Obits piling up on Sears Holdings


Analysts are busy piling on Sears Holdings (SHLD +0.6%) after the company issued a lackluster report on Q1.

Credit Suisse's Gary Balter notes the meltdown in sales and margins at the company would have been even worse if the Sears Canada units which are now sold are stripped out and two months of contributions from Lands' End were also excluded.

In his report titled "Running Out of Fingers to Stop the Leaking" Balter crunches a few numbers to show a negative equity value for SHLD can be extrapolated.

CS sees a +40% sell-off in shares to put Sears Holdings near the $20 level.

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Comments (31)
  • Stone Fox Capital
    , contributor
    Comments (9505) | Send Message
     
    too funny.... any analyst that focuses on the retail operations just doesn't get it.
    22 May 2014, 01:47 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    Very novice comment on your part - considering that Eddie has made it very clear at the annual shareholder meeting that he is, in fact, very much focused on the retail operations.
    22 May 2014, 02:13 PM Reply Like
  • Energysystems
    , contributor
    Comments (2038) | Send Message
     
    What should he focus on; spinoffs that were supposed to be sales but had no buyers, bullish real estate sales estimates that haven't come to fruition, or the cash burn that continues with no end in sight?
    22 May 2014, 02:21 PM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (9505) | Send Message
     
    idk,
    Really?? Novice??? So you see them fixing up stores don't you? He isn't focused on the retail operations at all other than building online and Shop Your Way.

     

    Maybe you ought to go read it again and look between the lines.
    22 May 2014, 09:32 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    If ShopYourWay and building online aren't part of the retail operations, then I'm not sure what is.

     

    The whole bull thesis this whole time was retail operations suck, but we don't need it because "it's all about the real estate."

     

    Now, I think it's fairly clear that you're getting "Eddie the retailer."

     

    Time to snap out of denial.
    22 May 2014, 10:27 PM Reply Like
  • rube123
    , contributor
    Comments (2089) | Send Message
     
    "look between the lines"
    there hasn't been done enough ?
    or are we back to data centers , Seritage Seritage again
    can't anybody talk about what is happening , not speculation

     

    the reality he is following Montgomery wards , they started the store in a store concept , SYW is nothing new
    Eddie is running out of cards , or maybe you can tell all of us what is between those lines

     

    link to what is between those lines ?

     

    let me know if you want a link to that Montgomery Wards concept
    23 May 2014, 08:04 AM Reply Like
  • John/Jack
    , contributor
    Comments (156) | Send Message
     
    Balter's crunching the wrong numbers. The stock's up on this report -- and his gloomy forecast.
    22 May 2014, 01:53 PM Reply Like
  • Mark Larson
    , contributor
    Comments (427) | Send Message
     
    I'm curious on Balter's price target though as he erroneously increased it. In his piece today he said SHLD price target is "still at $20" (same as pre-spin). They spun off LE at $8/share. If SHLD pre-spin is worth $20, and SHLD post-spin is $20 and I have $8 cash in my pocket, that makes it worth $28. So he erroneously increased his price target by 40%... no small amount! I'm not surprised at this oversight, but I do find it humorous.
    22 May 2014, 01:58 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    Mark, not much better oversight than you posting a Michael's article, dated 2006, on the CornerofBerkshire site (the article laughably referenced a huge credit card info breech) and stating that Eddie might be looking to buy Michael's.
    22 May 2014, 02:14 PM Reply Like
  • Mark Larson
    , contributor
    Comments (427) | Send Message
     
    Agreed, idk. But I'm also not a public figure trying to move markets like Balter is attempting. Part of the point of COBF is to fact-check and get input, Balter's job is to share facts and unbiased analysis... he's not doing that.
    22 May 2014, 02:23 PM Reply Like
  • rube123
    , contributor
    Comments (2089) | Send Message
     
    the article your link refers to talks about
    "Sears Domestic included comps from Lands’ End for two months, which helped them to eck out a slightly positive comp (+0.2%). "

     

    sounds about right , what is wrong with that , I don't see how $8 and $20 have any more value than diversion tactics

     

    he also said he still maintains $20
    were does his target effect stock price, he had $20 before, and it has stayed higher

