SHLDQ - Sears Holdings Corp

[tooskinneejs]

Sears Hometown Store coming to Adrian

 

http://www.sooeveningnews.com/article/20130830/BUSINESS/130839958/0/FRONTPAGE 

 

Has it really come to this?  Posts to announce individual Sears franchise store openings?

 

I'm starting to feel like this thread should be moved over to the Yahoo Finance message boards.

[alertmeipp]

Sears Hometown Store coming to Adrian

 

http://www.sooeveningnews.com/article/20130830/BUSINESS/130839958/0/FRONTPAGE 

 

Has it really come to this?  Posts to announce individual Sears franchise store openings?

 

I'm starting to feel like this thread should be moved over to the Yahoo Finance message boards.

 

You don't think store opening information is relevant info?

[CorpRaider]

Relevant to me at least to highlight the franchising of the concept to expand in rural markets with low competition and zero capital outlay from SHLD.  Thanks for sharing.

[Luke 532]

Relevant to me at least to highlight the franchising of the concept to expand in rural markets with low competition and zero capital outlay from SHLD.  Thanks for sharing.

 

You're welcome.  I believe store openings, store closings, insider ownership, etc. are all relevant.  Maybe this information is irrelevant to some, but those factors are part of my style of investing as I like to follow my holdings to get a good idea of where they are heading.  Admittedly, I might have more time than most to follow potential/existing investments as I do this full-time, but I'd like to think it would be my style even if I wasn't full-time.

[ourkid8]

Would you happen to know if Sears Holdings is receiving a franchise fees for allowing these stores to use the Sears name? 

 

S

 

Relevant to me at least to highlight the franchising of the concept to expand in rural markets with low competition and zero capital outlay from SHLD.  Thanks for sharing.

 

You're welcome.  I believe store openings, store closings, insider ownership, etc. are all relevant.  Maybe this information is irrelevant to some, but those factors are part of my style of investing as I like to follow my holdings to get a good idea of where they are heading.  Admittedly, I might have more time than most to follow potential/existing investments as I do this full-time, but I'd like to think it would be my style even if I wasn't full-time.

[krazeenyc]

Would you happen to know if Sears Holdings is receiving a franchise fees for allowing these stores to use the Sears name? 

 

S

 

Relevant to me at least to highlight the franchising of the concept to expand in rural markets with low competition and zero capital outlay from SHLD.  Thanks for sharing.

 

You're welcome.  I believe store openings, store closings, insider ownership, etc. are all relevant.  Maybe this information is irrelevant to some, but those factors are part of my style of investing as I like to follow my holdings to get a good idea of where they are heading.  Admittedly, I might have more time than most to follow potential/existing investments as I do this full-time, but I'd like to think it would be my style even if I wasn't full-time.

 

They do not. SHOS gets those fees. SHOS provides items on consignment to individual store owners -- the store owners receive commissions when the goods sell. SHLD sells the merchandise to SHOS at cost (+ product warranty costs are bundled) + SHLD receives royalties for KCD products that are sold.  (There are a whole slew of operational things SHLD does for SHOS that SHOS pays for in addition to what is mentioned above.)

[ourkid8]

Just to get this straight, SHLD is selling goods to SHOS at cost and not making any profit.  The only profit SHLD is making is from product warranty + royalties from KCD?  Eddie is also talking about selling the warranty business so this will leave us only to receive royalty from KCD.  Not a great model IMO...

 

quick update:  Eddie is looking at selling Warranty, not royalty business.  My mistake.

 

Would you happen to know if Sears Holdings is receiving a franchise fees for allowing these stores to use the Sears name? 

 

S

 

Relevant to me at least to highlight the franchising of the concept to expand in rural markets with low competition and zero capital outlay from SHLD.  Thanks for sharing.

 

You're welcome.  I believe store openings, store closings, insider ownership, etc. are all relevant.  Maybe this information is irrelevant to some, but those factors are part of my style of investing as I like to follow my holdings to get a good idea of where they are heading.  Admittedly, I might have more time than most to follow potential/existing investments as I do this full-time, but I'd like to think it would be my style even if I wasn't full-time.

