Sears gets bearish Barron's treatment

The value of Sears' (SHLD) real estate could be far less than the bullish views of Baker Street (don't forget Bruce Berkowitz), writes Jacqueline Doherty. What's more, the company is selling some of its most profitable locations to raise cash to cover its massive losses - "burning the furniture to stay warm," says ISI's Matt McGInley, whose price target on the stock is just $25.

Relying on a price-per-square-foot analysis by Cushman & Wakefield - which got its comps from J.C. Penney sale prices - Credit Suisse has a price target of $20.

Part of the bullish real estate case relies on redeveloping certain stores, but that's easier said than done. Sears' Seritage Realty Trust has subleased "a number" of stores to other retailers, according to a spokesman, but Ubiquity Critical Environments - set up to convert locations into data centers - hasn't launched a fully operating one yet.

Barron's also takes a jab at Baker Street Capital - whose bullish report was the impetus in Sears' moonshot last month. The small operation - whose stock and options positions in Sears had been well under water - won't give detail on exactly which real estate experts led to such an outlier of an estimate on the value of the real estate holdings.

Sears gave back 14% of its big August/September gains last week. Monday morning might see even more selling.

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Comments (20)
  • wyostocks
    , contributor
    Comments (9113) | Send Message
    Smells like a pump and dump phony rally.
    13 Oct 2013, 10:37 AM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (9690) | Send Message
    Pump and dump by Barrons and the others? Everybody knows that Lampert and Berkowitz are the smartest 2 people in this conversation. One needs to ask why these others are so desperate to prove them wrong?


    The incredible part is that all of the comps suggest that Baker St undervalues the real estate.


    Guess nobody read the release on Fri night... hmm
    13 Oct 2013, 12:42 PM Reply Like
  • movies555
    , contributor
    Comments (1439) | Send Message
    "One needs to ask why these others are so desperate to prove them wrong?"


    Why are some people so desperate for them to be right? Berkowitz in particular seems to be worshipped as if he is incapable of doing any wrong.


    Lampert and Berkowitz are two undeniably smart people, but they aren't always right (the point looks as if it is going to go to Einhorn on St Joe) and I think it's incredibly irritating that Lampert is praised up and down for taking a classic American brand (admittedly one that wasn't in great shape) and making matters worse by neglecting the business.


    Lampert is smart, Berkowitz is smart, but they are not incapable of making mistakes. Ackman is smart too, but he's another hedge funder who has had one fail after another in retail (Borders, Target, JCP.)


    I don't think the case is as negative as Barrons made it out to be, but these people who think there is astronomical value to be unlocked in mall real estate are going to be disappointed. I'm also skeptical on the value of inventory (Ooooh, Sears inventory, I mean, the retail operation is run so well I bet buyers will be lining up for all of that fast-moving merch), although there is value in the brands.


    What has happened to Sears under Lampert is very sad - it's not deserving of praise. People want someone who has turned a classic American brand that was becoming irrelevant into a company that was totally and completely irrelevant under their watch and believe he now unlock all this value after what the company has become under his watch? Good luck.


    Not long or short, just find it upsetting that what Lampert has done is apparently worthy of praise.


    Shareholders in ESL are probably upset enough after their redemptions were met with shares of Autonation (not bad) and Orchard Supply Holdings (bad).


    "Gross assets declined 24 percent to $5.1 billion at end of 2012 from a year earlier, and the number of investors in the fund dropped to 164 from 250, filings show."



    Completely agree with this view from Bronte Capital re: Sears (as well as a number of the comments from the comments section...)
    13 Oct 2013, 04:26 PM Reply Like
  • movies555
    , contributor
    Comments (1439) | Send Message
    :"although there is value in the brands."


