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Wasn't aware Sears had any big retail stores left. All we see here are smallish shops that take catalogue orders and stock a few appliance & lawn equipment items. Usually staffed by only one or two people.
Back in the 70s and 80s Sears had some magnificent large department stores in the suburban Detroit area where we lived. Was a real treat to spend a couple hours shopping in one. Sears was always a cut above competitor Montgomery Ward in ambiance, quality, and price.
Ahh ... times sure change. Amazon and other smaller internet fish are eating everyone's lunch these days. And here in Michigan they can still get away with not collecting the state's 6% sales tax - which really hurts the local brick & mortar guys. (Doesn't do much for our schools and infrastructure either.) Kinda sad.
And, yup - I'm aware they operate the KMart chain. But from what I see those stores are poorly staffed and poorly run and stock a real "mixed-bag" in terms of product. In no ways do today's KMarts resemble the fine Sears stores of days past.
Eddie Lampert is delusional if he continues to believe that this "members" program is leading some major turnaround. Sears lost how much this last quarter? How much in the last few years?
I used to hear that the value of Sears was in their real estate holdings. I wonder about that now. Who would want a large mall store or any of their Kmart stores?
I used to hear that the value of Sears was in their real estate holdings. I wonder about that now. Who would want a large mall store or any of their Kmart stores?
I do think that there is value in Sears. I think there's value in the real estate, value in the reinsurance arm and, to a much lesser degree, value in brands (whose value has been eroded as Sears has become less and less relevant) and inventory (if they aren't buying it at Sears, how much is it really worth?)
All of the Sears recent spin-offs have either dropped quite a bit (look at the recent Land's End spin-off and what that has done) or are gone entirely. Some of the prime real estate has been offloaded. Some other retailers are subleasing.
I do think that there is probably more value in Sears than the shares would indicate today, but the optimistic case is - I think - absurd. Additionally, there's a mountain to climb to get from here to that value being realized and there's no guarantees.
I question their property values in part because of the overall transition from strip malls to online and life center malls. The Kmart properties in particular are mostly in less desirable locations.
Their Craftsman brand was their bread and butter but they too have gone the China way and the feedback I hear is that most of it is no better than other brands at a premium price. Not all of it is made in China but for some it is a complete turnoff. Home Depot and Lowes have their house branded tools and they have eroded Craftman's market share.
Also my favorite observation; when there are more employees in a store than customers, that store is in trouble.
Makita makes an excellent tool. I have a corded angle grinder that has been heavily used. Still going strong. We put diamond blades on it to cut tiles. It's done two houses so far plus some extra stuff.
I question their property values in part because of the overall transition from strip malls to online and life center malls. The Kmart properties in particular are mostly in less desirable locations.
Their Craftsman brand was their bread and butter but they too have gone the China way and the feedback I hear is that most of it is no better than other brands at a premium price. Not all of it is made in China but for some it is a complete turnoff. Home Depot and Lowes have their house branded tools and they have eroded Craftman's market share.
Also my favorite observation; when there are more employees in a store than customers, that store is in trouble.
Oh, I don't disagree with you. I think there's value to the retail, but not as much as the "optimistic" case notes. Some prime locations have already been sold (to GGP) and I think this idea of Sears being able to lease space is presented as wonderful, but it's not without its serious issues.
There is a very large mall space that Sears tried to open a Great Indoors in not that far away, but it didn't last that long. This is a huuuuge space. They subleased to another store that lasted even less time and the space has been sitting empty for a few years. Sears is paying the bills on a giant space with nothing going on in it for probably 2-3 years and counting. How many instances of this are going on? How many will be?
There are K-Mart locations that I have to imagine could sit empty for years and Sears locations in C and D-level malls that are just not of great value. I think it's going to be hard to lease out Sears space en masse if that's part of the plan. There was all this discussion of turning space into data centers (and again, I can't imagine turning a 60's-era K-Mart or Sears into a data center, but that's just me), but haven't heard much on that lately.
I think what's happened to Sears is very unfortunate, but - as much as it was already becoming irrelevant when Eddie Lampert came in - his complete lack of care in trying to turn the ship around is a big reason why Sears is in the state it is. All this talk of a new,"member-centric" Sears is delusional.
