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My view is that I don't hate Sears, I hate what Sears has become under Lampert. You have a classic American brand that was admittedly becoming irrelevant, but Lampert has done it no favors. Berkowitz is an excellent investor, but I found his praise of Lampert upsetting - what value has Lampert added during his term???
Is it a real estate play? Sure, but I continue to believe that A:) in a world of online shopping and mobile, giant spaces aren't going to be as desirable - Best Buy and others are downsizing stores. B:) I'd be willing to bet that some store locations are just not desirable at all (and having stores that are poorly rated by customers as indicated in the article above I'd guess isn't doing wonders for real estate value for malls where Sears is the anchor and crowds are dwindling) and in general, I think there's more interest in Sears as a real estate play than the real estate deserves.
There's also the idea that you're trusting a leadership team who has run the company into the ground to successfully liquidate the company if that's the path it's heading towards. The brands have value (Kenmore), but I question the value of the inventory - if it isn't selling at Sears...
Lampert keeps propping up shares with short squeezes and discussing a turnaround, but it just hasn't happened or looked to have started to any noticeable degree.
In terms of not having demand for retail, this would appear to validate that - Sears is trying to turn stores into data centers and "disaster recovery spaces" (So ... the anchor store in a mall will be a data center and/or disaster recovery space?) http://www.forbes.com/sites/retailwire/2013/05/31/sears-replaces-retail-stores-with-data-centers/ "...And yet, Ken Lonyai, digital innovation strategist and co-founder of ScreenPlay InterActive points to Sears’ sketchy customer service reputation as it enters this exacting market. “Retail consumers and data center customers are entirely different clientele with different needs and different levels of tolerance for missteps,” he wrote on RetailWire. “Most data centers promise 99.9% up-time in their SLAs. Given its track record, it would be truly audacious for Sears to promise anything close to that and anything less would render them uncompetitive.”
I've said in other threads and I'll say it here: I do think there's value in the real estate but I question the demand for it and it would appear there isn't demand from other retailers.
I do think there's value in Sears, but just not as much as some believe. Additionally, every day that goes by, Sears becomes more irrelevant (and that's not even mentioning K-Mart.) Again, it also goes back to the idea of trusting someone to unlock value now after failing to do so for years.
As for unlocking land value, Berkowitz looks to be ready to exit (at least to a considerable degree) St Joe (http://seekingalpha.com/article/1469661-st-joe-is-fairholme-ready-to-sell?source=yahoo), despite still being about half of what it was in 2007/2008 and not all that far off 2009 lows. A lot of land plays, with the exception of TPL, have just not done much over the years and any sort of attempt to unlock value is going to take longer than most shareholders have the patience for these days (see Wintergreen and CTO)
I don't like retail much, but if I had to, I'd go for Tesco (TSCDY.pk) or a few other odds/ends. Costco, perhaps, if it came down.
Talking to myself was wondering how much property Sears really owns and how desirable it is. I would think most properties are in property management co's.
"Mark Cohen, who teaches at Columbia University’s business school in New York, is a former chairman and chief executive officer of Sears Canada. Don’t get him started on Eddie Lampert, the chief executive officer and majority owner of Sears Holdings Corp. (SHLD)
“Sears is slowly and steadily failing at the hands of a ruthless, methodical asset-stripper,” Cohen said in an interview. “Lampert will come up with some cash every quarter or two to make sure the balance sheet is still viable. It’s a tragedy because Sears is a legacy brand that needed to be and could’ve been repositioned.” http://www.bloomberg.com/news/2013-06-18/lampert-says-he-has-sears-strategy-as-analysts-doubt-it-retail.html?cmpid=yhoo =========================================
"Hedge-fund manager Edward Lampert is facing some unhappy investors.
His firm, ESL Investments Inc. distributed 9.1 million shares of AutoNation Inc. AN -0.23% to investors to meet their requests to withdraw money from his hedge fund, according to a Wednesday regulatory filing. In the same filing, Mr. Lampert disclosed that another ESL entity, called CBL, had given investors an additional 2.1 million shares of the car-dealership company. The total value of AutoNation shares distributed was $515.5 million on June 10, the day they were given out to investors.
ESL Partners also gave out 197,000 common and 520,000 preferred shares of Orchard Supply Hardware Stores Corp. OSH -15.64% to investors on June 10 to meet redemption requests, according to another filing by Mr. Lampert. The moves were earlier reported by Bloomberg News, which said Mr. Lampert has previously given securities instead of cash to meet redemption requests. The practice is unusual in the hedge-fund industry." http://online.wsj.com/article/SB10001424127887323734304578544050516749128.html
(Additionally, regarding OSH, a couple of days later, Thursday, June 13, 4:02 PM Shares of Orchard Supply Stores (OSH -1.8%) are all over the board today, shooting up nearly 27% at the open only to quickly reverse course and trade back down into the red following reports that the company will file for bankruptcy as soon as next week. Debtwire reported that the company had hired the BMC Group to handle the bankruptcy filing. 1 Comment [On the Move])
Reply to @scott: An article in this morning's San Francisco Chronicle bolstering Cohen's point regarding asset stripping. Evidently Orchard was acquired by Sears, loaded with untenable debt, and then "spun off" again. Apparently Lowe's intends to buy OSH out of bankruptcy and operate it as a separate entity, appealing to a somewhat more "upscale" market.
