Sears Kmart are inseparable from Seritage/ESL's fate, and Seritage is doomed. Consider:
- ESL's journey from $9 Billion to under $200M
ESL used to have $9 Billion under its control. As everyone lost faith in Eddie's intelligence (because he's a complete fraud who was lucky enough to run a penny stock style pump and dump twice on large scale, and fooled everyone into thinking he was smart).
ESL sold over $100,000,000 in Autonation stock in the last year just to keep the lights on in its various companies, and that was before COVID-19. Per most recent 13F filings, it has less than $200 million left in equity holdings, down from a billion even just before the Sears bankruptcy. It's barely holding on to even its Seritage and Lands' End holdings. Mostly it's Autonation now, and it's disappearing fast. There's also Transform and what these various companies owe him. Eddie is circling the wagons and trying to bring things into his own personal holdings, but that's rapidly devolving into worthlessness. No one whatsoever has any faith in Eddie's investing acumen anymore, not that they ever should have. Anyone can get a quarter to come up heads twice.
- Seritage is underwater and can't break even
The crown jewel of Eddie's holdings is Sears' former real estate, the spinoff known as Seritage. It has roughly 200 properties left, and at the time of bankruptcy, Sears/Kmart accounted for around 90% of its rent at pretty low rates. Unlike every other REIT in the world, it's lost money for nearly a decade, because Eddie is a unparalleled shtty businessman. Because Eddie hired pretty smart people, they've been converting it to more profitable properties, but they've been working against the headwinds of 1) no one wants mall properties anymore, because Eddie waited 15 years. 2) Eddie let the properties go to sht for 15 years by not investing a penny in their upkeep and 3) no one wants to lease because you can pick up these properties from everywhere for a penny a barrel. As a result, the price per square foot has been way below what Seritage needs to break even on its enormous capital expenditure. In the best case, Seritage was going to lose money, even with all the sh–ty U-Hauls, Amazons, and Big Lots filling what few properties Eddie could sell. Seritage was only collecting a fraction of what it was collecting from Sears/Kmart before the bankruptcy.
- COVID-19 has destroyed any prospect Seritage had of existence
Now that COVID has come along, all of Seritage's lessors have simply stopped paying. It collected less than 50% of its rent at its last quarterly report, and that was early on in the pandemic, a number that has gotten much worse now. An atomic sh*tpile has dropped on all retail where the likes of JCPenney, J. Crew, and Neiman have declared bankruptcy, with far more closures and bankruptcies to come. Gyms are gone. Churches won't be expanding. Don't look for those multi-use projects to go anywhere. Seritage is diluting stock just to raise capital to survive, even as it has fallen through the floor at fire sale prices. Warren Buffet was very smart, he predicted the demise of Sears 15 years ago, seeing Eddie as an id-ot, and thought he would pick up all of Seritage's holdings for a song (it's already sold a fifth of that recently just to keep the lights on), but now he wouldn't touch it with a ten foot pole if he had a choice, but he's pot committed, and will be left holding the bag. Eddie will be left with a potato sack, and the shareholders some duct tape and chewing gum. 99% of the option activity on Seritage Friday was puts, which made me laugh. Hedge fund managers are going to make big bank on Seritage's failure. Anyway, Seritage's potential customers have evaporated.
Eddie never had the executive ability to run a lemonade stand, and is like a kindergartner looking at the space shuttle and thinks he understands metrics. The whole retail industry has become hyperefficient at metrics and except for a handful, is treading water, never mind an id–t like Eddie to can't be bothered to learn the basics.
Ayn Rand, his supposed guiding light once opined that the contract is the basis of a free society, and breaking it is ruinous to freedom and society. As much as he has the pretense of pushing her ideals, he is precisely the villain in every single one of her novels, the bumbling m-ron who cheats others, doesn't make good on his financial promises, and takes advantage of regulations and red tape to cheat and stifle hardworking producers and innovators. The diametric opposite of a true Ayn Rand acolyte like Jeff Bezos.
sincerely, former ESL partner