sort of like the Chris Rock joke about how the line between flirting and harassment is a matter of looking like Denzel Washington or Bill Clinton. If a company offers a low performance record, then you have to wonder whether disclosures are really informative, or just mining for good news.

[ShahKhezri]

No spin.  The results ARE improving, I added twice today.  The way I see it, the buyers over 50, 100, 150 paid the price.  This was the most popular stock discussed by value investors at the Berkshire meeting 4 years ago.  Now, the transformation is going through, results are improving, balance sheet is improving YOY.  At 60% of my position.

[rogermunibond]

I'd love to see a reassessment of Berkowitz's real estate liquidation hypothesis, after stripping out the properties thatvSears has already moved likevthe Ala Moana mall space in Honolulu. I found this link below just recently, but there's a real disconnect between Berkowitz and mall operators.

 

http://www.costar.com/News/Article/The-De-Malling-of-America-Whats-Next-for-Hundreds-of-Outmoded-Malls-/141980

[JRH]

I'd love to see a reassessment of Berkowitz's real estate liquidation hypothesis, after stripping out the properties thatvSears has already moved likevthe Ala Moana mall space in Honolulu. I found this link below just recently, but there's a real disconnect between Berkowitz and mall operators.

 

http://www.costar.com/News/Article/The-De-Malling-of-America-Whats-Next-for-Hundreds-of-Outmoded-Malls-/141980

 

I mis-spoke before when I said Berkowitz said Sears' real estate was worth $160/share.  He was referring to Sears outright:

 

http://finance.fortune.cnn.com/2012/11/26/bruce-berkowitz-fairholme/

 

Note that this is recent (Nov. 2012).

 

I do agree with you that it is challenging to square a simplistic number like that with what you hear or witness firsthand (I can't imagine 2 of the 3 Sears stores in my area being worth squat).

[Uccmal]

I haven't followed Sears close lately, but my rating of Lampert's retailing skills on a scale of 1 to 10 falls somewhere around 1. 

 

The brand destruction at Sears Canada has been unreal.  This destruction accelerated when SHLD took in the majority of shares and continued ever since.  They are closing their flagship Toronto store at Sherway Gardens.... Nordstrom is moving in. 

 

I had dealings with Sears Home this weekend that would make your head spin.  Lets just say, I walked out after 45 minutes after nearly completing the purchase of a mattress set.  The total story is not pretty and I will never be going into another Sears as long as I live, ever, ever, ever!  I figure I am not alone because you could have bowled down the aisles without hitting anyone. 

 

I was a shareholder in this dog, years ago, and have seen nothing but destruction ever since.  I hope for the sake of those of you who have shares that he can monetize the real estate before there is nothing left at all.

[constructive]

In that interview Berkowitz said: "You can look back at recent transactions and ask a question: How can Sears close stores and generate hundreds of millions of dollars of cash?"

 

The answer is not rocket science, they sold the Hawaiian flagship store for a quarter billion and the other stores for around $2M each. Does Berkowitz think that selling or closing average Sears stores generates profit/cash, because I highly doubt it.

[Parsad]

No spin.  The results ARE improving, I added twice today.  The way I see it, the buyers over 50, 100, 150 paid the price.  This was the most popular stock discussed by value investors at the Berkshire meeting 4 years ago.  Now, the transformation is going through, results are improving, balance sheet is improving YOY.  At 60% of my position.

 

Hi Shah,

 

Can you explain the balance sheet improvement analysis, because it doesn't look better to me.  It actually looks worse on every front.  Cheers!

[FCharlie]

In that interview Berkowitz said: "You can look back at recent transactions and ask a question: How can Sears close stores and generate hundreds of millions of dollars of cash?"

 

The answer is not rocket science, they sold the Hawaiian flagship store for a quarter billion and the other stores for around $2M each. Does Berkowitz think that selling or closing average Sears stores generates profit/cash, because I highly doubt it.

 

 

Berkowitz was quoted saying that the 80/20 rule applies to Sears real estate, and that investors should be mindful of that if/when they see Lampert selling off property.

 

20% of the properties hold 80% of the value.  The transaction that included the Hawaii store is a perfect example of this and a perfect example that Bruce Berkowitz has done his work here.

 

 

 

[Matson125]

This is a good exmaple fowhat we might see more of:

Big plans for Sears property in St. Paul

http://www.startribune.com/local/stpaul/185692252.html?refer=y

 

 

[BargainValueHunter]

This blurb is a year old but when SHLD gets down to $20 things could get REAL interesting:

 

http://blogs.wsj.com/marketbeat/2012/01/23/the-sears-rally-continues-credit-suisse-calls-it-classic-short-squeeze/

 

{From January 2012 after the huge short squeeze started}

 

“We are stuck in a classic short squeeze, a squeeze that given the float we do not even harbor to speculate when it may end,” Mr. Balter adds. “How the stock moves in the short term is a good question as with so little float, and no stock available to short, this squeeze could go on for awhile. However, when it ends, we would not wish to be on the other side, as we don’t see the value for the equity above our $20 target price.”

 

So, if no short squeezes are in order do we see $20? Could the general market really believe that this equity could trade at such a discount to its (perceived) asset worth.

 

 

[FCharlie]

 

 

Yeah, this is the problem I see...Sears always spins their reporting, instead of just admitting their mistakes and doing what needs to be done.  The simple truth is that they were incredibly slow in monetizing assets, and they've slowed down again since they closed all those stores and spun off a couple of brands.  The existing business has eaten up a ton of shareholder value over the years.  The balance sheet looks like crap year after year...constant deterioration...and no one, including Eddie, has ever stepped up and said "we've just done a plain shitty job of this over the last few years!  We're trying to save something that just doesn't work anymore." 