 

They do not. SHOS gets those fees. SHOS provides items on consignment to individual store owners -- the store owners receive commissions when the goods sell. SHLD sells the merchandise to SHOS at cost (+ product warranty costs are bundled) + SHLD receives royalties for KCD products that are sold.  (There are a whole slew of operational things SHLD does for SHOS that SHOS pays for in addition to what is mentioned above.)

[ERICOPOLY]

Just to get this straight, SHLD is selling goods to SHOS at cost and not making any profit.  The only profit SHLD is making is from product warranty + royalties from KCD?  Eddie is also talking about selling the royalty business so this will leave us only to receive royalty from KCD.  Not a great model IMO...

 

Well, they get volume discounts.  So it does help them both.

 

This was explained in either one of the conference call transcripts that I read or in the annual report itself -- I don't remember which.

 

[merkhet]

Two questions:

 

(1) If I remember correctly, Sears Holdings invoices Sears Hometown after 10 days. Does anyone know how long Sears Hometown gets to pay that off? Is it immediate? Also, does anyone else think that Sears Holdings is using Sears Hometown to tighten up its inventory conversion cycle? That could provide the company with some liquidity, no?

 

(2) Does anyone else think Sears might turn a profit this year? (GAAP or FCF?)

[ourkid8]

Would you please elaborate on volume discount?  What kind of margins are we looking at?

 

Just to get this straight, SHLD is selling goods to SHOS at cost and not making any profit.  The only profit SHLD is making is from product warranty + royalties from KCD?  Eddie is also talking about selling the royalty business so this will leave us only to receive royalty from KCD.  Not a great model IMO...

 

Well, they get volume discounts.  So it does help them both.

 

This was explained in either one of the conference call transcripts that I read or in the annual report itself -- I don't remember which.

[krazeenyc]

Just to get this straight, SHLD is selling goods to SHOS at cost and not making any profit.  The only profit SHLD is making is from product warranty + royalties from KCD?  Eddie is also talking about selling the warranty business so this will leave us only to receive royalty from KCD.  Not a great model IMO...

 

quick update:  Eddie is looking at selling Warranty, not royalty business.  My mistake.

 

Would you happen to know if Sears Holdings is receiving a franchise fees for allowing these stores to use the Sears name? 

 

S

 

Relevant to me at least to highlight the franchising of the concept to expand in rural markets with low competition and zero capital outlay from SHLD.  Thanks for sharing.

 

You're welcome.  I believe store openings, store closings, insider ownership, etc. are all relevant.  Maybe this information is irrelevant to some, but those factors are part of my style of investing as I like to follow my holdings to get a good idea of where they are heading.  Admittedly, I might have more time than most to follow potential/existing investments as I do this full-time, but I'd like to think it would be my style even if I wasn't full-time.

 

They do not. SHOS gets those fees. SHOS provides items on consignment to individual store owners -- the store owners receive commissions when the goods sell. SHLD sells the merchandise to SHOS at cost (+ product warranty costs are bundled) + SHLD receives royalties for KCD products that are sold.  (There are a whole slew of operational things SHLD does for SHOS that SHOS pays for in addition to what is mentioned above.)

 

I completely disagree with this post. Sears does not manufacture any appliances or hardware. So let's get this straight. Sears does nothing... these guys work their butts off selling these products sears gets product warranty money, volume $$, AND KCD royalty revenues? You really think that is bad? KCD royalty revenues are very valuable they pretty much flow straight to the bottom line.  It would be different if Sears was actually manufacturing their appliances.

[ERICOPOLY]

Would you please elaborate on volume discount?  What kind of margins are we looking at?

 

Just to get this straight, SHLD is selling goods to SHOS at cost and not making any profit.  The only profit SHLD is making is from product warranty + royalties from KCD?  Eddie is also talking about selling the royalty business so this will leave us only to receive royalty from KCD.  Not a great model IMO...

 

Well, they get volume discounts.  So it does help them both.

 

This was explained in either one of the conference call transcripts that I read or in the annual report itself -- I don't remember which.

