SHLDQ - Sears Holdings Corp

[krazeenyc]

They are very clear about how they are choosing to close stores.

 

They are closing them based on store performance relative  to the value of the real estate. So, while they are going to be closing plenty of crappy K-Marts and Sears by simply not renewing the lease and incurring losses for them, they are also going to be closing stores that while profitable are not profitable enough to justify not selling the store. (My guess is the Ala Moana store was probably profitable as are the 2 stores they're selling to CBL -- but not enough so not to sell back to GGP/CBL -- this of course is not the reason ebitda is down).

 

Ebitda is down cause Sears is not a good retailer.

[alertmeipp]

ESL is now seriously trying to turn Sears around so RE valuation only good in providing investors a piece of mind. Those are not hidden assets (we have numerous articles on the subject, etc...) yet the stock still trading at decade low. We need a trigger for the short squeeze. No short will cover if SHLD deliver lousy results year after year.

 

How about make some profit? How about pension liability reduction? How about some serious asset sales? How about ESL do some insider buy?

[Guest hellsten]

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

 

+1

 

Thanks muscleman.

 

Those are not hidden assets (we have numerous articles on the subject, etc...) yet the stock still trading at decade low. We need a trigger for the short squeeze.

 

I'm speculating that the short squeeze will come from a combination of the short patience of the shorts and Eddie and Bruce buying more and more.

[Junto]

 

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?

 

 

Actually in Minneapolis, Minnesota area, I priced out a full appliance set and found them cheaper than all the competitors by about 10% when I was shopping...perhaps it is store based.

[FCharlie]

ESL is now seriously trying to turn Sears around so RE valuation only good in providing investors a piece of mind. Those are not hidden assets (we have numerous articles on the subject, etc...) yet the stock still trading at decade low. We need a trigger for the short squeeze. No short will cover if SHLD deliver lousy results year after year.

 

How about make some profit? How about pension liability reduction? How about some serious asset sales? How about ESL do some insider buy?

 

 

Pension liability reduction is happening now.

 

Serious asset sales?  They are selling $500 million of real estate this year!  That's 11% of the market cap!! You must mean "serious" as in quantity of stores and not quantity of cash.

 

Think about this.... The quarter billion dollars SHLD has collected in real estate transactions this year represented only 0.002% of the store count!!!!!  They are potentially selling the warranty business for another $500 million. 

 

ESL is free to do some insider buying right now. His typical style, both personally and with SHLD buybacks, is to buy beginning the day after earnings are released and continue buying as long as the stock continues dropping. Typically it doesn't drop long if he's buying.

[Luke 532]

How about make some profit? How about pension liability reduction? How about some serious asset sales? How about ESL do some insider buy?

 

Pension liability reduction is happening now.

To the tune of $700 million... that's a huge chunk of the liability getting whacked. 

 

ESL is free to do some insider buying right now. His typical style, both personally and with SHLD buybacks, is to buy beginning the day after earnings are released and continue buying as long as the stock continues dropping. Typically it doesn't drop long if he's buying.

 

SHLD liquidity position Q2 2013 attached.  ESL has >$1B in cash from stock sales last quarter.  Doesn't include cash already held within ESL.  Also doesn't include any redemptions that might need to be paid.  Take just 20% of that $1B and you wipe out 5 million shares of the float.  Float is currently ~23M* with short interest at 14M.

 

Keep in mind, Lampert liquidated nearly half (44%!) of ESL positions (excluding SHLD) in the past 3 months.  If that doesn't scream "I'm about to close my fund and/or be 100% vested in SHLD" then I don't know what does.  I know, I know... this is technically "speculating" that he might do that, but at some point you have to use logic, his past actions, and realize what he is likely up to.  Is it guaranteed he closes his fund and/or goes 100% in SHLD?  No, of course not.  But I think one or both of those events is more likely than not.

 

*the 23M float is ultra-conservative, it only takes into account Lampert, Berkowitz and Tisch and assumes every other investor (including institutions) will sell their shares and not hold them long-term.

[txlaw]

 

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?

 

 

Actually in Minneapolis, Minnesota area, I priced out a full appliance set and found them cheaper than all the competitors by about 10% when I was shopping...perhaps it is store based.

