Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: alertmeipp on November 16, 2012, 06:32:51 PM

Title: SHLD - Sears
Post by: alertmeipp on November 16, 2012, 06:32:51 PM
Surprise I can't find a subject with Sears... it tanks 20% today.
Title: Re: SHLD - Sears
Post by: hellsten on November 17, 2012, 01:04:01 AM
Interesting. I remember reading a quarterly letter last week about how money managers are piling in to high-dividend and high-quality stocks. I wonder if it's this flight-to-quality that is pushing down all these smelly stocks or am I hallucinating?

Here are a few links:
http://www.grahamanddoddsville.net/wordpress/Files/Gurus/Bruce%20Berkowitz/OID%20-%20Bruce%20Berkowitz%20-%203-17-2009.pdf
http://www.fairholmefunds.com/sites/default/files/120815%20SHLD%20Presentation.pdf
http://www.manualofideas.com/files/shld_moi_20081223.pdf (from 2008...)

Value Line doesn't seem to like SHLD (don't remember how fresh this report is…):
Quote
TIMELINESS 5 Lowered 4/20/12
SAFETY 3 New 5/13/05
TECHNICAL 3 Raised 3/9/12
BETA 1.05 (1.00 = Market)
2015-17 PROJECTIONS
Ann’l Total
Price Gain Return
High 55 (+10%) 2%
Low 35 (-30%) -9%
Title: Re: SHLD - Sears
Post by: FCharlie on November 17, 2012, 05:25:28 AM
I too was surprised no one was talking about the 20% drop. The loss was better than expected, but still just more of the same. A company that appears worth so much more dead than alive, yet can't aggressively liquidate in this economy.

It seems that Sears has gone from being either completely loved or completely hated to simply no one cares anymore.

Title: Re: SHLD - Sears
Post by: DCG on November 17, 2012, 06:06:43 AM
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867 (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867)
Title: Re: SHLD - Sears
Post by: alertmeipp on November 17, 2012, 07:03:19 AM
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867 (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867)

And?
Title: Re: SHLD - Sears
Post by: mysticdrew on November 17, 2012, 08:19:36 AM
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867 (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867)

And?

it answers your original comment
"Surprise I can't find a subject with Sears"
Title: Re: SHLD - Sears
Post by: DCG on November 17, 2012, 08:28:20 AM
http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867 (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg75867/#msg75867)

And?

it answers your original comment
"Surprise I can't find a subject with Sears"

This. While there doesn't seem to be a post in 'investment ideas' Sears has been discussed in this thread.
Title: Re: SHLD - Sears
Post by: Shane on December 02, 2012, 11:59:50 AM
From what I have heard from this site and others, my impression of SEARS was very poor.  I imagined depressed workers, crappy products, and low foot traffic.

Recently I went to their Miami retail store while visiting the city... It was a great place to shop.  Friendly staff, good product selection, and full of shoppers.  Their auto center was on the same property so I imagine people shop while they are getting auto work done.  I was impressed with the reality of the store contrasted with my expectations.

Maybe it was a new model, recently remodeled, or just a new store.
Title: Re: SHLD - Sears
Post by: rmitz on December 02, 2012, 12:37:16 PM
From what I have heard from this site and others, my impression of SEARS was very poor.  I imagined depressed workers, crappy products, and low foot traffic.

Recently I want to their Miami retail store while visiting the city... It was a great place to shop.  Friendly staff, good product selection, and full of shoppers.  Their auto center was on the same property so I imagine people shop while they are getting auto work done.  I was impressed with the reality of the store contrasted with my expectations.

Maybe it was a new model, recently remodeled, or just a new store.

There is definitely a range of quality at sears locations, but in my experience the Kmart locations are the depressing ones.
Title: Re: SHLD - Sears
Post by: FCharlie on December 02, 2012, 04:00:05 PM
Open question to all:

What would it take to get you interested in, or more interested in SHLD?

For me, SHLD was one of my largest positions a couple of years ago when they were consistently producing free cash flow and repurchasing shares. I viewed it not as a retailer but as a giant pile of assets being priced as if it were scrap.... and every quarter that passed, I owned more and more of it. The stores were always weak but I like Bruce Berkowitz point that SHLD has more real estate than Simon Property Group yet only has 1/10th the market value... On top of that you have greater than $50/share of net inventory. The share repurchases have stopped. The free cash flow has dried up, and today I sit and wait, not really adding but not selling either.

Thoughts anyone?
Title: Re: SHLD - Sears
Post by: valuecfa on December 02, 2012, 04:09:53 PM
Open question to all:

What would it take to get you interested in, or more interested in SHLD?

For me, SHLD was one of my largest positions a couple of years ago when they were consistently producing free cash flow and repurchasing shares. I viewed it not as a retailer but as a giant pile of assets being priced as if it were scrap.... and every quarter that passed, I owned more and more of it. The stores were always weak but I like Bruce Berkowitz point that SHLD has more real estate than Simon Property Group yet only has 1/10th the market value... On top of that you have greater than $50/share of net inventory. The share repurchases have stopped. The free cash flow has dried up, and today I sit and wait, not really adding but not selling either.

Thoughts anyone?

I took my first very small bite on Friday. If earnings and sales continue to decline at such a rapid pace as they have in the past, i suspect the share price will continue to follow.
Title: Re: SHLD - Sears
Post by: Grenville on December 02, 2012, 04:33:38 PM
Do you guys remember where Bruce gave an outline for the worth of the real estate? I'm looking for the source. I could be wrong on my numbers, hence looking for the source.

My notes say he valued the real estate:
20% at 500 sq/ft
80% at 10 sq/ft

Title: Re: SHLD - Sears
Post by: ItsAValueTrap on December 02, 2012, 05:34:34 PM
Quote
What would it take to get you interested in, or more interested in SHLD?

New management maybe?  In the history of retail, a few retailers will make almost all the money (e.g. Walmart is one of the best performing stocks of all time).  If you are holding these stocks on multi-year timeframes, then it may make sense to stick to the few companies with the best management teams.  They will probably make most of the money in the sector.

I believe why the high short interest (39% of float short) in Sears exists is because of bad management.  It's a bet on Lampert consistently choosing bad CEOs and damaging their performance with interference on his part.
Title: Re: SHLD - Sears
Post by: drewdalton on December 02, 2012, 06:46:57 PM
Grenville,

Bruce discussed Sears Holdings real estate portfolio (ie- the 80/20 rule) in the March 17, 2009 issue of Outstanding Investor Digest.  Here is the link


http://www.google.ca/url?sa=t&rct=j&q=march%2017%2C%202009%20and%20outstanding%20investor%20digest&source=web&cd=1&cad=rja&sqi=2&ved=0CC0QFjAA&url=http%3A%2F%2Fwww.grahamanddoddsville.net%2Fwordpress%2FFiles%2FGurus%2FBruce%2520Berkowitz%2FOID%2520-%2520Bruce%2520Berkowitz%2520-%25203-17-2009.pdf&ei=1A-8UK6JIYjE2gXdq4GAAw&usg=AFQjCNF7J04qOV9uWCTLCC695qDAjYnPVg
Title: Re: SHLD - Sears
Post by: wisdom on December 02, 2012, 07:59:44 PM
What are the odds of permanent loss by owning SHLD? With the kind of balance sheet, assets SHLD has - how can it go into bankruptcy?

I have been unable to come up with many scenarios where that can happen. Especially, at the holding company level - the odds of bankruptcy are extremely remote.

A large part of its sales/services are directly linked to the housing market. Yet, is has survived the worst crash in living memory in housing with a strong balance sheet. In fact, it has continued to contribute to its pension plan, paid down debt and bought a lot of shares through this period. i.e in a lot of ways the balancesheet is better today. Having survived the slow down alone insures that they will do well when consumer spending comes back and the housing market get better.

I do not think the management at SHLD has been as bad as most people claim. Look at Home Depot, Best Buy and other retailers like JCP over the last 4 years. SHLD's drop in sales is similar - could the real reason for it be the slow down in housing and lower consumer spending rather than the management. Something to consider.

It is also a play on commercial real estate with low cost real estate or low rents locked in.

SHLD's strong balancesheet allows EL to play the waiting game (similar to Watsa or Buffett):
- housing is already making a come back which should lead to higher sales, thus, cashflow should start improving.

- malls are getting busier, thus, making commercial real estate more valuable. If we get inflation at some point in the future and real estate prices/rentals make a come back - SHLD would be one of the largest beneficiary's as it controls a large commercial real estate portfolio.

- in a high inflation scenario SHLD also benefits with its low locked in rents, etc. while revenues should rise with inflation.

- in a delationary scenario - SHLD has limited debt compared to some other retailers, low rents, has contributed heavily to its pension plan, a fair amount of cash and flexible B/S.

- If SHLD is EL's BRK - he already has 6 different businesses within SHLD - BRK only had textiles in the beginning. The share buybacks reming me of what Singleton (Teledyne) did during tough times in the market.

- Online retailers have enjoyed an advantage over brick and mortar companies - no sales taxes. Online retailers will start paying sales taxes as governments look for more revenue. Most brick and mortar stores with a large online presence stand to benefit. The advantage that Amazon has enjoyed will be reduced and a lot of these sales could come back to large retailers with both an online and a physical presence. 

$40B in annual sales
Even at EBITDA of 5% on $40B in sales (or $2B) SHLD will do well purchased at current prices with no increase in sales.

Thus, the question is - $42/share - is this a reasonable price to pay. I think so and I am prepared to wait.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on December 02, 2012, 08:28:56 PM
- If SHLD is EL's BRK


It isn't.  When SHLD has cash, it returns it to shareholders.

BRK never did that.  BRK was built by retaining cash and using it to fund new income streams.

Completely different trajectory at SHLD.  Moons apart.
Title: Re: SHLD - Sears
Post by: drewdalton on December 02, 2012, 09:16:13 PM
Eric-  This is what I recall from reading Snowball.

In the early days of Berkshire Buffett used part of the cash he squeezed out of the textile business to repurchase shares.  Buffett first invested in Berkshire in 1962 and assumed control in 1965.  From 1962 to 1975 Berkshire reduced its shares outstanding from about 1.6 million to slightly under 1 million.  Many of the shares were repurchased from Buffett's previous partners.  Warren gave them enough information about the business, but just enough. 

 
 
Title: Re: SHLD - Sears
Post by: rimm_never_sleeps on December 02, 2012, 09:33:53 PM
What are the odds of permanent loss by owning SHLD? With the kind of balance sheet, assets SHLD has - how can it go into bankruptcy?

I have been unable to come up with many scenarios where that can happen. Especially, at the holding company level - the odds of bankruptcy are extremely remote.

A large part of its sales/services are directly linked to the housing market. Yet, is has survived the worst crash in living memory in housing with a strong balance sheet. In fact, it has continued to contribute to its pension plan, paid down debt and bought a lot of shares through this period. i.e in a lot of ways the balancesheet is better today. Having survived the slow down alone insures that they will do well when consumer spending comes back and the housing market get better.

I do not think the management at SHLD has been as bad as most people claim. Look at Home Depot, Best Buy and other retailers like JCP over the last 4 years. SHLD's drop in sales is similar - could the real reason for it be the slow down in housing and lower consumer spending rather than the management. Something to consider.

It is also a play on commercial real estate with low cost real estate or low rents locked in.

SHLD's strong balancesheet allows EL to play the waiting game (similar to Watsa or Buffett):
- housing is already making a come back which should lead to higher sales, thus, cashflow should start improving.

- malls are getting busier, thus, making commercial real estate more valuable. If we get inflation at some point in the future and real estate prices/rentals make a come back - SHLD would be one of the largest beneficiary's as it controls a large commercial real estate portfolio.

- in a high inflation scenario SHLD also benefits with its low locked in rents, etc. while revenues should rise with inflation.

- in a delationary scenario - SHLD has limited debt compared to some other retailers, low rents, has contributed heavily to its pension plan, a fair amount of cash and flexible B/S.

- If SHLD is EL's BRK - he already has 6 different businesses within SHLD - BRK only had textiles in the beginning. The share buybacks reming me of what Singleton (Teledyne) did during tough times in the market.

- Online retailers have enjoyed an advantage over brick and mortar companies - no sales taxes. Online retailers will start paying sales taxes as governments look for more revenue. Most brick and mortar stores with a large online presence stand to benefit. The advantage that Amazon has enjoyed will be reduced and a lot of these sales could come back to large retailers with both an online and a physical presence. 

$40B in annual sales
Even at EBITDA of 5% on $40B in sales (or $2B) SHLD will do well purchased at current prices with no increase in sales.

Thus, the question is - $42/share - is this a reasonable price to pay. I think so and I am prepared to wait.

except his balance sheet is not that strong. his debt ratings are not good and the bonds trade below par. I own some sears bonds that trade at $12, down from $18-$19. finance 101. if your bonds trade below par buy them in before you buy back your stock. he also has big issues with underfunded pension.  3 years ago you could make your argument. but things have gone south in a big way. when you are losing money your balance sheet can go south in a hurry. that's what's happened. that's why he did the rights offering. to raise cash. his share buybacks were terrible uses of cash in hindsight. not like Singleton at all.
Title: Re: SHLD - Sears
Post by: drewdalton on December 02, 2012, 09:35:36 PM
I just noticed a new SEC filing for SHLD effective Nov 30, 2012.  From my reading ESL (Eddie's hedge funds) has wound up one of its partnerships and distributed 5.9m of SHLD to its limited partners.  It will be interesting to see if Eddie has taken his management fees in SHLD shares.  In January and July of this year ESL wound up two partnerships that it specifically set up for the Ziff brothers.  Eddie ended up with all those shares (about 6 to 7 million) either through fees or through purchases. 

SHLD may have been sold off last week in anticipation of the limited partners' shares hitting the market.

Title: Re: SHLD - Sears
Post by: compoundinglife on December 02, 2012, 09:41:24 PM
- Online retailers have enjoyed an advantage over brick and mortar companies - no sales taxes. Online retailers will start paying sales taxes as governments look for more revenue. Most brick and mortar stores with a large online presence stand to benefit. The advantage that Amazon has enjoyed will be reduced and a lot of these sales could come back to large retailers with both an online and a physical presence. 

I have heard this argument quite a bit, usually in the context of AMZN bear cases. I know it has been discussed quote a bit on the Overstock thread as well. I don't buy it.

AMZN delivers a better experience to shoppers and I think customers who shop on AMZN only to cheat sales tax is a non-material percentage. I think it is pretty meaningless in the SHLD turn around thesis. SHLD's online sales will be dependent on execution of delivering a decent shopping experience. Unfortunately they are at a serious disadvantage to a company like Amazon in that space. But I think if they can sticking around the top 5 and generating some return from that business it does not have to be best of breed.

disclosure: long

Title: Re: SHLD - Sears
Post by: ERICOPOLY on December 02, 2012, 09:45:24 PM
Eric-  This is what I recall from reading Snowball.

In the early days of Berkshire Buffett used part of the cash he squeezed out of the textile business to repurchase shares.  Buffett first invested in Berkshire in 1962 and assumed control in 1965.  From 1962 to 1975 Berkshire reduced its shares outstanding from about 1.6 million to slightly under 1 million.  Many of the shares were repurchased from Buffett's previous partners.  Warren gave them enough information about the business, but just enough. 

 

Okay, I got that part wrong.

As for the other half, what businesses has Eddie bought for diversifying the earnings streams of ESL?  None.
Title: Re: SHLD - Sears
Post by: wisdom on December 02, 2012, 09:56:13 PM
Eric - it could be worthwhile looking at how he has structured SHLD - 6 different areas of business eg: home services, real estate, etc. One could interpret it as different subsidiaries.

You also have Sears Canada, potential global expansion of sears.com (some of it is already happening), etc.
Title: Re: SHLD - Sears
Post by: wisdom on December 02, 2012, 10:06:35 PM
compounding life - you are right - sales tax on online sales is not something that SHLD thesis depends on. I have tried to list things that could work in the same direction - build momentum.

rimm - it is easy to say that the share purchases were bad use of capital in hindsight. At that point in time it could have been the best decision. Today it might be buying back the debt.

The rights offer also speaks to the flexibility he has if an error is made - I believe the large margin of safety allows him more room for error. I do not expect EL to be perfect in every decision.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on December 02, 2012, 10:06:54 PM
Eric - it could be worthwhile looking at how he has structured SHLD - 6 different areas of business eg: home services, real estate, etc. One could interpret it as different subsidiaries.

You also have Sears Canada, potential global expansion of sears.com (some of it is already happening), etc.

ESL is the Berkshire.  Not SHLD.

ESL has passive investments.  ESL has operating companies (via SHLD).

Buffett had all passive investments and operating companies done via Berkshire.
Title: Re: SHLD - Sears
Post by: wisdom on December 02, 2012, 10:14:55 PM
Eric - I am not saying SHLD is like BRK. This is why i used - IF SHLD is EL's BRK.

It could be one of the outcomes depending on how things play out.

Would ESL provide permanent capital? The %age of ownership that EL now has in SHLD keeps moving up.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on December 02, 2012, 10:21:26 PM
Never say never I suppose.

Perhaps he'll manage money virtually for free via SHLD thus effectively losing the ESL fees.  A hedge fund manager that no longer wants to make money off of his partners' money is a rare breed.

Title: Re: SHLD - Sears
Post by: Grenville on December 02, 2012, 10:56:41 PM
Grenville,

Bruce discussed Sears Holdings real estate portfolio (ie- the 80/20 rule) in the March 17, 2009 issue of Outstanding Investor Digest.  Here is the link


http://www.google.ca/url?sa=t&rct=j&q=march%2017%2C%202009%20and%20outstanding%20investor%20digest&source=web&cd=1&cad=rja&sqi=2&ved=0CC0QFjAA&url=http%3A%2F%2Fwww.grahamanddoddsville.net%2Fwordpress%2FFiles%2FGurus%2FBruce%2520Berkowitz%2FOID%2520-%2520Bruce%2520Berkowitz%2520-%25203-17-2009.pdf&ei=1A-8UK6JIYjE2gXdq4GAAw&usg=AFQjCNF7J04qOV9uWCTLCC695qDAjYnPVg

Thanks DrewDalton for the link!
Title: Re: SHLD - Sears
Post by: FCharlie on December 03, 2012, 04:18:44 AM
I just noticed a new SEC filing for SHLD effective Nov 30, 2012.  From my reading ESL (Eddie's hedge funds) has wound up one of its partnerships and distributed 5.9m of SHLD to its limited partners.  It will be interesting to see if Eddie has taken his management fees in SHLD shares.  In January and July of this year ESL wound up two partnerships that it specifically set up for the Ziff brothers.  Eddie ended up with all those shares (about 6 to 7 million) either through fees or through purchases. 

SHLD may have been sold off last week in anticipation of the limited partners' shares hitting the market.


Eddie also distributed shares of AutoNation to partners.

At the end of the day, distributing shares shouldn't matter. Eddie himself hasn't sold. Bruce Berkowitz hasn't either. They are the reasons most of us are here.

The stock is down almost 40% in the past three weeks. Wow.


Title: Re: SHLD - Sears
Post by: bmichaud on December 03, 2012, 05:27:54 AM
What are the odds of permanent loss by owning SHLD? With the kind of balance sheet, assets SHLD has - how can it go into bankruptcy?

I have been unable to come up with many scenarios where that can happen. Especially, at the holding company level - the odds of bankruptcy are extremely remote.

A large part of its sales/services are directly linked to the housing market. Yet, is has survived the worst crash in living memory in housing with a strong balance sheet. In fact, it has continued to contribute to its pension plan, paid down debt and bought a lot of shares through this period. i.e in a lot of ways the balancesheet is better today. Having survived the slow down alone insures that they will do well when consumer spending comes back and the housing market get better.

I do not think the management at SHLD has been as bad as most people claim. Look at Home Depot, Best Buy and other retailers like JCP over the last 4 years. SHLD's drop in sales is similar - could the real reason for it be the slow down in housing and lower consumer spending rather than the management. Something to consider.

It is also a play on commercial real estate with low cost real estate or low rents locked in.

SHLD's strong balancesheet allows EL to play the waiting game (similar to Watsa or Buffett):
- housing is already making a come back which should lead to higher sales, thus, cashflow should start improving.

- malls are getting busier, thus, making commercial real estate more valuable. If we get inflation at some point in the future and real estate prices/rentals make a come back - SHLD would be one of the largest beneficiary's as it controls a large commercial real estate portfolio.

- in a high inflation scenario SHLD also benefits with its low locked in rents, etc. while revenues should rise with inflation.

- in a delationary scenario - SHLD has limited debt compared to some other retailers, low rents, has contributed heavily to its pension plan, a fair amount of cash and flexible B/S.

- If SHLD is EL's BRK - he already has 6 different businesses within SHLD - BRK only had textiles in the beginning. The share buybacks reming me of what Singleton (Teledyne) did during tough times in the market.

- Online retailers have enjoyed an advantage over brick and mortar companies - no sales taxes. Online retailers will start paying sales taxes as governments look for more revenue. Most brick and mortar stores with a large online presence stand to benefit. The advantage that Amazon has enjoyed will be reduced and a lot of these sales could come back to large retailers with both an online and a physical presence. 

$40B in annual sales
Even at EBITDA of 5% on $40B in sales (or $2B) SHLD will do well purchased at current prices with no increase in sales.

Thus, the question is - $42/share - is this a reasonable price to pay. I think so and I am prepared to wait.

except his balance sheet is not that strong. his debt ratings are not good and the bonds trade below par. I own some sears bonds that trade at $12, down from $18-$19. finance 101. if your bonds trade below par buy them in before you buy back your stock. he also has big issues with underfunded pension.  3 years ago you could make your argument. but things have gone south in a big way. when you are losing money your balance sheet can go south in a hurry. that's what's happened. that's why he did the rights offering. to raise cash. his share buybacks were terrible uses of cash in hindsight. not like Singleton at all.

Is it possible that "RIMM never sleeps" is the reincarnation of Peter Burke CEO? Owning SHLD bonds made me pause....the calling card of Burke was consistent RIMM bashing, and I distinctly remember him hinting at picking up SHLD debt earlier this year or late last year when SHLD was under some stress.  Just throwing it out there.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on December 03, 2012, 05:38:19 AM
Can anyone shed some light on some of Eddie Lampert's previous investing/ asset allocation mistakes and failures?

He seems to have a rather impressive track record.
Title: Re: SHLD - Sears
Post by: rkbabang on December 03, 2012, 06:59:10 AM
AMZN delivers a better experience to shoppers and I think customers who shop on AMZN only to cheat sales tax is a non-material percentage.

I don't own AMZN or SHLD, but I agree with you about AMZN.  I live in New Hampshire where there is no sales tax online or off and I find it easier to use Amazon.com rather than go to a physical store.   What does Sears have that is so compelling that I am going to actually physically go there when I don't have to?  This is a problem with any physical store without a strong online presence I think.  Even groceries we use PeaPod.com and get it delivered to our door.  Why people spend their lives driving from place to place to get these things done when it is no longer necessary I'll never understand.  Certainly the kids today will grow up and think it is oddly quaint that some older folks still like to drive around from place to place to place and aimlessly shop for things, never getting exactly what they want, but instead needing to settle for whatever the place they happen to be has in stock.
Title: Re: SHLD - Sears
Post by: Mikenhe on December 03, 2012, 07:45:08 AM
AMZN delivers a better experience to shoppers and I think customers who shop on AMZN only to cheat sales tax is a non-material percentage.

I don't own AMZN or SHLD, but I agree with you about AMZN.  I live in New Hampshire where there is no sales tax online or off and I find it easier to use Amazon.com rather than go to a physical store.   What does Sears have that is so compelling that I am going to actually physically go there when I don't have to?  This is a problem with any physical store without a strong online presence I think.  Even groceries we use PeaPod.com and get it delivered to our door.  Why people spend their lives driving from place to place to get these things done when it is no longer necessary I'll never understand.  Certainly the kids today will grow up and think it is oddly quaint that some older folks still like to drive around from place to place to place and aimlessly shop for things, never getting exactly what they want, but instead needing to settle for whatever the place they happen to be has in stock.

I still like to go to the store for various things. I still need the tactile experience of touching things that I'm thinking of buying. That doesn;t mean that I will buy it in the store though. I have no loyalty to the store so I'm ok with checking out something in person then buying it online. Somethings I want to see and buy at the store..
IE - in the last few months I have been shopping at Best Buy - I saw the tv I wanted and liked the look of it plus was able to check out the look of the refresh rate of a 120hz tv vs a 60 and see where the ports were etc. I bought the tv at the store and took it home. I also checked out digital picture frames and cameras. Those I bought online because the price was better (and it was a deal on black friday - and it'll be a cold day in hell before I go to shop on that day!!)

plus going to the mall of new hampshire in December is a fate worse than death - although that obviously doesn;t stop plenty of people waiting an hour for a parking space!!
Title: Re: SHLD - Sears
Post by: alpha23 on December 03, 2012, 07:51:44 AM
Is anyone else looking at SHLD bonds? The 2018 6.25's are trading at $74.75 for a YTM just under 13%.
Title: Re: SHLD - Sears
Post by: txlaw on December 03, 2012, 07:58:47 AM
Is anyone else looking at SHLD bonds? The 2018 6.25's are trading at $74.75 for a YTM just under 13%.

Peter Burke probably is. ;D
Title: Re: SHLD - Sears
Post by: hellsten on December 03, 2012, 08:22:16 AM
Here are some quotes from Murray Stahl's writings on Sears:
http://www.horizonkinetics.com/docs/2011Q4_commentary.pdf

Quote
Everyone knows Sears, no one likes it. I mean it; I’ve met no one outside of Horizon Kinetics who likes
Sears. Nearly every person in this country of driving age has had an opportunity to be dismayed by the
shopping experience

Quote
Yet, if viewed as a real estate company, virtually every management decision has been logical. This was
the initial investment thesis when the position was established: that the ultimate value of the real estate
was worth more than the market capitalization of the company, and that the realization of that value
would be a long-term prospect, since it appeared that the controlling shareholder, Eddie Lampert, was
intent on first maximizing the cash flow available from the retail business. Indeed, since 1996, the
repurchase of shares has increased the amount of real estate owned per share by over 50%, which is no
small matter. If Sears has been engaged in a long-term end game of capitalizing the real estate, then
there would necessarily have to come a time when the stores would begin to reach a point of
diminishing returns. Eight years after Mr. Lampert became chairman, this appears to be happening to at
least some of the stores, and those are being closed; they are not being supported with additional
spending.

Quote
Of the roughly 4,000 Sears stores, some 800 are owned, and these encompass roughly 93 million square feet. If, merely
for momentary consideration, these are worth $200 per square foot, then this real estate is worth $18
billion, or $168 per share; at only $100 per square foot, the per-share value would be $85. If one
subtracts both the company’s net debt and capital lease obligations (net of cash) and pension and postretirement liability obligations of $33 per share, then the net value of the real estate is $52 per share.
Moreover, the balance sheet has been arranged such that it will not be until 2016 that the first major
debt maturities and credit line expirations take place. Thus, there will be a good four years for retailing
and housing (Sears sells the white goods—refrigerators, washing machines and dishwashers)—to
recover, for capitalization rates to improve, and for optionality to be realized within this enormous real
estate portfolio. Aside from the owned stores there is reason to believe that there are many long-term,
below-market leases among the 3,000-plus leased stores. These, too, have value as real estate. As does
the company’s 2 million square feet of owned office space at its headquarters in the Hoffman Estates
suburb of Chicago. There are other assets, too. Aside from whatever values are attached to the brands
that it owns (for example, Craftsman tools, Kenmore, Land’s End and DieHard car batteries), Sears is also
a major internet presence: it was listed as the 7 th largest internet retailer in 2011 by Internet Retailer,
directly behind Walmart.com.

Quote
Moreover, the balance sheet has been arranged such that it will not be until 2016 that the first major
debt maturities and credit line expirations take place. Thus, there will be a good four years for retailing
and housing (Sears sells the white goods—refrigerators, washing machines and dishwashers)—to
recover, for capitalization rates to improve, and for optionality to be realized within this enormous real
estate portfolio

More:
http://www.horizonkinetics.com/docs/3Q_CoreValue_Highlighted_Holdings.pdf

Quote
In addition to the widely-known retail outlets and
brands, Sears owns over 90 million square feet of retail real estate space.  In our view, the value
of this real estate space is not reflected in current market valuations of the company.  In order to
maximize cash flows through the sale or lease of underperforming properties, the company
created the SHC Realty division.  SHC Realty not only leases and sells full lots, but also maximizes
each property through the lease of off lots, demised space and separated in-line retail lots.
Considering the current uncertainty with regard to the economy, particularly the real estate
market, investors have failed to properly recognize this endeavor which is likely to produce
exceptional long-term value.

http://www.horizonkinetics.com/docs/Spin_Commentary_September2012.pdf
http://www.horizonkinetics.com/docs/Horizon_Commentary_4thQuarter_2010.pdf

I don't own Sears, but will probably buy it very soon. I like misunderstood stocks that stink and owner-operators like Eddie Lampert. I also like what Murray Stahl and Bruce Berkowitz have written about the company. Stahl puts the value of the real estate at $85 (same as Berkowitz in 2009) take away liabilities and you have $52 left, and that's just the real estate.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on December 03, 2012, 08:53:23 AM
Indeed, since 1996, the repurchase of shares has increased the amount of real estate owned per share by over 50%, which is no small matter.

I don't want to belittle the author's point, but a commercial REIT yielding 7% does the same thing for the investor who purchases more shares with the distribution.  So it does seem to be a relatively small matter.

What am I missing?

EDIT:  Although the author wrote 1996 I presume he meant 2006
Title: Re: SHLD - Sears
Post by: giofranchi on December 03, 2012, 09:00:51 AM
I don't own Sears, but will probably buy it very soon. I like misunderstood stocks that stink and owner-operators like Eddie Lampert. I also like what Murray Stahl and Bruce Berkowitz have written about the company. Stahl puts the value of the real estate at $85 (same as Berkowitz in 2009) take away liabilities and you have $52 left, and that's just the real estate.

hellsten,
just one simple thought: I like owner-operators, because first of all I want to partner with outstanding managers. An Mr. Lampert is an outstanding manger, no doubt about it. But I also want to be in a business that I like. For instance, I like insurance (FFH, LRE), I like the media sector (LMCA), and I like the money management business (OAK). But I don’t like retail. So, though I certainly seek to partner with managers as good as Mr. Lampert, that’s not enough for me… These requirements must BOTH be met, for me to pull the trigger:
1) A great manager / capital allocator
2) A business that I like
Of course, also requirement 3) is most important: a good price. But without 1) AND 2) I almost never invest.

giofranchi
Title: Re: SHLD - Sears
Post by: wisdom on December 03, 2012, 10:22:28 AM
Gio - Is SHLD in retail or is it that some of it's subsidiaries are? We are not talking of Sears Roebuck here but Sears Holdings. I find too often people think them to be one and the same. Is BRK in retail because it own's NFM?

From SHLD - 10k

Sears Holdings Corporation (“Holdings,” “we,” “us,” “our,” or the “Company”) is the parent company of Kmart Holding Corporation (“Kmart”) and Sears, Roebuck and Co. (“Sears”). Holdings was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”) on March 24, 2005. We are a broadline retailer with 2,201 full-line and 1,354 specialty retail stores in the United States operating through Kmart and Sears and 483 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 92%-owned subsidiary.

This is why I believe that the probability of failure at the holding company level to be lower than the retail business - let me know if my thinking is wrong.

Title: Re: SHLD - Sears
Post by: txlaw on December 03, 2012, 11:34:03 AM
A couple things I would note about SHLD.   

First, they are trying their best to create a strong online presence and to convert to a "members-based business model."  So while SHLD is no AMZN, they understand the new world of retail.  ESL has been one of those smart cookies who saw this coming a long time ago (see AN, GPS, etc.).

Second, take a look at Sears Hometown (SHOS).  Not only were comps up this quarter, but they are increasing their stores on a net basis.  Why is this important?  Because one ought to be able to see that SHLD is trying to preserve its dominant share in appliances by continuing to convert part of the existing store base to an appliance and tool only format via Hometown.  Money losing stores will be sold off/subleased, but stores that break even will continue to break even so long as they preserve Sears' position, as they cannot just shut down all of the stores and expect to maintain their cost advantages as a large distributor of appliances and tools.

IMO, ESL has finally shown us the plan, and they're executing quite well.
Title: Re: SHLD - Sears
Post by: FCharlie on December 03, 2012, 11:36:52 AM

I don't own Sears, but will probably buy it very soon. I like misunderstood stocks that stink and owner-operators like Eddie Lampert. I also like what Murray Stahl and Bruce Berkowitz have written about the company. Stahl puts the value of the real estate at $85 (same as Berkowitz in 2009) take away liabilities and you have $52 left, and that's just the real estate.


With Sears, the liabilities (pension) disappear with higher interest rates. At the 2010 annual meeting I asked Mr. Lampert about this and after checking w/ the CFO, came back with an answer that every 1% change in interest rates would impact pension liabilities by $500 million dollars.

Sears could be the ultimate sleeper. Sit back and accumulate cheap and wait for two things. One, higher interest rates and two, a rebound in real estate.

It's just a shame that they don't produce enough cash to repurchase shares anymore.

Title: Re: SHLD - Sears
Post by: compoundinglife on December 03, 2012, 12:00:10 PM
A couple things I would note about SHLD.   

First, they are trying their best to create a strong online presence and to convert to a "members-based business model."  So while SHLD is no AMZN, they understand the new world of retail.  ESL has been one of those smart cookies who saw this coming a long time ago (see AN, GPS, etc.).

I have spent a bunch of time reviewing SHLD employees on LinkedIn and monitoring there job postings for technology people. I think on tech and ecom. side they are heading in the right direction, like the fact that are attempting to embrace a more agile approach to IT and leverage more open source style solutions. Unfortunately there is no way they can recruit the technical talent that is required to go toe to toe with AMZN on retail as you mentioned. But on the flip side I don't think Costco or Walmart can either I think you will basically have AMZN at the top and the rest fighting for the second through fifth place. Maybe we will sears.com running on AWS in a couple of years.

Title: Re: SHLD - Sears
Post by: txlaw on December 03, 2012, 12:37:06 PM
A couple things I would note about SHLD.   

First, they are trying their best to create a strong online presence and to convert to a "members-based business model."  So while SHLD is no AMZN, they understand the new world of retail.  ESL has been one of those smart cookies who saw this coming a long time ago (see AN, GPS, etc.).

I have spent a bunch of time reviewing SHLD employees on LinkedIn and monitoring there job postings for technology people. I think on tech and ecom. side they are heading in the right direction, like the fact that are attempting to embrace a more agile approach to IT and leverage more open source style solutions. Unfortunately there is no way they can recruit the technical talent that is required to go toe to toe with AMZN on retail as you mentioned. But on the flip side I don't think Costco or Walmart can either I think you will basically have AMZN at the top and the rest fighting for the second through fifth place. Maybe we will sears.com running on AWS in a couple of years.

Didn't mean to suggest they can go toe to toe with AMZN.

Instead, I think that Sears, in particular, could be successful by being an integrated retailer for appliances and tools, and parts associated with those goods (see PartsDirect). 

If indeed they grow their e-commerce to its full potential, perhaps they will use outsourced cloud infrastructure like AWS, rather than their own data centers. 
Title: Re: SHLD - Sears
Post by: compoundinglife on December 03, 2012, 12:47:44 PM
A couple things I would note about SHLD.   

First, they are trying their best to create a strong online presence and to convert to a "members-based business model."  So while SHLD is no AMZN, they understand the new world of retail.  ESL has been one of those smart cookies who saw this coming a long time ago (see AN, GPS, etc.).

I have spent a bunch of time reviewing SHLD employees on LinkedIn and monitoring there job postings for technology people. I think on tech and ecom. side they are heading in the right direction, like the fact that are attempting to embrace a more agile approach to IT and leverage more open source style solutions. Unfortunately there is no way they can recruit the technical talent that is required to go toe to toe with AMZN on retail as you mentioned. But on the flip side I don't think Costco or Walmart can either I think you will basically have AMZN at the top and the rest fighting for the second through fifth place. Maybe we will sears.com running on AWS in a couple of years.

Didn't mean to suggest they can go toe to toe with AMZN.

Instead, I think that Sears, in particular, could be successful by being an integrated retailer for appliances and tools, and parts associated with those goods (see PartsDirect). 

If indeed they grow their e-commerce to its full potential, perhaps they will use outsourced cloud infrastructure like AWS, rather than their own data centers.

Nope. I don't believe they can rival AMZN. I expect they will remain in the top 10 but I don't believe they will be able to go toe for toe and I don't think they need to nor should they try. AMZNs head start in online retail, company culture and depth of technical talent is something SHLD can't rival. If sears.com can stay in the top 10 and not bleed money that is enough for me.
Title: Re: SHLD - Sears
Post by: PlanMaestro on December 03, 2012, 01:19:05 PM
Not to mess with the thread – hey, I am watching SHLD too – but I don't remember seeing this Buffett opinion shared.

http://www.fool.com/community/pod/2005/050713.htm

Q: What is your opinion of the prospects for the Kmart/Sears merger? How will Eddie Lambert do at bringing Kmart and Sears together?

Nobody knows. Eddie is a very smart guy but putting Kmart and Sears together is a tough hand. Turning around a retailer that has been slipping for a long time would be very difficult. Can you think of an example of a retailer that was successfully turned around? Broadcasting is easy; retailing is the other extreme. If you had a network television station 50 years ago, you didn't really have to invent or being a good salesman. The network paid you; car dealers paid you, and you made money.

But in retail you have to be smarter than Wal-Mart. Every day retailers are constantly thinking about ways to get ahead of what they were doing the previous day.

Retailing is like shooting at a moving target. In the past, people didn't like to go excessive distances from the street cars to buy things. People would flock to those retailers that were near by. In 1996 we bought the Hochschild Kohn department store in Baltimore. We learned quickly that it wasn't going to be a winner, long-term, in a very short period of time. We had an antiquated distribution system. We did everything else right. We put in escalators. We gave people more credit. We had a great guy running it, and we still couldn't win. So we sold it around 1970. That store isn't there anymore. It isn't good enough that there were smart people running it.

It will be interesting to see how Kmart and Sears play out. They already have a lot of real estate, and have let go of a bunch of Sears' management (500 people). They've captured some savings already.

We would rather look for easier things to do. The Buffett grocery stores started in Omaha in 1869 and lasted for 100 years. There were two competitors. In 1950, one competitor went out of business. In 1960 the other closed. We had the whole town to ourselves and still didn't make any money.

How many retailers have really sunk, and then come back? Not many. I can't think of any. Don't bet against the best. Costco is working on a 10-11% gross margin that is better than the Wal-Mart's and Sams'. In comparison, department stores have 35% gross margins. It's tough to compete against the best deal for customers. Department stores will keep their old customers that have a habit of shopping there, but they won't pick up new ones. Wal-Mart is also a tough competitor because others can't compete at their margins. It's very efficient.

If Eddie sees it as impossible, he won't watch it evaporate. Maybe he can combine certain things and increase efficiencies, but he won't be able to compete against Costco's margins.


Title: Re: SHLD - Sears
Post by: ShahKhezri on December 03, 2012, 02:46:21 PM
When was the last time you bought a lawn mower, tools, a washer/dryer, diehard battery online?

I understand why they should get out of soft retail and pharmacy/grocery for K-Mart...I don't see why they should get out markets they hold their own. 

The sales willl continue to shrink and shrink...but the EBITDA margin has some real upside.  Also, their liquidity position is night/day from last year.  They could so sale/leaseback of their hq or their 12 distribution centers and raise 1-2Bn.  Easily.  They already have plans to raise another $500MM in monetiziations in the next 12 months. 

If you grade the company on what they should have done/said vs. what they did for 2012, SHLD has done a great job.  Earlier this year, they said they would raise $1.7Bn, they already did.  You can blame him for repurchasing at a high price...but you didn't pay for that...the people at $100+ did.

I initiated 1/10th of my position today.  Hope it goes lower and lower.  I've had great 'luck' with SHLD, I've sold puts on 8 times and never been put the stock.  A couple of years back, I bought at 28 and sold at 105.  This time, I'm looking at holding longer term. 

Title: Re: SHLD - Sears
Post by: txlaw on December 03, 2012, 03:02:35 PM
When was the last time you bought a lawn mower, tools, a washer/dryer, diehard battery online?

I understand why they should get out of soft retail and pharmacy/grocery for K-Mart...I don't see why they should get out markets they hold their own. 

The sales willl continue to shrink and shrink...but the EBITDA margin has some real upside.  Also, their liquidity position is night/day from last year.  They could so sale/leaseback of their hq or their 12 distribution centers and raise 1-2Bn.  Easily.  They already have plans to raise another $500MM in monetiziations in the next 12 months. 

If you grade the company on what they should have done/said vs. what they did for 2012, SHLD has done a great job.  Earlier this year, they said they would raise $1.7Bn, they already did.  You can blame him for repurchasing at a high price...but you didn't pay for that...the people at $100+ did.

I initiated 1/10th of my position today.  Hope it goes lower and lower.  I've had great 'luck' with SHLD, I've sold puts on 8 times and never been put the stock.  A couple of years back, I bought at 28 and sold at 105.  This time, I'm looking at holding longer term.

Re: buying lawn mower, tools, a washer/dryer, diehard battery, online, I think it's not out of the question to see more sales of such goods online, especially if we start seeing more same day delivery to homes or pick-up lockers.  Heck, I bought my current flat screen TV over five years ago from Amazon, and I would have never thought I'd do such a thing ten years ago.

In other words, the showroom effect could certainly translate to these types of goods.  However, Sears has something going for them, which is they already have a huge market share here, which gives them buying power, and these are goods that people tend to like to see and feel.  This could allow them to make the smaller format stores essentially showrooms and points of pick up, where the transaction is consummated via the Internet. 

SHLD gets this possible threat, which explains their new membership model and focus on "integrated retail." 

The odd thing about the current price action in SHLD is that it SHLD is in better shape today than it has been in in a while, except with regards to the pension fund, which as someone has already pointed out will be much less underfunded in a normal interest rate and environment, and which is now at the level where buyouts are possible.

I would love to see this thing go sub-$30.  I will load up.
Title: Re: SHLD - Sears
Post by: ShahKhezri on December 03, 2012, 03:25:59 PM
I agree.  Also, with the pension, they purchased $250MM of the 6.625%, I'm curious to see if they use the $203MM they funded this quarter to buy more of the bonds and get the 10%+ yield.  It would be really interesting to see what his plans are with the pension and ESL's investments in the commercial paper. 

If they are moving to asset light, there are going to be more REIT monetazation(s), hq, distribution center, stores.  The argument that there isn't a market for mall/big box assets is unfounded, you have SPG selling at +20x FFO.  I was recently caught in a short that gapped over night by 30% because of a reit conversion, on my list of risks for this short, I had never considered that.  The Company is PENN, we're talking about a single entity, special special purpose REIT conversion.  The market is hungry for yield and they really don't care what kind of asset it is.

I think with SHLD, one of the catalysts will always be a short squeeze.
Title: Re: SHLD - Sears
Post by: rkbabang on December 03, 2012, 06:45:08 PM
When was the last time you bought a lawn mower, tools, a washer/dryer, diehard battery online?

It just so happens that I bought a washer and dryer in the last year online.  As well as remodeling my kitchen and buying a double convection wall oven, cooktop, ventilation system, dishwasher, farmers sink, round stainless sink and faucets online.  We had a Sub-Zero fridge already but it was white, we bought stainless panels for it online and I found a new front grill for it on Craigslist, still in the box. The only thing I purchased offline was the cabinets and marble.
Title: Re: SHLD - Sears
Post by: texual on December 03, 2012, 09:48:52 PM
SHLD is a good investment. It just isn't for everyone.
Title: Re: SHLD - Sears
Post by: ItsAValueTrap on December 03, 2012, 10:06:53 PM
http://www.fool.com/community/pod/2005/050713.htm

Thanks for posting that interview... I enjoyed it.

What I don't understand is why people on this board aren't dissecting Walmart, Costco, Dollar General, etc.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 03, 2012, 11:11:27 PM
The biggest factor here IMO with regards to margin of safety is the value of the real estate. I have read 16 billion, "at least $80 a share" and of BB's comparison of Sear's total Sq. footage vs that of Simon. So summoning Howard Marks (watched the interview recently), what do we know that the market doesn't about SHLD's real estate? Nothing. What is our second level of thinking that makes us confident that the market is wrong and we are right?

So for most of us I think this boils down to a few things:

1. Smart Investors whom most of us respect have indicated the real estate is worth considerably more than the EV of 7.8B

2. ESL has a great long term investing track record. I think anyone on this board who is long SHLD believes he will be able to eventually monetize assets and either return capital to share holders or deploy it in attractive investments.

3. We understand the balance sheet and realize that SHLD is not widely followed, has a small float, most analysts that do bother to report on it focus on retail sales and compare it to BBY or other retailers overlooking the sum of parts value.

So the question I have been asking myself is "Is this really second level thinking?". Is it just that my temperament and personality is well suited for these situations and I am able to tune out the noise and look at the facts? Or am I missing something others see?

I keep coming back to the one wildcard which for me is the value of the real estate. I have been following the saga for quite a while and jumped in at the lows of late 2011/early 2012, I felt like it was very much a "I don't have to know a man's weight to know he is fat" scenario. But this is mainly based on estimates from BB and hints that ESL has dropped. They have demonstrated a little by selling some properties. But really for the most part I feel we are going off of what we have read or heard from people that we respect and are deserving of respect.

So where I am going with this? I have really wanted to pull the trigger on SHLD in a big way when the price gets down but in order to do that I need to be able to back up the real estate value thesis. It is currently a 2% position that I would probably go 5 to 10 on if I could assert some estimation of the MOS provided by the real estate. So I purchased a database of all their US locations with approximate co-ordinates, addresses, phone numbers, type of store (sears, hometown etc...). It has about 3100 locations, some of which were spun off already or sold.

The question is how does one go about efficiently taking this list and getting reasonable estimates of value? Is this something that a group of people could tackle and quickly knock out in a week or two? Is that something that SHLD junkies on the board would be interested in doing?

I would like to know at least the following about each:

1. Lease or Own
2. How big is the store
3. If lease, what is the remaining time
4. What is the current rate in that market per sq. ft for renting or purchasing

I could go on but that is a good starting point. Internet research and cold calling the stores are the first things that come to mind. But 3000 is a large #.

If folks are interested enough crowd sourcing this or even have good ideas for getting this information I am all ears. I have usually done all my own research on investments so I am not sure if this information is already available for a reasonable cost somewhere.


Title: Re: SHLD - Sears
Post by: giofranchi on December 04, 2012, 12:03:16 AM
Gio - Is SHLD in retail or is it that some of it's subsidiaries are? We are not talking of Sears Roebuck here but Sears Holdings. I find too often people think them to be one and the same. Is BRK in retail because it own's NFM?

From SHLD - 10k

Sears Holdings Corporation (“Holdings,” “we,” “us,” “our,” or the “Company”) is the parent company of Kmart Holding Corporation (“Kmart”) and Sears, Roebuck and Co. (“Sears”). Holdings was formed as a Delaware corporation in 2004 in connection with the merger of Kmart and Sears (the “Merger”) on March 24, 2005. We are a broadline retailer with 2,201 full-line and 1,354 specialty retail stores in the United States operating through Kmart and Sears and 483 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (“Sears Canada”), a 92%-owned subsidiary.

This is why I believe that the probability of failure at the holding company level to be lower than the retail business - let me know if my thinking is wrong.

wisdom,
I tend to think about a business in terms of “platform”. In my view a high quality platform combines two things together:
1) a machine that generate lots of reliable free cash,
2) a machine that reliably compounds that free cash at satisfactory rates of return.
For instance, I view my firm’s platform as follows:
1) civil engineering services and for profit education generate free cash: not very good, because margins are low and predictability is low  :(
2) I allocate my firm’s free cash as best as I can: not very good, but, believe me, my partners would most probably do an even worse job! So, not many other choices…  ;D
If 1) is not very good and 2) is not very good, imo it follows that the platform is not very good.
Now, what about SHLD? Well, my idea is that SHLD has a wonderful 2), but a not very good 1). Average “wonderful” and “not very good” and what you get is “fair” at least, “good” at best. But I would be hard pressed to say “great”.
Of course, you may say I misjudged the quantity and the reliability of the free cash generated by 1) in SHLD. And I admit I have never dug deep into SHLD, so you might very well be right!

giofranchi
Title: Re: SHLD - Sears
Post by: FCharlie on December 04, 2012, 06:13:58 AM

The question is how does one go about efficiently taking this list and getting reasonable estimates of value? Is this something that a group of people could tackle and quickly knock out in a week or two? Is that something that SHLD junkies on the board would be interested in doing?

I would like to know at least the following about each:

1. Lease or Own
2. How big is the store
3. If lease, what is the remaining time
4. What is the current rate in that market per sq. ft for renting or purchasing

I could go on but that is a good starting point. Internet research and cold calling the stores are the first things that come to mind. But 3000 is a large #.

If folks are interested enough crowd sourcing this or even have good ideas for getting this information I am all ears. I have usually done all my own research on investments so I am not sure if this information is already available for a reasonable cost somewhere.


A few years back I tried to do exactly this on a smaller scale, with the idea that if I selected at random, at least I'd get a sense of what values were on average.

I simply searched the SHLD website for locations, then found the county websites of those stores, searched real estate tax values online, and eventually had compiled a list of values for stores everywhere from Florida, North Carolina, Colorado, Alaska.

I found assessed values (not necessarily current appraised values) ranging between $6 million for a store in Charlotte North Carolina to $25 million for a store in Anchorage, Alaska.

Somewhere in the middle I remember finding stores averaging $7-12 million each. There were in Miami, Florida, Raleigh, North Carolina, Denver, Colorado. There were also distribution centers that appeared to be quite valuable.

That said, this is a game where the pieces are moving. Real Estate values can change, and the shares outstanding can change. At the time Bruce Berkowitz first named his "conservative estimate" of $80-90 per share on Real Estate... SHLD had shares outstanding about 125 million. Today the number is 106 million so even assuming a 15% decline in values, the per share number would still be $80-90 per share.

I met Mr. Lampert at a shareholders meeting a few years back and I personally thanked him for not suspending share repurchases during the financial crisis the way that nearly everyone else had done. In fact, when I mentioned how SHLD had repurchased over 10% of it's share count at half of book value his instant response was "We wish we'd have bought more."

That confidence combined with Berkowitz confidence is the margin of safety that I fall back on. Let's not forget that the inventory alone gets you the stock price. SHLD is cheap. Dirt cheap. Wall Street doesn't have the patience to wait for the turnaround here.

I'd be happy to help with your project if you'd like.

Title: Re: SHLD - Sears
Post by: Kraven on December 04, 2012, 06:33:31 AM
Let's not forget that the inventory alone gets you the stock price.

I have a question about this if you don't mind.  I've looked a little, not a lot, at Sears and this is a point that others have made here, Berkowitz has made, etc.  I don't understand it at all.  What does it mean to say that inventory is worth the stock price?  I mean obviously inventory less all liabilities is a negative.  Some people say inventory less accounts payable.  I just don't understand the metrics.  I don't see how ignoring liabilities makes sense.   Could you please explain?
Title: Re: SHLD - Sears
Post by: ShahKhezri on December 04, 2012, 07:00:18 AM
Let's not forget that the inventory alone gets you the stock price.

I have a question about this if you don't mind.  I've looked a little, not a lot, at Sears and this is a point that others have made here, Berkowitz has made, etc.  I don't understand it at all.  What does it mean to say that inventory is worth the stock price?  I mean obviously inventory less all liabilities is a negative.  Some people say inventory less accounts payable.  I just don't understand the metrics.  I don't see how ignoring liabilities makes sense.   Could you please explain?

Kraven, personally I'm not looking at the inventory for equity support.  Per the credit agreement, using 90% A/R, 65% Inventory I use it to support all of their RLOC (1st lien) and the $1.25Bn 6.625% (2nd lien) and payables. 

Title: Re: SHLD - Sears
Post by: Grenville on December 04, 2012, 08:07:12 AM
Not to mess with the thread – hey, I am watching SHLD too – but I don't remember seeing this Buffett opinion shared.

http://www.fool.com/community/pod/2005/050713.htm


Nice notes. Thanks for posting.
Title: Re: SHLD - Sears
Post by: FCharlie on December 04, 2012, 08:12:36 AM
Let's not forget that the inventory alone gets you the stock price.

I have a question about this if you don't mind.  I've looked a little, not a lot, at Sears and this is a point that others have made here, Berkowitz has made, etc.  I don't understand it at all.  What does it mean to say that inventory is worth the stock price?  I mean obviously inventory less all liabilities is a negative.  Some people say inventory less accounts payable.  I just don't understand the metrics.  I don't see how ignoring liabilities makes sense.   Could you please explain?

Hello, Kraven.

My point is that if you add up inventory and subtract for payables, you end up with a value greater than market value. This isn't to say that net inventory covers all liabilities, but obviously net inventory isn't the only asset here.... Apologies if I made it seem too basic.... This is simply one more piece of data which doesn't make sense when you view all the other assets that go with it. Someone earlier said they don't need to know someone's exact weight to know that they are fat. Warren Buffett said that you shouldn't have to do all kinds of calculations to know that something is cheap... that the value should just scream at you..... To me, if it costs less to purchase the entire company than it costs to purchase everything they offer for sale, that seems like the business is being left for dead.

I think Berkowitz has a tendency to make things too simple, and perhaps I am doing the same... He probably could speak for hours about the work he's done here but when he's asked, he simply reminds people that the value of the parts are multiples of the stock price. I could speak for hours about the discussions I've had with people, the stores I've been in, the annual meetings I've been to, the 10Q's & K's, but really it boils down to the assets appear to be worth much, much more than the stock price, and two of my favorite investors on earth are the largest two owners here.

Title: Re: SHLD - Sears
Post by: nsa122 on December 04, 2012, 08:26:32 AM
Have been curious about the real estate value for a while, would be happy to help.  Can you post your list of locations to a Google Docs spreadsheet? We can come up with a consensus method of valuation (county appraisal district appraised value?) and go to work.  A brief search on the Bexar County Appraisal District (San Antonio) listed 16 locations, ~$50M appraised value.  I don't know the relationship of the appraised tax value to realistic market value (anyone?).  3000 locations seems like a very doable task.
Title: Re: SHLD - Sears
Post by: racemize on December 04, 2012, 08:29:37 AM
Have been curious about the real estate value for a while, would be happy to help.  Can you post your list of locations to a Google Docs spreadsheet? We can come up with a consensus method of valuation (county appraisal district appraised value?) and go to work.  A brief search on the Bexar County Appraisal District (San Antonio) listed 16 locations, ~$50M appraised value.  I don't know the relationship of the appraised tax value to realistic market value (anyone?).  3000 locations seems like a very doable task.

Crowd Sourced Valuation--seems like a great idea.
Title: Re: SHLD - Sears
Post by: oddballstocks on December 04, 2012, 08:37:18 AM
Let's not forget that the inventory alone gets you the stock price.

I have a question about this if you don't mind.  I've looked a little, not a lot, at Sears and this is a point that others have made here, Berkowitz has made, etc.  I don't understand it at all.  What does it mean to say that inventory is worth the stock price?  I mean obviously inventory less all liabilities is a negative.  Some people say inventory less accounts payable.  I just don't understand the metrics.  I don't see how ignoring liabilities makes sense.   Could you please explain?

Hello, Kraven.

My point is that if you add up inventory and subtract for payables, you end up with a value greater than market value. This isn't to say that net inventory covers all liabilities, but obviously net inventory isn't the only asset here.... Apologies if I made it seem too basic.... This is simply one more piece of data which doesn't make sense when you view all the other assets that go with it. Someone earlier said they don't need to know someone's exact weight to know that they are fat. Warren Buffett said that you shouldn't have to do all kinds of calculations to know that something is cheap... that the value should just scream at you..... To me, if it costs less to purchase the entire company than it costs to purchase everything they offer for sale, that seems like the business is being left for dead.

I think Berkowitz has a tendency to make things too simple, and perhaps I am doing the same... He probably could speak for hours about the work he's done here but when he's asked, he simply reminds people that the value of the parts are multiples of the stock price. I could speak for hours about the discussions I've had with people, the stores I've been in, the annual meetings I've been to, the 10Q's & K's, but really it boils down to the assets appear to be worth much, much more than the stock price, and two of my favorite investors on earth are the largest two owners here.

I'm stuck on this inventory thing too.  To be upfront I'm more of an asset investor myself, I do a lot of net-nets, low P/B type of situations.  With that said I'm always wary of inventory values, the inventory only has a full value if the company itself can continue to sell it, or if it's easily resalable.

In the Sears case their inventory is easily liquidated, but I don't think you'd get full value.  The cool thing is there is a very reliable proxy for value, which would be what a discounter like TJ Maxx or Gabriels could sell the stuff for, that's usually where this inventory would end up.

So if I understand you correctly, you're saying the value if the inventory minus all payables (net inventory) is greater than the market value of the company minus inventory?  Correct?  Or are you saying that the market value of the company is equal to the net inventory value which means the market is giving the company no credit for real estate and whatever grab bag of stuff they have left over.

So here's my grand question on Sears.  Clearly the retail is not the best path forward, they've lost mind-share and it's not coming back.  The general thesis seems to be that they have valuable real estate and brands.  So why not license the brands to other stores or spin them off.  Then sell down the inventory and sell off the real estate.  People state they're in a slow motion liquidation, but they're going so slow they're letting the operations destroy whatever value is left.  I don't know how many times they turn their inventory but in theory they could probably clear the shelves in a few months at most.  At that point all that inventory cash could be freed up for Lampert to reinvest at his higher rates instead of sinking it back into the stores.

Then the real estate could be sold down and that cash redeployed.  It's possible they're doing this at a glacial pace.  The Kmart we've been in near us (terrible location by the way) has half empty shelves already, so maybe they're already doing it.  I can't tell the difference between neglect and a well orchestrated slow motion liquidation though.

I wonder aloud, and I think I did earlier in this thread who's going to take over the real estate?  The locations I've seen for Kmart aren't all that great.  Sears is usually in a decent mall, so I figure someone might be able to fill it, but these are big spaces, and brick and mortar retail isn't exactly experiencing a boom right now.  Near us a Circuit City went out of business and was replaced by a Ross, I'm going to wager that Ross is paying less than Circuit City, but it's just a guess.  Not many chains are expanding right now.

Just some general thoughts.  I'm not trying to bash Sears, this seems like a great investment, but I just can't get over the hump with these questions.
Title: Re: SHLD - Sears
Post by: fareastwarriors on December 04, 2012, 08:51:10 AM
http://www.mevsemt.blogspot.com/ (http://www.mevsemt.blogspot.com/)

Our fellow member added to SHLD.

Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 08:59:26 AM
So the question I have been asking myself is "Is this really second level thinking?". Is it just that my temperament and personality is well suited for these situations and I am able to tune out the noise and look at the facts? Or am I missing something others see?

I think with respect to the RE value, most of us are indeed going off of the ranges espoused by various investors, most notably Bruce Berkowitz.

However, there are additional factors that make RE not the only story with respect to MOS, factors which the market is indeed overlooking.

First, there is the strategy component that is being put into place to maintain and grow the intangible assets -- SHLD IP (KCD, Land's End, HomeServices, PartsDirect), appliance tool market share, and existing vendor and customer relationships.  This, IMO, is not being factored in at all by the market, as it is associated with an asset-lite or good co/bad co point of view that the Mr. Market has problems analyzing.

Second, some board members will recall that, a while back, Sanjeev posted some hints on SHLD from one of his friends that focuses on the organizational structure of SHLD.  Going through the exercise of tearing that apart is not a trivial one, and the market simply hasn't done the homework in that regard.  IMO, doing that analysis helps explain why Bruce B thinks that SHLD is worth a multiple of the current market cap.

Finally, I would note that I think it is the case that, here, temperament absolutely matters.  Even if you spoon fed Mr. Market with all this info, this would probably not have a real effect on the price.
Title: Re: SHLD - Sears
Post by: racemize on December 04, 2012, 09:09:16 AM

I wonder aloud, and I think I did earlier in this thread who's going to take over the real estate?  The locations I've seen for Kmart aren't all that great.  Sears is usually in a decent mall, so I figure someone might be able to fill it, but these are big spaces, and brick and mortar retail isn't exactly experiencing a boom right now.  Near us a Circuit City went out of business and was replaced by a Ross, I'm going to wager that Ross is paying less than Circuit City, but it's just a guess.  Not many chains are expanding right now.


I similarly share concerns re: Kmart stores.  Also, as you hint, who is the new anchor that is going to step up and fill in a Sears position?  Aren't all the anchors typically already there?
Title: Re: SHLD - Sears
Post by: FCharlie on December 04, 2012, 09:10:04 AM


I'm stuck on this inventory thing too.  To be upfront I'm more of an asset investor myself, I do a lot of net-nets, low P/B type of situations.  With that said I'm always wary of inventory values, the inventory only has a full value if the company itself can continue to sell it, or if it's easily resalable.

In the Sears case their inventory is easily liquidated, but I don't think you'd get full value.  The cool thing is there is a very reliable proxy for value, which would be what a discounter like TJ Maxx or Gabriels could sell the stuff for, that's usually where this inventory would end up.

So if I understand you correctly, you're saying the value if the inventory minus all payables (net inventory) is greater than the market value of the company minus inventory?  Correct?  Or are you saying that the market value of the company is equal to the net inventory value which means the market is giving the company no credit for real estate and whatever grab bag of stuff they have left over.



Sears market cap is $4.5 billion.   Net inventory is greater than $4.5 billion

I have heard over the years that inventory isn't a useful number because in a liquidation you can't get full price.... However, inventory is held on the books at the lower of cost or market.

If you go back to the conference call last Feb, Lou'D, the CEO, said that even when closing stores, they "ALWAYS ARE ABLE TO SELL INVENTORY FOR MORE THAN THEY PAID FOR IT"

So, knowing those two pieces of information, I'd say it's reasonable to assume the inventory is worth what the books say it's worth... and if that's the case, then you could buy the entire company for less dollars than you could buy all of their washers/dryers/ fridges/ socks/ jewelery, etc.... And if that's the case, then assuming the retail business is capable of funding the pension as they wind it down, the real estate is all gravy.

Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 09:30:35 AM
So here's my grand question on Sears.  Clearly the retail is not the best path forward, they've lost mind-share and it's not coming back.  The general thesis seems to be that they have valuable real estate and brands.  So why not license the brands to other stores or spin them off.  Then sell down the inventory and sell off the real estate.  People state they're in a slow motion liquidation, but they're going so slow they're letting the operations destroy whatever value is left.  I don't know how many times they turn their inventory but in theory they could probably clear the shelves in a few months at most.  At that point all that inventory cash could be freed up for Lampert to reinvest at his higher rates instead of sinking it back into the stores.

Then the real estate could be sold down and that cash redeployed.  It's possible they're doing this at a glacial pace.  The Kmart we've been in near us (terrible location by the way) has half empty shelves already, so maybe they're already doing it.  I can't tell the difference between neglect and a well orchestrated slow motion liquidation though.

"Clearly the retail is not the best path forward, they've lost mind-share and it's not coming back."

IMO, this is a big part of what the Street is missing. 

It would be incredibly foolish for Sears to just give away their dominance in appliances and tools.  Take a look at Sears Hometown.  They are opening stores and their same store sales are up.  Moreover, there is a big push for integrated retail that is intended to make Sears the go-to place for appliances and tools, regardless of which channel one uses to buy (Internet, Sears mall stores, Sears Hometown, or other hardware stores such as ACE).

Instead, the smarter plan -- one that ESL has put into place -- is to transform into an asset-lite model over time and to slowly move the "store" base from the mall and big box formats to a smaller store and Internet presence.  Then, ESL can monetize the Sears RE (both owned and leased).

As for Kmart, the locations that are not closed still generate sales, which are sales that are taken away from their competitors.  I personally think that there are better uses for Kmart locations, such as Walmarts, Targets, Costcos, Dollar Trees, or any number of alternative stores.

I wonder aloud, and I think I did earlier in this thread who's going to take over the real estate?  The locations I've seen for Kmart aren't all that great.  Sears is usually in a decent mall, so I figure someone might be able to fill it, but these are big spaces, and brick and mortar retail isn't exactly experiencing a boom right now.  Near us a Circuit City went out of business and was replaced by a Ross, I'm going to wager that Ross is paying less than Circuit City, but it's just a guess.  Not many chains are expanding right now.