 

It was mentioned somewhere in the transcripts, and I don't want to go flipping through the Q&A again to find it.

 

But here is how I understood it:

 

1)  Initially SHLD and SHOS were all under one roof.  There are 'N' amounts of product 'X' inventory purchased by SHLD.

2)  Then the spinoff of SHOS.  Now both SHLD and SHOS still collectively need to purchase 'N' amounts of product "X" inventory

3)  Were they each to purchase "X" separately, they wouldn't get the volume discount.

 

So if SHLD still buys "N" amounts of product "X" and merely sells some of it (at cost) to SHOS, then SHLD still gets the volume discount on what it stocks in SHLD stores.

 

Let's say that SHLD stops selling any of product "X" at cost to SHOS.  Then SHLD no longer gets the volume discount on what it sells in it's own stores.  And of course, SHOS no longer gets it at volume discount pricing either.

 

So as I understand it, both stand to benefit from this arrangement.

 

EDIT:  They sell it at cost to SHOS -- so this not-for-profit revenue negatively impacts SHLD margins.  But in doing so, it makes things better by getting better pricing on some of the items stocked in SHLD stores. 

[muscleman]

Would you please elaborate on volume discount?  What kind of margins are we looking at?

 

Just to get this straight, SHLD is selling goods to SHOS at cost and not making any profit.  The only profit SHLD is making is from product warranty + royalties from KCD?  Eddie is also talking about selling the royalty business so this will leave us only to receive royalty from KCD.  Not a great model IMO...

 

Well, they get volume discounts.  So it does help them both.

 

This was explained in either one of the conference call transcripts that I read or in the annual report itself -- I don't remember which.

 

It was mentioned somewhere in the transcripts, and I don't want to go flipping through the Q&A again to find it.

 

But here is how I understood it:

 

1)  Initially SHLD and SHOS were all under one roof.  There are 'N' amounts of product 'X' inventory purchased by SHLD.

2)  Then the spinoff of SHOS.  Now both SHLD and SHOS still collectively need to purchase 'N' amounts of product "X" inventory

3)  Were they each to purchase "X" separately, they wouldn't get the volume discount.

 

So if SHLD still buys "N" amounts of product "X" and merely sells some of it (at cost) to SHOS, then SHLD still gets the volume discount on what it stocks in SHLD stores.

 

Let's say that SHLD stops selling any of product "X" at cost to SHOS.  Then SHLD no longer gets the volume discount on what it sells in it's own stores.  And of course, SHOS no longer gets it at volume discount pricing either.

 

So as I understand it, both stand to benefit from this arrangement.

 

EDIT:  They sell it at cost to SHOS -- so this not-for-profit revenue negatively impacts SHLD margins.  But in doing so, it makes things better by getting better pricing on some of the items stocked in SHLD stores.

 

I think they talked about this in Q1's conference call. They said they are doing this to keep the economy of scale.

[merkhet]

I think a lot of people are complaining about a lack of "substantive" commentary on this thread because they view "substantive" and "quantitative" as the same. Quantitative may or may not be more important than qualitative commentary, but in any case, here is an updated list of quantitative things to think about.

 

Things we've already listed:

(1) The $600 million pension reversal coming in Q4 2013.

(2) The $120 million expense reduction coming in 2H2013.

(3) The $500 million liquidity target.

 

New things for the list:  -- (AKA why did Sears' numbers suck for 2H 2012?)

(1) The 3Q 2012 numbers were negatively impacted by a $235 million income tax expense charge. As far as I can tell, this was a non-cash write down of tax assets they determined they might not be able to use.

(2) The 4Q 2012 numbers were negatively impacted by an impairment charge of $330 million.

(3) The 4Q 2012 numbers were negatively impacted by a pension settlement of $455 million -- might be offset depending on whether Sears wants to pony up for $350 million in expected pension payments (they've paid $94 million already as of 2Q 2013)

 

If we have similar 3Q & 4Q numbers as last year, and we adjust for all these things and add it to the 2H 2013 numbers we currently have, I think Sears has a good chance to eke out a positive GAAP profit and/or a positive free cash flow.

