SHLDQ - Sears Holdings Corp

[FCharlie]

Thanks! I'll read through that.

 

(I was trying to figure out at what point Eddie might be able to throttle back on the pension contributions that have sucked up our cash.)

 

 

I've posted this before but not since SHLD updated their pension situation last quarter. If interest rates hold where they are and the updated liability of $1.6 Billion holds until year end, I think we'd see serious relief next year.

 

Year        Discount Rate      Cash Contributions    Actual Return      Benefits Paid    Status

 

2005        5.5%                    $262 Million            $345 Million        ($455 Million )  ($1.54 Bln)

 

2006        5.9%                    $355 Million              $602 Million        ($578 Million)  ($1.01 Bln)

 

2007        6.45%                  $184 Million              $285 Million        ($620 Million)    ($719 Mln)

 

2008        7.0%                    $262 Million            ($1.16 Billion)      ($541 Million)    ($1.52 Bln)

 

2009        6.0%                    $183 Million              $699 Million        ($447 Million)    ($1.84 Bln)

 

2010        5.75%                  $279 Million              $550 Million        ($416 Million)    ($1.68 Bln)

 

2011        4.9%                    $358 Million              $55 Million          ($479 Million)    ($2.25 Bln)

 

2012        4.25%                  $549 Million              $512 Million        ($445 Million)    ($2.25 Bln)

[Aberhound]

I sold 1/3 rd at a 42% gain. Thanks all particularly Luke and Eric (I particularly trust Eric's gut instinct which seemed to make the decision to buy).

 

I believe Obamacare will kill retail sales as health spending and taxation is prioritized over retail spending so this quarter will be a disaster with slow recovery thereafter as budgets are adjusted to the new awful reality. I also believe a big deal could happen at any time selling multiple locations. I hope for a volatile price. Sears should be a survivor as many buyers can only afford quality clothes that last but they will need to downsize substantially. I agree with management's decision not to invest capital in stores except where the mall is being redeveloped. Close, downsize, get rid of Kmart brand with its perceived low quality, and take advantage of low rents by leasing space to independent brands with high quality. Redevelop malls with towers like is happening in Vancouver as cities become more dense. Redevelopments should always close Kmarts or replace them with Sears or its other Sears brands in much smaller stores. Time  is short as Hayekian crack up booms don't last long.

 

Quality anecdote. I was driving my 13 year old daughter and teammate from soccer practice and they discussed their favourite stores. They mentioned some small stores that I have never heard of then they agreed Sears was also a good place to shop because the quality was high (they mentioned Land's End).

[krazeenyc]

I sold 1/3 rd at a 42% gain. Thanks all particularly Luke and Eric (I particularly trust Eric's gut instinct which seemed to make the decision to buy).

 

I believe Obamacare will kill retail sales as health spending and taxation is prioritized over retail spending so this quarter will be a disaster with slow recovery thereafter as budgets are adjusted to the new awful reality. I also believe a big deal could happen at any time selling multiple locations. I hope for a volatile price. Sears should be a survivor as many buyers can only afford quality clothes that last but they will need to downsize substantially. I agree with management's decision not to invest capital in stores except where the mall is being redeveloped. Close, downsize, get rid of Kmart brand with its perceived low quality, and take advantage of low rents by leasing space to independent brands with high quality. Redevelop malls with towers like is happening in Vancouver as cities become more dense. Redevelopments should always close Kmarts or replace them with Sears or its other Sears brands in much smaller stores. Time  is short as Hayekian crack up booms don't last long.

 

Quality anecdote. I was driving my 13 year old daughter and teammate from soccer practice and they discussed their favourite stores. They mentioned some small stores that I have never heard of then they agreed Sears was also a good place to shop because the quality was high (they mentioned Land's End).

 

I know I will regret asking -- but why do you think Obamacare will kill retail sales? You are suggesting the people who went without health insurance, and used to spend money on clothes or other retail goods will now be spending that money on health insurance -- thus killing retail?