Take a look at the "SHLD anyone?" thread.  There has been a lot of discussion about this over there.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on December 04, 2012, 09:30:50 AM
Is the sum-of-the-parts valuation of Ackman's JCP thesis as discounted as Berkowitz's SHLD thesis?
Title: Re: SHLD - Sears
Post by: Kraven on December 04, 2012, 10:09:28 AM
Let's not forget that the inventory alone gets you the stock price.

I have a question about this if you don't mind.  I've looked a little, not a lot, at Sears and this is a point that others have made here, Berkowitz has made, etc.  I don't understand it at all.  What does it mean to say that inventory is worth the stock price?  I mean obviously inventory less all liabilities is a negative.  Some people say inventory less accounts payable.  I just don't understand the metrics.  I don't see how ignoring liabilities makes sense.   Could you please explain?

Hello, Kraven.

My point is that if you add up inventory and subtract for payables, you end up with a value greater than market value. This isn't to say that net inventory covers all liabilities, but obviously net inventory isn't the only asset here.... Apologies if I made it seem too basic.... This is simply one more piece of data which doesn't make sense when you view all the other assets that go with it. Someone earlier said they don't need to know someone's exact weight to know that they are fat. Warren Buffett said that you shouldn't have to do all kinds of calculations to know that something is cheap... that the value should just scream at you..... To me, if it costs less to purchase the entire company than it costs to purchase everything they offer for sale, that seems like the business is being left for dead.

I think Berkowitz has a tendency to make things too simple, and perhaps I am doing the same... He probably could speak for hours about the work he's done here but when he's asked, he simply reminds people that the value of the parts are multiples of the stock price. I could speak for hours about the discussions I've had with people, the stores I've been in, the annual meetings I've been to, the 10Q's & K's, but really it boils down to the assets appear to be worth much, much more than the stock price, and two of my favorite investors on earth are the largest two owners here.

Thanks FCharlie.  I guess I should re-phrase my question a little.  I understand the point that net inventory (inventory less A/P) is the same as market value.  I don't understand though how that matters or even is relevant in a "sum of the parts" type valuation.  There are lots of companies where if you took some of their assets and either netted out a contra liabilities or whatever that it would be worth more than market value. 

For example, Dell's market cap is roughly $15 bil.  Well, cash and investments are over $14 bil.  So do we say that we can get Dell almost for free?  Just about any bank I've ever looked at (and I've looked at hundreds or even thousands) has more cash and investments than market cap. 

I really like Berkowitz and I like the way he drills down on investment ideas and summarizes them into their core points.  But he also says for example that AIG has more cash than market cap.  So I guess we ignore all the liabilities?  It's the same point as the banks I mentioned, Dell, etc.

I am trying to understand the thesis.  I am sure I am missing something, so just having a discussion.  I would be grateful if you or someone else can explain to me how this actually means Sears is cheap.  Thanks much.
Title: Re: SHLD - Sears
Post by: rimm_never_sleeps on December 04, 2012, 10:11:14 AM
the street gets ESL strategy. they want him to move quicker in transforming it. because if you are an index hugging institutional investor, without any earnings nor prospects for any from operations, there is no reason to own this right now. and if you are the more adventurous sort, like the typical hedgie, eddie is probably moving too slowly to create value for you. that's why there are very few "fans" of the stock. cheers!
Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 10:20:33 AM
the street gets ESL strategy. they want him to move quicker in transforming it. because there is no reason to own this right now, if you are an index hugging institutional investor without any earnings. and if you are the more adventurous sort, eddie is moving to slowly too create value for you. that's why there are very few "fans" of the stock. cheers!

On the contrary, ESL is preserving value for the common by moving slowly.

Perhaps you want ESL to move quickly to create value by purchasing your bonds?  Finance 101?
Title: Re: SHLD - Sears
Post by: FrankArabia on December 04, 2012, 10:21:00 AM
i'm doubtful they can liquidate their inventory at stated values...........

i'm still not quite clear why Sears is value per se...i took a look at berkowitz presentation but all it looks like its saying is that it has a lot of real estate....but a lot of real estate doesn't translate to a lot of value
Title: Re: SHLD - Sears
Post by: rimm_never_sleeps on December 04, 2012, 10:29:52 AM
the street gets ESL strategy. they want him to move quicker in transforming it. because there is no reason to own this right now, if you are an index hugging institutional investor without any earnings. and if you are the more adventurous sort, eddie is moving to slowly too create value for you. that's why there are very few "fans" of the stock. cheers!

On the contrary, ESL is preserving value for the common by moving slowly.

Perhaps you want ESL to move quickly to create value by purchasing your bonds?  Finance 101?

that was my point actually. I did not say what I preferred. I said what the street preferred. that's why there is no sponsorship. I never said esl should move faster. in fact he may be trying to drain the swamp so he can transfer their shares to his pocket. I own the stock too. cheers!
Title: Re: SHLD - Sears
Post by: compoundinglife on December 04, 2012, 10:34:03 AM
Have been curious about the real estate value for a while, would be happy to help.  Can you post your list of locations to a Google Docs spreadsheet? We can come up with a consensus method of valuation (county appraisal district appraised value?) and go to work.  A brief search on the Bexar County Appraisal District (San Antonio) listed 16 locations, ~$50M appraised value.  I don't know the relationship of the appraised tax value to realistic market value (anyone?).  3000 locations seems like a very doable task.

When I purchased the list I agreed to a EULA that said I would not make it available for wholesale download but could use it for business or for usage in an application. So if I post it on Google docs I will have to limit the access. I am more than happy to do that and then limit the access to folks on the board who are interested in doing the leg work and then we can report back to the board with our findings. I could even take the results and put it in a web page where you could search by zip code or store # to the see the values. The EULA said it was ok to use it for building apps or tools you just can't make it easy for the public to download the whole data set. While I think the likely hood of them being able to enforce that on data like this is low, I agreed to the terms and would like to keep my word.

One other idea I had was to make a web bot that just iterated over all the US zip codes and input them into the Sears store locator and download the results. If I did that then I could post the results online of the data I collected instead of the data I purchased.

Later today I will import it into google docs and folks interested in gathering the data can PM me. Sound good?
Title: Re: SHLD - Sears
Post by: LongHaul on December 04, 2012, 10:50:01 AM
I am not invested in Sears and can't get to much of a liquidation value.
Curious what people think.  My rough analysis below.

I think the real estate (not based on any comprehensive analysis) is worth roughly the following:

~750 stores owned and assume about 150 have real value.
150 x $50m per store = $7.5b
Plus other stores, etc.= $0.5b
Total Real Estate Value=$8.0

Current Assets 10/27/12: $11.3b 
I have left Current Assets at book value which might be very optimistic.

Total Asset Value = $19.3b

Total Liab ~ $18b

Net: $1.3b

There is also big negative EBITDA - Maint Capex (-$400m in the most recent FY)
Plus there are Min lease payments that have ~ $4.7b liability in the most recent 10-K.
In addition I have completely left out present value calculations, taxes, and liquidation costs.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 04, 2012, 11:00:07 AM
So the question I have been asking myself is "Is this really second level thinking?". Is it just that my temperament and personality is well suited for these situations and I am able to tune out the noise and look at the facts? Or am I missing something others see?

I think with respect to the RE value, most of us are indeed going off of the ranges espoused by various investors, most notably Bruce Berkowitz.

However, there are additional factors that make RE not the only story with respect to MOS, factors which the market is indeed overlooking.

First, there is the strategy component that is being put into place to maintain and grow the intangible assets -- SHLD IP (KCD, Land's End, HomeServices, PartsDirect), appliance tool market share, and existing vendor and customer relationships.  This, IMO, is not being factored in at all by the market, as it is associated with an asset-lite or good co/bad co point of view that the Mr. Market has problems analyzing.

Second, some board members will recall that, a while back, Sanjeev posted some hints on SHLD from one of his friends that focuses on the organizational structure of SHLD.  Going through the exercise of tearing that apart is not a trivial one, and the market simply hasn't done the homework in that regard.  IMO, doing that analysis helps explain why Bruce B thinks that SHLD is worth a multiple of the current market cap.

Finally, I would note that I think it is the case that, here, temperament absolutely matters.  Even if you spoon fed Mr. Market with all this info, this would probably not have a real effect on the price.

I agree with everything you are saying here. I think the likely hood of bankruptcy is very low but it is still a possibility, so I would like to be able to assert with some confidence that if that happens there is enough MOS.

Cash:     754
Recv:     347 when valued at 50%
Invent: 5610 when valued at 66%
Other:    388 should probably discount this, but how much?

That is around 7B of current assets not including PPE.

So now we have liabilities of 17.1B

Other assets:
KCD  1.7B
Land's End: 1.5B (have read 1 to 1.5)
Sears Canada %50: 0.5B
Sears Reinsurance: Not sure off the top of my head isn't this mostly KCD holding?

Real Estate: ?

There are other things in there, but that is all I can remember without looking at my notes which are not with me ATM.

That gets us up to 10.5B with out RE and some other assets I may have forgotten. So in trying to close the 7 billion gap between what else needs to be in there? If RE is 16B then that gives us 26B which leaves approximately 9B left in liquidation, more than double todays market cap. Looking pretty good from a MOS perspective but the majority is based on RE and I would like to have some data that backs that up.

You could also argue I discounted the receivables and inventory too much, but that still doesn't change the fact that RE is the biggest factor in liquidation.
Title: Re: SHLD - Sears
Post by: rimm_never_sleeps on December 04, 2012, 11:00:55 AM
600 owned stores worth $500m? seems very random. and you don't include the hoffman estates properties.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 04, 2012, 11:05:23 AM
the street gets ESL strategy. they want him to move quicker in transforming it. because if you are an index hugging institutional investor, without any earnings nor prospects for any from operations, there is no reason to own this right now. and if you are the more adventurous sort, like the typical hedgie, eddie is probably moving too slowly to create value for you. that's why there are very few "fans" of the stock. cheers!

Agreed. Most people are not willing wait to years especially volatile years. If you are manager holding SHLD and the media is talking about how screwed they are and how ESL is a moron for attempting this, then your investors are going to think "hmmm, my money manager is a moron for holding SHLD". I am guessing that most managers are not willing to wait for outsized returns at the cost of the pain.
Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 11:31:56 AM
I agree with everything you are saying here. I think the likely hood of bankruptcy is very low but it is still a possibility, so I would like to be able to assert with some confidence that if that happens there is enough MOS.

But BK for which entities?  Which entities do you think would be facing insolvency?  And how would that play out in terms of what's left over for owners of the Holdco?

That's why I said above that there should be some tearing apart of the financials, as per Sanjeev's friend's advice.
Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 11:33:58 AM
A timely presentation entitled "Perception and Reality" was just posted on the OAK thread.

http://www.sec.gov/Archives/edgar/data/1403528/000119312512490268/d449181dex991.htm

Very much applicable to the SHLD situation.
Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 11:37:08 AM
A timely presentation entitled "Perception and Reality" was just posted on the OAK thread.

http://www.sec.gov/Archives/edgar/data/1403528/000119312512490268/d449181dex991.htm

Very much applicable to the SHLD situation.

Not literally applicable, of course.  :)
Title: Re: SHLD - Sears
Post by: ShahKhezri on December 04, 2012, 11:41:52 AM
Don't forget about the DTA's that were written down last year.  If you assume there will be some profitability down the road on a KCD/Hold Co..
Title: Re: SHLD - Sears
Post by: compoundinglife on December 04, 2012, 11:46:15 AM
I agree with everything you are saying here. I think the likely hood of bankruptcy is very low but it is still a possibility, so I would like to be able to assert with some confidence that if that happens there is enough MOS.

But BK for which entities?  Which entities do you think would be facing insolvency?  And how would that play out in terms of what's left over for owners of the Holdco?

That's why I said above that there should be some tearing apart of the financials, as per Sanjeev's friend's advice.

Sure, so Sears Retail and Kmart would be the entities facing insolvency and the real estate holding company is untouched. I don't doubt that there is protection of assets in the structure. So lets say we rule out bk for the hold co and it is still left with the assets, a better of idea of RE value is still important to me. Appreciate your comments.

Title: Re: SHLD - Sears
Post by: compoundinglife on December 04, 2012, 11:48:38 AM
A timely presentation entitled "Perception and Reality" was just posted on the OAK thread.

http://www.sec.gov/Archives/edgar/data/1403528/000119312512490268/d449181dex991.htm

Very much applicable to the SHLD situation.

Thanks. As I mentioned earlier the interview with Marks on Guru focus was what motivated me to think about this investment some more.
Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 11:58:00 AM
I agree with everything you are saying here. I think the likely hood of bankruptcy is very low but it is still a possibility, so I would like to be able to assert with some confidence that if that happens there is enough MOS.

But BK for which entities?  Which entities do you think would be facing insolvency?  And how would that play out in terms of what's left over for owners of the Holdco?

That's why I said above that there should be some tearing apart of the financials, as per Sanjeev's friend's advice.

Sure, so Sears Retail and Kmart would be the entities facing insolvency and the real estate holding company is untouched. I don't doubt that there is protection of assets in the structure. So lets say we rule out bk for the hold co and it is still left with the assets, a better of idea of RE value is still important to me. Appreciate your comments.

Have you looked at which entities are guarantor versus non-guarantor subsidiaries for the senior secured notes, and how the balance sheet will change upon divestiture of more of SHOS and Sears Canada?

Just trying to provide some help.  Your comments and questions are very reasonable.  Please don't think I'm trying to push back on your point about the value of the RE.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 04, 2012, 12:45:03 PM
I agree with everything you are saying here. I think the likely hood of bankruptcy is very low but it is still a possibility, so I would like to be able to assert with some confidence that if that happens there is enough MOS.

But BK for which entities?  Which entities do you think would be facing insolvency?  And how would that play out in terms of what's left over for owners of the Holdco?

That's why I said above that there should be some tearing apart of the financials, as per Sanjeev's friend's advice.

Sure, so Sears Retail and Kmart would be the entities facing insolvency and the real estate holding company is untouched. I don't doubt that there is protection of assets in the structure. So lets say we rule out bk for the hold co and it is still left with the assets, a better of idea of RE value is still important to me. Appreciate your comments.

Have you looked at which entities are guarantor versus non-guarantor subsidiaries for the senior secured notes, and how the balance sheet will change upon divestiture of more of SHOS and Sears Canada?

Just trying to provide some help.  Your comments and questions are very reasonable.  Please don't think I'm trying to push back on your point about the value of the RE.

Txlaw, I don't think you are trying to push back and really do appreciate comments/questions. Yes KCD and the Real Estate company are non-guarantor for the notes. I realize that this is a big piece to the puzzle. But I also consider that ESL is not someone who is strictly numbers and has a sense of responsibility and ethics. So while I see that this structure protects some of the most valuable assets, I don't think its likely that he would walk away from the other subs responsibility on their liabilities, which is why I like to view it as a flat picture. Does it make sense to think about it that way?
Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 01:29:31 PM
I agree with everything you are saying here. I think the likely hood of bankruptcy is very low but it is still a possibility, so I would like to be able to assert with some confidence that if that happens there is enough MOS.

But BK for which entities?  Which entities do you think would be facing insolvency?  And how would that play out in terms of what's left over for owners of the Holdco?

That's why I said above that there should be some tearing apart of the financials, as per Sanjeev's friend's advice.

Sure, so Sears Retail and Kmart would be the entities facing insolvency and the real estate holding company is untouched. I don't doubt that there is protection of assets in the structure. So lets say we rule out bk for the hold co and it is still left with the assets, a better of idea of RE value is still important to me. Appreciate your comments.

Have you looked at which entities are guarantor versus non-guarantor subsidiaries for the senior secured notes, and how the balance sheet will change upon divestiture of more of SHOS and Sears Canada?

Just trying to provide some help.  Your comments and questions are very reasonable.  Please don't think I'm trying to push back on your point about the value of the RE.

Txlaw, I don't think you are trying to push back and really do appreciate comments/questions. Yes KCD and the Real Estate company are non-guarantor for the notes. I realize that this is a big piece to the puzzle. But I also consider that ESL is not someone who is strictly numbers and has a sense of responsibility and ethics. So while I see that this structure protects some of the most valuable assets, I don't think its likely that he would walk away from the other subs responsibility on their liabilities, which is why I like to view it as a flat picture. Does it make sense to think about it that way?

I think that's right -- ESL seems like an honorable guy.  But the breakdown also tells us more about just who is and who isn't a guarantor of the notes.  The breakdown, which you can figure out by looking at the prospectus referenced in the thread started by Sanjeev, also allows us to put a potential value on the asset-lite side of the good co/bad co model, where runoff of capital from bad co is used to pay down liabilities, with the remaining equity/capital redeployed into the asset-lide side. 

In other words, the only way that I personally get to substantially more than the market cap is by taking the asset-lite model into account, and that's because I simply don't have the time or resources to figure out the value of the RE.  But I'm starting to think that I'm crazy for thinking about SHLD this way, and that I'm missing something or am mistaken about this.
Title: Re: SHLD - Sears
Post by: ShahKhezri on December 04, 2012, 01:47:03 PM
I agree with everything you are saying here. I think the likely hood of bankruptcy is very low but it is still a possibility, so I would like to be able to assert with some confidence that if that happens there is enough MOS.

I have this comment saved from the Barrons article, have not been able to confirm it.

Quote
Cliff Orr, Privet Fund   
   Loan Documents indicate that KCD and other non-guarantor subs generate more than $600MM in FCF annually.



But BK for which entities?  Which entities do you think would be facing insolvency?  And how would that play out in terms of what's left over for owners of the Holdco?

That's why I said above that there should be some tearing apart of the financials, as per Sanjeev's friend's advice.

Sure, so Sears Retail and Kmart would be the entities facing insolvency and the real estate holding company is untouched. I don't doubt that there is protection of assets in the structure. So lets say we rule out bk for the hold co and it is still left with the assets, a better of idea of RE value is still important to me. Appreciate your comments.

Have you looked at which entities are guarantor versus non-guarantor subsidiaries for the senior secured notes, and how the balance sheet will change upon divestiture of more of SHOS and Sears Canada?

Just trying to provide some help.  Your comments and questions are very reasonable.  Please don't think I'm trying to push back on your point about the value of the RE.

Txlaw, I don't think you are trying to push back and really do appreciate comments/questions. Yes KCD and the Real Estate company are non-guarantor for the notes. I realize that this is a big piece to the puzzle. But I also consider that ESL is not someone who is strictly numbers and has a sense of responsibility and ethics. So while I see that this structure protects some of the most valuable assets, I don't think its likely that he would walk away from the other subs responsibility on their liabilities, which is why I like to view it as a flat picture. Does it make sense to think about it that way?

I think that's right -- ESL seems like an honorable guy.  But the breakdown also tells us more about just who is and who isn't a guarantor of the notes.  The breakdown, which you can figure out by looking at the prospectus referenced in the thread started by Sanjeev, also allows us to put a potential value on the asset-lite side of the good co/bad co model, where runoff of capital from bad co is used to pay down liabilities, with the remaining equity/capital redeployed into the asset-lide side. 

In other words, the only way that I personally get to substantially more than the market cap is by taking the asset-lite model into account, and that's because I simply don't have the time or resources to figure out the value of the RE.  But I'm starting to think that I'm crazy for thinking about SHLD this way, and that I'm missing something or am mistaken about this.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 04, 2012, 01:50:52 PM


I have this comment saved from the Barrons article, have not been able to confirm it.

Quote
Cliff Orr, Privet Fund   
   Loan Documents indicate that KCD and other non-guarantor subs generate more than $600MM in FCF annually.

I have always figured most of the KCD cashflow came from the products Sears sells, but it would be great to know how much of that is coming from outside sales.

Title: Re: SHLD - Sears
Post by: ShahKhezri on December 04, 2012, 02:07:51 PM
Based on the SHOS filings, almost 88% of sales are products from SHLD, with agreements.

Asset light to me means royalty.  Sears Brands / Sears Real Estate.  Money flowing to Hold Co., EL investing as he sees fit.  Sub spinoffs spend the money on ad's, invest in working capital, etc. 

The point regarding analysts and investing community, if SHLD moves to more disclosure, breakout of sales (ie Land's end, KCD, etc.), restructuring...it's only positive. 

If you look at the top 10 shareholders as of 9/30...group the stable holders (ESL, Lampert, Fairholme, Tisch, Horizon/Kinetics) and the institutional (State Street, Vanguard, Investco, BlackRock) you see the stables owning more of SHLD with 89.6MM shares and the institutions owning 6.5MM shares.  Here's the funny thing, 9/30/12 was the most the stable's have owned (last data piece I have) and the least the institutionals have owned since 6/30/07.  This also doesn't include Chou and that's why my short interest as a % of float is much higher than reported. 

Lack of bad news is a catalyst, clarity on the company's direction is a catalyst.   
Title: Re: SHLD - Sears
Post by: spin on December 04, 2012, 08:19:39 PM
"group the stable holders (ESL,"

Is ESL a stable holder?

http://www.sec.gov/Archives/edgar/data/860585/000118143112061481/xslF345X03/rrd361623.xml

1. Represents shares of common stock of Sears Holdings Corporation (the "Issuer") that were distributed by ESL Partners, L.P. ("Partners") on a pro rata basis to limited partners that elected to redeem all or a portion of their interest in Partners in 2012.

~40% addition to FF there - good for shorts for supply to cover if redeeming LPs shorted pre distribution or intend to bail.

Why did Eddie distribute ~20% of his holdings ( ~5.6% of SHLD outstanding) to LPs?   He didn't last year - What changed?  Why now?

Spin
Title: Re: SHLD - Sears
Post by: txlaw on December 04, 2012, 08:22:37 PM
"group the stable holders (ESL,"

Is ESL a stable holder?

http://www.sec.gov/Archives/edgar/data/860585/000118143112061481/xslF345X03/rrd361623.xml

1. Represents shares of common stock of Sears Holdings Corporation (the "Issuer") that were distributed by ESL Partners, L.P. ("Partners") on a pro rata basis to limited partners that elected to redeem all or a portion of their interest in Partners in 2012.

~40% addition to FF there - good for shorts for supply to cover if redeeming LPs shorted pre distribution or intend to bail.

Why did Eddie distribute ~20% of his holdings ( ~5.6% of SHLD outstanding) to LPs?   He didn't last year - What changed?  Why now?

Spin

Tax reasons?
Title: Re: SHLD - Sears
Post by: Matson125 on December 04, 2012, 09:24:22 PM
5 years ago Lampert raised money through Goldman Sachs with a 5 year lock-up.  The lock-up expires at the end of the year according to WSJ

http://online.wsj.com/article/SB10001424052970203750404577173071474457812.html
Title: Re: SHLD - Sears
Post by: texual on December 04, 2012, 09:49:18 PM
Assume you did all the homework and we all agree that today, as of this moment the value of the real estate is 18 billion dollars. And in a rising market those properties could be worth more. Now with that assumption out of the way and done, explain how we get from point A to B where I and all of the shareholders own a pure real estate company and have the cash returned to us or given to ESL to invest for us... instead of right now... where I seem to be loosing money and patience with the investment thinking we would be at point B, or at least damn close.

Also nobody should still be under the impression that SHLD is a ongoing 'turnaround' in any traditional sense of the word. JCP is in turnaround, fixing operations and improving stores. As of now Sears as a store is dead, theres no going back. So my question is if theres so much great value here, why not just go for the jugular?

I can wait another 5 years. I just don't want to watch JCP make more money for its shareholders using the traditional turnaround vs our value investors haven Bruce and Eddie telling us that theres value to be had. Show me the money!
Title: Re: SHLD - Sears
Post by: JRH on December 05, 2012, 05:39:00 AM
Assume you did all the homework and we all agree that today, as of this moment the value of the real estate is 18 billion dollars. And in a rising market those properties could be worth more. Now with that assumption out of the way and done, explain how we get from point A to B where I and all of the shareholders own a pure real estate company and have the cash returned to us or given to ESL to invest for us... instead of right now... where I seem to be loosing money and patience with the investment thinking we would be at point B, or at least damn close.

Also nobody should still be under the impression that SHLD is a ongoing 'turnaround' in any traditional sense of the word. JCP is in turnaround, fixing operations and improving stores. As of now Sears as a store is dead, theres no going back. So my question is if theres so much great value here, why not just go for the jugular?

I can wait another 5 years. I just don't want to watch JCP make more money for its shareholders using the traditional turnaround vs our value investors haven Bruce and Eddie telling us that theres value to be had. Show me the money!

It is certainly possible that the reason the market doesn't "recognize" the sum-of-the-parts value of Sears is that they expect it to take forever to unlock.  Could think of it as a discounted cash flow valuation where all the meaningful cash flow is in the distant future (at least, distant enough to be uncertain).  Basically, the "lack of a near-term catalyst" thesis.  However, the spin-offs/distributions over the last year seem to suggest the time may actually be upon us.
Title: Re: SHLD - Sears
Post by: ShahKhezri on December 05, 2012, 05:41:20 AM
"group the stable holders (ESL,"

Is ESL a stable holder?

http://www.sec.gov/Archives/edgar/data/860585/000118143112061481/xslF345X03/rrd361623.xml

1. Represents shares of common stock of Sears Holdings Corporation (the "Issuer") that were distributed by ESL Partners, L.P. ("Partners") on a pro rata basis to limited partners that elected to redeem all or a portion of their interest in Partners in 2012.

~40% addition to FF there - good for shorts for supply to cover if redeeming LPs shorted pre distribution or intend to bail.

Why did Eddie distribute ~20% of his holdings ( ~5.6% of SHLD outstanding) to LPs?   He didn't last year - What changed?  Why now?

Spin

I do.  At its max, ESL held 66MM shares, today ESL & EL own a combined 65.7MM shares.  If anything, the fact that he's putting his own chips in equity and debt, tells me he's vested.  If you're shorting this stock, you're nuts.  I haven't said that before about SHLD, but I think it's true now.  I think even the shorts get it, check out the 12/31/11 vs. 9/30 numbers.
Title: Re: SHLD - Sears
Post by: txlaw on December 05, 2012, 09:08:41 AM
Fitch affirms CCC rating and says that outlook is Negative:

http://www.reuters.com/article/2012/12/05/idUSWNA052920121205
Title: Re: SHLD - Sears
Post by: spin on December 05, 2012, 11:56:33 AM
Dollarbills:
"The lock-up expires at the end of the year according to WSJ"
Yes the locup expires and LPs are redeeming.  Last year LPs also redeemed.  Difference is Eddie distributed AN/AZO last year and tightly held SHLD, this year he distributed AN/OSH/SHLD.

I'm wondering why he distributed SHLD this year when he could had distributed COF/GPS/AN + some of his smaller holdings if SHLD is the huge bargain, or at least minimised the SHLD distribution.    Here is what he distributed:

(http://i45.tinypic.com/2zz1es7.png)

ShahKhezri:
"I do.  At its max, ESL held 66MM shares, today ESL & EL own a combined 65.7MM shares."
Can you step me thru this?  5.9MM Shares distributed went to redeeming LPs vs Eddie hence the ESL+Eddie holdings are down I would think?

1. Represents shares of common stock of Sears Holdings Corporation (the "Issuer") that were distributed by ESL Partners, L.P. ("Partners") on a pro rata basis to limited partners that elected to redeem all or a portion of their interest in Partners in 2012.

Spin
Title: Re: SHLD - Sears
Post by: ShahKhezri on December 05, 2012, 12:22:58 PM
Dollarbills:
"The lock-up expires at the end of the year according to WSJ"
Yes the locup expires and LPs are redeeming.  Last year LPs also redeemed.  Difference is Eddie distributed AN/AZO last year and tightly held SHLD, this year he distributed AN/OSH/SHLD.

I'm wondering why he distributed SHLD this year when he could had distributed COF/GPS/AN + some of his smaller holdings if SHLD is the huge bargain, or at least minimised the SHLD distribution.    Here is what he distributed:

(http://i45.tinypic.com/2zz1es7.png)

ShahKhezri:
"I do.  At its max, ESL held 66MM shares, today ESL & EL own a combined 65.7MM shares."
Can you step me thru this?  5.9MM Shares distributed went to redeeming LPs vs Eddie hence the ESL+Eddie holdings are down I would think?

1. Represents shares of common stock of Sears Holdings Corporation (the "Issuer") that were distributed by ESL Partners, L.P. ("Partners") on a pro rata basis to limited partners that elected to redeem all or a portion of their interest in Partners in 2012.

Spin

Down slightly, but not by a whole lot.  I thought it was for tax reasons as well.  Last year we had the fiscal cliff situation as well and I'm assuming he thought capital gains tax would adjust.  Just an assumption though.  Big picture, the believers are still long and strong holders and the group is more long than at any time in the last 5 years is my point.
Title: Re: SHLD - Sears
Post by: spin on December 05, 2012, 12:39:26 PM
If RBS/ESL is now willing to distribute out 9% of their SHLD holdings for LP redemptions (for tax or otherwise) then I'm not sure I would say they are a stable holder is what I'm wondering really.  If that that 5.9MM chunk of SHLD shares is gong to LPs who are non-believers or indifferent  vs 'hold till I die' the free float just increased 40% which is good for the shorts - Killis the whole 'Shorts can't cover this and will get wiped out' argument it would seem.

Spin


Title: Re: SHLD - Sears
Post by: ShahKhezri on December 05, 2012, 12:46:13 PM
Good point.  I've thought about  a 20-30% drop and what it would do to my view of the business, I only recently initiated a position (12/3) and I'm only 20% done with my position.  I have a really bad habit of anchoring to a price I like and that has caused me to stop adding to positions when they go up 10, 15, 20% from my original purchase.  So a big drop would be a good thing. 
Title: Re: SHLD - Sears
Post by: compoundinglife on December 05, 2012, 12:46:54 PM
If RBS/ESL is now willing to distribute out 9% of their SHLD holdings for LP redemptions (for tax or otherwise) then I'm not sure I would say they are a stable holder is what I'm wondering really.  If that that 5.9MM chunk of SHLD shares is gong to LPs who are non-believers or indifferent  vs 'hold till I die' the free float just increased 40% which is good for the shorts - Killis the whole 'Shorts can't cover this and will get wiped out' argument it would seem.

Spin

Without knowing what agreements are in place with the different partners, its anybody's guess why is distributing SHLD this year vs not doing it last year. It could be that the partners want to ride out the SHLD investment but also want to have some liquidity in their shares without having locked up another 5 years. But who knows.

As for the free float, if it increases, who cares? Sure more people can short if those shares are available to borrow, but a short squeeze is really any part of the SHLD thesis. Although it is a fun thing to talk about and has introduced a ton of volatility.
Title: Re: SHLD - Sears
Post by: spin on December 05, 2012, 01:23:04 PM
rimm_never_sleeps:
"could this be a Machiavellian way for for EL to accumulate more shares for his pa"

Well there are some who say that this is what Eddie did last year by driving down the price via the PRs on DTA writeoff, mentioning cash draws on revolver then taking his management fee in SHLD shares and further buying on market.

http://www.sec.gov/Archives/edgar/data/860585/000120919112003365/xslF345X03/doc4.xml

I'm not so sure this year though that this is the play.

compoundinglife:
"As for the free float, if it increases, who cares?"

Well for one, any one who wants to buy large chunks of stock with out materially moving the price would care very much what the free float was - Long-term structural shorts for example.

Or perhaps Eddie wants to increase the free float so SHLD can start taking down another chunk of shares in the future with out moving the price up.

Those two constituents would care very much about the free float.

"but a short squeeze is really any part of the SHLD thesis."

I'm thinking that the a previous argument that the long-terms structural shorts had no where to go when they wanted to cover, were somehow trapped in their short position, that they would turn in on themselves and eat their young if you will; those arguments seem to be unsupportable now.

Spin
Title: Re: SHLD - Sears
Post by: txlaw on December 05, 2012, 01:32:40 PM
I don't particularly care about the short position one way or the other because I don't think they can take down the company's ability to obtain financing.

I think that ESL's increased disclosure about the plan finally demonstrates that he's not trying to screw over minority shareholders.
Title: Re: SHLD - Sears
Post by: ShahKhezri on December 05, 2012, 01:44:57 PM
I don't particularly care about the short position one way or the other because I don't think they can take down the company's ability to obtain financing.

I think that ESL's increased disclosure about the plan finally demonstrates that he's not trying to screw over minority shareholders.

That's a good point, a take under has a lower probability now than before.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 05, 2012, 01:48:20 PM
compoundinglife:
"As for the free float, if it increases, who cares?"

Well for one, any one who wants to buy large chunks of stock with out materially moving the price would care very much what the free float was - Long-term structural shorts for example.

Right. I was expressing that opinion as a long who is unlikely to acquire a market moving amount of shares. I understand that parties interested in shorting SHLD would care about this. I really just figured no one on this thread would be shorting SHLD so my response was more of "why does anyone on this thread care?". That is a fair point.

Quote
Or perhaps Eddie wants to increase the free float so SHLD can start taking down another chunk of shares in the future with out moving the price up.

Those two constituents would care very much about the free float.

You are right they would or potentially do care. From my perspective what happens in the short term with SHLD and how it trades is not very interesting to me unless it provides cheaper buying opportunities. The one thing I would that would concern me is ESL selling a large block for no apparent reason.

Quote
"but a short squeeze is really any part of the SHLD thesis."

I'm thinking that the a previous argument that the long-terms structural shorts had no where to go when they wanted to cover, were somehow trapped in their short position, that they would turn in on themselves and eat their young if you will; those arguments seem to be unsupportable now.

Spin
I don't know enough about trading to say if this increased FF make those arguments unsupportable or not. It still seems like a pretty small FF to me. I would be interested to hear what folks with knowledge in that domain have to say. But at the end of the day I will buy if/when I like the price. What ever else happens... happens.
Title: Re: SHLD - Sears
Post by: texual on December 05, 2012, 09:47:41 PM
ESL for whatever its worth to you has shown through filings that Lamperts personal stake in Sears has grown tremendously through the years. He has purchased shares in his own account, or taking his payment from the hedge fund in the form of shares. He also owns shares in his ownership of the firm which each year appears to get larger. When his partners are cashing out they can take their shares and sell them or have cash, and that's up to them.

Not so different from Warren Buffett when he liquidated his partnership over a few years until the end was his partners having a choice, theres some Berkshire shares you own... you could sell em... but I think I want to stick around the Mill's for a few years, up to you!'

His hedge fund just completed the reduction of Autozone - they may own zero shares at this point in time. He is reducing Autonation shares. And he is dispensing the shares to his limited partners and he is also growing his ownership of the firms remaining shares. Basically ESL has to rid itself of a lot of the excess money and partners in order for Eddie to get out of this with a huge, 20, 30% ownership of SHLD at the end.  Until that happens (and I believe this plan was in motion for the past several years) he will continue to run the investments and return money to investors in the form of shares until the remainder is all his, including his personal accounts.

Buffett owned about 33% of Berkshire Hathaway before he was content with his control and decided the rest could be his partners but it took a while to get all the partners cashed out and given the option to have shares or sell them back to Buffett ;)
Title: Re: SHLD - Sears
Post by: drewdalton on December 07, 2012, 11:39:00 AM
Here in Canada, the supermarket chain Loblaws is creating a REIT. 

http://business.financialpost.com/2012/12/06/loblaw-to-create-one-of-canadas-largest-reits


Loblaw’s real estate portfolio is 47-million square feet with an estimated market value of $9-billion to $10-billion, executives said. It owns 70% of its retail footprint in Canada and leases about 30% from other landlords. 



SHLD owns and/or has long term leases on 90m square feet of real estate.  One can see how Bruce comes up with a range of values for SHLD's real estate of between $90 and $160 per share.   
Title: Re: SHLD - Sears
Post by: txlaw on December 07, 2012, 11:46:18 AM
Here in Canada, the supermarket chain Loblaws is creating a REIT. 

http://business.financialpost.com/2012/12/06/loblaw-to-create-one-of-canadas-largest-reits


Loblaw’s real estate portfolio is 47-million square feet with an estimated market value of $9-billion to $10-billion, executives said. It owns 70% of its retail footprint in Canada and leases about 30% from other landlords. 



SHLD owns and/or has long term leases on 90m square feet of real estate.  One can see how Bruce comes up with a range of values for SHLD's real estate of between $90 and $160 per share.

Very interesting.  Thanks for posting.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 07, 2012, 04:22:25 PM
Here in Canada, the supermarket chain Loblaws is creating a REIT. 

http://business.financialpost.com/2012/12/06/loblaw-to-create-one-of-canadas-largest-reits


Loblaw’s real estate portfolio is 47-million square feet with an estimated market value of $9-billion to $10-billion, executives said. It owns 70% of its retail footprint in Canada and leases about 30% from other landlords. 



SHLD owns and/or has long term leases on 90m square feet of real estate.  One can see how Bruce comes up with a range of values for SHLD's real estate of between $90 and $160 per share.

Where did you get that 90m number from? BB had around 250M on his slide deck (pre spin offs) and last CC they said "over 200m".
Title: Re: SHLD - Sears
Post by: Hawk4value on December 07, 2012, 06:18:55 PM
texual:

I found your evaluation of SHLD very interesting. It always seemed to me that Eddie would evantually increase his personal stake in SHLD to the point where he controlls it. I think that he also will slowly monetize Shld's assets and transform the company into a "Berkshire" type of entity with permanent capital. I am a big proponent of investing with smart owner/operators with superior ability to allocate capital. Although I am not willing to invest in Shld right now because of my distaste for any investment that has to compete with the Targets, Walmarts, and Costcos of this world, if Shld becomes Eddie's investment vehicle I would be very interested.

Am I on the right track??
Title: Re: SHLD - Sears
Post by: drewdalton on December 08, 2012, 09:39:18 AM
Where did you get that 90m number from? BB had around 250M on his slide deck (pre spin offs) and last CC they said "over 200m".


Compounding

The 200m plus figure is correct.  The Loblaws REIT highlights the potential value of SHLD's real estate.   
Title: Re: SHLD - Sears
Post by: compoundinglife on December 09, 2012, 02:33:52 PM
Sears Automotive is re-launching it road handler tire brand:

http://www.tirebusiness.com/article/20121205/NEWS/121209965/sears-relaunching-roadhandler-brand
Title: Re: SHLD - Sears
Post by: texual on December 10, 2012, 03:10:17 PM
Take your time, SHLD isn't going anywhere just yet. I'd also listen to Bruce Berkowitz at the U of Miami discussion. He mentions that the secret sauce to making great money is permanent capital and if he could, he would. He has some ideas brewing - but its quote " the reason Warren Buffett dissolved his partnership and got involved in a beat up textile mill, and another reason an investor would be suddenly buying shares of Sears Holdings,"

Funny you guys ask, because that's the same reason I would own the shares too. The end result is a beat up retailer with some good assets and a good investor at the helm. No other reason exists to own SHLD outside of that core logic. The real estate assets are nothing without a good dealmaker who can connect with partners to sell or renovate the spaces. Nobody will turn around the retail assets, because those will improve only with a housing turnaround. I wouldn't own shares without a little bit of external faith that ESL is eventually going to own 33% personally and ditch the hedge fund to run SHLD as a permanent capital vehicle.

Title: Re: SHLD - Sears
Post by: jay21 on December 10, 2012, 03:12:56 PM
Take your time, SHLD isn't going anywhere just yet. I'd also listen to Bruce Berkowitz at the U of Miami discussion. He mentions that the secret sauce to making great money is permanent capital and if he could, he would. He has some ideas brewing - but its quote " the reason Warren Buffett dissolved his partnership and got involved in a beat up textile mill, and another reason an investor would be suddenly buying shares of Sears Holdings,"

Funny you guys ask, because that's the same reason I would own the shares too. The end result is a beat up retailer with some good assets and a good investor at the helm. No other reason exists to own SHLD outside of that core logic. The real estate assets are nothing without a good dealmaker who can connect with partners to sell or renovate the spaces. Nobody will turn around the retail assets, because those will improve only with a housing turnaround. I wouldn't own shares without a little bit of external faith that ESL is eventually going to own 33% personally and ditch the hedge fund to run SHLD as a permanent capital vehicle.

If that's the thesis, why not wait until it comes to fruition (i.e. EL finally starts investing the CFs)?
Title: Re: SHLD - Sears
Post by: texual on December 10, 2012, 03:36:11 PM
That I cannot answer. Both Bruce Berkowitz and I appear to be foolish on this matter.

However I will add that I find it odd - even strange that ESL shut down his offices in CT, and moved his life to FL. But not just anywhere in FL - literally within a short distance of both Fairholme and Bruce Berkowitz. Now I don't want anyone to read into that more than what I just said. But if you are a fan of Bruce, and I am - you will notice that he speaks with reverence of many of his investments.

However if you know anything about JOE (which he has owned for perhaps a shorter time than SHLD), he used to speak very highly of. While he still owns it and made a slight reduction, he really hasn't talked about it for the past two years. Many interviews later and I think JOE just isn't on the discussion platform of banks and insurance. But SHLD, he is almost poetic about - and hes owned it with terrible results since 2005.

All of this has got to make one wonder.
Title: Re: SHLD - Sears
Post by: Myth465 on December 10, 2012, 04:21:21 PM
Bruce is tough to follow, he did the same thing with CNQ and FUR. He just sales out, moves on, and doesnt really explain what happened.
Title: Re: SHLD - Sears
Post by: JRH on December 10, 2012, 06:03:48 PM
Bruce is tough to follow, he did the same thing with CNQ and FUR. He just sales out, moves on, and doesnt really explain what happened.

I had the impression he sold out of FUR because they started issuing equity.  He had definitely come off as an Ashner fan prior to that.  Similar in a way to when he sold out of Penn West (late '07, if I recall correctly) - someone asked him and he implied that they made a dilutive deal.

Sorry, getting a little off-topic.
Title: Re: SHLD - Sears
Post by: JRH on December 10, 2012, 06:15:26 PM
However I will add that I find it odd - even strange that ESL shut down his offices in CT, and moved his life to FL.

FWIW, Florida has no state income tax for persons and a fairly low corporate income tax.  I was under the impression that was one of the things that took Fairholme down there.
Title: Re: SHLD - Sears
Post by: Myth465 on December 10, 2012, 06:26:32 PM
Bruce is tough to follow, he did the same thing with CNQ and FUR. He just sales out, moves on, and doesnt really explain what happened.

I had the impression he sold out of FUR because they started issuing equity.  He had definitely come off as an Ashner fan prior to that.  Similar in a way to when he sold out of Penn West (late '07, if I recall correctly) - someone asked him and he implied that they made a dilutive deal.

Sorry, getting a little off-topic.

Bruce praises then just kind of moves on without offering much of an explanation. I think he left FUR for the same reason I did, IV and issuing equity, but he never says anything really publicly about investments he leaves. He is not evasive, just doesnt really put it on the table.  One day he may do the same with SHLD one day.
Title: Re: SHLD - Sears
Post by: Matson125 on December 12, 2012, 11:07:40 AM
http://www.newswire.ca/en/story/1087819/sears-canada-announces-sale-of-its-leasehold-interest-in-medicine-hat-mall

Sears Canada Announces Sale of its Leasehold Interest in Medicine Hat Mall for $43 million.

Title: Re: SHLD - Sears
Post by: MYDemaray on December 12, 2012, 11:30:18 AM
However I will add that I find it odd - even strange that ESL shut down his offices in CT, and moved his life to FL. But not just anywhere in FL - literally within a short distance of both Fairholme and Bruce Berkowitz.

doesn't seem odd to me....that's the only part of Florida I'd move to, and I was born and raised in FL!

Also, aren't ESL's offices still up and running in CT?  It's just ESL himself who has transplanted.

That said, your point is taken...they will be socializing (though I hear from first-hand sources that if you take ESL to a baseball or football game, he just works the whole time).
Title: Re: SHLD - Sears
Post by: StubbleJumper on December 12, 2012, 11:49:22 AM
http://www.newswire.ca/en/story/1087819/sears-canada-announces-sale-of-its-leasehold-interest-in-medicine-hat-mall

Sears Canada Announces Sale of its Leasehold Interest in Medicine Hat Mall for $43 million.


Interesting.  A quick Google search suggests that's just north of $500/ square foot for 82,168 square feet.  Presumably what they sold was the remaining portion of what was probably originally a 99 year lease that would have been signed in about 1979?

I would not have guessed that a lease in Medicine Hat would have that much value...

SJ
Title: Re: SHLD - Sears
Post by: Matson125 on December 12, 2012, 11:59:18 AM
http://www.newswire.ca/en/story/1087819/sears-canada-announces-sale-of-its-leasehold-interest-in-medicine-hat-mall

Sears Canada Announces Sale of its Leasehold Interest in Medicine Hat Mall for $43 million.


Interesting.  A quick Google search suggests that's just north of $500/ square foot for 82,168 square feet.  Presumably what they sold was the remaining portion of what was probably originally a 99 year lease that would have been signed in about 1979?

I would not have guessed that a lease in Medicine Hat would have that much value...

SJ

Neither would I.  The reason is that I live in the Greater Toronto Area and every major mall has Sears as an anchor.  If a lease in Medicine Hat is worth $40 million imagine what Yorkdale, Sherway Gardens, Upper Canada Mall or even 1 floor at the Eaton Centre would go for!

Michael
Title: Re: SHLD - Sears
Post by: drewdalton on December 12, 2012, 01:07:44 PM
Regarding Sears Canada, what is Calvin McDonald going to do with the proceeds from these potentially on going property sales?  As SHLD shareholders we have all been distributed shares of Sears Canada.  I would like to see Calvin return a significant portion of this money to shareholders either through share buybacks or dividends.  I know he is re-investing in the stores but how much capital should be allocated to the stores at a potentially low return?



Title: Re: SHLD - Sears
Post by: dcollon on December 12, 2012, 01:45:58 PM
TORONTO, Dec. 12, 2012 /CNW/ - The following issues have been halted by IIROC:
Company: Sears Canada Inc.
TSX Symbol: SCC (all issues)

Reason: Pending News

Halt Time (ET): 04:28: PM ET
Title: Re: SHLD - Sears
Post by: drewdalton on December 12, 2012, 02:37:21 PM
Sears Canada Announces Extraordinary Dividend


TORONTO, Dec. 12, 2012 /CNW/ - Sears Canada Inc. (SCC.TO) announced today that its Board of Directors declared that an extraordinary cash dividend of $1.00 per share on all Common Shares of the Company, or approximately $102 million, will be paid on December 31, 2012 to shareholders of record as at the close of business on December 24, 2012.

Sears Canada hereby notifies shareholders that it designates the full amount of the dividend to be paid on the common shares, to be an "eligible dividend" as defined in subsection 89(1) of the Income Tax Act (Canada), and in any similar provincial and territorial tax legislation.

______________________________________________________________________________

Thank you Calvin and Eddie Lampert, of course.  It looks like Eddie only wants to pay 15% federal tax on his dividend and Florida has a 0% state tax.


Title: Re: SHLD - Sears
Post by: biaggio on December 13, 2012, 05:09:47 PM
http://finance.yahoo.com/news/sears-holdings-elects-paul-depodesta-135000210.html

"Sears Holdings (SHLD) announced today the election of Paul DePodesta, vice president of player development and amateur scouting for the New York Mets, to membership on the Sears Holdings board of directors.
"We are pleased to add the strong analytical skills and talent assessment acumen of Paul DePodesta to our board of directors. As Sears Holdings continues the work of transforming and strengthening our company, we look forward to his leadership and contributions," said Sears Holdings Chairman Edward S. Lampert. "Mr. DePodesta's ability to scrutinize data and use it to assess talent and drive execution makes him ideally suited to join our board."

I think he is one of the original guys (behind the seen brain)who was involved in developing the money ball in Oakland A's front office. I am not sure how much help he will be.
Title: Re: SHLD - Sears
Post by: schin on December 13, 2012, 08:17:36 PM
Paul wasn't that great after leaving Oakland for the Los Angeles Dodgers.
Title: Re: SHLD - Sears
Post by: drewdalton on December 30, 2012, 01:23:44 PM
Here is the latest 13D that ESL has filed with the SEC.  If you scroll down to Item 5 of the document it lays out all of ESL's various funds and partnerships.   

http://www.sec.gov/Archives/edgar/data/1310067/000119312512487787/0001193125-12-487787-index.htm

According to this filing Eddie, personally, owns 23.47 million shares or 22% of Sears Holdings.  I can see his percentage of ownership increasing as more funds/partnerships get dissolved.  Eddie will take his management fees in SHLD shares and buy shares directly from his partners who elect to sell to him.  If and when SHLD's cash flow improves it will repurchase more of its own shares further increasing Eddie ownership. 

Eddie Lampert is in the process of making his transition from a money manager to a businessman.
 
Title: Re: SHLD - Sears
Post by: Parsad on December 30, 2012, 06:19:38 PM
Eddie Lampert is in the process of making his transition from a money manager to a businessman.

Hopefully the business is worth more than the cash it constantly consumes.  I'm very ambivalent about Sears...I see the assets, but I see the burn rate and lackadaisical approach to realizing those assets as cash.  It has to get even cheaper for me to be interested.  Cheers!
Title: Re: SHLD - Sears
Post by: wellmont on December 30, 2012, 07:08:39 PM
i wonder what Buffett's berkshire transition to investment co. was like? was it more deliberate and defined; or did it meander and seemingly stall out at times, like Lampert's execution at shld?
Title: Re: SHLD - Sears
Post by: plato1976 on December 30, 2012, 07:12:38 PM
yeah, couldn't convince myself to pull the trigger;

why Eddie is so low in liquidating ? Does he really believe he can make the machine cash flow positive and then slowly liquidate ?
Why it's a worse strategy to do a quick liquidation and then use the funds to do other more attractive business ?
After all, a retailer turn-around is a very very rare thing , esp. when the paradigm is shifting to e-business for many items

i wonder what Buffett's berkshire transition to investment co. was like? was it more deliberate and defined; or did it meander and seemingly stall out at times, like Lampert's execution at shld?
Title: Re: SHLD - Sears
Post by: compoundinglife on December 30, 2012, 08:01:49 PM
i wonder what Buffett's berkshire transition to investment co. was like? was it more deliberate and defined; or did it meander and seemingly stall out at times, like Lampert's execution at shld?

Going off memory from various books that I have not read for quite a while so this might not be entirely accurate, but as I remember it he got the original Berkshire manager out of there and promoted an existing employee (Chase?) that showed promise and took Buffett's direction on cutting costs, this fellow was able to run a pretty tight ship and got them to break even at some point in the late sixties. The manager would from time to time try to get Buffett to buy off on some capex that could improve the operations but Buffett generally turned him down, they paid a dividend at some point after having a good period selling rayon and he offered to trade debt to shareholders who wanted income bearing securities so he wouldn't be pressured into paying anymore dividends. But overall they were able to get it mostly paying for itself and then he killed it when that wasn't possible anymore. That is the gist of story from what I remember. It was different from SHLD in that they were able to stop bleeding but it was also a much smaller ship to steer than SHLD is.

So ESL's handling of SHLD is different from WEB's handling of BRK in the early days, but its a different situation too.

 
Title: Re: SHLD - Sears
Post by: ItsAValueTrap on December 30, 2012, 09:02:55 PM
Quote
i wonder what Buffett's berkshire transition to investment co. was like? was it more deliberate and defined; or did it meander and seemingly stall out at times, like Lampert's execution at shld?

I'm not sure exactly what happened.  Maybe Buffett was done with running a hedge fund/investment partnership and was thinking about what else he was going to do with his life.  It's not like he needed the money any more. 

In this interview, Ed Thorp suggests indirectly that Buffett wasn't trying to steer his clients into holding onto Berkshire shares:
http://www.edwardothorp.com/sitebuildercontent/sitebuilderfiles/Interview_with_The_Journal_of_Investment_Consulting_2011.pdf

Maybe Berkshire Hathaway became something that he did not originally set out to do.  Munger comments that he took control of Berkshire because he was really pissed that the CEO lied to him about the tender offer.  In Carol Loomis' book, she notes that Berkshire was Buffett's biggest mistake in his career.

Since he took control of Berkshire, it made sense for Buffett to allocate its capital since it was his money on the line.  So maybe everything evolved from there...?
Title: Re: SHLD - Sears
Post by: ScottHall on December 30, 2012, 09:10:08 PM
http://www.newswire.ca/en/story/1087819/sears-canada-announces-sale-of-its-leasehold-interest-in-medicine-hat-mall

Sears Canada Announces Sale of its Leasehold Interest in Medicine Hat Mall for $43 million.


Interesting.  A quick Google search suggests that's just north of $500/ square foot for 82,168 square feet.  Presumably what they sold was the remaining portion of what was probably originally a 99 year lease that would have been signed in about 1979?

I would not have guessed that a lease in Medicine Hat would have that much value...

SJ

Neither would I.  The reason is that I live in the Greater Toronto Area and every major mall has Sears as an anchor.  If a lease in Medicine Hat is worth $40 million imagine what Yorkdale, Sherway Gardens, Upper Canada Mall or even 1 floor at the Eaton Centre would go for!

Michael

It's an interesting question. Do you have any sense of whether commercial real estate is in as much of a bubble in Canada as residential real estate is? That could explain the high property valuations.
Title: Re: SHLD - Sears
Post by: ItsAValueTrap on December 30, 2012, 09:51:31 PM
Regarding retailers and Buffett:

1- Berkshire Hathaway was a mistake since it took Buffett a long time to realize that it's usually better to buy quality companies at low prices than cigar butts.

Suppose it takes 4 years for a cigar butt for the market price to reach intrinsic value.  So you get an 18.9% return if you bought at 50% of intrinsic value.

If you bought a really awesome business that compounds at 18.9%/year... you'd come out ahead of buying cigar butts after taxes.

Buffett usually buys quality companies that are likely to sustain earnings growth over a long period of time.  The companies that do that typically (A) either have a really great manager who won't quit their job or (B) have some type of durable competitive advantage.

2- As far as retailers go, very few of them have a durable competitive advantage.  I think Buffett said that Walmart has an advantage due to its low-costs from the way its infrastructure is set up.  Walmart has very sophisticated warehouses and distribution centers.  It has buyers that scout the world for the best suppliers/products.  So maybe this is something that is very difficult to duplicate... maybe like an ad agency or a major investment bank (other things that Buffett has invested in).

Otherwise when you invest in a retailer you are looking at the quality of management.  Buffett (or Berkshire... not sure) owned a retailer very early on.  He quickly realized that retailing is a tough business.
http://books.google.ca/books?id=tU_CAUXWpCsC&pg=PA332&lpg=PA332&dq=Hochschild,+Kohn+and+Co+buffett&source=bl&ots=ixgekMcDlJ&sig=-l9RBfoCPZn2u6W34G393ZRVyAY&hl=en&sa=X&ei=iSDhUJ-cMcjCrQG24oDADg&ved=0CFQQ6AEwBg#v=onepage&q=Hochschild%2C%20Kohn%20and%20Co%20buffett&f=false

As far as Sears goes:
a- Bad/average management.  Any retailer without above average management is going to lose.
b- No moat.

The economics of the department store business may be bad in the long run.  It is a dying retail format.  Look at every individual department in Sears.  For every department, there is some category-killer store format that is probably doing better than the department store.  For tools, Sears doesn't compete well against the Home Depots.  For clothes, it competes with thrift stores and specialty apparel.  In terms of the big box format (stores with lots of square footage), Walmart seems to be beating out Sears.
And even Walmart may be losing ground against Tractor Supply (TSCO), Rural King, Menard's, etc.  TSCO has sometimes succeeded where Walmart has failed as they have opened small stores in former Walmart locations.  TSCO may not be as good as its private competitors Rural King and Menard's.  Walmart started out as a rural retail phenomenon (they opened city stores later) and people would ask when Walmart would open a store where they lived... take a look at Tractor Supply and Rural King's Facebook pages, they are the new Walmart.  This may be creative destruction at work.
Title: Re: SHLD - Sears
Post by: compoundinglife on December 31, 2012, 12:19:05 AM
Regarding retailers and Buffett:

I don't think anyone here is arguing that retailing or SHLD's retail business is great or has a great moat. I believe Plan posted a quote from Buffett earlier in the thread that reiterates what you said about his thoughts on retailing, his experience with Diversified Retail and his thoughts on competing with Costco and Walmart. He also said something along the lines of "Eddie is a smart guy and won't let it evaporate if it sees it as impossible, he might be able to make things more efficient but he will never be able to compete with Costco and Walmart."

Title: Re: SHLD - Sears
Post by: bargainman on December 31, 2012, 08:56:00 AM
As far as Sears goes:
a- Bad/average management.  Any retailer without above average management is going to lose.
b- No moat.

The economics of the department store business may be bad in the long run.  It is a dying retail format.  Look at every individual department in Sears.  For every department, there is some category-killer store format that is probably doing better than the department store.  For tools, Sears doesn't compete well against the Home Depots.  For clothes, it competes with thrift stores and specialty apparel.  In terms of the big box format (stores with lots of square footage), Walmart seems to be beating out Sears.

Right but Lampert has said that they are 'transforming'.  They are and have closed stores that weren't performing, so I'm sure he knows all the stuff you just stated.  I think the key question is if they are doing it fast enough, and if Lampert is the right guy to lead the transformation, or can attract the talent necessary to do it while not having the negative cash flow melt away what's left of the assets.  Looking at Lampert vs Bezos (who also had a hedge fund background), Bezos was able to attract massive talent and motivate them.  I've heard nothing good about Lampert's ability to actually run a business or attract and motivate talent.  Morale is super low, and most of the talent acquisitions I've seen were questionable.

The other thing I haven't seen mentioned but I did see written on several interviews is that Lampert was going to shutter things a lot quicker, but then when he realized the human cost of putting 200K people out of jobs, he made a 180 and decided to give a turnaround a go.  The danger is that he will run out of time/assets before pulling the plug on the turnaround attempt. 
Title: Re: SHLD - Sears
Post by: PlanMaestro on December 31, 2012, 09:03:32 AM
The other thing I haven't seen mentioned but I did see written on several interviews is that Lampert was going to shutter things a lot quicker, but then when he realized the human cost of putting 200K people out of jobs, he made a 180 and decided to give a turnaround a go.

Bargain, do you remember the sources?
Title: Re: SHLD - Sears
Post by: JRH on December 31, 2012, 09:33:31 AM
The other thing I haven't seen mentioned but I did see written on several interviews is that Lampert was going to shutter things a lot quicker, but then when he realized the human cost of putting 200K people out of jobs, he made a 180 and decided to give a turnaround a go.

Bargain, do you remember the sources?

I haven't heard Lampert actually talk about this, but Pabrai mentioned it after he sold out of his SHLD position in early 2009.  To paraphrase, he said the liquidation thesis was interesting, but that the employees were standing in between Lampert and the assets.

I think this was in a video interview although it is hard to remember specifics like that from 3-4 years ago.
Title: Re: SHLD - Sears
Post by: bargainman on December 31, 2012, 03:35:23 PM
hmm good question.  I don't remember the specifics to be honest.  I vaguely remember it either being an interview or one of the chairmen letters, or maybe second hand through another investor, either Bruce Berkowitz or Monish.  But i do remember it being more definitive than what a second hand person might know.. I did some googling and could not find it but will post again if I do...
Title: Re: SHLD - Sears
Post by: ItsAValueTrap on December 31, 2012, 04:40:01 PM
Quote
Right but Lampert has said that they are 'transforming'.
Every player in the retail industry is transforming and trying to improve their business.  One sanity check I use is this:

Look at every player in that industry.  Try to figure out who the winners and losers will be based on growing the underlying business (you can include non-listed companies).  And try to figure out which stocks will be winners and losers.  By ranking them, you might avoid some biases that you might have if looking at just one stock.  So you might have a winners pile, a losers pile (which should be much larger than the winners pile), and a I don't know pile.

In terms of stocks, you might put Dollar General, Walmart, and other Berkshire holdings into the winners pile.  I would put Amazon into the winners pile (though I don't like the stock).  I think it's obvious that Sears should belong in the losers pile.  The stores are depressing, they've been putting up bad numbers for years, etc. 

As an asset play, they really need to be monetizing their assets and putting cash into higher-yielding areas.  Berkshire got out of the awful textiles business.  SHLD needs to get out of its bad retail business.  Because it has been very slow in doing so... I don't think that this is a good stock.  I'm not surprised that the short interest is so high.
Title: Re: SHLD - Sears
Post by: texual on January 01, 2013, 08:34:30 PM
What do you guys think is the rationale behind ESL hiring former board member/interim CEO of Best Buy, G Mike Mikan as the new 'President' of ESL?

From BusinessWire; "Mike is a proven business leader who has a great track record of driving operating performance and a diverse background spanning operations, finance and strategy," Edward S. Lampert said. "Mike's background fits with our strategy and he will be a great asset to me and to ESL's portfolio companies."

"I have a great deal of respect for Eddie and the world-class investment firm he has built. ESL's philosophy of making long-term investments in companies and working with managements fits with my experience and passion in helping companies grow their businesses and reach their potential through operational excellence," Mr. Mikan said. "I look forward to partnering with Eddie and the team at ESL."


Interesting. Let's discuss.
Title: Re: SHLD - Sears
Post by: muscleman on January 02, 2013, 10:09:08 AM
What do you guys think is the rationale behind ESL hiring former board member/interim CEO of Best Buy, G Mike Mikan as the new 'President' of ESL?

From BusinessWire; "Mike is a proven business leader who has a great track record of driving operating performance and a diverse background spanning operations, finance and strategy," Edward S. Lampert said. "Mike's background fits with our strategy and he will be a great asset to me and to ESL's portfolio companies."

"I have a great deal of respect for Eddie and the world-class investment firm he has built. ESL's philosophy of making long-term investments in companies and working with managements fits with my experience and passion in helping companies grow their businesses and reach their potential through operational excellence," Mr. Mikan said. "I look forward to partnering with Eddie and the team at ESL."


Interesting. Let's discuss.

Does that mean he hasn't given up trying to save SHLD's retail business?
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 07, 2013, 05:47:49 PM
Some very interesting news out of SHLD tonight.

CEO Stepping down and Lampert assuming role: http://finance.yahoo.com/news/hedge-funder-eddie-lampert-taking-011400543.html

Updated on Q4:  http://searsholdings.mediaroom.com/index.php?s=16310&item=136558

Disclosure: Long SHLD.
Title: Re: SHLD - Sears
Post by: Myth465 on January 07, 2013, 06:12:59 PM
Isnt this bad news / more of the same?
Title: Re: SHLD - Sears
Post by: drewdalton on January 07, 2013, 07:28:43 PM
What do you guys think is the rationale behind ESL hiring former board member/interim CEO of Best Buy, G Mike Mikan as the new 'President' of ESL?

-----------------------------------------------------------------------------------------------------------------------------

texual,

We now have our answer for ESL's hiring of Best Buy's G. Mike Mikan.
 
Title: Re: SHLD - Sears
Post by: compoundinglife on January 07, 2013, 07:47:32 PM
What do you guys think is the rationale behind ESL hiring former board member/interim CEO of Best Buy, G Mike Mikan as the new 'President' of ESL?

-----------------------------------------------------------------------------------------------------------------------------

texual,

We now have our answer for ESL's hiring of Best Buy's G. Mike Mikan.

I read that as you think he will be handling more of the overhead at the fund to free ESL up to do more at SHLD?
Title: Re: SHLD - Sears
Post by: drewdalton on January 07, 2013, 08:09:53 PM
compoundinglife,

Yes, now that Eddie has taken on the role of SHLD's CEO he will be allocating most of his time to continuing its transformation.  Mike Mikan will take on the role of advising the funds portfolio companies such as GAP.  He, also, will provide Eddie with advice on SHLD. 

   
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 07, 2013, 09:07:48 PM
In some earlier posts I stated that Sears domestic had a real shot of positive comps in Q4, the headline is CEO stepping down, the reality is the numbers are improving.
Title: Re: SHLD - Sears
Post by: ragnarisapirate on January 08, 2013, 09:11:20 AM
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?
Title: Re: SHLD - Sears
Post by: FCharlie on January 08, 2013, 10:28:41 AM
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!




