Sears, a 125 year old company is now a penny stock.

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michaeljc70
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Re: Sears, a 125 year old company is now a penny stock.

Post by michaeljc70 » Mon Oct 15, 2018 10:01 am

criticalmass wrote:
Mon Oct 01, 2018 12:06 am
corpgator wrote:
Sun Sep 30, 2018 10:58 pm
Don't worry, Eddie the Vampire will continue sucking it dry while whining about how hard it is until it's not even a penny stock. There really should be no 5 year limitation on suing these hedge funds that purposely load companies up with debt to pay themselves with every intention of bankrupting the company eventually.
I'm still not sure what Fast Eddie's end game is.
1.) Takeover company, run Sears as a hedge fund vehicle
2.) Run company into ground, terrorize executive talent until gone
3.) Sell off real estate to keep some cash flow while busy executing #2.
4.) Apply for bankruptcy.
5.) Buy damaged Kenmore brand to wound that more too
5.) Profit ????

Maybe he can make a deal with Carl Icahn.
I thought it was a scam when this whole thing started. Kmart filed for bankruptcy....claimed to essentially be worthless....then Eddie bought it and claimed the real estate was worth a fortune practically the next day. He then used the over inflated values to buy Sears.

He has made secured loans, bought a lot of the real estate, sold off some assets so I am curious when all the dust settles how he did on the whole deal (since 2005). For sure, at every step, anything he did was in his interest and IMO not necessarily the shareholders.

The management since he took over has been a disaster. Some of the stories you read are unbelievable.

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Re: Sears, a 125 year old company is now a penny stock.

Post by MnD » Mon Oct 15, 2018 10:14 am

mindboggling wrote:
Sun Sep 30, 2018 5:37 am
My first piece of plastic was a Sears charge card back around 1975. I had just graduated from college and couldn't qualify for anything else yet.
The only credit app rejection of my life was for a Sears card. Just graduated and had a couple gas station cards. Shortly after applied for a Visa at my bank and was approved. Kind of soured me on store cards - never had any except a Home Depot which used to give 12 months no payments no interest on appliances.

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Re: Sears, a 125 year old company is now a penny stock.

Post by willthrill81 » Mon Oct 15, 2018 10:19 am

DartThrower wrote:
Mon Oct 01, 2018 7:26 am
Bacchus01 wrote:
Sat Sep 29, 2018 2:19 pm
socaldude wrote:
Sat Sep 29, 2018 1:40 pm
Even before the Internet, maybe early 80's (late 70's ? ) Sears management starting driving their stores into the ground. True of many retail companies, they cut wages and try to sell you cheap crap on every aisle. You can watch greed slowly destroy great companies. I have bought Kenmore and Craftsman for 40 years, it is sad. The local JC Penneys has been remodeled (by some idiot consulting co. I'm sure... it's a maze) and it's a poor excuse for a store, like Walmart poor or no training and low wages, they love desperate poor workers, service is such a rare thing...they drive you to the internet.
Sounds like political ranting, not facts
I think it has to be recognized that these retailers were in a Catch-22 situation. If you pay higher wages and provide great training, the internet retailers crush you on price. If you provide poor training and low wages and cheap products, you get crushed on customer satisfaction. I was one of those customers deeply dissatisfied with my experience at Sears for about the last 10 years.

I'm sure that the rise of financialization hasn't helped better manage the retailers either. It is probably much more lucrative to manage their slow demise instead of working to make them great companies again somehow.

This article from Knowledge at Wharton discusses the issue:

http://knowledge.wharton.upenn.edu/arti ... -business/


With regard to the decline of Ford Motor Company, Rana Foroohar writes:
Eventually, this disconnect from core product and value came back to haunt Ford and other companies driven by finance. A famous Harvard Business Review article from 1980, “Managing Our Way to Economic Decline,” dates falling investment in research and development back to the mid-1960s. Increasingly, the authors found, U.S. companies focused on “sophisticated and exotic” management of their growing cash reserves, grew preoccupied with cost-cutting measures, and treated “technological matters simply as if they were adjuncts to finance or marketing decisions.”
To some extent I think Sears and other companies like it started to treat the value proposition to their customers as an adjunct to finance or marketing decisions.
They certainly lost any semblance of a market orientation (i.e. focusing on delivering superior customer value above all else) that they ever had.

Interestingly, firms like Sears had far better capabilities to do what Amazon has done that Amazon did. Sears had cash, brand recognition, a supply chain, etc. But they viewed their business myopically, like most businesses do, defining it in terms of the product they sell rather than the value they provide. It's a story that has been repeated over and over and over. Kodak and Blockbuster did the same thing, as did countless other firms.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

michaeljc70
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Re: Sears, a 125 year old company is now a penny stock.