[TwoCitiesCapital]

If you're referring to me, I may have missed the first part, but I definitely caught most of the squeeze.  ;D

 

Good for you! What are your thoughts on the rising of the stock, since now we know it is mostly not due to short squeeze? thanks.

 

 

Can you really say that it wasn't a short squeeze? Just because the short shares remained roughly the same doesn't mean it wasnt a squeeze. You can have a squeeze where shorts are scrambling to buy shares that others are selling short thus simply rolling the short exposure at a higher average strike.

[Parsad]

If you're referring to me, I may have missed the first part, but I definitely caught most of the squeeze.  ;D

 

Good for you! What are your thoughts on the rising of the stock, since now we know it is mostly not due to short squeeze? thanks.

 

 

Can you really say that it wasn't a short squeeze? Just because the short shares remained roughly the same doesn't mean it wasnt a squeeze. You can have a squeeze where shorts are scrambling to buy shares that others are selling short thus simply rolling the short exposure at a higher average strike.

 

Yes, that would be correct.  I think the point they were trying to make was that the short interest remains the same even though the stock has risen 40%+.  With any good news at all, the squeeze could continue on the guys rolling in after buying the shorts being covered.  Cheers!

[tombgrt]

Jup. While I have sold 40% of my position, I actually think it could make sense to sell your profitable ITM calls and get some OTM calls with a much lower outlay of capital. You risk less while having captured most of your return and you can keep close to the same upside potential. This short squeeze could be one of the rare cases where this (very basic) idea could actually make sense given the stable short intrest and the growing pressure on shorters while the stock gets higher. All considering I don't pay taxes on gains of course.  Am I nuts?

[txlaw]

If you're referring to me, I may have missed the first part, but I definitely caught most of the squeeze.  ;D

 

Good for you! What are your thoughts on the rising of the stock, since now we know it is mostly not due to short squeeze? thanks.

 

I have no idea why the stock price is rising.  I assumed it was because of some sort of short squeeze, but I'm not the one to talk to about market mechanics. 

[Luke 532]

No idea who Adam Levine is..but :

 

http://www.4-traders.com/SEARS-HOLDINGS-CORP-9814/news/Sears-Holdings-Corp--Adam-Levine-Opens-500-Shop-Within-Shops-in-Kmart-Stores-Throughout-the-Countr-17319845/

 

You are quick! When I saw this news this morning, I thought Luke5:32 must have already posted that here. He is always the quickest in posting SHLD related news.

 

Haha!  Actually I've been off the grid for a couple days as my beautiful bride gave birth to our 3rd son!  Mommy and baby doing well.  Of course, being so bullish on SHLD, we gave him the first name "Eddie" and middle name "Bruce."  Just kidding  ;D

[Mephistopheles]

No idea who Adam Levine is..but :

 

http://www.4-traders.com/SEARS-HOLDINGS-CORP-9814/news/Sears-Holdings-Corp--Adam-Levine-Opens-500-Shop-Within-Shops-in-Kmart-Stores-Throughout-the-Countr-17319845/

 

You are quick! When I saw this news this morning, I thought Luke5:32 must have already posted that here. He is always the quickest in posting SHLD related news.

 

Haha!  Actually I've been off the grid for a couple days as my beautiful bride gave birth to our 3rd son!  Mommy and baby doing well.  Of course, being so bullish on SHLD, we gave him the first name "Eddie" and middle name "Bruce."  Just kidding  ;D

 

lol

 

Congrats!!!

[Parsad]

No idea who Adam Levine is..but :

 

http://www.4-traders.com/SEARS-HOLDINGS-CORP-9814/news/Sears-Holdings-Corp--Adam-Levine-Opens-500-Shop-Within-Shops-in-Kmart-Stores-Throughout-the-Countr-17319845/

 

You are quick! When I saw this news this morning, I thought Luke5:32 must have already posted that here. He is always the quickest in posting SHLD related news.