     

    if facts were an issue, SHLD would be trading at $3 a share
    the reality is SHLD rises on B/S like data centers spread by Lampert, and his public monkeys

     

    Lampert has waved the magical wand several times with no results

     

    after being boxed in on many of the fruitless fantasy's , Eddie is running out of cards

     

    he can't sell the properties , it didn't take an accountant to see what was going on in the pension

     

    swapping debt is not a viable method for staying in business

     

    $2.4 billion in assets laid to rest $1billion in debt
    page 3

     

    http://1.usa.gov/1jZvnRD

     

    and its really that simple , after 29 quarters , there is nothing complicated
    22 May 2014, 06:47 PM Reply Like
  • MSF INVESTMENTS
    , contributor
    Comments (6204) | Send Message
     
    Yes, and Balter is also forgetting the other spin offs in the past valued at $19.00 paid to shareholders.

     

    It figures the DOJ is going after Credit Suisse for felonies.

     

    Long SHLD
    one share
    23 May 2014, 07:22 AM Reply Like
  • rube123
    , contributor
    Comments (2089) | Send Message
     
    link to were Balter has been charged ?

     

    again, diversion from what Balter said
    maybe you should stick to (AN) partnering with the auto centers ...LOL

     

    the cow jumping over the moon , spin offs ,the "suggestion" of $19 added value , or the suggestion that they are legally after Balter now , doesn't have anything to do with what Balter said

     

    let me simplify

     

    if SHLD would have accurately reported , there would have been no appearance of improved sales at Sears
    I noticed BBY disclosed that recently closed and open stores were not counted , I didn't remember seeing that in Sears/Kmart

     

    the #'s are a little confusing , its going to take a while to register
    they closed 111 stores the prior year with less losses
    this year they were 85 less, with a lot of them closing in the 1rst quarter, so they reaped the benefits , to go with L.E.'s 2 months and dividend

     

    this quarter was

     

    the increased losses is what I don't understand , January , they lay off, what drove the large increase in losses......that surprised me
    23 May 2014, 07:54 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    MSF, what are the other free spinoffs?

     

    OSH went bankrupt.

     

    SHOS was a rights offering - you had to once again spend money on the rights offering in order to be given the right to exercise the option to once again buy shares. It wasn't a "free spinoff."
    23 May 2014, 12:13 PM Reply Like
  • MSF INVESTMENTS
    , contributor
    Comments (6204) | Send Message
     
    Mark I don't mean to make fun of you but you posted not to be surprised if earnings were positive this time. As we saw it was the worst.

     

    What were you thinking, it sort of makes us think about your comments now. Again, I'm not busting chops we all make mistakes but this one was way off.

     

    What happened ?
    24 May 2014, 07:23 PM Reply Like
  • Mark Larson
    , contributor
    Comments (427) | Send Message
     
    MSF, I said don't be surprised if same store sale comps were positive (they were for domestic Sears). I won't bust your chops for reading comprehension, either ;-)
    24 May 2014, 07:27 PM Reply Like
  • Mark Larson
    , contributor
    Comments (427) | Send Message
     
    MSF, here's the original post:
    Don't be surprised if we see positive SSS comps for Q1 in this week's earnings....
    http://bit.ly/1jAmL9J
    “So we did see an improvement in our comp sales through the month of January. While still early in the quarter, we are seeing positive domestic comparable store sales for the month of February for Sears’ full-line and Kmart formats combined.”
    24 May 2014, 07:31 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    Mark, weren't they actually negative?

     

    They were only positive if you took out electronics - that's like saying your earnings also could've been positive if you didn't have to pay salaries, interest, or taxes.
    24 May 2014, 10:59 PM Reply Like
  • Mark Larson
    , contributor
    Comments (427) | Send Message
     
    No, Domestic Sears were positive 0.2% across the board, would be 0.8% without electronics.
    25 May 2014, 12:43 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    Oh right, if you choose domestic Sears specifically.

     

    What was the overall SSS change?
    25 May 2014, 12:53 PM Reply Like
  • Mark Larson
    , contributor
    Comments (427) | Send Message
     
    It was down, idk. I love how you translate "don't be surprised" into "it definitely will be." The market was likely surprised at the positive domestic Sears comps... not that I care what the market does short-term.
    25 May 2014, 01:32 PM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    Mark, I wasn't translating anything.