Title: Re: SHLD - Sears
Post by: JRH on January 08, 2013, 10:34:45 AM
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.
Title: Re: SHLD - Sears
Post by: ragnarisapirate on January 08, 2013, 10:46:02 AM
The old stores in rural KY that got closed generally turned into peddler's malls. Basically, a slightly nicer version of a flea market...
Title: Re: SHLD - Sears
Post by: Parsad on January 08, 2013, 11:59:04 AM
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!
Title: Re: SHLD - Sears
Post by: compoundinglife on January 08, 2013, 12:03:24 PM
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.
Title: Re: SHLD - Sears
Post by: JRH on January 08, 2013, 12:14:06 PM
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.
Title: Re: SHLD - Sears
Post by: txlaw on January 08, 2013, 12:17:04 PM
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
Title: Re: SHLD - Sears
Post by: Parsad on January 08, 2013, 12:23:52 PM
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! 
Title: Re: SHLD - Sears
Post by: JAllen on January 08, 2013, 12:45:12 PM
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
Title: Re: SHLD - Sears
Post by: txlaw on January 08, 2013, 12:58:09 PM
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. 
Title: Re: SHLD - Sears
Post by: compoundinglife on January 08, 2013, 01:09:00 PM
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.

Title: Re: SHLD - Sears
Post by: Rabbitisrich on January 08, 2013, 01:30:28 PM




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.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 08, 2013, 01:54:57 PM
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.
Title: Re: SHLD - Sears
Post by: rogermunibond on January 08, 2013, 02:01:41 PM
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
Title: Re: SHLD - Sears
Post by: JRH on January 08, 2013, 02:09:58 PM
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).
Title: Re: SHLD - Sears
Post by: Uccmal on January 08, 2013, 03:01:43 PM
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.
Title: Re: SHLD - Sears
Post by: constructive on January 08, 2013, 03:41:47 PM
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.
Title: Re: SHLD - Sears
Post by: Parsad on January 08, 2013, 04:16:14 PM
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!
Title: Re: SHLD - Sears
Post by: FCharlie on January 08, 2013, 04:48:31 PM
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.


Title: Re: SHLD - Sears
Post by: Matson125 on January 08, 2013, 04:53:06 PM
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

Title: Re: SHLD - Sears
Post by: BargainValueHunter on January 08, 2013, 05:08:03 PM
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}

Quote
“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.

Title: Re: SHLD - Sears
Post by: FCharlie on January 08, 2013, 05:20:48 PM


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:

http://www.youtube.com/watch?v=4vRgaDXxdP0

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.

Title: Re: SHLD - Sears
Post by: ShahKhezri on January 08, 2013, 05:59:25 PM
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). 
Title: Re: SHLD - Sears
Post by: txlaw on January 08, 2013, 09:51:48 PM
ESL speaks:

http://www.chicagotribune.com/business/columnists/ct-biz-0109-phil-sears--20130109,0,6208619.column
Title: Re: SHLD - Sears
Post by: Parsad on January 09, 2013, 12:32:36 AM
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!   
Title: Re: SHLD - Sears
Post by: giofranchi on January 09, 2013, 01:00:24 AM
I like Eddie...I much prefer him to Einhorn, Ackman, or a multitude of other hedge fund managers of similar notoriety...

Well, although Mr. Einhorn has clearly still to prove himself as a businessman, I think he recognized the fact that insurance + investment acumen generally is better that retail + investment acumen. Insurance tends to be much less subject to all those changes that only Mr. Bezos saw and nobody else. Insurance basically is exploiting opportunities and risk management, both activities at which I think Mr. Einhorn excels.

giofranchi
Title: Re: SHLD - Sears
Post by: prevalou on January 09, 2013, 02:17:26 AM
I don't see the cash burn in 2012
Title: Re: SHLD - Sears
Post by: Edward on January 09, 2013, 02:29:17 AM
I don't see the cash burn in 2012
looking at Q3 2012 cash flow statement:

Cash generated from operating activities before changes in operating assets and liabilities, 39 weeks: (735) M $

Same number for 39 weeks in 2011 was: (473) M $

This is a significant cash burn even before capex, which is much lower than depreciation. With such minimal investment in the business no wonder it struggles.
Title: Re: SHLD - Sears
Post by: Uccmal on January 09, 2013, 04:04:22 AM
I don't see the cash burn in 2012
looking at Q3 2012 cash flow statement:

Cash generated from operating activities before changes in operating assets and liabilities, 39 weeks: (735) M $

Same number for 39 weeks in 2011 was: (473) M $

This is a significant cash burn even before capex, which is much lower than depreciation. With such minimal investment in the business no wonder it struggles.

The thing is, you only need to do a little scuttlebut on this to know the above is true.  Just go to a dozen of their stores.  Takes what, half a day?  For Pete's sakes, Sears Canada is closing its flagship Toronto Store at Toronto's pre-eminent mall.  And the mall is perpetually full.  The management by Lampert has been atrocious. 

Since I first invested in BAC I have been to NT, Boston, Fresno, LV, and their machines and storefronts are busy everywhere.  That told me something, right there. 

I appreciate Shah's sentiment about it being a trading stock only.  If I held it from 7 years ago, waiting for the real esate side to play out I would have made -100% so far.  As an asset play it would have been a real long wait. 
Title: Re: SHLD - Sears
Post by: prevalou on January 09, 2013, 06:23:46 AM
I don't see the cash burn in 2012
looking at Q3 2012 cash flow statement:

Cash generated from operating activities before changes in operating assets and liabilities, 39 weeks: (735) M $

Same number for 39 weeks in 2011 was: (473) M $

This is a significant cash burn even before capex, which is much lower than depreciation. With such minimal investment in the business no wonder it struggles.
Why choose selective numbers on the cash flows statements ?
I'd prefer adjusted EBITDA: (74 m$) 2011 39 weeks, +197 m$ 2012 39 weeks and 2012 Q4 is better than 2011 Q4.
Your figures take the pension plan contribution into account (unrelated to stores performance) but not other items.

Title: Re: SHLD - Sears
Post by: Edward on January 09, 2013, 06:41:52 AM
Why choose selective numbers on the cash flows statements ?
I'd prefer adjusted EBITDA: (74 m$) 2011 39 weeks, +197 m$ 2012 39 weeks and 2012 Q4 is better than 2011 Q4.
Your figures take the pension plan contribution into account (unrelated to stores performance) but not other items.

I prefer looking at free cash flow (FCF) which I define as: Cash from operating activities - changes in operating assets and liabilities - maintenance CAPEX.

Sometimes adjustments should be made but this is the general formula. Of course to isolate the business you could eliminate the pension contributions as you mentioned.

This doesn't make for a much prettier picture as FCF is a negative number in 2011 and 2012. It means that even excluding pensions, they are burning through at least several hundreds of USD per year and this is financed primarily by more debt. It is not sustainable for long.

I think that the outcome here is binary. Either the lenders stop lending and it's forced liquidation time, or the company actually survives for a while, liquidates assets at good prices, and shareholders make some/a lot of money. But it's by no means a low risk investment.

Just my take on the situation.

EDIT: edited for clarity.
Title: Re: SHLD - Sears
Post by: prevalou on January 09, 2013, 06:50:25 AM
Adjusted EBITDA is computed as net loss attributable to Sears Holdings Corporation appearing on the Condensed Consolidated Statements of Operations excluding income (loss) attributable to noncontrolling interest, loss from discontinued operations, net of tax, income tax (expense) benefit, interest expense, interest and investment income, other income (loss), depreciation and amortization and gain on sales of assets. In addition, it is adjusted to exclude certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our businesses, as well as executive compensation metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.
While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance because:

EBITDA excludes the effects of financings and investing activities by eliminating the effects of interest and depreciation costs;

Management considers gains/(losses) on the sale of assets to result from investing decisions rather than ongoing operations; and

Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results.


Anyway you have to consider the whole year because cash flow is negative Q1 to Q3 and largely positive Q4.
Title: Re: SHLD - Sears
Post by: Edward on January 09, 2013, 07:07:41 AM
Anyway you have to consider the whole year because cash flow is negative Q1 to Q3 and largely positive Q4.
Of course,

Looking forward to the 2012 FY results.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 09, 2013, 07:59:22 AM
Quote
It means that even excluding pensions, they are burning through at least several hundreds of USD per year and this is financed primarily by more debt. It is not sustainable for long.

I think that the outcome here is binary. Either the lenders stop lending and it's forced liquidation time, or the company actually survives for a while, liquidates assets at good prices, and shareholders make some/a lot of money. But it's by no means a low risk investment.


I disagree.  The cash burn was not financed by more debt in 2012, but asset dispositions. 

Why would a lender stop lending if they are in a good collateral position and the debt is ABL?  If it was unsecured, I could see your scenario.  Further, I would study the Americredit/GGP and Fairholme.  In a scenario where SHLD is tapped of the credit markets (which is FAR from truth as most real estate/HQ/DC is unencumbered), there is backstop.  Quite frankly I think the liquidity concerns are WAY overblown (like the BAC run on the bank that never happened).  I'd also look at the maturities for the next 3 years, there is very little refinance risk.  The CIT headlines last year were a concern and 5-year CDS on SRAC was 3x the level this time last year. 

Again, I don't think a guy of EL caliber goes "all in" (see quote below) on a hunch.  And if he is, he'll lose his net worth and I will lose mast 5-10%. 

"He's in it all the way," one high-level executive told Crain's. "It's a go-for-broke fight. I believe he'll invest everything he has to prove he's right."


http://www.chicagorealestatedaily.com/article/20121204/BLOGS08/121209944/flashback-meet-eddie-lampert-the-next-warren-buffett
Title: Re: SHLD - Sears
Post by: Edward on January 09, 2013, 08:16:55 AM
I disagree.  The cash burn was not financed by more debt in 2012, but asset dispositions. 

Why would a lender stop lending if they are in a good collateral position and the debt is ABL?  If it was unsecured, I could see your scenario.  Further, I would study the Americredit/GGP and Fairholme.  In a scenario where SHLD is tapped of the credit markets (which is FAR from truth as most real estate/HQ/DC is unencumbered), there is backstop.  Quite frankly I think the liquidity concerns are WAY overblown (like the BAC run on the bank that never happened).  I'd also look at the maturities for the next 3 years, there is very little refinance risk.  The CIT headlines last year were a concern and 5-year CDS on SRAC was 3x the level this time last year. 
I think we have to wait for FY 2012 results to see if they really added debt or not, as the short term debt increase in Q3 is seasonal.

As for the available collateral, I don't know how to keep track of it. Would love a reference.

On the one hand they probably have plenty of unencumbered assets.

On the other hand these assets are used by a cash flow negative retailer. It could have been a lot more valuable leased under a long term contract to some other profitable and stable business. Also, every time an asset is posted as collateral the company loses a degree of control over its finances.

How could shareholders be certain that the company has enough reserves to weather the next few years and make a good return for them? Has anyone done the math on the real value of the real estate assets and the probable cost and time of winding down the retail business?
Title: Re: SHLD - Sears
Post by: Partner24 on January 09, 2013, 09:10:09 AM
The fact is time is the friend of the great businesses and when the business is weak, it's usually the reputation of the management that get hurt. Regarding Lampert, when things got clear that it was not about building a holding company like BRK (and benefit from it's investment acumen) but a retailer turnaround situation only, I did get out quickly.

It's very tough to turnaround a retailer, especially a big one like that. Lampert was open minded to try different things and look for the results, but so far it has not worked very much. I do not want to say that there is anything to do and Sears is a mess, but it's a tough job.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 09, 2013, 10:26:56 AM
There is the traditional retail turnaround, which JCP is doing and there is execution/operation/financial (capex) risk, and then there's SHLD or the kitchen sink approach.  So let’s go back to 2008 and assume he spends instead of the 4-500MM in Capex/year, but $1bn, that would have been a disaster as evidenced by housing only starting to pickup at 2011/2012.  Keep in mind that Ackman brought the “retail genius” and now the fund managers and retail think he’s an idiot for trying to engineer a turnaround. 
Sales have dropped from $53Bn in FY07 to $40Bn LTM FY12.  This is a period where stores with poor economics AND upcoming leases maturing have closed down.  Also, it's no wonder that they are through Q4 reporting positive comps for Sears - Domestic when this is a retailer that is fundamentally driven by housing.  This is hindsight, but who actually thinks that if in FY'08, FY'09 and FY'10 he spend $1bn/year vs. the approximately $1.4Bn total that sales would have moved up?
HD from 07-10 sales down ~16%
Stanley Black and Decker 07-10 sales down ~15%
SHLD 07-10 sales down ~18%

I also want to ask the group that believes he should have done something differently as far as doing something radically different than what he has, how many exciting/new retailing concepts have been introduced in the last 5 years?  (LULU, ULTA, UA, FRAN - ok?).  JCP is bringing in Levis, Disney and they have a crown in Sephora…none of  those would have fit in at SHLD. 
He's gone from being a genius in 2006 to being labeled an idiot in 5 years and I'm not sure if I would have done anything differently if you factor in a pension liability, 200K employees and the worst housing crisis in a long time. 
1.  People want him to monetize assets as quickly/rapidly as possible - which is nonsense considering consolidated still has $40Bn in sales and 4 major brand anchors.  If you have a cheap lease and the store is at breakeven cashflow, why would you shut it down if that lease matures in 12-24 months?  You simply let it come within 3 months and announce a closing.
2. People want a retail turnaround, but if spent the $1bn in capex/year there would have been a liquidity issue. 
Surprisingly, 1 and 2 are brought up by the same people which I don't understand. 
One concern that I think is valid and Al brought up is the customer service.  I think that in order to be a well thought retailer, great (not good) customer service is important. 
Title: Re: SHLD - Sears
Post by: maxprogram on January 09, 2013, 11:03:05 AM
I'm not sure if Lampert could have done much different (other than not plow $billions into share buybacks at prices that had, even with a healthy real estate market, little margin of safety).

He was damned if he did, damned if he didn't. It was a bad long-term investment to begin with, with the best-case scenario involving many years of slow liquidation, bad press, closing stores down, and laying off 10s of thousands of people. He made most of his profit from purchasing Kmart in BK and seeing it out.

Buying with today's prices and timeframe may be a different story, but to me it was clearly a bad investment (even without hindsight) 5+ years ago.
Title: Re: SHLD - Sears
Post by: Edward on January 09, 2013, 11:35:57 AM
I'm not sure if Lampert could have done much different (other than not plow $billions into share buybacks at prices that had, even with a healthy real estate market, little margin of safety).

He was damned if he did, damned if he didn't. It was a bad long-term investment to begin with, with the best-case scenario involving many years of slow liquidation, bad press, closing stores down, and laying off 10s of thousands of people. He made most of his profit from purchasing Kmart in BK and seeing it out.

Buying with today's prices and timeframe may be a different story, but to me it was clearly a bad investment (even without hindsight) 5+ years ago.
I agree completely.
Title: Re: SHLD - Sears
Post by: txlaw on January 11, 2013, 03:51:37 PM
Open market purchases by ESL?

http://www.sec.gov/Archives/edgar/data/860585/000118143113003011/xslF345X03/rrd366643.xml
Title: Re: SHLD - Sears
Post by: texual on January 11, 2013, 05:28:52 PM
I'd like to buy some shares of this now that all this news just confirms my theory that his CEO move isn't just dumb luck. Then again you'd have to be crazy to ignore his continued purchase of stock and I wouldn't be surprised if he gets more.

Perhaps my NOK profit can go toward my renewed 2013 sears thesis. I made my original purchases in 2009 and so this would be averaging down for me. How about you guys where do you stand on sears after the news?

I may also just wait a month and see what he says in the shareholder letter but last year buying shares in January after his purchase was pretty profitable.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 11, 2013, 05:33:11 PM
I'm at 60%, this just confirms my view as well.  Looking to add the other 40% in the next 20-30 days when I sell my FAAFX and BBY. 
Title: Re: SHLD - Sears
Post by: compoundinglife on January 11, 2013, 06:08:27 PM
Currently a %2 position for me. Bought some in December 2011 for an average price of 40 and some more in January for average price of 29 and change. I added a little last week, figured I wait to see if we got down the near the lows of last January considering that we have shed some assets since last years lows with the orchard, sosh, and sears canada. It appears that Mr. Market might not give us the same prices this time around. I would like to make this at least a %10 percent position. If the PRXI titanic auction could finally work out then I can move those funds into SHLD :) I was also thinking about parlaying most of my USG into SHLD. 
Title: Re: SHLD - Sears
Post by: bargainman on January 11, 2013, 07:50:52 PM
I'm at 60%, this just confirms my view as well.  Looking to add the other 40% in the next 20-30 days when I sell my FAAFX and BBY.


Are you saying your portfolio/fund is 60% in SHLD?  sorry if that's a dumb question, I just wanted to clarify.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 11, 2013, 08:49:39 PM
I'm at 60%, this just confirms my view as well.  Looking to add the other 40% in the next 20-30 days when I sell my FAAFX and BBY.


Are you saying your portfolio/fund is 60% in SHLD?  sorry if that's a dumb question, I just wanted to clarify.

Yeah, I should have clarified, I read it that way too just right now.  I look to allocate 12.5-15% of my portfolio to SHLD, currently I'm at 60% of that allocation.  Do you own any? 

Title: Re: SHLD - Sears
Post by: texual on January 11, 2013, 10:00:12 PM
USG ey? I like both companies and the thesis is similar with housing rebounding but for the time being I believe I'd rather hold onto USG than give it up for shld. Both companies are owned by great long term investors with a decent sense of how the world works. That being said my dollar cost average on USG is simply too good for SHLD till it really hits those lows from January last year.

I'm actually becoming one of those investors that works in pairs. Name one company in my portfolio and ill name you a analog that I balance depending on risk. MSFT and NOK are one pair and I guess Citi and BAC are another. And SHLD and USG are a great pair too. I didn't really want to bet on one without the other.


Back to SHLD though. This new CEO position would be great if there was no risk of Lampert finding a different CEO down the road. Truthfully I want this to be like WEB taking control of the company via shares and re instating himself as the CEO and carries forward by winding down his fund. I've got the feeling lampert is now here to stay and really make the gears turn but I said that a long time ago too. We're now on his 10th anniversary of Kmart and so I wonder if that was his timeline to begin to make significant changes?

I love the investment potential but I don't see the road ahead for the simple reason that ESL is still a hedge fund that needs his time. He installs a new president which is fine but I want things to be clearer as to his career choices this year.

Berkowitz says this is all reminiscent of early Berkshire Hathaway if we play back the tape.

Earlier this year he said we are beginning to see the emergence of a new Berkshire Hathaway. Lampert sells autozone and buys more stock of sears. Lampert hires a president for his firm and moves to Florida and now for the first time stepping into the CEO job. I don't  know but this seems like a good time to watch every bit of news coming from sears
Title: Re: SHLD - Sears
Post by: texual on January 11, 2013, 10:11:52 PM
http://www.nantucketproject.com/eddie-lampert
Title: Re: SHLD - Sears
Post by: Evolveus on January 11, 2013, 11:38:50 PM
Lampert takes another $67m bite of SHLD:

http://www.sec.gov/Archives/edgar/data/860585/000118143113003011/xslF345X03/rrd366643.xml
Title: Re: SHLD - Sears
Post by: BargainValueHunter on January 12, 2013, 05:00:21 AM
Sears is a big deal in appliances, tools and home services:

(http://research.stlouisfed.org/fred2/data/HOUST_Max_630_378.png)

Assuming the current stock price only reflects RE and inventory value...

and 15.83% of shares are sold short...

and 55.75% of shares owned by two institutional investors who show no signs of selling (one is definitely buying)...

Hmmm....   ???
Title: Re: SHLD - Sears
Post by: FCharlie on January 12, 2013, 06:42:32 AM
Sears has been left for dead. Period.  It's almost impossible to find anyone who thinks that buying the stock makes sense.

Isn't this the dream of of value investors?

 You've got three die hard value guys (Lampert, Tisch, Berkowitz) controlling all but about twenty million shares, and even though the main market for the company (tools & appliances) is just beginning to recover from a depression, the twenty million shares that remain are priced as if the company has no hope of anything good ever happening. On top of this you have Lampert and Berkowitz buying in the open market this year. What more could you ask for as an investor?


Title: Re: SHLD - Sears
Post by: texual on January 12, 2013, 09:43:19 AM
Your essentially getting Ed Lampert for free if you consider that the stock price reflects just inventory and some real estate and nothing else. His future is linked if not determined now by the performance of the stock which he now owns 22 percent himself. Each day he gets more concentrated as his lock ups expire or he buys out investors. Not to mention the buy backs could start again and reduce float. 


Even if you hate everything about the company you have to admit that if you like both Bruce and Eddie this is a significant thing to increase their reputations and legacy.

Methinks the stock price goes up higher.
Title: Re: SHLD - Sears
Post by: compoundinglife on January 12, 2013, 09:50:45 AM
Lampert takes another $67m bite of SHLD:

http://www.sec.gov/Archives/edgar/data/860585/000118143113003011/xslF345X03/rrd366643.xml

Looks more like ~13.5 million to me.
Title: Re: SHLD - Sears
Post by: nkp007 on January 12, 2013, 11:19:17 AM
Lampert takes another $67m bite of SHLD:

http://www.sec.gov/Archives/edgar/data/860585/000118143113003011/xslF345X03/rrd366643.xml

Looks more like ~13.5 million to me.

I've been looking at this investment up close over the past few weeks. Even if this is a bet on Lampert, hasn't Fairholme been invested in SHLD since 2008?

What makes us think we're any closer to Lampert doing thing X which will generate a ton of value for shareholders than Fairholme thought in 2008 when it made its initial investment?

It's undeniable that asset-wise, the company looks cheap. And it's awesome to be partnered with Lampert and Fairholme. But seriously, how much longer until thing X happens? And what is thing X (other than the most alarming question I have)?



Title: Re: SHLD - Sears
Post by: Parsad on January 12, 2013, 12:45:40 PM
Lampert takes another $67m bite of SHLD:

http://www.sec.gov/Archives/edgar/data/860585/000118143113003011/xslF345X03/rrd366643.xml

Looks more like ~13.5 million to me.

I've been looking at this investment up close over the past few weeks. Even if this is a bet on Lampert, hasn't Fairholme been invested in SHLD since 2008?

What makes us think we're any closer to Lampert doing thing X which will generate a ton of value for shareholders than Fairholme thought in 2008 when it made its initial investment?

It's undeniable that asset-wise, the company looks cheap. And it's awesome to be partnered with Lampert and Fairholme. But seriously, how much longer until thing X happens? And what is thing X (other than the most alarming question I have)?

That's exactly my point too Nkp.  There is undoubtedly value in the company.  I'm a very big fan of Berkowitz's and I like Eddie.  But they've been buying stock from $180 down and it's been pretty obvious they weren't moving quick enough to monetize assets and stem the bleeding. 

Every day that goes by, Sears loses another chink in the armour.  Sears was everywhere in Vancouver 20 years ago.  They were the dominant department store in Vancouver 10 years ago.  They had downtown stores 4 years ago.  Today, that footprint and brand is becoming extinct!

They started closing stores in bulk in the last year and spinning off brands...a step in the right direction.  But there was a lot of capital lost in the previous three years because they didn't want to take that step.  In that time, the brand has suffered, competition is even stronger, and will it be enough.  I don't know.  It's very much like RIMM.  Cheers!
Title: Re: SHLD - Sears
Post by: txlaw on January 12, 2013, 01:02:58 PM
There is no thing X, so to speak.  Transformation of the enterprise -- which will occur over time -- is the key, and ESL has finally given shareholders enough info to determine what exactly he's trying to do with SHLD.  That's why Bruce B says that this is a study in patience.  And that's why Pabrai says that patience is the number one quality to have for a superinvestor. 

Here are some of the posts I have made in the past about SHLD that were intended to convey what I felt would be the appropriate strategy for SHLD going forward and that I hoped reflected ESL's intentions for the company.

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg65138/#msg65138

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg65305/#msg65305

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg65359/#msg65359

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg65363/#msg65363

Almost all of what ESL has done in the last year confirms that I was on the right track with respect to what ESL is trying to accomplish, and now I feel comfortable that he's not going to screw over minority shareholders, and that his slow and steady approach could very well be value-enhancing, as opposed to value destroying.  Although I do agree with some folks that he could have taken steps earlier to more quickly transform the biz five years ago instead of simply buying shares at quite high prices.

From his recent interview:

"The framework which was placed upon me and the company was: 'OK, this was all about real estate. It's about selling real estate.' Then when we didn't sell real estate, it became: 'Well, they missed the opportunity in 2006, 2007 to sell the real estate.'"

"I've never denied there was substantial real estate value in the company," he said. "Suffice it to say that … the most value can be created if we actually transform it."


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

Again, in any transformational shift -- be it SHLD, DELL, RIMM, JCP, and more -- you have to wait a while to get results. 

You can always trade this, though, if you really have an urge to make money quick.  I have made a good amount doing so.  When SHLD went from $30 to $80 last year, I made a boatload of money, sold down the vast majority of the position, and waited to see what would happen.  I started establishing a substantial position again after it recently went under $47. 

My hope is that there will be some more announcements in the next earnings call that continue to show how he's transforming the biz.  Would love to see monetization of Land's End and then may be some Kmart locations, as well.  I believe we still have $500 million to raise, as per the plan.
Title: Re: SHLD - Sears
Post by: texual on January 12, 2013, 01:11:38 PM
For reference the fairholme fund began purchasing shares of sears holdings co in late 2005 and reported the stake in 2006 later in the year. His original purchase prices were 150 a share and just after the merger. Berkowitz has increased his position from 2005 to 16 million shares.

I don't see him selling the stock for any reason short of lampert dying. But even so I think he is sticking through all these years and only seems more confident now. I'd like to hear him speak more on the topic. Maybe he could join the board at SHLD?
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 12, 2013, 01:36:47 PM
Lampert takes another $67m bite of SHLD:

http://www.sec.gov/Archives/edgar/data/860585/000118143113003011/xslF345X03/rrd366643.xml

Looks more like ~13.5 million to me.

I've been looking at this investment up close over the past few weeks. Even if this is a bet on Lampert, hasn't Fairholme been invested in SHLD since 2008?

What makes us think we're any closer to Lampert doing thing X which will generate a ton of value for shareholders than Fairholme thought in 2008 when it made its initial investment?

It's undeniable that asset-wise, the company looks cheap. And it's awesome to be partnered with Lampert and Fairholme. But seriously, how much longer until thing X happens? And what is thing X (other than the most alarming question I have)?

I'll make an attempt to answer this question because I think there is a lot of validity vs. some of the other comments that are blanket statements.  The objective is to really understand what he’s done, what he’s doing and where you think the puck is going. 
The easy part is he’s been involved in very few names compared to Ackman, Einhorn and some of the other hedge funds/activists.  The tough part for investors alongside him is that you really have to have a long time horizon or know exactly when the tipping point is.

I think it’s useful to study AZO, when he got involved and what exactly he did.  Now AZO is a much more stable cash-flow business and it has benefitted greatly from the average age of vehicles increasing.  He started his involvement in the late 90’s (98/99) and his ownership was in the high 20% of shares o/s.  We’ll use the 1999 share price of $30 and shares o/s 150MM, up to 2001 the share price was around the same level, but the shares o/s was 112MM.  There was a period from 99 to late 06 where the stock was between $30 and $100 and all he did was continue to repurchase bringing shares o/s from 150MM to about 75MM.  Throughout 2012 he has started liquidating his AZO stake and he has made over 10x in a 12 year period (simple math, doesn’t include when he added additional shares or sold)

What does this have to do with SHLD?  He has stopped repurchasing shares the past 2 years (if he doesn’t purchase any stock between now and the end of this month) share o/s will have ended at 109MM in Jan  2011 to 106.4MM in 2013.  Why? Because the business started underperforming, cash flows declined.  That is one big difference between AZO and SHLD, stabilized cash flow vs. SHLD which is trying to right-size. 

I think 2013-2016 might be really interesting.  (see http://searsholdings.com/invest/docs/2012_Q3_Webcast.pdf) page 15, you can see debt down and that was achieved through a combination of the Orchard Spinoff and pay down.  Page 16, you see debt maturities which are de minimis and page 17 you can see projected 2013 obligations.  With an improving housing market a better Sears domestic and another anticipated $500MM spinoff you can start to see SHLD in a much better shape and discretionary cash to ramp up repurchases and pursue other monetization’s.  The situation at the end of 2011/beg of 2012 was tough, the headlines were scary and the reaction (you can check out the board’s comments) was this is Circuit City/Linen’s and Things.

Why do I think he’s closer to doing X than in 2008?  I would check out Schriesheim’s background, hired on Aug 2011.  He has a handful of 3-5 year stints where the outcome was remarkable.  Looking back to 2012, I’m not surprised SHLD spun-off OSH,  SHOS and SCC.to.  Robert was brought in for this transformation and if you look at his previous body of work it’s hard not to think X started happening in 2012 and should continue in 2013.  For all the crap he receives for not hiring the “right” people, I think he did well on this and he hired another guy David Lukes in early 2012 (previously CEO of Mall Properties and experience at Kimco).  I’m not going to bore you with the real estate assets, cheap leases, the brands etc., I just know these two hires were strategic and represent an event where EL is finally ready to start X. 

The amusing thing is the difference from EL being labeled a village idiot in 2011/12 to a genius in 2015/16 is share price.  If sales are flat/down over the next 5 years and the stock is at $150 achieved through X, all the doubters will still scream he doesn’t understand retail.  I couldn’t care less about his lack of knowledge in retail or why he does this vs. that.  Because of an improving balance sheet  (and we’ll know more about the pension in the earnings release and the 10K), monetization’s, lack of debt maturities and an improving environment for Sears domestic, I believe a purchase at this level is an interesting point.

On a side note, using Buffett’s quotes of reputation of management/business, and him not liking retailers is a cop-out.  I think we can all agree WB has made mistakes in the past.  The furniture market is very competitive and dependent on a good economy (not a mistake, but a retailer).  He bought Dexter and ended up losing close to $3Bn because he used stock.  So he lost on Dexter, does that mean that investors should never look at a footwear company?  EL has made a couple of mistakes with SHLD, clearly buying shares back at $150+ was dumb, it’s not the end game though if you think he’s still going to be involved. 

Anyways, this is probably my last post on SHLD, I'm convinced.  The criticism remains the same, quarterbacks use audibles to change a play at the line based on the defense, the elite QB's will at times go through 2-3 quarters of sub-par performance before figuring out the defense and making the right changes and winning the game. 
Title: Re: SHLD - Sears
Post by: compoundinglife on January 12, 2013, 02:04:29 PM
I have probably written 4 responses to various posts on the thread and then decided not to post them. Mostly because after re-reading what I have written I always come to the same conclusion, either you believe ESL is doing what is best for long term value creation or you don't. I don't disagree with posts stating that he could of done things differently and I am sure that like anyone else if he knew what was going to happen he would have done things differently.

We all have the same information at this point we just digest it and end up having different opinions. But hey thats one of the great things about this board.


Title: Re: SHLD - Sears
Post by: drewdalton on January 12, 2013, 02:14:55 PM
"We purchased Autozone at $27 in 1997.  The stock stayed flat for 4 years.  Then it went to $70 in 2001.  It stayed flat for another 5 years until it went to $110.  Today it is $395 a share.  If you owned a hundred shares, a  thousand shares or a million shares you got to ride with us all the way up."
 

Edward Lampert at the 2012 Annual Meeting 
Title: Re: SHLD - Sears
Post by: ExpectedValue on January 12, 2013, 04:35:41 PM
The one thing I wonder about SHLD, from an asset value perspective, of how JCP affects it.

I think if JCP's operational turnaround goes south, they might get pressure from Ackman to start monetizing the value of the assets by selling some of the real estate down. If they do, I think they'll be adding supply to the mall real estate market and if SHLD was doing this at the same time, that excess capacity hitting the market should cause a devaluation in mall real estate values.

Title: Re: SHLD - Sears
Post by: Munger_Disciple on January 12, 2013, 06:41:13 PM
drewdalton

can you please post the 2012 Sears annual meeting transcript? thx
Title: Re: SHLD - Sears
Post by: texual on January 12, 2013, 07:22:42 PM
There's also going to be a shareholders letter in a month from now and admittedly the last two have been just soso. However his new job as the CEO may be something he needs to address in more detail as opposed to his chairman letters. However I'd also not be surprised if its opaque and doesn't change anything. I also assume this upcoming shareholders meeting will feature a lot more lampert. In 2010 he spoke a lot but the past two it was Lou doing the talking so I'm certain this is a good year to attend the meeting if anyone's going it would be awesome to get some notes for the board.


Anyone think restoration hardware looks appealing for SHLD again now that its public? I love that store and brand and it would have been cool for the holdings co to own it but that didn't happen. Any other aquisitions look interesting?
Title: Re: SHLD - Sears
Post by: drewdalton on January 13, 2013, 07:29:20 AM
sreenr

I don't have a transcript for the 2012 annual meeting.  That quote was from memory.  ESL's comments on the stock price of Autozone, and his long term commitment to it, really stuck in my mind.  Also, his reference to a hundred shares and a million shares reinforces my belief that he is commited to creating value for all long term shareholders.

One of things I have noted in ESL's letters are his comments on share repurchases.  He uses phrases, such as, "we have provided liquidity to shareholders who have "elected" to sell their shares."  It reminds of Buffett in the 60's and 70's when he was buying back every Berkshire share he could get his hands on.  Many were repurchased from his original partners who "elected" to sell.  It's interesting to watch ESL slowly wind down his partnerships/funds.  As shares become available he just keeps buying.   
 
 
Title: Re: SHLD - Sears
Post by: muscleman on January 13, 2013, 11:32:42 AM
sreenr

I don't have a transcript for the 2012 annual meeting.  That quote was from memory.  ESL's comments on the stock price of Autozone, and his long term commitment to it, really stuck in my mind.  Also, his reference to a hundred shares and a million shares reinforces my belief that he is commited to creating value for all long term shareholders.

One of things I have noted in ESL's letters are his comments on share repurchases.  He uses phrases, such as, "we have provided liquidity to shareholders who have "elected" to sell their shares."  It reminds of Buffett in the 60's and 70's when he was buying back every Berkshire share he could get his hands on.  Many were repurchased from his original partners who "elected" to sell.  It's interesting to watch ESL slowly wind down his partnerships/funds.  As shares become available he just keeps buying.   
 
 

Sorry I am late in tracking Sears, so probably some newbie questions.
Lambert's personal estate is about $3 bn, including his own Sears holdings, right? How much is his liquidity if he has to buy out all other partners?

Title: Re: SHLD - Sears
Post by: drewdalton on January 13, 2013, 05:37:56 PM
I don't see how ESL could have have the liquidity to buy out all of of his other partners.  He bought out the Ziff brothers partnerships in two separate purchases in 2012, however, the latest partnership has distributed close to 6 million shares and he only purchased 332,000.  He personally and through his hedge fund owns a couple hundred million of Sears debt and that money is not available anytime soon.  Plus, Sears currently does not have the cashflow to repurchase any shares.     

As texual said earlier it is a good to watch every bit of news coming out of Sears.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 13, 2013, 05:50:50 PM
I don't see how ESL could have have the liquidity to buy out all of of his other partners.  He bought out the Ziff brothers partnerships in two separate purchases in 2012, however, the latest partnership has distributed close to 6 million shares and he only purchased 332,000.  He personally and through his hedge fund owns a couple hundred million of Sears debt and that money is not available anytime soon.  Plus, Sears currently does not have the cashflow to repurchase any shares.     

As texual said earlier it is a good to watch every bit of news coming out of Sears.

Were you surprised that he fully subscribed to SHOS? 

I agree with your thoughts on his liquidity.  There was another poster here (Valuegeek) who thought the pension's assumptions (asset growth) was hidden value.  I started looking at the last 5 years of data and couldn't make anything out of it, not really well versed in that area.  The offering of early buyout will have ramifications and future payments will definitely be lower.  I'm going to try and make it to the annual meeting and I want to ask a question about this.  Still, I am surprised that equities represent about 32% of assets and has been at that level for a while. 
Title: Re: SHLD - Sears
Post by: drewdalton on January 13, 2013, 06:47:20 PM
No, I wasn't surprised that he fully subscribed to SHOS.  At $15 per share plus a right it was a good buy.  He clearly has created value for SHLD shareholders, including himself.  SHOS has a clean balance sheet, unlike Orchard Supply, and will benefit from the continued improvement in housing. 

I'm not well versed in making out the pension data either.  But, ESL has taken advantage of the Pension Benefit Guarantee Corporation's decision last year to the average the interest rate assumptions over the long term to offer buyouts to employees.  As you said it will lower contributions and free up cash flow going forward.  I attended the annual meeting last year and hope to make it back this year.  It well worth the trip.   
Title: Re: SHLD - Sears
Post by: PlanMaestro on January 14, 2013, 08:10:56 AM
As a friend told me a few weeks back, there is one poster you MUST follow in this thread.

Why in the hell would Sears just liquidate a retail business that has 30% share of the appliance market?  That makes no sense. 
Title: Re: SHLD - Sears
Post by: nkp007 on January 14, 2013, 08:20:29 AM
As a friend told me a few weeks back, there is one poster you MUST follow in this thread.

Why in the hell would Sears just liquidate a retail business that has 30% share of the appliance market?  That makes no sense. 

Nice thing about large appliances - it doesn't make sense to sell them on the internet. The freight costs kill the margin. Then you have to create some sort of installation network.

Title: Re: SHLD - Sears
Post by: muscleman on January 14, 2013, 08:36:25 AM
As a friend told me a few weeks back, there is one poster you MUST follow in this thread.

Why in the hell would Sears just liquidate a retail business that has 30% share of the appliance market?  That makes no sense. 

Who is that poster in this thread? ;)
Title: Re: SHLD - Sears
Post by: bargainman on January 14, 2013, 08:40:42 AM
Here is the original message:

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/shld-anyone/msg65305/#msg65305

poster is txlaw.
Title: Re: SHLD - Sears
Post by: PlanMaestro on January 14, 2013, 08:54:57 AM
Nice thing about large appliances - it doesn't make sense to sell them on the internet. The freight costs kill the margin. Then you have to create some sort of installation network.

Here I have weakly held opinions. I know of at least one country where e-commerce has had a huge impact in the appliance market. In that country, I bought over the internet not just the appliances but also furniture (including bed and large TV) and most of the deco .

In the appliance market, you still need to transport the appliance from the store to the house/apartment, so you need either a pickup truck or pay the store for the freight. So you either pay the site/store or DIY that is almost the same either picking up at the store or warehouse of the internet site. So I'm not sure the freight is such a barrier. In urban locations, I think the tradeoff should be clear to the internet benefit.

This is how these LATAM internet operations were making money with very cheap freight surcharge.

(1) Drop Scale: The appliance market is very related to house formation. Wedding lists (float) are very important at least in Latam. As my one person sample shows, when you buy appliances you are not just buying appliances.
(2) Financing: Also you need financing for these big ticket items at that critical moment, very few start a home/apartment with savings.
(3) Extended Guarantees: well we know how that racket goes.
(4) Central Warehousing: no need to pay for store real estate and selling commission.
(5) Negative Working Capital.

These might also explain why in the US the internet has not had such an impact: low interest rates, other sources of financing, and wedding lists losing importance.

I've been very surprised how slow has been this transition in the USA, and how Sears has been able to defend market share for decades. I was looking at some data from the 90s the other day, market share in the 30s with Lowe's and HD gaining share but very, VERY, slowly.

What surely does not make sense: to sell appliances in a shopping mall. Only use it for display.
Title: Re: SHLD - Sears
Post by: nkp007 on January 14, 2013, 08:59:16 AM
Nice thing about large appliances - it doesn't make sense to sell them on the internet. The freight costs kill the margin. Then you have to create some sort of installation network.

Here I have weekly held opinions. I know of at least one country where e-commerce has had a huge impact in the appliance market. In that country, I bought over the internet not just the appliances but also furniture (including my bed) and most of the deco .

In the appliance market, you still need to transport the appliance from the store to the house/apartment, so you need either a pickup truck or pay the store for the freight. So you either pay the site/store or DIY that is almost the same either picking up at the store or warehouse of the internet site. So I'm not sure the freight is such a barrier. In urban locations, I think the tradeoff should be clear to the internet benefit.

This is how these LATAM internet operations were making money with very cheap freight surcharge.

(1) Drop Scale: The appliance market is very related to house formation. Wedding lists (float) are very important at least in Latam. As my one person sample shows, when you buy appliances you are not just buying appliances.
(2) Financing: Also you need financing for these big ticket items at that critical moment, very few start a home/apartment with savings.
(3) Extended Guarantees: well we know how that racket goes.
(4) Central Warehousing: no need to pay for store real state and selling commission.
(5) Negative working capital.

This is how the internet operations are making money in Latam, and maybe it explains why in the US the internet has not make such an impact in the sector: low interest rates, other sources of financing, and wedding lists losing importance.

I've been very surprised how slow has been this transition in the USA, and how Sears has been able to defend market share for decades. I was looking at some data from the 90s the other day, market share in the 30s with Lowe's and HD gaining share but very, VERY, slowly.

What surely does not make sense: to sell appliances in a shopping mall. Only use it for display.

True. My words were too strong.

Most e-tailers don't want to deal with selling large appliances due to the logistics. Even with that, there's still a lot of price competition in physical stores.
Title: Re: SHLD - Sears
Post by: PlanMaestro on January 14, 2013, 09:14:10 AM
Most e-tailers don't want to deal with selling large appliances due to the logistics. Even with that, there's still a lot of price competition in physical stores.

For that reason, if someone should be able to make the internet transition is Sears. If Lampert decides to spinoff the internet and financing operations I might be a buyer.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 14, 2013, 09:27:28 AM
Most e-tailers don't want to deal with selling large appliances due to the logistics. Even with that, there's still a lot of price competition in physical stores.

For that reason, if someone should be able to make the internet transition is Sears. If Lampert decides to spinoff the internet and financing operations I might be a buyer.

It won't be this year.  His next spin-off is most likely Land's End because in the deck CFO classifies it as "stand-alone" business, the other asset that was classified as stand-alone last year was Sears Canada. 
Title: Re: SHLD - Sears
Post by: rogermunibond on January 14, 2013, 01:52:55 PM
Not sure how Lands End gets spunoff since there are quite a few stores where LE comprises 30-40% of the soft goods retailing sq ft. Maybe the spinoff entity pays rent to Sears.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 14, 2013, 02:04:25 PM
You mean the other way around.  LE pays rent to SHLD RE?
Title: Re: SHLD - Sears
Post by: rogermunibond on January 14, 2013, 03:51:43 PM
You mean the other way around.  LE pays rent to SHLD RE?

Yes, thanks.  That's what I meant.  :)
Title: Re: SHLD - Sears
Post by: texual on January 14, 2013, 04:41:32 PM
I wouldn't bet against his insider purchase and I think there's a lot of cash here to distribute but only when there's an economic need to do so. Pundits make it look like sears is about to die the past 20 years and yet they largely missed out on how badly best buy turned out. In 2009 I said best buy would go private or go bankrupt before sears. But the SHLD investment is very long term to me.

Bruce is all in. Eddies all in and pundits think I should read their link bait articles and pontificating something they can barely understand outside of same store sales. There's a lot more going on at sears than a retailer.

I'm buying more shares.
Title: Re: SHLD - Sears
Post by: wellmont on January 14, 2013, 04:44:07 PM
Not sure how Lands End gets spunoff since there are quite a few stores where LE comprises 30-40% of the soft goods retailing sq ft. Maybe the spinoff entity pays rent to Sears.

I believe they are trying to sell Land's End to p/e buyers.
Title: Re: SHLD - Sears
Post by: ShahKhezri on January 14, 2013, 05:40:21 PM
Yup, bought early this morning at 42.39, have to buy two more times to make it full. 
Title: Re: SHLD - Sears
Post by: muscleman on January 14, 2013, 07:54:59 PM
5 years ago Lampert raised money through Goldman Sachs with a 5 year lock-up.  The lock-up expires at the end of the year according to WSJ

http://online.wsj.com/article/SB10001424052970203750404577173071474457812.html


According to the video, every 5 years, investors get a chance to get money out of ESL, and if they choose not to, they have to wait for another 5 years?
I think that is good, because I was worried if in the middle of this SHDL turnaround process, investors start to become impatient and force ESL to sell out of SHDL.
Title: Re: SHLD - Sears
Post by: muscleman on January 14, 2013, 08:24:27 PM
As far as Sears goes:
a- Bad/average management.  Any retailer without above average management is going to lose.
b- No moat.

The economics of the department store business may be bad in the long run.  It is a dying retail format.  Look at every individual department in Sears.  For every department, there is some category-killer store format that is probably doing better than the department store.  For tools, Sears doesn't compete well against the Home Depots.  For clothes, it competes with thrift stores and specialty apparel.  In terms of the big box format (stores with lots of square footage), Walmart seems to be beating out Sears.

Right but Lampert has said that they are 'transforming'.  They are and have closed stores that weren't performing, so I'm sure he knows all the stuff you just stated.  I think the key question is if they are doing it fast enough, and if Lampert is the right guy to lead the transformation, or can attract the talent necessary to do it while not having the negative cash flow melt away what's left of the assets.  Looking at Lampert vs Bezos (who also had a hedge fund background), Bezos was able to attract massive talent and motivate them.  I've heard nothing good about Lampert's ability to actually run a business or attract and motivate talent.  Morale is super low, and most of the talent acquisitions I've seen were questionable.

The other thing I haven't seen mentioned but I did see written on several interviews is that Lampert was going to shutter things a lot quicker, but then when he realized the human cost of putting 200K people out of jobs, he made a 180 and decided to give a turnaround a go.  The danger is that he will run out of time/assets before pulling the plug on the turnaround attempt.

Are these 200k union jobs? If they are, then the potential buyout for these employees could cost a lot of money.
Title: Re: SHLD - Sears
Post by: berkshiremystery on January 14, 2013, 08:25:26 PM
Just for everybody who is curious about Sears real estate values. I once put some links in an old Berkowitz thread last October, but maybe not everybody has seen them yet, so I repost them here.

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/berkowitz-interview-on-investment-strategy/msg88741/#msg88741

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/berkowitz-interview-on-investment-strategy/msg88750/#msg88750

-----

Some charts from my old message.... "Berkowitz: Case Study III" ---->>

(http://static5.businessinsider.com/image/50533892eab8eaca25000005-900/.jpg)

(http://static3.businessinsider.com/image/5053389369bedd6206000001-900/.jpg)

(http://static3.businessinsider.com/image/50533895ecad04f22e00002b-900/.jpg)

(http://static2.businessinsider.com/image/5053389669bedd4f0300000b-900/.jpg)

(http://static6.businessinsider.com/image/50533897ecad04e02e000018-900/.jpg)

(http://static3.businessinsider.com/image/50533897ecad041b2f00000b-900/.jpg)

(http://static2.businessinsider.com/image/5053389869bedde105000019-900/.jpg)

(http://static2.businessinsider.com/image/50533899ecad04e32e00000d-900/.jpg)

(http://static2.businessinsider.com/image/5053389b6bb3f7e36e000011-900/.jpg)

(http://static1.businessinsider.com/image/5053389becad04242f00001d-900/.jpg)

(http://static1.businessinsider.com/image/5053389ceab8ea492300000c-900/.jpg)

(http://static2.businessinsider.com/image/5053389deab8eac32300000d-900/.jpg)

(http://static6.businessinsider.com/image/5053389eeab8ea7828000000-900/.jpg)



Title: Re: SHLD - Sears
Post by: berkshiremystery on January 14, 2013, 08:53:38 PM
If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

-------
Simon Property Group Inc. (SPG)
$49.32 billion market cap    = 245 million square feet of real estate

Sears Holdings Corporation (SHLD)
$4.75 billion market cap = 256+ million square feet of real estate
-------

So my provocative question as a novice,...

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!



Any reasonable objections are welcome ?

Title: Re: SHLD - Sears
Post by: compoundinglife on January 14, 2013, 09:49:32 PM
If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

-------
Simon Property Group Inc. (SPG)
$49.32 billion market cap    = 245 million square feet of real estate

Sears Holdings Corporation (SHLD)
$4.75 billion market cap = 256+ million square feet of real estate
-------

So my provacitive question as a novice,...

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!



Any reasonable objections are welcome ?

In the BB video I watched I think that is the point he is trying to make valuation wise. However SPG is a REIT that is earning a positive return and able to pay out its earnings to shareholders so its not an apples to apples comparison. So I don't object with the idea that it is possible but I felt like the way BB presented it in the video, he tried to make it sound as simple as the market just needs to realize that SHLD is like SPG and its not that simple. There is a lot of work that needs to be done to get it there.

 When you look at the project in St. Paul and some of the other stuff going on it seems like the RE group at SHLD might be slowly making the transformation to operating more like a SPG.  If they did a decent job then we might start to see the multiple that BB speaks of.

The way I look at SHLD is that you don't need to know a mans weight to know he is fat, its obvious. I don't know the exact future value of SHLD to know its cheap, I just know that it is  much greater than what I can buy it for today.

So in 5-10 years if things play out well you could see a bunch of things come together in a lollapalooza type affect between monetizing real estate (not necessarily liquidating), leveraging the KCD brands, retail turn around or housing recovery, progress in the online business and the chance for ESL to actually have some CF coming in the door that he can use for investments. I don't think its that far of a stretch.

Title: Re: SHLD - Sears
Post by: berkshiremystery on January 14, 2013, 10:27:25 PM
If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

-------
Simon Property Group Inc. (SPG)
$49.32 billion market cap    = 245 million square feet of real estate

Sears Holdings Corporation (SHLD)
$4.75 billion market cap = 256+ million square feet of real estate
-------

So my provacitive question as a novice,...

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!



Any reasonable objections are welcome ?

In the BB video I watched I think that is the point he is trying to make valuation wise. However SPG is a REIT that is earning a positive return and able to pay out its earnings to shareholders so its not an apples to apples comparison. So I don't object with the idea that it is possible but I felt like the way BB presented it in the video, he tried to make it sound as simple as the market just needs to realize that SHLD is like SPG and its not that simple. There is a lot of work that needs to be done to get it there.

 When you look at the project in St. Paul and some of the other stuff going on it seems like the RE group at SHLD might be slowly making the transformation to operating more like a SPG.  If they did a decent job then we might start to see the multiple that BB speaks of.

The way I look at SHLD is that you don't need to know a mans weight to know he is fat, its obvious. I don't know the exact future value of SHLD to know its cheap, I just know that it is  much greater than what I can buy it for today.

So in 5-10 years if things play out well you could see a bunch of things come together in a lollapalooza type affect between monetizing real estate (not necessarily liquidating), leveraging the KCD brands, retail turn around or housing recovery, progress in the online business and the chance for ESL to actually have some CF coming in the door that he can use for investments. I don't think its that far of a stretch.

But the ride will definitly be bumpy for sure like Autozone.

"We purchased Autozone at $27 in 1997.  The stock stayed flat for 4 years.  Then it went to $70 in 2001.  It stayed flat for another 5 years until it went to $110.  Today it is $395 a share.  If you owned a hundred shares, a  thousand shares or a million shares you got to ride with us all the way up."
 

Edward Lampert at the 2012 Annual Meeting
Title: Re: SHLD - Sears
Post by: compoundinglife on January 14, 2013, 10:45:49 PM

But the ride will definitly be bumpy for sure like Autozone.

"We purchased Autozone at $27 in 1997.  The stock stayed flat for 4 years.  Then it went to $70 in 2001.  It stayed flat for another 5 years until it went to $110.  Today it is $395 a share.  If you owned a hundred shares, a  thousand shares or a million shares you got to ride with us all the way up."
 

Edward Lampert at the 2012 Annual Meeting
Yup, it already has been. I have my seatbelt on :)
Title: Re: SHLD - Sears
Post by: siddharth18 on January 14, 2013, 10:46:40 PM
But the ride will definitly be bumpy for sure like Autozone.

"We purchased Autozone at $27 in 1997.  The stock stayed flat for 4 years.  Then it went to $70 in 2001.  It stayed flat for another 5 years until it went to $110.  Today it is $395 a share.  If you owned a hundred shares, a  thousand shares or a million shares you got to ride with us all the way up."
 

Edward Lampert at the 2012 Annual Meeting

I guess with SHLD you just have to ask yourself what type of investor you are. Are you a buy-and-sit-on-it-for-5-years-or-more type of guy? Or would you rather want to own something else - like quick hits/cigar-butts?

The value is there and you have a reasonably clever manager (playing on your team with a huge stake) that sees the value.
Title: Re: SHLD - Sears
Post by: FCharlie on January 15, 2013, 06:27:05 AM
If Lampert compares SHLD vs SPG,...  it has become relative cheaper currently,... or better said the spread has widened !!!

-------
Simon Property Group Inc. (SPG)
$49.32 billion market cap    = 245 million square feet of real estate

Sears Holdings Corporation (SHLD)
$4.75 billion market cap = 256+ million square feet of real estate
-------

So my provocative question as a novice,...

if Sears would be valued purely on their hidden real restate values, the same way as Simon Property Group,... shouldn't it trade at least above $50 billion or at $450 per share ?!?!?!



Any reasonable objections are welcome ?

I don't think the values are completely hidden. Bruce Berkowitz claims he knows the value of all SHLD properties. Eddie Lampert has said at the annual meeting that they "get calls all the time" from people wanting to lease or buy their properties. The fact that these two men who happen to have terrific track records as investors appear to know the values fairly well, combined with the fact that they are both buying more year after year should be a huge wake up call to skeptics, in my opinion.




Title: Re: SHLD - Sears
Post by: MYDemaray on January 16, 2013, 10:26:00 AM
Thought this was pertinent reminder that square feet is only one of the drivers of retail location values... http://online.wsj.com/article/SB10001424127887324595704578242161282500552.html?mod=ITP_moneyandinvesting_5
Title: Re: SHLD - Sears
Post by: racemize on January 16, 2013, 10:43:10 AM
Thought this was pertinent reminder that square feet is only one of the drivers of retail location values... http://online.wsj.com/article/SB10001424127887324595704578242161282500552.html?mod=ITP_moneyandinvesting_5

I agree with the sentiment (e.g., particularly for Kmarts), but the above was for an entire mall, versus Sears, which just a portion of a mall.  They get a lot more diversification in that respect, since they are surely anchor stores for most of the best malls out there.
Title: Re: SHLD - Sears
Post by: muscleman on January 16, 2013, 02:25:00 PM
There is the traditional retail turnaround, which JCP is doing and there is execution/operation/financial (capex) risk, and then there's SHLD or the kitchen sink approach.  So let’s go back to 2008 and assume he spends instead of the 4-500MM in Capex/year, but $1bn, that would have been a disaster as evidenced by housing only starting to pickup at 2011/2012.  Keep in mind that Ackman brought the “retail genius” and now the fund managers and retail think he’s an idiot for trying to engineer a turnaround. 
Sales have dropped from $53Bn in FY07 to $40Bn LTM FY12.  This is a period where stores with poor economics AND upcoming leases maturing have closed down.  Also, it's no wonder that they are through Q4 reporting positive comps for Sears - Domestic when this is a retailer that is fundamentally driven by housing.  This is hindsight, but who actually thinks that if in FY'08, FY'09 and FY'10 he spend $1bn/year vs. the approximately $1.4Bn total that sales would have moved up?
HD from 07-10 sales down ~16%
Stanley Black and Decker 07-10 sales down ~15%
SHLD 07-10 sales down ~18%

I also want to ask the group that believes he should have done something differently as far as doing something radically different than what he has, how many exciting/new retailing concepts have been introduced in the last 5 years?  (LULU, ULTA, UA, FRAN - ok?).  JCP is bringing in Levis, Disney and they have a crown in Sephora…none of  those would have fit in at SHLD. 
He's gone from being a genius in 2006 to being labeled an idiot in 5 years and I'm not sure if I would have done anything differently if you factor in a pension liability, 200K employees and the worst housing crisis in a long time. 
1.  People want him to monetize assets as quickly/rapidly as possible - which is nonsense considering consolidated still has $40Bn in sales and 4 major brand anchors.  If you have a cheap lease and the store is at breakeven cashflow, why would you shut it down if that lease matures in 12-24 months?  You simply let it come within 3 months and announce a closing.
2. People want a retail turnaround, but if spent the $1bn in capex/year there would have been a liquidity issue. 
Surprisingly, 1 and 2 are brought up by the same people which I don't understand. 
One concern that I think is valid and Al brought up is the customer service.  I think that in order to be a well thought retailer, great (not good) customer service is important.

Got you. I was wondering why he won't just liquidate the company ASAP and start to invest that money. I realize that is probably not the best option now.
I heard that for the big retailers, they have an account payable period that is longer than their inventory turnaround, so they actually keep a big "FLOAT" just like the insurance company? If that can work, then it does make sense to hold on to Sears stores even if it merely breaks even. Then Lambert can use all that money to invest.
Title: Re: SHLD - Sears
Post by: finetrader on January 16, 2013, 02:33:41 PM
Interesting article explaining a little bit about the relationship between Sears and Simon property.
Could help defining Sears's real estate IV.

http://www.ibj.com/sears-closings-shouldnt-be-big-problem-for-simon/PARAMS/article/31649
Title: Re: SHLD - Sears
Post by: ERICOPOLY on January 16, 2013, 02:50:38 PM
I heard that for the big retailers, they have an account payable period that is longer than their inventory turnaround, so they actually keep a big "FLOAT" just like the insurance company? If that can work, then it does make sense to hold on to Sears stores even if it merely breaks even. Then Lambert can use all that money to invest.

Things may change of course, but what's holding him back so far?  He's controlled SHLD through a period of incredibly cheap stock prices, and the only thing he has done is returned cash to shareholders.

Title: Re: SHLD - Sears
Post by: berkshiremystery on January 16, 2013, 03:18:58 PM
Interesting article explaining a little bit about the relationship between Sears and Simon property.
Could help defining Sears's real estate IV.

http://www.ibj.com/sears-closings-shouldnt-be-big-problem-for-simon/PARAMS/article/31649

Very interesting... from the article...

-----
Simon has Sears as a tenant in 137 of its 190 malls, while competitor General Growth Properties Inc. has Sears in 110 of its 167 malls, said Andrew Johns, an analyst at Green Street Advisors Inc. in Newport Beach, Calif.
-----

Sears is a tenant @ Simon Property Group !!!!!

Simon trades at 10x Sears, while they both each and individually control almost the same sq ft of real estate,... they even share the same mall locations,.... that it's even more outrageous in logic to my mind,... the biggest contradiction I have seen yet  :o


Title: Re: SHLD - Sears
Post by: Sportgamma on January 16, 2013, 03:54:13 PM
http://www.costar.com/News/Article/The-De-Malling-of-America-Whats-Next-for-Hundreds-of-Outmoded-Malls-/141980
Title: Re: SHLD - Sears
Post by: berkshiremystery on January 16, 2013, 04:29:22 PM
http://www.costar.com/News/Article/The-De-Malling-of-America-Whats-Next-for-Hundreds-of-Outmoded-Malls-/141980

Like in any slow growth or declining markets, there are a few winners and many losers. I bet there are more losers than winners, and those losers feed the few winners, it's evolution.

-----

Kristin Mueller, executive vice president and director of retail business development with Jones Lang LaSalle in Atlanta, has a simple message to those who would write their obituary: Malls are not dead.

"The vast majority of the malls in the U.S. will continue to be incredibly relevant and are thriving," Mueller said. "There are many indicators that show malls are going very strong; you see it in their sales performance and in the REIT stocks of those that own two-thirds of the malls in this country.

"There are many different ways that we as an industry are working with malls to make sure they're relevant for their shoppers and communities, usually through a combination of new retail and other alternative uses," Mueller said.

Mueller acknowledged that some, "perhaps more than a handful," of the country's stock of 1,200 to 1,400 enclosed malls are in serious trouble. "Those malls have usually been unfavorably impacted by their surrounding communities, or they’ve been outflanked by bigger, better competition" from lifestyle and power centers, Mueller said.
Title: Re: SHLD - Sears
Post by: wellmont on January 16, 2013, 04:53:40 PM
Interesting article explaining a little bit about the relationship between Sears and Simon property.
Could help defining Sears's real estate IV.

http://www.ibj.com/sears-closings-shouldnt-be-big-problem-for-simon/PARAMS/article/31649

Very interesting... from the article...

-----
Simon has Sears as a tenant in 137 of its 190 malls, while competitor General Growth Properties Inc. has Sears in 110 of its 167 malls, said Andrew Johns, an analyst at Green Street Advisors Inc. in Newport Beach, Calif.
-----

Sears is a tenant @ Simon Property Group !!!!!

Simon trades at 10x Sears, while they both each and individually control almost the same sq ft of real estate,... they even share the same mall locations,.... that it's even more outrageous in logic to my mind,... the biggest contradiction I have seen yet  :o

it's all about the structure. investors prefer the simon structure at the moment. they hate the shld structure, which is probably by ESL design. investors don't like their real estate assets being enclosed in a money losing envelope which doesn't pay a dividend. this is all very convienent for  esl who wants to increase his ownership stake in those assets.
Title: Re: SHLD - Sears
Post by: hyten1 on January 16, 2013, 05:01:31 PM
also note even if sears is in ALL of simon and ggp's mall we still need to know the % or the amount of sq ft that is as a percentage of the entire sq ft.

it is a little premature to say  because sears is in 100% of simon and ggp that means 100% or close to 100% of sears sq ft is prime real estate.

i am not saying sears is bad or putting it down.

at the end of the day i have not seen anyone (it doesn't mean it doesn;t exist, i just have not seen it nor did i do the work for it) analyzing entire sears RE portfolio breaking it down what percentage is class A vs B or C etc.

eddie and bruce prob have this? if they did they have not share it with the  public? if someone has this info please share.

Title: Re: SHLD - Sears
Post by: MYDemaray on January 16, 2013, 05:30:15 PM
...Simon and Sears are two totally different business models.  Collecting rent across a large number of properties is more predictable than being a retailer, thus it attracts a higher multiple.
Title: Re: SHLD - Sears
Post by: valuecfa on January 16, 2013, 06:15:27 PM
It wouldn't take too much more in share repurchases to take out the entire float of this company. And to think there is over $400 million in short interest at the moment.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on January 16, 2013, 07:06:52 PM
What's up with the near put/call parity these days?  I was getting used to there always being call premiums at 1/2 the cost of put premiums (giving you 2x upside for your 1x downside).

What changed in the calculus to bring this back into line?  Did the short sellers find shares to borrow or something?

Title: Re: SHLD - Sears
Post by: muscleman on January 16, 2013, 07:56:28 PM
Does anyone know how expense it is to layoff one worker in Sears?

From their Q3 presentation:
Made 86,000 lump sum offers totaling $2.0 billion

This means that each person is being offered a mere 23k for the buyout?
That is much lower than GM's buyout of over 100k during 2006-2008.
I am happy with this number, but could anyone tell me why is it such a big difference between auto workers and retail workers?
Title: Re: SHLD - Sears
Post by: Sportgamma on January 17, 2013, 03:22:25 AM

Howard Davidowitz is a man with a hammer and he absolutely nails it...

http://finance.yahoo.com/blogs/daily-ticker/lululemon-still-stuff-howard-davidowitz-160601498.html
Title: Re: SHLD - Sears
Post by: muscleman on January 17, 2013, 08:14:06 AM
I wouldn't bet against his insider purchase and I think there's a lot of cash here to distribute but only when there's an economic need to do so. Pundits make it look like sears is about to die the past 20 years and yet they largely missed out on how badly best buy turned out. In 2009 I said best buy would go private or go bankrupt before sears. But the SHLD investment is very long term to me.

Bruce is all in. Eddies all in and pundits think I should read their link bait articles and pontificating something they can barely understand outside of same store sales. There's a lot more going on at sears than a retailer.

I'm buying more shares.

Bruce is all in? I see SHLD is his 2nd largest holding as of Q4 2012, but that is still just 13% of his entire fund.
Title: Re: SHLD - Sears
Post by: biaggio on January 17, 2013, 08:55:39 AM

Howard Davidowitz is a man with a hammer and he absolutely nails it...

http://finance.yahoo.com/blogs/daily-ticker/lululemon-still-stuff-howard-davidowitz-160601498.html

Thanks for posting. If I can summarize:

1. management matters a whole lot

but

2. retail is very hard, you have to be a genius (or just lucky) to guess exactly right what consumer is going to want

Seems to agree with most here that SHLD in an orderly liquidation.