 

Haha!  Actually I've been off the grid for a couple days as my beautiful bride gave birth to our 3rd son!  Mommy and baby doing well.  Of course, being so bullish on SHLD, we gave him the first name "Eddie" and middle name "Bruce."  Just kidding  ;D

 

Congratulations to you and your family Luke!  Cheers!

[muscleman]

No idea who Adam Levine is..but :

 

http://www.4-traders.com/SEARS-HOLDINGS-CORP-9814/news/Sears-Holdings-Corp--Adam-Levine-Opens-500-Shop-Within-Shops-in-Kmart-Stores-Throughout-the-Countr-17319845/

 

You are quick! When I saw this news this morning, I thought Luke5:32 must have already posted that here. He is always the quickest in posting SHLD related news.

 

Haha!  Actually I've been off the grid for a couple days as my beautiful bride gave birth to our 3rd son!  Mommy and baby doing well.  Of course, being so bullish on SHLD, we gave him the first name "Eddie" and middle name "Bruce."  Just kidding  ;D

 

Congrats!

[heth247]

Congrats, Luke! Maybe you should consider buying some diapers from Kmart/Sears.  ;)

[Aberhound]

 

I know I will regret asking -- but why do you think Obamacare will kill retail sales? You are suggesting the people who went without health insurance, and used to spend money on clothes or other retail goods will now be spending that money on health insurance -- thus killing retail?

BLS in CPI calculation puts healthcare spending for a median income $50,000 at $27 per month. No doubt the average spending basket was reduced because many people chose to have no health insurance. $3000 per year for a Bronze plan reported in the press puts that at $250 per month. Those who opt out pay tax which means fewer will opt out than the current number of uninsured. Discretionary spending will therefore be reduced significantly on the median income.

[Luke 532]

It's from Motley Fool (I know, I know), but it's a good read...

 

http://www.fool.com/investing/general/2013/10/07/is-this-retailer-gunning-for-amazon.aspx

 

Is This Retailer Gunning for Amazon?

 

Updated Oct 7th 2013 6:02PM

 

Is it possible that this down and out retailer has a game plan to take on Amazon.com ? Amazon is by far the leading online retailer, but it might surprise most investors that Sears Holdings (NASDAQ: SHLD) is considerably along the path toward being a leading online retailer.

 

No matter what investors think of the plans that CEO Eddie Lampert has undertaken by limiting spending on sprucing up stores, the company has made plans to become a leading online retailer. Sears has even recently advanced fulfillment services to include same-day delivery or in-store pickup that might offer a compelling advantage over Amazon.

 

Over the last few years, Sears has seen strong growth in online sales even as the in-store sales have faltered. In addition, the company has obtained high rankings for online-shopping experience and has advanced commerce services for merchants to use the platform similar to Amazon. The question is whether Sears can use its dual presence to bounce back in a way reminiscent of Best Buy's that was all the more impressive given that Best Buy was virtually left for dead at the end of 2012. Best Buy is now prospering from store-in-a-store offerings and same-day pickup.

 

Leading Online Retailer

With online sales surging 20% in its most recent quarter, Sears investors should glean a glimmer of hope that Sears is transitioning away from a store-based retail approach that will allow it to lease out space in valuable mall locations. By treating the collection of discrete assets individually, Sears can sell valuable brands via online and third-party sellers, as opposed to relying on its dying store locations.

 

A recent report by Web-research group Baymard Institute ranked Sears eighth out of 100 big e-commerce sites for the quality of its online-shopping "checkout experience." For 2012, the company was the number three mass-merchant retailer behind Amazon and Wal-Mart and the number eight overall retailer.

 

Sears.com has an incredible 60 million items from marketplace sellers only (marketplace for third-party sellers to use the Sears.com website and checkout process for selling products) and was generating 15 million unique visits a month. At only an estimated $4.2 billion in annual sales, it still remains a far cry from the $61 billion in sales generated by Amazon last year.

