'While retail experts estimate that store chains traditionally spend $6 to $8 per square foot on annual maintenance, Sears is spending a fraction of that amount, said Matthew McGinley, managing director of International Strategy & Investment Group, an investor research firm.
"With roughly 250 million square feet domestically, [Sears] is spending about $1.90 a foot, which is a quarter of what you need to maintain share and keep it as an acceptable place to shop," Mr. McGinley said.'
To the average "person on the street", it may be patently obvious that when your stores are filthy and understaffed, no one will want to shop there. To Eddie Lampert, the way to juice EBITDA for a few years is to slash that maintenance money.
Pour one out for the death of multiple iconic American brands (Craftsman, Kenmore, and eventually Sears itself). Don't shed a tear for Lampert, since he's set himself up for a "heads, investors, customers, and employees lose" and "tails, I win" situation.
There's a kmart (which is owned by Sears and therefore in the same situation) near my old office and it's downright depressing to go in there. The lighting isn't bright enough, the store is run with a skeleton staff and everything looks a bit old or dirty. For example, the floor tiles are overdue for a replacement. Want to buy a watch? Good luck finding an employee to help you at the watch counter. But the most eerie part is that the store is so devoid of customers.
When I go to a nearby Target, you can hardly move around all the shopping carts in there. The Kmart, which is a similar size, might only have a few customers in the store at a time. Maybe Target is slightly more upscale, but even the Walmart nearby looks much nicer, plus has a better selection and similar if not lower prices.
Unlike many other retail stores, it doesn't even feel like Kmart is trying to adapt. Bestbuy has it's superior customer service (not exactly world class, but better than competitors). T.J.Maxx/Homegoods has an ever-changing selection of bargains and the feeling of being in a treasure hunt. Even J.C. Penney tried a new transparent pricing scheme (which failed). But I haven't seen Kmart/Sears try to do something similar.
Edit: changed the store is run on a skeleton staff to the store is run with a skeleton staff
I had a similar experience the last time I was in a Kmart. No employees, no other customers, empty shelves. Go to the electronics department and you'll find games for systems that were obsolete a decade ago. I don't understand how they've managed to stay open so long.
In some neighborhoods, the local KMart was the only local clothing store for miles. This was the case in the neighborhood a few miles away from me until the mid 2000s and the rise of Amazon.
We had a Kmart go under in our town recently. It was a dead store walking for years before it finally happened. Made entirely of cinderblocks, totally unkept, frankly it was reminiscent of dirt floor cinderblock villages I'd been to in Central America.
Target hasn't adapted that much because they didn't have to, what they were in the 90s was good enough to keep up with online competition. I don't pretend to understand all of it, but I can tell they have something that resonates with consumers.
His Hedge Fund bought a bunch of Sears debt and he took an activist investment which meant becoming CEO of Sears, in order to make his investment valuable.
Note: this is what Warren Buffett did several times, with massive leverage, to make his riches before he became the baby boomer conservative investment guru.
Sears just happens to be a household name that is getting a lot of discerning eyes on it.
>His ESL Hedge Fund has dropped 80% in value from its peak in 2006 to 2016, and has almost certainly fallen more since then.
this statement is kind of misleading because "value" means NAV, not actual losses. it could very well be that the fund neither made or lost money, but 80% of the investors pulled out.
From the sounds of it, his fund may have lost money, but his other ventures may have profited from his looting of Sears. The other investors may be losing out, but he's coming out ahead.
My wife and I walked into our Sears for the first time in forever. We were looking for a dress shirt for our son.
The place was almost completely empty of product. The shelves were bare, there was almost no racks to place things, and nobody was in the store to shop.
We both said to each other that there is not much time before it closes.
There is no reason to shop there since there is nothing there to buy.
I very rarely shop for clothes, but even then, Sears would probably be way at the bottom of my list when it came to dress shirts.
I can name at least 5 department stores that I'd check before even thinking about Sears when it comes to clothing. It is simply not their specialty, and it's weird to expect the selection to be good there.
I will, however, echo your sentiment that the store looks very bare and very few customers. It looks closer to a warehouse than a retail location.
I thought about Sears at one point when they owned Lands End. Back in the day, our Sears was probably 10% household goods, 30% clothes, 20% tools, 20% appliances, 10% TVs, 10% jewelry. So a lot of clothes.
Speaking of craftsman....Sears sold them off a few years ago. They seem to be making a resurgence in Lowe's stores. They're being sold at a slightly lower price point then the Lowe's standard Kobalt brand.
> [Craftsman tools] seem to be making a resurgence in Lowe's stores. They're being sold at a slightly lower price point then the Lowe's standard Kobalt brand.
Is that really a resurgence or just an attempt to profit by burning up the brand's remaining goodwill?
I can't imagine Craftsman tools maintaining their reputation after they've been been positioned as the cheaper alternative to store-brand tools for a while. They must be cutting massive corners to achieve that price-point.
