Sears Holdings (SHLD) Eddie Lampert released his latest shareholder letter. While much of is a recitation of results, there are clear signs into the companies direction.
It is going to become all about the brands:
First this:
“One of our most important resources is the great brands we own, in particular DieHard, Craftsman, Kenmore, and Lands’ End. All four of these brands have significant equity with customers and provide tremendous opportunity for value creation. To illustrate, let me discuss one of them, DieHard, in more detail. Based on brand recognition studies, DieHard leads in customer recognition among car battery brands by a wide margin, but it lags dramatically in market share. Why? We believe it is due to fewer points of distribution. As a proprietary brand, DieHard is only available in 900 Sears Auto Centers and 1,400 Kmart stores. Yet it is competing with other batteries that are available in thousands of locations across the country. Further, a car battery purchase is a duress purchase event, in which the customer is looking for the nearest, most convenient solution. Unfortunately, it is not always us, but there is an opportunity for us to rethink our brand distribution strategy to create value. “
Then:
“Our mission is to provide our customers with the products and services they want. And, we need to be prepared to supply them where and when our customers want. In many cases, that may not be exclusively through our stores. Instead, it could be online, via catalog, or possibly even through other retail outlets. We will now have a dedicated brand team who will manage our branded products – Kenmore, Craftsman, and DieHard, that way. Furthermore, we will have a Real Estate business that will act as an internal landlord, providing access to space and maximizing the value of that space over time. In order to be successful in the future we need to more quickly adapt to the changing marketplace and we believe that this structure will help us do that. We have begun the process of transforming the organization to this new model, but it will take some time to build the processes and information systems necessary to support the structure.”
There is more, including a record year that saw Land’s End post a 12% profit gain and others, but I wanted to get this out early. More to come later………
Read the full letter here:
Disclosure (“none” means no position): Long SHLD
3 replies on “Lampert’s Latest Sears Holdings Letter”
He is confirming a lot of the things you have writing about right here in your blog.
Btw, have you seen this video conference of Walter Schloss at the Ben Graham Centre.
thanks vlado….
i will check out the video….
“…but there is an opportunity for us to rethink our brand distribution strategy to create value … we need to be prepared to supply them where and when our customers want. In many cases, that may not be exclusively through our stores. Instead, it could be online, via catalog, or possibly even through other retail outlets.”
Sears Holdings would certainly be better able to compete via online, catalog, & other retail outlets. The interesting thing is that once these outlets are established, the monetizing of the real estate would not be at the expense of the brands.
I am becoming more confident in Sears Holdings‘ ability to not only survive, but to be a powerhouse. I may have been a little premature in calling Sears Holdings‘ current transformation a mere REIT play, a la Vornado Realty Trust (VNO). They will certainly succeed at that, but the brands have the potential to exponentially compound Sears’ success in a scenerio with near-limitless points of distribution.