Sears Holdings (SHLD) annual meeting was a bit anti-climactic yet reassuring. Note to Chairman Lampert, stop having it around Berkshire (BRK.A) weekend, you get drowned out by the Buffett extravaganza in Omaha.
Onto the meeting. As we have discussed here countless times Sears need to leverage its brands and improve it internet presence. Both seem to be a priority and even better, both are seeing signs of real progress.
While Mr. Lampert expects that most Sears sales will continue to occur in brick and mortar stores, he said he would increase investment in Internet experiments. His goal, he said, is to capture the attention of shoppers at the crucial moment when they begin to discuss purchases with friends on social-media Web sites and to research buying choices online.
“We want to make sure we don’t become completely irrelevant as people’s way of making decisions changes,” he said, adding, “The goal is not just survival, it’s progress.”
Note: Sears Web sites will offer more than 3 million products in 2009, up from 500,000 in 2008
It continues:
But there were hopeful signs, including a spike in the company’s already leading share of the appliance market last year to 34.6% from about 30%. That share continued to increase in the first quarter of this year, company officials said.
Mr. Lampert said he expected Sears’s exclusive Kenmore appliance and Craftsman tool brands to leverage their size better by developing innovative products.
“Historically, we have been way too passive,” he said. He added that he didn’t see Sears’s lack of production ability as a hindrance. “Nike doesn’t own manufacturing,” he said.
This is a telling quote because it possibly signals brands like DieHard, Craftsmen and Kenmore might possibly be sold in outlets other than Sears or Kmart. The constant debate is whether selling them outside of Sears owned properties would lead to further erosion of foot traffic. Too some extent it would but, would that be offset by the increased sales of merchandise? For Craftsmen, it think having them in Home Depot (HD) and Lowe’s (LOW) is a no brainer. Drills, screwdrivers and pliers are more of a commodity purchase than a $1000 appliance. For that reason, people will make the special trip to a Sears to get the washer/dryer but probably not to get a socket set that can be purchases around the corner at another location.
The lower the price point, the less “shopping” in involved and the need to market saturation of the product is necessary. Let’s hope they are moving that way. For Craftsmen and DieHard. Let’s see results for those two before we do anything with appliances.
Regarding acquisitions Lampert gave the typical “we’d consider it” answer. One must not expect anything of major significance given Sears cash levels, credit markets and the uncertainty about the future. I would not be surprised to see more tech buys like the recent Delver one.
Lampert also highlighted “mygofer”, which opened its first store last week in the southwest Chicago suburb of Joliet. Shoppers go online, select items and receive curbside delivery at the location right away. The store, which operates more like a warehouse than a retail location, features few displays, think of it as a Sam’s Club drive-thru.
“We think that’s going to be a better way for people to shop,” he said. “This is not just about there being a new store experience, it’s about there being a different way for people to shop”, said Lampert.
Anyone who was at the meeting and has more detailed notes, you can email them and I will post for you.. (valueplays at gmail dot com)
Disclosure (“none” means no position):Long SHLD
10 replies on “Sears Annual Meeting: Internet and Brands”
Couple of notes and observations:
* Lampert told shareholders not to expect any major M&A or deal any time soon. The company is focused on seeing it's strategy through without a distraction.
* Lampert must be a big fan of Porter's five forces. The majority of his responses included the language of "the capability to" and to "the ability to".
* Richard Perry left the board. I wonder if he will be replaced and who the replacement will be.
* The Fairholme analyst went straight for Lampert after the meeting concluded. I wonder if he had a message to deliver from Berkowitz.
* Lampert has the respect of the Sears retirees. One of the retiree's reps read a glowing letter thanking Lampert for his actions and dedication.
* Lampert said that ESL will eventually sell some SHLD shares at some point.
* Sears is trying to compete with Walmart and Target. Lampert didn't view Ambercrombie as a direct competitor.
Anyone else there that can comment on this last post? Did Eddie really say that ESL would sell some SHLD at some point? That doesn’t sound like an ESL kind of thing to say, at all. Also, did he actually say he saw Walmart and Target as their competition? These would appear to be contradictory statements to what he has said in the past. Any other posts or notes on the meeting would be great.
To my earlier post,Lampert really only mentioned Walmart and Target when he spoke about competitors to SHLD. He also mentioned that doesn’t view Amazon as a direct competitor. He did not mention JCP or M during the entire meeting.
If you have notes, please post them. I, and I’m sure many others who weren’t able to attend would love to see them. I am thinking that based on your comments, you are short SHLD. Eddie has said in the past that they are not trying to compete with WMT and TGT, so I would be pretty shocked if he flatly stated they now are trying to compete with them. Also, I would doubt he said anything about ESL selling SHLD shares. Eddie doesn’t even tell ESL investors what he is doing with their money… why would he mention anything to outsiders? Nobody knows what his plan is for SHLD other than him.
have too agree w.anon #2
lampert would never disclose any plans re:stock
A retired attorney asked Lampert during the Q&A how she should interpret insiders selling shares, presumably referring to Perry. Lampert responded that these insiders have fiduciary duties to their investors and that sales aren't necessarily indicative of Sears' future.
On ESL selling shares, I believe Lampert recognized that ESL selling SHLD shares was in the realm of possibilities but not a certainty.
No remembrance of WMT and TGT as direct competitors.
Lampert did mention that Ackman not being there was fine by him.
Lampert’s main message was that Todd Sullivan is a bozo and he demands the sale of his sales at once.
“the sale of my sales” ????
I’m the bozo? Better luck next time
Maybe I’m naive – I still don’t get it. Lots of talk about online this and online that… He wants to remain relevant – I get it. He feels like Sears has great brands (they do), but aren’t perceived as relevant (the store isn’t). Mass media doesn’t work; online social media is where it’s at. That’s why he will invest 20% of capex into online ventures. He wants to create a listening organization, a consumer-focused one. He’s got a chip on his shoulder because his stores and his apparel are perceived negatively and he wants online to change that. Logical enough.
But let’s look at the results:
*They get about 13m visitors / month and it’s growing. Target gets 50% more traffic; Wal-mart double; Amazon 4x. Hell, Lowes gets 20% less traffic, but spends 10% of what Sears spends.
*They added 1.5m products, but all of it via 3rd party drop shippers like JC Whitney or Ingram Micro or Digital River in highly competitive, low margin categories like auto parts, books, and digital media. Good business strategy, but inconsequential in the grand scheme of things. What wins online is quality, not quantity (unless you’re going after Amazon – hmmmm)
*Their ecom business is at most $2B with Lands End (regardless of what Internet Retailer says; it’s wholly inaccurate). It’s growing at the industry growth rate – 20% (using Forrester). Maybe higher, but not much. This is in-line with competitors, but slower than Amazon which is growing at 33%.
*Ecom still accounts for just 4% of total sales. While it might influence 40%+, the negative store comps indicate the online/offline influence isn’t changing Sears consumer shopping behavior.
*managemyhome.com, servicelive.com, mysears.com, etc. all amount to $0 on a balance sheet and lead to -$0 on an income statement. Again, good portfolio strategy, but I actually think Best Buy is doing a superior job in the same space with a clear focus on selling more products.
Look, I get what ESL is trying to do. He sees tremendous assets like a large website, lots of consumers, stores, brands, services, etc. and wants to create greater leverage, asset utilization, lifetime value. And I applaud his test and learn approach. But let’s not kid ourselves in thinking that online and ecom are a panacea for the company. Or that he has a clearly defined strategy. In the end, he’s going to have to figure out what to do with his stores.
The good thing is that he can be very patient. He’s still making money…
And I am long SHLD
Anyone long sears stock should expect esl sales of stock, regardless of what Eddie said.
He has a huge lock up, but his clients will want their money back in some amount whenever they can get it after the chaos of the last couple of years. If they want more back than he can front, then He’ll sell stock to give it to them.
One could hope that the long term shareholder value creation mentality is strong in Eddie, but we can’t be sure.
Funny thing, I googled sears annual meeting notes, and read the whole list of last year’s notes that Todd put up in 2008 up to the Ackman part before I realized that they were from last year.
Seemed relevant now still.
Thanks to whoever anonymously analyzed the ecommerce aspect of the biz.
I just consider it inconsequential, but perhaps a future source of value.