Very much a case of burning the remaining goodwill.
The tools are also sold in Ace hardware stores, and the warranty is absolute garbage (which was one of the main selling points originally). I broke a 1/2" wrench, and needed proof of purchase for a warranty replacement. At this point, Harbor-Freight may be higher quality, but they definitely have better warranty support.
Harbor Freight is one of the only consumer-oriented tool sellers that's constantly and regularly improving their product lines. There are enough stores that it's handy for most, and their warranty returns are really easy.
I'm getting tired of reading all the ill-informed Harbor Freight bashing. Frankly, they're at least at good as most tools in the consumer market at this point.
Oh, and their stuff is vastly higher quality than the mid-century, consumer-oriented, American-made junk that I inherited from my grandfathers. I keep that stuff around just as an example of how "American made" didn't necessarily mean quality.
At Harbor Freight you can buy two of anything for the price of one of the same thing elsewhere. Keep a spare for one the first one breaks down, plus there is always a 20% discount coupon.
Used to be finding a busted up Craftsman tool, like in the gutter and run over a few times, was a windfall. You could walk into any Sears and get a free replacement no questions asked.
Yep, pretty strange to think that Kobalt and Husky are now the solid choice in the big box stores, and Craftsman is a contender for something you might want to use once or twice but not get too bent out of shape if it fails.
> "To boost “visibility and accountability,” Lampert explained in a letter to investors, he divided the company into more than 30 business units, including product-based divisions (apparel, tools, appliances), support functions (human resources, IT), brands (Kenmore appliances, Craftsman tools, DieHard batteries), and units focused on e-commerce and real estate. Under the new scheme, each business unit had its own president, chief marketing officer, board of directors, and, most important, its own profit-and-loss statement.
Large technology companies and industrial conglomerates such as General Electric also take a decentralized approach. But retailers tend to favor an integrated model. That way, different divisions can be compelled to make sacrifices, such as discounting goods, to attract shoppers to stores."
> "Former Sears executives say their biggest objection to Lampert’s model is that it discourages cooperation. “Organizations need a holistic strategy,” says Erik Rosenstrauch, former head of Sears’s DieHard unit, who is now CEO of Fuel Partnerships, a retail marketing agency. As the business unit leaders pursued individual profits, rivalries broke out. Former executives say they began to bring laptops with screen protectors to meetings so their colleagues couldn’t see what they were doing.
Appliance maker Kenmore is a widely recognized brand sold exclusively at Sears. Under SOAR, the appliances unit had to pay fees to the Kenmore unit. Because the appliances unit could make more money selling devices manufactured by outside brands, such as LG Electronics, it began giving Kenmore’s rivals more prominent placement in stores. A similar problem arose when Craftsman, Sears’s beloved tool brand, considered selling a tool with a battery made by DieHard, also owned by Sears. Craftsman didn’t want to pay extra royalties to DieHard, so the idea was quashed."
> "The bloodiest battles took place in the marketing meetings, where different units sent their CMOs to fight for space in the weekly circular. These sessions would often degenerate into screaming matches. Marketing chiefs would argue to the point of exhaustion. The result, former executives say, was a “Frankenstein” circular with incoherent product combinations (think screwdrivers being advertised next to lingerie)."
> "Eventually Lampert’s advisory committee instituted a bidding system, forcing the units to pay for space in the circular. This eliminated some of the infighting but created a new problem: The wealthier business units, such as appliances, could purchase more space. Two former business unit heads recall how, for the 2011 Mother’s Day circular, the sporting-goods unit purchased space on the cover for a product called a Doodle Bug minibike, popular with young boys."
> "In the weeks leading up to Black Friday in 2011, Sears discovered that some of its rivals planned to open on Thanksgiving at midnight. Sears executives knew they should open early, too, but couldn’t get all the business unit heads on board, according to former executives. (A Sears spokesman says the decision “was not contingent on the business unit structure.”) Instead, the stores opened early the following morning. One former vice president drove to the mall that night and watched families pack into rival stores. By the time Sears opened, he says, cars were leaving the parking lot."
I have personally not worked for a major retailer, but I have worked for a vendor to several major retail chains in North America.
It is certainly not the industry norm to have this kind of management and internal competition serve as a substitute for merchandising know-how. I think these quotes from the article speak for themselves.
The only way those decisions make sense to me is if you're purposely trying to kill a business while maintaining plausible deniability to pick it apart and leave the minority shareholders with nothing.
Which will be the reality for Sears. Lampert will blame everyone else, while ignoring his personal failings as a manager of a large retail business. Because, hey, his hedge fund made bank. And tacitly, that's his goal. Conflict of interest is written all over this.
