Seems the web is a flutter lately with Sears Holdings (SHLD) posts.
The latest today is from Portfolio.com and it essentially reiterates the premise that “most investors have given up on the prospect of a retail turnaround and are counting on Chairman Edward Lampert to begin raising cash through asset sales.”
I guess the question I have to ask is “did anyone really buy shares of Sears thinking Lampert was gunning to give Wal-Mart (WMT) a run for their money”? Really? Did anyone buy shares in a tiny New England textile mill in the 1960’s because they thought Warren Buffett has his sights on Berkshire Hathaway (BRK.A) becoming a textile empire?
I think Lampert has simply said several times it can be a very profitable business (and has up until last quarter).
Didn’t most people who bought into the company do so because they were intrigued as to what Lampert could wring out of it and parlay that into? Didn’t others of us buy because of that and because we saw the value in underutilized brands like Kenmore, Craftsmen, DieHard and Land’s End and the land they sit on?
I guess the answer to the “Sears as a retailer” question comes down the how it is defined. Are the brands it owns going away? No. Will those brands remain profitable for years? Yes. If that is true, then Sears will be around as a retailer of those brands for years. Will it remain in its current incarnation? Probably not. I have assumed here for a long time Kmart will eventually disappear and to be honest, so what if it does? As long as Lampert can take the dollars received for the location and parlay them into additional dollars in excess of what he made at Kmart, then, does anyone really care if there are 1,200 or 40 Kmarts left in three years?
If, as everyone of the doubters seem to claim Kmart is as lousy as they feel then that feat ought not be that difficult.
Will it happen overnight? No. Years? Yes.
The bottom line here is that Lampert still sits on $1.4 billion at Sears, until he does something with it other than repurchase Sears shares, Sears will be viewed as a
retailer. Once he branches Sears out, then it officially becomes an investment vehicle. One could argue that the new divisional realignment with the REIT division is already a step in that direction but, again, until things there actually take shape most folks will not see it. Like Buffett Lampert is using early ownership years to consolidate his ownership of the company. Today’s prices will allow that process to be expedited.
Who is right and who is wrong? Well, those of us who bought Sears shares years ago are still is the “right” column as we are still way up in our investment. Those who bought at $150, not so much. The good news? Buffett himself has said “you are neither right or wrong because the market says you are, you are either right or wrong because in the end, you are”
“In the end” is the key phrase. Berkshire shareholders (the were a bunch) who panicked at the turn of the century and sold shares when Berkshire plummeted near 50% later regretted that decision. Perhaps they believed the press that Buffett was “out of touch”? Those who doubted the media and used that opportunity to finally own shares (yours truly) later loved the results (I later sold leaving about $600 per “b” share on the table).
Sears is not an investment on a “quick retail turnaround”. It is an investment in a cash generating mechanism and what its head can eventually do with that cash. Because of that, measuring the outcome of the investment based on a quarter or two or a slide (or jump) in the share price will lead folks to assume too much in either direction.
Disclosure (“none” means no position):Long SHLD
54 replies on “More Sears Musings”
Todd,
Why doesn’t Lampert simply scream out we are not just a retailer but a holding company.
Why hasn’t his surplus of cash he invested not made money offsetting the loss in retail.What is he doing but buying Sears stock back.
Sitting on the retail for years and not receiving a didvidend,at least reits pay a dividend while you wait.
Todd How long have you been saying this and that and why does not everyone see it.
It seems to me Lampert does not want to say what he wants to do because should he fail again,he does want to look bad.
Please,stop comparing BRK with SEARS and Buffet with Lampert.
Be serious.
TODD PLEASE,
EASE UP ON THE CHEESEBURGERS.
ITS GOING PRIVATE.
AS FAR AS THE HEDGE FUND MORONS THAT BOUGHT SEARS SHOWS YOU WHAT THEY KNOW THEY BOUGHT AT THE HIGHS.
Anonymous – Lampert is simply investing in Sears stock because it is below his calculated intrinsic value of the company; I, as a shareholder, do not want a dividend because then I will be taxed on it, after Sears has already been taxed on it. that being said, i’d prever lampert investing my cash than myself until i have fully learned the intricacies of the market like those who have invested for 40 years; also, lampert has “screamed” that SHLD is not just a retailer by announcing the Restructuring plan and by the company being formed as Sears Holdings, not Sears Retailer. keep writing Todd
Nicely put jud…long Shld.
I agree that KMart is looking like the weakest part of SHLD and is the most likely to be thrown from the train. I’m not sure how much value there is though because SHLD only owns 160 of the KMart locations. Eddie had already squeezed the best out of KMart. Still, if KMart starts being a drag on cashflow…
Plus, shutting down KMart will be an admission of failure in the attempt to extend the Sears brand, as the addition of Sears product to the KMart stores has been able to stem the downward slide of KMart revenue.