 

Fulfilled by Sears

Earlier this year, Sears launched a turnkey fulfillment service that offers businesses a simple, cost-effective solution for getting seller orders from Sears Marketplace to customers. Fulfilled by Sears, as the program is called, allows sellers to have their inventory at Sears and allow Sears to pick, pack, and fulfill their orders.

 

A major advantage is that customers can buy from sellers online and pick up in- store at Sears the same day or opt for same-day delivery. Sellers are able to leverage the vast 2,000 store base in order to get customer orders to them quicker. Suddenly those supposedly dying stores become the ideal distribution locations for online shopping.

-----

 

I cut off the article at that point as the most important information, in my opinion, is contained above.

[muscleman]

It's from Motley Fool (I know, I know), but it's a good read...

 

http://www.fool.com/investing/general/2013/10/07/is-this-retailer-gunning-for-amazon.aspx

 

Is This Retailer Gunning for Amazon?

 

Updated Oct 7th 2013 6:02PM

 

Is it possible that this down and out retailer has a game plan to take on Amazon.com ? Amazon is by far the leading online retailer, but it might surprise most investors that Sears Holdings (NASDAQ: SHLD) is considerably along the path toward being a leading online retailer.

 

No matter what investors think of the plans that CEO Eddie Lampert has undertaken by limiting spending on sprucing up stores, the company has made plans to become a leading online retailer. Sears has even recently advanced fulfillment services to include same-day delivery or in-store pickup that might offer a compelling advantage over Amazon.

 

Over the last few years, Sears has seen strong growth in online sales even as the in-store sales have faltered. In addition, the company has obtained high rankings for online-shopping experience and has advanced commerce services for merchants to use the platform similar to Amazon. The question is whether Sears can use its dual presence to bounce back in a way reminiscent of Best Buy's that was all the more impressive given that Best Buy was virtually left for dead at the end of 2012. Best Buy is now prospering from store-in-a-store offerings and same-day pickup.

 

Leading Online Retailer

With online sales surging 20% in its most recent quarter, Sears investors should glean a glimmer of hope that Sears is transitioning away from a store-based retail approach that will allow it to lease out space in valuable mall locations. By treating the collection of discrete assets individually, Sears can sell valuable brands via online and third-party sellers, as opposed to relying on its dying store locations.

 

A recent report by Web-research group Baymard Institute ranked Sears eighth out of 100 big e-commerce sites for the quality of its online-shopping "checkout experience." For 2012, the company was the number three mass-merchant retailer behind Amazon and Wal-Mart and the number eight overall retailer.

 

Sears.com has an incredible 60 million items from marketplace sellers only (marketplace for third-party sellers to use the Sears.com website and checkout process for selling products) and was generating 15 million unique visits a month. At only an estimated $4.2 billion in annual sales, it still remains a far cry from the $61 billion in sales generated by Amazon last year.

 

Fulfilled by Sears

Earlier this year, Sears launched a turnkey fulfillment service that offers businesses a simple, cost-effective solution for getting seller orders from Sears Marketplace to customers. Fulfilled by Sears, as the program is called, allows sellers to have their inventory at Sears and allow Sears to pick, pack, and fulfill their orders.

 

A major advantage is that customers can buy from sellers online and pick up in- store at Sears the same day or opt for same-day delivery. Sellers are able to leverage the vast 2,000 store base in order to get customer orders to them quicker. Suddenly those supposedly dying stores become the ideal distribution locations for online shopping.

-----

 

I cut off the article at that point as the most important information, in my opinion, is contained above.

 

Have you bought stuff from sear online? I did it once, and encountered a number of serious bugs.

I sent emails to customer service. They replied and thanked me for that and offered a 10% discount for my next order.

Still, I think if Eddie is serious about online shopping, these obvious bugs should not even occur, because it is so easy to find.

The bugs I found include:

1. "Inkjet Phote printer" does not even find one product that is a printer.