Personally I think you could put the greatest retailer of all time + he would probably not turn SHLD around---I do like the underlying commercial RE + the fact that 2 of the best cap allocators are putting their money in.
Title: Re: SHLD - Sears
Post by: wellmont on January 17, 2013, 09:10:01 AM

Howard Davidowitz is a man with a hammer and he absolutely nails it...

http://finance.yahoo.com/blogs/daily-ticker/lululemon-still-stuff-howard-davidowitz-160601498.html

he sees retail stocks from one perspective only. same store sales. he's a broken record and simply a mouthpiece for the media when they want to present the negative case on shld.
Title: Re: SHLD - Sears
Post by: berkshiremystery on January 17, 2013, 11:11:55 AM
At least Berkowitz thinks that Sears real estate is valued at $160 per share.



Lately you've begun talking about the real estate value of Sears, which accounts for 10% of your fund.The value of Sears (SHLD) [which trades near $xx] would be over $160 a share if the land on the books was fully valued. 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? It gets at the inventory. The liquidation value of its inventory approaches its stock price. Forget the real estate.


Source: Berkowitz interview in FORTUNE 2012-11-26
http://finance.fortune.cnn.com/2012/11/26/bruce-berkowitz-fairholme/?section=money_markets&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_markets+%28Markets%29

-----

How Sears Is Worth More Dead
2012-11
http://investorplace.com/2012/11/how-sears-is-worth-more-dead/


Any conversation about the true intrinsic value of SHLD stock begins with real estate. Between Sears and Kmart, the company has 241 million square feet of retail space, 37% of it owned and the rest in long-term, below-market leases. Berkowitz values its real estate at $160 per share, or $17 billion.

Simon Property Group (NYSE:SPG) has 245 million square feet of retail space (almost an identical amount), and its market cap is $46.5 billion, 10 times Sears’ current valuation.

Clearly, it would take years to bring the above scenario to fruition, so it’s safe to say $41.4 billion isn’t what Sears would actually extract from its real estate. Especially when you consider that the longer it takes for Sears to enter the death spiral, the greater the decay in the value of those leases.
Title: Re: SHLD - Sears
Post by: JRH on January 17, 2013, 11:43:58 AM
EDIT: apologies, if you read the two quotes in the previous post, they are saying slightly different things.  1) The book value is $160/share.  2) The Property is worth $160 share as one component of the balance sheet.  I was assuming #2.

Quick estimate - replacing the Property & Equipment line with that value in the October 10-Q gives you a book value of ~$130/share.

For curiosity's sake, if Berkowitz is overestimating the discrepancy by 2x (between his estimate and the reported number), the book value would be $84/share.

Obviously they are burning through cash but that at least gives some rough context to margin of safety.
Title: Re: SHLD - Sears
Post by: texual on January 17, 2013, 03:55:13 PM
Jcp vs shld I'd guess there's a difference when you account for the fact that jcp has no private label brands that come close to the power in craftsman or kenmore. How jcp is going to differentiate from Macy's is astounding. Looks like their big innovation in new jcp is to rebuild a few parts of the store to look like Macy's. I don't see this strategy as original. Would you really shop at jcp over Macy's for any particular brand. Unless you have something nobody else has then you can't just copy it and expect a miracle.

Square footage sales will improve at jcp but lampert was right not to get carried away and let emotions take away the long term cash. In a few years we might see jcp as having lost in the long term when these stores remodels appear stale or in need of a refresh. If sears figures out how to improve profits with fewer stores and integrated retail experiences they'll be a shining example of how to really run a company. I don't believe the majority of investors who think this is a liquidation because if that we're the case lampert would be long dead before he can close down half the operations here.

You've got to believe the company is actually focused on making a retail effort here or I wouldn't even invest because you'll be wrong when five years from now they are still turning it around.
Title: Re: SHLD - Sears
Post by: bargainman on January 17, 2013, 08:46:53 PM
At a recent interview with Bezos he had some insights.  One that stuck with me is that you have to acknowledge the change and the unknowable and try to focus on things that will be true 10 years or more from now.  One of the things he said was that people want stuff for cheap, that's not going to change..  So that's one thing they focus on, running a tight ship, super low margins doing things like the kindle which are essentially loss leaders etc.  Eddie always talks about customer service and 'having it your way', but last time I had to buy something Sears sold I looked elsewhere and the price was cheaper (amazon/costco) or the warranty/return policy was better (costco).  I don't know, but it seems to me that he's caught halfway between a discounter and a service oriented retailer, and failing at both, or at least flailing.  Just some thoughts...  I used to own them but no more..   Might jump back in.. I'm torn.. I wish they had warrants or that the Leaps weren't so expensive!
Title: Re: SHLD - Sears
Post by: muscleman on January 17, 2013, 09:33:24 PM
Regarding SHLD's Q3 2012, it says adjusted EBITDA for the first nine months is 197 M, in which it added back 199 M interest expense. Could anyone tell me why? It is calculating as if interest expense does not exist?
On the other hand, it added back over 600 M in D&A. Normally, how long can a store renovation last before they have to do it again? I don't think they can add 100% of D&A back.

Is Eddie still trying to revive the retail business?
Title: Re: SHLD - Sears
Post by: Sunrider on January 17, 2013, 10:59:05 PM
Regarding SHLD's Q3 2012, it says adjusted EBITDA for the first nine months is 197 M, in which it added back 199 M interest expense. Could anyone tell me why? It is calculating as if interest expense does not exist?
On the other hand, it added back over 600 M in D&A. Normally, how long can a store renovation last before they have to do it again? I don't think they can add 100% of D&A back.

Is Eddie still trying to revive the retail business?

Well, I think the answer is in your question - EBITDA - as in *before* INTEREST, TAXES and DEPRECIATION, hence they're adding it back in their calculation, no?

C.
Title: Re: SHLD - Sears
Post by: muscleman on January 18, 2013, 08:48:41 AM
Regarding SHLD's Q3 2012, it says adjusted EBITDA for the first nine months is 197 M, in which it added back 199 M interest expense. Could anyone tell me why? It is calculating as if interest expense does not exist?
On the other hand, it added back over 600 M in D&A. Normally, how long can a store renovation last before they have to do it again? I don't think they can add 100% of D&A back.

Is Eddie still trying to revive the retail business?

Well, I think the answer is in your question - EBITDA - as in *before* INTEREST, TAXES and DEPRECIATION, hence they're adding it back in their calculation, no?

C.


Well, in that sense, it is true. Perhaps the question I am asking is wrong.
I see that they are using adjusted EBITDA as their management operating metric, which I disagree with.
I think it needs to deduct interest expense, and then add back only a portion of the D&A. I mean, the real estate depreciation can be fully added back, but D&A for their brands and store renovation expenses cannot be fully added back.

Anyway, I agree that 2012's performance has improved. And now that housing market becomes hot again, I think SHLD will probably start to make the turnaround in 2013.
Title: Re: SHLD - Sears
Post by: PlanMaestro on January 18, 2013, 09:04:24 AM
Most e-tailers don't want to deal with selling large appliances due to the logistics.

Odd business models: this guy shops at Ikea for you and assembles the flatpacks for an hourly rate. http://www.fearlessmike.com/index.html
Title: Re: SHLD - Sears
Post by: muscleman on January 22, 2013, 09:07:37 PM
Sorry to ask a newbie question, what is the relationship between housing market and sears'sales?
Title: Re: SHLD - Sears
Post by: texual on January 22, 2013, 09:38:04 PM
Nothing. But there is a correlation between rising home sales and consumer spending and in a rising tide all boats rise. At sears any lift in sales and profitability would create a magical situation for several reasons. One of the reasons is the massive share repurchases and concentrated ownership along with short interest make it a potent stock for earnings per share when the economy is chugging along. And it will. Give it a few years and expect a company that in good times can earn 10 dollars a share with a shares outstanding of just under 100 million and reducing.

People buy craftsman tools in housing upturns. But they really buy appliances when housing is good. Sears being the number one appliance retailer gets that distinction of being a housing recovery play but I think there's a little more to it. Share repurchases magnify both earnings and losses going ahead. For now I just think theyll need to keep calm and be strategic about he repurchases but I would have loved to see another 10% reduction in float during 2012.
Title: Re: SHLD - Sears
Post by: texual on January 22, 2013, 09:42:32 PM
Can we also do a rundown analysis of ESLs letter which should be here shortly in February.

And who plans to be at the meeting perhaps we can organize a set of questions that our board would like to ask. Maybe if two or three of us attend we can ask him a few questions from the group?

Should be an interesting year for the meeting since the CEO is now chairman and vice versa. He's going to have to do a lot of work starting feb 1.
Title: Re: SHLD - Sears
Post by: muscleman on January 23, 2013, 08:57:14 AM
Can we also do a rundown analysis of ESLs letter which should be here shortly in February.

And who plans to be at the meeting perhaps we can organize a set of questions that our board would like to ask. Maybe if two or three of us attend we can ask him a few questions from the group?

Should be an interesting year for the meeting since the CEO is now chairman and vice versa. He's going to have to do a lot of work starting feb 1.

Well my questions are:
No.1 What is his timeline for turning this into a baby Berkshire, now that housing market has rebounded strongly?
No.2 Does he intend to stay on the CEO job for the long term, or is he seeking someone to replace his current CEO role?
Title: Re: SHLD - Sears
Post by: FCharlie on January 23, 2013, 02:42:22 PM
Can we also do a rundown analysis of ESLs letter which should be here shortly in February.

And who plans to be at the meeting perhaps we can organize a set of questions that our board would like to ask. Maybe if two or three of us attend we can ask him a few questions from the group?

Should be an interesting year for the meeting since the CEO is now chairman and vice versa. He's going to have to do a lot of work starting feb 1.

Well my questions are:
No.1 What is his timeline for turning this into a baby Berkshire, now that housing market has rebounded strongly?
No.2 Does he intend to stay on the CEO job for the long term, or is he seeking someone to replace his current CEO role?


And his answers will be :

No. 1   No comment

No.2  He will do whatever is best for shareholders. All decisions are made with the idea of doing what is best for long term shareholders.

I say this because I've watched him be asked about the Buffett comparison. I've watched him directly and immediately pass on the question. I've also watched him be asked specific questions and although he may speak for ten minutes in response, he isn't going to lay out a concrete response to a question like that.
Title: Re: SHLD - Sears
Post by: fareastwarriors on January 23, 2013, 05:52:07 PM
Google Déjà Vu for Sears CEO: Fix Kmart

or

http://professional.wsj.com/article/SB10001424127887323783704578247762547817102.html?mod=WSJ_hp_LEFTWhatsNewsCollection (http://professional.wsj.com/article/SB10001424127887323783704578247762547817102.html?mod=WSJ_hp_LEFTWhatsNewsCollection)




Title: Re: SHLD - Sears
Post by: berkshiremystery on January 23, 2013, 06:11:39 PM
Eddie Lampert: Why Are We Biting the Hand that Feeds Us?
VIDEO 5:29min

http://www.nantucketproject.com/eddie-lampert

http://vimeo.com/50151365

Eddie Lampert, CEO of ESL Investments and Chairman of Sears Holding Corporation spoke at the 2011 Nantucket Project and stood up for business in his talk – “Why do we bite the hand that feeds us?”
Title: Re: SHLD - Sears
Post by: muscleman on January 28, 2013, 09:00:21 PM
Eddie Lampert: Why Are We Biting the Hand that Feeds Us?
VIDEO 5:29min

http://www.nantucketproject.com/eddie-lampert

http://vimeo.com/50151365

Eddie Lampert, CEO of ESL Investments and Chairman of Sears Holding Corporation spoke at the 2011 Nantucket Project and stood up for business in his talk – “Why do we bite the hand that feeds us?”

What has this to do with SHLD?
Title: Re: SHLD - Sears
Post by: CONeal on February 01, 2013, 08:59:45 AM
Looks like Kmart found a way to turn their sales around for stores.   :D

http://www.huffingtonpost.com/2013/02/01/pot-in-kmart-10-pounds-marijuana-delivered-seattle_n_2597824.html?utm_hp_ref=crime&amp
Title: Re: SHLD - Sears
Post by: txlaw on February 04, 2013, 09:40:21 AM
Apparently, Bruce B said the following about SHLD at the CSIMA conference (thanks to hellsten for the notes):

I'll give you a hint. Go to Sears. Do an analysis of Sears' legal entities.
Separate the companies between guarantors and non-guarantors.
Take a look at those two individual balance sheets and cash flows and tell me what you think.


This is exactly the same advice that was given to the board by a friend of Sanjeev, which I have pointed out several times in the various SHLD threads.

So if you're interested in SHLD, you probably ought to do that analysis.
Title: Re: SHLD - Sears
Post by: PlanMaestro on February 04, 2013, 09:43:40 AM
So if you're interested in SHLD, you probably ought to do that analysis.

Yes, it's a good one … and SHOS might be worth studying in that context too.
Title: Re: SHLD - Sears
Post by: txlaw on February 04, 2013, 09:44:55 AM
So if you're interested in SHLD, you probably ought to do that analysis.

Yes, it's a good one … and SHOS might be worth studying in that context too.

Indeed.
Title: Re: SHLD - Sears
Post by: PlanMaestro on February 04, 2013, 10:54:12 AM
Apparently, Bruce B said the following about SHLD at the CSIMA conference (thanks to hellsten for the notes):

59 min. mark.

http://investinginknowledge.com/info/2013/02/bruce-berkowitz-csima-2013-audio/
Title: Re: SHLD - Sears
Post by: muscleman on February 04, 2013, 12:43:57 PM
Apparently, Bruce B said the following about SHLD at the CSIMA conference (thanks to hellsten for the notes):

I'll give you a hint. Go to Sears. Do an analysis of Sears' legal entities.
Separate the companies between guarantors and non-guarantors.
Take a look at those two individual balance sheets and cash flows and tell me what you think.


This is exactly the same advice that was given to the board by a friend of Sanjeev, which I have pointed out several times in the various SHLD threads.

So if you're interested in SHLD, you probably ought to do that analysis.


Does SHLD's SEC filings have the info sufficient to do the break down analysis?
Title: Re: SHLD - Sears
Post by: txlaw on February 04, 2013, 12:57:39 PM
Apparently, Bruce B said the following about SHLD at the CSIMA conference (thanks to hellsten for the notes):

I'll give you a hint. Go to Sears. Do an analysis of Sears' legal entities.
Separate the companies between guarantors and non-guarantors.
Take a look at those two individual balance sheets and cash flows and tell me what you think.


This is exactly the same advice that was given to the board by a friend of Sanjeev, which I have pointed out several times in the various SHLD threads.

So if you're interested in SHLD, you probably ought to do that analysis.


Does SHLD's SEC filings have the info sufficient to do the break down analysis?

Yes.  Just do a search on the board for the referenced thread.  Once you find that thread and read it, you'll figure out where to go look.
Title: Re: SHLD - Sears
Post by: hyten1 on February 04, 2013, 01:59:29 PM
compoundinglife, i just recently saw this post of yours, did you ever get the RE values done? do you need help?



The biggest factor here IMO with regards to margin of safety is the value of the real estate. I have read 16 billion, "at least $80 a share" and of BB's comparison of Sear's total Sq. footage vs that of Simon. So summoning Howard Marks (watched the interview recently), what do we know that the market doesn't about SHLD's real estate? Nothing. What is our second level of thinking that makes us confident that the market is wrong and we are right?

So for most of us I think this boils down to a few things:

1. Smart Investors whom most of us respect have indicated the real estate is worth considerably more than the EV of 7.8B

2. ESL has a great long term investing track record. I think anyone on this board who is long SHLD believes he will be able to eventually monetize assets and either return capital to share holders or deploy it in attractive investments.

3. We understand the balance sheet and realize that SHLD is not widely followed, has a small float, most analysts that do bother to report on it focus on retail sales and compare it to BBY or other retailers overlooking the sum of parts value.

So the question I have been asking myself is "Is this really second level thinking?". Is it just that my temperament and personality is well suited for these situations and I am able to tune out the noise and look at the facts? Or am I missing something others see?

I keep coming back to the one wildcard which for me is the value of the real estate. I have been following the saga for quite a while and jumped in at the lows of late 2011/early 2012, I felt like it was very much a "I don't have to know a man's weight to know he is fat" scenario. But this is mainly based on estimates from BB and hints that ESL has dropped. They have demonstrated a little by selling some properties. But really for the most part I feel we are going off of what we have read or heard from people that we respect and are deserving of respect.

So where I am going with this? I have really wanted to pull the trigger on SHLD in a big way when the price gets down but in order to do that I need to be able to back up the real estate value thesis. It is currently a 2% position that I would probably go 5 to 10 on if I could assert some estimation of the MOS provided by the real estate. So I purchased a database of all their US locations with approximate co-ordinates, addresses, phone numbers, type of store (sears, hometown etc...). It has about 3100 locations, some of which were spun off already or sold.

The question is how does one go about efficiently taking this list and getting reasonable estimates of value? Is this something that a group of people could tackle and quickly knock out in a week or two? Is that something that SHLD junkies on the board would be interested in doing?

I would like to know at least the following about each:

1. Lease or Own
2. How big is the store
3. If lease, what is the remaining time
4. What is the current rate in that market per sq. ft for renting or purchasing

I could go on but that is a good starting point. Internet research and cold calling the stores are the first things that come to mind. But 3000 is a large #.

If folks are interested enough crowd sourcing this or even have good ideas for getting this information I am all ears. I have usually done all my own research on investments so I am not sure if this information is already available for a reasonable cost somewhere.
Title: Re: SHLD - Sears
Post by: no_free_lunch on February 04, 2013, 07:11:45 PM
Hyten1 & compoundinglife,

I was thinking about this a bit.  Obviously it would be ideal if you could get the square footage of each location along with the type of store at each location.  I just don't know if that is possible.  Maybe even if you got a decent sampling of a hundred+ stores it would allow you to make good estimates.  At any rate I certainly can't help with that type of project.

However, what you might be able to do is compare each location to the average residential price in the city that it's located in.  This would allow you to get a crude weighted average.  If you could come up with some actual sale prices in a few locations you could try to tie those to the residential prices and apply it to the weighted average.  Now it wouldn't take into account store square footage, type of store, quality of store, etc. but it would still give you a considerably more accurate figure than what is in the Berkowitz presentation.  Also I am pretty sure it could actually be done.

If it is a dumb idea then just ignore this post.



Title: Re: SHLD - Sears
Post by: jeffmori7 on February 05, 2013, 06:37:18 AM
Is it not a danger in SHLD that Lampert take it private, à là Dell?

Let's say Sears is worth a multiple of what the market values it today, but as it is never recognized, Lampert could be able to buy it all, with Berkowitz, for much less than what it's worth..In this case, you must be sure to have a cost basis really low as a 50% to your intrinsic value wouldn't do it if they buy it entirely at, let's say, one-third of it?
Title: Re: SHLD - Sears
Post by: value-is-what-you-get on February 05, 2013, 06:53:02 AM
Hyten1 & compoundinglife,

I was thinking about this a bit.  Obviously it would be ideal if you could get the square footage of each location along with the type of store at each location.  I just don't know if that is possible.  Maybe even if you got a decent sampling of a hundred+ stores it would allow you to make good estimates.  At any rate I certainly can't help with that type of project.

However, what you might be able to do is compare each location to the average residential price in the city that it's located in.  This would allow you to get a crude weighted average.  If you could come up with some actual sale prices in a few locations you could try to tie those to the residential prices and apply it to the weighted average.  Now it wouldn't take into account store square footage, type of store, quality of store, etc. but it would still give you a considerably more accurate figure than what is in the Berkowitz presentation.  Also I am pretty sure it could actually be done.

If it is a dumb idea then just ignore this post.

That's not a bad idea at all - using the average home prices as a proxy.

Also, as Munger says "Invert, always invert", so strip out inventory and other known assets at a liquidation price and divide the remaining market cap by square feet to see if it's a ridiculous number. 

If the lowest number you get from your residential by proxy method is well above the markets valuation of SHLD square footage, then you have a margin of safety. 

Knowing exactly how much it's worth is not easy to do, but knowing it's worth a whole lot more (perhaps many multiples more) than the market will sell it for is good enough.   Then it's a question of time.
Title: Re: SHLD - Sears
Post by: MYDemaray on February 05, 2013, 07:51:03 AM
Hyten1 & compoundinglife,

I was thinking about this a bit.  Obviously it would be ideal if you could get the square footage of each location along with the type of store at each location.  I just don't know if that is possible.  Maybe even if you got a decent sampling of a hundred+ stores it would allow you to make good estimates.  At any rate I certainly can't help with that type of project.

However, what you might be able to do is compare each location to the average residential price in the city that it's located in.  This would allow you to get a crude weighted average.  If you could come up with some actual sale prices in a few locations you could try to tie those to the residential prices and apply it to the weighted average.  Now it wouldn't take into account store square footage, type of store, quality of store, etc. but it would still give you a considerably more accurate figure than what is in the Berkowitz presentation.  Also I am pretty sure it could actually be done.

If it is a dumb idea then just ignore this post.

That's not a bad idea at all - using the average home prices as a proxy.

Also, as Munger says "Invert, always invert", so strip out inventory and other known assets at a liquidation price and divide the remaining market cap by square feet to see if it's a ridiculous number. 

If the lowest number you get from your residential by proxy method is well above the markets valuation of SHLD square footage, then you have a margin of safety. 

Knowing exactly how much it's worth is not easy to do, but knowing it's worth a whole lot more (perhaps many multiples more) than the market will sell it for is good enough.   Then it's a question of time.

I have no position here, but maybe this would help in square footage estimation.  Google Earth Pro.  Allows you to take measurements - $400: http://www.google.com/enterprise/earthmaps/earthpro-features.html
Title: Re: SHLD - Sears
Post by: compoundinglife on February 05, 2013, 08:37:24 AM
compoundinglife, i just recently saw this post of yours, did you ever get the RE values done? do you need help?


Sorry for the delayed response.

I loaded the store location data onto a google doc spreadsheet and board member nsa122 updated some data he had from Texas. I have not actually done anything yet due to being extremely busy at work. I am willing to share the spreadsheet with anyone who PM's me. I just don't want to link it in public because of the EULA w/the data source. Although I don't think they legally do anything about it, I agreed to it when I purchased the list and I like to keep my word.



Title: Re: SHLD - Sears
Post by: compoundinglife on February 05, 2013, 08:40:15 AM
Is it not a danger in SHLD that Lampert take it private, à là Dell?

Let's say Sears is worth a multiple of what the market values it today, but as it is never recognized, Lampert could be able to buy it all, with Berkowitz, for much less than what it's worth..In this case, you must be sure to have a cost basis really low as a 50% to your intrinsic value wouldn't do it if they buy it entirely at, let's say, one-third of it?

There is a risk. But if you read the thread history this was asked at one of the meetings and ESL indicated he would not do anything that benefitted him and not all share holders. I don't believe he would intentionally go back on his word. But each person has to make that character judgement on their own.
Title: Re: SHLD - Sears
Post by: JAllen on February 05, 2013, 10:08:44 AM
For those that want more SHLD real estate info you can go here: http://www.shcrealty.com/
Title: Re: SHLD - Sears
Post by: muscleman on February 05, 2013, 11:53:20 AM
Is it not a danger in SHLD that Lampert take it private, à là Dell?

Let's say Sears is worth a multiple of what the market values it today, but as it is never recognized, Lampert could be able to buy it all, with Berkowitz, for much less than what it's worth..In this case, you must be sure to have a cost basis really low as a 50% to your intrinsic value wouldn't do it if they buy it entirely at, let's say, one-third of it?

There is a risk. But if you read the thread history this was asked at one of the meetings and ESL indicated he would not do anything that benefitted him and not all share holders. I don't believe he would intentionally go back on his word. But each person has to make that character judgement on their own.

I agree with you. I bought around $46, which is lower than Bruce's entry price of $54. As long as my price is lower than theirs, even if they want to take it private, they would probably have to pay a price higher than $54. Otherwise Bruce won't agree with it.
Title: Re: SHLD - Sears
Post by: no_free_lunch on February 06, 2013, 06:18:59 PM
I had a crack at valuing the SHLD real estate over the past couple of days.  In the end I came to the conclusion that it just way too hard to properly evaluate RE over the internet and my initial results really didn't point to anything too exciting.

I initially was planning to just look at the city of the property and scale the results based on residential real estate prices.  Then I realized that there are actual commercial retail RE prices online as well.  So I had a look using these.  The problem I ran into is that the variance in RE prices even with a city are tremendous.  This is probably all very obvious to most but I had thought that the prices would be within a factor of 2 or 3 but I am seeing prices vary from $20-$250 / sqft.   Makes it VERY difficult to do a valuation.

For instance, look at these two listings:

I think both of these cities have KMart or Sears locations:

http://www.loopnet.com/xNet/MainSite/Listing/Search/SearchResults.aspx#/Saint-Cloud,MN/Retail/For-Sale/c!ARUIBQAAAQ

In the above listing there is an actual WalMart location for sale in Saint-Cloud Minnesota.  That has to be a good proxy for a Kmart right?  So it is going for $3.9M for 119k sqft.  That works out to $33 / sqft.

http://www.loopnet.com/xNet/MainSite/Listing/Search/SearchResults.aspx#/Rochester,MN/Retail/For-Sale/c!ARUIBQAAAQ

In the listing above is a mall.  It's going for $9.7M for 75k sqft.     That gives about $130 / sqft.   

Both of these locations are in the same state and similar populations (I think Rochester's population is about 100k vs 70k for St Cloud) but just due to differences in the type of building and perhaps location the prices vary by 4-fold.   Which is a KMart more similar to?  I tend to think the WalMart.

Based on these prices and others I have a hard time being both conservative and arriving at a number much past $80 / sqft.  This is really just a guess but honestly I almost feel that I'm not being conservative enough with that figure.  With 240M sqft and only 37% owned, that would value the owned RE at about $7B. 

So it all depends on what value the leases have.  To me the leases are even harder to evaluate.  Without knowing the average cost and lease life as well as comparable lease rates in the area it is just a total black box.  It could be $5B or it could be $500M, I just can't put a figure on it.  If anyone has came across any good info on valuing the leases, I would certainly be interested.

For the time being I am putting it back into the too hard pile. 
Title: Re: SHLD - Sears
Post by: BTShine on February 13, 2013, 07:59:07 AM
Good point.  There's a lot of variance within real estate values. 

The two examples you gave, St. Cloud and Rochester, are very different cities even though their population size may be similar.   I'm somewhat familiar with both towns (I live about 90 minutes from each). 

- Rochester is the home to Mayo Clinic, and is funny because it's a small town in the middle of nowhere, but you'll see BMW and Mercedes SUV's rolling around town because there's some wealth from the Mayo Clinic (Dr's and other highly paid medical professionals live in this small town).  Rochester is considered to be more vibrant and growing vs. St. Cloud, likely some of the reason it has more valuable real estate.

- St. Cloud is more of a typical American town of it's size.  For safety, I'd value Sears' rural real estate based upon the St. Cloud, MN value of $33/sq ft, not the Rochester's $100+ sq ft. 
 

Title: Re: SHLD - Sears
Post by: BargainValueHunter on February 13, 2013, 11:23:47 AM
I was in a Sears today in a rather affluent mall. The mall was @ about 45% of what I'd call "Christmas Eve" traffic. The Sears, on the other hand, was a ghost town slash museum. The staff looked bored stiff and desperate to help a customer ANY customer.

But interestingly, the store was VERY clean, neat and well tended. The prices were not bad at all. I had the feeling that if you magically transported 300 shoppers into the store they would have no qualms about buying stuff. The problem is that shoppers were avoiding the entrance as if the Sears products carried a fungus.

I don't see any possible way an investment in SHLD is not a liquidation/ Eddie $$ alchemy play.

Am I wrong?
Title: Re: SHLD - Sears
Post by: ShahKhezri on February 13, 2013, 11:44:16 AM
I was in a Sears today in a rather affluent mall. The mall was @ about 45% of what I'd call "Christmas Eve" traffic. The Sears, on the other hand, was a ghost town slash museum. The staff looked bored stiff and desperate to help a customer ANY customer.

But interestingly, the store was VERY clean, neat and well tended. The prices were not bad at all. I had the feeling that if you magically transported 300 shoppers into the store they would have no qualms about buying stuff. The problem is that shoppers were avoiding the entrance as if the Sears products carried a fungus.

I don't see any possible way an investment in SHLD is not a liquidation/ Eddie $$ alchemy play.

Am I wrong?

Other than Wednesday being one of the slowest business days...you're not wrong.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on February 13, 2013, 11:54:10 AM
I was in a Sears today in a rather affluent mall. The mall was @ about 45% of what I'd call "Christmas Eve" traffic. The Sears, on the other hand, was a ghost town slash museum. The staff looked bored stiff and desperate to help a customer ANY customer.

But interestingly, the store was VERY clean, neat and well tended. The prices were not bad at all. I had the feeling that if you magically transported 300 shoppers into the store they would have no qualms about buying stuff. The problem is that shoppers were avoiding the entrance as if the Sears products carried a fungus.

I don't see any possible way an investment in SHLD is not a liquidation/ Eddie $$ alchemy play.

Am I wrong?

Other than Wednesday being one of the slowest business days...you're not wrong.

Yeah, but Wed. is a slow day for ALL retailers. Sears was DEAD. The other stores had light to moderate traffic. It was baffling because the store looked REALLY well managed as opposed to the down market Kmarts I've stumbled into...
Title: Re: SHLD - Sears
Post by: Palantir on February 13, 2013, 12:46:03 PM
When have you ever gone to Sears to buy something? I personally think about Sears as a home hardware and appliances store....
Title: Re: SHLD - Sears
Post by: no_free_lunch on February 13, 2013, 05:27:26 PM
There is a good, albeit old, article on Bronte Capital about the Sears liquidation case.  His argument is that it would be a monumental undertaking.  Not sure I agree it's impossible but it's worth thinking about if that's why you're buying the stock.  Keep in mind that he was short sears at the time of writing.

Quote
My view: owning Sears as a property play is a demonstration of the arrogance and breathtaking naivete of much that passes on Wall Street. Sears Holdings has over 300 thousand employees. I don't know how you successfully liquidate a business integrated with that many lives. I don't know of anyone who has ever successfully liquidated a business with that many employees.** I am not sure it can be done and it certainly can't be done by someone with my skill-set (highly analytical, ability to spy value or value traps but no people management skill and not much tact).

http://brontecapital.blogspot.ca/2011/12/sears-holdings-liquidation-sale.html
Title: Re: SHLD - Sears
Post by: fareastwarriors on February 13, 2013, 05:35:20 PM
I was in a Sears today in a rather affluent mall. The mall was @ about 45% of what I'd call "Christmas Eve" traffic. The Sears, on the other hand, was a ghost town slash museum. The staff looked bored stiff and desperate to help a customer ANY customer.

But interestingly, the store was VERY clean, neat and well tended. The prices were not bad at all. I had the feeling that if you magically transported 300 shoppers into the store they would have no qualms about buying stuff. The problem is that shoppers were avoiding the entrance as if the Sears products carried a fungus.

I don't see any possible way an investment in SHLD is not a liquidation/ Eddie $$ alchemy play.

Am I wrong?

Other than Wednesday being one of the slowest business days...you're not wrong.

Yeah, but Wed. is a slow day for ALL retailers. Sears was DEAD. The other stores had light to moderate traffic. It was baffling because the store looked REALLY well managed as opposed to the down market Kmarts I've stumbled into...

All the Sears I been to in the San Francisco area are dead.  But The prices are reasonable. The sales were good. I got a few shirts but it was quiet ...
Title: Re: SHLD - Sears
Post by: LC on February 13, 2013, 06:18:06 PM
There is a good, albeit old, article on Bronte Capital about the Sears liquidation case.  His argument is that it would be a monumental undertaking.  Not sure I agree it's impossible but it's worth thinking about if that's why you're buying the stock.  Keep in mind that he was short sears at the time of writing.

Quote
My view: owning Sears as a property play is a demonstration of the arrogance and breathtaking naivete of much that passes on Wall Street. Sears Holdings has over 300 thousand employees. I don't know how you successfully liquidate a business integrated with that many lives. I don't know of anyone who has ever successfully liquidated a business with that many employees.** I am not sure it can be done and it certainly can't be done by someone with my skill-set (highly analytical, ability to spy value or value traps but no people management skill and not much tact).

http://brontecapital.blogspot.ca/2011/12/sears-holdings-liquidation-sale.html

I absolutely agree. Liquidation value can be a theoretical floor for the stock price if that makes you sleep better at night, but WHO KNOWS what prices they will incur if they ever attempted to liquidate. Additionally, imagine all those properties coming on the market at once! First, only a few retailers can buy them up all at once. So if you can't sell them all to Wal-Mart, you're looking at splitting them up and selling them piecemeal. In that case they would get horrible prices for their "average" building and be left with properties that just would not sell!


In my opinion anyone who says SHLD can be liquidated is simply trying to rationalize using a certain price as a "floor" for their investment.

(For what it's worth, I think they should franchise their smaller properties. Then chop up their other, run of the mill stores into a Sears half the size, rent out the other half to another non-competing retailer or restaurant or local biz. Keep the high-performing ones doing what they're doing now.)
Title: Re: SHLD - Sears
Post by: FCharlie on February 14, 2013, 01:39:41 PM
Bruce Berkowitz just filed. He's purchased 1.2 million more SHLD shares. Now owns 18.1 million or over 17% of shares.

http://www.sec.gov/Archives/edgar/data/1056831/000105683113000001/submission021413.txt
Title: Re: SHLD - Sears
Post by: ShahKhezri on February 14, 2013, 02:43:15 PM
That's interesting, so I guess he sold the SHOS warrants. 
Title: Re: SHLD - Sears
Post by: texual on February 14, 2013, 04:12:46 PM
ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%
Title: Re: SHLD - Sears
Post by: Parsad on February 14, 2013, 04:19:51 PM
ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

How many of you think that this thing is going private pretty soon?  Cheers!
Title: Re: SHLD - Sears
Post by: wellmont on February 14, 2013, 04:37:48 PM
I don't. but I suspect his is going to get way more proactive in creating value.
Title: Re: SHLD - Sears
Post by: valuecfa on February 14, 2013, 04:39:21 PM
ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

How many of you think that this thing is going private pretty soon?  Cheers!

Would likely be to the detriment of shareholders that have been in the company for a while if it were to occur.
Title: Re: SHLD - Sears
Post by: biaggio on February 14, 2013, 04:47:32 PM
ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

How many of you think that this thing is going private pretty soon?  Cheers!

Don t both Berkowitz and Lampert live in Miami? Maybe they will team up and use SHLD as their investment vehicle and not have to worry about lock ups, fund withdrawls, etc---assets would be pretty illiquid so I would think this would be unlikely.


Title: Re: SHLD - Sears
Post by: Parsad on February 14, 2013, 05:19:46 PM
ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

How many of you think that this thing is going private pretty soon?  Cheers!

Don t both Berkowitz and Lampert live in Miami? Maybe they will team up and use SHLD as their investment vehicle and not have to worry about lock ups, fund withdrawls, etc---assets would be pretty illiquid so I would think this would be unlikely.

That's kind of what I'm thinking.  Bruce said "stay tuned!"  Cheers!
Title: Re: SHLD - Sears
Post by: BargainValueHunter on February 14, 2013, 07:09:21 PM
ESL partners also reported and have sold 13.5m shares of Autonation. They've also sold about every share of AZO. No more NFLX. The GAP stake is around 400 million, down by a lot since owning it. As it stands the hedge fund is dominated by two stocks, SHLD and AN ~1.5 billion each. The way things are going it appears SHLD could be the last stock in the portfolio.

Bruce Berkowitz increased his stake in SHLD and now owns 17.1%

How many of you think that this thing is going private pretty soon?  Cheers!

Quote
The way I think Sears works out after three years of really nothing so far is that one day, Eddie Lampert will own one share, and Fairholme Capital Management will own one share for our shareholders, and that's it, and we'll split the pie.

Bruce Berkowitz, 2011 Morningstar Panel Discussion
Title: Re: SHLD - Sears
Post by: ShahKhezri on February 14, 2013, 07:29:36 PM
I bought 10 times in the month of January and it's at the level I stated earlier in this thread it would become (12.5%) at an avg. of 43.50. 

I think the real estate and inventory is often the focus with SHLD.  I messed around for almost 3 weekends and did different valuation scenarios.  He doesn't make it easy because the numbers aren't broken out.  For simplicity, suppose 20% of total sales are related to KCD....do different breakouts of 40/40/20 or whatever...and start putting p/s multiples based on comps (WHR, SWK)...you're pretty much starting a fictitious brand company (that's the going concern) whereas the often mentioned real estate/inventory liquidation (is the liquidation - obviously).

Add Land's End at half what they bought it for if you think it's a pos ($1bn) - which they will rid of soon. 

Sear's comps positive, zero debt maturity until 2015-16, pension - less of an issue. 

You can get comfortable pretty fast...it takes time to sensitize the p/s and different scenarios.  Look at the new faces at the company...see their body of work...and yes for me a short squeeze has always been a catalyst. 

Also with the real estate valuation, I haven't done the work...I know another poster here mentioned they would...again if you simplify and follow the 80/20 rule, just focus on the locations in the top 20 city's...you don't need the whole picture...just enough to let you be comfortable is what I do. 
Title: Re: SHLD - Sears
Post by: txlaw on February 15, 2013, 07:49:05 AM
Not sure whether Bruce B and ESL would team up.  That would be very interesting, as they are both the most WEB/Munger-like value guys out there, IMO.

I think that if I were a billionaire money manager that was averse to paying more taxes, now would be a good time to put into place my "tax laundering" strategy, as Ericopoly would put it, for the following reasons:

-Personal income taxes almost certainly to go up going forward
-Carried interest loophole ought to go away
-Corporate taxes could possibly go down
-NOLs are plentiful at some companies and can be used to shelter corporate income, including financial investment-related income (anyone want to start an insurance co?), when turning the ships around or transforming them
-Debt capital for acquisitions and working capital is cheapest we might see in the US for a long time (maybe our life times)

So maybe "tax laundering" is an additional reason for these guys to shut down their funds and get permanent capital.  I love this word, btw, which I believe Ericopoly may have coined.
Title: Re: SHLD - Sears
Post by: muscleman on February 15, 2013, 07:55:56 AM
Not sure whether Bruce B and ESL would team up.  That would be very interesting, as they are both the most WEB/Munger-like value guys out there, IMO.

I think that if I were a billionaire money manager that was averse to paying more taxes, now would be a good time to put into place my "tax laundering" strategy, as Ericopoly would put it, for the following reasons:

-Personal income taxes almost certainly to go up going forward
-Carried interest loophole ought to go away
-Corporate taxes could possibly go down
-NOLs are plentiful at some companies and can be used to shelter corporate income, including financial investment-related income (anyone want to start an insurance co?), when turning the ships around or transforming them
-Debt capital for acquisitions and working capital is cheapest we might see in the US for a long time (maybe our life times)

So maybe "tax laundering" is an additional reason for these guys to shut down their funds and get permanent capital.  I love this word, btw, which I believe Ericopoly may have coined.

That would sound like a better idea if they buy AIG together. SHLD is harder because the liquidation takes a long time to complete.
If they buy AIG together and let AIG install them as the Chief Investment Officer, imagine how that would work out. ;)
Title: Re: SHLD - Sears
Post by: biaggio on February 15, 2013, 12:53:22 PM
I bought 10 times in the month of January and it's at the level I stated earlier in this thread it would become (12.5%) at an avg. of 43.50. 

I think the real estate and inventory is often the focus with SHLD.  I messed around for almost 3 weekends and did different valuation scenarios.  He doesn't make it easy because the numbers aren't broken out.  For simplicity, suppose 20% of total sales are related to KCD....do different breakouts of 40/40/20 or whatever...and start putting p/s multiples based on comps (WHR, SWK)...you're pretty much starting a fictitious brand company (that's the going concern) whereas the often mentioned real estate/inventory liquidation (is the liquidation - obviously).

Add Land's End at half what they bought it for if you think it's a pos ($1bn) - which they will rid of soon. 

Sear's comps positive, zero debt maturity until 2015-16, pension - less of an issue. 

You can get comfortable pretty fast...it takes time to sensitize the p/s and different scenarios.  Look at the new faces at the company...see their body of work...and yes for me a short squeeze has always been a catalyst. 

Also with the real estate valuation, I haven't done the work...I know another poster here mentioned they would...again if you simplify and follow the 80/20 rule, just focus on the locations in the top 20 city's...you don't need the whole picture...just enough to let you be comfortable is what I do.

ShahK I have a very small amount I bought in the $68 range- I would like to average down but how do you get comfortable with the $17+b in debt it has.
Title: Re: SHLD - Sears
Post by: wisdom on February 15, 2013, 01:14:57 PM
Total liabilities are at $17B. Long term debt is $2B. Look at the holding company structure. The debt is guaranteed by subsidiaries.
Title: Re: SHLD - Sears
Post by: biaggio on February 15, 2013, 02:06:12 PM
Total liabilities are at $17B. Long term debt is $2B. Look at the holding company structure. The debt is guaranteed by subsidiaries.

Thanks for the reply.

Debt may be guaranteed by subs, but SHLD ultimately responsible as well, no?

I just would like to see more assets on the other side of the balance sheet. I understand that a lot are hidden like the real estate.

Comfortable with LTD of $2B

The other ~$15B = $10.7B current debt + Pension Liability $2.26B + other long term debt of $2.14B

vs

current assets of  $11.28b
property              $ 6.17B
other                   $   .78B

Total of about $18B in assets

plus the value of the hidden assets-mainly the real estate +/- brand value

This seems like a lot of leverage. Leverage would be good if we had a great underlying business, but we have the added risk of declining business.

I am cognizant of the fact that  when (and/or if) the balance sheet is cleaned up the price of the stock will be north of where it is today.

Intrigued by involvement of BB and E.Lampert. I would love this to turn into jockey/asset allocator/compounder + be rid of the retail. I would love to invest along side these guys rather than be bought out in a privatization.
Title: Re: SHLD - Sears
Post by: Mephistopheles on February 16, 2013, 03:18:10 PM
After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.
Title: Re: SHLD - Sears
Post by: txlaw on February 16, 2013, 03:40:41 PM
After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.

Bruce B wouldn't do that.  That much I'm sure of.

I doubt ESL would do that either, but I was totally wrong about Michael Dell on that front, so take my opinion on ESL with a grain of salt.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on February 16, 2013, 03:41:57 PM
After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.

Lampert, Berkowitz, Chou and Stahl already own ~ 62% of the company and 8,552,896 shares are sold short so I don't see how we get into a Dell situation.
Title: Re: SHLD - Sears
Post by: wellmont on February 16, 2013, 03:56:06 PM
After the dell fiasco, I've become skeptical. What if Eddie and Bruce decide to team up and steal this company from shareholders? I think both are very smart people and it seems like taking it private or using it as an investment vehicle is a real possibility, but I can't help but be hesitant.

what evidence do you have that they've even met? Bruce runs a mutual fund. they can't take things private.  right now esl is actually just trying to create some + shareholder value. because shld has been burning cash and destroying value. the business is performing poorly. lots of problems. too many moving parts. unpredictable cash flows. not the kind of business you take private. some of their debt trades at 55c on the dollar, signaling that esl needs to deleverage, not add leverage in a going private transaction. the interest rate to take it private would be too high. so many reason why it won't happen. I wish there were as many reasons why the business will improve.
Title: Re: SHLD - Sears
Post by: premfan on February 16, 2013, 03:59:04 PM
I closed my sear position last year due to a couple things:

1.) There is no catalyst. Only speculation that Eddie L. will start using cash to diversify from retail and create the next berkshire hathaway. I'm not saying this wont happen but, i cant really base an investment thesis on "hope".

2.) The retail business was worse than i thought. I assumed he would shut down more stores and create income from the real estate at a quicker pace.  I was wrong.

All in all its a safe stock. Cause there is a clear floor. There are a ton of great investors in the stock and i'm sure in the long term value will be created. I just had to put it in the too hard pile for now.

Title: Re: SHLD - Sears
Post by: texual on February 16, 2013, 04:32:01 PM
Michael dell said in 2009 that he wanted to go private. I'm not kidding he actually said that. So I always knew what dell would do. I listen to every word of Bruce berkowitz and Eddie lampert and see nothing remotely close to suggesting they go private. If anything they are going private in their funds and planning to work on investment vehicles. Read their comments on sears.

There's a lot of reasons that if you consider all the investments of these two men, that ultimately, sears will become a holdings company that has no choice but to diversify with investments. Who better to control a organizations cash flow than esl or bb?

The natural and logical consequences of their ownership suggest they are interested in a partnership where sears is private capital and they run it. Problems solved. They live in Florida a few miles away from each other and have no interest in communications with anyone outside the value investor community. I'm eager to see the letter from SHLD in a few days.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on February 18, 2013, 07:44:58 AM
I listen to every word of Bruce berkowitz and Eddie lampert and see nothing remotely close to suggesting they go private. If anything they are going private in their funds and planning to work on investment vehicles. Read their comments on sears.

Plus, how would taking it private be the right deal for the Fairholme Fund shareholders?  A mediocre one-time pop is not how Bruce B typically seems to invest.  He's supposed to be looking out for their best interests.
Title: Re: SHLD - Sears
Post by: texual on February 18, 2013, 06:38:02 PM
These are honorable men and the last thing they want is a tarnished reputation. Fairholme funds are pretty risky depending on your aversions (not to me) but I can understand the uncertainty with SHLD. But heres food for thought.

Berkowitz has essentially three 'chess piece' moves going forward. Stay tuned as he says.

1. He retreats to St. Joe since hes already chairman. He doesn't talk about JOE anymore, if you have noticed. No case studies, no commentary in interviews. Hes quiet about the prospects. But if you read into his past statements youll know that he sees it as a great vehicle for further acquisitions and illiquid assets.

2. He retreats to Sears Holdings along with his buddy ESL. Theres a few great things about that move, but I do not know if Bruce sees himself as the second guy. Is Eddie Lampert: Warren Buffett as Bruce Berkowitz: Charlie Munger? I don't know enough to say he would be cool with that. But this is the most exciting and financially beneficial move (to me).

3. He opens a private hedge fund for partners with 1 million minimums, a five year lock up, and 2/20 style management fees. This is by far the least appealing for several reasons. I don't think we as FAIRX owners get any benefit. Nor do we as owners of the companies he owns. Its a private fund, he can do whatever he likes and it lacks transparency. Not to mention he should have entered this space about 20 years ago. It just seems too little, too late for a guy his age to begin dabbling in starting a hedge fund. But you never know.

And I guess the last possible prospect is that he just retreats to running his mutual fund and nothing special happens for a long while and his plans just fall by the wayside. I don't think he would tell us to stay tuned if nothing was around the corner. Hes obviously planning on a longer term, private capital vehicle such as Sears, and wants the flexibility of a hedge fund.

What do you think?
Title: Re: SHLD - Sears
Post by: Liberty on February 18, 2013, 06:43:31 PM
2. He retreats to Sears Holdings along with his buddy ESL. Theres a few great things about that move, but I do not know if Bruce sees himself as the second guy. Is Eddie Lampert: Warren Buffett as Bruce Berkowitz: Charlie Munger? I don't know enough to say he would be cool with that. But this is the most exciting and financially beneficial move (to me).

I don't know the personalities involved enough to judge, but maybe this could turn into more of a Cummings-Seinberg dynamic than Buffett-Munger. That would certainly be interesting to see.
Title: Re: SHLD - Sears
Post by: Matson125 on February 18, 2013, 06:51:34 PM
According to this article he is infact raising partnership money
http://www.advisorone.com/2013/02/04/fairholmes-berkowitz-hints-at-mutual-fund-exit

Title: Re: SHLD - Sears
Post by: wisdom on February 18, 2013, 07:43:01 PM
Based on his past record - Eddie is unlikely to take SHLD pvt. He is not Michael Dell.

According to Bruce - he has hardly had any contact with Eddie. So, I do not see most of the partnership scenarios playing out.

SHLD is cheap with a smart money manager in charge and there is no way SHLD goes into bankruptcy. Something good will happen over time.

You either trust Eddie and his skills like Buffett or Watsa or else this is not for you.
Title: Re: SHLD - Sears
Post by: texual on February 18, 2013, 08:40:24 PM
He also said something about Apple being saved by Microsoft with a cash injection during its bad times. Then he said something about how Fairholme would be very open to loaning cash to Sears if that day ever came.

Also theres no evidence suggesting he doesn't know ESL. He began investing in SHLD in 2005 but in 2008 claimed he had yet to meet or speak with Eddie. But I am pretty sure since that time they've been friendly. In 2010 ESL himself told me to 'ignore the crowd' when I asked him how to be a better investor. And in 2012 and 2013 Berkowitz has said favorable things about ESL and claims he is a ethical person and is really trying hard to make retail work.

By now its also obvious they live within a few miles of each other and maintain offices in the same town. I have no doubt that they are regular in their communication and that they'll be working together in some way or another.
Title: Re: SHLD - Sears
Post by: texual on February 18, 2013, 08:55:52 PM
I'd be disappointed if Bruce made us wait to hear that hes opening a partnership for his richest clients. I don't see how that solidifies or changes his reputation going forward. After all hes like 55 years old and I guess hes got plenty of work ahead of him. But hedge funds are started by way younger guys who want 10, 20 or 30 years to really make those returns shine. ESL started his at 27. Buffett was similar. So BB opening a hedge fund just honestly sounds... stupid. He could have just run the mutual fund and gotten a reputation like Fidelity Magellan had. In fact I would say Fairholme is one of the most successful and highest quality mutual funds ever, and its still young! 2001 guys!

But something else seems amiss - he told Bloomberg the fund had plenty of cash (20%? in 2013) and that he wanted to have less dilution from new cash. So why exactly does he hold 20% cash if he feels so secure about not wanting more? Tough logic to follow if you ask me. If he buys more stocks going forward he has no way of really pouncing on new things with his investor base getting smaller each year. I was actually assuming he would have way less cash this year because he was fully invested and got rid of all the extra cash for withdrawals. Which leads me to another question entirely.

Why did he just close the fund to new people and still allows his existing investors to put in cash. Wouldn't we also see the possibility of a cash inflow if his richest clients decided they wanted to keep pouring in more? What I mean to say is - Why did he just not close the fund entirely (no additional shares can be purchased) and let it run off until he decides to sell his stocks? That way he can run these mythical 'investment vehicles' like JOE or SHLD. The way I see it, he can still wind up with a situation that he claims he doesnt want. But what do I know? Last I heard at the peak, FAIRX had about 500,000 investors. I am certain that number will get smaller as time goes on.

So because of that, I became a little skeptical that he would go into the operations level and run companies or become their investment manager. Its more likely at present, hes going to just run a little hedge fund of a billion and change.
Title: Re: SHLD - Sears
Post by: txlaw on February 18, 2013, 09:09:02 PM
According to this article he is infact raising partnerhsip money
http://www.advisorone.com/2013/02/04/fairholmes-berkowitz-hints-at-mutual-fund-exit

Going straight to the source . . .
http://www.sec.gov/Archives/edgar/data/1566213/000091957413000300/xslFormDX01/primary_doc.xml
Title: Re: SHLD - Sears
Post by: biaggio on February 19, 2013, 05:33:00 AM
According to this article he is infact raising partnerhsip money
http://www.advisorone.com/2013/02/04/fairholmes-berkowitz-hints-at-mutual-fund-exit

Going straight to the source . . .
http://www.sec.gov/Archives/edgar/data/1566213/000091957413000300/xslFormDX01/primary_doc.xml

Thanks for posting. Interesting.

Could he not run an LP and still run his mutual funds- or is there a law against that.

My feeling on SHLD (as well as JC Penny, FTP.TO) is what WEB says: "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact."

I am still holding (small) but am waiting for it to transform into ESL's investment vehicle, a business with better economics- don t know that this will happen
Title: Re: SHLD - Sears
Post by: JRH on February 19, 2013, 06:57:44 AM
But something else seems amiss - he told Bloomberg the fund had plenty of cash (20%? in 2013) and that he wanted to have less dilution from new cash. So why exactly does he hold 20% cash if he feels so secure about not wanting more? Tough logic to follow if you ask me.

In the CNBC interview he mentioned the statutory limit on how much Bank of America he can buy.  He can only have a cost basis equal to 5% of a fund, but he can let it appreciate as much as he wants.  You can see this in the elevated % of FAIRX and FAAFX represented by BAC and BAC-WTA (respectively) today.

He may have made it sound like a combination of factors (what did that mention of AIG have to do with anything?), but what I heard was, "BANK OF AMERICA IS SIGNIFICANTLY UNDERPRICED!!"
Title: Re: SHLD - Sears
Post by: texual on February 19, 2013, 11:05:36 AM
Well after reading through the filing it's a near certainty he's just going to create a new pool of money that stays locked up and he does whatever he likes. Nothing more to see here. Great shame though for what could have been! I really wanted to see berkowitz escape the fund business and work within a public company and be like Buffett. Oh we'll.
Title: Re: SHLD - Sears
Post by: jay21 on February 19, 2013, 11:59:55 AM
Well after reading through the filing it's a near certainty he's just going to create a new pool of money that stays locked up and he does whatever he likes. Nothing more to see here. Great shame though for what could have been! I really wanted to see berkowitz escape the fund business and work within a public company and be like Buffett. Oh we'll.

He has more flexibility to do something like that in a partnership than a mutual fund.
Title: Re: SHLD - Sears
Post by: muscleman on February 19, 2013, 12:13:04 PM
Well after reading through the filing it's a near certainty he's just going to create a new pool of money that stays locked up and he does whatever he likes. Nothing more to see here. Great shame though for what could have been! I really wanted to see berkowitz escape the fund business and work within a public company and be like Buffett. Oh we'll.

He has more flexibility to do something like that in a partnership than a mutual fund.

Nice! I am looking forward to that! I admire him a lot and I have SHLD/AIG/MBI all because of my trust in his judgement.
Title: Re: SHLD - Sears
Post by: txlaw on February 20, 2013, 09:23:30 AM
Sears conducting new Mygofer test:
http://www.chicagotribune.com/business/ct-biz-0214-sears-20130214,0,3631851.story

Still can't stand that name.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on February 25, 2013, 07:59:17 AM
I think that if I were a billionaire money manager that was averse to paying more taxes, now would be a good time to put into place my "tax laundering" strategy, as Ericopoly would put it, for the following reasons:

-Personal income taxes almost certainly to go up going forward
-Carried interest loophole ought to go away
-Corporate taxes could possibly go down
-NOLs are plentiful at some companies and can be used to shelter corporate income, including financial investment-related income (anyone want to start an insurance co?), when turning the ships around or transforming them
-Debt capital for acquisitions and working capital is cheapest we might see in the US for a long time (maybe our life times)

So maybe "tax laundering" is an additional reason for these guys to shut down their funds and get permanent capital.  I love this word, btw, which I believe Ericopoly may have coined.

Tax laundering might be your term if you want to claim it -- I think I was using "dividend laundering".  Well, whatever, they're both good things!  If only more managers would wake up to the idea instead of paying cash dividends.  Just keep buying back shares until you die, then your heirs get all the accumulated dividends tax free. 

You can even pay 200% of intrinsic value for the shares where it's still not necessarily worse than paying a dividend (provided you are paying a 50% tax rate on the dividend, which you just might be in the near future in a place like California).

In a more normal scenario, anytime the shares are perhaps only modestly overvalued (say 10% or so), it's an obvious slam dunk to buy in the shares and to NOT pay the dividend in cash.  Especially clear is this strategy if this is going to be your investment vehicle going forward and you plan to hold onto the shares until your death.

Yes, we've all heard Warren Buffett claim a company should pay the cash dividend instead unless it's extremely undervalued... but he's in a special situation where he holds his passive investments within portfolios of insurance companies.  In other words, the dividend tax is only like 14.5% for him.  But the capital gains tax is 35%.  I can understand his point of view better and might even agree with him if I too had those skewed tax incentives to form my opinion. 



Title: Re: SHLD - Sears
Post by: muscleman on February 25, 2013, 08:51:52 AM
Sears conducting new Mygofer test:
http://www.chicagotribune.com/business/ct-biz-0214-sears-20130214,0,3631851.story

Still can't stand that name.

The name is weird, but I think it is a good idea to order online and pickup at a store.
Title: Re: SHLD - Sears
Post by: texual on February 25, 2013, 02:48:28 PM
And yet warren is buying back Berkshire Hathaway and not giving dividends. He loves when his companies pay him with dividends because it gives him immediate purchasing power and he never has to sell a share of coca cola or whatever. But he also loves that IBM will buy back tons of stock. In theory he said he'd be happy when IBM shares outstanding reach his 65 million shares. Sears works identically in that the earnings per share is what matters to the long term owners. For you see, they never sell shares, they just cash out the shareholders who elect to sell. Buying back shares is a vote of confidence to both parties so they can sell back to the company and it means the world to permanent owners. Or you just wait till the company buys back everything you bought originally like autozone did and boom, your a billionaire.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on February 25, 2013, 11:35:00 PM
He loves when his companies pay him with dividends because it gives him immediate purchasing power and he never has to sell a share of coca cola or whatever.

Yes (aside from the 35% tax rate upon selling shares) I suppose he'd hate to have the press always asking him if his opinion had soured on Coca Cola.

Otherwise (ignoring taxes and press issues) he could just sell some shares and not care too much either way.
Title: Re: SHLD - Sears
Post by: Matson125 on February 27, 2013, 09:53:11 AM
Baker Street buys 7.1 million shares
http://www.sec.gov/Archives/edgar/data/1310067/000092189513000470/0000921895-13-000470-index.htm
Title: Re: SHLD - Sears
Post by: wellmont on February 27, 2013, 10:01:56 AM
not exactly.
Consists of the Shares owned directly by BSC LP, including the 7,000,000 Shares underlying certain options exercisable within 60 days.
Title: Re: SHLD - Sears
Post by: texual on February 27, 2013, 10:03:08 AM
Beat me to it! Further proof that this is the best group of investors on the planet and I'm only sad I didn't find it earlier.

But hot damn these guys bought over 7 million shares that is impressive. Anyone know who they are? Interesting stuff.
Title: Re: SHLD - Sears
Post by: texual on February 27, 2013, 10:05:03 AM
Keep this thread going because we are within a day of ESL's letter to the shareholders and I expect it'll be a interesting discussion for SHLD tomorrow. Anything could happen.
Title: Re: SHLD - Sears
Post by: muscleman on February 27, 2013, 04:26:01 PM
Baker Street buys 7.1 million shares
http://www.sec.gov/Archives/edgar/data/1310067/000092189513000470/0000921895-13-000470-index.htm

Who is Baker Street? Is that a super investor fund?
Title: Re: SHLD - Sears
Post by: sswan11 on February 27, 2013, 06:12:59 PM
http://www.scribd.com/doc/79854534/Baker-Street-Investor-Presentation
Title: Re: SHLD - Sears
Post by: dcollon on February 28, 2013, 04:31:48 AM
Here's a link to the results and letter:

http://www.searsholdings.com/invest/#letter


Title: Re: SHLD - Sears
Post by: JRH on February 28, 2013, 06:43:04 AM
Here's a link to the results and letter:

http://www.searsholdings.com/invest/#letter

"Now, let's look at the stores we have closed to see how much profit they contributed in 2006, our peak operating earnings year. While we have closed just over 300 domestic stores since 2006, we have retained most of the stores that contributed significantly to our profitability in that year. We calculate that the amount of EBITDA that the closed stores generated in 2006 was a little more than $100 million of the $3.2 billion in domestic Adjusted EBITDA that the company had in 2006. Through a combination of net inventory and real estate proceeds, we estimate that we have generated roughly $1 billion in value from these stores. While we closed these stores at different times over the past six years, if you combined their performance for the twelve months prior to the start of the process to close each store, they generated an EBITDA loss of over $50 million in aggregate."


It seems to me that Lampert becomes a little more explicit every year in his outline of the liquidation value of the company's assets.

EDIT: even though that seems to be his only mention of the liquidation idea in this year's letter.
Title: Re: SHLD - Sears
Post by: BTShine on February 28, 2013, 09:35:44 AM
I think his point was that the future profitability of Sears should not be hurt by the stores that have closed.  By showing that the 300 closed stores only generated $100 Million of EBITDA at their peak in 2006, we can assume that the historical sources of Sears profitability are still intact.   I think his point is that the closing of these 300 stores did not impair Sears' ability to generate profits in the future. 

The 300 stores were kept open because Lampert hoped that they could turn a profit someday.  In the end, they never turned a profit, but stores were still very valuable when liquidated.   

Best of both world here.  1) Close the break even stores and liquidate for a ton of money.    2)  Retain the stores that are profitable during a normal environment. 

I'd argue that we are not in a normal environment for sears, since they do best when the housing market is normal.  When we get to 1.5 million housing completions I think it will be a normal environment for Sears.  Appliances are sold when homes are completed and Sears dominates the appliance market.   Currently we are seeing approx. 950,000 starts, which means we are about 6 months from seeing 950,000 completions.   Currently housing completions are about 700,000.


Title: Re: SHLD - Sears
Post by: sampr01 on February 28, 2013, 11:20:41 AM
Are these results adjusted for spin offs and closed stores during last years?.
Thanks
I think his point was that the future profitability of Sears should not be hurt by the stores that have closed.  By showing that the 300 closed stores only generated $100 Million of EBITDA at their peak in 2006, we can assume that the historical sources of Sears profitability are still intact.   I think his point is that the closing of these 300 stores did not impair Sears' ability to generate profits in the future. 

The 300 stores were kept open because Lampert hoped that they could turn a profit someday.  In the end, they never turned a profit, but stores were still very valuable when liquidated.   

Best of both world here.  1) Close the break even stores and liquidate for a ton of money.    2)  Retain the stores that are profitable during a normal environment. 

I'd argue that we are not in a normal environment for sears, since they do best when the housing market is normal.  When we get to 1.5 million housing completions I think it will be a normal environment for Sears.  Appliances are sold when homes are completed and Sears dominates the appliance market.   Currently we are seeing approx. 950,000 starts, which means we are about 6 months from seeing 950,000 completions.   Currently housing completions are about 700,000.
Title: Re: SHLD - Sears
Post by: texual on February 28, 2013, 12:54:29 PM
Overall letter was a disappointment. I had hoped for more personality and some gentle rants. What took me a hour to read a few years ago is now a 10 or 15 minute affair. I did not expect him to write another treatise but gosh he didn't event mention the word craftsman or lands end. No mention of the annual meeting coming up either. He also didn't prove that he has those skills or abilities which all retailers are going to need in their leadership. On the whole read through I just wished he had said listen to me and I will get us to the other side. Or that he was confident they were making a breakthrough on these initiatives.

It felt like his excuse was he set up shop your way as a startup inside sears and it latched into the
Organization through every way and oh by the way it now matters because our size makes it a huge program. I get that it matters but it seemed as if it was destined to become a big thing just from all the customers who signed up. Did he mention anything related to its growth or sales potential? Profitability? No. He just said it matters to the future of retail and that they want to be there to change the game so to speak. Well, I guess there's my rant. What gives, Eddie?
Title: Re: SHLD - Sears
Post by: bargainman on February 28, 2013, 08:18:08 PM
I agree it was a very uninspiring letter.  There didn't seem to be any shared insights or anything of note.  my bet is that this a housing recovery bet, and a liquidation bet.  I was thinking about what the end game could or would be here.  I think eventually he is going to do something either with the assets or spin offs.  I can't see him blowing the assets into a bottomless pit.  I guess the big question is when does he finally monetize the assets and start investing them as he would his hedge fund?  And what is the chance he loses his opportunity to do this because he can't put the brakes on the losses.  Plus what is the opportunity cost of leaving money in shld while he either figures how to make shld work, or gives up and monetizes?  not sure I'm making much sense here... 
Title: Re: SHLD - Sears
Post by: FCharlie on March 01, 2013, 06:25:19 AM
The main issue Sears faces is it's pension liability. I was happy to see that one third of pension participants took the one time buyout. Going forward, if the pension could get under control, Sears really doesn't have a problem being cash flow positive. Even with mediocre profits during 2008/2009/2010, Sears produced a ton of cash. Assuming they can get back to cash flow positive, they really don't need to do anything except buy back stock and cherry pick offers to sell/sublease real estate. It may take decades to wind Sears down and that assumes that it doesn't continue to exist for the remainder of our lives, which would be fine with me so long as E.L does a good job of allocating the capital that is generated.

Title: Re: SHLD - Sears
Post by: ShahKhezri on March 01, 2013, 06:31:25 AM
I'll just note 5-year SRAC cds hit a 52-week low yesterday.
Title: Re: SHLD - Sears
Post by: 20ppy on March 01, 2013, 07:28:31 AM
I'll just comment that I've been hoarding Sears shares :)
Title: Re: SHLD - Sears
Post by: premfan on March 01, 2013, 07:31:07 AM
Buying back stock and selling off estate is a capital allocation plan not a catalyst for the business. Sears needs a catalyst. 