Aside from Lands End I really do question how transferable the brand value is of Craftsman, Die Hard and Kenmore. Plus, every year as Sears sales and marketshare shrinks, the brand value shrinks so Eddie really has to act fast. In 2005 Sears-Kmart was a $54B retailer, this year they’ll be a $47B retailer, in 2011 a $40B retailer. In fact, Best Buy will pass them in size probably in 2009.
SHLD certainly has value, the brands have value now, but that value will decrease with each year nothing is done. The Real Estate has value, value that probably has eroded greatly since the merger and may be several years away from regaining value. Sears Canada seems worthwhile too, it fits it markets better than Sears USA. It’s actually, thanks to currency exchange rates and a better economy, been quite a disproportionate benefit to cash flow and is the only growing segment of the company.
I do think from an investment standpoint the assets would suggest that the downside is limited, though the upside is probably nowhere near what the stock once fetched. From a retail standpoint, I wish he’d just take the company out instead of just strangling it to death, squeezing out what cashflow he can while not investing in the company or it’s employees future.
OK SO I GUESS EVERYONE IN WALL STREET ARE STUPID.
THEY WANT TO INSIST IT IS A RETAIL PLAY.
CAN IT BE BECAUSE HE NEVER HAS ANYTHING TO OFFSET THE RETAIL LOSSES.
WHO IS STUPID HERE.
It’s obvious he cares about his hedge funds than his shareholders of Sears.
He gets his fees there either way.
TODD,
OU REMIND ME OF THAT IDIOT CRAMER WHO SAID TO BUY ALL THE WAY UP TO $180.
NOW HE SAYS NOT TO BUY.
“LOSE MONEY” WITH JIM CRAMER
This is probably trivial, but does anyone have knowledge as to why so much of their cash is kept in Canada?
ding…
probably an accounting thing. also, based on the two nation’s currencies the last two years, it is growing sitting there..
Any comments on what Lampert might do with Sears besides using it as an investment vehicle.
Is there something with his hedge fund buying Autonation possibly.
Any ideas.
NO PLAN OR STRATEGY IT’S GOING PRIVATE.
NOT A RETAILER,,WHAT IS THE IDIOT DOING WITH TJ KOOL.
MORE WORTHLESS MARKETING,,,
TODD EASE UP ON THE CHEESEBURGERS.
anon,
autonation……hmmmm..
something to think about
anon #2…
it is LL cool J, not “TJ Cool”. if you are going to insult, do it it right, otherwise…well,… you know
WHO CARES ,IT’S NOT GOING TO WORK.
TODD,NOW YOU TRYING TO BE LIKE LAMPERT ,”HMMMM AUTONATION,,,ARE YOU GOING TO TAKE A PICTURE OF YOU THINKING WITH YOUR HAND RUBBING YOUR CHIN.
PUT BOTH YOUR HEADS TOGETHER AND YOU KNOW,,,,,
My opinion is because of the real estate and the brands our grandchilderen’s grandchilderen will be very happy with the shares of Sears bought today.
There is no rush for Lampert he is already a billionaire and his family will do just fine.
Hello Todd,
I have been reading that even though Sears reported a loss they are still gemerating a cash flow for investments.
Can you expalin this in detail if it is true.
TODD IS TOO BUSY EATING.
THE REASON IS BAD INVESTMENTS WITH THE CASH FLOW EQUALS LOSS.
FOR INSTANCE BUYING BACK SEARS STOCK AT HIGHER PRICES AND THE STOCK TANKING.
cash flow
here is a good explanation
Companies that have announced significant writedowns of assets, particularly goodwill, may have substantially higher cash flows than the announced earnings would indicate. For example, telecoms firms that paid substantial sums for 3G licenses or for acquisitions have subsequently had to write-off goodwill, that is, indicate that these investments were now worth much less. These write-downs have frequently resulted in large announced annual losses, such as Vodafone’s announcement in May 2006 that it had lost £21.9 billion due to a writedown of its German acquisition, Mannesmann, one of the largest annual losses in European history. Despite this large “loss”, which represented a sunk cost, Vodafone’s operating cash flows were solid: “Strong cash flow is one of the most attractive aspects of the cellphone business, allowing operators like Vodafone to return money to shareholders even as they rack up huge paper losses.”[1]
http://en.wikipedia.org/wiki/Cash_flow
Todd,
Simply define goodwill in detail.
WHEN DO YOU KNOW YOU HAVE A BAD STOCK,,,,WHEN THE MARKET IS UP ALMOST 200 POINTS AND YOUR STOCK IS DOWN.