[muscleman]

I think a lot of people are complaining about a lack of "substantive" commentary on this thread because they view "substantive" and "quantitative" as the same. Quantitative may or may not be more important than qualitative commentary, but in any case, here is an updated list of quantitative things to think about.

 

Things we've already listed:

(1) The $600 million pension reversal coming in Q4 2013.

(2) The $120 million expense reduction coming in 2H2013.

(3) The $500 million liquidity target.

 

New things for the list:  -- (AKA why did Sears' numbers suck for 2H 2012?)

(1) The 3Q 2012 numbers were negatively impacted by a $235 million income tax expense charge. As far as I can tell, this was a non-cash write down of tax assets they determined they might not be able to use.

(2) The 4Q 2012 numbers were negatively impacted by an impairment charge of $330 million.

(3) The 4Q 2012 numbers were negatively impacted by a pension settlement of $455 million -- might be offset depending on whether Sears wants to pony up for $350 million in expected pension payments (they've paid $94 million already as of 2Q 2013)

 

If we have similar 3Q & 4Q numbers as last year, and we adjust for all these things and add it to the 2H 2013 numbers we currently have, I think Sears has a good chance to eke out a positive GAAP profit and/or a positive free cash flow.

 

Is the pension 600 million instead of 700 million?

Is the cost cutting 120 million instead of 200 million?

[merkhet]

I think a lot of people are complaining about a lack of "substantive" commentary on this thread because they view "substantive" and "quantitative" as the same. Quantitative may or may not be more important than qualitative commentary, but in any case, here is an updated list of quantitative things to think about.

 

Things we've already listed:

(1) The $600 million pension reversal coming in Q4 2013.

(2) The $120 million expense reduction coming in 2H2013.

(3) The $500 million liquidity target.

 

New things for the list:  -- (AKA why did Sears' numbers suck for 2H 2012?)

(1) The 3Q 2012 numbers were negatively impacted by a $235 million income tax expense charge. As far as I can tell, this was a non-cash write down of tax assets they determined they might not be able to use.

(2) The 4Q 2012 numbers were negatively impacted by an impairment charge of $330 million.

(3) The 4Q 2012 numbers were negatively impacted by a pension settlement of $455 million -- might be offset depending on whether Sears wants to pony up for $350 million in expected pension payments (they've paid $94 million already as of 2Q 2013)

 

If we have similar 3Q & 4Q numbers as last year, and we adjust for all these things and add it to the 2H 2013 numbers we currently have, I think Sears has a good chance to eke out a positive GAAP profit and/or a positive free cash flow.

 

Is the pension 600 million instead of 700 million?

Is the cost cutting 120 million instead of 200 million?

 

As far as I can tell from the investor presentations, they say 1% translates to $600 million.

 

Again, as far as I can tell, they've already cut $80 million in expenses.

[BTShine]

I think a lot of people are complaining about a lack of "substantive" commentary on this thread because they view "substantive" and "quantitative" as the same. Quantitative may or may not be more important than qualitative commentary, but in any case, here is an updated list of quantitative things to think about.

 

Things we've already listed:

(1) The $600 million pension reversal coming in Q4 2013.

(2) The $120 million expense reduction coming in 2H2013.

(3) The $500 million liquidity target.

 

New things for the list:  -- (AKA why did Sears' numbers suck for 2H 2012?)

(1) The 3Q 2012 numbers were negatively impacted by a $235 million income tax expense charge. As far as I can tell, this was a non-cash write down of tax assets they determined they might not be able to use.

(2) The 4Q 2012 numbers were negatively impacted by an impairment charge of $330 million.

(3) The 4Q 2012 numbers were negatively impacted by a pension settlement of $455 million -- might be offset depending on whether Sears wants to pony up for $350 million in expected pension payments (they've paid $94 million already as of 2Q 2013)

 

If we have similar 3Q & 4Q numbers as last year, and we adjust for all these things and add it to the 2H 2013 numbers we currently have, I think Sears has a good chance to eke out a positive GAAP profit and/or a positive free cash flow.