"Potential" catalyst

1.) Turned into berkshire type structure. This is obviously everyones hopes and dreams
2.) Really embracing technology to "wow" the customer like no traditional retailer has done before. 


The best bet for sears  to me is to be so high tech in every aspect of customer service that it stands apart from other retailer competitors.
 Then the other retailers will just copy that. The owners of sears should know why they are holding the company. Hoping for a sudden situation of turning this into a berkshire type vehicle is irrational. Own it cause eventually in the future. Way Way Way in the future they are going to be a lean mean technology embracing retailing machine. Hopefully by then robots are not the cashiers and the singularity wouldnt have happened yet.
Title: Re: SHLD - Sears
Post by: wellmont on March 01, 2013, 08:17:37 AM
I think the sell off is related to esl giving his shareholders absolutely nothing in terms of future tactics and timing for value creation. he is creating a shareholder base of patient investors because anybody who's not is selling.
Title: Re: SHLD - Sears
Post by: Sportgamma on March 01, 2013, 09:18:09 AM
I think the sell off is related to esl giving his shareholders absolutely nothing in terms of future tactics and timing for value creation. he is creating a shareholder base of patient investors because anybody who's not is selling.

ESL is a clever guy, the kind of guy who could negotiate his way out of a hostage situation. If he is going to liquidate in a way that benefits him the most, slowly is likely the way go. Its in his own best interest to keep his cards close to his chest...my $0.02
Title: Re: SHLD - Sears
Post by: texual on March 01, 2013, 09:53:35 AM
The noise against sears is deafening to me however the noise against jcp suddenly changed tunes this past few months. Ron Johnson was a hero a short while ago. Today he's a loser. Take it from me, there's a lot of truth to lamperts ominous forcast: there are dark days ahead for most of the retailers who are general merchandisers. It will take Jeff bezos analytical and technical skills and Millard drexler merchandisers to vault the department store category to survival. Today the only company who admits this is sears. To a degree I'd expect Ron Johnson to say the same stuff down the line.

Three things I learned from esl was 1. He is not going to improve stores. Sorry, there's a god reason why closing underperforming ones could be key to long term profits. It needs to stay ahead by holding back. Smartest move so far. 2. Pensions are hard to get rid of but he's doing damn well at getting rid of it. Good thing they got rid of 1/3 more, and it'll be a few years to go but it will be resolved eventually. And 3. His only investment in sears has and will be the shop your way program. They'll keep building it and soon they'll have a great deal more leverage over their competitors. For now it's too early to tell bit it's grown larger each year. I don't use it but ill look at the site later to give it a shot.

I'm optimistic that from what it seems he believes the store is important as a means to an end while other competitors are relying on old world tactics to keep doing the same thing they've always done. It won't work as esl says, they are missing the real critical changes. It might work for analysts and e short term but here's food for thought: if amazon has such sales and low costs and power to market withou a single store, how come sears has to be wal mart when they can be a hybrid of both but lean more on the digital aspects?

If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart. The natural benefit is a online digital business takes care of itself and is far less cumbersome than running a retail empire. It would be great for esl to invest alongside a business that weans itself away from big box and transformed into a hybrid where stores don't need such a big investment of time and money. I think Lampert saw that years ago and it was hard to grasp because everyone thinks Macy's is what retailers should all copy. But that's simply a case that stands out from the rest, who tried that stuff and failed. You can't think of retail like Android for instance. The ideas great but who makes all the ash from android? Samsung. Everyone's trying to copy them but they are not making money. So being in that environment is hostile and profit less. These guys are not chasing Macy's they re chasing amazon. Smart business acumen I'd you ask me.

Walmart could have done this years ago too, they chose to avoid online and will find out that its not so easy to do. Sears hopefully might die while shop your way lives. It very ell could become independent of the retail entity. They could even include other retailers in the platform and do many other things. I'd keep sears on the hope they can manage through the crisis and let other stores fail and some day analysts will say wow, they had it right all along.

Any other thoughts?


Title: Re: SHLD - Sears
Post by: premfan on March 01, 2013, 10:22:41 AM
The noise against sears is deafening to me however the noise against jcp suddenly changed tunes this past few months. Ron Johnson was a hero a short while ago. Today he's a loser. Take it from me, there's a lot of truth to lamperts ominous forcast: there are dark days ahead for most of the retailers who are general merchandisers. It will take Jeff bezos analytical and technical skills and Millard drexler merchandisers to vault the department store category to survival. Today the only company who admits this is sears. To a degree I'd expect Ron Johnson to say the same stuff down the line.

Three things I learned from esl was 1. He is not going to improve stores. Sorry, there's a god reason why closing underperforming ones could be key to long term profits. It needs to stay ahead by holding back. Smartest move so far. 2. Pensions are hard to get rid of but he's doing damn well at getting rid of it. Good thing they got rid of 1/3 more, and it'll be a few years to go but it will be resolved eventually. And 3. His only investment in sears has and will be the shop your way program. They'll keep building it and soon they'll have a great deal more leverage over their competitors. For now it's too early to tell bit it's grown larger each year. I don't use it but ill look at the site later to give it a shot.

I'm optimistic that from what it seems he believes the store is important as a means to an end while other competitors are relying on old world tactics to keep doing the same thing they've always done. It won't work as esl says, they are missing the real critical changes. It might work for analysts and e short term but here's food for thought: if amazon has such sales and low costs and power to market withou a single store, how come sears has to be wal mart when they can be a hybrid of both but lean more on the digital aspects?

If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart. The natural benefit is a online digital business takes care of itself and is far less cumbersome than running a retail empire. It would be great for esl to invest alongside a business that weans itself away from big box and transformed into a hybrid where stores don't need such a big investment of time and money. I think Lampert saw that years ago and it was hard to grasp because everyone thinks Macy's is what retailers should all copy. But that's simply a case that stands out from the rest, who tried that stuff and failed. You can't think of retail like Android for instance. The ideas great but who makes all the ash from android? Samsung. Everyone's trying to copy them but they are not making money. So being in that environment is hostile and profit less. These guys are not chasing Macy's they re chasing amazon. Smart business acumen I'd you ask me.

Walmart could have done this years ago too, they chose to avoid online and will find out that its not so easy to do. Sears hopefully might die while shop your way lives. It very ell could become independent of the retail entity. They could even include other retailers in the platform and do many other things. I'd keep sears on the hope they can manage through the crisis and let other stores fail and some day analysts will say wow, they had it right all along.

Any other thoughts?





Hey that was a great post. My thinking on this is that eventually online brands will pivot into offline retail stores. This has already occurred with apple and Microsoft.  Vice Versa offline retail brands would need to downsize and have more of a influence online to be sustainable.  Its the yin/yang of life and the tao te ching thinking. What goes up must come down. What is online now will be offline later. Its much easier to obviously  pivot into having retail stores while having an online brand already established. This is the future of retail. For the online brands to justify having offline retail stores they must be vertically aligned with a product to sell.  So in sears case it makes sense to only have retail stores that only sell there brands. Everything else is a waste. 
Title: Re: SHLD - Sears
Post by: muscleman on March 01, 2013, 02:22:49 PM
http://www.scribd.com/doc/79854534/Baker-Street-Investor-Presentation

Removed...... :-[
Title: Re: SHLD - Sears
Post by: Grahamisback on March 01, 2013, 02:31:03 PM
I did not read everything (there were great case studies) :(

Did someone have the time to download it?
Title: Re: SHLD - Sears
Post by: constructive on March 01, 2013, 02:40:44 PM
If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart.

I disagree. Berkshire is a lot more similar to Wal-Mart than Amazon.

-massive physical presence compared to online presence
-more concerned with profitability than growth
-as a consequence, highly profitable
-optimizes existing markets, doesn't create new markets
Title: Re: SHLD - Sears
Post by: compoundinglife on March 01, 2013, 03:16:07 PM
I did not read everything (there were great case studies) :(

Did someone have the time to download it?

I found another copy on Issu.com:

http://issuu.com/teee6/docs/baker_street_capital_management

They don't allow downloads for this document, but there is always a way ;)

http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_1.jpg
http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_2.jpg
http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_3.jpg
http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_4.jpg
http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_5.jpg
http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_6.jpg
http://image.issuu.com/130228214714-2bd8db7d315d454cb0ded933ecfcd115/jpg/page_7.jpg
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Title: Re: SHLD - Sears
Post by: Grahamisback on March 01, 2013, 03:20:48 PM
Thank you  ;)
Title: Re: SHLD - Sears
Post by: BargainValueHunter on March 01, 2013, 03:32:12 PM
Regarding Amazon:

When I hear "Amazon" I think "micron-thin margins".

Shouldn't the goal of a retailer be (in part) expanding operating margins?

If another company is going to be a good comparison for where Sears needs to go then perhaps

http://www.shopyourway.com/

should emulate

www.herbalife.com/
Title: Re: SHLD - Sears
Post by: plato1976 on March 01, 2013, 05:31:10 PM
For all the wonderful discussion here, I only have one question :

What will those commercial real estate be worth in a few years ?
I see all those big box retailers are in big trouble. They are really losing business to online competitors quickly. It's a paradigm shift and I don't think anyone can reverse it. So, if all these big retailers go down, or at least shrink to a much much smaller size, who will take up all these commercial real estate capacity in this country ? I just feel SHLD 's commercial real estate is not worth that much unless they immediately liquidate them now.

When Bruce compared SHLD with Simon , I believe it's not SHLD undervalued, it's Simon overvalued...

Anyway, I don't have a lot knowledge in commercial real estate, can someone more knowlegeable educate me on this ? How do we plan to use all these commercial real estate - I think it has lots of overcapacity in the long run...

Regarding Amazon:

When I hear "Amazon" I think "micron-thin margins".

Shouldn't the goal of a retailer be (in part) expanding operating margins?

If another company is going to be a good comparison for where Sears needs to go then perhaps

http://www.shopyourway.com/

should emulate

www.herbalife.com/
Title: Re: SHLD - Sears
Post by: bargainman on March 01, 2013, 08:01:11 PM
A few things.  If he's talking about technological transformation, tell me where the techie talent that's going to do this transformation is going to come from?  The last time I looked good techie talent was in high demand, and I don't know anyone who's gearing up to go to SHLD.  I'm sure he'll be able to find people but they won't be top notch as far as I can tell.  With regards to razor thin margins, think WMT and COST, it's possible to be a good company with those margins.  I don't see him trying to play this game though. 

I still think this is primarily a real estate recovery play short term.  He's the biggest in appliances.

Longer term it's some form of asset monetization and reinvestment.  I don't know if that reinvestment in sears and retail or something else.
Title: Re: SHLD - Sears
Post by: RichardGibbons on March 02, 2013, 12:32:37 AM
Walmart could have done this years ago too, they chose to avoid online and will find out that its not so easy to do. Sears hopefully might die while shop your way lives. It very ell could become independent of the retail entity. They could even include other retailers in the platform and do many other things. I'd keep sears on the hope they can manage through the crisis and let other stores fail and some day analysts will say wow, they had it right all along.

It's worthwhile noting that Walmart is the combination of Walmart and Amazon.  Walmart is certainly a top 5 online retailer.  This list says #4:

http://www.internetretailer.com/top500/list/

It's also worthwhile to note that Walmart has marketplace, like Amazon and Overstock.  So, I think if you're going to look for who combines online and bricks and mortar most effectively now,  you probably have to chose between Walmart, Staples, and Office Depot.  And if you're talking about general merchandise, there is no answer other than Walmart.
Title: Re: SHLD - Sears
Post by: Kiltacular on March 03, 2013, 03:07:35 AM
Quote
Hey that was a great post.

+1
Title: Re: SHLD - Sears
Post by: Junto on March 03, 2013, 05:42:20 AM

If sears were to be Berkshire like, the obvious answer is that they should strive to be more like amazon than wal mart.

In reality, if it were to be Berkshire like, it would pivot and exit retailing and move cash resources into another more long-term value generating business via acquisition or money management. I think this is what some have been betting on but has not come forth to date. Lampert appears to be sizing up the best way to pull apart the various value drivers of the legacy Sears and Kmart business. He may be on to it now.

I own a small position but I can't say I know exactly what the long-term plan is yet from Lampert and certainly don't believe that plan is to keep all its cash resources in the existing business. 

Title: Re: SHLD - Sears
Post by: muscleman on March 03, 2013, 07:13:55 AM
I did not read everything (there were great case studies) :(

Did someone have the time to download it?

I found another copy on Issu.com:

http://issuu.com/teee6/docs/baker_street_capital_management

They don't allow downloads for this document, but there is always a way ;)

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hmm. Their performance has been very good, though it is a short track record.
From here, it show what it bought is not SHLD, but Sears home town.
http://whalewisdom.com/filer/baker-street-capital-management-llc

Title: Re: SHLD - Sears
Post by: Cardboard on March 03, 2013, 08:02:54 AM
I find interesting that Lampert seems to be "blaming" a lot of what has happened to them to online retailing. Also interesting to read that he "claims" to be one of the very few to see the inescapable terminal decline of traditional retail. To my knowledge, traditional retailing has grown since 2006 despite the faster growth seen at online retailing. There are winners and losers and unfortunately, their operation is in the latter category.

For all of you who believe that online retailing will be everything in the future then I say good luck. It will represent a big percentage of the pie, but not all of it. It will be big especially for the boring and recurring part of shopping. However, going to the marketplace to find goods has been a human activity since the beginning of times. It is a social activity while shopping online, on your own, is not. It may change with virtual reality, but we are not there yet and I also suspect that the physical activity associated with walking through shops may be seen as a benefit going forward with jobs requiring less and less physical effort. Get out of your tech labs and go to the mall or an outlet mall. Look at the beautiful women hunting around and chatting to each other about this and that. Then you may see the light.

What is lacking at Sears is an enjoyable shopping experience and the goods that you are looking for. One thing that I know about Sears since a very long time is to never buy anything that is not at a major discount. The staff will even tell you to come back in a week since the article that you are looking for will sell at 30 or 50% of the current price! What kind of strategy is that? Not only is it inconvenient, it creates a bad reputation. So on that count, I know that the JC Penney strategy of fair prices and better inventory is the right one. It may be too late to reverse the reputation at JC Penney, but I can't see how this is wrong.

Regarding investing in the stores, there is a limit to cutting spending on displays that add no value, to no spending at all which makes the stores obsolete and looking like garbage bins to shoppers. He says that he invested selectively, but it is pretty hard for me to see where at supposedly winning stores. The technology push and membership idea are definitely good ones, however I am not sure that it is enough to turn around such massive operation with so many square feet.

Anyhow, I would love to hear about your upside target on Sears and HOW it gets there. What is your thesis? By the way, that Lampert or Berkowitz owns it in size does not cut it. He says that he got $1 billion out of 300 closed stores with half of them in the last year. There are 2,500 left. Doing the math, you get $8.3 billion. Add back their cash, substract short term debt and all long term liabilities and you get about $0. If he gets double that amount, then there is $78 left per share. Not even sure if that is realistic considering that they are still bleeding money overall and that there should be a glut of retail space going forward if he is right about online retail. If it is not a liquidation thesis, then is it based on earnings? What is it?

Cardboard
Title: Re: SHLD - Sears
Post by: bargainman on March 03, 2013, 08:13:23 AM
In reality, if it were to be Berkshire like, it would pivot and exit retailing and move cash resources into another more long-term value generating business via acquisition or money management.

I don't know if 'pivot' is the right word here.. maybe more like 'run off' then 'redirect'?  didn't Buffett take 10 years + to wind down/run off the berkshire textile mill?  I remember reading recently that he even bought another mill in the process no? 
Title: Re: SHLD - Sears
Post by: finetrader on March 03, 2013, 08:13:50 AM
Quote
Get out of your tech labs and go to the mall or an outlet mall. Look at the beautiful women hunting around and chatting to each other about this and that. Then you may see the light.

Indeed!! And you may find yourself in a position where you want to go and speak to them!
Title: Re: SHLD - Sears
Post by: bargainman on March 03, 2013, 08:18:36 AM
It is a social activity while shopping online, on your own, is not. It may change with virtual reality, but we are not there yet and I also suspect that the physical activity associated with walking through shops may be seen as a benefit going forward with jobs requiring less and less physical effort. Get out of your tech labs and go to the mall or an outlet mall. Look at the beautiful women hunting around and chatting to each other about this and that. Then you may see the light.

Cardboard

Cardboard, in general I agree with you that this is correct for some segment of the population.  I would point out though that in some ways online shopping can be as 'social' or 'community driven'.  In fact that's one of the big drivers of amazon.  The community reviews.  You don't just see a product, you get to see all the reviews of a product. People write stuff up, post pictures with comments, and even do videos.  You really don't get that at a real mall.  I do believe that both will continue to exist though.  in particular I suspect both women and teenagers will keep going to malls. 
Title: Re: SHLD - Sears
Post by: EdWatchesBoxing on March 03, 2013, 09:18:18 AM
Checking out the women in malls makes it a less painful visit!
Title: Re: SHLD - Sears
Post by: ERICOPOLY on March 03, 2013, 09:24:03 AM
Checking out the women in malls makes it a less painful visit!


Has my wife yet figured out that I buy her presents from the stores with the most flirtatious sales girls?
Title: Re: SHLD - Sears
Post by: Kraven on March 03, 2013, 10:23:59 AM
Checking out the women in malls makes it a less painful visit!


Has my wife yet figured out that I buy her presents from the stores with the most flirtatious sales girls?

That is top secret info from the old married guys playbook.
Title: Re: SHLD - Sears
Post by: Junto on March 03, 2013, 12:42:15 PM
In reality, if it were to be Berkshire like, it would pivot and exit retailing and move cash resources into another more long-term value generating business via acquisition or money management.

I don't know if 'pivot' is the right word here.. maybe more like 'run off' then 'redirect'?  didn't Buffett take 10 years + to wind down/run off the berkshire textile mill?  I remember reading recently that he even bought another mill in the process no?

I think the message wasn't lost...
Title: Re: SHLD - Sears
Post by: EdWatchesBoxing on March 03, 2013, 01:30:56 PM
Checking out the women in malls makes it a less painful visit!


Has my wife yet figured out that I buy her presents from the stores with the most flirtatious sales girls?

Haha, does she know about this forum?



Title: Re: SHLD - Sears
Post by: Uccmal on March 03, 2013, 03:11:50 PM
I find interesting that Lampert seems to be "blaming" a lot of what has happened to them to online retailing. Also interesting to read that he "claims" to be one of the very few to see the inescapable terminal decline of traditional retail. To my knowledge, traditional retailing has grown since 2006 despite the faster growth seen at online retailing. There are winners and losers and unfortunately, their operation is in the latter category.

For all of you who believe that online retailing will be everything in the future then I say good luck. It will represent a big percentage of the pie, but not all of it. It will be big especially for the boring and recurring part of shopping. However, going to the marketplace to find goods has been a human activity since the beginning of times. It is a social activity while shopping online, on your own, is not. It may change with virtual reality, but we are not there yet and I also suspect that the physical activity associated with walking through shops may be seen as a benefit going forward with jobs requiring less and less physical effort. Get out of your tech labs and go to the mall or an outlet mall. Look at the beautiful women hunting around and chatting to each other about this and that. Then you may see the light.

What is lacking at Sears is an enjoyable shopping experience and the goods that you are looking for. One thing that I know about Sears since a very long time is to never buy anything that is not at a major discount. The staff will even tell you to come back in a week since the article that you are looking for will sell at 30 or 50% of the current price! What kind of strategy is that? Not only is it inconvenient, it creates a bad reputation. So on that count, I know that the JC Penney strategy of fair prices and better inventory is the right one. It may be too late to reverse the reputation at JC Penney, but I can't see how this is wrong.

Regarding investing in the stores, there is a limit to cutting spending on displays that add no value, to no spending at all which makes the stores obsolete and looking like garbage bins to shoppers. He says that he invested selectively, but it is pretty hard for me to see where at supposedly winning stores. The technology push and membership idea are definitely good ones, however I am not sure that it is enough to turn around such massive operation with so many square feet.

Anyhow, I would love to hear about your upside target on Sears and HOW it gets there. What is your thesis? By the way, that Lampert or Berkowitz owns it in size does not cut it. He says that he got $1 billion out of 300 closed stores with half of them in the last year. There are 2,500 left. Doing the math, you get $8.3 billion. Add back their cash, substract short term debt and all long term liabilities and you get about $0. If he gets double that amount, then there is $78 left per share. Not even sure if that is realistic considering that they are still bleeding money overall and that there should be a glut of retail space going forward if he is right about online retail. If it is not a liquidation thesis, then is it based on earnings? What is it?

Cardboard

You are absolutely on the money here Cardboard.  The reason Sears is getting killed is because EL did not invest in upgrading the stores.  For crying out loud, they closed their flagship Canadian store down the road from me.  Nordstron is moving in.  This mall is permanently busy, every day of the week.  People come from 40 miles around.  Apple, Sony, Lululemon, the Bay, Holt Renfrew, and everyone else has done excellent at this location.  Not Sears.  To my recollection they threw in the towel years ago.  The Sears Home location across the street is a horror show.

The fault rests solely with Lampert.  Retail requires constant reinvention and investment.  Lampert is an example of the Peter Principle in action.  Great as a passive investor but lousy as an operations person. 

Former SHLD shareholder who has studied the numbers. 
Title: Re: SHLD - Sears
Post by: Uccmal on March 03, 2013, 04:37:15 PM
Recent bad Sears Home experience:

Two years ago we bought aound 10 k of appliances, and furniture from the local store.  I used my Sears card and had alot of points.  I had 170 left plus a few gift cards from Christmas etc.

In Janaury I went in to buy a mattress set and had agreed to purchase one.  I was directed to the business desk where it was discovered that my points had been erased from Sears system.  We called their bank which re-instated the points.  I had to give my name, address, birth date etc.  The points didn't show up in the Sears system.  The staff person called her manager, who said they needed proof on their system that the points were reinstated.  We called again and were assured they were coming through.  Waited nearly an hour in total.  Called again and was told I needed to make a purchase before the points were activated.  At this point I gave up, crunched up the Sears card in my hand, spoke loud enough for the two store mangers to hear me, that I was leaving.  No one did a thing. 

I made very clear I would never shop at Sears again. 

This was not the first time.  Another time we tried to buy a crib for my newborn (3.5 yrs ago).  We liked the model on the floor.  The lady looked it up and couldn't find it in stock (while she was telling me this I am standing by the floor model).  She didn't offer me floor model at a discount.  We went to Toys R Us across the street and bought the same crib on the spot at the same price. 

At a certain point consumers give up, and no amount of advertising will ever bring them back.  Sears is long past that point.  And it is 100 % Lamperts fault.

The retailing will never recover, and the brands have no significant value.  So you are left with the real estate.
Title: Re: SHLD - Sears
Post by: texual on March 03, 2013, 04:57:25 PM
I think the brands hold value and are tremendous assets in the context that if Home Depot sold Craftsman tools they'd do great. Or any of those things like DieHard, could make it themselves if they felt the need to expand their reach. Until they can really call the retail a lost front, they cannot do much with those brands except small stuff. I don't think there will be Kenmore in other stores until SHLD has rid itself of the idea that its stores will thrive. They will decline but somewhere down the road the economy picks up, and the remaining stores will make more money and things will be fine. Until that day you can argue who did the right and wrong thing, but remember this - if you consider that JCP spent a year just trying to change the way THEY sold their products, which had such a massive influence on customers who decided to STOP shopping there (which is funny because every JCP I saw after Ron Johnson arrived looked a lot better, and the signs were upbeat and it appeared they spent a lot of cash on store fixes) that customers left. They are down double digits!

And all they did was improve themselves, who would have thought? I think JCP essentially proved ESL's point that every retailer is going through major shifts in a storm they don't even understand. They can pretend money will solve things, that didn't work at Best Buy, which has a ton of cash. And it isnt about store appearances by the JCP situation, or even better, Barnes & Noble which to me, has some of the nicest real estate and locations/upkeep. You could sit there and blame the book market is old, its in secular decline... but how do you explain that to Amazon who kicks ass at both selling books in hardcopy and digital? Or how is it that WEB keeps buying print news? Or that the WSJ is blowing out the lights on subscriptions to their paper? I think theres a lot more to the story of Sears and retail in general - we don't agree on ESL's strategy on our message board but I think if you really went to a JCP and convinced yourself it was a 'better' experience you would be missing the point because you'd be 100% right but also 100% wrong on how that didn't change their relative situations. Cheers.
Title: Re: SHLD - Sears
Post by: Cardboard on March 03, 2013, 05:44:57 PM
The JCP experiment proves nothing at all relative to what Lampert is talking about. It just proves that when you are a retailer selling junk at discounts that it is very hard to lose that reputation and do something totally different. You brought up Best Buy. Why is it that traffic was up during the Holidays and that they reported better than expected profits? Could it be that people still like to see, touch and take away the item with them if the price is right? Could it be proving that the Amazon price match is working?

Regarding Sears, many of you seem to be waiting for a revival of the economy or more particularly of housing starts and that it will translate into boom time for Sears and its appliances. To be honest, when I look for an appliance, I don't even think of Sears as a seller of appliances and I can't imagine that I am alone. Now, if you consider that shoppers going to Sears are also on the decline, then what is going to make them think of Sears and Kenmore down the road? And the brands! Kenmore, Diehard and Craftsman. Sounds like brands from the past such as Singer, Quasar and AMC. What is the value of these? Are these goods selling at a premium because they have some very special features or are they just commodities with a name on them?

If Lampert is absolutely convinced that investing in its stores is not profitable because bricks and mortars are doomed then I am scratching my head as to why he keeps operating them now at a loss. Is it really to make a few profits on appliances once the economy gets better. Then what happens during the next recession? Makes no sense. Liquidate the whole thing now if that is what he thinks or before there is a glut of retail space with all these retailers caught and lost in that major storm. 

Cardboard
Title: Re: SHLD - Sears
Post by: texual on March 03, 2013, 06:51:15 PM
I don't think anyone knows the future - Berkowitz said it could be a grand slam if the retail works out. But hes happy even if it doesn't. And that ESL is a economic person (which I believe, too) and would not let this thing go to hell before changing his mind. BUT as he says you get ESL's future for free. Whats that worth? Hes cashed out of AZO and going after small positions in other stocks, and that tells me every single day his future becomes more and more tied to that of Sears. Berkowitz also made another million and change share purchase (which, for a guy whos fund is now officially closed to new investors, makes him too, much more concentrated in that stock).

The impatient ones gave up years ago. Soon there will be really nobody left which is great if you want to accumulate control which is part of ESL and BB's strategy no matter how it may seem ethically - its in his and Fairholme's interest that Sears remain a heavily shorted, unloved stock so they buy more and more. The way I see it, they'll wind up selling half the stores over the next 10 years anyways. I wish it happened much faster but thats just not in the cards.

They are the smartest mutual fund manager, and smartest hedge fund managers I know of, and invested in the same company with reasonable conviction. Skin in the game is why they have no choice. Read it again, NO CHOICE but to turn it into a winning combination. I can only think of one other situation where this kind of 'stupidity' ensued for years and two hedge funds owned a lot of stock of a company and tried to accumulate more shares and power. And the operations faltered and went to crud. They even spent a lot of cash repurchasing shares and buying upgraded equipment and saw the thing go further down. They kept buying it and people were baffled. They got together and set out to earn 24 billion in 2012... and said it was a dud year.

I've certainly heard of big hedge funds going after single investments or getting blown up. But not this way, not the way its been playing out.

That means they could easily just turn around and buy stocks or a insurance business, or make aquisitions that turn them into Berkshire Hathaway! They have that option and are not blind to it. But they are not doing it yet, which pisses everyone off because we don't quite see it as ESL sees it - a return to previous earnings would be amazing because theyve got fewer shares outstanding and own more of it. So if that doesnt happen, they could sell a lot of their assets and make cash, which can buy more stock. Basically my opinion boils down to this: you get either a company that stays afloat because of a tepid return to profits and a better economy OR you get a investment vehicle for two smart guys - or kind of both? I see all three as a winning outcome.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on March 03, 2013, 08:10:04 PM
Checking out the women in malls makes it a less painful visit!


Has my wife yet figured out that I buy her presents from the stores with the most flirtatious sales girls?

Haha, does she know about this forum?

This is where the good juju comes from, is what she understand about this forum.  Now, it doesn't matter where you get your appetite as long as you come home to eat.
Title: Re: SHLD - Sears
Post by: bargainman on March 03, 2013, 10:09:55 PM
Regarding Sears, many of you seem to be waiting for a revival of the economy or more particularly of housing starts and that it will translate into boom time for Sears and its appliances. To be honest, when I look for an appliance, I don't even think of Sears as a seller of appliances and I can't imagine that I am alone. Now, if you consider that shoppers going to Sears are also on the decline, then what is going to make them think of Sears and Kenmore down the road? And the brands! Kenmore, Diehard and Craftsman. Sounds like brands from the past such as Singer, Quasar and AMC. What is the value of these? Are these goods selling at a premium because they have some very special features or are they just commodities with a name on them?

I agree that he messed up by not improving the stores at key locations.  Personally I also don't think of sears when I want an appliance, but according to their site:
http://commercial.sears.com/aboutus/scs_kenmore.html
"Kenmore's market share is extraordinary -- 50 percent higher than its closest competitor."

I'm not sure if that's declined or been steady.
They are also the largest appliance servicer and home services company, in the country, which is recurring revenue.  Whether I think of them or not is not necessarily relevant.  It does prove that I'm not a current customer, but it does not show that they don't have customers.

That said, the question of whether these are just commodities with a name attached is a very good question..  They still have to have a good product and service offering, and it's clear they've been falling down in that regard considering all the experiences we've heard of and seen first hand.
Title: Re: SHLD - Sears
Post by: Uccmal on March 04, 2013, 03:52:39 AM
To be fair.  I agree that there could be value if the cash had been redeployed when he had it.  I also expect he will redeploy some of the cash in the future if he can get it.

I agree that the Sears mobile business is awesome.  That is one part that has excellent value.  They need to sell the products to service and you dont do that by alienating customers.

What most of the public doen't know is that the Kenmore appliances are identical in every way to other brand name appliances made by GE, and others.   Bully on Sears for keeping Kenmore up there.

Hopefully, he is turning his eye to redeploying the cash elsewhere, unless he is planning a complete takeover.

Unfortnately, Sears is not the Berkshire Hathaway mill system.  It is megaloads larger.

 If anyone wonders why I spend so much time critiquing SHLD, its because I may just be interested in buying shares one day. 
Title: Re: SHLD - Sears
Post by: Cardboard on March 04, 2013, 05:36:53 AM
I think that the comparison with Berkshire Hathaway is flawed big time. Buffett was able to acquire control of a company selling well below net-net working capital and the company was profitable for many years. Return on equity was subpar, but it still made money. He then set out to quickly redeploy the great majority of cash flow and whatever proceeds into insurance and other businesses. Once it became clear that the company would lose money going forward then he closed shop. By then, the textile operation was tiny relative to Berkshire.

Please read the 1973 annual letter from Berkshire Hathaway or about 6 or 7 years after he took control (more or less the same as Eddie). It is clear that the textile mills are profitable at that time (recession) and he was already into 4 other different businesses plus I imagine some common stocks. The strategy also seemed pretty clear to an outside investor reading Buffett while with Sears, there seems to be a dark hidden agenda.

Like Uccmal, I am keeping my eye on this thing. I never bought a share, but I have been watching since the merger of Kmart and Sears. What drove up my skepticism at this time is the tone of the annual letter which I read to get more insight into the current state of the retail business. If my opinion is worth anything, I think that the biggest problem in the U.S. relative to retail is the amount of competition. There are so many stores from so many different owners that it is no wonder that the business is in turmoil.

I went to visit a mall, so I could take a look at JC Penney. Then I saw Macy's, Dillard's and Sears all under the same roof. By the way, I ended up buying nice clothes at Dillard's at large discounts. Then you had a ton of boutiques which are also trying to sell apparels. Not saying that they are all the same, but they are all competing in apparels for a large majority of their square footing. We have nowhere near the same level of competition up here in Canada especially for department stores and it is still a tough business. It made me rethink quite a bit about the potential success of a JCP turnaround. Then you have Nordstrom, Bloomingdales, Saks, Target, Wal-Mart, Kohl's, Ross Stores, TJ Maxx, Stein Mart...

Not totally related, but the competition with restaurants is also amazing. You can go eat to Chili's, pick two good meals and an appetizer to share for $20, anytime. We can't even get lunch specials anywhere near these offerings up here at family restaurants. Applebee's has the same offer, although I like it less, but still amazingly affordable. Outback is also very cheap for the quality of steaks and food being offered.

Anyway, my hope here with Sears is to gain more knowledge from you guys in terms of its attractiveness as an investment. However, it is very tough to understand and I am disappointed that there is not more discussion about hard numbers vs qualitative factors. I am also concerned about the time is money element which is crucial to any investor, especially if you don't exercise control. Remember that Buffett was fast at Berkshire while I don't see this same sense of urgency at Sears.

Cardboard
Title: Re: SHLD - Sears
Post by: texual on March 04, 2013, 10:31:07 AM
It also is important to know that jcp reported a fall in online sales growth. That's in contrast to sears growing their online business 20 or 30 percent every time they report. How can this be? Well, it is very hard to get bricks and mortar stores to convince customers of the benefit of visiting their online store! So with this membership program which also adds a few rewards and social components they can get sales to grow because customers can buy and use the brick store as well. However jcp just has a regular online site which has not as much stickiness to its brick stores. They are trying hard and their site is much nicer than last year, and I saw a kiosk in the store that is for online purchase pickups but it just wasn't enough. Also sears invested in a marketplace that really scaled to over 16 million products.

They have 60 percent of transactions over the shop your way program, which is over 20 billion on the total of their revenue. Means when your stores are selling to that volume of users who will use their online site to redeem rewards and coupons they'll buy stuff. It's a good idea but only time will tell. Jcp however can't generate online sales because they've failed to invest in that. Instead they believed a Levi's jeans bar was great use of cash. It was for a short bit, they generated decent sales but they'll find themselves back to square one soon.

I think I'm more comfortable with their strategy now than I was five years ago. They've said their online growth is what they want to strive for, it's not a confusing strategy that they can also wait till a rebound in housing to take advantage of their stores doing better, to sell them or make changes to the store base. Is giving them more time good? Yes and no, because we all get impatient. I'm restless after five years. Bruce is 8 years in and esl is 11 years into this investment. Well I'd say they also want a return on their cash and time. I believe they'll achieve it one way or another.
Title: Re: SHLD - Sears
Post by: ShahKhezri on March 04, 2013, 11:22:41 AM
In fairness...JCP's online sales are struggling because home accounts for 50% of their online sales and they are revamping that by May, so the bleeding should stop.

Long SHLD and JCP.
Title: Re: SHLD - Sears
Post by: CONeal on March 04, 2013, 12:37:44 PM
It also is important to know that jcp reported a fall in online sales growth. That's in contrast to sears growing their online business 20 or 30 percent every time they report. How can this be?

From my experience in Sears this number maybe a little flawed.  On a couple of occasions insead of letting me grab an item and checkout they wanted me to order online right there in the store for them to go in the back and get the item.
Title: Re: SHLD - Sears
Post by: FCharlie on March 04, 2013, 07:51:31 PM
http://www.sec.gov/Archives/edgar/data/860585/000118143113014235/xslF345X03/rrd372756.xml


Looks like Eddie bought another 1.2 million shares of SHLD from his fund.
Title: Re: SHLD - Sears
Post by: texual on March 05, 2013, 07:31:02 AM
'Boom' - Denzel Wahsington, Training Day
Title: Re: SHLD - Sears
Post by: compoundinglife on March 05, 2013, 08:32:48 AM
'Boom' - Denzel Wahsington, Training Day

Glad he is buying, but a %5 move in this stock in one day is nothing to write to home about. We could be at $30 next week. The real "boom" is going to take more time, IMO.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on March 05, 2013, 09:20:30 AM
'Boom' - Denzel Wahsington, Training Day

Glad he is buying, but a %5 move in this stock in one day is nothing to write to home about. We could be at $30 next week. The real "boom" is going to take more time, IMO.

I sure hope it's $30 next week. Such a discount to book is a rare opportunity. ;)
Title: Re: SHLD - Sears
Post by: compoundinglife on March 05, 2013, 09:40:13 AM
'Boom' - Denzel Wahsington, Training Day

Glad he is buying, but a %5 move in this stock in one day is nothing to write to home about. We could be at $30 next week. The real "boom" is going to take more time, IMO.

I sure hope it's $30 next week. Such a discount to book is a rare opportunity. ;)

Saying it could be at $30 next week was kind of a joke, but it would not shock me in the slightest bit and I would be ok with that.

 The stock always seems to rally on ESL buying then it creeps it way back down. It was approaching 80 at the end of 2011 not very long after that I was able to start my position 45, then add at 37, 35 and 29 then it rallied to $80 and then back down to $39 and now he we are. But none of that is news to any of the SHLD holders.

I guess my point is when I log in and see %5-%6 move on my SHLD position, positive or negative I don't really pay it any mind.

As I think texual had mentioned SHLD has been a good stock to trade in and out of. But I am in it for the long haul and would rather ride the roller coaster than sell at what I think is a top only to miss the beginning of the "boom".

Or maybe I am just a sucker...
Title: Re: SHLD - Sears
Post by: compoundinglife on March 05, 2013, 10:21:32 AM
'Boom' - Denzel Wahsington, Training Day

Glad he is buying, but a %5 move in this stock in one day is nothing to write to home about. We could be at $30 next week. The real "boom" is going to take more time, IMO.

I sure hope it's $30 next week. Such a discount to book is a rare opportunity. ;)

Saying it could be at $30 next week was kind of a joke, but it would not shock me in the slightest bit and I would be ok with that.

 The stock always seems to rally on ESL buying then it creeps it way back down. It was approaching 80 at the end of 2011 not very long after that I was able to start my position 45, then add at 37, 35 and 29 then it rallied to $80 and then back down to $39 and now he we are. But none of that is news to any of the SHLD holders.

I guess my point is when I log in and see %5-%6 move on my SHLD position, positive or negative I don't really pay it any mind.

As I think texual had mentioned SHLD has been a good stock to trade in and out of. But I am in it for the long haul and would rather ride the roller coaster than sell at what I think is a top only to miss the beginning of the "boom".

Or maybe I am just a sucker...

Heh, a little slow this morning but nice one BVH ;)
Title: Re: SHLD - Sears
Post by: muscleman on March 10, 2013, 09:21:41 AM
Folks, I just found this website, which makes me pretty concerned about my SHLD position.
http://www.resellerratings.com/store/Sears

In the latest letter, Eddie said he wants all members to be satisfied and even if 1% of transactions are unsatisfactory, it is not good. But look at there, I am surprised that no one is happy.

-----------------------
Update:
I did a bit more research.... It looks like this site is set up for unhappy consumers to come and complain. Other stores like ebay and Macy's also have a poor rating. Amazon's rating is high but I am not sure if Amazon hired people to post there and give 5 stars. But when I searched for ratings for Primotronix.com, I can tell that the posters giving 5 stars are likely Primotronix.com's own sales people, because all they say is quite similar.

But anyway, Amazon's rating there is very high, and the posters giving 5 stars look like real consumers. So I think if Sears.com wants to compete with Amazon.com, they need more work to do.

Can anyone please tell me why Eddie built sears.com and also shopyourway.com? Why not combine them into one site?
Title: Re: SHLD - Sears
Post by: compoundinglife on March 10, 2013, 11:32:54 AM
Folks, I just found this website, which makes me pretty concerned about my SHLD position.
http://www.resellerratings.com/store/Sears

In the latest letter, Eddie said he wants all members to be satisfied and even if 1% of transactions are unsatisfactory, it is not good. But look at there, I am surprised that no one is happy.

-----------------------
Update:
I did a bit more research.... It looks like this site is set up for unhappy consumers to come and complain. Other stores like ebay and Macy's also have a poor rating. Amazon's rating is high but I am not sure if Amazon hired people to post there and give 5 stars. But when I searched for ratings for Primotronix.com, I can tell that the posters giving 5 stars are likely Primotronix.com's own sales people, because all they say is quite similar.

But anyway, Amazon's rating there is very high, and the posters giving 5 stars look like real consumers. So I think if Sears.com wants to compete with Amazon.com, they need more work to do.

Can anyone please tell me why Eddie built sears.com and also shopyourway.com? Why not combine them into one site?

I follow Sears on twitter and facebook. There are angry posters who have had issues with appliances not being fixed or something not being shipped on time. Hard to tell if it is a material % of customers though. 

One thing that does me concern me is their market place. Sellers on the market place are often responsible for online complaints that I have seen, but the blame falls on Sears. I had a friend post something on facebook to the tune of the "I found this pressure cooker on Amazon for $200 cheaper than Sears.com, no wonder they are going out of business!". I went and looked at Sears.com and sure enough it was a third party market place reseller who had a bunch of stuff at uncompetitive prices. Of course the perception is that Sears has horrible pricing.

Not sure if Amazon customers are just more familiar with the market place settings, or maybe they do a better job in the UI of making it clear you are not buying from them. But yeah the Sears market place worries me. It would be nice to see them have a better handle on this, especially because I am guessing a decent amount of Sears.com shoppers are not veteran online shoppers, but I could be wrong on that assumption.
Title: Re: SHLD - Sears
Post by: muscleman on March 10, 2013, 11:51:50 AM
Folks, I just found this website, which makes me pretty concerned about my SHLD position.
http://www.resellerratings.com/store/Sears

In the latest letter, Eddie said he wants all members to be satisfied and even if 1% of transactions are unsatisfactory, it is not good. But look at there, I am surprised that no one is happy.

-----------------------
Update:
I did a bit more research.... It looks like this site is set up for unhappy consumers to come and complain. Other stores like ebay and Macy's also have a poor rating. Amazon's rating is high but I am not sure if Amazon hired people to post there and give 5 stars. But when I searched for ratings for Primotronix.com, I can tell that the posters giving 5 stars are likely Primotronix.com's own sales people, because all they say is quite similar.

But anyway, Amazon's rating there is very high, and the posters giving 5 stars look like real consumers. So I think if Sears.com wants to compete with Amazon.com, they need more work to do.

Can anyone please tell me why Eddie built sears.com and also shopyourway.com? Why not combine them into one site?

I follow Sears on twitter and facebook. There are angry posters who have had issues with appliances not being fixed or something not being shipped on time. Hard to tell if it is a material % of customers though. 

One thing that does me concern me is their market place. Sellers on the market place are often responsible for online complaints that I have seen, but the blame falls on Sears. I had a friend post something on facebook to the tune of the "I found this pressure cooker on Amazon for $200 cheaper than Sears.com, no wonder they are going out of business!". I went and looked at Sears.com and sure enough it was a third party market place reseller who had a bunch of stuff at uncompetitive prices. Of course the perception is that Sears has horrible pricing.

Not sure if Amazon customers are just more familiar with the market place settings, or maybe they do a better job in the UI of making it clear you are not buying from them. But yeah the Sears market place worries me. It would be nice to see them have a better handle on this, especially because I am guessing a decent amount of Sears.com shoppers are not veteran online shoppers, but I could be wrong on that assumption.

Amazon is of course better in showing who the seller is. When you open an item, you can click "New" or "Used", and then it shows a list of sellers with each seller's price. Then you choose the seller. So if you feel unhappy, you blame that seller instead of Amazon.

sears.com only shows non-sears items as "Market Place" items, but who knows what that means.

In the most recent annual letter, Eddie said that by closing 300 stores, SHLD received over $1 bn cash. I am pretty confused about this, as I do not see an item like "Gain on sale of assets" showing in the annual 8-K as a significant number, which means that they probably did close those stores and received $1 bn cash, but what is written on the book value has already fully reflected this.

We invest in SHLD because of the hidden value in the real estates. But if the hidden value does not exist, then I don't see why we should invest in SHLD. Can anyone help me clarify this, please?
http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9121448-6192-91798&type=sect&TabIndex=2&companyid=656789&ppu=%252fdefault.aspx%253fsym%253dSHLD
Title: Re: SHLD - Sears
Post by: compoundinglife on March 10, 2013, 12:25:04 PM
Folks, I just found this website, which makes me pretty concerned about my SHLD position.
http://www.resellerratings.com/store/Sears

In the latest letter, Eddie said he wants all members to be satisfied and even if 1% of transactions are unsatisfactory, it is not good. But look at there, I am surprised that no one is happy.

-----------------------
Update:
I did a bit more research.... It looks like this site is set up for unhappy consumers to come and complain. Other stores like ebay and Macy's also have a poor rating. Amazon's rating is high but I am not sure if Amazon hired people to post there and give 5 stars. But when I searched for ratings for Primotronix.com, I can tell that the posters giving 5 stars are likely Primotronix.com's own sales people, because all they say is quite similar.

But anyway, Amazon's rating there is very high, and the posters giving 5 stars look like real consumers. So I think if Sears.com wants to compete with Amazon.com, they need more work to do.

Can anyone please tell me why Eddie built sears.com and also shopyourway.com? Why not combine them into one site?

I follow Sears on twitter and facebook. There are angry posters who have had issues with appliances not being fixed or something not being shipped on time. Hard to tell if it is a material % of customers though. 

One thing that does me concern me is their market place. Sellers on the market place are often responsible for online complaints that I have seen, but the blame falls on Sears. I had a friend post something on facebook to the tune of the "I found this pressure cooker on Amazon for $200 cheaper than Sears.com, no wonder they are going out of business!". I went and looked at Sears.com and sure enough it was a third party market place reseller who had a bunch of stuff at uncompetitive prices. Of course the perception is that Sears has horrible pricing.

Not sure if Amazon customers are just more familiar with the market place settings, or maybe they do a better job in the UI of making it clear you are not buying from them. But yeah the Sears market place worries me. It would be nice to see them have a better handle on this, especially because I am guessing a decent amount of Sears.com shoppers are not veteran online shoppers, but I could be wrong on that assumption.

Amazon is of course better in showing who the seller is. When you open an item, you can click "New" or "Used", and then it shows a list of sellers with each seller's price. Then you choose the seller. So if you feel unhappy, you blame that seller instead of Amazon.

sears.com only shows non-sears items as "Market Place" items, but who knows what that means.

In the most recent annual letter, Eddie said that by closing 300 stores, SHLD received over $1 bn cash. I am pretty confused about this, as I do not see an item like "Gain on sale of assets" showing in the annual 8-K as a significant number, which means that they probably did close those stores and received $1 bn cash, but what is written on the book value has already fully reflected this.

We invest in SHLD because of the hidden value in the real estates. But if the hidden value does not exist, then I don't see why we should invest in SHLD. Can anyone help me clarify this, please?
http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9121448-6192-91798&type=sect&TabIndex=2&companyid=656789&ppu=%252fdefault.aspx%253fsym%253dSHLD

They have closed 300 stores since 2006 and have reported gains on sale of assets in the past. Haven't read the most recent filings or the letter yet, but were you thinking they sold 300 stores last year? Also part of the cash raised from closures comes from inventory which won't show up under sales of assets. Not sure how many properties they sold in 2012 off the top of my head.
Title: Re: SHLD - Sears
Post by: muscleman on March 11, 2013, 08:48:24 AM

They have closed 300 stores since 2006 and have reported gains on sale of assets in the past. Haven't read the most recent filings or the letter yet, but were you thinking they sold 300 stores last year? Also part of the cash raised from closures comes from inventory which won't show up under sales of assets. Not sure how many properties they sold in 2012 off the top of my head.

Eddie said he closed over half of those 300 stores last year, right?
If they did book gains on sales, then the book value will be closer to the true value, which is around $3.1bn now dropping from $4.5 bn in the past, and hidden value will be less.
Title: Re: SHLD - Sears
Post by: compoundinglife on March 11, 2013, 08:56:36 AM
Update: Sorry I misread your post and thought you said Eddie closed those 300 stores last year. My bad. Yes you are correct, approximately half last year.


They have closed 300 stores since 2006 and have reported gains on sale of assets in the past. Haven't read the most recent filings or the letter yet, but were you thinking they sold 300 stores last year? Also part of the cash raised from closures comes from inventory which won't show up under sales of assets. Not sure how many properties they sold in 2012 off the top of my head.

Eddie said he closed over half of those 300 stores last year, right?
If they did book gains on sales, then the book value will be closer to the true value, which is around $3.1bn now dropping from $4.5 bn in the past, and hidden value will be less.

No they did not close 300 stores last year. They closed approximately 150. Also closing does not mean they sold the property. The sears real estate site has 99 properties listed in their "closed stores" database:

http://www.shcrealty.com/closed-store-opportunities.aspx

The letter WRT store closing:

http://www.searsholdings.com/invest/index.htm#letter

Quote
Since 2006, we have closed just over 300 Sears Full-line and Kmart stores, or 13% of the Sears Full-line and Kmart stores we operated at that time, with about half of these store closings coming in our last fiscal year. Obviously, this is disappointing to us because in most cases we were unable to take low performing stores and make them successful. However, there are several benefits that come with closing poorly performing stores.

First, we no longer suffer the operating losses of the money-losing stores. Second, in most cases, we are no longer penalized by the rating agencies for the lease expense (or obligation) associated with those stores. Third, we are usually able to generate significant cash from the net inventory invested in the stores, as the net inventory proceeds typically exceed the severance and closing costs. Fourth, we are able to realize the value of the real estate in situations where we own the stores or where the lease terms are attractive to third parties.

Now, let's look at the stores we have closed to see how much profit they contributed in 2006, our peak operating earnings year. While we have closed just over 300 domestic stores since 2006, we have retained most of the stores that contributed significantly to our profitability in that year. We calculate that the amount of EBITDA that the closed stores generated in 2006 was a little more than $100 million of the $3.2 billion in domestic Adjusted EBITDA that the company had in 2006. Through a combination of net inventory and real estate proceeds, we estimate that we have generated roughly $1 billion in value from these stores. While we closed these stores at different times over the past six years, if you combined their performance for the twelve months prior to the start of the process to close each store, they generated an EBITDA loss of over $50 million in aggregate.
Title: Re: SHLD - Sears
Post by: muscleman on March 11, 2013, 09:42:00 AM
Update: Sorry I misread your post and thought you said Eddie closed those 300 stores last year. My bad. Yes you are correct, approximately half last year.


They have closed 300 stores since 2006 and have reported gains on sale of assets in the past. Haven't read the most recent filings or the letter yet, but were you thinking they sold 300 stores last year? Also part of the cash raised from closures comes from inventory which won't show up under sales of assets. Not sure how many properties they sold in 2012 off the top of my head.

Eddie said he closed over half of those 300 stores last year, right?
If they did book gains on sales, then the book value will be closer to the true value, which is around $3.1bn now dropping from $4.5 bn in the past, and hidden value will be less.

No they did not close 300 stores last year. They closed approximately 150. Also closing does not mean they sold the property. The sears real estate site has 99 properties listed in their "closed stores" database:

http://www.shcrealty.com/closed-store-opportunities.aspx

The letter WRT store closing:

http://www.searsholdings.com/invest/index.htm#letter

Quote
Since 2006, we have closed just over 300 Sears Full-line and Kmart stores, or 13% of the Sears Full-line and Kmart stores we operated at that time, with about half of these store closings coming in our last fiscal year. Obviously, this is disappointing to us because in most cases we were unable to take low performing stores and make them successful. However, there are several benefits that come with closing poorly performing stores.

First, we no longer suffer the operating losses of the money-losing stores. Second, in most cases, we are no longer penalized by the rating agencies for the lease expense (or obligation) associated with those stores. Third, we are usually able to generate significant cash from the net inventory invested in the stores, as the net inventory proceeds typically exceed the severance and closing costs. Fourth, we are able to realize the value of the real estate in situations where we own the stores or where the lease terms are attractive to third parties.

Now, let's look at the stores we have closed to see how much profit they contributed in 2006, our peak operating earnings year. While we have closed just over 300 domestic stores since 2006, we have retained most of the stores that contributed significantly to our profitability in that year. We calculate that the amount of EBITDA that the closed stores generated in 2006 was a little more than $100 million of the $3.2 billion in domestic Adjusted EBITDA that the company had in 2006. Through a combination of net inventory and real estate proceeds, we estimate that we have generated roughly $1 billion in value from these stores. While we closed these stores at different times over the past six years, if you combined their performance for the twelve months prior to the start of the process to close each store, they generated an EBITDA loss of over $50 million in aggregate.

Aha, I understand the situation now. So the $1 bn proceeds received from the store closings does not fully include the real estate values. They still have properties unsold or not leased yet.
I think what Eddie suggests here is that he can close unprofitable stores and receive cash from them, and then let the profitable stores run. This will make the turnaround much easier than it sounds at the beginning.
I once read some article or book recommended by PlanMaestro, which mentioned that over 66% or so successful turnarounds come from closing unprofitable operations and keep the profitable ones run. SHLD seems to be on this track.
Title: Re: SHLD - Sears
Post by: compoundinglife on March 11, 2013, 09:48:29 AM
Update: Sorry I misread your post and thought you said Eddie closed those 300 stores last year. My bad. Yes you are correct, approximately half last year.


They have closed 300 stores since 2006 and have reported gains on sale of assets in the past. Haven't read the most recent filings or the letter yet, but were you thinking they sold 300 stores last year? Also part of the cash raised from closures comes from inventory which won't show up under sales of assets. Not sure how many properties they sold in 2012 off the top of my head.

Eddie said he closed over half of those 300 stores last year, right?
If they did book gains on sales, then the book value will be closer to the true value, which is around $3.1bn now dropping from $4.5 bn in the past, and hidden value will be less.

No they did not close 300 stores last year. They closed approximately 150. Also closing does not mean they sold the property. The sears real estate site has 99 properties listed in their "closed stores" database:

http://www.shcrealty.com/closed-store-opportunities.aspx

The letter WRT store closing:

http://www.searsholdings.com/invest/index.htm#letter

Quote
Since 2006, we have closed just over 300 Sears Full-line and Kmart stores, or 13% of the Sears Full-line and Kmart stores we operated at that time, with about half of these store closings coming in our last fiscal year. Obviously, this is disappointing to us because in most cases we were unable to take low performing stores and make them successful. However, there are several benefits that come with closing poorly performing stores.

First, we no longer suffer the operating losses of the money-losing stores. Second, in most cases, we are no longer penalized by the rating agencies for the lease expense (or obligation) associated with those stores. Third, we are usually able to generate significant cash from the net inventory invested in the stores, as the net inventory proceeds typically exceed the severance and closing costs. Fourth, we are able to realize the value of the real estate in situations where we own the stores or where the lease terms are attractive to third parties.

Now, let's look at the stores we have closed to see how much profit they contributed in 2006, our peak operating earnings year. While we have closed just over 300 domestic stores since 2006, we have retained most of the stores that contributed significantly to our profitability in that year. We calculate that the amount of EBITDA that the closed stores generated in 2006 was a little more than $100 million of the $3.2 billion in domestic Adjusted EBITDA that the company had in 2006. Through a combination of net inventory and real estate proceeds, we estimate that we have generated roughly $1 billion in value from these stores. While we closed these stores at different times over the past six years, if you combined their performance for the twelve months prior to the start of the process to close each store, they generated an EBITDA loss of over $50 million in aggregate.

Aha, I understand the situation now. So the $1 bn proceeds received from the store closings does not fully include the real estate values. They still have properties unsold or not leased yet.
I think what Eddie suggests here is that he can close unprofitable stores and receive cash from them, and then let the profitable stores run. This will make the turnaround much easier than it sounds at the beginning.
I once read some article or book recommended by PlanMaestro, which mentioned that over 66% or so successful turnarounds come from closing unprofitable operations and keep the profitable ones run. SHLD seems to be on this track.

Yeah I believe most of the up front cash from closures comes from inventory liquidation. Also if you look at page 14 of the 8k for year ended Feb. 2nd 2013, I see $419M gains on sale of assets, 157M in tax on that.
Title: Re: SHLD - Sears
Post by: texual on March 11, 2013, 11:35:59 AM
I think the real point he was trying to make was the 300 stores as a whole, (assuming they were the worst of the bunch) were contributing very little to the company even at its highest point in 2006 or 2007. Those years correspond to the highest EBITDA and slashing 300 stores out of that contribution meant very little to the overall company. So closing them or leaving them open really didn't make much of a difference at all. I always knew this but people irrationally wanted him to close hundreds of stores and very rapidly. That would be stupid because keeping them open, having them operate really wasn't as big a drag as earlier theories proported. The entire company could be better off with half the store count but even the 300 offenders contributed very little in their best years. Now that I believe we are in a housing recovery they should just keep the stores open and generate cash and figure out what to do afterwards.

I'd watch appliance sales, and notice how many more commercials you see on tv about new GE washers etc. I bet youll see their sales go up on home and hardwares.
Title: Re: SHLD - Sears
Post by: augustabound on March 14, 2013, 03:17:35 AM
Interesting quote from Michael Bigger,
How Long Can You Hold Your Breath? (http://biggercapital.squarespace.com/biggercapital-investment/2013/3/6/how-long-can-you-hold-your-breath.html)

Quote
Eddie is slowly stealing the company away from investors a la Michael Dell but in a more subtle way. He knows you can't hold you breath.
Title: Re: SHLD - Sears
Post by: Cardboard on March 14, 2013, 06:36:39 AM
That is a dumb article. I mean, Eddie Lampert became a billionaire surely knowing the fact that time is money. If it takes him 10 or 20 years to take-over an asset that he is doing his best to "kill" to make it as unattractive for other shareholders as possible then what kind of rate of return is he going to make on that carcass?

There is no conspiracy here, he is simply stuck in that situation. He can't sell his current stake to anyone. He has no choice, but to monetize the business, turn it around or a mix of both in a timeframe take makes sense. He may acquire shares from impatient investors in the meantime, but he knows full well that time is not on his side as long as the company keeps on shrinking and generating losses.

Cardboard
Title: Re: SHLD - Sears
Post by: augustabound on March 14, 2013, 06:37:56 AM
I should mention I have no position in Sears, I just found the statement interesting.
Title: Re: SHLD - Sears
Post by: compoundinglife on March 14, 2013, 08:30:23 AM
Interesting quote from Michael Bigger,
How Long Can You Hold Your Breath? (http://biggercapital.squarespace.com/biggercapital-investment/2013/3/6/how-long-can-you-hold-your-breath.html)

Quote
Eddie is slowly stealing the company away from investors a la Michael Dell but in a more subtle way. He knows you can't hold you breath.

Here is a quote from board member "theando" regarding the SHLD meeting:

Quote
He did answer a question related to taking the company private at the expense of existing shareholders. He noted that he has operated public companies like AZO etc and always wants their investors to profit along with them. I do not think he would take it private at the expense of existing shareholders unless he was forced into a really tough situation.

I agree that it is highly unlikely ESL would take the company private at the expense of smaller shareholders. If you choose to sell to him though that is your option, he is not forcing you.
Title: Re: SHLD - Sears
Post by: texual on March 21, 2013, 11:31:54 AM
http://www.bloomberg.com/news/2013-03-20/sears-says-lampert-will-remain-as-ceo-earning-1-salary.html

Thoughts?
Title: Re: SHLD - Sears
Post by: txlaw on March 21, 2013, 11:54:03 AM
This is great.

'Nuff said.
Title: Re: SHLD - Sears
Post by: compoundinglife on March 21, 2013, 12:22:27 PM
From the 13D yesterday, incentive pay can be cash or stock. 4.5M shares on monthly schedule price locked in for this year March 18th and Feb 1 in future years.

http://www.sec.gov/Archives/edgar/data/923727/000119312513117365/d507822dsc13da.htm

Quote
On March 19, 2013, Mr. Lampert and Holdings entered into the Letter, pursuant to which Mr. Lampert will continue to serve as Chief Executive Officer of Holdings. Under the Letter, Mr. Lampert will be paid an annual base salary of $1, effective as of February 1, 2013. In addition, during each of the first three years of Mr. Lampert’s service as Chief Executive Officer of Holdings, Mr. Lampert will (i) participate in the Holdings’ Annual Incentive Plan, with a target incentive opportunity of $2,000,000, payouts under which (if any) may be paid, at Mr. Lampert’s election, in cash or in Holdings Common Stock, and (ii) receive Holdings Common Stock with value of $4,500,000 per annum, payable in equal monthly installments subject to his continued service as Chief Executive Officer. The number of shares issued to Mr. Lampert will be based on the value of Holdings’ Common Stock on March 18, 2013 for shares issued through January 31, 2014, and on the February 1st of each successive 12-month period of his employment. To the extent there is not a sufficient number of shares available under Holdings’ equity plans to make any award contemplated under the Letter, Mr. Lampert will be entitled to receive compensation of substantially equivalent economic value in such form as Holdings and Mr. Lampert agree upon. The foregoing is qualified in its entirety by reference to the form of Letter attached hereto as Exhibit 99.6 and incorporated by reference herein.
Title: Re: SHLD - Sears
Post by: Matson125 on March 21, 2013, 12:28:09 PM
I think it's great as well!  When I first heard of the news I was glad to see in the press release that his appointment to CEO was not on an interim basis. 
Title: Re: SHLD - Sears
Post by: Liberty on March 21, 2013, 12:35:07 PM
Off-topic:

Am I the only one that, even after all these years, read SHLD as "shield" every time I see the ticker?
Title: Re: SHLD - Sears
Post by: fareastwarriors on March 21, 2013, 12:39:00 PM
Off-topic:

Am I the only one that, even after all these years, read SHLD as "shield" every time I see the ticker?

you;re not the only one! i do that too. i dont even call it Sears anymore, just shield
Title: Re: SHLD - Sears
Post by: txlaw on March 21, 2013, 12:48:38 PM
Off-topic:

Am I the only one that, even after all these years, read SHLD as "shield" every time I see the ticker?

you;re not the only one! i do that too. i dont even call it Sears anymore, just shield

I do that too.  I think I may have picked that up from Jim Cramer.  ;D

Just like when I read my moniker in my head, I pronounce it tex-law.  Don't know why -- I just do.
Title: Re: SHLD - Sears
Post by: compoundinglife on March 21, 2013, 12:51:45 PM
Off-topic:

Am I the only one that, even after all these years, read SHLD as "shield" every time I see the ticker?

you;re not the only one! i do that too. i dont even call it Sears anymore, just shield

I do that too.  I think I may have picked that up from Jim Cramer.  ;D

Just like when I read my moniker in my head, I pronounce it tex-law.  Don't know why -- I just do.

Hmm I must be focused on letter. When I read your username I think t x law. But that might be from working with radios stuff where you say t x for transmitting. Also think w/Sears I think S H L D. I usually call it "S H L D holdings" when talking about it.
Title: Re: SHLD - Sears
Post by: writser on March 21, 2013, 12:59:11 PM
I always see 'SOLD'. Probably that's why I don't have a position :)
Title: Re: SHLD - Sears
Post by: Phaceliacapital on March 22, 2013, 12:22:58 AM
Off-topic:

Am I the only one that, even after all these years, read SHLD as "shield" every time I see the ticker?

you;re not the only one! i do that too. i dont even call it Sears anymore, just shield

This made me spill OJ on my keyboard :D
Title: Re: SHLD - Sears
Post by: 20ppy on March 22, 2013, 05:51:34 AM

...
"Chou’s other new buy, MBIA (MBI), climbed 33% from his average share price of $9 and Dell (DELL) increased 29% from his average price of $11 per share. He also has 7.4% of his portfolio weighted in Edward Lampert’s company, Sears Holdings (SHLD)."
...

http://www.forbes.com/sites/gurufocus/2013/03/20/edward-lampert-and-francis-chous-new-stocks-see-biggest-gains/2/

Title: Re: SHLD - Sears
Post by: muscleman on March 22, 2013, 08:11:40 AM

...
"Chou’s other new buy, MBIA (MBI), climbed 33% from his average share price of $9 and Dell (DELL) increased 29% from his average price of $11 per share. He also has 7.4% of his portfolio weighted in Edward Lampert’s company, Sears Holdings (SHLD)."
...

http://www.forbes.com/sites/gurufocus/2013/03/20/edward-lampert-and-francis-chous-new-stocks-see-biggest-gains/2/

http://www.gurufocus.com/profile/Francis+Chou
This guy's performance doesn't seem to be that great, does it? Is the data correct there?
Title: Re: SHLD - Sears
Post by: texual on March 29, 2013, 05:58:33 PM
How many of us are going to the meeting next month? I am about a hairs length from pulling the trigger and going back once again. Last time I went I had a great experience and talked to Eddie for a bit - and I think this year would be a good transition between Lou and Eddie taking more of the discussion once again.

