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  • batbeer2 2017-06-16 00:14
    softdude2000: Other than balance sheet, do you see any safety in cash flow statement/income of SHOS.
    Hi Softdude,

    Yes and no. This is a pretty simple business with a lot of revenue. They are not generating enough cash now but that IMHO is a choice. They are investing for transition (shops with different brand; non-Sears). I would prefer if they just liquidated and bought back stock. If that makes the price of the stock go up then you can deploy cash to develop the business.

    Best I can say is that cash flow is artificially depressed. The bad news is that perhaps management will keep it that way. That is not good. If the stock price is this low then you should not be investing in your business, you should be liquidating (at least a few stores).

    To me the key is whether this management is willing to generate cash flows FOR THE BENEFIT OF SHAREHOLDERS. It is not a question whether they could. (sorry for the caps but the italics aren't working today). Alternatively management is keeping this business alive for the benefit of Sears holdings as an efficient way for Sears to dump its excess inventory. That would be the worst reasonable scenario I can think of in this case.

    just some thoughts.
  • batbeer2 2017-06-04 02:32
    softdude2000: Thanks for the reply.

    Is this IT system worth anything if they close down their business?
    I am trying to understand if there is any resale value fro
    No.

    The IT/logistics system is only worth something to the business as a going concern. At least if my assumption that their IT investments are indeed focussed on gaining "independence" from Sears.
  • batbeer2 2017-06-03 09:46
    softdude2000: I was reading latest 10-Q for SHOS. what caught my attention is that they spent 10M, 15M in 2015 and 2016 for IT related stuff. They are planning anot
    Hi Softdude,

    Bricks and mortar are expensive but so is IT infrastructure.

    I don't think the IT expenses are on the downstream side (webshop). I think they are on the upstream side. SHOS is transitioning from an outlet to sell Sears' "excess" inventory to an outlet that can sell stuff from other manufacturers/retailers. I suppose they relied heavily on Sears' IT infrastructure to manage their logistics. Now they are building their own system. 45m is a lot of money but as an IT guy myself I can understand how you could spend that if you were building a logistics system for your retail operation on that scale.

    Also, I would not bet on the expenses dropping of to 0 in 2018. Best case they spend 20% of 45m (call it 10m) annually maintaining their system and that's if they do it in the cloud. If they did it on their own hardware it would cost more.

    Just some thoughts.

    I'll read that 10q soon. If I see anything interesting with regards to the above I'll let you know.

    best,
    F
  • kfh227 2011-06-03 21:30
    Sent me this a while ago:
    Do you know answer to my comments here: http://www.gurufocus.com/news.php?id=125588

    KO when Buffett bought it was a different company.  They were basically a brand that collected royalties.  They only made the syrup for its soda.  It was not very capital intensive back then for KO.  The expenses were on the bottlers shoulders.  Today, they own the bottlers.  It was a much more easy to understand company back in the  day with way better margins that had (still has) a huge moat.  That is why WEB bought.
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