     

    As for not caring what the market does short-term, that's what SHLD shareholders over the last 8 years have kept telling themselves.
    25 May 2014, 03:58 PM Reply Like
  • rube123
    , contributor
    Comments (2089) | Send Message
     
    what would Sears comps be if you took out the liquidation sales ?
    I don't know how much effect that had , but their sales normally suck 1rst quarter , so I am sure it didn't hurt , I didn't see that they were excluded , I think this is all timing , and next quarter they will yelling margins didn't go down due to L.E. spin off
    220 basis points on margins ??
    that is a lot in 1 quarter , even for Sears to screw up ......card tricks

     

    one day you ever find out what that long term thesis is, be sure to share it , fast Eddie doesn't know , he just knows he has dug a hole he can't get out of
    25 May 2014, 10:55 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11050) | Send Message
     
    Lampert is a horrible retailer.

     

    Worst value destruction since Bear Stearns.
    22 May 2014, 02:29 PM Reply Like
  • Nate Sterling
    , contributor
    Comments (615) | Send Message
     
    Odds are pretty good that SHLD ends up filing bankruptcy to wipe out their large debt burden and reorganize like GM did. The sooner they file BK the better because they are hemorrhaging cash quarter after quarter under the status quo.
    22 May 2014, 03:56 PM Reply Like
  • shughes1116
    , contributor
    Comments (118) | Send Message
     
    I would take the analysts' opinions/recommendations with a grain of salt.
    Ultimately, it seems to me that bankruptcy is the end game.

     

    Step 1, spin off valuable assets/property, and distribute proceeds to current shareholders.

     

    Step 2, declare bankruptcy with remaining cash-flow negative assets.

     

    Step 3, emerge from bankruptcy with substantial reduction in debt and pension obligations.

     

    Step 4, continue turnaround at Sears/Kmart by repurposing property and improving retail operations, with positive cash flow that much easier to achieve due to reduction in debt payments and pension obligations.

     

    I haven't read the most recent financial filings for Sears, but I wonder how much of the secured debt is owned by ESL and related parties. If ESL owns a fair amount of secured debt, they would likely continue to own a substantial part of Sears as it comes out of any bankruptcy proceeding, with a large property base unencumbered by debt obligations. Their portion of Sears after a bankruptcy would be that much more valuable given the lower threshold of cash flow necessary to achieve profitability.
    22 May 2014, 04:24 PM Reply Like
  • MSF INVESTMENTS
    , contributor
    Comments (6204) | Send Message
     
    That would be bad news for Lampert considering he is the largest shareholder of the common stock.
    24 May 2014, 11:14 AM Reply Like
  • JamesJoyce
    , contributor
    Comments (129) | Send Message
     
    That's the big issue that MSF continued to duck. How the long term value in shld is extracted given the power of the dominant shareholders and the role of bond holders. It's not a good investment for minority shareholders even if the real estate argument holds true.
    24 May 2014, 03:38 AM Reply Like
  • MSF INVESTMENTS
    , contributor
    Comments (6204) | Send Message
     
    Lampert owns the common shares like the minority shareholders.

     

    Read into Sears Re, etc.
    24 May 2014, 11:19 AM Reply Like
  • idkmybffjill
    , contributor
    Comments (1910) | Send Message
     
    But MSF, as you pointed out many times before, Lampert is wealthy many times over from his hedge fund. And Sears makes up about half his net worth - he still has $1.5B in other stocks.
    24 May 2014, 01:44 PM Reply Like
  • JamesJoyce
    , contributor
    Comments (129) | Send Message
     
    From Wikipedia, about squeezing out smaller shareholders..

     

    "In the U.S. squeeze-outs are governed by State laws. E.g. 8 Delaware Code § 253 permits a parent corporation owning at least 90% of the stock of a subsidiary to merge with that subsidiary, and to pay off in cash the minority shareholders. The consent of the minority shareholders is not required. They are merely entitled to receive fair value for their shares. This is in contrast to freeze-outs, where the minority interest is unable to liquidate their investment."
    25 May 2014, 11:49 AM Reply Like
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