Ah the only thing holding me back is that I am worried he may keep quiet about any real plans and let Lou do the talking since its his last day basically. Can anyone confirm that Lou is poised to be at this meeting and running it? Otherwise I would jump at another chance to meet ESL and maybe this time get a photo, since they dont let cameras in... haha.

If anyones going perhaps we could have a gathering before or afterwards to put names to faces? I've grown quite fond of the discussions here and wouldn't mind doing that.
Title: Re: SHLD - Sears
Post by: drewdalton on March 29, 2013, 07:23:01 PM
texual,

I am planning on attending the meeting and would enjoy meeting other members of this board.

Title: Re: SHLD - Sears
Post by: muscleman on March 31, 2013, 09:02:42 AM
texual,

I am planning on attending the meeting and would enjoy meeting other members of this board.

I am a software engineer with some website experience. If you would like to attend the meeting, could you please tell Eddie that he needs to improve his website?
1. He needs a better web designer. Right now the layout of the site looks not so good. For example, if I search for Nikon J1 camera, I got a lot of similar listings. He should try to combine identical items into one listing. Check out how Amazon does this. In addition, each item takes so much space, and there is not enough space between items. I felt dizzy when I saw it.
2. He needs a fluid website for sears.com and shopyourway.com, which means that the website should look good under any browser width >= 320 px. Then he could get rid of his m.sears.com website. Nowadays there are more and more mobile users who buy online. He needs to capture these folks. The fact that he is not doing any of these implies that he needs to get rid of his current chief software engineer for a better one. There is a saying that one superstar engineer is worth much more than five solid engineers. He should hire a really good one, even if he needs to pay millions a year for him.
Title: Re: SHLD - Sears
Post by: Matson125 on April 01, 2013, 07:54:08 AM
How Sears Got Into the Data-Services Game

http://adage.com/article/dataworks/sears-data-services-game/240635/
Title: Re: SHLD - Sears
Post by: muscleman on April 01, 2013, 09:00:28 AM
How Sears Got Into the Data-Services Game

http://adage.com/article/dataworks/sears-data-services-game/240635/

This is interesting. If they want to get this done nicely, shouldn't they get more aggressive and hire more folks from Google/MSFT/Amazon?
Title: Re: SHLD - Sears
Post by: drewdalton on April 01, 2013, 02:36:31 PM
This is interesting. If they want to get this done nicely, shouldn't they get more aggressive and hire more folks from Google/MSFT/Amazon?
[/quote]

Sears is getting more aggressive in its hiring of military veterans.

http://it-jobs.fins.com/Articles/SBB0001424052702304870304577490710601969318/Sears-Holdings-on-Track-to-Hire-3-500-Vets
Title: Re: SHLD - Sears
Post by: muscleman on April 01, 2013, 04:07:22 PM
This is interesting. If they want to get this done nicely, shouldn't they get more aggressive and hire more folks from Google/MSFT/Amazon?

Sears is getting more aggressive in its hiring of military veterans.

http://it-jobs.fins.com/Articles/SBB0001424052702304870304577490710601969318/Sears-Holdings-on-Track-to-Hire-3-500-Vets
[/quote]

I don't know if Eddie understands how software development works, where one superstar engineer can contribute 10x more than 5 solid engineers. He really needs to understand that and start hiring aggressively the talents from the tech companies.
Or he could just make SHLD a client of Google/AMZN's cloud service for data management instead of reinventing the wheel.
Title: Re: SHLD - Sears
Post by: MYDemaray on April 12, 2013, 10:40:22 AM
Great new K-Mart ad: https://www.youtube.com/watch?feature=player_embedded&v=I03UmJbK0lA
Title: Re: SHLD - Sears
Post by: Kraven on April 12, 2013, 11:00:29 AM
Great new K-Mart ad: https://www.youtube.com/watch?feature=player_embedded&v=I03UmJbK0lA

Thanks for posting.  Very funny!
Title: Re: SHLD - Sears
Post by: Matson125 on April 12, 2013, 11:38:30 AM
I had posted on this back in January, but when I was doing some research this caught my eye:
http://www.twincities.com/business/ci_22310974/st-paul-sears-site-eyed-redevelopment-homes-offices

"Sears has identified about 10 sites across the country that they believe are ripe for redevelopment, and this is one of them. And when I say redevelopment, they mean keeping the store."

http://www.enewspf.com/latest-news/school-news/42007-roosevelt-students-win-2013-eisenberg-foundation-midwest-real-estate-challenge.html
 "This year’s site was proposed by the Sears Holdings Corporation around the existing Sears store at 62nd street which would anchor redevelopment on a total of nearly 38 acres in total.  Sears is proposing similar innovative redevelopment in other urban locations in the U.S. with one of the first being in St. Paul."
Title: Re: SHLD - Sears
Post by: CorpRaider on April 12, 2013, 11:46:22 AM
I had posted on this back in January, but when I was doing some research this caught my eye:
http://www.twincities.com/business/ci_22310974/st-paul-sears-site-eyed-redevelopment-homes-offices

"Sears has identified about 10 sites across the country that they believe are ripe for redevelopment, and this is one of them. And when I say redevelopment, they mean keeping the store."

http://www.enewspf.com/latest-news/school-news/42007-roosevelt-students-win-2013-eisenberg-foundation-midwest-real-estate-challenge.html
 "This year’s site was proposed by the Sears Holdings Corporation around the existing Sears store at 62nd street which would anchor redevelopment on a total of nearly 38 acres in total.  Sears is proposing similar innovative redevelopment in other urban locations in the U.S. with one of the first being in St. Paul."

They did one where I live.  The sears was remodeled but it was ginormous and about half the SF are now filled with a Whole Foods.  I bet that asset is now worth a bit more than BV.
Title: Re: SHLD - Sears
Post by: biaggio on April 12, 2013, 12:05:14 PM
I had posted on this back in January, but when I was doing some research this caught my eye:
http://www.twincities.com/business/ci_22310974/st-paul-sears-site-eyed-redevelopment-homes-offices

"Sears has identified about 10 sites across the country that they believe are ripe for redevelopment, and this is one of them. And when I say redevelopment, they mean keeping the store."

http://www.enewspf.com/latest-news/school-news/42007-roosevelt-students-win-2013-eisenberg-foundation-midwest-real-estate-challenge.html
 "This year’s site was proposed by the Sears Holdings Corporation around the existing Sears store at 62nd street which would anchor redevelopment on a total of nearly 38 acres in total.  Sears is proposing similar innovative redevelopment in other urban locations in the U.S. with one of the first being in St. Paul."

They did one where I live.  The sears was remodeled but it was ginormous and about half the SF are now filled with a Whole Foods.  I bet that asset is now worth a bit more than BV.

Thanks for posting and update.

I could not get that link to work, kept crashing me.

Are there any pictures elsewhere? Or other details? Was the surrounding area pretty nice? Do you recall how long it took to re develop

I can see them turning some crappy locations into something more upscale if they can attract some upscale tenants like whole foods.

Interesting, maybe I won t sell my SHLD. Maybe a price less than $50 we should add
Title: Re: SHLD - Sears
Post by: txlaw on April 13, 2013, 10:17:32 AM
I had posted on this back in January, but when I was doing some research this caught my eye:
http://www.twincities.com/business/ci_22310974/st-paul-sears-site-eyed-redevelopment-homes-offices

"Sears has identified about 10 sites across the country that they believe are ripe for redevelopment, and this is one of them. And when I say redevelopment, they mean keeping the store."

http://www.enewspf.com/latest-news/school-news/42007-roosevelt-students-win-2013-eisenberg-foundation-midwest-real-estate-challenge.html
 "This year’s site was proposed by the Sears Holdings Corporation around the existing Sears store at 62nd street which would anchor redevelopment on a total of nearly 38 acres in total.  Sears is proposing similar innovative redevelopment in other urban locations in the U.S. with one of the first being in St. Paul."

I pointed this out to someone at the FFH AGM this week.  Biaggio, was that you?

In any case, this is one more thing for folks to think about re: SHLD real estate and whether they should have liquidated it quickly.  These urban sites are very, very interesting.  Fits very well with the long term trend for the hip young people (like me -- sort of ;D) to move into the urban core. 
Title: Re: SHLD - Sears
Post by: compoundinglife on April 13, 2013, 10:33:53 AM
I had posted on this back in January, but when I was doing some research this caught my eye:
http://www.twincities.com/business/ci_22310974/st-paul-sears-site-eyed-redevelopment-homes-offices

"Sears has identified about 10 sites across the country that they believe are ripe for redevelopment, and this is one of them. And when I say redevelopment, they mean keeping the store."

http://www.enewspf.com/latest-news/school-news/42007-roosevelt-students-win-2013-eisenberg-foundation-midwest-real-estate-challenge.html
 "This year’s site was proposed by the Sears Holdings Corporation around the existing Sears store at 62nd street which would anchor redevelopment on a total of nearly 38 acres in total.  Sears is proposing similar innovative redevelopment in other urban locations in the U.S. with one of the first being in St. Paul."

I pointed this out to someone at the FFH AGM this week.  Biaggio, was that you?

In any case, this is one more thing for folks to think about re: SHLD real estate and whether they should have liquidated it quickly.  These urban sites are very, very interesting.  Fits very well with the long term trend for the hip young people (like me -- sort of ;D) to move into the urban core.

Man I really should of tried to meet up with more of the board members while I was at the dinner and meeting. Didn't realize how many of you were there. Next Year!

I am right there with you, ESL has a very long term view of what SHLD is capable of returning and we constantly see little tid bits of that. Let the haters hate and we can check back in 10 years.
Title: Re: SHLD - Sears
Post by: compoundinglife on April 13, 2013, 10:36:38 AM
BTW, did anyone visit the Sear's Canada store downtown at the Eaton Center? That store is much nicer than the stores I have visited in the US. Feels much more upscale. They had large area for men's suits and carried some decent brands like Kenneth Cole.
Title: Re: SHLD - Sears
Post by: biaggio on April 13, 2013, 11:43:15 AM
"I pointed this out to someone at the FFH AGM this week.  Biaggio, was that you?''

not me, Txlaw

i still have a very small position-

will have to look at my notes, re evaluate my position

over time i think hopefully there will be some disclosure as to how these projects are doing  and there may be time to add
Title: Re: SHLD - Sears
Post by: texual on April 13, 2013, 12:19:08 PM
But the consensus was, these redev properties are numbered at about ten? Ten is not enough to move any dial, and takes years. I would step back from this because on the end Sears is a middle class store, aiming to improve its earnings per share by two ways: buy back shares and an uptick in appliance sales.

Those two facts really are the catalyst for Sears, the rest is icing on the cake. Some time ago Bruce said Sears was easily capable of earning ten dollars a share for owners. Back then the share count was higher and he said that number only grows, while the stock price basically oscillates between 70 and 40. So time it well, and you get to own a stock with a cost average of 50, if your lucky, 40,... that can earn EPS of 10. Over the coming years if they go below 80 million shares outstanding, ownership will be squeezed thin and trade lightly - you do the math.

I saw on twitter someone mentioned that appliance age in 2007 was 5 years old, and in 2012 the average age of appliances in homes were somewhere around 8. That is severely above the normal and so this next generation of smart appliances smack into the real trend, which is people will replace those appliances, and housing will improve and new home formation requires appliances. I am proud to own a small share of the #1 appliance retailer.

More anecdotally I spend a lot of time in Lowes and HD and Best Buy and this past two years those appliance sections are growing, someone obviously senses a opportunity here. But even with competition Sears offers way more service and selection for appliances. You can't beat that combination. So when ESL decides to spend money on store upkeep, I would back away. The way I see this playing out is the stores will get back to profitability and start kicking ass when those EPS numbers grow with appliance sales. The softlines are important but not in any cyclical sense, I am invested in Sears for its appliance business first, then the other stuff becomes important after.
Title: Re: SHLD - Sears
Post by: texual on April 13, 2013, 12:22:56 PM
And for the record I have never wasted time assuming this was a real estate investment. It is a small, but important aspect of the big picture but I could never value it (too much of an investment of my time) while I believe the analysis is sound, I doubt ESL wants to sell real estate as his primary business. The big trend is appliance sales and building a presence online. After all the dust settles he could go sell property, but his job is hard enough just navigating the next few years.
Title: Re: SHLD - Sears
Post by: compoundinglife on April 16, 2013, 02:24:43 PM
Some PRs out of SHLD and Ace Hardware recently:

"Sears Holdings Establishes New Business Unit Focused on Entertainment-Driven Fashion Brands"

http://www.prnewswire.com/news-releases-test/sears-holdings-establishes-new-business-unit-focused-on-entertainment-driven-fashion-brands-202337361.html

"Craftsman(R) Tools Now Available at More Than 2,000 Ace Hardware Stores Nationwide"

http://online.wsj.com/article/PR-CO-20130416-909134.html?mod=googlenews_wsj
Title: Re: SHLD - Sears
Post by: ItsAValueTrap on April 16, 2013, 02:39:11 PM
Quote
BTW, did anyone visit the Sear's Canada store downtown at the Eaton Center? That store is much nicer than the stores I have visited in the US. Feels much more upscale. They had large area for men's suits and carried some decent brands like Kenneth Cole.
I always thought that store was kind of nasty compared to everything else in the Eaton Center. 

Traffic is ok but not as good compared to everything else in that building.
It isn't as well-lit as other retailers.  But it is better than bottom-tier retailers (e.g. many independently-owned convenience stores).
On the promotional front, Sears may not be as good at playing the "coupon crack" game as other retailers.  They don't seem to have good promotions that draw people in.
On the cosmetics front, Sephora is #1 at what they do and they are clearly doing things better than Sears.  Customers seem to prefer the model where the salesperson isn't trying to push a particular brand's cosmetics (in a Sears, there are stands for each brand).

Overall, they aren't the best and they aren't the worse.
Title: Re: SHLD - Sears
Post by: compoundinglife on April 16, 2013, 03:19:43 PM
Quote
BTW, did anyone visit the Sear's Canada store downtown at the Eaton Center? That store is much nicer than the stores I have visited in the US. Feels much more upscale. They had large area for men's suits and carried some decent brands like Kenneth Cole.
I always thought that store was kind of nasty compared to everything else in the Eaton Center. 

Traffic is ok but not as good compared to everything else in that building.
It isn't as well-lit as other retailers.  But it is better than bottom-tier retailers (e.g. many independently-owned convenience stores).
On the promotional front, Sears may not be as good at playing the "coupon crack" game as other retailers.  They don't seem to have good promotions that draw people in.
On the cosmetics front, Sephora is #1 at what they do and they are clearly doing things better than Sears.  Customers seem to prefer the model where the salesperson isn't trying to push a particular brand's cosmetics (in a Sears, there are stands for each brand).

Overall, they aren't the best and they aren't the worse.

Yes most of the stores in that mall are much nicer. In comparison to most of the US Sears stores I have visited there was a higher caliber of merchandise and the store interior had a better feel to it.
Title: Re: SHLD - Sears
Post by: txlaw on April 17, 2013, 07:35:39 AM
Press release on Fulfilled by Sears offerings:

http://online.wsj.com/article/PR-CO-20130417-909334.html
Title: Re: SHLD - Sears
Post by: muscleman on April 17, 2013, 11:38:20 AM
Press release on Fulfilled by Sears offerings:

http://online.wsj.com/article/PR-CO-20130417-909334.html

This is nice!
Title: Re: SHLD - Sears
Post by: biaggio on April 17, 2013, 02:37:04 PM
Press release on Fulfilled by Sears offerings:

http://online.wsj.com/article/PR-CO-20130417-909334.html

This is nice!

Thanks for posting.

Looks like they are throwing another low cost idea on the wall to see if sticks.

I wish they would try to use a new name with their ideas i.e. don t use Kmart or Sears in there press releases/marketing efforts. I think some people will automatically be turned off once they see the names Sears or Kmart.

If it is truly good cost, might be a good value for small merchants- like an ebay with added advantage of low cost storage & distribution all over North America . Good for SHLD as they can utilize capacity in warehouses, distribution, retail stores etc.   

Good that they are trying to re invent themselves rather then taking on the market leaders head on.

Maybe wishful thinking.

Surprised that release says that 65% of Sears transactions are online. This might mean that they don t have much sales in their bricks and mortar which would not be a surprise I guess.
Title: Re: SHLD - Sears
Post by: hellsten on April 18, 2013, 03:36:41 AM
Horizon Kinetic on SHLD in the Q1 2013 commentary that Gio posted in http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/horizon-kinetic-q1-2013-commentary/msg112901/:
Quote
In 2011, Sears recorded a $1.8 billion non-cash charge to write down its deferred tax assets. This was necessitated by an accounting rule test requiring that a valuation reserve be established when income has not been generated over a three-year cumulative period to support the deferred tax asset. However, the company stated in its just- released 2012 annual report that it believes that no economic loss has occurred. If the company is correct, then those net operating losses and tax benefits remain available to reduce future taxes on future income. So, as of 2012, Sears still had $679 million of deferred tax assets on its balance sheet and what it believes should be an additional $1.8 billion. Future after-tax income, then, could be far higher than would otherwise be anticipated. The company’s book value, now $3.2 billion, as against a stock market capitalization of $5.3 billion, would actually be $5 billion if the write-down of the tax asset were reversed. The Sears book value discussion has some additional interesting complexities, so we’ll call this adjusted $5 billion book value an “all else equal” figure.

It also recorded a gain of $163 million for the surrender and early termination of the leases on three properties operated by Sears Canada; proceeds were $170 million.

In comparing the amount of gain with the total proceeds, which were only marginally greater, one might reflect on what the stated book value of Sears really means. One might also reflect on the value of some of the Sears stores that it doesn’t own, but merely leases, if those are long-term leases. Finally, one might reflect on the aggregate gains figure of $468 million on these 14 properties in the context of the 2,109 full-line stores that the company operates.
Title: Re: SHLD - Sears
Post by: mevsemt on April 18, 2013, 06:37:32 AM
Horizon's commentary on the real estate was interesting, but it's nothing that hasn't been said before. 

On a related note, I think it's worth taking a closer look at Eddie's annual letter, specifically under the "Creating Long-Term Value" subheading.  Instead of talking about real estate, brands, Land's End, etc. in broad terms, he basically focuses on one very specific thing - store closings.  When i first read the letter, my reaction was basically "meh, that's interesting, but all these store closings have already happened, so why go into so much detail about it?"

But now I'm wondering if the discussion was meant as a precursor to another round of store closings in the near future?  For anyone who's looked at Kmart's exit from bankruptcy up through its acquisition/merger with Sears, you know there's significant value to be unlocked by "downsizing".  Anyway, it would certainly make things interesting...

mevsemt.blogspot.com
Title: Re: SHLD - Sears
Post by: txlaw on April 18, 2013, 07:47:31 AM
I wish they would try to use a new name with their ideas i.e. don t use Kmart or Sears in there press releases/marketing efforts. I think some people will automatically be turned off once they see the names Sears or Kmart.

If it is truly good cost, might be a good value for small merchants- like an ebay with added advantage of low cost storage & distribution all over North America . Good for SHLD as they can utilize capacity in warehouses, distribution, retail stores etc.   

I think as long as they use Sears and not Kmart, they'll be okay.  Heck, if they do a good job, we could see a revitalization of the "Sears" name. 

But we'll see how it goes.
Title: Re: SHLD - Sears
Post by: JEast on April 18, 2013, 08:12:00 AM
I understand the rhetoric, value adding process, potential value, and agree with it.  However, at the end of the day the numbers are what they are.  Even adding back tax allowances and potential sales of real estate down the road at higher prices, the stock is not at an extremely cheap price for investment.  Of course, if good news comes out over the next 6-18 months the stock may double but surely not an investment with a great deal of margin-of-safety on the balance sheet.

There appears currently to be cheaper opportunities out there with BAC and RFP to name a couple.

Cheers
JEast
Title: Re: SHLD - Sears
Post by: txlaw on April 18, 2013, 08:32:37 AM
I understand the rhetoric, value adding process, potential value, and agree with it.  However, at the end of the day the numbers are what they are.  Even adding back tax allowances and potential sales of real estate down the road at higher prices, the stock is not at an extremely cheap price for investment.  Of course, if good news comes out over the next 6-18 months the stock may double but surely not an investment with a great deal of margin-of-safety on the balance sheet.

There appears currently to be cheaper opportunities out there with BAC and RFP to name a couple.

Cheers
JEast

I disagree.  The (hidden) balance sheet absolutely presents an MOS.  This is no JCP.
Title: Re: SHLD - Sears
Post by: JEast on April 18, 2013, 11:37:07 AM
Of course the (hidden) balance sheet items absolutely presents an extra MOS.  But recognize I am a cheap SOB that likes things really cheap.  Adding the potential hidden items of Sears back only gets one down to about 1.1X of BV, and that is way too expensive for me.  I like stuff at 0.5X of BV or at 0.9X BV if you have a capable capital allocator working with float.

Cheers
JEast
Title: Re: SHLD - Sears
Post by: BTShine on April 25, 2013, 06:00:12 PM
An article was published today on Sears Real Estate Divestitures, etc.

http://www.chicagorealestatedaily.com/article/20130425/CRED03/130429852/sears-to-unload-eight-more-stores-here#ixzz2RVUC6GKY

Title: Re: SHLD - Sears
Post by: cubsfan on April 25, 2013, 06:24:17 PM
Nice article on the real estate liquidation.
They mention the K-Mart in Willowbrook, Ill.
I live about 3 miles away. It's a large property, very old store.
Great location - I'm sure they will make plenty of money on it.
My wife hopes Costco will buy it!
Title: Re: SHLD - Sears
Post by: muscleman on April 26, 2013, 08:08:02 AM
An article was published today on Sears Real Estate Divestitures, etc.

http://www.chicagorealestatedaily.com/article/20130425/CRED03/130429852/sears-to-unload-eight-more-stores-here#ixzz2RVUC6GKY

Yeah. They still have 2000 more stores to go.
Well, I think Eddie will keep the profitable ones. How many unprofitable ones are there? 1000? That is still a long way to go. Probably 3 more years if he decides to aggressively liquidate?
Title: Re: SHLD - Sears
Post by: texual on April 26, 2013, 08:42:51 AM
It all comes back to appliance sales and average age of appliances in American homes. Either people will replace them (win for sears) or need service (again, win for sears). But right now appliance sales are weak and housing is still in a slow trend back to normal. I think in those three years if he can sever the worst stores and keep even the underwater, but performing locations, Sears would do very well with appliances leading their way out. But I don't watch appliance data much, however I do notice a lot more commercials for GE, Kenmore and Whirlpool appliances on tv, even during primetime.

It says to me that theres a market to be had, and we should own a piece of the largest contributor to the market.
Title: Re: SHLD - Sears
Post by: cubsfan on April 26, 2013, 08:59:26 AM
RE: the appliances - that is such a good way to look at it. My wife and I have held off any new appliances for years, but in the last 6 months
we replaced 2 refrigerators, 1 dishwasher and 1 stove top unit. We looked into getting them repaired from Kenmore - too expensive -
so we bought all new Kenmore stuff anyway. People rag on Sears, but we really have always liked Kenmore.

Just like the auto story, the appliances replacements are coming, with or without a housing recovery.
Title: Re: SHLD - Sears
Post by: texual on May 01, 2013, 08:40:56 AM
Please keep us up to date on meeting information, minutes, Anything!
Title: Re: SHLD - Sears
Post by: Matson125 on May 01, 2013, 10:20:11 PM
Hi All,

I took the opportunity and attended the annual meeting.  I had met a few people from the board, so if I have missed anything please feel free to make any additions or corrections as you see fit.

Presentation
-Online sales increased 25% in Q4 and 17% for the full year
-Half of the online business is from integrated retail ex: Shop from home and pick up in store, ship to store
-65 million products online, 10 million products added in the last quarter
-Last year shipping to the end user took an average of 3 days, currently they have improved to 2 days or less, and in some cases 1 day shipping.
-Throughout the presentation he never used the word “customers” he would call them “our members”.
-Sears received an award for being #1 in mobile speed by Internet Retailer
http://www.internetretailer.com/mobile/2013/04/17/sears-achieves-lightning-fast-speed-after-redesigning-its?list_type=tag&tag=m-commerce&index=5
-Shopyourway.com is able to personalize rewards ex: during Hurricane Sandy, Sears was able to upload points to affected homeowners by searching their postal code and information the originally provide Sears.  Members used those points to buy items they need to recover.
-All about feedback.  Eddie talked about rewarding members for telling Sears when a transaction or a purchase was a nice experience.
-“Members get more” Eddie talked about pricing specifically for members.  He also talked about two different sale prices displayed in store and on line for members and non-members which will entice non-members to become members.
-This is a direct quote from Eddie” Profitability is well below the assets we have committed to the business”

Q+A

-Eddie was asked about being regulated to participate in sustainability projects (I didn’t get the question in full) Eddie had said he was not a fan of an overregulated society.

-Is Housing currently a headwind or tailwind?  Eddie has briefly talked about what he sees in his hometown of Miami and that housing is improving.  With respect to Sears he mentioned that Sears will benefit when there’s “home turnover” not just when a new home is purchased.   He said we can expect as the economy recovers “core products” (I assume he means KCD products) at Sears will drive profits. 

-He had also mentioned that throughout 08-09 the better of the Sears stores suffered the most as they sold the most appliances and were the hardest hit.  Sears got hit worse that other stores as the big purchases are credit dependent, and credit was frozen at the time.

-Eddie reads WEB’s letter every year
-Eddie said that he was saddled with the view of others that this is a real estate play
-Eddie was asked about spinoffs in the future ex: Lands’ End “If we can drive a sufficient level of profit having the assets together is better that having them separated”.
-Book recommendation: Top Dog: The Science of Winning and Losing by Po Bronson and Ashley Merryman

-Eddie was asked about the development in St. Paul http://www.startribune.com/local/stpaul/185692252.html?refer=y
He initially directed the question to an exec who handles the real estate, however the exec was not in attendance at the meeting.  Eddie said he’s not familiar with this development in any great detail.

-A question was asked about pursuing one brand instead of having multiple brands.  Eddie had answered the “How about a shop your way store”.

-All and all I felt the meeting was informative.  Being a numbers guy I would have liked to see some more figures that solidifies Eddie’s points and arguments.  This is the first shareholders meeting I attended where the CEO didn’t take any informal questions after the Q+A.  I was ready to ask questions that I think would spark a discussion, but Eddie left the room immediately after the meeting was adjourned.

Michael

Title: Re: SHLD - Sears
Post by: jeffmori7 on May 02, 2013, 05:42:54 AM
Thanks for the writeup!

So, if I understand, Eddie said that Sears is not just a real estate play? Is it the first time he mentions that?

Their online business seems to be doing great, watchout Amazon :)
Title: Re: SHLD - Sears
Post by: cubsfan on May 02, 2013, 05:49:02 AM
Eddie said he never intended SHLD to be a real estate play.
The value of the real estate would be dramatically higher if they
succeeded as retailer in the location. He said this was always a misconception.
Title: Re: SHLD - Sears
Post by: Philip Morris IV on May 02, 2013, 09:37:53 AM
I'd venture that most of us are fine with SHLD not being a real estate play, but we also can't ignore the massive real estate portfolio here.  Has Eddie or management articulated what SHC Realty's grander plans are?  By that I mean:  safe to say they do some leasing and selling, but how will they allocate the ensuing cash flow?
Title: Re: SHLD - Sears
Post by: muscleman on May 02, 2013, 10:17:55 AM
I'd venture that most of us are fine with SHLD not being a real estate play, but we also can't ignore the massive real estate portfolio here.  Has Eddie or management articulated what SHC Realty's grander plans are?  By that I mean:  safe to say they do some leasing and selling, but how will they allocate the ensuing cash flow?

The real estate will be more valuable if the stores are performing. Then they can sublease a portion of it for a good price.
Eddie seems to be a retail specialist. I think he will use the cash flow to grow Sears retail, or acquire other retailers. But this will be quite different from BRK. I don't foresee Eddie running an insurance company.
Title: Re: SHLD - Sears
Post by: compoundinglife on May 02, 2013, 10:29:41 AM
I'd venture that most of us are fine with SHLD not being a real estate play, but we also can't ignore the massive real estate portfolio here.  Has Eddie or management articulated what SHC Realty's grander plans are?  By that I mean:  safe to say they do some leasing and selling, but how will they allocate the ensuing cash flow?

The real estate will be more valuable if the stores are performing. Then they can sublease a portion of it for a good price.
Eddie seems to be a retail specialist. I think he will use the cash flow to grow Sears retail, or acquire other retailers. But this will be quite different from BRK. I don't foresee Eddie running an insurance company.

Well he already has Sears Re. AFAIK they don't insure anything but SHLD. Guessing you referring to taking on external liabilities, but he is running one.
Title: Re: SHLD - Sears
Post by: BTShine on May 02, 2013, 12:57:34 PM
I was at the meeting, too.  Here are some of my thoughts based on what's already been posted to our board...

At one point Mr. Lampert was asked "how should we think about valuing this company...?"  I don't think Lampert gave the answer everyone wanted to hear, but he said that "there is no doubt the real estate is valuable.  But, the company is much more valuable if it can be profitable.  So, he said there are two different ways to think of SHLD's value.  #1 is purely based upon real estate value" (I took this to mean his 'worst case scenario') "and #2 is based upon profitability."   This still leaves us with the problem of estimating the value of SHLD's real estate.

Hearing Lampert say the real estate has value basically solidified the idea that the company has the real estate as a baseline value.  The money losing stores can continue to be closed, which unburdens the profitable stores.  And, it harvests value from the inventory and real estate of the poorly performing stores. 

When Mr. Jaffe of Force Capital asked if SHLD is getting for it's real estate... specifically, "are we at the 'full dollar' with the offers we are receiving" (Mr. Jaffe asked how today's offers compare to the low '50 cent on the dollar' offers SHLD was getting for its real estate a few years back),  Mr. Lampert responded that "we are not getting offers at the full dollar, but we are getting closer."     

Title: Re: SHLD - Sears
Post by: Philip Morris IV on May 02, 2013, 01:17:03 PM
The real estate will be more valuable if the stores are performing. Then they can sublease a portion of it for a good price.
Eddie seems to be a retail specialist. I think he will use the cash flow to grow Sears retail, or acquire other retailers. But this will be quite different from BRK. I don't foresee Eddie running an insurance company.

Sorry - I realize I wasn't clear on that question.  I was referring to the stores he plans to close.

Say Sears closes 50-100 stores per year over the next 5-10 years, and SHC Realty then sells/leases that real estate.  How will he allocate the ensuing cash flows?  How will he handle the growth of SHC Realty relative to retail.

I guess what I'm getting at is - if he's closing stores, it's a fair assumption he won't put that much cash flow into "growing" Sears retail (i.e. opening more stores lol).  So then where will the cash go?

BTShine - great info!
Title: Re: SHLD - Sears
Post by: wellmont on May 02, 2013, 01:20:33 PM
The real estate will be more valuable if the stores are performing. Then they can sublease a portion of it for a good price.
Eddie seems to be a retail specialist. I think he will use the cash flow to grow Sears retail, or acquire other retailers. But this will be quite different from BRK. I don't foresee Eddie running an insurance company.

Sorry - I realize I wasn't clear on that question.  I was referring to the stores he plans to close.

Say Sears closes 50-100 stores per year over the next 5-10 years, and SHC Realty then sells/leases that real estate.  How will he allocate the ensuing cash flows?  How will he handle the growth of SHC Realty relative to retail.

I guess what I'm getting at is - if he's closing stores, it's a fair assumption he won't put that much cash flow into "growing" Sears retail (i.e. opening more stores lol).  So then where will the cash go?

BTShine - great info!

he will reduce debt.
Title: Re: SHLD - Sears
Post by: muscleman on May 02, 2013, 01:24:40 PM
The real estate will be more valuable if the stores are performing. Then they can sublease a portion of it for a good price.
Eddie seems to be a retail specialist. I think he will use the cash flow to grow Sears retail, or acquire other retailers. But this will be quite different from BRK. I don't foresee Eddie running an insurance company.

Sorry - I realize I wasn't clear on that question.  I was referring to the stores he plans to close.

Say Sears closes 50-100 stores per year over the next 5-10 years, and SHC Realty then sells/leases that real estate.  How will he allocate the ensuing cash flows?  How will he handle the growth of SHC Realty relative to retail.

I guess what I'm getting at is - if he's closing stores, it's a fair assumption he won't put that much cash flow into "growing" Sears retail (i.e. opening more stores lol).  So then where will the cash go?

BTShine - great info!

Why would you worry about this? He is a great fund manager and you are worrying if he has no place to deploy his cash?
Title: Re: SHLD - Sears
Post by: BargainValueHunter on May 02, 2013, 02:25:49 PM
Was Berkowitz @ the meeting?

He is a very large owner after all.
Title: Re: SHLD - Sears
Post by: BTShine on May 02, 2013, 03:14:10 PM
Berkowitz was not at the meeting as far as I could see. 

As for "what will he do with the cash", I think that would be a nice problem to see him try to solve.  He would either reinvest the money into SHLD's operations (handing out more ShopYourWay Points to new members), or buy back stock, or pay down debt, etc. 

Title: Re: SHLD - Sears
Post by: muscleman on May 05, 2013, 06:31:30 PM
I went to this Sears store today and bought two Land's End Canvas coat.
http://www.yelp.com/biz/sears-redmond

The label says it is 70% off the already reduced price, but when I took them to the counter, the computer showed the reduced price, not the final price (which should be 70% off the reduced price). The associate didn't even know there is the 70% off promotion. I felt unhappy but then the other associate came and said she knew the discount, so she had to manually apply the discount for me.
Then I said I wanted to talk to the manager, but the associate lied that the manager is very busy and wouldn't have time to meet me. I insisted and then she pretended to call the manager. I waited for 10 minutes but the manager didn't come.

Then I walked around the store and found the manager myself. I complained to him and he said he didn't receive any calls from the associates. Then he said it is surprising that the computer didn't show the final price and that some of the associates didn't know the promotion. Then he asked me if there is anything else I wanted to buy. I pointed to a jewelry box. He said he could check it out for me using his ipod. Then his ipod didn't show the correct price and he had to bring me to the counter to check out.

I think overall this store that I visited is poorly managed. I think there is a lot of room for improvement, and I hope someone could forward my story to Eddie.
In addition, I don't understand why there is sears.com and at the same time shopyourwayrewards.com. Couldn't they make just one site?
Title: Re: SHLD - Sears
Post by: txlaw on May 07, 2013, 07:36:16 PM
http://www.reuters.com/article/2013/05/01/sears-meeting-idUSL2N0DH36T20130501
Title: Re: SHLD - Sears
Post by: compoundinglife on May 09, 2013, 03:02:44 PM
http://www.dailyfinance.com/on/sears-offers-lease-to-own-program/

Partnering with Why Not Lease It (http://www.whynotleaseit.com/) to offer lease to own.
Title: Re: SHLD - Sears
Post by: muscleman on May 09, 2013, 08:56:54 PM
http://www.dailyfinance.com/on/sears-offers-lease-to-own-program/

Partnering with Why Not Lease It (http://www.whynotleaseit.com/) to offer lease to own.

This looks very cool. Appliances are very expensive, and this lease to own option could help a lot. :)
Title: Re: SHLD - Sears
Post by: BTShine on May 10, 2013, 10:28:49 AM
Agreed - Appliances are very expensive.

At the meeting Mr. Lampert commented on how financing had not really opened up for a lot of consumers buying appliances, etc.   Hearing that, and now seeing this news, is very encouraging to me. 

Also, in the meeting presentation, (see here: http://searsholdings.com/invest/docs/SHC_2013_Shareholder_Presentation.pdf) I think it's on page 27, they show that sales have increased by 8% PER MEMBER...I think this is big, big, big news, but I haven't heard anyone talking about it, and I haven't been able to figure out what that information really means for the big picture of SHLD.  Obviously it's encouraging...but, I can't quantify exactly how that will affect sales.   

Does anyone on this board have any thoughts about how the 8% growth in sales per SYWR member will affect things?  Also, if membership is growing, and sales per member are growing, how is it possible for sales to stay flat?  (granted, we haven't seen the Q1 sales figures, so maybe they aren't flat anymore :) )

Any insight is appreciated.

Title: Re: SHLD - Sears
Post by: Matson125 on May 13, 2013, 07:49:51 AM
Why Sears sees salvation in servers


http://www.tirebusiness.com/article/20130513/NEWS/130519983/why-sears-sees-salvation-in-servers

http://www.ubiquityce.com/
Title: Re: SHLD - Sears
Post by: muscleman on May 13, 2013, 08:18:01 AM
Why Sears sees salvation in servers


http://www.tirebusiness.com/article/20130513/NEWS/130519983/why-sears-sees-salvation-in-servers

http://www.ubiquityce.com/

This looks like a cool idea. Have you noticed that since Lambert took over the crown, new changes are coming in a fast pace?
Lease to own, and then the data center. :)
Title: Re: SHLD - Sears
Post by: txlaw on May 13, 2013, 10:51:06 AM
Why Sears sees salvation in servers


http://www.tirebusiness.com/article/20130513/NEWS/130519983/why-sears-sees-salvation-in-servers

http://www.ubiquityce.com/

Very interesting indeed.
Title: Re: SHLD - Sears
Post by: Matson125 on May 14, 2013, 09:48:59 AM
Sears Hometown Annual Meeting Slides

http://www.sec.gov/Archives/edgar/data/1548309/000154830913000015/ceoslidesvfinalannualsha.htm
Title: Re: SHLD - Sears
Post by: BTShine on May 14, 2013, 10:55:59 AM
The SHOS slide deck is interesting.  Thanks for posting.

Title: Re: SHLD - Sears
Post by: wellmont on May 14, 2013, 10:58:09 AM
Why Sears sees salvation in servers


http://www.tirebusiness.com/article/20130513/NEWS/130519983/why-sears-sees-salvation-in-servers

http://www.ubiquityce.com/

This looks like a cool idea. Have you noticed that since Lambert took over the crown, new changes are coming in a fast pace?
Lease to own, and then the data center. :)

more throwing stuff at the wall to see what sticks. :)
Title: Re: SHLD - Sears
Post by: muscleman on May 14, 2013, 02:12:39 PM
Why Sears sees salvation in servers


http://www.tirebusiness.com/article/20130513/NEWS/130519983/why-sears-sees-salvation-in-servers

http://www.ubiquityce.com/

This looks like a cool idea. Have you noticed that since Lambert took over the crown, new changes are coming in a fast pace?
Lease to own, and then the data center. :)

more throwing stuff at the wall to see what sticks. :)

But definitely he is not trying dumb things like what happened in JCP.
Title: Re: SHLD - Sears
Post by: FCharlie on May 14, 2013, 07:49:21 PM
So Sears wants to transform some of it's 2,000+ stores into data centers.  The article says that a data center can produce $7-$10 million in rent annually.

Let's just for fun say that Sears turns 1,000 stores into data centers that each produce $8.5 million of rent and $5 million of profit. That would be $5 billion of profit annually for a $6 billion company.

That would leave Sears at a little over one times earnings.

Likely? Probably not. Regardless, the point is simply to say that all Sears needs to do is find something, anything productive to do with it's assets and this stock would be a total grand slam home run.

Title: Re: SHLD - Sears
Post by: rmitz on May 15, 2013, 06:01:50 AM
So Sears wants to transform some of it's 2,000+ stores into data centers.  The article says that a data center can produce $7-$10 million in rent annually.

Let's just for fun say that Sears turns 1,000 stores into data centers that each produce $8.5 million of rent and $5 million of profit. That would be $5 billion of profit annually for a $6 billion company.

That would leave Sears at a little over one times earnings.

Likely? Probably not. Regardless, the point is simply to say that all Sears needs to do is find something, anything productive to do with it's assets and this stock would be a total grand slam home run.

I get your point and I think it's a fine point, but for those where the stores are not owned outright but long term below-market leases, this seems like something that would be prohibited.  I don't know that for sure but it's definitely not what the mall owner would want.  There's also the fact that you'd be having massive layoffs and so on.  Now, suppose you found some way to dramatically downsize the store into the profitable bits + a data center.

(FWIW there are also problems with the data center concept in general--there are big economies of scale in being very careful about your building design and location.  That's not to say these couldn't still be profitable, and more profitable than running the stores as-is.)
Title: Re: SHLD - Sears
Post by: txlaw on May 15, 2013, 07:55:45 AM
I get your point and I think it's a fine point, but for those where the stores are not owned outright but long term below-market leases, this seems like something that would be prohibited.  I don't know that for sure but it's definitely not what the mall owner would want.

You might be right about that leased space not being allowed to have these sorts of facilities.  Too bad the annual meeting is passed -- that would have been a great question to ask ESL.

I wonder if they could convert space into incubator/office space?  That's kind of a growing market in places like Austin these days, and I could see taking low cost leased RE, dividing it into incubator space, providing shared amenities, and subleasing it out.  Not sure what the profit potential of that is, though.
Title: Re: SHLD - Sears
Post by: ShahKhezri on May 15, 2013, 08:11:59 AM
This discussion is good.  Rackpace is headquartered in an old mall in San Antonio.  The city gave a very lucrative property tax credit to the Company because of the quality of jobs.  The mall is located in a not so great part of the town, but it was a good deal.

Title: Re: SHLD - Sears
Post by: ERICOPOLY on May 15, 2013, 09:01:15 AM
I got sucked in today for 4% position.

There ought to be an "ask txlaw" thread as I think he is pretty much always right.
Title: Re: SHLD - Sears
Post by: txlaw on May 15, 2013, 09:06:21 AM
I got sucked in today for 4% position.

There ought to be an "ask txlaw" thread as I think he is pretty much always right.

Haha, no wonder there was a spike today at the open! :)

Maybe I should start fund. ;D
Title: Re: SHLD - Sears
Post by: jeffmori7 on May 15, 2013, 09:55:57 AM
I got sucked in today for 4% position.

There ought to be an "ask txlaw" thread as I think he is pretty much always right.

Great idea, I would like to hear more about txlaw trackrecord, investment philosophy and so on!


eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)
Title: Re: SHLD - Sears
Post by: ERICOPOLY on May 15, 2013, 11:33:39 AM
eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)

I think Sears is an awful retailer that will never get turned around, and thus we may finally be getting somewhere with the stock after Eddie finally gives up on Sears the retailer and gets some other tenant into that real estate.

Sort of strange that my logic revolves around how terrible the Sears retail stores are.  I guess I am not that confident with only 4% invested but usually I find it easier to add than to make the initial outlay.

Title: Re: SHLD - Sears
Post by: plato1976 on May 15, 2013, 11:49:14 AM
Eric,

How do you value SEARS ' real estate ?
I feel when all those big box retailers are in trouble - the value of U.S. commercial real estate will be actually much lower than what's indicated now....



eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)

I think Sears is an awful retailer that will never get turned around, and thus we may finally be getting somewhere with the stock after Eddie finally gives up on Sears the retailer and gets some other tenant into that real estate.

Sort of strange that my logic revolves around how terrible the Sears retail stores are.  I guess I am not that confident with only 4% invested but usually I find it easier to add than to make the initial outlay.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on May 15, 2013, 11:51:19 AM
Eric,

How do you value SEARS ' real estate ?
I feel when all those big box retailers are in trouble - the value of U.S. commercial real estate will be actually much lower than what's indicated now....



eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)

I think Sears is an awful retailer that will never get turned around, and thus we may finally be getting somewhere with the stock after Eddie finally gives up on Sears the retailer and gets some other tenant into that real estate.

Sort of strange that my logic revolves around how terrible the Sears retail stores are.  I guess I am not that confident with only 4% invested but usually I find it easier to add than to make the initial outlay.

Why do you figure that they will all be in trouble?

I don't personally value the real estate.  I have this loosely coupled team of free analysts that have done that and I don't think I'll be any better than them so I saved myself the effort.
Title: Re: SHLD - Sears
Post by: plato1976 on May 15, 2013, 11:54:54 AM
well, I believe these analysts are really good to value the "current" value of these commercial real estate;
but I really have some concern about those physical retailers in general
maybe I am just too pessimistic
otherwise I would have jumped in one year ago

Eric,

How do you value SEARS ' real estate ?
I feel when all those big box retailers are in trouble - the value of U.S. commercial real estate will be actually much lower than what's indicated now....



eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)

I think Sears is an awful retailer that will never get turned around, and thus we may finally be getting somewhere with the stock after Eddie finally gives up on Sears the retailer and gets some other tenant into that real estate.

Sort of strange that my logic revolves around how terrible the Sears retail stores are.  I guess I am not that confident with only 4% invested but usually I find it easier to add than to make the initial outlay.

Why do you figure that they will all be in trouble?

I don't personally value the real estate.  I have this loosely coupled team of free analysts that have done that and I don't think I'll be any better than them so I saved myself the effort.
Title: Re: SHLD - Sears
Post by: Matson125 on May 15, 2013, 12:03:38 PM
This should further the RE discussion

J.C. Penney stores, real estate worth $4.06 billion: appraisal

http://www.reuters.com/article/2013/05/14/us-jcpenney-realestate-idUSBRE94D11D20130514

 
Title: Re: SHLD - Sears
Post by: compoundinglife on May 15, 2013, 12:07:51 PM
Eric,

How do you value SEARS ' real estate ?
I feel when all those big box retailers are in trouble - the value of U.S. commercial real estate will be actually much lower than what's indicated now....


Not Eric, but I will offer a response.

Sure real estate prices like anything else will be affected by supply and demand. If SHLD over the long term can turn its idle real estate into cash flow machines, who cares what the real estate market does in the short term. I posted a link in this thread a while back about a blown out building that makes some serious cash from advertising billboards on the side of the building. That is an example of some outside the box thinking of how to take an asset that was idle and viewed as undesirable and turn it into a source of cash flow.

Who knows if the data center idea or other ideas will stick but you have a smart long term thinking guy with a bunch of assets that sees greater value in them throwing off cash to him vs selling them. I like that they appear to be thinking outside of the box.

My 2 cents.
Title: Re: SHLD - Sears
Post by: FCharlie on May 15, 2013, 02:02:23 PM
Looks like Bruce Berkowitz picked up another 1.3 million shares of SHLD during Q1

Now owns 19.5 million shares.

Lampert, Tisch, & Berkowitz own over 82 million shares or just over 77% of SHLD

Title: Re: SHLD - Sears
Post by: hellsten on May 16, 2013, 12:02:31 AM
Interesting to see what people were saying about SHLD in 2005-2006:

Quote
But no less an authority than the investor Warren E. Buffett, whom Mr. Lampert
has held out as his model, has cautioned that Mr. Lampert has a hard job ahead of him.
"Eddie is a very smart guy, but putting Kmart and Sears together is a tough hand," Mr. Buffett says
in a transcript of a conversation he had in May with students from the University of Kansas that is
circulating on investment Web sites.

Mr. Buffett noted that few retailers that had long lagged competitors had been successfully revived.
"We would rather look for easier things to do," Mr. Buffett said.

Quote
"When Eddie got involved in AutoZone, the company already had double-digit market share," he said. That allowed Mr. Lampert
to push the company to cut spending, much as he is doing at Sears. Advertising spending at Sears,
for example, is already down substantially, he said. But because Sears is starting from a weak market
share position, that strategy has some risks, he said.

"Eddie has been a great finder of value," Mr. Melich said. "He has yet to take a business and grow it organically."

http://www.nytimes.com/2005/08/02/business/02place.html

Robert Jaffe from Force Capital Management:
Quote
We still think Sears [SHLD] is a bargain at today’s share price [of $168] for
two main reasons. In November of 2004,
[Sears Chairman] Eddie Lampert said “If
you’re a retailer and you can’t get 10%
EBITDA margins, you don’t belong in the
business.” Look at other struggling
retailers like J.C. Penney, which went
from 2% EBITDA margins to 11% margins over a span of 18 months. So our
first assumption is that Sears can achieve
10% margins, starting on a run-rate basis
next year.

Our second big assumption is based on
the fact that Eddie Lampert is one of the
best capital allocators there is, and we
think he’d like to shrink Sears’ share base
by one-third, to 100 million shares. If
those two things happen – and there are
some logistical difficulties in buying back
so many shares – the shares are worth
two to three times the current price.

http://www.valueinvestorinsight.com/12_06Trial.PDF

Share count is now 106.39 million (short % is 30.94%). EBITDA margin is not 10%…

Force Capital Management biggest position is still Sears plus Sears Hometown. They also own a lot of call options:
http://www.sec.gov/Archives/edgar/data/1317601/000131760113000004/a201303-13f_hr.txt
Title: Re: SHLD - Sears
Post by: BargainValueHunter on May 16, 2013, 06:02:04 AM
This:

Quote
Looks like Bruce Berkowitz picked up another 1.3 million shares of SHLD during Q1

Now owns 19.5 million shares.

Lampert, Tisch, & Berkowitz own over 82 million shares or just over 77% of SHLD

Plus This:

Quote
Share count is now 106.39 million (short % is 30.94%).

Equals:

What the heck is going to happen to the shorts if Sears reports a surprise to the upside next quarter???
Title: Re: SHLD - Sears
Post by: Myth465 on May 16, 2013, 06:09:21 AM
I almost want to buy just for the squeeze, Im not the best at math but short plus long term holders is more than 100%.
Berkowitz and Lampert should just keep buying.

When did the Tisch's get into this.
Title: Re: SHLD - Sears
Post by: prunes on May 16, 2013, 06:27:57 AM
That 30% is percent of the float not percent of total shares outstanding.
Title: Re: SHLD - Sears
Post by: accutronman on May 16, 2013, 07:12:11 AM
From Credit Suisse analysis:

J.C. Penney, in its presentation to potential investors on its debt offering,
includes a detailed real estate valuation prepared by a leading real estate
firm that gives us some insight into valuing Sears’s portfolio. Using that, and
with significant assumptions on the value of leased stores, the mix of the
portfolio relative to JCP, and valuations for Kmart, we have sharpened our
previous sum-of-the-parts analysis for SHLD. Using JCP as a guide, we are
lowering our breakup value to a range of $16 to $60 for the asset value. The
wide range primarily reflects the value of many of the leased properties and
the likelihood that closing stores will cost money.

■ In doing the above, we used the dark or closed stores analysis from the JCP
presentation, as that would be the way these stores are valued. Inside we
show our analysis, which we highlight has significant assumptions built in.

■ Two clear caveats in applying JCP’s analysis to Sears. First, we believe
Sears has a select number of trophy properties, where the zoning would
allow for redevelopment of the site at a significant profit to Sears. Knowing
how many of these sites exist is the question mark, but there could be as
many as 50 sites at $100+ per square foot. Second, offsetting the above, we
believe the JCP analysis was overly generous in its C and D mall grade
values, as we view those as zero or below, and we believe Sears has more
of those between its two brands than Penney does.

■ We continue to expect that SHLD will spin off or sell Lands’ End and Sears
Canada and sell a few stores. The company has indicated its intent to create
$500 million of liquidity this year, in addition to $300 million of cash
generated from carrying less inventory, so we will see how they create this
value. We note that we expect operations to generate negative $5 per share
in value, implying that should the breakup value be greater than the current
stock price that now would be an opportune time to start extracting value.
Title: Re: SHLD - Sears
Post by: hellsten on May 16, 2013, 10:08:56 AM
What the heck is going to happen to the shorts if Sears reports a surprise to the upside next quarter???

My guess is something similar to what happened with OSTK and TSLA stocks.

It seems Baker Street Capital also owns some SHLD options:
http://www.sec.gov/Archives/edgar/data/1488207/000092189513001081/form13fhr07950_03312013.txt
Title: Re: SHLD - Sears
Post by: muscleman on May 16, 2013, 10:49:48 AM
What the heck is going to happen to the shorts if Sears reports a surprise to the upside next quarter???

My guess is something similar to what happened with OSTK and TSLA stocks.

It seems Baker Street Capital also owns some SHLD options:
http://www.sec.gov/Archives/edgar/data/1488207/000092189513001081/form13fhr07950_03312013.txt

Is the data correct?

http://whalewisdom.com/filer/baker-street-capital-management-llc

Baker Street put in 81% of their money into one call option?
I guess it is 7 million shares equivalent, which should be 70,000 call options, right?
Title: Re: SHLD - Sears
Post by: muscleman on May 16, 2013, 10:55:06 AM
That 30% is percent of the float not percent of total shares outstanding.

Correct. Only 7.8 Million shares are shorted.
Title: Re: SHLD - Sears
Post by: Sunrider on May 16, 2013, 01:02:30 PM
What the heck is going to happen to the shorts if Sears reports a surprise to the upside next quarter???

My guess is something similar to what happened with OSTK and TSLA stocks.

It seems Baker Street Capital also owns some SHLD options:
http://www.sec.gov/Archives/edgar/data/1488207/000092189513001081/form13fhr07950_03312013.txt

Is the data correct?

http://whalewisdom.com/filer/baker-street-capital-management-llc

Baker Street put in 81% of their money into one call option?
I guess it is 7 million shares equivalent, which should be 70,000 call options, right?

Very odd. Is there any way to find out which calls (expiry/strike)?
Title: Re: SHLD - Sears
Post by: Sunrider on May 16, 2013, 01:07:48 PM
their last 13g indicates that includes 7m shares underlying options exercisable within 60days - and that was on Feb 19th. Still odd. When are the next results due? What do they expect to happen in the next ... month?


What the heck is going to happen to the shorts if Sears reports a surprise to the upside next quarter???

My guess is something similar to what happened with OSTK and TSLA stocks.

It seems Baker Street Capital also owns some SHLD options:
http://www.sec.gov/Archives/edgar/data/1488207/000092189513001081/form13fhr07950_03312013.txt

Is the data correct?

http://whalewisdom.com/filer/baker-street-capital-management-llc

Baker Street put in 81% of their money into one call option?
I guess it is 7 million shares equivalent, which should be 70,000 call options, right?

Very odd. Is there any way to find out which calls (expiry/strike)?
Title: Re: SHLD - Sears
Post by: hellsten on May 16, 2013, 01:59:48 PM
Old West Investment Management's comments on SHLD from June 2011:
http://www.oldwestim.com/files/media/Download%20this%20site/Commentaries%20and%20Investor%20Letters%202013.02.04.pdf

Quote
To sum it up, we believe that Eddie Lampert has found
the perfect arbitrage: by using conservative, consolidated accounting and refusing to correct Wall Street’s
analytical mistakes, he has been able to attractively buy back a majority of the shares he doesn’t own in the
company that he knows better than anyone else.



We have recently stopped lending
out our shares because we are increasingly concerned that there could be a fail-to-deliver problem if there
happens to be a short squeeze based on the market better recognizing the company’s underlying value as a
result of real estate deals, brand distribution deals, better than expected operating performance (imagine
margins rising as sales fall), or just continued buybacks with cash taken from operations or runoff activities.
When you strip out the shares owned by Eddie Lampert/ESL, boardmemember/ESL investor Tommy
Tisch, and long-term shareholder Bruce Berkowitz at Fairholme, only 20% of the total shares outstanding
remain publicly traded, and 50% of that ever-shrinking float is reported short. To repeat, only 20% of total
shares outstanding remain publicly traded, 50% of that float is reported short, and the company is buying
back 25-50% of its float annually
. If we’re right about the company’s cash flow, the company would be able
to buy back the rest of its float in 2 years at current prices and the high short interest just accelerates that.

More:
Quote
For those talking heads who spout that Eddie Lampert doesn’t know anything about retailing, we would encourage them to look at the financial summary on the first page of AutoZone’s annual report. If you’ve ever studied any retailer’s financials, it speaks for itself.

Old West Investment Management has ~23% of their portfolio in SHLD.

Interestingly, they have also opened a new position in SPDR S&P 500 (PUT) (26.3%)
Title: Re: SHLD - Sears
Post by: willie2013 on May 16, 2013, 02:54:41 PM
Looking at buying the common ($57.54 at today's close) and selling 9/21/13 $60 calls for $5.30 (last price today).  This example puts you in the stock at $52.24 ($57.54 - $5.30) and, if the stock is above $60 on 9/21 the return is 42% annualized  ($7.76/$52.54 X 365/128 days to expiry).  And, perhaps the buying by insiders/funds, improving retailing environment, and the value of the real estate limits the downside (stock falls below $52.24).  Feel free to poke holes in this, correct my math, etc - I welcome criticism....
Title: Re: SHLD - Sears
Post by: muscleman on May 16, 2013, 03:36:05 PM
Looking at buying the common ($57.54 at today's close) and selling 9/21/13 $60 calls for $5.30 (last price today).  This example puts you in the stock at $52.24 ($57.54 - $5.30) and, if the stock is above $60 on 9/21 the return is 42% annualized  ($7.76/$52.54 X 365/128 days to expiry).  And, perhaps the buying by insiders/funds, improving retailing environment, and the value of the real estate limits the downside (stock falls below $52.24).  Feel free to poke holes in this, correct my math, etc - I welcome criticism....

It depends on your projected price on 9/21/13. If the price will be $60 on that day, you are right.
But if the price will be $80 on that day, then buying today and selling a covered call at strike $80 gets you much better return.
Title: Re: SHLD - Sears
Post by: Myth465 on May 16, 2013, 04:12:34 PM
That 30% is percent of the float not percent of total shares outstanding.

Aw thanks Prunes.
Title: Re: SHLD - Sears
Post by: berkshiremystery on May 16, 2013, 04:46:45 PM
SHLD Short Interest in the last 12 months

http://www.nasdaq.com/symbol/shld/short-interest


---------------------------------------------------------------

Settlement Date   Short Interest   Avg Daily Share Volume   Days To Cover
4/30/2013   7,812,207   598,541   13.052083
4/15/2013   7,972,027   550,968   14.469129
3/28/2013   8,221,058   514,640   15.974386
3/15/2013   8,661,270   1,140,858   7.591891
2/28/2013   8,821,897   856,174   10.303860
2/15/2013   8,247,443   561,645   14.684441
1/31/2013   8,552,896   1,066,898   8.016601
1/15/2013   8,822,105   1,625,737   5.426527
12/31/2012   9,161,095   1,307,993   7.003933
12/14/2012   9,438,097   1,509,885   6.250871
11/30/2012   9,235,064   1,757,287   5.255296
11/15/2012   7,899,358   710,507   11.117917
10/31/2012   7,488,718   810,911   9.234944
10/15/2012   7,038,236   709,926   9.914042
9/28/2012   7,806,220   896,169   8.710656
9/14/2012   7,579,838   2,361,483   3.209779
8/31/2012   8,934,831   1,112,094   8.034241
8/15/2012   9,055,782   731,276   12.383535
7/31/2012   9,327,597   539,245   17.297512
7/13/2012   9,443,657   566,007   16.684700
6/29/2012   9,660,609   749,130   12.895771
6/15/2012   9,566,876   835,722   11.447438
5/31/2012   9,900,527   1,381,674   7.165603
5/15/2012   9,631,115   1,480,732   6.504293



Title: Re: SHLD - Sears
Post by: berkshiremystery on May 16, 2013, 06:03:47 PM
Here's the filing by Baker Street Capital about their SHLD call options -->

http://www.sec.gov/Archives/edgar/data/1310067/000092189513000470/sc13g07950011_02192013.htm

( 1) Includes 7,000,000 shares of Common Stock underlying certain options exercisable within 60 days.

Beware! This doesn't necessary mean that they are 81% of their assets in SHLD calls. They only have to report to the SEC the equity and option investments, while a big cash position goes unnoticed! If they keep 50% in cash, this might only be some 40.5% position in SHLD calls, but still impressive.







their last 13g indicates that includes 7m shares underlying options exercisable within 60days - and that was on Feb 19th. Still odd. When are the next results due? What do they expect to happen in the next ... month?


What the heck is going to happen to the shorts if Sears reports a surprise to the upside next quarter???

My guess is something similar to what happened with OSTK and TSLA stocks.

It seems Baker Street Capital also owns some SHLD options:
http://www.sec.gov/Archives/edgar/data/1488207/000092189513001081/form13fhr07950_03312013.txt

Is the data correct?

http://whalewisdom.com/filer/baker-street-capital-management-llc

Baker Street put in 81% of their money into one call option?
I guess it is 7 million shares equivalent, which should be 70,000 call options, right?

Very odd. Is there any way to find out which calls (expiry/strike)?
Title: Re: SHLD - Sears
Post by: FCharlie on May 16, 2013, 06:34:19 PM
Looking at buying the common ($57.54 at today's close) and selling 9/21/13 $60 calls for $5.30 (last price today).  This example puts you in the stock at $52.24 ($57.54 - $5.30) and, if the stock is above $60 on 9/21 the return is 42% annualized  ($7.76/$52.54 X 365/128 days to expiry).  And, perhaps the buying by insiders/funds, improving retailing environment, and the value of the real estate limits the downside (stock falls below $52.24).  Feel free to poke holes in this, correct my math, etc - I welcome criticism....


Go for it. You can make a small fortune selling SHLD options. I've always been amazed at the premiums that are offered on both sides. I do this also, except I'd suggest selling shorter time periods simply because as someone else pointed out, the stock could be at $80 and you'll wish you'd have not sold the calls.

I think with Lampert and Berkowitz buying every dip combined with the 10K saying that they plan to raise $500 million of liquidity through asset sales this year, there is a floor under the stock.
Title: Re: SHLD - Sears
Post by: nsa122 on May 17, 2013, 05:21:23 AM
"Now, let's look at the stores we have closed to see how much profit they contributed in 2006, our peak operating earnings year. While we have closed just over 300 domestic stores since 2006, we have retained most of the stores that contributed significantly to our profitability in that year. We calculate that the amount of EBITDA that the closed stores generated in 2006 was a little more than $100 million of the $3.2 billion in domestic Adjusted EBITDA that the company had in 2006. Through a combination of net inventory and real estate proceeds, we estimate that we have generated roughly $1 billion in value from these stores. While we closed these stores at different times over the past six years, if you combined their performance for the twelve months prior to the start of the process to close each store, they generated an EBITDA loss of over $50 million in aggregate."

This caught my attention, in part so refreshing to have a management discuss the business so forthrightly. It'd be enlightening to see a distribution of stores by profitability. He has closed the bottom 300, I wonder what do the top 300 look like.

I also wonder what he means exactly by "generated roughly $1 billion in value from these stores." Does this wording mean $1B in cash proceeds from liquidation of real estate and inventory or $1B in averted future losses due to ceasing unprofitable business?
Title: Re: SHLD - Sears
Post by: nsa122 on May 17, 2013, 07:18:31 AM
Here is my attempt to value SHLD's real estate in Texas. I basically took each store and looked it up in the county's appraisal district database.

60 stores.
Range $1.4M-18.2M
Mean $4.6M
Median $3.5M
Total $268M

If the rest of the country looks like Texas, that would equal $3.6B. How well the tax rolls approximate the potential market value of the stores I put up for debate.
Of note, the most valuable store, at $18M in Valley View Mall in North Dallas, is the subject of a proposed $2B redevelopment.
http://www.wfaa.com/news/local/Developing-plans-at-Valley-View-Mall-location-to-be-revealed-today-148657265.html
A few stores like this might change the value of the real estate total, but hard to predict by how much.
Title: Re: SHLD - Sears
Post by: plato1976 on May 17, 2013, 01:36:09 PM
May I shamelessly ask what you guys' estimation of SHLD 's intrinsic value ?
I almost want to jump in , just for the potential of a short squeeze - it's closer and closer to the point of show hand when those big shareholders keep buying

Looking at buying the common ($57.54 at today's close) and selling 9/21/13 $60 calls for $5.30 (last price today).  This example puts you in the stock at $52.24 ($57.54 - $5.30) and, if the stock is above $60 on 9/21 the return is 42% annualized  ($7.76/$52.54 X 365/128 days to expiry).  And, perhaps the buying by insiders/funds, improving retailing environment, and the value of the real estate limits the downside (stock falls below $52.24).  Feel free to poke holes in this, correct my math, etc - I welcome criticism....


Go for it. You can make a small fortune selling SHLD options. I've always been amazed at the premiums that are offered on both sides. I do this also, except I'd suggest selling shorter time periods simply because as someone else pointed out, the stock could be at $80 and you'll wish you'd have not sold the calls.

I think with Lampert and Berkowitz buying every dip combined with the 10K saying that they plan to raise $500 million of liquidity through asset sales this year, there is a floor under the stock.
Title: Re: SHLD - Sears
Post by: wellmont on May 17, 2013, 03:07:42 PM
Looking at buying the common ($57.54 at today's close) and selling 9/21/13 $60 calls for $5.30 (last price today).  This example puts you in the stock at $52.24 ($57.54 - $5.30) and, if the stock is above $60 on 9/21 the return is 42% annualized  ($7.76/$52.54 X 365/128 days to expiry).  And, perhaps the buying by insiders/funds, improving retailing environment, and the value of the real estate limits the downside (stock falls below $52.24).  Feel free to poke holes in this, correct my math, etc - I welcome criticism....

there are a lot of short term trades in today's market. it seems to me that this one will capture a bit of upside in a short period if the stock runs. But keep in mind that eddie was at one point buying stock back over $100 a share. and he's not in it to make a ST CAP gain. Neither is BB. So yeah if you're right you have a nice ST gain that you pay tax on, and then have to find a place to put that money.  I don't think any of the great value investors are as short term focused as this trade indicates. it's a trade for someone who doesn't have a lot of conviction. this stock could be over $65 in 2 or 3 sessions.  Think big.
Title: Re: SHLD - Sears
Post by: plato1976 on May 17, 2013, 08:59:42 PM
don't see an obvious catalyst except that big shareholders are buying buying and buying
the float shares are shrinking

Looking at buying the common ($57.54 at today's close) and selling 9/21/13 $60 calls for $5.30 (last price today).  This example puts you in the stock at $52.24 ($57.54 - $5.30) and, if the stock is above $60 on 9/21 the return is 42% annualized  ($7.76/$52.54 X 365/128 days to expiry).  And, perhaps the buying by insiders/funds, improving retailing environment, and the value of the real estate limits the downside (stock falls below $52.24).  Feel free to poke holes in this, correct my math, etc - I welcome criticism....

there are a lot of short term trades in today's market. it seems to me that this one will capture a bit of upside in a short period if the stock runs. But keep in mind that eddie was at one point buying stock back over $100 a share. and he's not in it to make a ST CAP gain. Neither is BB. So yeah if you're right you have a nice ST gain that you pay tax on, and then have to find a place to put that money.  I don't think any of the great value investors are as short term focused as this trade indicates. it's a trade for someone who doesn't have a lot of conviction. this stock could be over $65 in 2 or 3 sessions.  Think big.
Title: Re: SHLD - Sears
Post by: merkhet on May 18, 2013, 11:39:09 AM
re Baker Street -- I think it's interesting to note the attached screen shot... the 60s and 70s see to be the only ones with enough open interest to accommodate 70,000 contracts...

Perhaps they bought the 60s and sold the 70s so that they could reduce their actual outlay?

Title: Re: SHLD - Sears
Post by: merkhet on May 18, 2013, 11:44:36 AM
Notably, Force Capital (where Baker Street's CEO used to work) might have a similar play...

http://whalewisdom.com/filer/force-capital-management-llc
Title: Re: SHLD - Sears
Post by: maxthetrade on May 18, 2013, 12:05:20 PM
Wow, they have a third of their reported portfolio in S&P500 put options!
Title: Re: SHLD - Sears
Post by: BargainValueHunter on May 18, 2013, 12:43:15 PM
Just a little reminder:

http://www.gurufocus.com/news/123169/answers-from-bruce-berkowitz-of-fairholme-fund-comment-on-banks-insurers-and-st-joe

Quote
The point was that housing prices did erode the initial value that I had on Sears’ real estate. Its price is starting to bump around the bottom. Eddie Lampert has done a fairly good job of improving the balance sheet. We are moving off-balance-sheet pension fund liabilities and starting to close down unprofitable stores, while at the same time trying a few new ideas.

It wasn’t that long ago when everyone thought Apple was about to go down the tubes. Except Sears has a much better balance sheet now than Apple did at that time.

I'm not too worried. In fact, I'm quite confident that Sears has the wherewithal to wait and prepare for an upturn in housing, which their business is very heavily tied to. Then we shall see. From watching it for the last few years, Sears has become a real win-win, in that if Eddie Lampert does what most people expect he can do – improve the retailing of Sears – the stock will fly high and recognize that. If he can't, the stock price will continue to be volatile, very depressed at times, less depressed at other times, and eventually he'll have one share and we'll have one share, and there will only be two shares.

(http://www.valueinvestingtv.tv/wp-content/uploads/2011/02/Berkowitz-on-Sears-189x175.jpg)
Title: Re: SHLD - Sears
Post by: luck on May 18, 2013, 02:00:42 PM
not sure what the cash position is.  but even if it's 50-50, this is a pretty wild trade.  my guess is the fund is probably in alot of cash to offset the risk of such a trade.  haven't looked into it though.  if not in alot of cash, the investors must be quaking in their boots.

at the very least, it causes to me to make a run through sears while i'm at the mall, to see if things are changing.  i had pretty much given up on buying SHLD after seeing the sears in the local mall.
Title: Re: SHLD - Sears
Post by: merkhet on May 18, 2013, 04:00:55 PM
Something to note re the Baker Street & Force Capital positions -- they hold options, but the reported position is based on # of shares x price of each share -- so their reported position is not their actual position. Their actual position is # of options x price of each option. A big difference.
Title: Re: SHLD - Sears
Post by: prunes on May 18, 2013, 04:35:12 PM
Is that a quirk of the 13F disclosure in general?
Title: Re: SHLD - Sears
Post by: muscleman on May 19, 2013, 11:09:44 AM
re Baker Street -- I think it's interesting to note the attached screen shot... the 60s and 70s see to be the only ones with enough open interest to accommodate 70,000 contracts...

Perhaps they bought the 60s and sold the 70s so that they could reduce their actual outlay?

A while ago I read some posters in this thread saying Baker street bought a lot of $60 calls expiring within 60 days. This means they are close to expiration now.
Title: Re: SHLD - Sears
Post by: BTShine on May 19, 2013, 05:55:16 PM
re Baker Street -- I think it's interesting to note the attached screen shot... the 60s and 70s see to be the only ones with enough open interest to accommodate 70,000 contracts...

Perhaps they bought the 60s and sold the 70s so that they could reduce their actual outlay?

A while ago I read some posters in this thread saying Baker street bought a lot of $60 calls expiring within 60 days. This means they are close to expiration now.


I believe the wording is something like "the options are exercisable within the next 60 days."  I'm not a specialist in these filings, but I've took this to mean that Baker Street has the ability to exercise (aka exercisable) these options in the next 60 days.  But, they are not obligated to exercise them, nor do the options necessarily expire, within the next 60 days.  That is a big difference to me.   January 2015 LEAPS are exercisable within the next 60 days, but we all know they're still good until January 2015. 
Title: Re: SHLD - Sears
Post by: muscleman on May 20, 2013, 08:29:16 AM
re Baker Street -- I think it's interesting to note the attached screen shot... the 60s and 70s see to be the only ones with enough open interest to accommodate 70,000 contracts...

Perhaps they bought the 60s and sold the 70s so that they could reduce their actual outlay?

A while ago I read some posters in this thread saying Baker street bought a lot of $60 calls expiring within 60 days. This means they are close to expiration now.


I believe the wording is something like "the options are exercisable within the next 60 days."  I'm not a specialist in these filings, but I've took this to mean that Baker Street has the ability to exercise (aka exercisable) these options in the next 60 days.  But, they are not obligated to exercise them, nor do the options necessarily expire, within the next 60 days.  That is a big difference to me.   January 2015 LEAPS are exercisable within the next 60 days, but we all know they're still good until January 2015.

Oh, ok. Then this is not a big problem for them. Why would they said exercisable within 60 days? That seems to imply it is no longer exercisable after 60 days. That is very weird.
Title: Re: SHLD - Sears
Post by: muscleman on May 20, 2013, 08:31:49 AM
http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9173227-924-570201&type=sect&TabIndex=2&companyid=656789&ppu=%252fdefault.aspx%253fsym%253dSHLD

Can anyone please help me understand Note 20 in this 10k? (In case you can't find it, open the page, CTRL+F, type in note 20, press ENTER :))
Bruce said recently that he wanted to give us a hint and we should check the assets and liabilities of Guarantor Subsidiaries and Non-Guarantor Subsidiaries. I found it here, but can't understand what it means.

This is also what Old West talked about:
Eddie Lampert has structured the company advantageously. Many of the company’s best assets are unencumbered by the bulk of the company’s liabilities. We think the subsidiaries all have positive equity, but it’s a useful exercise to consider worst case runoff values if the stakes in Sears Canada, Kenmore, Craftsman, DieHard, and some of the real estate are directly distributed to shareholders through spinoffs or creative re-financings.

Could anyone please help me understand this? Thanks a lot in advance! :)
Title: Re: SHLD - Sears
Post by: merkhet on May 20, 2013, 09:11:28 AM
I've created a screenshot of the assets & liabilities broken out by parent, guarantor & non-guarantor subsidiaries. 

(1) Take a look at the receivables & the payables. 
(2) Take a look at the equity value of the non-guarantor subsidiaries.
(3) Figure out the "real" equity value of the non-guarantor subsidiaries -- do they really need such high receivables?

Next, take a look at the statement of cash flows

(4) Figure out how much the non-guarantor subsidiary is earning
(5) Figure out (3) / (4) for an ROE number

The biggest issue with Sears has always been the "when" and not the "what."

(Edited to put the screenshots in as attachments.)
Title: Re: SHLD - Sears
Post by: nsa122 on May 20, 2013, 09:20:40 AM
Forgive my ignorance, but wouldn't the real estate value be listed under "Total property and equipment, net" which is listed as $4.8B for the Guarantor and $1.7B for the Non-Guarantor subsidiaries, suggesting that most of the real estate is held in the former?  Or am I making incorrect assumptions?
Also, is there any way to get a handle on what the Non-Guarantor subsidiaries actually are? Stupid question, but can you just put all your crappy stores in the guarantor subsidiary? Thanks in advance.
Title: Re: SHLD - Sears
Post by: muscleman on May 20, 2013, 09:32:42 AM
I've created a screenshot of the assets & liabilities broken out by parent, guarantor & non-guarantor subsidiaries. 

(1) Take a look at the receivables & the payables. 
(2) Take a look at the equity value of the non-guarantor subsidiaries.
(3) Figure out the "real" equity value of the non-guarantor subsidiaries -- do they really need such high receivables?

Next, take a look at the statement of cash flows

(4) Figure out how much the non-guarantor subsidiary is earning
(5) Figure out (3) / (4) for an ROE number

The biggest issue with Sears has always been the "when" and not the "what."

(Edited to put the screenshots in as attachments.)

This is confusing to me.
So the non-guarantor has 25 bn receivables and the guarantor has 25 bn payables. I guess this is somewhat like an intercompany loan?
If we reduce that receivable from the book value of the non-guarantor, then it has 3 bn book value and it is earning 900 m per year? That seems very high ROE.

But I guess the profitability of the non-guarantor depends on the guarantor. Maybe the guarantor is the biggest customer of the non-guarantor, so if the guarantor dies in the worst case scenario, then probably the non-guarantor will lose significant business too?

On the asset side, I still don't understand why the non-guarantor has the best assets. It is not disclosed here.
Title: Re: SHLD - Sears
Post by: merkhet on May 20, 2013, 11:56:56 AM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.
Title: Re: SHLD - Sears
Post by: muscleman on May 20, 2013, 12:41:08 PM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?
Title: Re: SHLD - Sears
Post by: merkhet on May 20, 2013, 01:16:20 PM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

I don't know if this is the easiest way, but it's the way that I have done it. I know there are other Sears followers on this board, so they should feel free to chime in at any time.

(1) List of subsidiaries -- http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm
(2) The $1.25 billion note for Sears -- http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/0001193125-10-230322-index.htm -- look under Schedule A and cross-reference
(3) Take the list of non-guarantor subsidiaries and do some Google searching (http://en.wikipedia.org/wiki/Sears_Holdings is also helpful)

As an example, take a look at the following:

(1) A Google search of "sears KCP IP" -- http://bit.ly/12Q4RUl
(2) Then you start to search for the May 2006 transaction, but that'll come up empty so you go to the 10-K
(3) And you'll find some language on page 46 of the 2006 10-K -- http://www.sec.gov/Archives/edgar/data/1310067/000119312507066067/d10k.htm

And then you keep following the rabbit down the hole... :)
Title: Re: SHLD - Sears
Post by: wellmont on May 21, 2013, 12:49:17 PM
lampert is going to be on the CC Thursday after the close.
Title: Re: SHLD - Sears
Post by: BTShine on May 21, 2013, 04:06:14 PM
Yeah, that should be interesting to listen to. 

Does anyone else think that their conference call will discuss some of their plans to "generate at least $500 million of additional liquidity through monetization of assets over the next twelve months" as they mentioned in their Q4/Year End press release?  That's my guess, but who knows...

Title: Re: SHLD - Sears
Post by: muscleman on May 22, 2013, 01:58:24 PM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

I don't know if this is the easiest way, but it's the way that I have done it. I know there are other Sears followers on this board, so they should feel free to chime in at any time.

(1) List of subsidiaries -- http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm
(2) The $1.25 billion note for Sears -- http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/0001193125-10-230322-index.htm -- look under Schedule A and cross-reference
(3) Take the list of non-guarantor subsidiaries and do some Google searching (http://en.wikipedia.org/wiki/Sears_Holdings is also helpful)

As an example, take a look at the following:

(1) A Google search of "sears KCP IP" -- http://bit.ly/12Q4RUl
(2) Then you start to search for the May 2006 transaction, but that'll come up empty so you go to the 10-K
(3) And you'll find some language on page 46 of the 2006 10-K -- http://www.sec.gov/Archives/edgar/data/1310067/000119312507066067/d10k.htm

And then you keep following the rabbit down the hole... :)

Thank you so much for holding me hand by hand through this exercise! I learned a lot! :)

The latest 10k said that "The 6   5/8% Notes are guaranteed by certain of our 100% owned domestic subsidiaries that own the collateral for the notes, as well as by Sears Holdings Management Corporation and SRAC (the “guarantor subsidiaries”)."

From the link that you posted, it didn't say who owns the KCD IP sub. I verified that Sears Holdings Management Corporation is owned by SHLD parent, and it didn't seem to own the KCD IP sub, so that probably implies that the parent directly owns KCD IP.

My other concern is that in the nightmare scenario, if the guarantor sub files for bankruptcy, and Eddie spins off KCD IP, does that constitute  fraudulent conveyance? I assume it does not, because the assets transferred out is from the parent, not from the guarantor sub, but I just want to make sure.
Title: Re: SHLD - Sears
Post by: dcollon on May 23, 2013, 09:48:17 AM
I think you all will enjoy this commercial.

http://www.youtube.com/watch?v=m1yir-p68xM&feature=youtu.be
Title: Re: SHLD - Sears
Post by: Grenville on May 23, 2013, 10:21:24 AM
I think you all will enjoy this commercial.

http://www.youtube.com/watch?v=m1yir-p68xM&feature=youtu.be

Hilarious!!! I laughed even more the second time I saw it. Thanks!
Title: Re: SHLD - Sears
Post by: wellmont on May 23, 2013, 12:39:43 PM
I love the out of the box thinking. trying new things. being creative. being innovative. not being me too.
Title: Re: SHLD - Sears
Post by: CorpRaider on May 23, 2013, 12:48:35 PM
I'm not claiming to know the answer to your fraudulent conveyance question but I think I recall reading something about the IP and brands being moved into "bankruptcy remote" subsidiaries in connection with the SHOS rights offering when they were outlining all of those steps.  You might review some of those materials maybe pull them up and work search the pdfs.  At least that might give you an indication of what they intended for the structure to accomplish.  Eddie got some questions about the separation of the IP and brands during the last earnings call as well, I think.  But I don't remember his responses being particularly helpful.  He did try to dispell the theory that he wants to ultimately end up with nothing but a brand licensing and IP holding co, if I recall correctly.  The mofo just loves selling appliances and auto parts, I guess.
Title: Re: SHLD - Sears
Post by: JRH on May 23, 2013, 01:21:37 PM
The mofo just loves selling appliances and auto parts, I guess.

I laughed MUCH harder at this than at the commercial.  Just me, I guess.

Earnings are out, stock not happy:
http://searsholdings.mediaroom.com/index.php?s=16310&item=137202
Title: Re: SHLD - Sears
Post by: wellmont on May 23, 2013, 01:24:36 PM
The mofo just loves selling appliances and auto parts, I guess.

I laughed MUCH harder at this than at the commercial.  Just me, I guess.

Earnings are out, stock not happy:
http://searsholdings.mediaroom.com/index.php?s=16310&item=137202

and the stock is getting crushed. which is par for the course after a shld earnings release. :) but really the worse things get the faster he should act in trying to create value with the asset base. one would think. but eddie may want to drain the swamp Again first....
Title: Re: SHLD - Sears
Post by: wellmont on May 23, 2013, 01:29:11 PM
this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)
Title: Re: SHLD - Sears
Post by: JRH on May 23, 2013, 01:55:33 PM
this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)

It's remarkable to view this in light of the 80/20 theory (20% of the stores hold 80% of the value).  If you believe the profitable stores are also largely the ones where the real estate is most valuable, then that means something like 80% of the stores are bleeding red ink by Sears' own preferred profitability metric.

FYI, Sears employs ~275,000 people.  That's a lot of jobs on life support.
Title: Re: SHLD - Sears
Post by: wellmont on May 23, 2013, 01:58:30 PM
this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)

It's remarkable to view this in light of the 80/20 theory (20% of the stores hold 80% of the value).  If you believe the profitable stores are also largely the ones where the real estate is most valuable, then that means something like 80% of the stores are bleeding red ink by Sears' own preferred profitability metric.

FYI, Sears employs ~275,000 people.  That's a lot of jobs on life support.

I really think he wants to buy more stock under $50. and when he gets the amount of stock he wants then he will start creating value. he is draining the swamp of all shareholders who lack infinite patience. I don't understand why he is not selling more assets. this is a sellers market and he does nothing.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on May 23, 2013, 02:05:39 PM
this company is not even producing adjusted ebitda anymore. eddie is certainly way more patient than the minority shareholders! :)



It's remarkable to view this in light of the 80/20 theory (20% of the stores hold 80% of the value).  If you believe the profitable stores are also largely the ones where the real estate is most valuable, then that means something like 80% of the stores are bleeding red ink by Sears' own preferred profitability metric.

FYI, Sears employs ~275,000 people.  That's a lot of jobs on life support.

I really think he wants to buy more stock under $50. and when he gets the amount of stock he wants then he will start creating value. he is draining the swamp of all shareholders who lack infinite patience. I don't understand why he is not selling more assets. this is a sellers market and he does nothing.

Reminds me of Loews during 2009. Many golden opportunities flew out of the window for the sake of...I don't know what!
Title: Re: SHLD - Sears
Post by: hellsten on May 23, 2013, 02:06:52 PM
I really think he wants to buy more stock under $50. and when he gets the amount of stock he wants then he will start creating value. he is draining the swamp of all shareholders who lack infinite patience. I don't understand why he is not selling more assets. this is a sellers market and he does nothing.

I hope he mentions the Sith Lord in the next earnings call.
Title: Re: SHLD - Sears
Post by: muscleman on May 23, 2013, 02:11:43 PM
The mofo just loves selling appliances and auto parts, I guess.

I laughed MUCH harder at this than at the commercial.  Just me, I guess.

Earnings are out, stock not happy:
http://searsholdings.mediaroom.com/index.php?s=16310&item=137202


The decline at Sears Domestic of 2.4% predominately was driven by weather related declines in the lawn & garden category. Excluding lawn & garden, comparable store sales would have increased 0.3%.

So things are actually stabilizing at least.
I think with their new lease to own program, Q2 results could be better. :)
Title: Re: SHLD - Sears
Post by: wellmont on May 23, 2013, 02:49:46 PM
stock headed for sub $50. I think you're being way optimistic about this business. it's not even producing ebitda. it's truly awful. And I suspect even Eddie is losing patience with the retail side and is going to have to start being more aggressive in restructuring this thing.
Title: Re: SHLD - Sears
Post by: FCharlie on May 23, 2013, 03:09:27 PM
Eddie sounded much more serious today than he has in the past. He seemed like he has had enough of the mediocre results. To be honest, there was no real reason to do this conference call. They didn't announce anything groundbreaking and the results were mediocre just as they have been for years.

What kills me is how easily they can raise cash from monetizing assets. They say that if they do a transaction with the protection agreement business they should easily raise $500 million and likely more. They also said that doing a transaction with the protection agreement business does not prevent them from doing other transactions and that although it's hard to predict size, they are likely to do real estate transactions this year.

So if it's that easy to generate cash, then sell the $500 million protection agreement business and buy back 10% of the shares. Then sell some stores. Sears is not in financial distress. They have tons of owned inventory, tons of liquidity, tons of assets, and minimal market capitalization.



stock headed for sub $50. I think you're being way optimistic about this business. it's not even producing ebitda. it's truly awful. And I suspect even Eddie is losing patience with the retail side and is going to have to start being more aggressive in restructuring this thing.
Title: Re: SHLD - Sears
Post by: wellmont on May 23, 2013, 03:31:54 PM
the selling assets bit did not help the stock at all. it's down well over 10%. :) people have heard this all before. he will sell enough to tread water a bit longer I suppose.
Title: Re: SHLD - Sears
Post by: plato1976 on May 23, 2013, 05:15:50 PM
I think my shares need infinite patience :(

the selling assets bit did not help the stock at all. it's down well over 10%. :) people have heard this all before. he will sell enough to tread water a bit longer I suppose.
Title: Re: SHLD - Sears
Post by: no_free_lunch on May 23, 2013, 06:17:36 PM
The link below is to discussions on an article about sears converting stores to a data center.  I think the data center link might have been on this board already, but the readers comments alone might be worth reading.

Quote
This makes sense. Most of the spaces Sears is closing are obsolescent for retail uses for several reasons. There is a vast over-supply of retail space in general, partially because the boom generated construction for the sake of construction, partially because the bust reduced consumer spending and partially because of the internet.

Retail shopping has also changed. Malls are being replaced by power centers and urban core retail is being revitalized. And there's Walmart for household items and Home Depot for white goods and Dicks for athletic equimpment etc.

One of the biggest changes is the way in which stores are placed relative to catchment. Driving patterns have changed and interstate access is more important than a high traffic corner for big box retail. Sears locations were based on the old model.

That said, their locations on older arterials tends to correlate with high levels of utility infrastructure. A collapsing retail micro-environment may mean surplus utility capacity. Which reminds me that another trend making Sears commercial buildings obsolescent is the radically improved energy efficiency of modern retail design - big boxes have skylights, etc.

[edit] A bit more about power supply. Local power companies sell power. That's how they make money. Like the Sears stores are surplus retail space, they often have capacity in the wrong places. They will cut deals in exchange for a long term return - it's why they run lines to a site in the first place.

https://news.ycombinator.com/item?id=5756508
Title: Re: SHLD - Sears
Post by: wellmont on May 24, 2013, 07:03:49 AM
with the stock down 17% today somehow I don't think the idea of converting stores to data centers are on people's mind. if you look at how data centers are evolving, they are getting larger----much larger than the typical sears store, they are in areas with ready access to cheap abundant power, and they are being put in low cost states that provide incentives to build there. this idea does not make much sense. Now how do we get eddie to become serious about restructuring the company?
Title: Re: SHLD - Sears
Post by: wisdom on May 24, 2013, 07:35:28 AM
He has clearly stated time and again that SHLD will be a retailer.
Title: Re: SHLD - Sears
Post by: muscleman on May 24, 2013, 08:55:20 AM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

I don't know if this is the easiest way, but it's the way that I have done it. I know there are other Sears followers on this board, so they should feel free to chime in at any time.

(1) List of subsidiaries -- http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm
(2) The $1.25 billion note for Sears -- http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/0001193125-10-230322-index.htm -- look under Schedule A and cross-reference
(3) Take the list of non-guarantor subsidiaries and do some Google searching (http://en.wikipedia.org/wiki/Sears_Holdings is also helpful)

As an example, take a look at the following:

(1) A Google search of "sears KCP IP" -- http://bit.ly/12Q4RUl
(2) Then you start to search for the May 2006 transaction, but that'll come up empty so you go to the 10-K
(3) And you'll find some language on page 46 of the 2006 10-K -- http://www.sec.gov/Archives/edgar/data/1310067/000119312507066067/d10k.htm

And then you keep following the rabbit down the hole... :)

I am digging into the covenants of this 1.25 bn notes, and there are things that still confuse me. So it looks like the only limitations for SHLD's non-guarantors are not to sell and lease-back properties (but outright sale for the purpose of raising cash seems permitted), and not to use the properties to secure additional borrowing?
http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/dex41.htm

INDENTURE, dated as of October 12, 2010, among SEARS HOLDINGS CORPORATION, a Delaware corporation (the “Issuer”),

So the issuer is SHLD parent.

“Restricted Subsidiary” means each Domestic Subsidiary of the Issuer other than Orchard Supply Hardware Stores Corporation and its Subsidiaries.

SECTION 4.04. Limitations on Liens.
The Issuer shall not, and shall not cause or permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit or suffer to exist any Liens (other than Permitted Liens) of any kind against or upon (i) prior to the occurrence of a Fall-Away Event, the Collateral or any proceeds thereof and (ii) from and after the occurrence of a Fall-Away Event, any property or assets of the Issuer or any of its Restricted Subsidiaries or any proceeds thereof, in each case, to secure indebtedness for borrowed money and whether such assets are owned on the Issue Date or acquired after the Issue Date.
SECTION 4.05. Limitation on Sale and Leaseback Transactions.
(a) The Issuer shall not, and shall not permit any Restricted Subsidiary to, enter into any arrangement with any Person providing for the sale by the Issuer or any Restricted Subsidiary of any property more than 180 days following the Issuer’s or such Restricted Subsidiary’s acquisition of such property, with the intention of taking back a lease of such property (a “Sale and Leaseback Transaction”) unless the terms of such sale or transfer have been determined by the Issuer’s Board of Directors to be fair and arm’s-length and either:
(i) within 12 months after the receipt of the proceeds of the sale or transfer, the Issuer or any of its Subsidiaries applies an amount equal to the net proceeds of the sale or transfer to the prepayment or retirement of indebtedness (other than any indebtedness that is subordinated to the Notes); or
 
-29-
(ii) the Issuer or such Restricted Subsidiary would be entitled, at the effective date of the sale or transfer, to incur indebtedness secured by a Lien on such property (and such Attributable Debt shall be deemed to be secured by a Lien on such property) in an amount at least equal to the Attributable Debt in respect of the Sale and Leaseback Transaction pursuant to Section 4.04.
(b) Clause (a) of this Section 4.05 will not apply to any Sale and Leaseback Transaction (i) for a term of not more than three years including renewals; or (ii) between the Issuer and a Subsidiary or between Subsidiaries, provided that the lessor is the Issuer or a wholly owned Subsidiary of the Issuer.
SECTION 4.06. Additional Guarantees.
If, any of the Domestic Subsidiaries of the Issuer becomes a Specified Subsidiary, then the Issuer shall cause such Specified Subsidiary (unless such Specified Subsidiary is already a Guarantor) to:
(a) execute and deliver to the Trustee a supplemental indenture pursuant to which such Specified Subsidiary shall unconditionally guarantee all of the Issuer’s obligations under the Notes and this Indenture and, unless a Fall-Away Event has occurred, enter into joinders to the Security Documents to grant the Collateral Agent a Lien on the assets of such Subsidiary constituting Collateral; and
(b) deliver to the Trustee one or more Opinions of Counsel that, subject to customary qualifications, such supplemental indenture and guarantee (i) have been duly authorized, executed and delivered by such Subsidiary and (ii) constitute valid and legally binding obligations of such Subsidiary, enforceable in accordance with their terms.
Title: Re: SHLD - Sears
Post by: muscleman on May 24, 2013, 09:14:10 AM
Something to note re the Baker Street & Force Capital positions -- they hold options, but the reported position is based on # of shares x price of each share -- so their reported position is not their actual position. Their actual position is # of options x price of each option. A big difference.

Does Baker street need to report short positions as well?
I checked the open interests on all expiration dates, and, as you pointed out, the only possible ones they bought are the Jan 2015 calls. They probably bought the $60 and sold the $70 ones.
That means they paid $3.3 per pair for the 70000 calls, which means they put down $21m, which is about 20% of their total portfolio into this single call option.
That is a big bet!!!! :o
Title: Re: SHLD - Sears
Post by: wellmont on May 24, 2013, 09:19:58 AM
they don't have to report short positions. but if they wanted to hedge they would buy puts no? and that would be reportable I believe. luckily they still have time. :)
Title: Re: SHLD - Sears
Post by: muscleman on May 24, 2013, 09:24:33 AM
10-Q is out.

http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9298630-907-506841&type=sect&TabIndex=2&companyid=7342&ppu=%252fdefault.aspx%253fsym%253dAMBC


page 12: Is that the underfunded pension liability here? Most of it seems to be guaranteed by the Guarantor sub as well.


http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9173227-924-570201&type=sect&TabIndex=2&companyid=656789&ppu=%252fdefault.aspx%253fsym%253dSHLD
Page 108.

Title: Re: SHLD - Sears
Post by: muscleman on May 24, 2013, 09:33:24 AM
they don't have to report short positions. but if they wanted to hedge they would buy puts no? and that would be reportable I believe. luckily they still have time. :)

No this is not hedge. Buying $60 calls and selling $70 calls is a bullish option strategy. :)
Title: Re: SHLD - Sears
Post by: premfan on May 24, 2013, 10:02:04 AM
Eddie sounded much more serious today than he has in the past. He seemed like he has had enough of the mediocre results. To be honest, there was no real reason to do this conference call. They didn't announce anything groundbreaking and the results were mediocre just as they have been for years.

What kills me is how easily they can raise cash from monetizing assets. They say that if they do a transaction with the protection agreement business they should easily raise $500 million and likely more. They also said that doing a transaction with the protection agreement business does not prevent them from doing other transactions and that although it's hard to predict size, they are likely to do real estate transactions this year.

So if it's that easy to generate cash, then sell the $500 million protection agreement business and buy back 10% of the shares. Then sell some stores. Sears is not in financial distress. They have tons of owned inventory, tons of liquidity, tons of assets, and minimal market capitalization.



stock headed for sub $50. I think you're being way optimistic about this business. it's not even producing ebitda. it's truly awful. And I suspect even Eddie is losing patience with the retail side and is going to have to start being more aggressive in restructuring this thing.

I cant think of a better real estate market to be dumping assets. I don't understand the logic of not dumping real estate assets in a bull market for property( yes we are in a serious bull market for real estate prices).  Eddie is too slow. Just dump enough assets so the capex is at  a manageable level. Use that cash to acquire tech assets if he wants and buyback stock. The plan is really  simple. He just refuses to give up on retail.  Eddie is not a great ceo/chairman. After reading the outsiders he is NOT a outsider.  Great companies are great from the beginning. Do case studies and see that the truly great companies are great within usually year 4.   
Title: Re: SHLD - Sears
Post by: Sportgamma on May 24, 2013, 11:38:20 AM
Eddie sounded much more serious today than he has in the past. He seemed like he has had enough of the mediocre results. To be honest, there was no real reason to do this conference call. They didn't announce anything groundbreaking and the results were mediocre just as they have been for years.

What kills me is how easily they can raise cash from monetizing assets. They say that if they do a transaction with the protection agreement business they should easily raise $500 million and likely more. They also said that doing a transaction with the protection agreement business does not prevent them from doing other transactions and that although it's hard to predict size, they are likely to do real estate transactions this year.

So if it's that easy to generate cash, then sell the $500 million protection agreement business and buy back 10% of the shares. Then sell some stores. Sears is not in financial distress. They have tons of owned inventory, tons of liquidity, tons of assets, and minimal market capitalization.



stock headed for sub $50. I think you're being way optimistic about this business. it's not even producing ebitda. it's truly awful. And I suspect even Eddie is losing patience with the retail side and is going to have to start being more aggressive in restructuring this thing.

I cant think of a better real estate market to be dumping assets. I don't understand the logic of not dumping real estate assets in a bull market for property( yes we are in a serious bull market for real estate prices).  Eddie is too slow. Just dump enough assets so the capex is at  a manageable level. Use that cash to acquire tech assets if he wants and buyback stock. The plan is really  simple. He just refuses to give up on retail.  Eddie is not a great ceo/chairman. After reading the outsiders he is NOT a outsider.  Great companies are great from the beginning. Do case studies and see that the truly great companies are great within usually year 4.

Could you refer to some data relating  to the bull market in (commercial/retail?) real estate?

TIA,

Gísli
Title: Re: SHLD - Sears
Post by: plato1976 on May 24, 2013, 03:21:55 PM
Just curious if it's easier for Eric to add SHLD after a crash to 50
:)
I still feel the catalyst is not there



eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)

I think Sears is an awful retailer that will never get turned around, and thus we may finally be getting somewhere with the stock after Eddie finally gives up on Sears the retailer and gets some other tenant into that real estate.

Sort of strange that my logic revolves around how terrible the Sears retail stores are.  I guess I am not that confident with only 4% invested but usually I find it easier to add than to make the initial outlay.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on May 24, 2013, 04:16:56 PM
Just curious if it's easier for Eric to add SHLD after a crash to 50
:)
I still feel the catalyst is not there



eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)

I think Sears is an awful retailer that will never get turned around, and thus we may finally be getting somewhere with the stock after Eddie finally gives up on Sears the retailer and gets some other tenant into that real estate.

Sort of strange that my logic revolves around how terrible the Sears retail stores are.  I guess I am not that confident with only 4% invested but usually I find it easier to add than to make the initial outlay.

It occurred to me today that the stock is down because the operations are terrible and Eddie still talks as if he is surprised.

I have an idea for him.  Shut down the corporate HQ and move his desk into one of the mostly vacant stores so he gets a better idea of why they lose money.
Title: Re: SHLD - Sears
Post by: plato1976 on May 24, 2013, 04:57:01 PM
I have a small position in SHLD under the assumption that Eddie knows they are in trouble as a retailer... After all he's in the game for a long time, and knows things much better than maybe all guys here

It's a mystery why he wants to drag out this thing for longer time
SHLD seems worth a few multiples of the current market cap with its real estate assets, its core brands and the appliance business. Its online business may be worth sth but they need to figure out a way to achieve a sustainable online business when they dramatically scale down store counts. But anyway they are not scaling down stores aggressively enough. I am in the game b/c the upside is very enticing...

Just curious if it's easier for Eric to add SHLD after a crash to 50
:)
I still feel the catalyst is not there



eric, what exactly got you in for SHLD? You want to make $ with all Berkowitz ideas? :)

I think Sears is an awful retailer that will never get turned around, and thus we may finally be getting somewhere with the stock after Eddie finally gives up on Sears the retailer and gets some other tenant into that real estate.

Sort of strange that my logic revolves around how terrible the Sears retail stores are.  I guess I am not that confident with only 4% invested but usually I find it easier to add than to make the initial outlay.

It occurred to me today that the stock is down because the operations are terrible and Eddie still talks as if he is surprised.

I have an idea for him.  Shut down the corporate HQ and move his desk into one of the mostly vacant stores so he gets a better idea of why they lose money.
Title: Re: SHLD - Sears
Post by: prunes on May 24, 2013, 05:06:30 PM
The two words every Eddie/Brucie worshipping, coattail riding investor needs to know: path dependence.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on May 24, 2013, 06:21:25 PM
The two words every Eddie/Brucie worshipping, coattail riding investor needs to know: path dependence.

I know its about the long term value but just for a little perspective SHLD is up 21.50% in 2013 (vs. ~15.70% for the S&P 500) AFTER today's dump.

It is hard to imagine a scenario where the stock falls back into the $20s and stays there with Lampert, Berkowitz, Stahl, etc. seeming ready to buy up what is left in the public market after every collapse.

Berkowitz just bought another million shares +.

Now if any of the big boys start selling then WATCH OUT BELOW!
Title: Re: SHLD - Sears
Post by: valuecfa on May 24, 2013, 07:54:31 PM
It'll be interesting to see if Eddie's partners in his fund will continue to trust his concentrated strategy in Sears as sales and earnings continue to disappoint by such a large margin.
Title: Re: SHLD - Sears
Post by: prunes on May 24, 2013, 08:30:01 PM
If I recall correctly, about 12 - 18 months ago he sold a bunch of shares from his fund to his personal account. Some people speculated at the time that it was driven by redemption requests.
Title: Re: SHLD - Sears
Post by: muscleman on May 24, 2013, 08:30:08 PM
It'll be interesting to see if Eddie's partners in his fund will continue to trust his concentrated strategy in Sears as sales and earnings continue to disappoint by such a large margin.

When you say his partners, do you mean his clients? I think his clients wants to get out, and he is buying stocks from them to give them the opportunity to get out.
See the latest filings of form 4. ESL partners is selling, and Eddie is buying.
Title: Re: SHLD - Sears
Post by: FCharlie on May 24, 2013, 08:39:08 PM
Amazing to me that out of 106 million shares, only about 24 million are outside the hands of Lampert, Berkowitz, and Tisch.

Today 8 million shares traded.



Title: Re: SHLD - Sears
Post by: valuecfa on May 24, 2013, 08:49:48 PM
If I recall correctly, about 12 - 18 months ago he sold a bunch of shares from his fund to his personal account. Some people speculated at the time that it was driven by redemption requests.

I'm sure it was from redemptions.

I'm referring to current remaining partners, with money still with him. I think those that are past the 5 yr lock up are contemplating their faith in his investment prowess. For those that do continue to exit, it will also be interesting to all see if Lampert will continue to fund their exits, or if it would put further pressure on the share price given the small float. And hopefully Lampert isn't using leverage, or overreaching with his stock as collateral on any personal liabilities...would hate to see an Aubrey McClendon moment.

Interesting to watch from the sidelines.

It's also kind of fun to speculate if those high net worth clients who would like to exit but can't, are hedging with puts in their personal portfolios, causing the large pricing premiums over the past year.
Title: Re: SHLD - Sears
Post by: prunes on May 25, 2013, 10:58:53 AM
The Tisches have been in this since at least 2006. With Thomas Tisch a director you'd think he'd be in a good position to evaluate the business. Pop quiz: how many shares have the Tisches added since 2006? Why? If the Tisches thought this were a homerun, could they allocate the cash to buy more shares? All else being equal, shouldn't we be closer, hypothetically, to a catalyst than we were in 2006? And if that's the case, shouldn't, all else being equal, you be more confident in your investment, and therefore more willing to allocate additional cash to it?
Title: Re: SHLD - Sears
Post by: CorpRaider on May 25, 2013, 05:17:39 PM
The Tisches have apparently been too busy sucking their thumbs since 2006 to allocate anything.
Title: Re: SHLD - Sears
Post by: muscleman on May 25, 2013, 09:39:34 PM
If I recall correctly, about 12 - 18 months ago he sold a bunch of shares from his fund to his personal account. Some people speculated at the time that it was driven by redemption requests.

I'm sure it was from redemptions.

I'm referring to current remaining partners, with money still with him. I think those that are past the 5 yr lock up are contemplating their faith in his investment prowess. For those that do continue to exit, it will also be interesting to all see if Lampert will continue to fund their exits, or if it would put further pressure on the share price given the small float. And hopefully Lampert isn't using leverage, or overreaching with his stock as collateral on any personal liabilities...would hate to see an Aubrey McClendon moment.

Interesting to watch from the sidelines.

It's also kind of fun to speculate if those high net worth clients who would like to exit but can't, are hedging with puts in their personal portfolios, causing the large pricing premiums over the past year.

I think how ESL works is that every five years, investors decide if they want to get money out. If they decide not to, they are locked up for another five years.
I can't find detailed info about this, but I saw one video in WSJ about this.
The lockup ended last year and there weren't too many investors who wanted to get out, so they will be locked for another five years from last year.
Title: Re: SHLD - Sears
Post by: muscleman on May 27, 2013, 10:57:17 PM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

Hi merkhet,
    I just read through the latest 10-Q. It seems like the notes are issued by the parent, SHLD, even though it is guaranteed by only a few subsidiaries? In case of bankruptcy, don't the note holders have the claims on the parent, SHLD's assets, including the non-guarantors' assets?


Thank you!
   
Title: Re: SHLD - Sears
Post by: muscleman on May 28, 2013, 09:11:20 AM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

I don't know if this is the easiest way, but it's the way that I have done it. I know there are other Sears followers on this board, so they should feel free to chime in at any time.

(1) List of subsidiaries -- http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm
(2) The $1.25 billion note for Sears -- http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/0001193125-10-230322-index.htm -- look under Schedule A and cross-reference
(3) Take the list of non-guarantor subsidiaries and do some Google searching (http://en.wikipedia.org/wiki/Sears_Holdings is also helpful)

As an example, take a look at the following:

(1) A Google search of "sears KCP IP" -- http://bit.ly/12Q4RUl
(2) Then you start to search for the May 2006 transaction, but that'll come up empty so you go to the 10-K
(3) And you'll find some language on page 46 of the 2006 10-K -- http://www.sec.gov/Archives/edgar/data/1310067/000119312507066067/d10k.htm

And then you keep following the rabbit down the hole... :)

I am trying my best to figure out if there is anything in the indenture that says even though SHLD is the issuer, it does not have any liabilities for the bond and only the guarantors have liabilities for the bond. I am not sure if I found one. Does the highlighted part mean that?

SECTION 10.01. Guarantee.
Subject to the provisions of this Article Ten, each Guarantor, by execution of this Indenture, jointly and severally, unconditionally guarantees to each Holder and to the Trustee and their respective successors and assigns (i) the due and punctual payment of the principal of and interest and premium, if any, on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration, required purchase or otherwise, the due and punctual payment of interest on the overdue principal of and interest on the Notes, to the extent lawful, and the due and punctual payment of all other Obligations of the Issuer to the Holders or the Trustee all in accordance with the terms of such Note, this Indenture and the Registration Rights Agreements, and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, required purchase or otherwise. Each Guarantor, by execution of this Indenture, agrees that its obligations hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note, this Indenture or the Registration Rights Agreements, any waiver, modification or indulgence granted to the Issuer or any other Guarantor with respect thereto by the Holder of such Note, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or such Guarantor.
 
-51-
Each Guarantor hereby waives diligence, presentment, demand for payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to any such Note or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guarantee will not be discharged as to any such Note except by payment in full of the principal thereof and interest thereon. Each Guarantor hereby agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) subject to this Article Ten, the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Obligations as provided in Article Six, subject to any rescission thereof pursuant to Section 6.04, such Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee.


But look at here:

The Trustee shall, upon the receipt of a written order of the Issuer signed by an Officer of the Issuer (an “Authentication Order”), the applicable Notes duly executed by the Issuer, and the notation of Guarantee to be endorsed thereon duly executed by each Guarantor, authenticate (i) Notes for original issue on the Issue Date in the aggregate principal amount not to exceed $1,250,000,000 and (ii) Additional Notes in an unlimited principal amount, to the extent permitted by Section 4.04. The Authentication Order shall specify the amount of Notes to be authenticated, the date on which the Notes are to be authenticated, and the names and delivery instructions for each Holder of the Notes. Furthermore, Notes may be authenticated or delivered upon registration or transfer, or in lieu of, other Notes pursuant to Section 2.07, 2.08, 2.11, 3.06 or 8.05 or in connection with a Change of Control Offer pursuant to Section 4.07 or Collateral Coverage Offer pursuant to Section 4.08. The Trustee shall be entitled to receive an Opinion of Counsel of the Issuer and the Guarantors in connection with such authentication of Notes that this Indenture will constitute valid and legally binding obligations of the Issuer and the Guarantors, and that such Notes, when duly authorized and executed by the Issuer and duly authenticated by the Trustee in the manner provided in this Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Issuer, and that the Guarantees, when duly authorized and executed by the Guarantors, will constitute valid and binding obligations of such Guarantors, enforceable in accordance with their terms, subject to (i) bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors generally, (ii) the application of general principles of equity, and (iii) applicable law and public policy with respect to rights to indemnity and contribution.
Title: Re: SHLD - Sears
Post by: Kraven on May 28, 2013, 10:23:07 AM
The brands (KCD) & real estate reside in the non-guarantor subsidiaries.  Also, the "net" at the end means net of depreciation, which grossly underestimates the value of the real estate.

You have to figure out what business the non-guarantor is in -- before you ask whether the value of the non-guarantor subsidiaries depends on the guarantor subsidiaries.  Does it currently?  Probably.  Must it always?  Not necessarily.

Sure. Could you please tell me where to find more info about this, such as what assets are in the non-guarantor and what are in the guarantor?

I don't know if this is the easiest way, but it's the way that I have done it. I know there are other Sears followers on this board, so they should feel free to chime in at any time.

(1) List of subsidiaries -- http://www.sec.gov/Archives/edgar/data/1310067/000131006713000013/shldex21201210k.htm
(2) The $1.25 billion note for Sears -- http://www.sec.gov/Archives/edgar/data/1310067/000119312510230322/0001193125-10-230322-index.htm -- look under Schedule A and cross-reference
(3) Take the list of non-guarantor subsidiaries and do some Google searching (http://en.wikipedia.org/wiki/Sears_Holdings is also helpful)

As an example, take a look at the following:

(1) A Google search of "sears KCP IP" -- http://bit.ly/12Q4RUl
(2) Then you start to search for the May 2006 transaction, but that'll come up empty so you go to the 10-K
(3) And you'll find some language on page 46 of the 2006 10-K -- http://www.sec.gov/Archives/edgar/data/1310067/000119312507066067/d10k.htm

And then you keep following the rabbit down the hole... :)

I am trying my best to figure out if there is anything in the indenture that says even though SHLD is the issuer, it does not have any liabilities for the bond and only the guarantors have liabilities for the bond. I am not sure if I found one. Does the highlighted part mean that?

SECTION 10.01. Guarantee.
Subject to the provisions of this Article Ten, each Guarantor, by execution of this Indenture, jointly and severally, unconditionally guarantees to each Holder and to the Trustee and their respective successors and assigns (i) the due and punctual payment of the principal of and interest and premium, if any, on each Note, when and as the same shall become due and payable, whether at maturity, by acceleration, required purchase or otherwise, the due and punctual payment of interest on the overdue principal of and interest on the Notes, to the extent lawful, and the due and punctual payment of all other Obligations of the Issuer to the Holders or the Trustee all in accordance with the terms of such Note, this Indenture and the Registration Rights Agreements, and (ii) in the case of any extension of time of payment or renewal of any Notes or any of such other Obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration, required purchase or otherwise. Each Guarantor, by execution of this Indenture, agrees that its obligations hereunder shall be absolute and unconditional, irrespective of, and shall be unaffected by, any invalidity, irregularity or unenforceability of any such Note or this Indenture, any failure to enforce the provisions of any such Note, this Indenture or the Registration Rights Agreements, any waiver, modification or indulgence granted to the Issuer or any other Guarantor with respect thereto by the Holder of such Note, or any other circumstances which may otherwise constitute a legal or equitable discharge of a surety or such Guarantor.
 
-51-
Each Guarantor hereby waives diligence, presentment, demand for payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest or notice with respect to any such Note or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guarantee will not be discharged as to any such Note except by payment in full of the principal thereof and interest thereon. Each Guarantor hereby agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) subject to this Article Ten, the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of such Obligations as provided in Article Six, subject to any rescission thereof pursuant to Section 6.04, such Obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee.


But look at here:

The Trustee shall, upon the receipt of a written order of the Issuer signed by an Officer of the Issuer (an “Authentication Order”), the applicable Notes duly executed by the Issuer, and the notation of Guarantee to be endorsed thereon duly executed by each Guarantor, authenticate (i) Notes for original issue on the Issue Date in the aggregate principal amount not to exceed $1,250,000,000 and (ii) Additional Notes in an unlimited principal amount, to the extent permitted by Section 4.04. The Authentication Order shall specify the amount of Notes to be authenticated, the date on which the Notes are to be authenticated, and the names and delivery instructions for each Holder of the Notes. Furthermore, Notes may be authenticated or delivered upon registration or transfer, or in lieu of, other Notes pursuant to Section 2.07, 2.08, 2.11, 3.06 or 8.05 or in connection with a Change of Control Offer pursuant to Section 4.07 or Collateral Coverage Offer pursuant to Section 4.08. The Trustee shall be entitled to receive an Opinion of Counsel of the Issuer and the Guarantors in connection with such authentication of Notes that this Indenture will constitute valid and legally binding obligations of the Issuer and the Guarantors, and that such Notes, when duly authorized and executed by the Issuer and duly authenticated by the Trustee in the manner provided in this Indenture and delivered against payment of the purchase price therefor, will constitute valid and binding obligations of the Issuer, and that the Guarantees, when duly authorized and executed by the Guarantors, will constitute valid and binding obligations of such Guarantors, enforceable in accordance with their terms, subject to (i) bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors generally, (ii) the application of general principles of equity, and (iii) applicable law and public policy with respect to rights to indemnity and contribution.

With all due respect, I think you're spending a lot of time spinning your wheels here.  You're wasting time I assume you don't want to waste.  You're never going to find the provision you're looking for.  I haven't read this indenture and I'm not going to, but by definition the issuer will be obligated on the debt.  So whichever Sears entity is the issuer it will be obligated.  The guarantors only are liable on the debt if the issuer is unable to pay.  So that's not a good thing.  Even then, the guarantors will typically have subrogation rights (i.e. the issuer would owe them the amounts they paid on their behalf if the issuer ever comes up with funds).  There's no free lunch on any of this. 
Title: Re: SHLD - Sears
Post by: merkhet on May 28, 2013, 11:27:54 AM

Hi merkhet,
    I just read through the latest 10-Q. It seems like the notes are issued by the parent, SHLD, even though it is guaranteed by only a few subsidiaries? In case of bankruptcy, don't the note holders have the claims on the parent, SHLD's assets, including the non-guarantors' assets?

Thank you!
   

Sears Holdings Corp (SHC) is the issuer, and it's on the hook if it defaults and the guarantor subsidiaries can't cough up the money.  While the non-guarantor subsidiaries are subsidiaries of SHC, they may not be on the hook because they're not guarantors and they're bankruptcy remote entities.  (See the following link: http://definitions.uslegal.com/b/bankruptcy-remote-entity/)
Title: Re: SHLD - Sears
Post by: Kraven on May 28, 2013, 11:57:42 AM

Hi merkhet,
    I just read through the latest 10-Q. It seems like the notes are issued by the parent, SHLD, even though it is guaranteed by only a few subsidiaries? In case of bankruptcy, don't the note holders have the claims on the parent, SHLD's assets, including the non-guarantors' assets?

Thank you!
   

Sears Holdings Corp (SHC) is the issuer, and it's on the hook if it defaults and the guarantor subsidiaries can't cough up the money.  While the non-guarantor subsidiaries are subsidiaries of SHC, they may not be on the hook because they're not guarantors and they're bankruptcy remote entities.  (See the following link: http://definitions.uslegal.com/b/bankruptcy-remote-entity/)

Just a clarification.  A non-guarantor sub would not be expected to be on the hook as you said, although there might be a claim on the parent's equity interest in that entity.  Being bankruptcy remote does not determine whether or not an entity is on the hook for an obligation.  All it means is that an entity has been organized in a manner by which it is unlikely that such entity would ever go into bankruptcy.  However, there have been bankruptcy remote entities that have gone under.  It can be ugly.
Title: Re: SHLD - Sears
Post by: merkhet on May 28, 2013, 12:04:14 PM
Yes, that's right -- they have a claim on the equity of the subsidiary but not the assets of the subsidiary.

I believe GGP had some bankruptcy-remote entities go under in '09.
Title: Re: SHLD - Sears
Post by: muscleman on May 28, 2013, 12:56:59 PM
Yes, that's right -- they have a claim on the equity of the subsidiary but not the assets of the subsidiary.

I believe GGP had some bankruptcy-remote entities go under in '09.

Thank you. So SHLD holds equity interests in the non-guarantor subs, and SHLD is liable for all of the $1.25 bn note. So how does that properly separate assets from liabilities, as Old West management said in their 2011 letter? If SHLD goes bankrupt, the equity interests of the non-guarantor subs will be taken away by the note holders.

If SHLD performs a spin off for these non-guarantor subs, they have to do it while they are still in good shape. If they do it within 6 months prior to bankruptcy, the note holders can sue them for fraudulent conveyance, can't they?
Title: Re: SHLD - Sears
Post by: merkhet on May 28, 2013, 05:53:16 PM
I'm not 100% sure about Old West. That said, Sears does not have a solvency issue, so if Sears goes bankrupt, it is unlikely that a $1.25 billion note holder will walk away with a batch of subsidiaries that are making $1 billion in cash flow.

I also don't think they will be spinning off the non-guarantors, but I could be wrong.
Title: Re: SHLD - Sears
Post by: muscleman on May 28, 2013, 07:51:10 PM

With all due respect, I think you're spending a lot of time spinning your wheels here.  You're wasting time I assume you don't want to waste.  You're never going to find the provision you're looking for.  I haven't read this indenture and I'm not going to, but by definition the issuer will be obligated on the debt.  So whichever Sears entity is the issuer it will be obligated.  The guarantors only are liable on the debt if the issuer is unable to pay.  So that's not a good thing.  Even then, the guarantors will typically have subrogation rights (i.e. the issuer would owe them the amounts they paid on their behalf if the issuer ever comes up with funds).  There's no free lunch on any of this.

This is not always true. If the debt is non-recourse, then the issuer will not have the liability to make it whole.
For example, the US mortgages are non-recourse. If I buy a house with a mortgage and then default. All the bank can recover is only from the foreclosure of the house. It cannot ask me for further compensation for their loss.

The $1.24 bn note here is a secured loan, so there is likelihood to be non-recourse. I haven't figured this out yet though. But if you search for sears, non-recourse in google, you can find out that Sears Canada and Orchard Hardware's debt are non-recourse to SHLD.
Title: Re: SHLD - Sears
Post by: Kraven on May 29, 2013, 04:20:28 AM

With all due respect, I think you're spending a lot of time spinning your wheels here.  You're wasting time I assume you don't want to waste.  You're never going to find the provision you're looking for.  I haven't read this indenture and I'm not going to, but by definition the issuer will be obligated on the debt.  So whichever Sears entity is the issuer it will be obligated.  The guarantors only are liable on the debt if the issuer is unable to pay.  So that's not a good thing.  Even then, the guarantors will typically have subrogation rights (i.e. the issuer would owe them the amounts they paid on their behalf if the issuer ever comes up with funds).  There's no free lunch on any of this.

This is not always true. If the debt is non-recourse, then the issuer will not have the liability to make it whole.
For example, the US mortgages are non-recourse. If I buy a house with a mortgage and then default. All the bank can recover is only from the foreclosure of the house. It cannot ask me for further compensation for their loss.

The $1.24 bn note here is a secured loan, so there is likelihood to be non-recourse. I haven't figured this out yet though. But if you search for sears, non-recourse in google, you can find out that Sears Canada and Orchard Hardware's debt are non-recourse to SHLD.

You're mixing up issues and confusing yourself.  Just because something is non-recourse doesn't mean you are not obligated on the debt.  It simply means there is no recourse to your assets.  But absent a legal determination that you are excused on the debt (like in a bankruptcy) or a lender forgiving the debt, the obligation remains.  It may just be in name only depending on the situation.

I am further confused why you are spending so much time on these issues.  They strike me as amoeba sized in the grand scheme of things.  While it is often not satisfactory to say that the experts have it handled, in this case it is accurate.  Sears is represented by some of the top lawyers in the country, the best money can buy.  These legal issues are well settled and basic.  While someone may sue down the road after a transaction, I have every confidence that Sears's lawyers will have properly structured any transaction they enter into and minimized the risk.  The risks you are concerned about are the corporate equivalent to an asteroid hitting the earth and ending life as we know it.  It's possible, but what are you going to do about it.  At least in the case of Sears, if you are so concerned, don't own the stock.  I think though you are getting worried over nothing.  There are bigger fish to fry in the analysis.
Title: Re: SHLD - Sears
Post by: muscleman on May 29, 2013, 11:20:04 AM

With all due respect, I think you're spending a lot of time spinning your wheels here.  You're wasting time I assume you don't want to waste.  You're never going to find the provision you're looking for.  I haven't read this indenture and I'm not going to, but by definition the issuer will be obligated on the debt.  So whichever Sears entity is the issuer it will be obligated.  The guarantors only are liable on the debt if the issuer is unable to pay.  So that's not a good thing.  Even then, the guarantors will typically have subrogation rights (i.e. the issuer would owe them the amounts they paid on their behalf if the issuer ever comes up with funds).  There's no free lunch on any of this.

This is not always true. If the debt is non-recourse, then the issuer will not have the liability to make it whole.
For example, the US mortgages are non-recourse. If I buy a house with a mortgage and then default. All the bank can recover is only from the foreclosure of the house. It cannot ask me for further compensation for their loss.

The $1.24 bn note here is a secured loan, so there is likelihood to be non-recourse. I haven't figured this out yet though. But if you search for sears, non-recourse in google, you can find out that Sears Canada and Orchard Hardware's debt are non-recourse to SHLD.

You're mixing up issues and confusing yourself.  Just because something is non-recourse doesn't mean you are not obligated on the debt.  It simply means there is no recourse to your assets.  But absent a legal determination that you are excused on the debt (like in a bankruptcy) or a lender forgiving the debt, the obligation remains.  It may just be in name only depending on the situation.

I am further confused why you are spending so much time on these issues.  They strike me as amoeba sized in the grand scheme of things.  While it is often not satisfactory to say that the experts have it handled, in this case it is accurate.  Sears is represented by some of the top lawyers in the country, the best money can buy.  These legal issues are well settled and basic.  While someone may sue down the road after a transaction, I have every confidence that Sears's lawyers will have properly structured any transaction they enter into and minimized the risk.  The risks you are concerned about are the corporate equivalent to an asteroid hitting the earth and ending life as we know it.  It's possible, but what are you going to do about it.  At least in the case of Sears, if you are so concerned, don't own the stock.  I think though you are getting worried over nothing.  There are bigger fish to fry in the analysis.

Sorry I am a newbie investor, so I am trying to learn everything as detailed as I can when I come across them. I am just taking this opportunity to learn from you experts about SHLD's legal structure and why this structure minimizes the risk, so in the future if I analyze another company on my own, I could tell if it is risky or safe. :)

Regarding non-recourse secured loan, what I learned is that: "Non-recourse debt or a non-recourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral."

So this means if SHLD's $1.25 bn secured debt is non-recourse, SHLD itself is not obligated to further liabilities once it defaults and transfers the collateral to the note holders.

http://en.wikipedia.org/wiki/Nonrecourse_debt

Anyway, since you mentioned that SHLD's other risks are more significant, could you please point me to a few so I can study those?
Title: Re: SHLD - Sears
Post by: ScottHall on May 29, 2013, 11:47:28 AM

With all due respect, I think you're spending a lot of time spinning your wheels here.  You're wasting time I assume you don't want to waste.  You're never going to find the provision you're looking for.  I haven't read this indenture and I'm not going to, but by definition the issuer will be obligated on the debt.  So whichever Sears entity is the issuer it will be obligated.  The guarantors only are liable on the debt if the issuer is unable to pay.  So that's not a good thing.  Even then, the guarantors will typically have subrogation rights (i.e. the issuer would owe them the amounts they paid on their behalf if the issuer ever comes up with funds).  There's no free lunch on any of this.

This is not always true. If the debt is non-recourse, then the issuer will not have the liability to make it whole.
For example, the US mortgages are non-recourse. If I buy a house with a mortgage and then default. All the bank can recover is only from the foreclosure of the house. It cannot ask me for further compensation for their loss.

The $1.24 bn note here is a secured loan, so there is likelihood to be non-recourse. I haven't figured this out yet though. But if you search for sears, non-recourse in google, you can find out that Sears Canada and Orchard Hardware's debt are non-recourse to SHLD.

One thing that I want to point out, even though it has nothing to do with Sears, is that only mortgages in some states are nonrecourse. In others they are recourse, and in others still, only certain types of mortgages are nonrecourse.
Title: Re: SHLD - Sears
Post by: Kraven on May 29, 2013, 11:52:43 AM

With all due respect, I think you're spending a lot of time spinning your wheels here.  You're wasting time I assume you don't want to waste.  You're never going to find the provision you're looking for.  I haven't read this indenture and I'm not going to, but by definition the issuer will be obligated on the debt.  So whichever Sears entity is the issuer it will be obligated.  The guarantors only are liable on the debt if the issuer is unable to pay.  So that's not a good thing.  Even then, the guarantors will typically have subrogation rights (i.e. the issuer would owe them the amounts they paid on their behalf if the issuer ever comes up with funds).  There's no free lunch on any of this.

This is not always true. If the debt is non-recourse, then the issuer will not have the liability to make it whole.
For example, the US mortgages are non-recourse. If I buy a house with a mortgage and then default. All the bank can recover is only from the foreclosure of the house. It cannot ask me for further compensation for their loss.

The $1.24 bn note here is a secured loan, so there is likelihood to be non-recourse. I haven't figured this out yet though. But if you search for sears, non-recourse in google, you can find out that Sears Canada and Orchard Hardware's debt are non-recourse to SHLD.

You're mixing up issues and confusing yourself.  Just because something is non-recourse doesn't mean you are not obligated on the debt.  It simply means there is no recourse to your assets.  But absent a legal determination that you are excused on the debt (like in a bankruptcy) or a lender forgiving the debt, the obligation remains.  It may just be in name only depending on the situation.

I am further confused why you are spending so much time on these issues.  They strike me as amoeba sized in the grand scheme of things.  While it is often not satisfactory to say that the experts have it handled, in this case it is accurate.  Sears is represented by some of the top lawyers in the country, the best money can buy.  These legal issues are well settled and basic.  While someone may sue down the road after a transaction, I have every confidence that Sears's lawyers will have properly structured any transaction they enter into and minimized the risk.  The risks you are concerned about are the corporate equivalent to an asteroid hitting the earth and ending life as we know it.  It's possible, but what are you going to do about it.  At least in the case of Sears, if you are so concerned, don't own the stock.  I think though you are getting worried over nothing.  There are bigger fish to fry in the analysis.

Sorry I am a newbie investor, so I am trying to learn everything as detailed as I can when I come across them. I am just taking this opportunity to learn from you experts about SHLD's legal structure and why this structure minimizes the risk, so in the future if I analyze another company on my own, I could tell if it is risky or safe. :)

Regarding non-recourse secured loan, what I learned is that: "Non-recourse debt or a non-recourse loan is a secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender's recovery is limited to the collateral."

So this means if SHLD's $1.25 bn secured debt is non-recourse, SHLD itself is not obligated to further liabilities once it defaults and transfers the collateral to the note holders.

http://en.wikipedia.org/wiki/Nonrecourse_debt

Anyway, since you mentioned that SHLD's other risks are more significant, could you please point me to a few so I can study those?

No problem.  It can get confusing.  Yes, if there was a non-recourse debt secured by a certain pool of assets, then that is where a lender (or noteholder) must look upon a default to recover on the debt.  There are various permutations and combinations. 

In terms of other risks, I am just speaking generally.  Things like Sears's business model and that kind of thing.  I don't think you will get a lot of mileage in trying to analyze obscure legal points that really will have no bearing on the stock.  Just my opinion.
Title: Re: SHLD - Sears
Post by: muscleman on May 29, 2013, 12:03:39 PM

With all due respect, I think you're spending a lot of time spinning your wheels here.  You're wasting time I assume you don't want to waste.  You're never going to find the provision you're looking for.  I haven't read this indenture and I'm not going to, but by definition the issuer will be obligated on the debt.  So whichever Sears entity is the issuer it will be obligated.  The guarantors only are liable on the debt if the issuer is unable to pay.  So that's not a good thing.  Even then, the guarantors will typically have subrogation rights (i.e. the issuer would owe them the amounts they paid on their behalf if the issuer ever comes up with funds).  There's no free lunch on any of this.

This is not always true. If the debt is non-recourse, then the issuer will not have the liability to make it whole.
For example, the US mortgages are non-recourse. If I buy a house with a mortgage and then default. All the bank can recover is only from the foreclosure of the house. It cannot ask me for further compensation for their loss.

The $1.24 bn note here is a secured loan, so there is likelihood to be non-recourse. I haven't figured this out yet though. But if you search for sears, non-recourse in google, you can find out that Sears Canada and Orchard Hardware's debt are non-recourse to SHLD.