2. Based on my IP address, they found a list of Chicago stores near me. But actually I live in Seattle. Other sites can correctly identify me.

3. Other random issues.

[Luke 532]

http://www.myfoxmemphis.com/story/23613696/sears-crosstown-project-facing-major-snag

 

The video is a Memphis news segment.

[nkp007]

http://online.wsj.com/article/SB10001424052702303643304579109023202738550.html#printMode

October 8, 2013

 

Several of Its Most-Profitable Locations Have Been Sold, Raising Cash but Undercutting Revenue

 

Sears Cashes Out of Prime Stores

 

Sears Holdings Corp. has been selling off some of its best stores to raise cash, an unusual strategy that makes it harder for the struggling chain to improve its sales even as it helps shore up its financial position.

 

The discounter has sold nearly a dozen profitable Sears stores in the U.S. and Canada over the past 18 months, including two separate deals that were signed this summer for four stores plus an option to sell a fifth, according to former employees and analysts who have tracked the deals.

 

That is a small number for a company that operates 2,000 Sears and Kmart stores in the U.S. and 148 Sears stores in Canada. Still, it is an indication the company is faced with tough choices between succeeding as a retailer and unlocking the value in its property.

 

[image]

In July, Sears agreed to sell two locations, one in the Fayette Mall in Lexington, Ky., and another in CoolSprings Galleria in Nashville, Tenn., to mall owner CBL & Associates Properties Inc. for an undisclosed price. Stephen Lebovitz, CBL's chief executive, said the stores were located in two of his company's top five malls. CBL owns or manages 93 malls.

 

The CoolSprings store sat on good real estate but wasn't that profitable, former Sears employees said. But the Fayette store turned a tidy profit, they said. Credit Suisse analyst Gary Balter estimates that CoolSprings generated $1.4 million in earnings before interest, taxes, depreciation and amortization on sales of $37.3 million, while Fayette earned $3.1 million on sales of $62.6 million.

 

Spokesmen for Sears U.S. and Sears Canada declined to comment on individual store performance, but said that when Sears did sell stores or leases that were performing well, the upfront cash payment outweighed the loss of operating income. Sears owns 51% of Sears Canada.

 

Sears U.S. spokesman Howard Riefs broadly disputed the accuracy of Mr. Balter's estimates, calling them misleading. He said most of the 300 U.S. Sears and Kmart stores that have been closed since 2010 were performing poorly, and Sears chose not to renew the leases. Less than 2% were in good locations with good performance, Mr. Riefs said.

 

The July deal followed an agreement Sears Canada reached in June to sell the leases of two stores to Oxford Properties Group and Alberta Investment Management Corp. for $191 million. The buyers also have the right to exercise an option to buy a third lease.

 

By Mr. Balter's estimates, the three stores pulled in a combined $283 million in sales and $13.7 million in Ebitda. A little over a year earlier, Sears Canada sold three other stores to Cadillac Fairview Corp. for $170 million.

 

Credit Suisse arrived at its estimates by averaging the sales per square foot of other retailers in the same malls and then discounting that number by 30% or 40%. To arrive at its Ebitda estimates, Credit Suisse assumed the Sears stores had an operating margin of 2.7% to 6.7% depending on the location.

 

Sears has posted more than $4 billion in losses in the past two years, and its revenue has steadily eroded. For the quarter ended Aug. 3, losses widened to $194 million from $132 million a year earlier. To shore up its financial position, the company has pledged to raise $500 million from asset sales this year. Through the second quarter, Sears pocketed $277 million from selling stores and leaseholds.

 

Mall owners and property developers said the Sears deals are unusual. "Retailers invest in their best stores and refurbish them, they don't sell them," said Robert Futterman, chief executive of RKF, which leases properties to retailers.

 

Edward Lampert, the billionaire hedge-fund manager and CEO, isn't running Sears like a typical retailer. He has invested less in store upgrades than most retailers. In 2012, Sears spent $378 million on capital expenditures, compared with $785 million at Kohl's Corp., $810 million at J.C. Penney Co. and $942 million at Macy's Inc.