Post by michaeljc70 » Mon Oct 15, 2018 10:29 am

I didn't read all the comments, but if you think of all the businesses once a part of Sears.....Discover, Dean Witter (now part of Morgan Stanley), AllState, etc., it is pretty amazing. My guess is after the holidays there will not be many stores left and they won't make it to Xmas 2019.

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Re: Sears, a 125 year old company is now a penny stock.

Post by Valuethinker » Mon Oct 15, 2018 10:32 am

workerbeeengineer wrote:
Mon Oct 15, 2018 9:08 am
Just to add another comment...I remember the phase when Sears tried having a Stock Brokerage desk in the store. I think it was Dean Whiter (spelling?) or something close. I had left my first employer after college and had a few ESOP shares of stock. Was able to sell those shares using this service. Should of held onto the shares, but that's another story.
From memory, Sears bought Dean Witter a long time ago (1970s?).

Then eventually spun it off. Then it merged with Morgan Stanley. Then Morgan Stanley CEO turned out to be a divisive egomaniac, and he was fired (with a huge payoff). Then it was spun off again.

https://en.wikipedia.org/wiki/Dean_Witter_Reynolds

acquired in 1981 by Sears and spun off in 1993. It's now part of the Smith Barney division of Morgan Stanley (private wealth management)

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Re: Sears, a 125 year old company is now a penny stock.

Post by pj1983 » Mon Oct 15, 2018 11:19 am

abuss368 wrote:
Sun Sep 30, 2018 9:29 pm
At some point in the future the stock certificates will be available on ebay.
K-Mart close enough? https://www.ebay.com/itm/KMART-CORPORAT ... 8386201524

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Re: Sears, a 125 year old company is now a penny stock.

Post by Valuethinker » Mon Oct 15, 2018 11:39 am

beardsworth wrote:
Mon Oct 15, 2018 7:38 am
Valuethinker wrote: It was hard for a retailer catering to mass tastes like Sears to keep up.
Agree. I've already commented, with links, elsewhere in this thread, on the fact that "changes in retailing" do not provide the whole story of what happened to Sears, and what was done to Sears, under its current management. But this "mass taste" phenomenon is certainly part of the story. And it has been a problem for department stores in general. They typically offer a little bit of everything, but not a whole lot of anything, and shoppers with substantial disposable income have increasingly gone to stores that specialize in particular product types.
Valuethinker wrote:Median incomes for Americans have stagnated since 1980 (average incomes have risen but most of the gain has accrued to the top 20% (in fact the top 1%) of income earners*). It's no surprise that for those on the lower half of that distribution curve, they are going to buy as cheap as they can. WalMart, and now the Dollar stores, offer stuff those people can afford to buy on incomes that don't get any bigger.
And, just as many American towns and cities have "food deserts" without a substantial grocery store, many small towns have also become "retail" deserts. Your comment triggered my memory of this recent story about the ongoing spread of Dollar General stores into this small-town vacuum, a phenomenon not necessarily always welcome.

https://www.theguardian.com/business/20 ... ven-kansas
I wanted to thank you for your comments and particularly the attached article which was very interesting "retail deserts" is not a concept with which I was familiar. We are back to the days when it took 2 days to go into town by horse and buggy, and thus the growth of the catalogue store aka Sears (and Woolworths?). Except now it's to a town with a shopping mall and real retailers, and it's Amazon & co that are filling the gap.

I have a friend from rural Illinois and he describes a similar syndrome - the town just loses its services and the population shrinks and grows older - it's within long distance commuting range of St. Louis, maybe.

I remember the impact of WalMart arriving on small towns, so this Dollar Stores rotation is the next iteration down - to places where even WalMart does not find it attractive.

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Re: Sears, a 125 year old company is now a penny stock.

Post by changingtimes » Mon Oct 15, 2018 12:00 pm

beardsworth wrote:
Mon Oct 15, 2018 7:38 am
And, just as many American towns and cities have "food deserts" without a substantial grocery store, many small towns have also become "retail" deserts. Your comment triggered my memory of this recent story about the ongoing spread of Dollar General stores into this small-town vacuum, a phenomenon not necessarily always welcome.

https://www.theguardian.com/business/20 ... ven-kansas
Tied into the news of the past week, when DH and I drove along US 98 from Panama City Beach all the way around to Tampa in 2016, we got to the point of bursting out laughing (with sadness as much as anything) that every single hamlet of more than 100 people had a Dollar General. Imagine trying to get your town back on its feet after a disaster when the only real retail pipelines are the Kwik-i-Mart attached to the gas station and a Dollar General.

