Malls are being reinvented. They are now being redeveloped into lifestyle destinations, where people shop, eat, play and can get entertained. They are now the new gathering place for fun activities besides shopping.
Sears Holdings Corp NASDAQ: SHLD remaining real estate holdings can be worth as much as up to $2 billion dollars, and it’s a key remaining asset for the retailer.
Even as though Sears has shuttered many of its stores, they are rebuilding and opening smaller and more attractively styled stores. Notably, with the Brookfield Square Sears redevelopment financing plan, proposed mall and hotel property approved. Within this mall reinvention, there will be a hotel and entertainment venues. The mall will focus less on clothing stores that have had a hard time competing with Amazon (AMZN). Even Target and Nordstrom’s are experimenting with opening up smaller stores that offer a much more different shopping experience like Nordstrom Local in Los Angeles with a more focus on services instead of just selling merchandise.
There will be a conference center that will reside where the old Sears automotive building was and Sears will host an 18,000-square-foot facility selling home goods such as mattresses and appliances. Anything ordered online at Sears.com can also be picked up in these store locations. Three new tenants will be leasing a small portion of the Sears building.
For Sears, closing stores can be a path to profitability and beefing up their online presence. Sears has made a deal with Amazon to start selling its Kenmore-branded appliances online that are compatible with Amazon’s Alexa.
For the fiscal year ended November 30, 2016, In FAIRHOLME FUNDS, INC For the Fiscal Year Ended November 30, 2016 it states “The Income Fund investments that were the biggest contributors to positive performance were Chesapeake, Fannie, Freddie, Seritage, Imperial Metals Corp. (“Imperial”), and Atwood Oceanics, Inc. There were no negative performers that significantly impacted.
For the annual report for 2017 from FAIRHOLME FUNDS, INC PORTFOLIO MANAGER’S REPORT For the Six Months Ended June 30, 2017 “Sears, et al. From the ashes of failed retailers often come great real estate companies. Malls and shopping centers are not in permanent decline. Sears spin-off, Seritage Growth Properties, has re-tenanted over three million square feet at more than three times old rents since 2015, and demand continues to grow. Investors may disagree on the exact path forward for Sears, but the company owns many valuable assets and there is huge value in optimizing all of them.”
In the first half of the year, Sears sold the Craftsman name for a net present value of $900 million. Real estate sales added another $400 million. Sears remains extremely competitive in all aspects of hardline retail. Company vendors are estimated to earn $5 billion annually from relationships with Sears. There is no reason why Sears cannot share in this success and monetize assets through innovative partnering. Sears continues to accelerate the pace of its operational restructurings, and is heading toward $1.25 billion in annualized cost savings. The news that Amazon is now offering Kenmore appliances with Sears’ white-glove delivery, warranty, and installation services greatly improves the competitive landscape for both. In addition, “Shop Your Way” already has millions of members enjoying a simple, easy, and personalized shopping experience. If you want to learn more about the Shop Your Way program, visit the following link: www.shopyourway.com/fairholme/ getmore.”
You can view portfolios managers’ report here: http://www.fairholmefundsinc.com/Reports/Funds2017SemiAnnual.pdf
Even though the fund this years has some losses on Sears, Seritage Growth Properties, a real estate company that’s redeveloping former Sears locations shines.
A Path To Profitability
For Sears, closing stores can be a path to profitability and beefing up their online presence. Sears has made a deal with Amazon to start selling its Kenmore-branded appliances online that are compatible with Amazon’s Alexa. Sears also made a another deal with Amazon selling its Die Hard Batteries and tires, further expanding its exposure to the millennial customer’s in which Amazon has a lot of sales traffic from.
But wait, there more. Sears CEO Eddie Lampert has already made changes to the Sears online shopping venue.
Currently in place is a membership program called “Shop Your Way.” Third party sellers are already on board, and that will compete with Amazon’s e-commerce marketplace that also hosts third-party sellers.
Uber drivers, now a large and very growing base of the independent work force across the world are offered significant discounts with Sears automotive services. Uber Technologies, Inc. and Sears are in partnership with “Shop Your Way” which already has tens of millions of members. Riders can earn discounts from Uber trips earning Shop Your Way points by linking up their Uber account to Shop Your Way and earn up to $2.00 per point for each Uber trip. Drivers can earn up to $1,000 in points by signing up with https://www.shopyourway.com/uber
Lastly but not least, if you listen to the financial pundits like CNBC’s Jim Cramer who owns “The Street.com” who don’t have a good word to say about Sears, actually recommended selling Netflix (NASDAQ:NFLX) on November 2nd, 2012. If you bought Netflix in 2012 it was still trading in the low teens. Had you held on to Netflix for 5 years, as of today your shares are trading at 187.76 at the time this article was written 12-26-2017.
Jim Cramer alerts a sell message on November 20, 2012 for Best Buy (BBY), and Hewlett Packard (HPQ). Hewlett Packard (HPQ) was up 115.62 percent and Best Buy gained 124.64 percent for a total return 6 months after the sell recommendation. Look at the money you missed out on gaining, not perhaps using your instincts of why you bought the stock in the first place, but relying on Jim Cramer’s losing recommendation.
There are many old brands out there that have had amazing turnarounds and proven profitable for their investors. (we would list these)With the powerful real estate holding of Sears of $2 billion dollars and the reinvention of malls and Sears new marketing and partnership plans with Amazon and Uber, Sears could just be the little engine that could, and did from $3.77 a share.