    Additionally, meant to say that there is value in the brands, but less then before Lampert made the company entirely irrelevant. Probably more when it was only semi-irrelevant.
    13 Oct 2013, 04:33 PM Reply Like
  • Energysystems
    , contributor
    Comments (2084) | Send Message
    If Berk was so smart, he wouldn't be underwater by hundreds of millions in his SHLD position. Lampert wouldn't have blown billions buying back stock at 100+. If those are the smartest guys in the room, are they bunking with Timmy "can't do TurboTax" Geithner?
    13 Oct 2013, 11:59 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
    Berkowitz, after holding the stock for so long, should have kept on selling covered calls. Could have easily lowered his average price.
    14 Oct 2013, 09:51 AM Reply Like
    , contributor
    Comments (6334) | Send Message
    Look out below...........
    13 Oct 2013, 10:38 AM Reply Like
  • JamesJoyce
    , contributor
    Comments (137) | Send Message
    I get you now. You're riding sears up and down...and up and down..? No long term shareholder position...?
    13 Oct 2013, 02:31 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
    Is it still too late to get into puts on Monday morning?
    13 Oct 2013, 11:36 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11174) | Send Message
    Take the average of all of the heavily researched analyses by the various shops.


    That gets you to ~$90 per share.


    Shave off another 25% ($72) and you STILL have value in the 2015 $50 calls (LEAPS).


    Finance by selling the JAN14 ATM $60 calls.


    Have a profitable day. ;)
    13 Oct 2013, 11:56 AM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4019) | Send Message
    It's shame that JCP didn't merge with Sears. Imagine a single dinosaur company consisting of JCP, Sears, and Kmart.


    It would be as amusing as watching a group of drunks dressed in lederhosen costumes at Munich's Oktoberfest--staggering down the street arm-in-arm, loudly singing songs that promise a return to the glory days of the fatherland.
    13 Oct 2013, 01:25 PM Reply Like
  • movies555
    , contributor
    Comments (1439) | Send Message
    "It's shame that JCP didn't merge with Sears. Imagine a single dinosaur company consisting of JCP, Sears, and Kmart."


    Maybe they could bring back Service Merchandise and Spiegel.
    13 Oct 2013, 04:31 PM Reply Like
  • JamesJoyce
    , contributor
    Comments (137) | Send Message
    Sears spin off, Orchard supply hardware, has been a disaster. Not much talk about this lately... What implications does it have for Eddie's credibility?
    13 Oct 2013, 02:30 PM Reply Like
  • KJP712
    , contributor
    Comments (469) | Send Message
    Sears should offer a Drive-thru at their stores.Then you would not bump into the same employee year after year.Just a thought...
    13 Oct 2013, 02:32 PM Reply Like
  • User 509088
    , contributor
    Comments (1704) | Send Message
    all the pointed comments neglect to observe that consumers are those people who have decently paying jobs.


    retail converting their real estate into stock would suggest that retail is going to be closing locations due to the lack of active consumers.


    why else would you segregate the land, which will appreciate more than your business, over the course of time?
    13 Oct 2013, 02:55 PM Reply Like
  • chopchop0
    , contributor
    Comments (5162) | Send Message
    Hi, I'm 3 years ago. Nice to meet you
    13 Oct 2013, 04:00 PM Reply Like
  • TAS
    , contributor
    Comments (3817) | Send Message
    Sears and KMart real estate in many cases is by in large near where rehabbers are buying homes and spinning them into HUD low-income rental units.


    This company is a disaster.


    The CEO is running an amusement park, not a retail company.
    13 Oct 2013, 07:22 PM Reply Like
  • Bouchart
    , contributor
    Comments (1104) | Send Message
    There was a KMart in my home town that closed over a decade ago. That land remains vacant to this day.
    13 Oct 2013, 10:01 PM Reply Like
  • Micah
    , contributor
    Comments (498) | Send Message
    The KMart store in my home town was redeveloped into a mega grocery/gas/liquor store with two fully leased out-lots.
    14 Oct 2013, 11:42 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1911) | Send Message
    Surprised the stock price is holding up.
    14 Oct 2013, 02:23 PM Reply Like
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