I don't think Sears has the time it seems to think it does and needs to push forward with the reality that it needs to either be broken up or that the resources to turnaround the company are - I think - not there. How much more money can be lost?
I don't think it's likely, but I think there's the possibility that the worst case scenario is that value is realized by others picking over assets if Sears just doesn't make it. Again, this attitude that they have time to try this, that and the other while the company just continues losing money is kind of baffling. "The parent company of Kmart and Sears said it lost $402 million, or $3.79 per share, for the period ended May 3. That compares with a loss of $279 million, or $2.63 per share, in the same period a year ago."
From the Credit Suisse report:
"The bulls on Sears argue for the most part that the value is in the real estate and brand names. If Mr. Lampert is trying to make it as an operator we should value them as such, but that’s a bigger problem. Using a positive $300 million EBITDA, that would imply an EV/EBITDA multiple of 29.5x lets say in 2017 to give them time for the turnaround. That would place their multiple well above anything we cover, including our best growth names such as The Container Store, Tractor Supply, ULTA, Lumber Liquidators, and CarMax. So if one accepts the turnaround and we give them an 8x EV/EBITDA multiple three years out, a somewhat generous multiple for a non-top-line grower, then the value of the equity would be negative."
There are K-Mart locations that I have to imagine could sit empty for years and Sears locations in C and D-level malls that are just not of great value. FWIW: Locale Kmart, on corner lot of major intersection has installed mini strip mall 3 or 4 years back & within the last year added to it with 3 or 4 more retail outlets. More than one way to turn a profit. Have a great wked, Derf
Was at a Sears store yesterday. When I first arrived saw a pickup truck with a Kenmore refrigerator in back of truck. The frig had a sign on it stating the unit was six months old and Sears would not honor the warranty. I think there's more to the story than what I saw. Then went inside to make a purchase. Next I observed a lot of sub standard high priced foreign merchandise. Did not complete the purchase that I had planed.
About a year ago I did a search on internet for American Made power hand tools. There is no such thing. Quality is good but made by cheap China labor and paying prices like they are made in America???
I think we're missing the elephant in the room to some extent - though appreciate all the cool ideas. Issue runs much deeper than KMart, Walmart, Target, etc. "Big Box" is generally in trouble due to Bezos and the continuing trend to internet buying.
I can spend an hour and a half dodging other consumers at Walmart to find the DVD, toaster or vitamins I need, and than wait in line to check-out. Or, I can click a few tabs on the IPad I'm holding here and have the item(s) at my doorstep, often the next day, for no difference in price. Which would you choose to do? Somebody will profit from the upheaval, but who? (Ideas: local specialty shops, maybe a new smaller version of big-box, and 3-D printing - which will revolutionize the way Amazon and others distribute their merchandise).
You might even argue K-Mart is a victim of the greying Boomers - since younger shoppers are increasingly adaptive to shopping online. I was astounded recently to run an add in the local paper with a web-link to the item I had for sale .... only to discover there are still people out there living without any access to internet or email. (The item sold to a 90 year old who had no way to view it online:-)
Amazon buys up Sears stores and turns them into local distribution centers...vastly expands same-day delivery option, like FTD.
Amazon buys UPS, takes delivery vehicles in house...or better, develops its own energy efficient fleet of electrical delivery vehicles in partnership with Elon Musk.
Reply to @Charles - Thanks. I hope the smiley face doesn't indicate a lack of seriousness re: your proposals. Both look plausible in one fashion or another. Splitting one's $$ between Musk & Bezos might not be a bad idea - though they compete against one another in their space launch ventures.
Regards, and "Happy Trails" with the cool rig!
LATE CORRECTION: The damned spell checker had changed "Musk" to "Muck." Apologies
Additionally, I think you're reaching the line with Amazon where the market is tired of them continually building out infrastructure and not focusing on the bottom line.
"I can spend an hour and a half dodging other consumers at Walmart to find the DVD, toaster or vitamins I need, and than wait in line to check-out."
That, and I've had instances where I've been trying on shoes (at DSW or whereever) and scanned the box UPC with the redlaser app (and Ebay owns Redlaser) and have seen them online for less (and in a few cases bought them right then and there.) So, showrooming is the other aspect of it.