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Re: Sears, a 125 year old company is now a penny stock.

Post by abuss368 » Mon Oct 15, 2018 1:33 pm

pj1983 wrote:
Mon Oct 15, 2018 11:19 am
abuss368 wrote:
Sun Sep 30, 2018 9:29 pm
At some point in the future the stock certificates will be available on ebay.
K-Mart close enough? https://www.ebay.com/itm/KMART-CORPORAT ... 8386201524
I remember going to K-Mart all the time as a little kid.
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Nicolas
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Re: Sears, a 125 year old company is now a penny stock.

Post by Nicolas » Tue Oct 16, 2018 1:50 pm

Sears Holdings is up 50% today at 45.4 cents, why? It's bankrupt soon and the shares will be delisted and worthless so why does anyone buy?

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Re: Sears, a 125 year old company is now a penny stock.

Post by michaeljc70 » Tue Oct 16, 2018 1:57 pm

Nicolas wrote:
Tue Oct 16, 2018 1:50 pm
Sears Holdings is up 50% today at 45.4 cents, why? It's bankrupt soon and the shares will be delisted and worthless so why does anyone buy?
I suspect day traders looking to make a quick buck mostly but maybe people that don't understand the stock will become worthless.

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Re: Sears, a 125 year old company is now a penny stock.

Post by KJVanguard » Tue Oct 16, 2018 2:13 pm

workerbeeengineer wrote:
Mon Oct 15, 2018 9:08 am
Just to add another comment...I remember the phase when Sears tried having a Stock Brokerage desk in the store. I think it was Dean Whiter (spelling?) or something close. I had left my first employer after college and had a few ESOP shares of stock. Was able to sell those shares using this service. Should of held onto the shares, but that's another story.
Yes, it was indeed Dean Witter and Sears was called "socks & stocks." My family had a .22 bolt-action rifle marked Sears & Roebuck, so they used to be a gun dealer too! No serial number, so prior to the Gun Control Act of 1968.

Last time I shopped at Sears was September 2016 after buying my home. I bought a Kenmore Elite washer & dryer. They washer was not waterproof and left a big puddle on my laundry room floor when they did a test run. On washer #2 they mixed up the hot & cold water lines. I was not impressed, and this might be part of what helped them fail. I did get $250 off for the washer that never should have passed quality control.

I have long noted (decades) that Sears is an empty wasteland -- no customers, nobody to help in the rare event there is any customer. I many times tried short selling Sears in early 2017, but it was impossible as there were no shares left to borrow as evidently everyone was shorting Sears. I remember an article from back then that mocked Sear's demise as "the longest going out of business sale ever." After all, it's been slowly moving towards extinction for at least the last two decades now. It's amazing it didn't die sooner. If Sears were an animal it would have been euthanized long ago.

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Re: Sears, a 125 year old company is now a penny stock.

Post by SGM » Tue Oct 16, 2018 4:07 pm

A friend bought a Sears house in Flatbush, Brooklyn within walking distance of a subway station. The house is now worth more than the houses in upscale Scarsdale, NY.

A college buddy nicknamed Jimbo came back to campus with a Sears credit card with the name Jim Bo on it.

About 40 years ago Sears had regular Friday night sales on tools. It was a good way to put together a tool collection for one of my fellow grad students.

As far as owning some individual stocks, I was surprised to hear that Jack Bogle still owns some that he bought as a young man.

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Re: Sears, a 125 year old company is now a penny stock.

Post by JackoC » Tue Oct 16, 2018 5:24 pm

willthrill81 wrote:
Mon Oct 15, 2018 10:19 am

Interestingly, firms like Sears had far better capabilities to do what Amazon has done that Amazon did. Sears had cash, brand recognition, a supply chain, etc. But they viewed their business myopically, like most businesses do, defining it in terms of the product they sell rather than the value they provide. It's a story that has been repeated over and over and over. Kodak and Blockbuster did the same thing, as did countless other firms.
I can see that for Sears, perhaps. Especially keeping in mind Sears did successfully convert itself from mainly one distribution channel to another in the past. Originally it was mainly a catalog sales merchant, only later an operator of a huge network of physical stores. And the earlier 'Sears Roebuck' (as still called by my parents, though I think even when I was a kid they wanted to be called Sears) had a slightly different product mix. No kit houses in Sears stores later on. :D But, they couldn't do it again in the internet age. In fairness though hardly any other mainly brick and mortar has managed it either. Some brick and mortars are, obviously, much better off than Sears financially and we must conclude have been better run than Sears. But challenging Amazon starting out as brick and mortar, even with brand recognition, cash etc. must be harder than it looks, if it looks easy to anyone. Not to say impossible of course. And someday Amazon too will probably be a sick old company which missed the last turn.