 

Yeah, a year ago, my dad went to a Sears small format store to buy a new stove for a rental property.  He went there specifically because that was the best price he could find -- and because he was buying for a rental property, so he didn't need anything nice! ;D

 

So it could be store based.  But note that Sears has a price match policy; you can go to the website to check it out.  Really, in an integrated retail experience for relatively expensive goods like appliances, Sears Hometown can't afford to be 50% more expensive. 

 

SHOS continuing to open stores:

 

http://www.westlakebayvillageobserver.com/read/2013/08/23/new-sears-home-appliance-showroom-in-westlake-now-open

http://www.bellinghamherald.com/2013/08/01/3124697/sears-hometown-making-plans-to.html

http://www.kotanow.com/story/23136871/hometown-store-sears-returning-to-monument-mall

http://www.mysuburbanlife.com/2013/08/08/new-sears-appliance-and-hardware-store-opens-in-bolingbrook/a353hpn/

 

Don't forget that SHOS used to be part of SHLD -- and that it generates EBITDA.  SHOS reports on August 30.

[jeffmori7]

Hey txlaw, do you own SHOS also?

[txlaw]

I really hope there is no short squeeze anytime soon. 

 

I sold some SHLD to harvest tax losses (took that play from Ericopoly) prior to earnings, and I would like to buy back after the wash sale period is over.

[alertmeipp]

In Canada, not many buy from Sears without a major markdown. Is it the same in US?

[txlaw]

Hey txlaw, do you own SHOS also?

 

I actually do not at the moment.  But I am strongly considering buying prior to earnings.

 

What people don't seem to understand is that if SHOS actually is a successful company, you have an asset light franchisor, sourcing, and royalty business inside SHLD that will grow in value.  Moreover, there is a direct relationship between SHOS' success and the speed at which SHLD can sell off or lease its Sears full line stores.

 

Rarely do I hear critics talk about SHOS -- willful ignorance?

[txlaw]

In Canada, not many buy from Sears without a major markdown. Is it the same in US?

 

I would think so.

 

Most people I know who are in the market for appliances would always prefer to buy from Lowe's or Home Depot if price isn't an issue.  But with 29% appliance market share in the US, SHLD/SHOS can be the lowest cost provider of appliances if they want to be.

 

People do also still consider the services factor when choosing Sears.

[txlaw]

Hey txlaw, do you own SHOS also?

 

I actually do not at the moment.  But I am strongly considering buying prior to earnings.

 

What people don't seem to understand is that if SHOS actually is a successful company, you have an asset light franchisor, sourcing, and royalty business inside SHLD that will grow in value.  Moreover, there is a direct relationship between SHOS' success and the speed at which SHLD can sell off or lease its Sears full line stores.

 

Rarely do I hear critics talk about SHOS -- willful ignorance?

 

I should strike the part about "franchisor" from the above.  SHOS is the franchisor.

[Guest hellsten]

Hey txlaw, do you own SHOS also?

 

I actually do not at the moment.  But I am strongly considering buying prior to earnings.

 

What people don't seem to understand is that if SHOS actually is a successful company, you have an asset light franchisor, sourcing, and royalty business inside SHLD that will grow in value.  Moreover, there is a direct relationship between SHOS' success and the speed at which SHLD can sell off or lease its Sears full line stores.

 

Rarely do I hear critics talk about SHOS -- willful ignorance?

 

Good point. Horizon Kinetics hinted at something similar too:

characteristics of the smaller Hometown and Outlet unit, which may prompt investors to recognize the profitability potential of properly sized and efficiently managed Sears locations.

 

http://www.horizonkinetics.com/docs/Spin_Commentary_September2012.pdf

 

What most bears seem to say is that Sears is selling the most profitable stores and won't be profitable at any size.

[tooskinneejs]

FCharlie said: " The quarter billion dollars SHLD has collected in real estate transactions this year represented only 0.002% of the store count!!!!!"

 

If one receives $250,000,000 for only 0.002% of their real estate, that implies their real estate is worth $12,500,000,000,000 ($250m/0.00002).  That's 12.5 trillion dollars.  Wow!  Maybe this is the steal of the century. ;)

[wisdom]

tooskineejs - you are mocking people rather than adding value. Fcharlie is pointing out that potentially there is immense value in RE.