 

Is the pension 600 million instead of 700 million?

Is the cost cutting 120 million instead of 200 million?

 

As far as I can tell from the investor presentations, they say 1% translates to $600 million.

 

Again, as far as I can tell, they've already cut $80 million in expenses.

 

You are right, as far as I can tell, too.  They've already reduced expenses by $80 million (of the $200 million) so far this year.

 

The $600 million reduction in pension assumes that interest rates stay where they are from today through end of year.  That's not likely to occur, so the change will almost certainly be different than $600 million (though I've no idea if it's more or less than $600 million).

 

[muscleman]

I think a lot of people are complaining about a lack of "substantive" commentary on this thread because they view "substantive" and "quantitative" as the same. Quantitative may or may not be more important than qualitative commentary, but in any case, here is an updated list of quantitative things to think about.

 

Things we've already listed:

(1) The $600 million pension reversal coming in Q4 2013.

(2) The $120 million expense reduction coming in 2H2013.

(3) The $500 million liquidity target.

 

New things for the list:  -- (AKA why did Sears' numbers suck for 2H 2012?)

(1) The 3Q 2012 numbers were negatively impacted by a $235 million income tax expense charge. As far as I can tell, this was a non-cash write down of tax assets they determined they might not be able to use.

(2) The 4Q 2012 numbers were negatively impacted by an impairment charge of $330 million.

(3) The 4Q 2012 numbers were negatively impacted by a pension settlement of $455 million -- might be offset depending on whether Sears wants to pony up for $350 million in expected pension payments (they've paid $94 million already as of 2Q 2013)

 

If we have similar 3Q & 4Q numbers as last year, and we adjust for all these things and add it to the 2H 2013 numbers we currently have, I think Sears has a good chance to eke out a positive GAAP profit and/or a positive free cash flow.

 

Is the pension 600 million instead of 700 million?

Is the cost cutting 120 million instead of 200 million?

 

As far as I can tell from the investor presentations, they say 1% translates to $600 million.

 

Again, as far as I can tell, they've already cut $80 million in expenses.

 

Sorry my bad.

Given that the 80 million cut in expenses did not go to the bottom line for H1, I don't expect any difference in H2.

[BTShine]

I think a lot of people are complaining about a lack of "substantive" commentary on this thread because they view "substantive" and "quantitative" as the same. Quantitative may or may not be more important than qualitative commentary, but in any case, here is an updated list of quantitative things to think about.

 

Things we've already listed:

(1) The $600 million pension reversal coming in Q4 2013.

(2) The $120 million expense reduction coming in 2H2013.

(3) The $500 million liquidity target.

 

New things for the list:  -- (AKA why did Sears' numbers suck for 2H 2012?)

(1) The 3Q 2012 numbers were negatively impacted by a $235 million income tax expense charge. As far as I can tell, this was a non-cash write down of tax assets they determined they might not be able to use.

(2) The 4Q 2012 numbers were negatively impacted by an impairment charge of $330 million.

(3) The 4Q 2012 numbers were negatively impacted by a pension settlement of $455 million -- might be offset depending on whether Sears wants to pony up for $350 million in expected pension payments (they've paid $94 million already as of 2Q 2013)

 

If we have similar 3Q & 4Q numbers as last year, and we adjust for all these things and add it to the 2H 2013 numbers we currently have, I think Sears has a good chance to eke out a positive GAAP profit and/or a positive free cash flow.

 

Is the pension 600 million instead of 700 million?

Is the cost cutting 120 million instead of 200 million?

 

As far as I can tell from the investor presentations, they say 1% translates to $600 million.

 

Again, as far as I can tell, they've already cut $80 million in expenses.

 

Sorry my bad.

Given that the 80 million cut in expenses did not go to the bottom line for H1, I don't expect any difference in H2.

 

Did anyone get the impression that some of the $120 million reduction in expenses will be related to reduced marketing costs, which will be possible due to the success of SYWR?  Since people are engaged with the SYWR program, Sears seems to be planning to reduce traditional marketing spend.  Did anyone else get the impression that the reduction in marketing spend was related to the $120 million in the 2nd Half of 2013?