Comments
Is it a real estate play? Sure, but I continue to believe that A:) in a world of online shopping and mobile, giant spaces aren't going to be as desirable - Best Buy and others are downsizing stores. B:) I'd be willing to bet that some store locations are just not desirable at all (and having stores that are poorly rated by customers as indicated in the article above I'd guess isn't doing wonders for real estate value for malls where Sears is the anchor and crowds are dwindling) and in general, I think there's more interest in Sears as a real estate play than the real estate deserves.
There's also the idea that you're trusting a leadership team who has run the company into the ground to successfully liquidate the company if that's the path it's heading towards. The brands have value (Kenmore), but I question the value of the inventory - if it isn't selling at Sears...
Lampert keeps propping up shares with short squeezes and discussing a turnaround, but it just hasn't happened or looked to have started to any noticeable degree.
In terms of not having demand for retail, this would appear to validate that - Sears is trying to turn stores into data centers and "disaster recovery spaces" (So ... the anchor store in a mall will be a data center and/or disaster recovery space?) http://www.forbes.com/sites/retailwire/2013/05/31/sears-replaces-retail-stores-with-data-centers/ "...And yet, Ken Lonyai, digital innovation strategist and co-founder of ScreenPlay InterActive points to Sears’ sketchy customer service reputation as it enters this exacting market. “Retail consumers and data center customers are entirely different clientele with different needs and different levels of tolerance for missteps,” he wrote on RetailWire. “Most data centers promise 99.9% up-time in their SLAs. Given its track record, it would be truly audacious for Sears to promise anything close to that and anything less would render them uncompetitive.”
I've said in other threads and I'll say it here: I do think there's value in the real estate but I question the demand for it and it would appear there isn't demand from other retailers.
I do think there's value in Sears, but just not as much as some believe. Additionally, every day that goes by, Sears becomes more irrelevant (and that's not even mentioning K-Mart.) Again, it also goes back to the idea of trusting someone to unlock value now after failing to do so for years.
As for unlocking land value, Berkowitz looks to be ready to exit (at least to a considerable degree) St Joe (http://seekingalpha.com/article/1469661-st-joe-is-fairholme-ready-to-sell?source=yahoo), despite still being about half of what it was in 2007/2008 and not all that far off 2009 lows. A lot of land plays, with the exception of TPL, have just not done much over the years and any sort of attempt to unlock value is going to take longer than most shareholders have the patience for these days (see Wintergreen and CTO)
I don't like retail much, but if I had to, I'd go for Tesco (TSCDY.pk) or a few other odds/ends. Costco, perhaps, if it came down.
“Sears is slowly and steadily failing at the hands of a ruthless, methodical asset-stripper,” Cohen said in an interview. “Lampert will come up with some cash every quarter or two to make sure the balance sheet is still viable. It’s a tragedy because Sears is a legacy brand that needed to be and could’ve been repositioned.”
http://www.bloomberg.com/news/2013-06-18/lampert-says-he-has-sears-strategy-as-analysts-doubt-it-retail.html?cmpid=yhoo
=========================================
"Hedge-fund manager Edward Lampert is facing some unhappy investors.
His firm, ESL Investments Inc. distributed 9.1 million shares of AutoNation Inc. AN -0.23% to investors to meet their requests to withdraw money from his hedge fund, according to a Wednesday regulatory filing. In the same filing, Mr. Lampert disclosed that another ESL entity, called CBL, had given investors an additional 2.1 million shares of the car-dealership company. The total value of AutoNation shares distributed was $515.5 million on June 10, the day they were given out to investors.
ESL Partners also gave out 197,000 common and 520,000 preferred shares of Orchard Supply Hardware Stores Corp. OSH -15.64% to investors on June 10 to meet redemption requests, according to another filing by Mr. Lampert. The moves were earlier reported by Bloomberg News, which said Mr. Lampert has previously given securities instead of cash to meet redemption requests. The practice is unusual in the hedge-fund industry."
http://online.wsj.com/article/SB10001424127887323734304578544050516749128.html
(Additionally, regarding OSH, a couple of days later, Thursday, June 13, 4:02 PM Shares of Orchard Supply Stores (OSH -1.8%) are all over the board today, shooting up nearly 27% at the open only to quickly reverse course and trade back down into the red following reports that the company will file for bankruptcy as soon as next week. Debtwire reported that the company had hired the BMC Group to handle the bankruptcy filing. 1 Comment [On the Move])