 

I do not understand why you would be posting on the SHLD thread unless you have something of value to add.

 

What did that post accomplish?

[muscleman]

ESL is now seriously trying to turn Sears around so RE valuation only good in providing investors a piece of mind. Those are not hidden assets (we have numerous articles on the subject, etc...) yet the stock still trading at decade low. We need a trigger for the short squeeze. No short will cover if SHLD deliver lousy results year after year.

 

How about make some profit? How about pension liability reduction? How about some serious asset sales? How about ESL do some insider buy?

 

 

Pension liability reduction is happening now.

 

Serious asset sales?  They are selling $500 million of real estate this year!  That's 11% of the market cap!! You must mean "serious" as in quantity of stores and not quantity of cash.

 

Think about this.... The quarter billion dollars SHLD has collected in real estate transactions this year represented only 0.002% of the store count!!!!!  They are potentially selling the warranty business for another $500 million. 

 

ESL is free to do some insider buying right now. His typical style, both personally and with SHLD buybacks, is to buy beginning the day after earnings are released and continue buying as long as the stock continues dropping. Typically it doesn't drop long if he's buying.

 

As I said earlier, most of the sale of real estate value comes from Sears Canada, not Sears domestic.

The adjusted EBITDA margin dropped 3% compared to last year. I know there is some 1.7% impact from SHOS, but I really don't understand why they cannot mark up everything by 1.5% to at least make 100-200 Million adjusted EDBITDA earnings. No consumer would notice a 1.5% price mark up. I think the management has to be really terrible for this to happen. :'(

[BTShine]

ESL is now seriously trying to turn Sears around so RE valuation only good in providing investors a piece of mind. Those are not hidden assets (we have numerous articles on the subject, etc...) yet the stock still trading at decade low. We need a trigger for the short squeeze. No short will cover if SHLD deliver lousy results year after year.

 

How about make some profit? How about pension liability reduction? How about some serious asset sales? How about ESL do some insider buy?

 

 

Pension liability reduction is happening now.

 

Serious asset sales?  They are selling $500 million of real estate this year!  That's 11% of the market cap!! You must mean "serious" as in quantity of stores and not quantity of cash.

 

Think about this.... The quarter billion dollars SHLD has collected in real estate transactions this year represented only 0.002% of the store count!!!!!  They are potentially selling the warranty business for another $500 million. 

 

ESL is free to do some insider buying right now. His typical style, both personally and with SHLD buybacks, is to buy beginning the day after earnings are released and continue buying as long as the stock continues dropping. Typically it doesn't drop long if he's buying.

 

As I said earlier, most of the sale of real estate value comes from Sears Canada, not Sears domestic.

The adjusted EBITDA margin dropped 3% compared to last year. I know there is some 1.7% impact from SHOS, but I really don't understand why they cannot mark up everything by 1.5% to at least make 100-200 Million adjusted EDBITDA earnings. No consumer would notice a 1.5% price mark up. I think the management has to be really terrible for this to happen. :'(

 

Great question!  My best guess is that they're looking to get traction on SSS, and get a better feeling that SYWR members are 'sticky'...being that they prefer Sears over other stores (JCP, Kohls, etc.).  Once they can get a core group of shoppers that are loyal to Sears, then they can slightly raise prices. 

 

They might even be able to reduce some advertising!  (Costco doesn't advertise, as one example)

[tooskinneejs]

Wisdom said: "tooskineejs - you are mocking people rather than adding value. Fcharlie is pointing out that potentially there is immense value in RE."

 

I sincerely apologize to FCharlie if my post came across that way, as this was not my intent.

 

Wisdom said: "I do not understand why you would be posting on the SHLD thread unless you have something of value to add."

 

In the few posts I've made on this thread, I've pointed out very significant flaws in the analysis that I'm seeing.  I guess, according to you, there is no "value added" in pointing out errors.  I was genuinely trying to help.  Apparently my efforts are in vain because no one seems to care about the flaws.  I guess you're right that I shouldn't have wasted my time in trying to help.  Carry on and good luck.