LOL
TODD HAVE A FEW MORE GUINESSES IT’S ONLY GOING TO GET WORST.
TODD WHAT HAPPENED DID YOU PASS OUT.
I THOUGHT SO – WHERE ARE ALL THE POSITIVE COMMENTS ABOUT SEARS.
BUY NOW YOUR GRANDCHILDEREN’S GRANCHILDEREN WILL LOVE YOU FOR IT.
MAYBE
OH BY THE WAY GREAT MOVE ON THOSE $80 CALLS.
Here is one.
Something is up with Autonation.
Eddie is looking to take control of it.
It looks like some sort of arrangement with Sears will be formed.
Probably with the Die Hard battery.
Remember one thing the rich want to get richer.
Eddie is working on something big.
Is it true Cramer sold his position in Sears.
I just wanted to bring out a point on the issue of Lampert and Sears being like Buffet and Berkshire.
Simply,Warren Buffet did not have a hedge fund when he was running Berkshire.It was only Berkshire Hathaway where as Lampert has ESL and Sears Holdings.
There is a major difference there.
TODD,WHERE SRE YOU HIDING.
NOTHING GOOD TO SAY ABOUT SEARS NOW.
THOSE CALLS BOUGHT BY BERKOWITZ ARE GOING DOWN GREAT TIMING ON THAT.
I think the comparison is in their investing techniques.
Also,his hedge fund is Sears Holdings.It owns the most shares in the company and if it goes down the hedge fund goes down.
Lampert is giving retail a try but has hedged by breaking up the company it is not just retail.Although shorts want to focus on that because it is a part of the company that is not working.
I agree something is going on with Autonation.
This is getting worse and worse.
Todd anything to say.
I did read a post where the writer said the reason Lampert is not saying anything or giving information on his plan is because he does not have a plan and his trading and investing with the surplus of cash is not working.
So by not saying anything and working behind the scenes he is not putting his head out.
How about that Citi purchase and the buying back of Sears stock at much higher prices.
????????? are we in good hands?????
anon,
Citi and sears are unrelated
he is neither trading or investing with surplus cash
sears still has the best balance sheet of any retailer (except walmart)….
the retail environment sucks, no reason to expect sears to be any different
Todd,
It seems he does his trading and moves with ESL.
Why does he not use his techniques with Sears.
Why doesn’t he use the surplus to invest.
Todd,
What then is he doing with Sears.
Please be in detail.
Thanks
Todd also do you have anything to say regarding those posts on Buffet.
It is true Buffet did not have a hedge fund and a retailer at the same time.
actually he did….
the “buffett partnerships” where what initially bought berkshire
anon,
the “what is he doing question” is way to long to answer here. read some of my past posts on the subject….
sears needs to cash now, to buy shares of an auto retailer now with retail, in the pits would not be responsible..
Thanks Todd,
But Berkshire became the company of Buffet.
He was not running the partnerships and Berkshire it all became one.
They need cash flow for what to pay their worthless executives and to buy back their stock.
That is all I’m seeing here correct me if I am wrong.
IDTA
Also Berkshire was a small textile business when Buffett bought it Sears is a 12 billion dollar company.
How on earth are they comparing these two.
Todd is it possible for ESL Investments to take Sears under them completely issuing ownership to Sears shareholders to his hedge fund.
ANYONE- WHAT IS SEAR’S BUSINESS PLAN.
anon,
for a few years it was both….
lampert could try but ackman blocked him in canada
no comp, is exact the parallels are there
Thanks Todd, are you saying that ESL wanted to take over Sears Canada,I never heard that.I thought it was Sears America wanted it all.
So you feel there is no way of ESL controling Sears completely.
If it did happen would it be good for Sears shareholders.
anon,
it was Sears that lampert tried to use to buy sears.ca. he owned 60% of the stock and ackman blocked him from buying the rest in court..
sears.us now owns 70% sears.ca
could esl get it? anything is possible but there would be a battle for it that lampert would want to avoid
i think he learned from the sears.ca episode and will just continue buying up the float at cheap prices
does he really car at the end if he has 65% or 75%? probably not…
Is the short interest high.
Will there be enough shares to cover should Sears go up.
You can’t even wipe yourself with Sears’ stock it’s too thin and worthless.
Hey Todd why arent you aswering their questions.
I don’t understand this.If a company or person owns 51 percent of a company and they want to buy another company that is out there as long as it is done legally which includes a possible monopoly,no one can prevent that.
The Sears Canada deal did not go through because Lmapert did not have 51 percent ownership.
Is that correct Todd,,,,in detail please.