"The team didn't execute. Oh well." While his decisions directly lead to ballooning costs (A couple years back I read how many units ended up with redundant accounting/HR/etc, sapping their budget for store presence), stores that feel lower rent than a rural flea market (the last time I was in a Sears it was a mess; this was in a major metro area), and the cheapest merch, that made Goodwill seem upscale.
They could also be ideologically driven. This seems like an attempt to run a company like a Randian free market utopia.
Unsurprisingly, it loses out to a well-ran, centrally managed, autocratic command economy, that fosters competition between different teams, and also, by force, compels co-operation between different departments.
The level of enforced organizational dysfunction described there is genuinely astonishing.
Competition has its place in a business, and that place is almost always exclusively sales. Trying to impose it upon other parts of an organization rarely ends well.
I was at Sears a few times recently since my daughter was working there as her first job. Her job was to keep the clothing nice but the problem was the hangers didn't have any divets on them to keep the clothes from sliding off, so her main job was to put everything back on the hangers as they fell off. She couldn't keep up. Often all of the employees would have to stay late to put the clothes back on the hangers. Also another thing I noticed is that checking out took 20 minutes because the process was really slow. I wanted to buy things but after the first couple of times waiting in line I just gave up the idea of buying anything. It is pretty obvious the CEO has never visited any of the stores.
Libertarians will now make themselves scarce. They will soon resurface with a complete revisionist history of ifs and buts to wash their hands off this latest disaster of their ideas in practice.
Meanwhile others will continue to pay the price for their delusional anti-social ideology.
No other major retailer creates completely siloed divisions, each with its own C-suite of executives. No other major retailer throws common-sense merchandising tenets to the wind in service of some idea of a "free market" of ideas.
If you reference the article in that comment thread above:
"Large technology companies and industrial conglomerates such as General Electric also take a decentralized approach. But retailers tend to favor an integrated model. That way, different divisions can be compelled to make sacrifices, such as discounting goods, to attract shoppers to stores."
Competition sounds great in theory. At Sears, Lampert divided the company into 30 units, each with its own profit and loss statement.
Space in the weekly circular was farmed out to the unit bidding the most, resulting in:
-Toys for boys being advertised on Mother's day, because that department bid the most for space in the circular
-Lingerie being featured next to tools.
---
Because each unit had its own P&L, and its managers were compensated accordingly:
-One Sears tool brand choosing to use an external battery supplier, because it didn't want to pay royalties to a Sears division that made lithium-ion batteries
-Sears stores not opening early for Black Friday in 2011, despite all its peers doing so, because to do so required agreement among the 30 business unit heads
---
It is perfectly reasonable for retail buyers to consider what mix of products to use, and whether to devote shelf space to external or house brands.
It is not reasonable for the instructive structure to be constructed in a way where the company loses customers and sales because each individual unit's decision makers have a financial incentive to do so.
No other major retailer operates/operated this way, and I'd wager that no one will try doing so in the future.
> Make departments compete for capital. Give capital to those with the best return.
That will inevitable result in a race to convert corporate commons (brand goodwill) into short term gains. That kind of game will be won by making your peers lose faster.
I agree that we should approach questions like this with some kind of epistemic modesty.
At the same time, if you look at Sears's peers, most of them are still alive and kicking, if not thriving. E.g. Target, Wal-Mart, Macy's, Kohl's, JC Penney, Best Buy etc.
> At the same time, if you look at Sears's peers, most of them are still alive and kicking, if not thriving. E.g. Target, Wal-Mart, Macy's, Kohl's, JC Penney, Best Buy etc.
That seems like confirmation bias to me. I could write a much longer list of national retail chains gone out of business over the last decade and a half. Circuit City, Mervyn's, A&P, Borders, CompUSA, Toys R Us, Marshall Fields, the list goes on.
I think we'll just have to agree to disagree on who Sears's peer companies are. I meant to compare Sears to other large department stores, though Best Buy is obviously more a peer to Sears's appliance/hard goods departments.
It's hard to find data from 2003 (when Lampert merged Sears and Kmart), but flip to page 3 of this PDF: https://core.ac.uk/download/pdf/7105653.pdf. All of those retailers except Sears are still healthy companies.
In regards to the examples you brought up, I think there are some questions about how comparable they are in terms of retail niche and scale. The Circuit City example I'll concede. They sold a lot of similar products as Sears.
-Mervyn's
From their wiki:
>Based on 2005 revenue, Mervyn's was the 83rd largest retailer in the United States.
It seems that Mervyn's is more of a regional chain? Not a national retailer.
-A&P
If this is the same east coast A&P that I know, this was a grocer. Doesn't really seem to be a peer of Sears.
-Marshall Fields
They were acquired by Macy's, not shuttered. Shareholders may have taken a haircut from the company's peak share price, but they weren't left with nothing. Sears trades at ~$1 as of today.
-Borders
If you mean Borders the specialty book seller, I don't really see how this is comparable to Sears.
-CompUSA
A specialty computer retailer, that to my memory did not even sell appliances? I don't see how they're a peer to Sears.