 

Instead, Mr. Lampert has adopted some unorthodox strategies including leasing space in Sears stores to third parties, including Western Athletic Clubs Inc., which in 2011 signed a contract to take over 69,000 square feet of a Sears store in Cupertino, Calif., and Gonzalez Grocery Store, which agreed to take over 41,000 square feet of a Kmart in San Diego.

 

Real estate has been a hot topic at Sears since Mr. Lampert bought Kmart out of bankruptcy in 2003 and combined it with Sears two years later.

 

Investors have speculated ever since that part of the attraction for Mr. Lampert was the underlying value of Sears's real estate. Yet, only a quarter of Sears mall stores are in the best centers, with the rest in average and even subpar malls, according to Green Street Advisors, a real estate research firm.

 

That hasn't stopped investors from getting excited about the potential for Sears to one day reap a huge payday from its real estate.

 

Baker Street Capital, one of Sears' largest investors, recently published a report that sent the stock up 25% over a four day period in mid-September by estimating that the company's top 350 locations were worth $7.3 billion—about $600 million more than Sears's market capitalization.

 

The problem with that scenario, according to Mr. Balter, of Credit Suisse, is that the top real estate also happens to be where Sears earns its money. If the best stores were sold, Mr. Balter wrote in a Sept. 11 rebuttal to Baker Street's research, "We highly doubt there would be a profitable chain left."

 

On a small scale, those are the choices Sears has been making.

 

Sears reached a $270 million deal in February 2012 to sell 11 stores to General Growth Properties. Among the stores was a location in the Ala Moana Center in Honolulu, Hawaii, which was one of the most profitable in the chain, former employees say.

 

The Ala Moana store was so valuable that all but $70 million of the purchase price went to pay for that one location, according to a person familiar with the transaction.

 

Three other stores in that deal—at the Woodlands Mall in Woodlands, Texas; the Fashion Place Mall in Murray, Utah; and the Apache Mall in Rochester, Minn.—were also highly profitable, the former employees said.

 

"While the Hawaii location was among the very, very few closed locations with good profits, we got an even better deal for selling the lease back," Mr. Riefs, the Sears spokesman, said.

 

He declined to comment on the profitability of the other stores in that deal.

 

Stores aren't the only assets on the block. Sears earlier this year spun off its Sears Hometown and Outlets Stores Inc., which sell appliances and tools, and it is considering selling its lucrative in-house warranty business.

 

Mr. Balter likens the sale of profitable stores and business units to a game of Jenga, in which players remove stacked wooden blocks one by one trying not to knock down the entire structure.

 

"What we are likely to see in the future is that too many pieces have been removed, which in turn is reducing the strength of the core," Mr. Balter wrote in a note to clients.

 

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

[Luke 532]

http://online.wsj.com/article/SB10001424052702303643304579109023202738550.html#printMode

October 8, 2013

 

Sears Holdings Corp. has been selling off some of its best stores to raise cash, an unusual strategy that makes it harder for the struggling chain to improve its sales even as it helps shore up its financial position...

 

Mall owners and property developers said the Sears deals are unusual.

 

http://www.bloomberg.com/news/2013-06-18/lampert-says-he-has-sears-strategy-as-analysts-doubt-it-retail.html

 

Lampert says critics just don’t grasp his strategy. “I understand what needs to be done here for us to be successful,” Lampert, who controls 55 percent of Sears, said in an interview last month.

 

Mall owners and property developers said the Sears deals are unusual.

"Retailers invest in their best stores and refurbish them, they don't sell them," said Robert Futterman, chief executive of RKF, which leases properties to retailers.

 

http://www.memphisdailynews.com/news/2012/may/3/sears-execs-say-retailer-financially-strong//print

 

"We can't deny that we're, one, a real estate company, and two, a customer company," Lampert said.