[alertmeipp]

ESL is now seriously trying to turn Sears around so RE valuation only good in providing investors a piece of mind. Those are not hidden assets (we have numerous articles on the subject, etc...) yet the stock still trading at decade low. We need a trigger for the short squeeze. No short will cover if SHLD deliver lousy results year after year.

 

How about make some profit? How about pension liability reduction? How about some serious asset sales? How about ESL do some insider buy?

 

 

Pension liability reduction is happening now.

 

Serious asset sales?  They are selling $500 million of real estate this year!  That's 11% of the market cap!! You must mean "serious" as in quantity of stores and not quantity of cash.

 

Think about this.... The quarter billion dollars SHLD has collected in real estate transactions this year represented only 0.002% of the store count!!!!!  They are potentially selling the warranty business for another $500 million. 

 

ESL is free to do some insider buying right now. His typical style, both personally and with SHLD buybacks, is to buy beginning the day after earnings are released and continue buying as long as the stock continues dropping. Typically it doesn't drop long if he's buying.

 

As I said earlier, most of the sale of real estate value comes from Sears Canada, not Sears domestic.

The adjusted EBITDA margin dropped 3% compared to last year. I know there is some 1.7% impact from SHOS, but I really don't understand why they cannot mark up everything by 1.5% to at least make 100-200 Million adjusted EDBITDA earnings. No consumer would notice a 1.5% price mark up. I think the management has to be really terrible for this to happen. :'(

 

Great question!  My best guess is that they're looking to get traction on SSS, and get a better feeling that SYWR members are 'sticky'...being that they prefer Sears over other stores (JCP, Kohls, etc.).  Once they can get a core group of shoppers that are loyal to Sears, then they can slightly raise prices. 

 

They might even be able to reduce some advertising!  (Costco doesn't advertise, as one example)

amazon, costco, simon, these are the names of execution and efficiency, so far, sears is anything but

[merkhet]

Wisdom said: "tooskineejs - you are mocking people rather than adding value. Fcharlie is pointing out that potentially there is immense value in RE."

 

I sincerely apologize to FCharlie if my post came across that way, as this was not my intent.

 

Wisdom said: "I do not understand why you would be posting on the SHLD thread unless you have something of value to add."

 

In the few posts I've made on this thread, I've pointed out very significant flaws in the analysis that I'm seeing.  I guess, according to you, there is no "value added" in pointing out errors.  I was genuinely trying to help.  Apparently my efforts are in vain because no one seems to care about the flaws.  I guess you're right that I shouldn't have wasted my time in trying to help.  Carry on and good luck.

 

I believe the pushback is occurring because of your strawman arguments and the hyperbolic tone.  For instance, I don't think anyone argued that Sears was worth $12 trillion, but your post implied that and then ridiculed it.

[Kraven]

Wisdom said: "tooskineejs - you are mocking people rather than adding value. Fcharlie is pointing out that potentially there is immense value in RE."

 

I sincerely apologize to FCharlie if my post came across that way, as this was not my intent.

 

Wisdom said: "I do not understand why you would be posting on the SHLD thread unless you have something of value to add."

 

In the few posts I've made on this thread, I've pointed out very significant flaws in the analysis that I'm seeing.  I guess, according to you, there is no "value added" in pointing out errors.  I was genuinely trying to help.  Apparently my efforts are in vain because no one seems to care about the flaws.  I guess you're right that I shouldn't have wasted my time in trying to help.  Carry on and good luck.

 

People have very thin skins.  The level of sensitivity to criticism or even perceived criticism on a message board is much higher than it should be.  Please keep posting if you have anything to say. 

 

That being said, as far as I'm concerned I don't think you've pointed out any flaws for those of us looking at this solely as an asset play.  The assets are there, I have no doubt about that.  The only question to me is whether the retail operations deplete the assets and permanently impair them.  I am not sure exactly how that happens.  I am no Lampert fan (it's not that I am not a fan, I just don't care either way), but have a hard time seeing how he would allow his personal fortune to be impaired to such an extent.  To me there is a tremendous margin of safety in the assets.