 

[muscleman]

I think a lot of people are complaining about a lack of "substantive" commentary on this thread because they view "substantive" and "quantitative" as the same. Quantitative may or may not be more important than qualitative commentary, but in any case, here is an updated list of quantitative things to think about.

 

Things we've already listed:

(1) The $600 million pension reversal coming in Q4 2013.

(2) The $120 million expense reduction coming in 2H2013.

(3) The $500 million liquidity target.

 

New things for the list:  -- (AKA why did Sears' numbers suck for 2H 2012?)

(1) The 3Q 2012 numbers were negatively impacted by a $235 million income tax expense charge. As far as I can tell, this was a non-cash write down of tax assets they determined they might not be able to use.

(2) The 4Q 2012 numbers were negatively impacted by an impairment charge of $330 million.

(3) The 4Q 2012 numbers were negatively impacted by a pension settlement of $455 million -- might be offset depending on whether Sears wants to pony up for $350 million in expected pension payments (they've paid $94 million already as of 2Q 2013)

 

If we have similar 3Q & 4Q numbers as last year, and we adjust for all these things and add it to the 2H 2013 numbers we currently have, I think Sears has a good chance to eke out a positive GAAP profit and/or a positive free cash flow.

 

Is the pension 600 million instead of 700 million?

Is the cost cutting 120 million instead of 200 million?

 

As far as I can tell from the investor presentations, they say 1% translates to $600 million.

 

Again, as far as I can tell, they've already cut $80 million in expenses.

 

Sorry my bad.

Given that the 80 million cut in expenses did not go to the bottom line for H1, I don't expect any difference in H2.

 

Did anyone get the impression that some of the $120 million reduction in expenses will be related to reduced marketing costs, which will be possible due to the success of SYWR?  Since people are engaged with the SYWR program, Sears seems to be planning to reduce traditional marketing spend.  Did anyone else get the impression that the reduction in marketing spend was related to the $120 million in the 2nd Half of 2013?

 

No idea, but probably correct.

Where does the first $80 million come from? I have no idea. I compared Q1, Q2 vs last year Q1 and Q2. The extra losses against last year is almost the same amount as the extra SYWR spending, so I am curious where does this $80 million saving go. It didn't go to the bottom line.

For the other $120 million, there is still the possibility that it won't go to the bottom line. ::)

[Luke 532]

Berkowitz interview on CNBC this morning: http://video.cnbc.com/gallery/?play=1&video=3000196230

 

Discusses SHLD briefly... nothing new, just mentions that he still thinks it's a mini-Berkshire and uses the SPG/SHLD market cap example again. 

 

When talking about Fannie/Freddie: "The gov't is an excellent hedge fund" (paraphrased) - love that quote  :D

[tombgrt]

Thanks. Can't argue with his general conviction on his picks, amazing. Like Kraven said in the other topic, he really seems to like a good story. Or he's seeing things others don't and just doesn't like to spell it all out. I don't see why that would be the case given how open he has been about stocks like BAC and AIG.

 

Took the opportunity to sell half my leap position (got to 7% of portfolio in a few days..) for a nice 85% return. What luck! Will let the rest run.

[jeffmori7]

Any news? Or the famous short squeeze?

[muscleman]

Any news? Or the famous short squeeze?

 

I was gonna ask the same question.

The other questions that I am curious about are:

1. Who naked sold short the shares? Since it is illegal, who did that? Which broker facilitated this?

I can't believe it is some retail investors who naked shorted the shares from some discount brokers. It must be some premium brokers who helped the big hedge funds to do this.

2. Is short positions not required to disclose in SEC filings? I haven't seen any. Assuming it is some unsophisticated long/short equity funds, maybe long Amazon/short Sears? Will they get margin calls for naked shorted positions?

[Luke 532]

Any news? Or the famous short squeeze?

 

A 7% move in one day or a 20% move in a week is far less than the magnitude suggested by the short interest as a percentage of float.