-Toys R Us
A specialty toy retailer vs a department store? I'd also note that there's been widespread debate about whether Toys R Us was done in by its debt-laden LBO (https://www.bloomberg.com/news/articles/2018-03-09/toys-r-us...). Also worth noting it has not been a public company since 2005.
There's also the question of whether some in this list have not been mismanaged themselves. You point to Toys R Us, but I've certainly heard similar questions about Borders and A&P, for instance.
Many retailers fail. There are few surviving department stores and weaker bug box stores get culled frequently.
Sears was unique as it was a legacy company who screwed up at every turn. The smart move for the shareholders would have been to spin out the business units and sell the valuable real estate.
Standard practice. The retailer's assets are converted to profit for some financial firm and the retailer dies. Hedge funds gain enough control to saddle them with debt, then cash out.
These major retailers failing? They're engineered to fail by the parasite that is the financial industry that vacuums up money into its control.
It is no surprise that the CEO, who owns the hedge fund that will give him a pretty penny of a 1 Billion with B cashout, wants to axe the company his somehow CEO of, for his own profit. It would not surprise me if the hedge fund got to install him though owning enough of the company.
This is nothing but the modern reincarnation of Gordon Gekko. Greed is good. Only they've evolved their methods of extracting and consolidating wealth from the public since then.
You can sue anyone for anything, but generally speaking, mismanaging a company to screw minority shareholders is grounds for a lawsuit. Sadly, these kinds of cases are never a sure thing. They can be settled for pennies on the dollar.
Financial engineers like this one need only to keep the thing out of bankruptcy for two years after the last asset extraction and the extraction's in the clear.
More charitably, I'd phrase it as "extracting what valuable assets it still has as dividends, in the (perhaps mistaken) belief that those assets no longer create as much value when being used by Sears".
It sure looks that way. I'd argue he wants it to succeed but this is what happened. 1/ A few years back he looked at all the strategies available to him to run the business. 2/ He found the one that screwed the most people and looked greediest. 3/ He chose that one.
I doubt it's purposeful - more just that retail in the Amazon era is difficult and he has demonstrated no particular talent or qualifications for running such a business. He used to get talked up as the next Warren Buffett, but I don't really think his skills as an investor have held up to scrutiny either.
2. Invest in nostalgia brands like Craftsman, that can't be purchased on amazon, and come with a built in consumer base.
3. Use previously considerable resources to position yourself as the best place to shop for X product, and make sure that several brands of X product are only available through you.
4. Still probably fail, but at least it looks like you tried.
Craftsman used to be valuable, because they had a strong reputation and a rock-solid replacement policy. That's no longer the case, and you're better off spending less money for Harbor Freight tools that are now good quality and fully warrantied.
Their lifetime warranty used to cover their poor quality. Buying duplicates was cheaper than snap-on and better suited to field work, where losing tools is a fact of life. My dad would buy duplicates and bulk-return the broken ones a few times a year. Apparently he deduced out the engineered working life of most of their tools.
Honestly, I avoided harbor freight for anything unless I knew I was going to destroy whatever it was in short order.
I now have a woodshop full of HF clamps that carry a better warranty than bessey and work just as well. I also have the HF wood lathe that is super cheap for the quality.
At Harbor Freight, every Indian-made tool I've used has been junk (wrenches). Every Chinese-made product has been acceptable to good. Every Taiwanese- and American-made (yes, they have a few!) product has been excellent.
The chrome and stamping on the sockets is every bit as good as my ~2000 era Craftsman sockets, and far better than the last Craftsman tool I bought around '07.
How is Wright a hobbyist tool though? All the Wright tools I have purchased have been as much or more than Snap-On, they are mainly targeting the industrial market (with pricing to match).
Plus, Gearwrench is not american made, it is Taiwanese. Good tools, but your statement is factually incorrect.
It's just crappy wording on my part. I was unsure if Tekton was also Taiwanese so I omitted country of origin on the first two. To clarify:
Gearwrench, Tekton and some Williams wrenches: Asia-made, reasonably priced, more than adequate for hobbyist use.
Wright and some Williams wrenches: US-made, more expensive but cheaper and more available than Snap-on, marketed towards industrial applications instead of professional mechanics.
Tekton doesn't make any tools, but source them from other manufacturers. So they have some Taiwanese, some Chinese, and some US made. Most of the pliers and all of the punches come from Wilde, a US manufacturer.
Best Buy's retail stores have been surprisingly successful. Sears can probably learn some lessons from Best Buy. Turn your competitor's strength into a weakness, e.g. people want to see and try big appliances before they buy them. You can do that at Best Buy and Sears, not Amazon.
I had a nightmarish time last year buying a complete set of 12 point craftsman sockets from sears online.
The first lot arrived at the store in a brown cardboard box from china and about half the sockets were missing. Returned it, complained, ordered another set, same issue.