On Kodak and Blockbuster I think that's more an example of companies which have no real reason to exist anymore. Companies are supposed to invest owner capital at optimize sustainable profit, return on that capital, within the law*. Sometimes the optimal approach for shareholders is for management to milk the cash cow of an established obsolescent business then close shop when cashflow goes negative. Trying to totally reinvent the way Kodak or Blockbuster would have had to isn't necessarily in shareholder interest. It's not always bad from investor POV if managements accept the doom of their company. The problem is often IMO value destruction that occurs while the managements seek implausible reinventions of their companies to sustain *their* jobs.

On Sears, well informed analysis seems mixed whether Lampert's efforts were aimed just at his own benefit (mainly within his rights as the big shareholder, and operating with carte blanche wrt his own investors) or actually weighted too heavily toward the sustainment of Sears for its own sake, or the sake of stasis, the idea that companies should just carry on forever because otherwise it disrupts people's lives. But that's not realistic in general, or desirable necessarily.

*not seeking to derail the discussion onto the responsibilities of companies other than profit making. But I think that's argued about more than necessary relative to the statement I made. Usually if people want companies to do something they aren't doing, they eventually propose to make them do it via law. OK, then if the law is passed it's still 'optimize profit within the law', including the news things in the new law. OTOH when companies voluntarily do stuff perceived as 'socially beneficial' beyond the requirements of law, it's almost always because the managements think it's also good for long run profits. Managements voluntarily doing stuff they think is bad for long term profits (other than some cases where they realize it's bad for profits but think it's good for *them* personally) is too rare a case to worry about IMO.

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Re: Sears, a 125 year old company is now a penny stock.

Post by Valuethinker » Tue Oct 16, 2018 7:00 pm

Nicolas wrote:
Tue Oct 16, 2018 1:50 pm
Sears Holdings is up 50% today at 45.4 cents, why? It's bankrupt soon and the shares will be delisted and worthless so why does anyone buy?
Sometimes debt holders also buy the equity. If the business avoids actual Chapter 7, the equity can still have negotiating rights, even though its value is zero.

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Re: Sears, a 125 year old company is now a penny stock.

Post by willthrill81 » Tue Oct 16, 2018 8:17 pm

JackoC wrote:
Tue Oct 16, 2018 5:24 pm
Trying to totally reinvent the way Kodak or Blockbuster would have had to isn't necessarily in shareholder interest. It's not always bad from investor POV if managements accept the doom of their company. The problem is often IMO value destruction that occurs while the managements seek implausible reinventions of their companies to sustain *their* jobs.
You're saying that Blockbuster shareholders would not have wanted Blockbuster to retool itself to be where Netflix, one of the largest companies in the world, is today? :shock:
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Re: Sears, a 125 year old company is now a penny stock.

Post by JackoC » Wed Oct 17, 2018 12:16 pm

willthrill81 wrote:
Tue Oct 16, 2018 8:17 pm
JackoC wrote:
Tue Oct 16, 2018 5:24 pm
Trying to totally reinvent the way Kodak or Blockbuster would have had to isn't necessarily in shareholder interest. It's not always bad from investor POV if managements accept the doom of their company. The problem is often IMO value destruction that occurs while the managements seek implausible reinventions of their companies to sustain *their* jobs.
You're saying that Blockbuster shareholders would not have wanted Blockbuster to retool itself to be where Netflix, one of the largest companies in the world, is today? :shock:
Wanting and doing are not the same thing. What you often or usually get in 'disrupted' industries are managements skilled (perhaps) in running a company under an old business model but not skilled in emulating or developing a new one. And they are also often fighting against various legacy issues (the culture etc) that new entrant they are pursuing doesn't face. Then they destroy value throwing good money after bad before the failure of the company to change its spots becomes obvious to everyone else.

Managements making it their key mission to perpetuate their company is an agency problem in public stock companies, a common bug, but not a feature. The best outcome for the stockholders may be to keep running without committing significant further capital until cashflow turns negative, then liquidate. Sometimes managements know that's the right course but don't take it, again for their own interests. They may know the expected return on new capital directed to the 'company reinvention' project is lower than what shareholders could get elsewhere, but that wouldn't sustain the management's current jobs. But that's not always true. Sometimes managements make the correct decision to run a company down then wrap it up. The non-owning public virtually never agrees with that course if it's a big enough company for them to be aware of, or if they work for it obviously, but it wouldn't be their money wasted on a futile attempt at a turnaround. Shareholders have no special interest in perpetuating companies, just in return.