Hank: I think we're missing the elephant in the room to some extent - though appreciate all the cool ideas. Issue runs much deeper than KMart, Walmart, Target, etc. "Big Box" is generally in trouble due to Bezos and the continuing trend to internet buying. As far as I can see, when the Christmas shopping gets done online, & the gals do most of their shopping also online, there's going to be a lot of brick & mortar for sale !! Have a good day, Derf P. S. I would agree, the trend is heading to internet shopping.
Scott said: "Additionally, I think you're reaching the line with Amazon where the market is tired of them continually building out infrastructure and not focusing on the bottom line." Yep - Agree. Amazon's getting stretched pretty thin. Maybe eventually some "spin-offs" voluntarily or perhaps mandated by Justice and/or courts?
If they're going to service those delivery trucks, they might as well open a chain of service centers nation-wide. Purchase a set of tires or oil change on their website and than, using Google's "Driverless Car" technology, your car drives itself to their closest repair center & back home again.
My local observations consist of a Kmart store in a strip mall that has about 10-15 cars parked in front most of the time. Usually older people shopping. Sears has a large store in a decent mall that they have just refurbished. Last time I was in there quite a few people were shopping. There was a sale going on. Not sure how many were buying. My brothers take advantage of a Sears Outlet store in the city that sells scratch and dented items. That store seems to do well.
In the Kmart example I should mention that over half of the strip mall is vacant.
Amazon's getting stretched pretty thin. Maybe eventually some "spin-offs" voluntarily or perhaps mandated by Justice and/or courts?
Courts cannot force Amazon to split up. It is not illegal to become a monopoly. They would have to either show that Amazon is price-dumping and selling below cost in an unsustainable fashion just to drive the competition out and only until then or show that they are using monopoly powers to drive prices up. But this is the opposite of what Amazon is doing.
This is why Apple's argument that Amazon was a monopoly to contest their conviction of price fixing with book publishers hasn't worked so far.
Some big activist investors may attempt to break Amazon up if they amass enough clout but they will do it only if the share price stagnates fot a while or falls significantly. Sears and the rest will be long gone by then.
Walmart has significantly ramped up its online operations with strategic acquisitions to better compete with Amazon and may become more Amazon-like in the future. Between the two of them, they will kill off Sears/Kmart. Sears is like RadioShack. Just a matter of when.
Used to love the Sears hardware store and the quality of the Craftsman tools. There is nothing Sears could have done to prevent the decline when cheaper quality tools started to flood the markets except become a very niche premium vendor. They decided to compete in a race to the bottom.
They could have tried what Nordstrom is doing very successfully with a similar shakeout in clothing - position itself as a mid-high end brand vendor but find the lowest end stuff in each brand and sell it at high margins combined with the best integration with online operations in the business. This is what Sears was doing with the Kenmore brand appliances and Craftsman power tools but buying white-labeled items from major brands. They should have ditched their own branding and highlighted well known brands but sell the lowest end products (ensuring similar items not available elsewhere) from those brands at a higher margin.
Target can probably do this if they get a competent CEO.
I wonder how much of an impact the entry of foreign brands in the home appliance sector has had on Sears? LG and Samsung are popular with their designs and features that appeal to a wide customer base.
I wonder how much of an impact the entry of foreign brands in the home appliance sector has had on Sears? LG and Samsung are popular with their designs and features that appeal to a wide customer base.
A lot but not necessarily related to foreign brands. It is the emergence of even US brands and their own marketing.
For example, Sears used Whirlpool to make some of their appliances white labeled and then branded them as Kenmore. Sears had the brand reputation and the service reputation so you just bought a Kenmore as a strong and reliable brand. The competition didn't have the same reputation even when they sold Whirlpool appliances under that brand.
Sears story started to unravel in the 80s long before the China invasion. Whirlpool started to advertise its own brand to establish credibility and were sold discounted at general appliance stores. People started to find out that they could find the same Kenmore machine at a cheaper price elsewhere. Even when they didn't know this, Kenmore had to compete as a brand against Whirlpool compared in things like Consumer Reports which gave same or better marks for Whirlpool over Kenmore, so people started to buy Whirlpool directly which were cheaper.
I think this was the beginning of the end for Sears as they started to lose people loyal to the brand. To compete, they lowered the quality of the appliances and tools, reduced warranty and quality of service, etc, which only snowballed the desertion.
