Author Topic: SHOS - Sears Hometown and Outlet Store  (Read 73596 times)

samwise

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Re: SHOS - Sears Hometown and Outlet Store
« Reply #170 on: June 05, 2019, 09:38:37 AM »

Thanks for your thoughtful post. I agree with being skeptical about anything involving Lampert, but I would quibble with some of your points:

* Outlet segment earned $19.3M in operating profit last year. While it likely is counter cyclical, I don't think you need to count on earnings "normalizing" here

* SHOS has over $280M in NOLs and the merger plan hints at their use ("it being understood, for the avoidance of doubt, that any net operating losses, tax credits, tax basis or any other tax attributes that would reduce such Taxes payable by the Company shall be taken into account in calculating such amount").

* Re the IT issue...This is from SHOS's Q4 earnings release: "We do not expect significant IT build fees or systems development costs after the second quarter of our 2019 fiscal year."

To be clear, I have no points besides pointing out that you need to
1. Value outlets
2. Understand the merger agreement

If you are comfortable with both (and it does seem so because you quoted the merger agreement on tax and NOLs) then maybe this is truly a very asymmetric bet which could work out very well.

Everything else I mentioned above are things I noticed and would have looked at if I wanted to do the work. The conditions for the merger may check out and appear reasonable, in which case this could be a good investment with limited downside and a short timeline. That's actually a perfect investment.

Normalization of earnings: the last few years have been variable. Maybe last years value is the true earnings power, or an average, or something else. You just need to judge that. No other implication of the word normalization here.

Good point about the NOL.

IT: splitting IT systems is painful. Look at what SHOS went through splitting from Sears. How easy will outlets be extracted from SHOS? What about warehouses and distribution? If the two segments run very independently with little shared infrastructure, then that's the easiest sale. Again, I have no point, except it's something to consider in the value of outlets to another buyer, whether it's a PE shop or Home Depot.


BTShine

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Re: SHOS - Sears Hometown and Outlet Store
« Reply #171 on: August 23, 2019, 08:18:29 AM »
This story should be getting an update considering the Outlet Stores sale process is supposed to end by Aug 24th, or proceed with an extension of 10 days.