One thing that I want to point out, even though it has nothing to do with Sears, is that only mortgages in some states are nonrecourse. In others they are recourse, and in others still, only certain types of mortgages are nonrecourse.

Thank you! I didn't know this before.
http://www.loansafe.org/forum/foreclosure-laws/4130-recourse-v-non-recourse-states.html
Title: Re: SHLD - Sears
Post by: Matson125 on May 30, 2013, 12:05:15 PM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.
Title: Re: SHLD - Sears
Post by: Matson125 on May 31, 2013, 09:58:33 AM
Sanjeev, this is out in your neck of the woods isn't it?


Sears aims to build seven towers on site
http://www.burnabynewsleader.com/news/209521191.html
Title: Re: SHLD - Sears
Post by: muscleman on May 31, 2013, 12:53:57 PM
No problem.  It can get confusing.  Yes, if there was a non-recourse debt secured by a certain pool of assets, then that is where a lender (or noteholder) must look upon a default to recover on the debt.  There are various permutations and combinations. 

In terms of other risks, I am just speaking generally.  Things like Sears's business model and that kind of thing.  I don't think you will get a lot of mileage in trying to analyze obscure legal points that really will have no bearing on the stock.  Just my opinion.

I start to get my head wrapped around this. SHLD has over $8 bn liabilities, so why should I focus so much onto that $1.25 bn note?
From the guarantor/non-guarantor breakdown, it seems like they have most liabilities carried on the guarantor subs, and the parent's only debt is the $1.25 bn note, which is secured by relatively liquid inventory and credit card receivables in the guarantor sub. This probably means it is almost unlikely that this note will have claims against the parent holding company.

Is there any way to figure out if the remaining liabilities are non-recourse to the parent? They are carries on the guarantor subs' balance sheet, so it is likely not recourse to parent, but I really want to figure this out before I can load up with the shares. :)
Title: Re: SHLD - Sears
Post by: sswan11 on May 31, 2013, 05:04:09 PM
Marc Andreeson on Sears:

http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/
Title: Re: SHLD - Sears
Post by: Parsad on May 31, 2013, 05:52:41 PM
Sanjeev, this is out in your neck of the woods isn't it?


Sears aims to build seven towers on site
http://www.burnabynewsleader.com/news/209521191.html

Yes, I know that area like the back of my hand...it was the mall I went to for the last 21 years, until I moved last year.  You are talking about a billion dollar development if Sears follows through.  That is very valuable land in what is becoming one of the tertiary city centers around Vancouver.  I did not know Sears owned that land!  I think they are very much on the right track if this what they plan on doing with the land on which their retail stores sit.  Cheers!
Title: Re: SHLD - Sears
Post by: ERICOPOLY on May 31, 2013, 06:28:17 PM
Marc Andreeson on Sears:

http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/

The founder of Netscrape pontificating on Sears.
Title: Re: SHLD - Sears
Post by: Parsad on May 31, 2013, 06:52:58 PM
Marc Andreeson on Sears:

http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/

He's quite incorrect.  I can tell you that simply by the stuff locally Sears has gotten rid of. 

The main corporate store in downtown Vancouver where they sold the lease back to Cadillac Fairview for tens of millions is now being occupied by Nordstrom's.  So, that's not quite the Halloween store going in for two weeks. 

The development that Dollarbills linked above in the Metrotown Mall area is going to be quite a massive development.  As I mentioned, that will be a billion dollars plus of towers going up.  Whether they sell the land to local developers or partner with them will decide the rate of return, but that is very valuable land and they can easily put up a retail/commercial/condo complex there.  I'm sure this strategy can be applied to many of their other stores around larger cities and municipalities. 

I do not own Sears, but I would be more inclined to buy the stock if this is the direction they are taking with the real estate.  Something they should have started doing years ago at a much more rapid pace, instead of burning through cash and assets.  Cheers!
Title: Re: SHLD - Sears
Post by: wellmont on May 31, 2013, 08:10:16 PM
Marc Andreesen, who suggested that HP buy Autonomy because software was the "future".
Title: Re: SHLD - Sears
Post by: bargainman on May 31, 2013, 08:13:48 PM
Marc Andreeson on Sears:

http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/

He's quite incorrect.  I can tell you that simply by the stuff locally Sears has gotten rid of. 

The main corporate store in downtown Vancouver where they sold the lease back to Cadillac Fairview for tens of millions is now being occupied by Nordstrom's.  So, that's not quite the Halloween store going in for two weeks. 

The development that Dollarbills linked above in the Metrotown Mall area is going to be quite a massive development.  As I mentioned, that will be a billion dollars plus of towers going up.  Whether they sell the land to local developers or partner with them will decide the rate of return, but that is very valuable land and they can easily put up a retail/commercial/condo complex there.  I'm sure this strategy can be applied to many of their other stores around larger cities and municipalities. 

I do not own Sears, but I would be more inclined to buy the stock if this is the direction they are taking with the real estate.  Something they should have started doing years ago at a much more rapid pace, instead of burning through cash and assets.  Cheers!

Yes but Vancouver is not indicative of most of Sears locations I would think.  You guys don't have amazon at the same scale as in the US.  So I'm not sure how much it will transfer.. I definitely see the threat from amazon being much lower overseas than in the US.
Title: Re: SHLD - Sears
Post by: txlaw on June 01, 2013, 08:04:25 AM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Thanks for posting about this.  I wonder if they are starting to get ready to spin this thing off?
Title: Re: SHLD - Sears
Post by: muscleman on June 01, 2013, 08:14:45 AM
I've created a screenshot of the assets & liabilities broken out by parent, guarantor & non-guarantor subsidiaries. 

(1) Take a look at the receivables & the payables. 
(2) Take a look at the equity value of the non-guarantor subsidiaries.
(3) Figure out the "real" equity value of the non-guarantor subsidiaries -- do they really need such high receivables?

Next, take a look at the statement of cash flows

(4) Figure out how much the non-guarantor subsidiary is earning
(5) Figure out (3) / (4) for an ROE number

The biggest issue with Sears has always been the "when" and not the "what."

(Edited to put the screenshots in as attachments.)

I have been studying these balance sheets for the past few days. Can we say that any liabilities listed in the guarantor sub's balance sheet will have no recourse to the parent holding corp? I found that in the previous 10-Ks for 2007 and 2008, they stated that Sears Canada and OSH's debt are not recourse to SHLD, so when they are spun off, they take away their own debt. I am wondering if that is the same here for the pension liabilities and account payable?

I tried to call SHLD's IR and I got transferred to a voice mail that never replied to me. I will try again later and post whatever answer I got from them here, if no one here already knows. :)
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 01, 2013, 08:22:01 AM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.
Title: Re: SHLD - Sears
Post by: txlaw on June 01, 2013, 09:22:26 AM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.
Title: Re: SHLD - Sears
Post by: hellsten on June 01, 2013, 11:54:40 AM
Marc Andreeson on Sears:

http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/

Andreesen invested in a niche retailer that has ~$500 million in revenue and a market value of around $1 billion (~2 P/S).
Quote
Zulily into one of the fastest-growing startups in the Seattle region, with monthly revenue now on a pace equivalent to nearly $500 million in annual sales.
http://www.xconomy.com/seattle/2012/11/15/zulily-adds-85-million-led-by-andreessen-horowitz/

Quote
The process is a perfect example of the type of software-focused “e-commerce 2.0 category killers” that he sees now cropping up, such as  Seattle’s Zulily, a mom’s and kids retail deals site, of which Andreessen’s venture capital firm is an investor. “I think they’re just going to roll through the retail landscape and take out a lot of the retail chains in that kind of market. We love that stuff.
http://qz.com/36619/andreessen-on-eddie-lampert-sears-play-so-the-real-estates-actually-not-valuable/

Andreesen doesn't like SHLD which has a P/S ratio of 0.15.

Andreesen definitely likes pump and dump scams. Hell, the scams have a name: “Andreessen Horowitz Effect.”:
Quote
Why all the fear and loathing? The primary complaint about Andreessen Horowitz is that they are price insensitive when they decide to invest in a startup. “They are overpaying for deals,” says one VC, “forcing the Greylocks of the world to overpay as well.” In other words, it can drive up valuations even in the deals it doesn’t win. Another VC calls this proclivity to push up prices the “Andreessen Horowitz Effect.”
http://techonomy.com/2012/08/the-andreessen-horowitz-effect/

His recent history of deals speaks for itself:
Quote
Groupon, IPO, 2011
Instagram, Acquired, 2012
Skype, Acquired, 2010
Zynga, IPO, 2011
http://en.wikipedia.org/wiki/Andreessen_Horowitz

I wouldn't trust anyone who helped sell Facebook, Groupon, Zynga, Skype, and Instagram to the public and greater fools. I guess the Autonomy deal is the epitomy of the "Andreessen Horowitz Effect".

Andreesen should be improving the world like Elon Musk, instead of selling crap to the greater fools. What an asshole.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 01, 2013, 12:14:01 PM
Andreesen should be improving the world like Elon Musk, instead of selling crap to the greater fools. What an asshole.

Andreesen:

1) gets started building first web browser: NCSA Mosaic.  It's a free web browser.
2) Founded Netscape which builds it's market share by giving away the browser for free
2)  Cries foul when Microsoft builds a web browser and gives it away for free to build share.

What an asshole indeed!
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 01, 2013, 12:35:22 PM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.
Title: Re: SHLD - Sears
Post by: merkhet on June 01, 2013, 12:49:07 PM
ericopoly, I'm curious as to your rationale for buying more. I don't see a clear catalyst for this investment such as with BAC or MBIA...
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 01, 2013, 01:19:09 PM
ericopoly, I'm curious as to your rationale for buying more. I don't see a clear catalyst for this investment such as with BAC or MBIA...

I think the stock went to $60 recently based on perception that Eddie would make an announcement regarding redevelopment of the properties, then I think that money disappeared rapidly when Eddie made no such comment.  I think the stock dropped more because of his giving no information, rather than dropping for telling us something we already all know (that the retailing sucks).

This Seritage Realty Trust website make me feel like the wait won't go on much longer.  But I'm not thinking I terms of weeks, but rather over the next year.
Title: Re: SHLD - Sears
Post by: valueInv on June 01, 2013, 01:27:08 PM
Andreesen should be improving the world like Elon Musk, instead of selling crap to the greater fools. What an asshole.

Andreesen:

1) gets started building first web browser: NCSA Mosaic.  It's a free web browser.
2) Founded Netscape which builds it's market share by giving away the browser for free
2)  Cries foul when Microsoft builds a web browser and gives it away for free to build share.

What an asshole indeed!

IIRC, it was Microsoft who made IE free first to gain marketshare. Netscape was then forced to give it away in response.
Title: Re: SHLD - Sears
Post by: AchilliesValue on June 02, 2013, 12:24:33 AM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

18 million sq ft seems relatively small when they have ~250 million (slightly less given recent sales and spins). I know a lot of the thesis is that 80% of the value is in 20% of the real estate but still seems small
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 02, 2013, 12:35:15 AM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

18 million sq ft seems relatively small when they have ~250 million (slightly less given recent sales and spins). I know a lot of the thesis is that 80% of the value is in 20% of the real estate but still seems small

10 million is 7.2% of 250 million, or 36% of the valuable 20% (assuming they are focusing on developing the valuable real estate).

So if redevelopment is extracting value, then they are extracting 28.8% of the total value (36% of 80%).

I'm not sure how accurate it is to assume 80% of the value is in 20% of the properties.  But perhaps there is also wide variation of value within that 20% bracket.  Like maybe 50% of the value is in 7.2% of the properties (perhaps they are developing the top third most valuable properties of those 20%).
Title: Re: SHLD - Sears
Post by: AchilliesValue on June 02, 2013, 12:55:05 AM
http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

18 million sq ft seems relatively small when they have ~250 million (slightly less given recent sales and spins). I know a lot of the thesis is that 80% of the value is in 20% of the real estate but still seems small

10 million is 7.2% of 250 million, or 36% of the valuable 20% (assuming they are focusing on developing the valuable real estate).

So if redevelopment is extracting value, then they are extracting 28.8% of the total value (36% of 80%).

I'm not sure how accurate it is to assume 80% of the value is in 20% of the properties.  But perhaps there is also wide variation of value within that 20% bracket.  Like maybe 50% of the value is in 7.2% of the properties (perhaps they are developing the top third most valuable properties of those 20%).

Yeah I think most that look at the Sears thesis agree that the intrinsic value is substantially higher than the current enterprise value but unless you actually go do the legwork and appraise the property yourself it will be hard to understand how much of a margin of safety you have as they begin to monetize the assets. Are they selling the best properties or the worst? I don't know which makes things difficult.
Title: Re: SHLD - Sears
Post by: luck on June 02, 2013, 06:16:27 AM
eric and others, wondering if you guys see this as a 4X or greater?  haven't seen anything recently quantifying the upside.  to take on the risk, it seems like this would have to be a multi-bagger. 

that said, intriguing developments with seritage, data centers, towers, guarantor/non-guarantor, baker street reporting 80% of their port in shld calls (perhaps not true reflection of actual port given cash, shorts, etc ). 

Title: Re: SHLD - Sears
Post by: plato1976 on June 02, 2013, 06:18:47 AM
According to my estimation, in a slightly optimistic case, the real estate plus brands is worth 5x the current market cap


eric and others, wondering if you guys see this as a 4X or greater?  haven't seen anything recently quantifying the upside.  to take on the risk, it seems like this would have to be a multi-bagger. 

that said, intriguing developments with seritage, data centers, towers, guarantor/non-guarantor, baker street reporting 80% of their port in shld calls (perhaps not true reflection of actual port given cash, shorts, etc ).
Title: Re: SHLD - Sears
Post by: no_free_lunch on June 02, 2013, 06:30:50 AM
Quote
According to my estimation, in a slightly optimistic case, the real estate plus brands is worth 5x the current market cap

Care to give a rough breakdown of that valuation?  I am having a really hard time justifying the bruce berkowitz RE valuations (not that I am in any way an expert) and would just like to know what you put as real estate vs brands. 
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 02, 2013, 07:06:44 AM
eric and others, wondering if you guys see this as a 4X or greater?

On what timeframe?  I can make 4x just letting the cash compound in my bank savings account.
Title: Re: SHLD - Sears
Post by: luck on June 02, 2013, 07:43:02 AM
true! :)  maybe 4X or greater in 6 years or less? 

perhaps a better question is: what sort of annualized return are you looking for from the investment?  not sure if folks are looking at this as a shorter term trade or a longer term investment.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on June 02, 2013, 07:01:27 PM
http://www.chicagorealestatedaily.com/article/20130425/CRED03/130429852/sears-to-unload-eight-more-stores-here

Quote
The decision to hire an outside firm surprised some local brokers, considering that Sears established an in-house division called SHC Realty more than a year ago to oversee its divestiture campaign. More recently, the company formed a new unit called Seritage Realty Trust LLC to augment SHC's work.

In a statement, Sears said only that it had hired David Lukes to head Seritage and “lead the company's efforts to further develop and create long-term value in certain real estate assets.”

http://jobs.jobs/hoffman-estates-il/marketing-specialist-graphic-design-greenwich-ct/36310748/job/

Quote
Effectively market a diverse collection of redevelopment properties while also growing the SERITAGE brand name and reputation through direct marketing as well as regional trade show support.
Title: Re: SHLD - Sears
Post by: BargainValueHunter on June 02, 2013, 07:09:06 PM
http://www.datacenterknowledge.com/archives/2013/05/23/ubiquity/

Quote
Ubiquity will be able to leverage real estate at both closed stores and some that are still operating, depending on the opportunity. The first step has been to evaluate the portfolio and identify properties that could work as data centers. Chicago engineering firm ESD has been conducting a “data center fitness test” on promising properties to size up their power, fiber and risk profiles. Ubiquity is also working with Newmark Grubb Knight Frank to market the portfolio to the brokerage community.

The first Ubiquity project will be a Sears store on the south side of Chicago, nestled alongside the Chicago Skyway. The 127,000 square foot store is closing at the end of June, and will be retrofitted as a multi-tenant data center. Farney says he already has a commitment for the first tenant at the site on East 79th Street, which has 5 megawatts of existing power capacity and the potential to expand.

“It’s a building that’s lit very well, from both a fiber and power perspective,” said Farney. “It’s going to be great data center building.”

Farney acknowledges that many of Sears’ mall-based retail locations aren’t viable for data center usage. “I don’t think the industry is yet ready for a mall-based data center,” he said. “That may take some time. The stand-alone location is optimal.”

Ubiquity has those stand-alone facilities, along with distribution centers and some parcels of vacant land. ”There are closed Kmarts that are stand-alone, 200,000 square-foot properties with good fiber and power and 10 acres of parking,” said Farney. “These are owned assets.”
Title: Re: SHLD - Sears
Post by: Myth465 on June 02, 2013, 08:43:37 PM
The thesis is starting to get some legs, if only they could move a bit faster, as well as explain the long term plan.
Title: Re: SHLD - Sears
Post by: maxprogram on June 03, 2013, 09:56:59 AM
Personal anecdote:

I am involved in a real estate firm that owns the property a large Kmart is on. It is a very good location right next to a major freeway and large residential area. The property is on a long-term lease with probably 10 years to go, but is renewed every 5 years (next renewal is a year away). They are paying an extremely cheap rate and it would continue to be cheap even after the renewal (due to a very advantageous lease agreement). This is why the run-down Kmart has been able to operate for so many years without going out of business. The RE firm has considered buying them out in the past to get out of the lease.

In the last month the firm received notice from Sears Holdings that they wanted out of the lease agreement immediately, no questions asked, no buyout. They are likely going to force them to stay for the next year so they can prep for new tenants. This tells me the location must be bleeding cash, or else they would have tried to sublease or get out any other way.

So take this anecdote FWIW, I think it could be viewed negatively or positively depending on your position.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 03, 2013, 11:17:34 AM
Personal anecdote:

I am involved in a real estate firm that owns the property a large Kmart is on. It is a very good location right next to a major freeway and large residential area. The property is on a long-term lease with probably 10 years to go, but is renewed every 5 years (next renewal is a year away). They are paying an extremely cheap rate and it would continue to be cheap even after the renewal (due to a very advantageous lease agreement). This is why the run-down Kmart has been able to operate for so many years without going out of business. The RE firm has considered buying them out in the past to get out of the lease.

In the last month the firm received notice from Sears Holdings that they wanted out of the lease agreement immediately, no questions asked, no buyout. They are likely going to force them to stay for the next year so they can prep for new tenants. This tells me the location must be bleeding cash, or else they would have tried to sublease or get out any other way.

So take this anecdote FWIW, I think it could be viewed negatively or positively depending on your position.

So a given % of the square footage is getting triaged out of the leased portfolio.  I'm glad there isn't a plan to bring in an Apple executive to turn KMart into a Walmart killer. 
Title: Re: SHLD - Sears
Post by: Parsad on June 03, 2013, 11:38:11 AM
Personal anecdote:

I am involved in a real estate firm that owns the property a large Kmart is on. It is a very good location right next to a major freeway and large residential area. The property is on a long-term lease with probably 10 years to go, but is renewed every 5 years (next renewal is a year away). They are paying an extremely cheap rate and it would continue to be cheap even after the renewal (due to a very advantageous lease agreement). This is why the run-down Kmart has been able to operate for so many years without going out of business. The RE firm has considered buying them out in the past to get out of the lease.

In the last month the firm received notice from Sears Holdings that they wanted out of the lease agreement immediately, no questions asked, no buyout. They are likely going to force them to stay for the next year so they can prep for new tenants. This tells me the location must be bleeding cash, or else they would have tried to sublease or get out any other way.

So take this anecdote FWIW, I think it could be viewed negatively or positively depending on your position.

So a given % of the square footage is getting triaged out of the leased portfolio.  I'm glad there isn't a plan to bring in an Apple executive to turn KMart into a Walmart killer.

LOL!  They've done enough of that shit...time to just use some common sense and monetize some of the assets.  Cheers!
Title: Re: SHLD - Sears
Post by: Matson125 on June 04, 2013, 06:25:52 AM
Some more detail on the Sears Canada development proposal

http://www.theglobeandmail.com/report-on-business/sears-joins-retails-real-estate-push/article12325885/

Sears owns roughly $900-million of real estate, according to a past estimate by retail analyst Keith Howlett at Desjardins Securities. It includes more than 10 owned stores, a number of distribution centres and joint mall holdings. But the retailer hasn’t disclosed all its property holdings in public filings, including the one at Burnaby, he said.

Title: Re: SHLD - Sears
Post by: Aberhound on June 04, 2013, 08:16:47 AM
If the Burnaby property is owned by Sears Canada and was undisclosed it will have a dramatic effect on the share price of Sears Canada not Sears. why aren't we buying Sears Canada instead? It appears to be a similar situation to when FFH was expected to buy the rest of Odyssey Re. Many board members made a ton thanks largely to Mungerville (now old Mungerville). Canada has silly RE prices with cap rate down to 2.5% so now is the time to cash in. This creates urgency which should force Lampert to buy the rest of Sears Canada quickly.

Some may be interested to know that the Burnaby property is where the downtown core was supposed to be when the city was laid out by the Royal Surveyors in 1858. It is near Central Park which was supposed to be similar to Central Park in New York. Vancouver has adopted a multiple city core plan to reduce traffic and Metrotown is the 2nd or 3rd of the core areas. The other is Surrey which is still struggling to develop a single core.
Title: Re: SHLD - Sears
Post by: Matson125 on June 04, 2013, 08:29:35 AM
If the Burnaby property is owned by Sears Canada and was undisclosed it will have a dramatic effect on the share price of Sears Canada not Sears. why aren't we buying Sears Canada instead? It appears to be a similar situation to when FFH was expected to buy the rest of Odyssey Re. Many board members made a ton thanks largely to Mungerville (now old Mungerville). Canada has silly RE prices with cap rate down to 2.5% so now is the time to cash in. This creates urgency which should force Lampert to buy the rest of Sears Canada quickly.

Some may be interested to know that the Burnaby property is where the downtown core was supposed to be when the city was laid out by the Royal Surveyors in 1858. It is near Central Park which was supposed to be similar to Central Park in New York. Vancouver has adopted a multiple city core plan to reduce traffic and Metrotown is the 2nd or 3rd of the core areas. The other is Surrey which is still struggling to develop a single core.

I'm from Canada and own Sears Canada directly, for our friends in the U.S. who owns Sears holdings this is relevant to them as well as Sears Holdings owns 50% of Sears Canada.  Also Sears Canada has been repurchasing shares, so that interest should increase over time.  A few years ago Bill Ackman bought a ton of Sears Canada solely for the real estate value and later sold his interest to Sears Holding for $30.00 a share.  http://www.bloomberg.com/news/2010-04-23/sears-to-buy-pershing-square-stake-in-sears-canada-unit-for-556-7-million.html



Title: Re: SHLD - Sears
Post by: muscleman on June 04, 2013, 06:53:45 PM
If the Burnaby property is owned by Sears Canada and was undisclosed it will have a dramatic effect on the share price of Sears Canada not Sears. why aren't we buying Sears Canada instead? It appears to be a similar situation to when FFH was expected to buy the rest of Odyssey Re. Many board members made a ton thanks largely to Mungerville (now old Mungerville). Canada has silly RE prices with cap rate down to 2.5% so now is the time to cash in. This creates urgency which should force Lampert to buy the rest of Sears Canada quickly.

Some may be interested to know that the Burnaby property is where the downtown core was supposed to be when the city was laid out by the Royal Surveyors in 1858. It is near Central Park which was supposed to be similar to Central Park in New York. Vancouver has adopted a multiple city core plan to reduce traffic and Metrotown is the 2nd or 3rd of the core areas. The other is Surrey which is still struggling to develop a single core.

I'm from Canada and own Sears Canada directly, for our friends in the U.S. who owns Sears holdings this is relevant to them as well as Sears Holdings owns 50% of Sears Canada.  Also Sears Canada has been repurchasing shares, so that interest should increase over time.  A few years ago Bill Ackman bought a ton of Sears Canada solely for the real estate value and later sold his interest to Sears Holding for $30.00 a share.  http://www.bloomberg.com/news/2010-04-23/sears-to-buy-pershing-square-stake-in-sears-canada-unit-for-556-7-million.html

Did you receive the SCC shares because of the spin off, or did you purchase the shares from the open market?
If they have the undisclosed lands, then it is hard to say what the upside is, but if we assume the Burnaby property is the only undisclosed property, then what do you think the upside is?
Title: Re: SHLD - Sears
Post by: Matson125 on June 05, 2013, 08:15:29 AM
If the Burnaby property is owned by Sears Canada and was undisclosed it will have a dramatic effect on the share price of Sears Canada not Sears. why aren't we buying Sears Canada instead? It appears to be a similar situation to when FFH was expected to buy the rest of Odyssey Re. Many board members made a ton thanks largely to Mungerville (now old Mungerville). Canada has silly RE prices with cap rate down to 2.5% so now is the time to cash in. This creates urgency which should force Lampert to buy the rest of Sears Canada quickly.

Some may be interested to know that the Burnaby property is where the downtown core was supposed to be when the city was laid out by the Royal Surveyors in 1858. It is near Central Park which was supposed to be similar to Central Park in New York. Vancouver has adopted a multiple city core plan to reduce traffic and Metrotown is the 2nd or 3rd of the core areas. The other is Surrey which is still struggling to develop a single core.

I'm from Canada and own Sears Canada directly, for our friends in the U.S. who owns Sears holdings this is relevant to them as well as Sears Holdings owns 50% of Sears Canada.  Also Sears Canada has been repurchasing shares, so that interest should increase over time.  A few years ago Bill Ackman bought a ton of Sears Canada solely for the real estate value and later sold his interest to Sears Holding for $30.00 a share.  http://www.bloomberg.com/news/2010-04-23/sears-to-buy-pershing-square-stake-in-sears-canada-unit-for-556-7-million.html

Did you receive the SCC shares because of the spin off, or did you purchase the shares from the open market?
If they have the undisclosed lands, then it is hard to say what the upside is, but if we assume the Burnaby property is the only undisclosed property, then what do you think the upside is?

I purchased them directly on the open market.  I had sold all my sears shares gradually after the spin out of SHOS and prior to the spin out of SCC.  I didn't want to pay the tax on the spinout of SCC knowing I could simply buy my prorated shares in my native currency tax free.

In terms of the upside, it would all depend on the amount of development and/or asset sales they take part in.  One interesting thing to note is that the float is very tightly held in the same fashion as SHLD.  3 Parties- SHLD, ESL and Berkowitz own 85% of the float.  SCC recently announced a normal course issuer bid as well.
Title: Re: SHLD - Sears
Post by: jeffmori7 on June 05, 2013, 08:30:11 AM
What I don't like about Sears Canada is that they are still strugling turning things around..and Target was not there yet. In the next few quarters, we will see the impact of the arrival of Target. I understand that there is probably a floor because of the real estate value, like in SHLD, but I'm afraid they will continue to burn cash as well... for how long?
Title: Re: SHLD - Sears
Post by: muscleman on June 05, 2013, 08:44:51 AM
If the Burnaby property is owned by Sears Canada and was undisclosed it will have a dramatic effect on the share price of Sears Canada not Sears. why aren't we buying Sears Canada instead? It appears to be a similar situation to when FFH was expected to buy the rest of Odyssey Re. Many board members made a ton thanks largely to Mungerville (now old Mungerville). Canada has silly RE prices with cap rate down to 2.5% so now is the time to cash in. This creates urgency which should force Lampert to buy the rest of Sears Canada quickly.

Some may be interested to know that the Burnaby property is where the downtown core was supposed to be when the city was laid out by the Royal Surveyors in 1858. It is near Central Park which was supposed to be similar to Central Park in New York. Vancouver has adopted a multiple city core plan to reduce traffic and Metrotown is the 2nd or 3rd of the core areas. The other is Surrey which is still struggling to develop a single core.

I'm from Canada and own Sears Canada directly, for our friends in the U.S. who owns Sears holdings this is relevant to them as well as Sears Holdings owns 50% of Sears Canada.  Also Sears Canada has been repurchasing shares, so that interest should increase over time.  A few years ago Bill Ackman bought a ton of Sears Canada solely for the real estate value and later sold his interest to Sears Holding for $30.00 a share.  http://www.bloomberg.com/news/2010-04-23/sears-to-buy-pershing-square-stake-in-sears-canada-unit-for-556-7-million.html

Did you receive the SCC shares because of the spin off, or did you purchase the shares from the open market?
If they have the undisclosed lands, then it is hard to say what the upside is, but if we assume the Burnaby property is the only undisclosed property, then what do you think the upside is?

I purchased them directly on the open market.  I had sold all my sears shares gradually after the spin out of SHOS and prior to the spin out of SCC.  I didn't want to pay the tax on the spinout of SCC knowing I could simply buy my prorated shares in my native currency tax free.

In terms of the upside, it would all depend on the amount of development and/or asset sales they take part in.  One interesting thing to note is that the float is very tightly held in the same fashion as SHLD.  3 Parties- SHLD, ESL and Berkowitz own 85% of the float.  SCC recently announced a normal course issuer bid as well.

Got you. Thank you!
Title: Re: SHLD - Sears
Post by: Rabbitisrich on June 05, 2013, 01:53:54 PM
One cautionary about SCC is Lampert's 2006 bid at $16.86 CAD. At the time, Bill Ackman led the counter charge. The OSC's ruling showed how Lampert played hardball with Genuity, the provider of the fair value opinion, and with Pershing Square: http://www.osc.gov.on.ca/documents/en/Proceedings-RAD/rad_20060808_searscanada.pdf (http://www.osc.gov.on.ca/documents/en/Proceedings-RAD/rad_20060808_searscanada.pdf)
Title: Re: SHLD - Sears
Post by: muscleman on June 05, 2013, 02:04:08 PM
If SCC is so good, why did SHLD try to take it private by paying Ackman $30 per share, only to partially spin it off last year near $11 per share?
Title: Re: SHLD - Sears
Post by: finetrader on June 05, 2013, 02:17:27 PM
Quote
If SCC is so good, why did SHLD try to take it private by paying Ackman $30 per share, only to partially spin it off last year near $11 per share?

Lambert goofed on this one!
I remember an article a few month after Sears bought Sears Canada. Sears Canada was making good profit before Lambert bought it. Then in this article Sears Canada's management was complaining that the head office (Sears) was asking for lower expense and that the inventories in store was very poor because of that. That's when Sears Canada's profitability has started to decline significantly.

Then last year, Lambert spun off Sears Canada at a lower price.
Title: Re: SHLD - Sears
Post by: jeffmori7 on June 05, 2013, 03:17:25 PM
Hey guys, stupid question probably, but I'm quite confused between RBS, ESL and Eddy Lampert personal holdings...can someone help me to sort it out? If my understanding is good, RBS is reducing its stake in Sears and Lampert is buying them personally or through ESL, which would be the same?
Title: Re: SHLD - Sears
Post by: muscleman on June 05, 2013, 04:02:03 PM
Hey guys, stupid question probably, but I'm quite confused between RBS, ESL and Eddy Lampert personal holdings...can someone help me to sort it out? If my understanding is good, RBS is reducing its stake in Sears and Lampert is buying them personally or through ESL, which would be the same?

I am also confused about the relationship between RBS and ESL. I know ESL is a fund that Lambert manages. I also know that Lambert is buying shares from ESL, probably due to redemption requests. But when I search in dataroma.com for the SHLD ownership, I also saw RBS partners there with Lambert as the manager.
Title: Re: SHLD - Sears
Post by: muscleman on June 05, 2013, 04:02:36 PM
Quote
If SCC is so good, why did SHLD try to take it private by paying Ackman $30 per share, only to partially spin it off last year near $11 per share?

Lambert goofed on this one!
I remember an article a few month after Sears bought Sears Canada. Sears Canada was making good profit before Lambert bought it. Then in this article Sears Canada's management was complaining that the head office (Sears) was asking for lower expense and that the inventories in store was very poor because of that. That's when Sears Canada's profitability has started to decline significantly.

Then last year, Lambert spun off Sears Canada at a lower price.

Ok. Does this imply that SCC is probably worth less than $30? :)
Title: Re: SHLD - Sears
Post by: plato1976 on June 06, 2013, 06:24:45 AM
Eric,

You are indeed very brave to increase the SHLD position in a big way based on these news

I really don't think it speaks too much - need to see more positive and clear confirmation that they will accelerate the real estate value unlock

I always have some concern about the prospects of commercial real estate in the long run ( I think that netscrape founder made some points) - yet if SHLD liquidates their assets quickly enough , I think the value here is enough to justify a buy - they just need to be quick and I want to have some kind of confirmation or signal that they will do that

seriously, they really need to unlock value before the end of most retailers... I may be too pessimistic



http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 06, 2013, 07:56:24 AM
seriously, they really need to unlock value before the end of most retailers... I may be too pessimistic

Don't worry, they are so awful at retailing their stores will be the first one through the exits of the burning theater.
Title: Re: SHLD - Sears
Post by: muscleman on June 06, 2013, 08:00:56 AM
seriously, they really need to unlock value before the end of most retailers... I may be too pessimistic

Don't worry, they are so awful at retailing their stores will be the first one through the exits of the burning theater.

There is a local Sears store that I visit from time to time. The traffic isn't that bad, and I did see people buying appliances there. I think their lease to own program will probably be successful. They are the only retailer that offers lease to own for big items. :)
Title: Re: SHLD - Sears
Post by: wellmont on June 06, 2013, 08:04:09 AM
If SCC is so good, why did SHLD try to take it private by paying Ackman $30 per share, only to partially spin it off last year near $11 per share?

he did not hurt his strategy in any way as he still has control of the company. he could still take it private. The partial spin could be part of the liquidation that nobody believes is happening fast enough. Who knows. He never tells you why.
Title: Re: SHLD - Sears
Post by: ourkid8 on June 06, 2013, 09:23:41 AM
Eric, Have you added to your position? I recently took a 2.5% position after the earnings call. 

Tks,
S

http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 06, 2013, 09:30:18 AM
Eric, Have you added to your position? I recently took a 2.5% position after the earnings call. 

Tks,
S

http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

Yes, I added this week.
Title: Re: SHLD - Sears
Post by: muscleman on June 06, 2013, 09:40:59 AM
Eric, Have you added to your position? I recently took a 2.5% position after the earnings call. 

Tks,
S

http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

Yes, I added this week.

It seems like you normally make very concentrated bets after you feel comfortable. Would you say this is going to be a 10, 20 or 30% position? Or do you just add more and more as you see more potential positive development coming?
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 06, 2013, 12:02:58 PM
Eric, Have you added to your position? I recently took a 2.5% position after the earnings call. 

Tks,
S

http://www.seritage.com/
SERITAGE Realty Trust, LLC is a nationwide developer of commercial real estate. Our portfolio contains over 200 properties, located in 33 states and totals over 18 Million SF.

This is the group that David Lukes is leading and I am certain this website had gone live in the past week or so, as I was doing some digging a few weeks back and didn't come across this. 
In addition to the Ubiquity Critical Environments page www.ubiquityce.com things are starting to get interesting.

Justification for buying more SHLD in my opinion.  I'm going to buy a lot more now.

Yeah, I've been buying too, but I started to do that after the quarter was released and the stock tanked.

I'm the dummy that paid $60 right before it tanked.  My position is only 4% though.  I'm going to ratchet it up quite a bit.

Yes, I added this week.

It seems like you normally make very concentrated bets after you feel comfortable. Would you say this is going to be a 10, 20 or 30% position? Or do you just add more and more as you see more potential positive development coming?

I don't have a plan like that.  No idea.  Might not even have it that long if everything crashes -- the tax loss selling is always quite attractive.
Title: Re: SHLD - Sears
Post by: jeffmori7 on June 07, 2013, 12:46:50 PM
http://www.4-traders.com/news/Sears-Holdings-Corporation-Sears-Canada-Submits-Development-Application-to-City-of-Burnaby--17011055/
Title: Re: SHLD - Sears
Post by: abitofvalue on June 08, 2013, 09:28:38 AM
Hey guys, stupid question probably, but I'm quite confused between RBS, ESL and Eddy Lampert personal holdings...can someone help me to sort it out? If my understanding is good, RBS is reducing its stake in Sears and Lampert is buying them personally or through ESL, which would be the same?

I am also confused about the relationship between RBS and ESL. I know ESL is a fund that Lambert manages. I also know that Lambert is buying shares from ESL, probably due to redemption requests. But when I search in dataroma.com for the SHLD ownership, I also saw RBS partners there with Lambert as the manager.

IIRC - RBS is a sub-fund / managed / owned of ESL.  Basically Eddie manages both funds.  If you want to separate what Lampert owns from what his fund owns - just treat ESL/RBS etc (think there might be a couple of other sub funds too) as his fund holdings and his personal holdings are what he himself owns.

on another note - Lampert visited our school last year for a talk.  we got to ask him questions at the end and he was asked about RE value / liquidation and he basically noted that while RE liquidation seemed like a good floor valuation when he bought the assets, once he got in there he realized the sheer scale of the company and the effect a liquidation would have on lives and couldn't bring himself to do it without trying everything he could to salvage it first. said that the thought of putting over 300,000 individuals out of a job and thus affecting over a 1m people was pretty harsh and just not something he wanted to do at this point in his life.  thought it was interesting to hear him basically say that a liquidation wasn't on the table.

note that he did make it quite clear that he does think the company can be turned around and there is tremendous value / cash flows a well run retailer can generate.
Title: Re: SHLD - Sears
Post by: prunes on June 08, 2013, 10:12:10 AM
In that vein, I think it's worth revisiting John Hempton's comments http://brontecapital.blogspot.com/2011/12/sears-holdings-liquidation-sale.html?m=1
Title: Re: SHLD - Sears
Post by: muscleman on June 08, 2013, 11:01:59 AM
Hey guys, stupid question probably, but I'm quite confused between RBS, ESL and Eddy Lampert personal holdings...can someone help me to sort it out? If my understanding is good, RBS is reducing its stake in Sears and Lampert is buying them personally or through ESL, which would be the same?

I am also confused about the relationship between RBS and ESL. I know ESL is a fund that Lambert manages. I also know that Lambert is buying shares from ESL, probably due to redemption requests. But when I search in dataroma.com for the SHLD ownership, I also saw RBS partners there with Lambert as the manager.

IIRC - RBS is a sub-fund / managed / owned of ESL.  Basically Eddie manages both funds.  If you want to separate what Lampert owns from what his fund owns - just treat ESL/RBS etc (think there might be a couple of other sub funds too) as his fund holdings and his personal holdings are what he himself owns.

on another note - Lampert visited our school last year for a talk.  we got to ask him questions at the end and he was asked about RE value / liquidation and he basically noted that while RE liquidation seemed like a good floor valuation when he bought the assets, once he got in there he realized the sheer scale of the company and the effect a liquidation would have on lives and couldn't bring himself to do it without trying everything he could to salvage it first. said that the thought of putting over 300,000 individuals out of a job and thus affecting over a 1m people was pretty harsh and just not something he wanted to do at this point in his life.  thought it was interesting to hear him basically say that a liquidation wasn't on the table.

note that he did make it quite clear that he does think the company can be turned around and there is tremendous value / cash flows a well run retailer can generate.

Thank you for the insights. This is quite like the original Berkshire, when Buffet said the local unions tried very hard to cooperate, and he feel it too harsh to fire those workers, and tried to turn the textile mill around. He finally decided that he had to fire those workers.
Title: Re: SHLD - Sears
Post by: plato1976 on June 08, 2013, 01:55:22 PM
exactly what we are concerned here.
that's why we need to see a signal that this guy finally decides want to liquidate
in some way

Hey guys, stupid question probably, but I'm quite confused between RBS, ESL and Eddy Lampert personal holdings...can someone help me to sort it out? If my understanding is good, RBS is reducing its stake in Sears and Lampert is buying them personally or through ESL, which would be the same?

I am also confused about the relationship between RBS and ESL. I know ESL is a fund that Lambert manages. I also know that Lambert is buying shares from ESL, probably due to redemption requests. But when I search in dataroma.com for the SHLD ownership, I also saw RBS partners there with Lambert as the manager.

IIRC - RBS is a sub-fund / managed / owned of ESL.  Basically Eddie manages both funds.  If you want to separate what Lampert owns from what his fund owns - just treat ESL/RBS etc (think there might be a couple of other sub funds too) as his fund holdings and his personal holdings are what he himself owns.

on another note - Lampert visited our school last year for a talk.  we got to ask him questions at the end and he was asked about RE value / liquidation and he basically noted that while RE liquidation seemed like a good floor valuation when he bought the assets, once he got in there he realized the sheer scale of the company and the effect a liquidation would have on lives and couldn't bring himself to do it without trying everything he could to salvage it first. said that the thought of putting over 300,000 individuals out of a job and thus affecting over a 1m people was pretty harsh and just not something he wanted to do at this point in his life.  thought it was interesting to hear him basically say that a liquidation wasn't on the table.

note that he did make it quite clear that he does think the company can be turned around and there is tremendous value / cash flows a well run retailer can generate.
Title: Re: SHLD - Sears
Post by: muscleman on June 08, 2013, 06:15:04 PM
exactly what we are concerned here.
that's why we need to see a signal that this guy finally decides want to liquidate
in some way

Hey guys, stupid question probably, but I'm quite confused between RBS, ESL and Eddy Lampert personal holdings...can someone help me to sort it out? If my understanding is good, RBS is reducing its stake in Sears and Lampert is buying them personally or through ESL, which would be the same?

I am also confused about the relationship between RBS and ESL. I know ESL is a fund that Lambert manages. I also know that Lambert is buying shares from ESL, probably due to redemption requests. But when I search in dataroma.com for the SHLD ownership, I also saw RBS partners there with Lambert as the manager.

IIRC - RBS is a sub-fund / managed / owned of ESL.  Basically Eddie manages both funds.  If you want to separate what Lampert owns from what his fund owns - just treat ESL/RBS etc (think there might be a couple of other sub funds too) as his fund holdings and his personal holdings are what he himself owns.

on another note - Lampert visited our school last year for a talk.  we got to ask him questions at the end and he was asked about RE value / liquidation and he basically noted that while RE liquidation seemed like a good floor valuation when he bought the assets, once he got in there he realized the sheer scale of the company and the effect a liquidation would have on lives and couldn't bring himself to do it without trying everything he could to salvage it first. said that the thought of putting over 300,000 individuals out of a job and thus affecting over a 1m people was pretty harsh and just not something he wanted to do at this point in his life.  thought it was interesting to hear him basically say that a liquidation wasn't on the table.

note that he did make it quite clear that he does think the company can be turned around and there is tremendous value / cash flows a well run retailer can generate.

I think he has already started a slow liquidation. He closed a lot of stores last year, but he didn't announce any plans for this year. Unlike Buffet, Eddie seems to be a retail special investor, so he may find it even harder to give up, with past success in Gap, AutoZone, and now AutoNation. Buffet is different because he is never a textile expert. He succeeded in various investments before he came across the Berkshire trouble.

With that said, I expect the 2nd quarter to catch up the pent up demand of the first quarter due to cold weather, and also Sears is the only retailer offering lease to own, so this could impact the sales positively from this point on. I am not worried about Sears at all. I think he needs to close the Kmart stores soon.
Title: Re: SHLD - Sears
Post by: ERICOPOLY on June 08, 2013, 09:34:17 PM
Unlike Buffet, Eddie seems to be a retail special investor, so he may find it even harder to give up, with past success in Gap, AutoZone, and now AutoNation. Buffet is different because he is never a textile expert. He succeeded in various investments before he came across the Berkshire trouble.

I don't know how to compare Buffett's textile to Lampert's retail.

Textile manufacturing simply left the country.  It didn't get beat by better US competition.
Retail has not left the country.  Sears and KMart are just getting whooped.  Walmart is doing just fine in the US.
Title: Re: SHLD - Sears
Post by: muscleman on June 09, 2013, 08:29:37 AM
Unlike Buffet, Eddie seems to be a retail special investor, so he may find it even harder to give up, with past success in Gap, AutoZone, and now AutoNation. Buffet is different because he is never a textile expert. He succeeded in various investments before he came across the Berkshire trouble.

I don't know how to compare Buffett's textile to Lampert's retail.

Textile manufacturing simply left the country.  It didn't get beat by better US competition.
Retail has not left the country.  Sears and KMart are just getting whooped.  Walmart is doing just fine in the US.

True. I can't imagine how retail industry would leave the country.
I am comparing these two in terms of their personal feelings and past experiences with the companies. Lambert is mostly a retail investor but Buffet made good investments in various areas.

So I  think it is easier for Lambert to convert the stores and keep the jobs than closing the stores and firing the people.
If he closes the stores and immediately lease it to Walmart or Norstorm, he may feel better because he knows that these people can find jobs in this new store.
On the other hand, I think he is trying various things such as data center. If it works really well, he will likely do more of these conversions, but right now he is probably waiting to see how the experiment goes on first.
Title: Re: SHLD - Sears
Post by: hellsten on June 09, 2013, 09:59:06 AM
Stumbled on this article today which might be mildly interesting to SHLD and Rackspace investors.

Revitalizing a Dead Mall (Don’t Expect Shoppers):
http://www.nytimes.com/2012/10/31/realestate/commercial/rackspace-revitalizes-a-defunct-mall-into-an-unorthodox-tech-campus.html

The article links to this site:
http://deadmalls.com/

You can use this Google query to find the articles that mention Sears:
site:deadmalls.com sears

Then there's also this Wikipedia article:
http://en.wikipedia.org/wiki/List_of_defunct_store_chains_of_the_United_States

Which leads to e.g. Builder's Square:
http://en.wikipedia.org/wiki/Builders_Square

Quote
A subsidiary of Kmart, its format was quite similar to Home Depot, Menards and Lowe's with floor space of about 100,000 square feet (9,300 m2)."

"all remaining stores ceased business operations by the end of 1999.[4] The current Builders Square, Inc. operates builderssquare.com as a comparison shopping website for home and garden products
Title: Re: SHLD - Sears
Post by: wellmont on June 09, 2013, 10:39:23 AM

With that said, I expect the 2nd quarter to catch up the pent up demand of the first quarter due to cold weather, and also Sears is the only retailer offering lease to own, so this could impact the sales positively from this point on. I am not worried about Sears at all. I think he needs to close the Kmart stores soon.

what pent up demand? their sales were truly horrific last quarter.  And this with housing supposedly doing pretty well. In fact sales were so low that the company is not only Not making any net income on sales, they aren't even making any ebitda, which is the absolute lowest standard of corporate profitability. this is not about shifting sales from one quarter to another based on weather. it's about a failed retail company that is Losing in the marketplace to better competitors. they aren't even making ebitda (unless it xmas quarter).  There is absolutely no evidence any of these new retail concepts can work to make the retail business profitable.
Title: Re: SHLD - Sears
Post by: muscleman on June 09, 2013, 11:41:39 AM

With that said, I expect the 2nd quarter to catch up the pent up demand of the first quarter due to cold weather, and also Sears is the only retailer offering lease to own, so this could impact the sales positively from this point on. I am not worried about Sears at all. I think he needs to close the Kmart stores soon.

what pent up demand? their sales were truly horrific last quarter.  And this with housing supposedly doing pretty well. In fact sales were so low that the company is not only Not making any net income on sales, they aren't even making any ebitda, which is the absolute lowest standard of corporate profitability. this is not about shifting sales from one quarter to another based on weather. it's about a failed retail company that is Losing in the marketplace to better competitors. they aren't even making ebitda (unless it xmas quarter).  There is absolutely no evidence any of these new retail concepts can work to make the retail business profitable.

What I am saying is that their appliances sales were affected by the cold weather, but if people buy less appliances in Q1, there is the pent up demand, so they will buy more in Q2.
Title: Re: SHLD - Sears
Post by: constructive on June 09, 2013, 12:15:31 PM
What I am saying is that their appliances sales were affected by the cold weather, but if people buy less appliances in Q1, there is the pent up demand, so they will buy more in Q2.

Not if they're buying appliances other places besides Sears.

Look at the results at Home Depot, Lowe's, hhgregg, Whirlpool, Electrolux, GE, etc. What you perceive as pent up demand may be them taking profitable market share from Sears.
Title: Re: SHLD - Sears
Post by: stahleyp on June 09, 2013, 04:48:47 PM
http://finance.yahoo.com/blogs/michael-santoli/most-hated-major-company-mall-172527823.html


fluff piece but some might find it interesting.
Title: Re: SHLD - Sears
Post by: muscleman on June 09, 2013, 05:43:20 PM
What I am saying is that their appliances sales were affected by the cold weather, but if people buy less appliances in Q1, there is the pent up demand, so they will buy more in Q2.

Not if they're buying appliances other places besides Sears.

Look at the results at Home Depot, Lowe's, hhgregg, Whirlpool, Electrolux, GE, etc. What you perceive as pent up demand may be them taking profitable market share from Sears.

This is true. Home Depot's net income increase quite a bit in Q1, but I can't find a breakdown about appliances. It is hard to say what's going on. For Whirlpool, they did have less sales this Q than one year ago in North America, but I don't see they mention cold weather. GE's appliance revenue were flat.
SHOS's Q1 revenue was also negatively impacted by cold weather.
Bruce Johnson, chief executive officer and president stated, "Sales were below last year due to the impact of unseasonably cool weather in February and March. Same store sales of lawn and garden, our second largest category, were down 45% in the first two months."

I am wondering if they were right, or they were just trying to find an excuse? I guess this could also be true because Whirlpool makes a different produce mix compared with SHOS.
The company said it experienced lower sales of lawn and garden in Hometown due to colder weather conditions experienced in large portions of the U.S. delaying the start of the spring/summer season. Excluding lawn and garden, comparable store sales increased 1.4 percent, led by appliances and mattresses.

Read more: http://www.nasdaq.com/article/sears-hometown-q1-profit-declines---update-20130607-00248#ixzz2VlluMHki
Title: Re: SHLD - Sears
Post by: jeffmori7 on June 11, 2013, 06:28:29 AM
A question for those of you invested in Sears : are you in just via SHLD, or are ou also in SHOS or SCC?

I see SHOS as more a pure play on housing turnaround, being a retailer of the valuable brand that are Kensmore and crafstman, while SHLD is really a bet on how Lampert will generate value from the assets. Sears Canada is kind of more like SHLD, but with less store for sale and less upside?
Title: Re: SHLD - Sears
Post by: CorpRaider on June 11, 2013, 06:37:55 AM
Unlike Buffet, Eddie seems to be a retail special investor, so he may find it even harder to give up, with past success in Gap, AutoZone, and now AutoNation. Buffet is different because he is never a textile expert. He succeeded in various investments before he came across the Berkshire trouble.

I don't know how to compare Buffett's textile to Lampert's retail.

Textile manufacturing simply left the country.  It didn't get beat by better US competition.
Retail has not left the country.  Sears and KMart are just getting whooped.  Walmart is doing just fine in the US.

yeah I always tend to try and compare lampert to buffett, but I think it is just my confirmation bias rearing it's ugly head and soothing me by saying "you spotted the next buffett".  Then I splash water on my face and remind myself, "buffett would never have called into an earnings call from his yacht."
Title: Re: SHLD - Sears
Post by: muscleman on June 11, 2013, 08:38:12 AM
A question for those of you invested in Sears : are you in just via SHLD, or are ou also in SHOS or SCC?

I see SHOS as more a pure play on housing turnaround, being a retailer of the valuable brand that are Kensmore and crafstman, while SHLD is really a bet on how Lampert will generate value from the assets. Sears Canada is kind of more like SHLD, but with less store for sale and less upside?

I am in SHLD. SHOS is a pure play on appliances, yes. SHLD is more about properties. SCC is harder to figure out the upside because it has valuable lands that are undisclosed.
Title: Re: SHLD - Sears
Post by: BRK IN MKE on June 11, 2013, 04:08:15 PM
Unlike Buffet, Eddie seems to be a retail special investor, so he may find it even harder to give up, with past success in Gap, AutoZone, and now AutoNation. Buffet is different because he is never a textile expert. He succeeded in various investments before he came across the Berkshire trouble.

I don't know how to compare Buffett's textile to Lampert's retail.

Textile manufacturing simply left the country.  It didn't get beat by better US competition.
Retail has not left the country.  Sears and KMart are just getting whooped.  Walmart is doing just fine in the US.

yeah I always tend to try and compare lampert to buffett, but I think it is just my confirmation bias rearing it's ugly head and soothing me by saying "you spotted the next buffett".  Then I splash water on my face and remind myself, "buffett would never have called into an earnings call from his yacht."

What is the story behind the earnings call from his yacht? I don't recall that ever happening.
Title: Re: SHLD - Sears
Post by: CorpRaider on June 11, 2013, 04:42:30 PM
Sorry, not an earnings call. 

http://www.chicagobusiness.com/article/20120421/ISSUE01/304219970/sears-where-america-shopped
Title: Re: SHLD - Sears
Post by: Matson125 on June 11, 2013, 04:43:32 PM
Sears Metrotown development plans cause stir
http://www.burnabynewsleader.com/news/211039431.html

The recent NewsLeader story on Sears' Metrotown plans even caused a minor stir across the border among investment types.
After the story was posted on its website, the NewsLeader was contacted by three U.S. investment firms, two in New York and one in Los Angeles, seeking more information on the proposal.


I suspect the Los Angeles based firm that is quoted is Baker Street. Since they own so much of SHLD, but then again it's just speculation.  Since last Thursday the volume on Sears Canada has really ramped up.  On Thursday there was over 2.5 million shares traded and yesterday 1.8 million shares changed hands. ESL, Sears Holding and Fairholme hold 84 million out of 101 million shares.  I'll be interested to see if Fairholme is doing the selling.
Title: Re: SHLD - Sears
Post by: muscleman on June 11, 2013, 09:44:15 PM
Sears Metrotown development plans cause stir
http://www.burnabynewsleader.com/news/211039431.html

The recent NewsLeader story on Sears' Metrotown plans even caused a minor stir across the border among investment types.
After the story was posted on its website, the NewsLeader was contacted by three U.S. investment firms, two in New York and one in Los Angeles, seeking more information on the proposal.


I suspect the Los Angeles based firm that is quoted is Baker Street. Since they own so much of SHLD, but then again it's just speculation.  Since last Thursday the volume on Sears Canada has really ramped up.  On Thursday there was over 2.5 million shares traded and yesterday 1.8 million shares changed hands. ESL, Sears Holding and Fairholme hold 84 million out of 101 million shares.  I'll be interested to see if Fairholme is doing the selling.

Likely. I still wonder why they bought a ton of call options...... If Eddie decides to spin off the valuable subs, SHLD will be worth much less than today's value, though shareholders will receive a lot of new stocks from the spin off, the call options will probably go sour.
Title: Re: SHLD - Sears
Post by: wellmont on June 12, 2013, 07:29:01 AM
Sears Metrotown development plans cause stir
http://www.burnabynewsleader.com/news/211039431.html

The recent NewsLeader story on Sears' Metrotown plans even caused a minor stir across the border among investment types.
After the story was posted on its website, the NewsLeader was contacted by three U.S. investment firms, two in New York and one in Los Angeles, seeking more information on the proposal.


I suspect the Los Angeles based firm that is quoted is Baker Street. Since they own so much of SHLD, but then again it's just speculation.  Since last Thursday the volume on Sears Canada has really ramped up.  On Thursday there was over 2.5 million shares traded and yesterday 1.8 million shares changed hands. ESL, Sears Holding and Fairholme hold 84 million out of 101 million shares.  I'll be interested to see if Fairholme is doing the selling.

Likely. I still wonder why they bought a ton of call options...... If Eddie decides to spin off the valuable subs, SHLD will be worth much less than today's value, though shareholders will receive a lot of new stocks from the spin off, the call options will probably go sour.

that would give the call seller a free lunch. and there aren't many of those in today's capital markets.

What are Adjusted Options
These non-standardized options with weird, tempting pricing are adjusted options and is excluded from options chains provided by online options trading brokers by default.

Adjusted options are created as a result of significant corporate activities such as mergers, acquisitions, spin-offs, stock splits, reverse splits or special dividends. In short, adjusted options are created as a result of changes in capital structure of a company that affects the capitalization or share value of its shares.

Whenever such significant changes happen to a stock, its stock options also need to be adjusted accordingly in order to reflect the new capital arrangement. Such an adjustment creates adjusted options with prices that cannot be determined by the conventional extrinsic / intrinsic value calculation.
Title: Re: SHLD - Sears
Post by: muscleman on June 12, 2013, 08:24:56 AM
Sears Metrotown development plans cause stir
http://www.burnabynewsleader.com/news/211039431.html

The recent NewsLeader story on Sears' Metrotown plans even caused a minor stir across the border among investment types.
After the story was posted on its website, the NewsLeader was contacted by three U.S. investment firms, two in New York and one in Los Angeles, seeking more information on the proposal.


I suspect the Los Angeles based firm that is quoted is Baker Street. Since they own so much of SHLD, but then again it's just speculation.  Since last Thursday the volume on Sears Canada has really ramped up.  On Thursday there was over 2.5 million shares traded and yesterday 1.8 million shares changed hands. ESL, Sears Holding and Fairholme hold 84 million out of 101 million shares.  I'll be interested to see if Fairholme is doing the selling.

Likely. I still wonder why they bought a ton of call options...... If Eddie decides to spin off the valuable subs, SHLD will be worth much less than today's value, though shareholders will receive a lot of new stocks from the spin off, the call options will probably go sour.

that would give the call seller a free lunch. and there aren't many of those in today's capital markets.

What are Adjusted Options
These non-standardized options with weird, tempting pricing are adjusted options and is excluded from options chains provided by online options trading brokers by default.

Adjusted options are created as a result of significant corporate activities such as mergers, acquisitions, spin-offs, stock splits, reverse splits or special dividends. In short, adjusted options are created as a result of changes in capital structure of a company that affects the capitalization or share value of its shares.

Whenever such significant changes happen to a stock, its stock options also need to be adjusted accordingly in order to reflect the new capital arrangement. Such an adjustment creates adjusted options with prices that cannot be determined by the conventional extrinsic / intrinsic value calculation.

Oh..... Thank you for pointing this out. :)
Title: Re: SHLD - Sears
Post by: BargainValueHunter on June 13, 2013, 08:48:11 AM
http://articles.washingtonpost.com/2013-06-02/business/39698263_1_howard-hughes-corp-landmark-mall-redevelopment-plan

Quote
Howard Hughes proposed adding apartments, pedestrian connections and public transit options for 1.2 acres in the center of the mall’s 51.5-acre site. In April, John Simon, Howard Hughes executive vice president, presented the company’s plans and told residents the project would create a “sort of small town, urban environment,” but that the plans were contingent on approval from Sears and Macy’s, which each own their stores and plan to remain open.

(http://assets.bizjournals.com/washington/breaking_ground/Landmark%20Mall%20-%20bridge%20render.jpg?v=1)

http://www.bizjournals.com/washington/breaking_ground/2012/12/landmark-mall-redevelopment-plans.html?page=all

Quote
Howard Hughes (NYSE: HHC) took control of the mall as part of the company’s split from General Growth Properties Inc. (NYSE: GGP) But the company only owns a third of the physical mall property itself and does not own the Macy’s or Sears stores there now. Any redevelopment would have to be done with their consent, or at least their feedback.
Title: Re: SHLD - Sears
Post by: muscleman on June 13, 2013, 09:06:28 AM
http://articles.washingtonpost.com/2013-06-02/business/39698263_1_howard-hughes-corp-landmark-mall-redevelopment-plan

Quote
Howard Hughes proposed adding apartments, pedestrian connections and public transit options for 1.2 acres in the center of the mall’s 51.5-acre site. In April, John Simon, Howard Hughes executive vice president, presented the company’s plans and told residents the project would create a “sort of small town, urban environment,” but that the plans were contingent on approval from Sears and Macy’s, which each own their stores and plan to remain open.

(http://assets.bizjournals.com/washington/breaking_ground/Landmark%20Mall%20-%20bridge%20render.jpg?v=1)

http://www.bizjournals.com/washington/breaking_ground/2012/12/landmark-mall-redevelopment-plans.html?page=all

Quote
Howard Hughes (NYSE: HHC) took control of the mall as part of the company’s split from General Growth Properties Inc. (NYSE: GGP) But the company only owns a third of the physical mall property itself and does not own the Macy’s or Sears stores there now. Any redevelopment would have to be done with their consent, or at least their feedback.

Nice! ;D
Title: Re: SHLD - Sears
Post by: BargainValueHunter on June 14, 2013, 05:06:43 AM
Sears to sell back two Toronto leases for $191 million.

Title: Re: SHLD - Sears
Post by: ourkid8 on June 14, 2013, 05:32:41 AM
 Remember, this is Sears Canada.  (Shld has a 51% ownership in it)

 In addition to the agreement on the two stores, Sears has also agreed to sell an option relating to a third store located at Scarborough Town Centre to the Co-Owners for financial consideration of $1 million , also to be paid by June 24, 2013 . The Co-Owners have five years to exercise the option on this property at a fixed total cost of $53 million .

Tks,
S
Sears to sell back two Toronto leases for $191 million.
Title: Re: SHLD - Sears
Post by: LC on June 14, 2013, 05:45:29 AM
The more I own Sears, the more I think it's a play on recovering home values across the country. I think EL is holding on until then so he can realize full value for the assets he has.
Title: Re: SHLD - Sears
Post by: value-is-what-you-get on June 14, 2013, 07:07:30 AM
Sears to sell back two Toronto leases for $191 million.

If it's helpful in valuing Sears real estate assets, these stores are at the three biggest retail mall locations in Toronto.  This is the high end of the valuation.  Without knowing the specifics of the lease terms, it's not possible to compute value.  Nordstrom's will be moving in to two of them.

It is interesting to note the incentives here too.  The mall owners would prefer a shiny new Nordstroms to a tired (in the consumers mind) Sears in the same location. 

Initially this all sounds good for SHLD but when a retailer is selling off prime retail locations, Munger's words ring in my ears ". . . and then what".
Title: Re: SHLD - Sears
Post by: muscleman on June 14, 2013, 08:08:04 AM
Sears to sell back two Toronto leases for $191 million.

If it's helpful in valuing Sears real estate assets, these stores are at the three biggest retail mall locations in Toronto.  This is the high end of the valuation.  Without knowing the specifics of the lease terms, it's not possible to compute value.  Nordstrom's will be moving in to two of them.

It is interesting to note the incentives here too.  The mall owners would prefer a shiny new Nordstroms to a tired (in the consumers mind) Sears in the same location. 

Initially this all sounds good for SHLD but when a retailer is selling off prime retail locations, Munger's words ring in my ears ". . . and then what".

Yes this sounds a little disturbing to me at first, but after a second thought, this is actually not a bad thing. The department store business will continue to decline in the near future, and Amazon will put on pressure for all retailers, so the sooner the exit, the better, especially if they can get a sweat deal.
Regarding the other properties outside of key locations, data center is not a bad idea if the infrastructure for power and cable exists. :)
Title: Re: SHLD - Sears
Post by: Sunrider on June 14, 2013, 09:57:42 AM
Sears to sell back two Toronto leases for $191 million.

If it's helpful in valuing Sears real estate assets, these stores are at the three biggest retail mall locations in Toronto.  This is the high end of the valuation.  Without knowing the specifics of the lease terms, it's not possible to compute value.  Nordstrom's will be moving in to two of them.

It is interesting to note the incentives here too.  The mall owners would prefer a shiny new Nordstroms to a tired (in the consumers mind) Sears in the same location. 

Initially this all sounds good for SHLD but when a retailer is selling off prime retail locations, Munger's words ring in my ears ". . . and then what".

Yes this sounds a little disturbing to me at first, but after a second thought, this is actually not a bad thing. The department store business will continue to decline in the near future, and Amazon will put on pressure for all retailers, so the sooner the exit, the better, especially if they can get a sweat deal.
Regarding the other properties outside of key locations, data center is not a bad idea if the infrastructure for power and cable exists. :)

Another way to look at it: roughly 19% of SCC's market cap in cash. Now, how many more of these prime locations there are, I don't know, but I'd expect a development like Burnaby to be worth in the billion rather than million range.

C.
Title: Re: SHLD - Sears
Post by: muscleman on June 15, 2013, 03:37:17 PM
valuecfa, I think your expectation is correct:
http://www.bloomberg.com/video/lampert-feels-sears-struggle-in-client-redemptions-1A1WaGGwSYi9Wj3wRRa4tA.html

And this happened before too.
http://artic