Of course sometimes companies can reinvent themselves successfully, and management might really not know whether their plan's expected return is sufficiently high. But you give the Netflix v Blockbuster example as if it's obvious that because NF is a big success BB could have emulated that, just because they were in a nominally similar business? I think that idea earns a :shock: itself :D

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Re: Sears, a 125 year old company is now a penny stock.

Post by willthrill81 » Wed Oct 17, 2018 2:45 pm

JackoC wrote:
Wed Oct 17, 2018 12:16 pm
willthrill81 wrote:
Tue Oct 16, 2018 8:17 pm
JackoC wrote:
Tue Oct 16, 2018 5:24 pm
Trying to totally reinvent the way Kodak or Blockbuster would have had to isn't necessarily in shareholder interest. It's not always bad from investor POV if managements accept the doom of their company. The problem is often IMO value destruction that occurs while the managements seek implausible reinventions of their companies to sustain *their* jobs.
You're saying that Blockbuster shareholders would not have wanted Blockbuster to retool itself to be where Netflix, one of the largest companies in the world, is today? :shock:
Wanting and doing are not the same thing. What you often or usually get in 'disrupted' industries are managements skilled (perhaps) in running a company under an old business model but not skilled in emulating or developing a new one. And they are also often fighting against various legacy issues (the culture etc) that new entrant they are pursuing doesn't face. Then they destroy value throwing good money after bad before the failure of the company to change its spots becomes obvious to everyone else.

Managements making it their key mission to perpetuate their company is an agency problem in public stock companies, a common bug, but not a feature. The best outcome for the stockholders may be to keep running without committing significant further capital until cashflow turns negative, then liquidate. Sometimes managements know that's the right course but don't take it, again for their own interests. They may know the expected return on new capital directed to the 'company reinvention' project is lower than what shareholders could get elsewhere, but that wouldn't sustain the management's current jobs. But that's not always true. Sometimes managements make the correct decision to run a company down then wrap it up. The non-owning public virtually never agrees with that course if it's a big enough company for them to be aware of, or if they work for it obviously, but it wouldn't be their money wasted on a futile attempt at a turnaround. Shareholders have no special interest in perpetuating companies, just in return.

Of course sometimes companies can reinvent themselves successfully, and management might really not know whether their plan's expected return is sufficiently high. But you give the Netflix v Blockbuster example as if it's obvious that because NF is a big success BB could have emulated that, just because they were in a nominally similar business? I think that idea earns a :shock: itself :D
You're arguing that BB was unable to transform their business because of their culture. I agree that their culture was inherently flawed, unfortunately like most businesses today. They define their business in terms of the product they sell rather than the value they provide to their customers. In so doing, they become wedded to the product and inevitably become blindsided by a revolutionary new product that is superior to their own. By the time they realize this, the writing is on the wall, and it's usually too late.

However, this is not destined to happen. There have been a number of very successful market oriented firms that were and are constantly on the lookout for ways to provide more value to their customers. If they need to ditch their old product(s) in favor of new ones, they do so. Their culture is one of innovation and change.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Sears, a 125 year old company is now a penny stock.

Post by qwertyjazz » Wed Oct 17, 2018 4:27 pm

willthrill81 wrote:
Wed Oct 17, 2018 2:45 pm
JackoC wrote:
Wed Oct 17, 2018 12:16 pm
willthrill81 wrote:
Tue Oct 16, 2018 8:17 pm
JackoC wrote:
Tue Oct 16, 2018 5:24 pm
Trying to totally reinvent the way Kodak or Blockbuster would have had to isn't necessarily in shareholder interest. It's not always bad from investor POV if managements accept the doom of their company. The problem is often IMO value destruction that occurs while the managements seek implausible reinventions of their companies to sustain *their* jobs.
You're saying that Blockbuster shareholders would not have wanted Blockbuster to retool itself to be where Netflix, one of the largest companies in the world, is today? :shock:
Wanting and doing are not the same thing. What you often or usually get in 'disrupted' industries are managements skilled (perhaps) in running a company under an old business model but not skilled in emulating or developing a new one. And they are also often fighting against various legacy issues (the culture etc) that new entrant they are pursuing doesn't face. Then they destroy value throwing good money after bad before the failure of the company to change its spots becomes obvious to everyone else.