[stahleyp]

tooskinnee,

 

I appreciate your insight.  It's good to "kill an investment" as Berkowitz talks about. What I can't get my head around is how can Chou, Lampert and Berkowitz all be wrong? All have significant stakes. From what I've read, most of the major liabilities are due until 2018 though it looks like a decent chunk of the off balance sheet stuff is due before that. 

 

Positives:

 

Sears is hated. Absolutely hated. My mom even sent me an anti-Sears article!

 

http://finance.yahoo.com/blogs/michael-santoli/sears-grows-shrink-fast-enough-offline-190411417.html

 

The company is complex. Complexity make people stray away, thereby lowering the price.

 

Excellent investors have large stakes, including Lampert who is better a ton of his personal fortune and reputation.

 

Potential short squeeze

 

Negatives:

 

Appliances have dropped off even though competitors are doing really well.

 

Shop Your Way and Sears.com search are unproven. I'll admit, the search feature isn't great...but like others have pointed out, unless it's Amazon almost ever other retailer has very similar levels of suckiness.

 

The off sheet liabilities are a concern.

 

Mall real estate ain't what it used to be. Maybe the perceived value is way off.

 

Someone pointed out that if things are this bad when the economy is growing, how nasty could this get if we hit a recession. good point.

[cubsfan]

Wisdom said: "tooskineejs - you are mocking people rather than adding value. Fcharlie is pointing out that potentially there is immense value in RE."

 

I sincerely apologize to FCharlie if my post came across that way, as this was not my intent.

 

Wisdom said: "I do not understand why you would be posting on the SHLD thread unless you have something of value to add."

 

In the few posts I've made on this thread, I've pointed out very significant flaws in the analysis that I'm seeing.  I guess, according to you, there is no "value added" in pointing out errors.  I was genuinely trying to help.  Apparently my efforts are in vain because no one seems to care about the flaws.  I guess you're right that I shouldn't have wasted my time in trying to help.  Carry on and good luck.

 

People have very thin skins.  The level of sensitivity to criticism or even perceived criticism on a message board is much higher than it should be.  Please keep posting if you have anything to say. 

 

That being said, as far as I'm concerned I don't think you've pointed out any flaws for those of us looking at this solely as an asset play.  The assets are there, I have no doubt about that.  The only question to me is whether the retail operations deplete the assets and permanently impair them.  I am not sure exactly how that happens.  I am no Lampert fan (it's not that I am not a fan, I just don't care either way), but have a hard time seeing how he would allow his personal fortune to be impaired to such an extent.  To me there is a tremendous margin of safety in the assets.

 

+1 - Yep, too Skinny, don't go away - we need both sides of this. Personally, I own SHLD too - but it's not a 1 foot hurdle and I can see both sides

        of the controversy. SHLD invokes a pretty visceral reaction in people. Last year, BBY, HPQ, and NFLX did as well. I think we're all trying to

        get to the bottom of this SHLD puzzle to see if it may be that kind of opportunity. I don't even talk to people about the potential of SHLD

        anymore since the idea is so ridiculed. Let's keep this thread useful.

 

[ERICOPOLY]

Shop Your Way and Sears.com search are unproven. I'll admit, the search feature isn't great...but like others have pointed out, unless it's Amazon almost ever other retailer has very similar levels of suckiness.

 

IMO, ShopYourWay is off the charts bad.  Try the "LED bulbs" search at HomeDepot.com, try it at Walmart.com, then Target.com.

 

All way better.  I mean, it goes beyond merely search relevance.  Sears.com can't lay it out either -- just scroll down to the bottom of the results and they keep adding to the page results (instead of giving it as one page where you can flip to "page 2", they just keep dumping stuff in an endless download at the bottom of the page).

 

I'm the one who originally compared it to Home Depot.  But then I thought that wouldn't be fair, because HomeDepot isn't a department store -- which is an advantage in terms of search relevance.  So I thought it would be fair to compare ShopYourWay to Amazon.com given that Amazon is the "mother of all department stores".  I mean, they have the hardest work cut out for them in terms of search relevance.

 

I honestly got so frustrated with trying to sift through the jumbled and disorganized search results as ShopYourWay presents them.  None of the other websites I mentioned have anywhere near this level of disarray.