Their customer service was shocking throughout.
I'd recommend buying an old set of Craftsman on Craigslist - or if you're lucky and find snap-on or Mac at a good price grab them. Otherwise I hate to write it but Harborfreight tools are mostly pretty much on par with Craftsman these days...
I don't think Sears had much control over the sockets they sent, I think they came direct from their supplier in China with no quality check by Sears before delivery.
The packaging was all in Chinese and was basically a bunch of random sockets thrown in a brown cardboard box, no branding.
They were the lazer cut Craftsman sockets with the bigger type on them which I like as you can see the size while grovelling around in the dark under cars, or at least sockets made with the same format. I still have 20 bucks of sears consolation money to spend online due to this debacle but it's hard to know how to spend it...
There are a ton of options as far as tools are concerned, and it really depends on frequency and type of use. For most people, cheap stuff is fine. Harbor Freight is far less "disposable" than people make it out to be, and tons of professionals happily use their tools. (No, really. Go visit your local mechanic or machinist. It is pretty likely they have that one 12in disk sander, if nothing else)
If you want to spend money, DeWalt and Milwaukee are still the industry standards, and I think that reputation is deserved. I've had pretty much exclusively positive experiences with their performance and longevity.
One thing to remember is that a cheap drill with a good bit is often going to outperform a good drill with a cheap bit. So it is worth spending a little extra on that sort of things, particularly if you see yourself working with metal at all.
Also, get some type of Dremel or similar. One of the most useful tools when you don't really have the correct tool for the job.
People are mentioning Dewalt and Milwaukee here, but if you want a lifetime set of tools for a reasonable price I think it’s tough to do better than Makita. I paid around $250 for a drill and impact driver over 10 years ago and they are still my daily drivers, never once slowed me down.
Reason I bought them is because I asked exact same question you are asking to a bunch of hardcore blue collar guys at the factory I worked at, and they recommended Makita.
Depends on what quality you want, the price you want, what you intend to do, and if you care about the country of origin. Best to buy tools for projects, otherwise you will enter an expensive hobby of collecting tools.
For power tools - Ryobi is fine for home use; the new Harbor Freight power tools have ok reviews. Dewalt and Milwaukee are better IMHO. Dewalt is assembling some of their power tools in the U.S. now. I have Ryobi, Dewalt, Ingersol Rand and Milwaukee cordless tools and battery systems. I personally prefer the Dewalt.
For hand tools, I have Snap-on, SK, Klein, Sunnex, Engineer, Craftsman, ChannelLock and some miscellaneous hand tools from other manufacturers. It really depends on what you want to do. I personally prefer tools made in U.S.A., Japan, and Taiwan in that order. But that is simply a personal preference.
Finally, keep in mind that no one company manufacturers all of their tools. A lot of tools are just rebranded and might be the same exact tool at considerably different prices.
Milwaukee makes pretty decent power tools. Their M18 batteries seem to hold up better than most. Whatever you go with, you really do want to standardize on one model of battery, so that everything is interchangeable and you don't end up with a half-dozen different chargers.
The adage I've heard is that if you care enough that you want to spend money on a nicer one you probably want a corded tool, rather than cordless. Which makes sense to me -- a corded tool is always going to be more powerful.
I'd agree with you, for the most part. Nevertheless, there's always things you need to use in places where running a cable is awkward, and that's where my cordless drills and impact drivers and stuff in that class are workhorses. I've tried to buy cheap Ryobi stuff, but it just gets burned up quickly.
Bosch is good quality and they go on sale on Amazon occasionally. I have an 18v drill, impact wrench, circular saw, sawsall, and jig saw from them and they are all top-notch.
The only one I don't love is the circular saw, but that's mainly because battery powered ones are just not as good as corded.
For hand tools, Gearwrench is a very solid option, IMO their wrenches compare favorably even to something like Snap-On.
Harbor Freight has some good stuff, their hand tools aren't bad and their air tools(esp. the earthquake impact guns) are good, but NEVER buy anything from that store that
1) has a battery
2) is a consumable (sandpaper, saw blades, etc.)
3) you will absolutely depend on professionally (so like craftsman, if you absolutely need then buy 2 and rotate through them.
I've always looked at Dewalt if I wanted something nice, but I usually buy the cheap Ryobi tool and only think about replacing it if it's not meeting my needs. Easy to spend more than you need to on tools as a home owner.
>more just that retail in the Amazon era is difficult and he has demonstrated no particular talent or qualifications for running such a business
"Right, I'm smart enough to realize that Amazon will crush us, and I can't outsmart Bezos, so why not enrich myself, say fuck the world, and go retire with a cool billion?"
In a sense Sears was the Amazon of 100 years ago. They started life in the 1800's as a mail-order catalog, when the communication and distribution technology of the time had just become advanced enough to make mail-order a possibility. Like Amazon, they only opened physical stores decades after they started as a company.