Managements making it their key mission to perpetuate their company is an agency problem in public stock companies, a common bug, but not a feature. The best outcome for the stockholders may be to keep running without committing significant further capital until cashflow turns negative, then liquidate. Sometimes managements know that's the right course but don't take it, again for their own interests. They may know the expected return on new capital directed to the 'company reinvention' project is lower than what shareholders could get elsewhere, but that wouldn't sustain the management's current jobs. But that's not always true. Sometimes managements make the correct decision to run a company down then wrap it up. The non-owning public virtually never agrees with that course if it's a big enough company for them to be aware of, or if they work for it obviously, but it wouldn't be their money wasted on a futile attempt at a turnaround. Shareholders have no special interest in perpetuating companies, just in return.

Of course sometimes companies can reinvent themselves successfully, and management might really not know whether their plan's expected return is sufficiently high. But you give the Netflix v Blockbuster example as if it's obvious that because NF is a big success BB could have emulated that, just because they were in a nominally similar business? I think that idea earns a :shock: itself :D
You're arguing that BB was unable to transform their business because of their culture. I agree that their culture was inherently flawed, unfortunately like most businesses today. They define their business in terms of the product they sell rather than the value they provide to their customers. In so doing, they become wedded to the product and inevitably become blindsided by a revolutionary new product that is superior to their own. By the time they realize this, the writing is on the wall, and it's usually too late.

However, this is not destined to happen. There have been a number of very successful market oriented firms that were and are constantly on the lookout for ways to provide more value to their customers. If they need to ditch their old product(s) in favor of new ones, they do so. Their culture is one of innovation and change.
Yes from Sears selling a few watches to catalogues to houses to finance to credit cards to brick and mortar retail in the Sun Belt to controlling the market for home appliances Sears was always focused on innovation and keeping solution minded focus on the customer
Wait ...
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Re: Sears, a 125 year old company is now a penny stock.

Post by willthrill81 » Wed Oct 17, 2018 6:15 pm

qwertyjazz wrote:
Wed Oct 17, 2018 4:27 pm
willthrill81 wrote:
Wed Oct 17, 2018 2:45 pm
JackoC wrote:
Wed Oct 17, 2018 12:16 pm
willthrill81 wrote:
Tue Oct 16, 2018 8:17 pm
JackoC wrote:
Tue Oct 16, 2018 5:24 pm
Trying to totally reinvent the way Kodak or Blockbuster would have had to isn't necessarily in shareholder interest. It's not always bad from investor POV if managements accept the doom of their company. The problem is often IMO value destruction that occurs while the managements seek implausible reinventions of their companies to sustain *their* jobs.
You're saying that Blockbuster shareholders would not have wanted Blockbuster to retool itself to be where Netflix, one of the largest companies in the world, is today? :shock:
Wanting and doing are not the same thing. What you often or usually get in 'disrupted' industries are managements skilled (perhaps) in running a company under an old business model but not skilled in emulating or developing a new one. And they are also often fighting against various legacy issues (the culture etc) that new entrant they are pursuing doesn't face. Then they destroy value throwing good money after bad before the failure of the company to change its spots becomes obvious to everyone else.

Managements making it their key mission to perpetuate their company is an agency problem in public stock companies, a common bug, but not a feature. The best outcome for the stockholders may be to keep running without committing significant further capital until cashflow turns negative, then liquidate. Sometimes managements know that's the right course but don't take it, again for their own interests. They may know the expected return on new capital directed to the 'company reinvention' project is lower than what shareholders could get elsewhere, but that wouldn't sustain the management's current jobs. But that's not always true. Sometimes managements make the correct decision to run a company down then wrap it up. The non-owning public virtually never agrees with that course if it's a big enough company for them to be aware of, or if they work for it obviously, but it wouldn't be their money wasted on a futile attempt at a turnaround. Shareholders have no special interest in perpetuating companies, just in return.

Of course sometimes companies can reinvent themselves successfully, and management might really not know whether their plan's expected return is sufficiently high. But you give the Netflix v Blockbuster example as if it's obvious that because NF is a big success BB could have emulated that, just because they were in a nominally similar business? I think that idea earns a :shock: itself :D
You're arguing that BB was unable to transform their business because of their culture. I agree that their culture was inherently flawed, unfortunately like most businesses today. They define their business in terms of the product they sell rather than the value they provide to their customers. In so doing, they become wedded to the product and inevitably become blindsided by a revolutionary new product that is superior to their own. By the time they realize this, the writing is on the wall, and it's usually too late.