Online shopping just hastened that demise. I had stopped going to Sears long before I had started to use Amazon and only occasionally for deals or Craftsman tools that were known to be the best still around that I wanted to own for a long time.
The branding premise behind Sears got lost destroying their business model. It has been downhill since then.
Comments
If so, suspect they will not be around much longer...figuratively and literally
Loyalty is a fleeting idea these days
Back in the 70s and 80s Sears had some magnificent large department stores in the suburban Detroit area where we lived. Was a real treat to spend a couple hours shopping in one. Sears was always a cut above competitor Montgomery Ward in ambiance, quality, and price.
Ahh ... times sure change. Amazon and other smaller internet fish are eating everyone's lunch these days. And here in Michigan they can still get away with not collecting the state's 6% sales tax - which really hurts the local brick & mortar guys. (Doesn't do much for our schools and infrastructure either.) Kinda sad.
And, yup - I'm aware they operate the KMart chain. But from what I see those stores are poorly staffed and poorly run and stock a real "mixed-bag" in terms of product. In no ways do today's KMarts resemble the fine Sears stores of days past.
FWIW
http://blogs.barrons.com/stockstowatchtoday/2014/05/22/sears-significantly-overvalued-credit-suisse-says/
All of the Sears recent spin-offs have either dropped quite a bit (look at the recent Land's End spin-off and what that has done) or are gone entirely. Some of the prime real estate has been offloaded. Some other retailers are subleasing.
I do think that there is probably more value in Sears than the shares would indicate today, but the optimistic case is - I think - absurd. Additionally, there's a mountain to climb to get from here to that value being realized and there's no guarantees.
The article I often reference as my favorite on the subject: http://finance.fortune.cnn.com/2011/05/12/eddie-lampert-dementor/
I question their property values in part because of the overall transition from strip malls to online and life center malls. The Kmart properties in particular are mostly in less desirable locations.
Their Craftsman brand was their bread and butter but they too have gone the China way and the feedback I hear is that most of it is no better than other brands at a premium price. Not all of it is made in China but for some it is a complete turnoff. Home Depot and Lowes have their house branded tools and they have eroded Craftman's market share.
Also my favorite observation; when there are more employees in a store than customers, that store is in trouble.
My son-in-law gave me a Makita LCT306W 18-Volt Compact Lithium-Ion Cordless 3-Piece Combo Kit for Christmas.
Take-your-breath-away cordless tools.
Powerful, long-lasting batteries. Quick recharge.
Have quickly become my favorites over DeWalt and Craftsman.
Highly recommend them.
Attached is pic of bike rack I installed on our trailer recently using Makita tools.
And, they were also great on pulling boards from our deck...to repair a Jacuzzi pump.
Like a dream.
Regards,
Ted
http://www.bloomberg.com/news/print/2014-05-21/sears-s-small-pool-of-analysts-shrinks-with-morningstar-exit-1-.html
Goodbye:
https://www.google.com/search?q=goodbye&biw=1600&bih=731&tbm=isch&imgil=pQAj3z0i9JBObM%3A%3Bhttps%3A%2F%2Fencrypted-tbn3.gstatic.com%2Fimages%3Fq%3Dtbn%3AANd9GcSGyx0aIl1K3WsRjTLOxti1_W3vDNFGwE1sBX7iFiK-bajhki22yw%3B325%3B325%3BhmpJ2ooh5jqiqM%3Bhttp%253A%252F%252Fblogs.sd41.bc.ca%252Falberts%252F2013%252F03%252F10%252Fgood-bye-welcome-back%252F&source=iu&usg=__0ekgubeClIIs72xqmUhO8VA9W74=&sa=X&ei=Dxd_U9LnJtKfyAS644G4CA&ved=0CDkQ9QEwAw#facrc=_&imgdii=_&imgrc=pQAj3z0i9JBObM%3A;hmpJ2ooh5jqiqM;http%3A%2F%2Fblogs.sd41.bc.ca%2Falberts%2Ffiles%2F2013%2F03%2Fgoodbye2.jpg;http%3A%2F%2Fblogs.sd41.bc.ca%2Falberts%2F2013%2F03%2F10%2Fgood-bye-welcome-back%2F;325;325
There is a very large mall space that Sears tried to open a Great Indoors in not that far away, but it didn't last that long. This is a huuuuge space. They subleased to another store that lasted even less time and the space has been sitting empty for a few years. Sears is paying the bills on a giant space with nothing going on in it for probably 2-3 years and counting. How many instances of this are going on? How many will be?