It's pretty hard to ride all the business trends correctly for over 100 years so I forgive Sears for missing out on the internet.
It still blows my mind that you could buy an entire house from Sears through their catalog, and many people did. And not just a mobile home or shed either – we're talking full-on bungalows and multi-story residences.
Kit homes are still around. I think they are not so common in the US because the big builders have streamlined home construction so much that there's no savings in pre-fab.
The Sears homes are pretty neat though. I live in a region where they were very popular.
I keep seeing pre-fab articles pop up on HN, but I think it's having difficulty gaining traction because construction requires a different process--design, sourcing, code approval, labor. Supposedly it can be substantially cheaper, both single family homes and apartment buildings.
My uninformed guess is that it won't be widely adopted until the various pre-fab companies with competing strategies and designs work toward some sort of standardization such that knowledge and skills can readily transfer. I bet it's also a patent minefield, precluding standardization and commoditization.
Perhaps some large homebuilder will acquire one of the pre-fab companies and then we'll start to see some volume. Maybe San Francisco should acquire one and just begin building a ton of cheap apartment buildings....
Did you see the link that just went up on HN a couple of days ago about land use regulations in San Francisco? I chuckle to think of the prospects of a pre-fab developer making headway against all of the forces SF has arrayed against them...
In particular, the article mentions Richmond Specials, which are "generic boxy buildings" that are designed to "maximize the size limits on each lot." Sounds kind of like what pre-fabbed apartments might turn out like, right? Unfortunately, they appear to be widely loathed.
I think the so-called Richmond Specials (there are at least 2 on my block--I didn't know the name until reading that article but recognize them everywhere) have aged enough that they've become part of the accepted architectural landscape.
Anything new will be hated by people. But why spend a fortune to be hated when you could spend much less and be hated all the same. San Francisco requires almost every building to prominently incorporate bay windows as part of the facade. (Richmond Specials lack this, which is why they stand out.) Every era of housing does this differently. As long as the pre-fab does it at least as well (very low bar), they'd fit right in. Plus, stucco is an extremely common street-facing exterior finish, and all the pre-fab stuff seems to have similarly textured exteriors.
I'm no architect, but I think if you can mimic the Edwardian or Spanish Revival styles (which are already quite simplified and boxy) which dominate much of the city you can grease the wheels. I don't understand why architects expend so much effort trying to do anything else; all it does is invite more attention.
My brother manages a Menards (midwest variant of Home Depot/Lowes) and they sell a surprising number of kit homes (~5/month in a marked of ~1/4million).
Perhaps unsurprisingly, the main market seems to be immigrants, poor credit history makes a traditional mortgage unattainable.
There was a season of This Old House from a couple years ago where they were putting together a kind of pre-fab house. It was somewhat custom, but all the walls and floors and things were made into panels, and assembled in a factory, indoors. They could also set up the wiring and plumbing in the wall panels while at the factory, instead of having to drill into things afterwards in the field. They then just shipped the panels to the site, and basically snapped them together. it was crazy how fast they came together once the panels and stuff were on site.
Indeed it's hard to stay on top, but missing the internet killed them, so i wouldn't go so far as forgiving them.
They had the better part of 20 years to adjust to the new reality but just kept plugging along with dirty, inefficient retail stores poorly stocked and staffed.
How could the same company that sold mail order houses a 100 years ago look at selling over the internet in the late 1990's and say "nah, it will never work - it's just too crazy"?
It reminds me of Blockbuster. They had the market, the product, and the startup capital but didn't take the risk to see if it would be worth it to pivot.
You can find plenty of examples of companies with founders that failed to pivot, and companies without founders that did pivot. I'm not aware of any research showing a correlation between those things.
Blockbuster did pivot though. They went out of business before streaming took off, but they had their own mail order DVD service, and it was pretty damn good. Being able to drop off in store to get the next set of discs shipped out immediately was a killer feature, when it worked! Often times I'd drop discs off but they'd show up as "unreturned" for a few days, basically putting their service on bar with Netflix's mail order business.
Being able to get the DVD extras, and director's cut editions of movies, as a huge advantage of physical discs. And of course the huge, one stop, selection. I currently have 2 VOD subscriptions and often still have to pay extra for quality movie rentals.
You're right; the sears catalog was the biggest, most efficient store on the analog internet and they absolutely killed the competition in supply chain and efficiency.
Toys r us it's another company that was well positioned to dominate but never took advantage of their competitive advantage
I'd argue that Toys R'us was more of a victim of changing times and overambition. Their performance since the buyout was at best mediocre thanks to both Amazon and a shrinking customer base.
If you are looking for an example of maliciously planned LBO, look up Dick Smith Electronics.