However, this is not destined to happen. There have been a number of very successful market oriented firms that were and are constantly on the lookout for ways to provide more value to their customers. If they need to ditch their old product(s) in favor of new ones, they do so. Their culture is one of innovation and change.
Yes from Sears selling a few watches to catalogues to houses to finance to credit cards to brick and mortar retail in the Sun Belt to controlling the market for home appliances Sears was always focused on innovation and keeping solution minded focus on the customer
Wait ...
For a while, they definitely were market oriented. But they lost their way and paid the price.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

qwertyjazz
Posts: 1079
Joined: Tue Feb 23, 2016 4:24 am

Re: Sears, a 125 year old company is now a penny stock.

Post by qwertyjazz » Thu Oct 18, 2018 1:47 pm

willthrill81 wrote:
Wed Oct 17, 2018 6:15 pm
qwertyjazz wrote:
Wed Oct 17, 2018 4:27 pm
willthrill81 wrote:
Wed Oct 17, 2018 2:45 pm
JackoC wrote:
Wed Oct 17, 2018 12:16 pm
willthrill81 wrote:
Tue Oct 16, 2018 8:17 pm


You're saying that Blockbuster shareholders would not have wanted Blockbuster to retool itself to be where Netflix, one of the largest companies in the world, is today? :shock:
Wanting and doing are not the same thing. What you often or usually get in 'disrupted' industries are managements skilled (perhaps) in running a company under an old business model but not skilled in emulating or developing a new one. And they are also often fighting against various legacy issues (the culture etc) that new entrant they are pursuing doesn't face. Then they destroy value throwing good money after bad before the failure of the company to change its spots becomes obvious to everyone else.

Managements making it their key mission to perpetuate their company is an agency problem in public stock companies, a common bug, but not a feature. The best outcome for the stockholders may be to keep running without committing significant further capital until cashflow turns negative, then liquidate. Sometimes managements know that's the right course but don't take it, again for their own interests. They may know the expected return on new capital directed to the 'company reinvention' project is lower than what shareholders could get elsewhere, but that wouldn't sustain the management's current jobs. But that's not always true. Sometimes managements make the correct decision to run a company down then wrap it up. The non-owning public virtually never agrees with that course if it's a big enough company for them to be aware of, or if they work for it obviously, but it wouldn't be their money wasted on a futile attempt at a turnaround. Shareholders have no special interest in perpetuating companies, just in return.

Of course sometimes companies can reinvent themselves successfully, and management might really not know whether their plan's expected return is sufficiently high. But you give the Netflix v Blockbuster example as if it's obvious that because NF is a big success BB could have emulated that, just because they were in a nominally similar business? I think that idea earns a :shock: itself :D
You're arguing that BB was unable to transform their business because of their culture. I agree that their culture was inherently flawed, unfortunately like most businesses today. They define their business in terms of the product they sell rather than the value they provide to their customers. In so doing, they become wedded to the product and inevitably become blindsided by a revolutionary new product that is superior to their own. By the time they realize this, the writing is on the wall, and it's usually too late.

However, this is not destined to happen. There have been a number of very successful market oriented firms that were and are constantly on the lookout for ways to provide more value to their customers. If they need to ditch their old product(s) in favor of new ones, they do so. Their culture is one of innovation and change.
Yes from Sears selling a few watches to catalogues to houses to finance to credit cards to brick and mortar retail in the Sun Belt to controlling the market for home appliances Sears was always focused on innovation and keeping solution minded focus on the customer
Wait ...
For a while, they definitely were market oriented. But they lost their way and paid the price.
All companies that are successful in a given era are market oriented. But IMO like all empires, leaders change or environments change or sometimes even a little luck in timing is off and then we say they are not market oriented. If Sears, GE and the Roman Empire can all stop innovating then we should probably not be surprised when the next company has problems. That does not mean that large companies cannot innovate (Sears did it multiple times). It just means that no company can continuously innovate. I am not even sure that we can compare the company with the same name as being the same. IOW did the Sears that sold watches fail, did the Sears KMart fail or did just the one in the last couple of years that could not adapt to lower mall land prices? etc
G.E. Box "All models are wrong, but some are useful."

spectec
Posts: 1225
Joined: Mon Jul 14, 2014 8:00 am

Re: Sears, a 125 year old company is now a penny stock.

Post by spectec » Thu Oct 18, 2018 4:03 pm

They're declaring bankruptcy, yet I'm still getting emails from them asking me to purchase appliance service contracts. :oops:
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

JackoC
Posts: 261
Joined: Sun Aug 12, 2018 11:14 am

Re: Sears, a 125 year old company is now a penny stock.

Post by JackoC » Fri Oct 19, 2018 9:18 am

willthrill81 wrote:
Wed Oct 17, 2018 2:45 pm
JackoC wrote:
Wed Oct 17, 2018 12:16 pm
willthrill81 wrote:
Tue Oct 16, 2018 8:17 pm
JackoC wrote:
Tue Oct 16, 2018 5:24 pm
Trying to totally reinvent the way Kodak or Blockbuster would have had to isn't necessarily in shareholder interest. It's not always bad from investor POV if managements accept the doom of their company. The problem is often IMO value destruction that occurs while the managements seek implausible reinventions of their companies to sustain *their* jobs.
You're saying that Blockbuster shareholders would not have wanted Blockbuster to retool itself to be where Netflix, one of the largest companies in the world, is today? :shock:
Wanting and doing are not the same thing. What you often or usually get in 'disrupted' industries are managements skilled (perhaps) in running a company under an old business model but not skilled in emulating or developing a new one. And they are also often fighting against various legacy issues (the culture etc) that new entrant they are pursuing doesn't face. Then they destroy value throwing good money after bad before the failure of the company to change its spots becomes obvious to everyone else.
You're arguing that BB was unable to transform their business because of their culture.
I'm, at least attempting to, make a broader point. Managers and other employees have a specific reason to try to perpetuate companies, as an end in itself. Owners do not. Since this is an *investment* forum I think it's better here to break out of the general mold where 'Blockbuster' or 'Sears' means the managers and employees of Blockbuster and Sears, as is typical in general public discussion, and focus on the owners. Sure, the owners are also better off *if* the managers and employees are really the best people, and organization, to pursue a new business venture unlike the old one. And, the existing organization might have advantages in terms of investments already made. But other times not. The problem is often the divergence in interest between management and shareholders in those situations. Managers and employees might reasonably see it as worth pursuing a (capital consuming) turnaround plan if there's any chance of it working. Rational shareholders should set a much higher bar, that the existing company is the *best* way to pursue the new business, again allowing for aspects of the old business that might still give a leg up in the new. But it's not the same calculation from the two POV's, that's my point.

From management's POV a capital consuming turnaround plan might make sense if there's any chance of it working ('you *have* to at least try'). From (informed and rational) shareholder's POV the hurdle is higher. It might be better to take their capital elsewhere to get higher returns.

The Sears case is especially interesting because the manager for some years has been the controlling owner. In many such cases private owners *do* just run down companies because that's actually in their financial interest. Private companies don't have the agency problem public stock companies do in this respect. Owner/managers often rationally assess that while they 'want' to be just like the highly profitable disrupter(s), the much more likely outcome is throwing good money after bad trying. But the Sears case illustrates how complicated the actual decisions can be and how much in the eye of the beholder the results. Some people's assessment of Lampert's rule at Sears is that he did mainly run it down, stripping away assets and securing his fund's position in complicated financial engineering deals. Other assessments are that Lampert himself came to view things more as a manager than owner and cost himself a lot more than necessary on the way to the inevitable end (from a shareholder POV, Chapter 11=stock zero basically, though Sears may reorganize and carry on on some form). The basic numbers seem to lean toward the second analysis being the more correct on the whole.

Valuethinker
Posts: 36322
Joined: Fri May 11, 2007 11:07 am

Re: Sears, a 125 year old company is now a penny stock.

Post by Valuethinker » Fri Oct 19, 2018 10:01 am

qwertyjazz wrote:
Thu Oct 18, 2018 1:47 pm

All companies that are successful in a given era are market oriented. But IMO like all empires, leaders change or environments change or sometimes even a little luck in timing is off and then we say they are not market oriented. If Sears, GE and the Roman Empire can all stop innovating then we should probably not be surprised when the next company has problems. That does not mean that large companies cannot innovate (Sears did it multiple times). It just means that no company can continuously innovate. I am not even sure that we can compare the company with the same name as being the same. IOW did the Sears that sold watches fail, did the Sears KMart fail or did just the one in the last couple of years that could not adapt to lower mall land prices? etc
No problem with all of the above.

But the Roman Empire did not stop innovating.

It went from an infantry army to a cavalry one. It broke itself into 2 parts, western and eastern, and the latter lasted another 1000 years.

And it adopted a whole new universal religion, which would carry on the language (Latin) and many of the traditions of the Roman Empire on into the Dark and Middle Ages. A basilica, for example, is a cathedral. But in the Roman Empire it was the civic building where the governor met petitioners.

Rome died as a political concept but not as an idea.

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