There are K-Mart locations that I have to imagine could sit empty for years and Sears locations in C and D-level malls that are just not of great value. I think it's going to be hard to lease out Sears space en masse if that's part of the plan. There was all this discussion of turning space into data centers (and again, I can't imagine turning a 60's-era K-Mart or Sears into a data center, but that's just me), but haven't heard much on that lately.
I think what's happened to Sears is very unfortunate, but - as much as it was already becoming irrelevant when Eddie Lampert came in - his complete lack of care in trying to turn the ship around is a big reason why Sears is in the state it is. All this talk of a new,"member-centric" Sears is delusional.
I don't think Sears has the time it seems to think it does and needs to push forward with the reality that it needs to either be broken up or that the resources to turnaround the company are - I think - not there. How much more money can be lost?
I don't think it's likely, but I think there's the possibility that the worst case scenario is that value is realized by others picking over assets if Sears just doesn't make it. Again, this attitude that they have time to try this, that and the other while the company just continues losing money is kind of baffling. "The parent company of Kmart and Sears said it lost $402 million, or $3.79 per share, for the period ended May 3. That compares with a loss of $279 million, or $2.63 per share, in the same period a year ago."
From the Credit Suisse report:
"The bulls on Sears argue for the most part that the value is in the real estate and brand names. If Mr. Lampert is trying to make it as an operator we should value them as such, but that’s a bigger problem. Using a positive $300 million EBITDA, that would imply an EV/EBITDA multiple of 29.5x lets say in 2017 to give them time for the turnaround. That would place their multiple well above anything we cover, including our best growth names such as The Container Store, Tractor Supply, ULTA, Lumber Liquidators, and CarMax. So if one accepts the turnaround and we give them an 8x EV/EBITDA multiple three years out, a somewhat generous multiple for a non-top-line grower, then the value of the equity would be negative."
http://247wallst.com/retail/2014/05/22/analyst-calls-sears-worth-only-20/
That link actually offers a lot of the Credit Suisse report.
===
Charles: very cool trailer!
There are K-Mart locations that I have to imagine could sit empty for years and Sears locations in C and D-level malls that are just not of great value.
FWIW: Locale Kmart, on corner lot of major intersection has installed mini strip mall 3 or 4 years back & within the last year added to it with 3 or 4 more retail outlets. More than one way to turn a profit.
Have a great wked, Derf
I think there's more to the story than what I saw.
Then went inside to make a purchase. Next I observed a lot of sub standard high priced foreign merchandise. Did not complete the purchase that I had planed.
About a year ago I did a search on internet for American Made power hand tools. There is no such thing. Quality is good but made by cheap China labor and paying prices like they are made in America???
Do we make anything in the states anymore???
Gary
I can spend an hour and a half dodging other consumers at Walmart to find the DVD, toaster or vitamins I need, and than wait in line to check-out. Or, I can click a few tabs on the IPad I'm holding here and have the item(s) at my doorstep, often the next day, for no difference in price. Which would you choose to do? Somebody will profit from the upheaval, but who? (Ideas: local specialty shops, maybe a new smaller version of big-box, and 3-D printing - which will revolutionize the way Amazon and others distribute their merchandise).
You might even argue K-Mart is a victim of the greying Boomers - since younger shoppers are increasingly adaptive to shopping online. I was astounded recently to run an add in the local paper with a web-link to the item I had for sale .... only to discover there are still people out there living without any access to internet or email. (The item sold to a 90 year old who had no way to view it online:-)
Meanwhile, the big internet retailers are not without their issues. Here's a Reuters story concerning some recent security problems at EBay. (Suggest you change your password there.). http://www.reuters.com/article/2014/05/22/us-ebay-password-idUSBREA4K0B420140522
And Cabelas' Jerkey Blaster has been in the news lately. (Suggest you pitch yours and replace it with some of the fine tools Charles uses:-)
http://thecolbertreport.cc.com/videos/7sujj3/colbert-report-consumer-alert---jerky-blaster
Amazon buys UPS, takes delivery vehicles in house...or better, develops its own energy efficient fleet of electrical delivery vehicles in partnership with Elon Musk.