 

[muscleman]

http://online.wsj.com/article/SB10001424052702303643304579109023202738550.html#printMode

October 8, 2013

 

Sears Holdings Corp. has been selling off some of its best stores to raise cash, an unusual strategy that makes it harder for the struggling chain to improve its sales even as it helps shore up its financial position...

 

Mall owners and property developers said the Sears deals are unusual.

 

When I see it is written by Credit Suisse, I just skip reading the whole thing.

It is funny that this poor analyst just doesn't give up. Probably a lot of clients who were advised of some kind of long/short strategy got caught badly. :)

[merkhet]

Here's what jumped out at me...

 

 

...

 

Sears Holdings Corp. has been selling off some of its best stores to raise cash, an unusual strategy that makes it harder for the struggling chain to improve its sales even as it helps shore up its financial position.

 

...

 

The CoolSprings store sat on good real estate but wasn't that profitable, former Sears employees said. But the Fayette store turned a tidy profit, they said. Credit Suisse analyst Gary Balter estimates that CoolSprings generated $1.4 million in earnings before interest, taxes, depreciation and amortization on sales of $37.3 million, while Fayette earned $3.1 million on sales of $62.6 million.

 

Spokesmen for Sears U.S. and Sears Canada declined to comment on individual store performance, but said that when Sears did sell stores or leases that were performing well, the upfront cash payment outweighed the loss of operating income. Sears owns 51% of Sears Canada.

 

Sears U.S. spokesman Howard Riefs broadly disputed the accuracy of Mr. Balter's estimates, calling them misleading. He said most of the 300 U.S. Sears and Kmart stores that have been closed since 2010 were performing poorly, and Sears chose not to renew the leases. Less than 2% were in good locations with good performance, Mr. Riefs said.

 

...

 

Sears reached a $270 million deal in February 2012 to sell 11 stores to General Growth Properties. Among the stores was a location in the Ala Moana Center in Honolulu, Hawaii, which was one of the most profitable in the chain, former employees say.

 

The Ala Moana store was so valuable that all but $70 million of the purchase price went to pay for that one location, according to a person familiar with the transaction.

 

Three other stores in that deal—at the Woodlands Mall in Woodlands, Texas; the Fashion Place Mall in Murray, Utah; and the Apache Mall in Rochester, Minn.—were also highly profitable, the former employees said.

 

"While the Hawaii location was among the very, very few closed locations with good profits, we got an even better deal for selling the lease back," Mr. Riefs, the Sears spokesman, said.

 

He declined to comment on the profitability of the other stores in that deal.

 

...

 

Mr. Balter likens the sale of profitable stores and business units to a game of Jenga, in which players remove stacked wooden blocks one by one trying not to knock down the entire structure.

 

"What we are likely to see in the future is that too many pieces have been removed, which in turn is reducing the strength of the core," Mr. Balter wrote in a note to clients.

 

...

 

 

So basically, it seems like the vast majority (98%) of the stores they've been closing have been unprofitable stores.  However, they've closed some profitable stores when they got a "godfather" deal -- to quote from the book I'm currently reading, King of Capital, re Equity Office Properties -- where the price was just too good to pass up for the profits being generated.

 

Somehow, by the end of the article, this is being spun as Sears selling off most of its prime assets and leaving behind an unprofitable and unsustainable shell of a company...

[Luke 532]

Sears U.S. spokesman Howard Riefs broadly disputed the accuracy of Mr. Balter's estimates, calling them misleading. He said most of the 300 U.S. Sears and Kmart stores that have been closed since 2010 were performing poorly, and Sears chose not to renew the leases. Less than 2% were in good locations with good performance, Mr. Riefs said.

 

That is a great quote.

[merkhet]

I think it's similarly instructive to compare to the following...

 

(Article link) http://online.wsj.com/news/articles/SB10001424052702303643304579109023202738550

 

 

The discounter has sold nearly a dozen profitable Sears stores in the U.S. and Canada over the past 18 months, including two separate deals that were signed this summer for four stores plus an option to sell a fifth, according to former employees and analysts who have tracked the deals.