That's what I wonder, so. Is it really that difficult? Amazon is opening brick and mortar stores, invested in whole foods and is constantly increasing its logistics food print with all the clst zhat comes along. All traditional retailers need to do is getting some kind of e-commerce unit up and running and we are looking at mich more level playing field. After all, every single exiating store can, by all means, be considered a fulfillment center as well. And from that perspective traditional retails geographic coverage is not bad at all. No idea why most fail to do so.
Walmart being the exception having bought jet.com (?). After all Amazon is making the majority of its profits from AWS.
I think the original plan was to use Sears to acquire more top brands, not sell them off. He made a failed bid for Restoration Hardware early on, and talked about building a portfolio of strong all-American brands.
The liquidation strategy was a reaction to his plan failing as far as I'm aware. In the early years all the talk was on building a bigger conglomerate, possibly using Sears "super valuable" real estate to fuel it.
I think my favorite part of the whole "Sears flushed itself down the toilet" story is that crappy management can play the "We got outplayed by Amazon" card to shrug off responsibility, meaning no stingy management at other companies and corporations will learn from this mistake
Anyone know what (if any) haircut the pension-recipients would need to take if he actually runs the company into the ground? Does the Pension Benefit Guaranty Corporation (aka PBGC aka USA aks "us") have to pay pensioners 100 cents on the dollar? Does the defined benefits plan get turned into a defined-contribution plan as of current value?
I feel bad for the employees of Sears...but i'm also selfishly worried that the US Government ("we") ends up having to pay out absurd pension schemes with absurd 7% annual return assumptions.
IIRC There was one in a red state that was left from some private company that the Feds promised to bail out but even when Obama proposed it get bailed out other GOP members refused. I don't know if they can get very far with Sears if politicians are out there won't even help constituents... let alone Sears.
Sorry I forget the name of the company associated with that pension.
Granted the Gov will pay.... just via social services and such.
It is absurd, and that's why the IFRS and US government forced corporation pension funds to use discount rates that match high grade corporate bond yield curves (which are no where near 7%).
I mean, the comparison should be against the stock market, not high grade corporate bonds.
Stick the money in the s&p 500 and it will easily get 7%. (The real number over the last 100 years is 9.7%). Having the number br 2.7% lower then that is a fair compromise to take into account risk.
>> I mean, the comparison should be against the stock market, not high grade corporate bonds.
A pension fund has ongoing annual liabilities, so they cannot invest a majority of their assets into the stock market because they cannot afford to suddenly lose 40% of their assets. That is why they are usually spread across asset classes and have a lot in corporate debt (which are providing more than US Gov debt, but have higher returns are almost never suddenly lose 30% or 40% value across the board.)
What is your source for 9.7%? I suspect it’s subject to survivorship bias.
There’s plenty of research on choosing discount rates for defined benefit pensions and annuities, and many papers to read. And there are myriad reasons you can’t just stick the money for a pension in the s&p 500, but suffice to say, everhone in finance sticks to the IFRS numbers and knows US GAAP is garbage.
My source is the S&P 500, which has been around for a hundred years.
You can pick the DOW if you like, as it has similar returns over the last hundred years.
Although, FYI, the 9.7% number I was using was not inflation adjusted. Perhaps that 7% number was inflation adjusted? That would make sense as the s&p inflation adjusted number comes out to be 7% almost exactly.
This is not survivorship bias, as the way investing in the s&p 500 works is that it is a moving list of the top 500 companies market cap.
IE, if a company goes down in price, and drops out of the top 500 companies, then so would your investment in it. And total returns take this into account.
It is perfectly possible to simply invest in the market, and recieve market returns, if you are also willing to accept market risks.
The stuff you are talking about, regarding risks, only matters to people who care about short term returns, not people who care about long term returns.
And a pension fund, which has a time horizon of decades, seems like the very best example of a fund that would not care the slightly about short term risk, and can instead optimize for long term returns.
Pension funds need to pay out all the time, in good times and bad, so they also have a short term component to worry about it. And they do invest in index funds, but going all in into sp500 isn’t the same as diversifying. Here are some good responses:
Pension funds also have money flowing in. They invest more money in down markets than good ones because they need to ‘catch up’ in bad markets and can scale back in good ones. The risk is the company failing to keep up in a bad year.
Diversification is also a relative term. Compared to owning a single stock the sp500 is more diversified.
But 130% would be absurd in that it can't happen, but 7% is within the realm of possibility. So, unacceptably optimistic or unlikely etc sure but the bar for absurd is higher than just unusual.
I’ve seen pension funds with an discount rate sensitive causinf a 1% change in discount rate can have a ~20% effect on liability. Being off even a few hundred basis points results in huge numbers. There’s a reason you don’t see annuities equal to taxpayer funded defined pensions even offered for sale.
its little-stated due to the massive fiscal and political implications but there's a belief among some of the better investment professionals out there that the past decade of 1) low baseline interest rates 2) large run up in stock multiples, 3) proliferation of index funds ... will depress long-run stock total returns into the 4-6% range for many decades.