Regards, and "Happy Trails" with the cool rig!
LATE CORRECTION: The damned spell checker had changed "Musk" to "Muck." Apologies
Amazon is already starting its own fleet of delivery trucks.
http://online.wsj.com/news/articles/SB10001424052702304788404579521522792859890 ("Amazon, in threat to UPS, tries its own deliveries")
Additionally, I think you're reaching the line with Amazon where the market is tired of them continually building out infrastructure and not focusing on the bottom line.
"I can spend an hour and a half dodging other consumers at Walmart to find the DVD, toaster or vitamins I need, and than wait in line to check-out."
That, and I've had instances where I've been trying on shoes (at DSW or whereever) and scanned the box UPC with the redlaser app (and Ebay owns Redlaser) and have seen them online for less (and in a few cases bought them right then and there.) So, showrooming is the other aspect of it.
I think we're missing the elephant in the room to some extent - though appreciate all the cool ideas. Issue runs much deeper than KMart, Walmart, Target, etc. "Big Box" is generally in trouble due to Bezos and the continuing trend to internet buying.
As far as I can see, when the Christmas shopping gets done online, & the gals do most of their shopping also online, there's going to be a lot of brick & mortar for sale !!
Have a good day, Derf
P. S. I would agree, the trend is heading to internet shopping.
If they're going to service those delivery trucks, they might as well open a chain of service centers nation-wide. Purchase a set of tires or oil change on their website and than, using Google's "Driverless Car" technology, your car drives itself to their closest repair center & back home again.
In the Kmart example I should mention that over half of the strip mall is vacant.
This is why Apple's argument that Amazon was a monopoly to contest their conviction of price fixing with book publishers hasn't worked so far.
Some big activist investors may attempt to break Amazon up if they amass enough clout but they will do it only if the share price stagnates fot a while or falls significantly. Sears and the rest will be long gone by then.
Walmart has significantly ramped up its online operations with strategic acquisitions to better compete with Amazon and may become more Amazon-like in the future. Between the two of them, they will kill off Sears/Kmart. Sears is like RadioShack. Just a matter of when.
Used to love the Sears hardware store and the quality of the Craftsman tools. There is nothing Sears could have done to prevent the decline when cheaper quality tools started to flood the markets except become a very niche premium vendor. They decided to compete in a race to the bottom.
They could have tried what Nordstrom is doing very successfully with a similar shakeout in clothing - position itself as a mid-high end brand vendor but find the lowest end stuff in each brand and sell it at high margins combined with the best integration with online operations in the business. This is what Sears was doing with the Kenmore brand appliances and Craftsman power tools but buying white-labeled items from major brands. They should have ditched their own branding and highlighted well known brands but sell the lowest end products (ensuring similar items not available elsewhere) from those brands at a higher margin.
Target can probably do this if they get a competent CEO.
PS: We have 15 year old Kenmore washer & dryer and both still going strong after almost daily use.
Never a problem.
For example, Sears used Whirlpool to make some of their appliances white labeled and then branded them as Kenmore. Sears had the brand reputation and the service reputation so you just bought a Kenmore as a strong and reliable brand. The competition didn't have the same reputation even when they sold Whirlpool appliances under that brand.
Sears story started to unravel in the 80s long before the China invasion. Whirlpool started to advertise its own brand to establish credibility and were sold discounted at general appliance stores. People started to find out that they could find the same Kenmore machine at a cheaper price elsewhere. Even when they didn't know this, Kenmore had to compete as a brand against Whirlpool compared in things like Consumer Reports which gave same or better marks for Whirlpool over Kenmore, so people started to buy Whirlpool directly which were cheaper.
I think this was the beginning of the end for Sears as they started to lose people loyal to the brand. To compete, they lowered the quality of the appliances and tools, reduced warranty and quality of service, etc, which only snowballed the desertion.
Online shopping just hastened that demise. I had stopped going to Sears long before I had started to use Amazon and only occasionally for deals or Craftsman tools that were known to be the best still around that I wanted to own for a long time.
The branding premise behind Sears got lost destroying their business model. It has been downhill since then.
Regards,
Ted
Stayin' Alive; Bee Gees: