Most retailing trends of the last decade can be summed up quite simply.
Shopping is no longer entertainment.
Shopping used to be entertainment, back before the Web was spun. Men and women would enter a store with a rough idea of want or need. The store, through displays, design and other merchandising tricks, would meet the need. The entertained shopper left with something in a bag.
This is no longer the case. Shopping has become utilitarian, we know what we want before we get in the car, and we don’t deviate. Even if we’re buying a car.
The job of the sales funnel has moved online, but many retailers have yet to adapt to this new reality, making them attractive, regular shorts.
Sears: The Model
But Sears Holdings Corporation (NASDAQ:SHLD) has never made any money in wow, nor in retailing. Sears Holdings Corporation (NASDAQ:SHLD) is a real estate company, drawing down a century’s worth of assets, a piece at a time. Its current model dates from 2005, and while the stock price rose 50% over the next two years, it is now down 72% from those highs.
That’s why Lampert said he would take over as CEO. The easy money may lie in spinning off discrete operations, as was done with what’s now Orchard Supply Hardware Stores Corp (NASDAQ:OSH). OSH looked like a winner when it came public last year, but is now worth a tiny fraction of that price, and Lampert has been quietly getting out of it.
Lampert’s game works for Lampert. It doesn’t work for you. There is nothing more limited than a limited partner, and if you’re buying SHLD you’re Lampert’s limited partner. He’s going to milk operations and extract cash for as long as he can get away with it, and very likely will come off whole. The only way you will is with selective shorting on the way down.
J.C. Penney: The Sequel
That’s because, once upon a time, J.C. Penney Company, Inc. (NYSE:JCP) was a really big, successful retailer, and like Sears Holdings Corporation (NASDAQ:SHLD) held a lot of real estate. Like Sears Holdings, J.C. Penney peaked in the 2007 real estate boom, and is down 82% from the 2007 peak.