Apparently I can't read the article in my RSS reader because it's a TOS violation for Bloomberg.
That's ok though. If it's a TOS violation to read the article without giving my info to their 23 trackers and 6 intrusive advertisements I'm all set anyway.
I've been getting that apparently due to the VPN that I use -- if I temporarily switch it off, I have no problem reading their articles despite my adblocker.
I happen to be using SurfEasy VPN, not that I recommend them other than that they're cheap, and this is on a phone where I keep it on as much as possible. So far only Bloomberg's website and one app are allergic to the VPN.
Used to do business with Sears years ago and visited the Hoffman Estates headquarters. I'll never forget the impression of truly massive bureaucracy that the place conveyed. I'll also never forget how they dismantled their whole catalog operation just a couple of years before internet shopping took off.
The really big irony in all of this is that, if I'm not mistaken, it was the old Sears Roebuck catalogs that used to say something like "it's folly to purchase items on credit". Then the next generation took advantage of consumer folly, making financing a core part of the business. And now debt is killing this originally-anti-debt company.
Can’t go into too much detail but had a meeting with some of their top tech peeps (title wise) and it was really, really clear they have no clue how to run an effective eCommerce business.
It was also incredibly hard for me to sit there and watch a company I fondly remembered visiting with my father to pick up some tools (back when it was run much, much better) have such minimal vision for their eCommerce + little leverage at the table.
I don't want to turn this into a "laissez-faire capitalism vs state-planned economy" debate, but I'm noticing this is the rule rather than the exception.
With so many incredibly gifted and hungry tech rockstars just searching for just one lucky break out there, how on Earth is it that all these clueless individuals continuously get to run major tech initiatives at major companies?
Well, honestly I’m not entirely sure but overall the feeling was they had impressive resumes (big tech backgrounds) but really just seemed like they skated along as I just curiously asked what they did/worked on and it was really like a mile wide, inch deep responses.
I dunno, it was also really weird to have tech people show up to a large tech company’s office in full suits during the summer. Felt really out of touch honestly.
Either Eddie is not so smart in peering through paper qualifications, or he deliberately put idiots in charge so he could continue to siphon off Sears' assets under the cover of falling revenue and "crisis" :) .... what a world.
It is just so sad that a company that was built on the catalog business couldn't transition into putting their catalog on the web. The Xmas catalog was an event each year for a lot of kids.
The poster inherited about $100,000 and their parent, controlling the money, invested it in SHLD in March 2015 (circa $40/share). I've always wondered whether that person managed to get the money out (in 2017 at $8/share) or whether it's still there now (at $1/share).
I live in an affluent area and the Sears by us closed. If Sears can't survive there, it's done. I feel bad for the people who worked there. Whenever I went in, they were always helpful. Now they are looking for something else.
If I'm reading the article correctly, Lampert's fund has put $2.5B into Sears, so the kickback would mean they "only" lose $1.5B instead. That's a very different story than how I thought the title read, which was: "CEO's hedge fund walks away $1B richer."
I hope investors are taking ESL's management of Sears into account when deciding if it's a hedge fund they will continue to support. There's risk, and then there's incompetence...
Involuntary bankruptcy is pretty rare in the USA, but Sears sounds like a good candidate for it. Kmart and Sears are obviously cruising towards Chapter 7 or 11. If I were a sizable creditor, I would rather get the company into bankruptcy court early, before the CEO was able to pillage all the cash holdings.
Does he just straight up bonus it to himself in this scenario or does he like funnel Sears contracts (for example like employee toilet paper or something) to businesses that he owns 100% privately, like "EDDIE'S PAYPA FUHFILFMENT CO. INC."?
I will never forget reading this article (from 2011): https://www.wsj.com/articles/SB10001424052970204517204577042....
'While retail experts estimate that store chains traditionally spend $6 to $8 per square foot on annual maintenance, Sears is spending a fraction of that amount, said Matthew McGinley, managing director of International Strategy & Investment Group, an investor research firm.
"With roughly 250 million square feet domestically, [Sears] is spending about $1.90 a foot, which is a quarter of what you need to maintain share and keep it as an acceptable place to shop," Mr. McGinley said.'
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Nor will I forget reading about his management philosophy where different Sears departments have to compete for money in the budget. Money to advertise, to purchase inventory, etc. (https://www.bloomberg.com/news/articles/2013-07-11/at-sears-...)
To the average "person on the street", it may be patently obvious that when your stores are filthy and understaffed, no one will want to shop there. To Eddie Lampert, the way to juice EBITDA for a few years is to slash that maintenance money.
Pour one out for the death of multiple iconic American brands (Craftsman, Kenmore, and eventually Sears itself). Don't shed a tear for Lampert, since he's set himself up for a "heads, investors, customers, and employees lose" and "tails, I win" situation.