 

 

 

The assets have value, but delays are just eating up that value, and I don't know how much upside will be left for shareholders.  Cheers!

 

 

If you go back to the Bruce Berkowitz interview w/ Consuela Mack found here:

 

 

Around 20 minutes Bruce says that with real estate you can't push on a string... and that when you're in a real estate cycle "There's a time to sell, there's a time to buy, there's a time to do nothing."

 

Imagine SHLD with a store holding a 99 year lease at $2/ sq. foot. Imagine SHLD could sublease this property today at $6/sq. foot but in E.L's mind he thinks that in a stronger economy they could sublease the same property for $10/sq. foot.  Does it make more sense to sublease at a low price or close it today when the alternative is to operate it at a mediocre profit or even a loss while you wait? E.L. views money losing stores as an investment. At the 2010 annual meeting he spoke at length about this.  If he thinks that in a stronger economy a store could be quite profitable or in a better economy he could sublease at $12/sq. foot what today would sublease for $9/sq. foot, perhaps it makes more sense to operate at a loss for a few years while he waits for the better opportunity? Commercial tenants don't want a two year lease. They want to lock in for twenty years at a time. For Sears to lock in tenants today they could be doing much more harm to shareholders than good.

 

SHLD was back to free cash flow positive in 2012. The biggest problem for Sears in my opinion is the pension liability but SHLD is making moves today to deal with this problem by offering buyouts to remove the liability.

 

SHLD is ugly. It's so ugly most people won't touch it without the instant gratification of a liquidation. I think if you break it down it's easy to see the value is there. Wow, the entire market value is below the value of the owned inventory! Most people seem to agree Land's End is worth $1.5-$2.0 billion, which would be 40% of the market value. Most agree the real estate is worth greater than the stock price. So inventory, RE, and Land's End are worth 2.5X the market cap. The company produces cash yet no one will touch this stock except Eddie Lampert, Thomas Tisch, Bruce Berkowitz, and a handful of investors out here.

 

 

[ShahKhezri]

Yeah, sure.  Unfortunately, most of my stuff is at home on my labtop and I live at work.  I'll be sure to post this weekend.  Generally speaking, read some of the headlines last year this time around.  There was talk of CIT and limited vendor finance and Blodget with talk of vendors and payables and bankruptcy.  Liquidity was questioned and rightfully so, mgmt came out with a very ambitious monetization plan and I thought they were way in over their heads, BUT they executed well given the circumstantces (real estate/lease sales, OSH, SHOS) and they have plans for another $500MM in 2013. 

 

In any case, TxLaw posted some time ago that this is very tradeable stock and I agree.  That is my plan as my avg price is $42 as of right now.  Also interesting is the performance of SHLD in Q1 (1/1 to 3/30), 8 out of the last 9 years the stock has returned an avg of 32.7%, with the only down year (2008) being only -.88%.  Performance from 3/31 to 12/31 has been hit or miss (often miss).  I'm not proposing to SHLD, this isnt "til death do us part", that's the data mining portion of SHLD.  There's also the first paragraph and my father subleases 3 locations within SHLD, I've walked the aisles, I've worked the stores and I've never held the stock more than 12 months, I've sold puts 8 times (never put the stock) and bought the stock twice, onces at 29 sold at 105 and the other at 50 sold at 80. 

 

I also think EL has a IQ higher than your average mental institution patient.  I don't think he's Mark Cuban (right place, right time) and think he has done some things right to become a billionaire.  We applaud and cheer people on this board (and rightfully so) for making a good call on an investment, but I doubt many (including myself) have ever been in a position to cut checks every two weeks to over 200,000 people (so yes I'm a believer of what BB says about him). 

[txlaw]

ESL speaks:

 

http://www.chicagotribune.com/business/columnists/ct-biz-0109-phil-sears--20130109,0,6208619.column

[Parsad]

ESL speaks:

 

http://www.chicagotribune.com/business/columnists/ct-biz-0109-phil-sears--20130109,0,6208619.column

 

"I do think what we've been trying to do at the company has been very clear," Lampert said. "If people want to doubt it or put a spin on it, they're entitled to do it. We just have to perform."

 

Investors are still waiting for them to do just that.  They have not been clear at all in the last couple of years on what they are trying to achieve.  I like Eddie...I much prefer him to Einhorn, Ackman, or a multitude of other hedge fund managers of similar notoriety...but his tenure as Chairman (and defacto CEO) has been very uninspiring. 

 

And I'm not one for short turnarounds, as much as I prefer Steak'n Shake style 6-month quickies!  I've held Fairfax for years and years, through the worst of times, with little concern.  I've held Chanticleer since the funds pretty much started, including this current period of fraud by their auditor.  I was unabashedly prepared for a long turnaround at BAC and was pleasantly surprised by the work of Brian Moynihan. 

 

The brand and model at Sears has deteriorated significantly over the years, and nearly as much again in just the last three years.  Eddie comments on the best merchant in the world being Jeff Bezos...a hedge fund guy...he's completely correct.  But Bezos was smart enough to see that the model for retailing was changing.  Eddie was too slow in recognizing that, and certainly I and most anyone else, did not see it either.  But some of us were saying that Sears had to change quicker than they were progressing, because we finally did recognize how swiftly the moat had shrunk.  Eddie still won't admit that, as they are stuck in their way of thinking as cash burns every quarter.  Cheers!