 

vs.

 

Sears U.S. spokesman Howard Riefs broadly disputed the accuracy of Mr. Balter's estimates, calling them misleading. He said most of the 300 U.S. Sears and Kmart stores that have been closed since 2010 were performing poorly, and Sears chose not to renew the leases. Less than 2% were in good locations with good performance, Mr. Riefs said.

 

 

Reading between the lines here, there's a way that they can both be correct.  Mr. Riefs mentions that only around 6 stores were stores in good locations with good performance.  (And received "Godfather"-esque offers.)  The remaining 6 stores may still be profitable (maybe barely so) and yet not be located in a place that's worth redeveloping.

[Luke 532]

I think it's similarly instructive to compare to the following...

 

(Article link) http://online.wsj.com/news/articles/SB10001424052702303643304579109023202738550

 

 

The discounter has sold nearly a dozen profitable Sears stores in the U.S. and Canada over the past 18 months, including two separate deals that were signed this summer for four stores plus an option to sell a fifth, according to former employees and analysts who have tracked the deals.

 

vs.

 

Sears U.S. spokesman Howard Riefs broadly disputed the accuracy of Mr. Balter's estimates, calling them misleading. He said most of the 300 U.S. Sears and Kmart stores that have been closed since 2010 were performing poorly, and Sears chose not to renew the leases. Less than 2% were in good locations with good performance, Mr. Riefs said.

 

 

Reading between the lines here, there's a way that they can both be correct.  Mr. Riefs mentions that only around 6 stores were stores in good locations with good performance.  (And received "Godfather"-esque offers.)  The remaining 6 stores may still be profitable (maybe barely so) and yet not be located in a place that's worth redeveloping.

 

Note that the first quote is US and Canada and the second quote is just US.  Either way, it appears that SHLD isn't selling the best properties in their portfolio... at least not a lot of them.  That contradicts much of what Credit Suisse said in their report responding to Baker Street.

[merkhet]

I think it's similarly instructive to compare to the following...

 

(Article link) http://online.wsj.com/news/articles/SB10001424052702303643304579109023202738550

 

 

The discounter has sold nearly a dozen profitable Sears stores in the U.S. and Canada over the past 18 months, including two separate deals that were signed this summer for four stores plus an option to sell a fifth, according to former employees and analysts who have tracked the deals.

 

vs.

 

Sears U.S. spokesman Howard Riefs broadly disputed the accuracy of Mr. Balter's estimates, calling them misleading. He said most of the 300 U.S. Sears and Kmart stores that have been closed since 2010 were performing poorly, and Sears chose not to renew the leases. Less than 2% were in good locations with good performance, Mr. Riefs said.

 

 

Reading between the lines here, there's a way that they can both be correct.  Mr. Riefs mentions that only around 6 stores were stores in good locations with good performance.  (And received "Godfather"-esque offers.)  The remaining 6 stores may still be profitable (maybe barely so) and yet not be located in a place that's worth redeveloping.

 

Note that the first quote is US and Canada and the second quote is just US.  Either way, it appears that SHLD isn't selling the best properties in their portfolio... at least not a lot of them.  That contradicts much of what Credit Suisse said in their report responding to Baker Street.

 

Yea, it's unclear how many of the dozen stores referenced are in the U.S. versus Canada. I was doing a thing I used to do for proofs in my mathematics classes. Assume the extreme and show how that affects the analysis. Assuming all of them are in the U.S. (or all but one), then what does that mean?

[Luke 532]

Yea, it's unclear how many of the dozen stores referenced are in the U.S. versus Canada. I was doing a thing I used to do for proofs in my mathematics classes. Assume the extreme and show how that affects the analysis. Assuming all of them are in the U.S. (or all but one), then what does that mean?

 

That means Riefs is a liar as he said <2% of the ~300 US stores (6 or less).  ;)